SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
--------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
USAIR, INC.
(Exact name of Registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
4512
(Primary Standard Industrial Classification Code Number)
-------------------------
53-0218143
(I.R.S. Employer Identification Number)
2345 Crystal Drive
Arlington, Virginia 22227
(703) 418-7000
(Address, including zip code and telephone number, including
area code, of Registrants' principal executive office)
-------------------------
copies to:
John W. Harper Lawrence M. Nagin
Senior Vice President-Finance Executive Vice President-Corporate
and Chief Financial Officer Affairs and General Counsel
USAir, Inc. USAir, Inc.
2345 Crystal Drive 2345 Crystal Drive
Arlington, Virginia 22227 Arlington, Virginia 22227
(703) 418-7000 (703) 418-7000
<PAGE>
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
Approximate date of commencement of proposed sale to the
public: As soon as practicable after this Registration Statement
becomes effective.
If any of the securities being registered on this Form are to
be offered on a delayed or continuous basis pursuant to Rule 415
under the Securities Act of 1933, check the following box. [x]
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
-------------------------------
<CAPTION>
Proposed
Title of each class Amount to be maximum Amount of
of securities to be registered aggregate registration
registered offering price fee
=====================================================================================
<S> <C> <C> <C>
6.76% Class A Enhanced $142,400,000 100% $49,103
Equipment Notes
7.50% Class B Enhanced $ 54,800,000 100% $18,897
Equipment Notes
8.93% Class C Enhanced $ 65,800,000 100% $22,690
Equipment Notes
=====================================================================================
TOTAL $263,000,000 ---- $90,690
=====================================================================================
The Registrant hereby amends this Registration Statement on such date or dates as may
be necessary to delay its effective date until the Registrant shall file a further
amendment which specifically states that this Registration Statement shall thereafter
become effective in accordance with Section 8(a) of the Securities Act of 1933, as
amended, or until this Registration Statement shall become effective on such date as the
Commission, acting pursuant to said Section 8(a), may determine.
</TABLE>
<PAGE>
CROSS REFERENCE SHEET
---------------------
Item Item Caption Location or Heading
in Prospectus
A. INFORMATION ABOUT THE TRANSACTION
---------------------------------
1. Forepart of the Regis-
tration Statement and
Outside Front Cover
Page of Prospectus........ Facing Page; Cross
Reference Sheet; Outside
Front Cover Page of the
Prospectus
2. Inside Front and Outside Back
Cover Pages of Prospectus.... Inside Front Cover Page
of Prospectus
3. Risk Factors; Ratio of
Earnings to Fixed Charges
and Other Information..... "Prospectus Summary";
"Risk Factors";
"Business";
"Selected Consolidated
Financial and Operating
Data"
4. Terms of the Transaction... "Prospectus Summary";
"Risk Factors"; "The
"The Exchange Offer";
"Description of the
Notes"; "United States
Federal Income Tax
Consequences"; "Plan of
Distribution"
5. Pro Forma Financial
Information................ *
6. Material Contacts With the
Company Being Acquired..... *
<PAGE>
7. Additional Information
Required for Reoffering
by Persons and Parties
Deemed to be Underwriters.. *
8. Interests of Named
Experts and Counsel........ "Independent Auditors";
"Experts"; "Legal
Matters"
9. Disclosure of Commission
Position on Indemnifi-
cation for Securities
Act Liabilities............ *
B. INFORMATION ABOUT THE REGISTRANT
--------------------------------
10. Information With Respect
to S-3 Registrants......... *
11. Incorporation of Certain
Information by Reference... *
12. Information With Respect
to S-2 or S-3 Registrants.. *
13. Incorporation of Certain
Information by Reference... *
14. Information With Respect
to Registrants Other Than
S-2 or S-3 Registrants..... Cover Page of Regis-
tration Statement;
"Prospectus Summary";
"Risk Factors";
"Business"; "Use
of Proceeds"; "Selected
Consolidated Financial
and Operating Data";
"Management's Discussion
and Analysis of Financial
Condition and Results of
Operations";
"Management";
"Security Ownership of
Certain Beneficial Owners
and Management".
<PAGE>
15. Information With Respect
S-3 Companies.............. *
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
--------------------------------------------
16. Information With Respect *
to S-2 or S-3 Companies....
17. Information With Respect
to Companies Other Than
S-2 or S-3 Companies....... *
18. Information if Proxies,
Consents or Authorizations
are to be Solicited........ *
D. VOTING AND MANAGEMENT INFORMATION
---------------------------------
19. Information if Proxies,
Consents or Authorizations
are not to be Solicited
or in an Exchange Offer "Management"; "Security
Ownership of Certain
Beneficial Owners and
Management"
____________________
*Not Applicable
<PAGE>
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 21, 1996
- -------------------------------------------
$263,000,000
------------
Offer to Exchange 6.76% Class A Enhanced Equipment Notes,
7.50% Class B Enhanced Equipment Notes and
8.93% Class C Enhanced Equipment Notes for any and all
outstanding 6.76% Class A Enhanced Equipment Notes,
7.50% Class B Enhanced Equipment Notes and
8.93% Class C Enhanced Equipment Notes
USAir, Inc. ("USAir" or the "Company") hereby offers to
exchange (the "Exchange Offer") (a) up to $142,400,000 in
aggregate principal amount of new 6.76% Class A Enhanced
Equipment Notes (the "New Class A Notes") for up to $142,400,000
in aggregate principal amount of outstanding Class A Enhanced
Equipment Notes (the "Old Class A Notes"), (b) up to $54,800,000
in aggregate principal amount of new 7.50% Class B Enhanced
Equipment Notes (the "New Class B Notes") for up to $54,800,000
in aggregate principal amount of outstanding Class B Enhanced
Equipment Notes (the "Old Class B Notes") and (c) up to
$65,800,000 in aggregate principal amount of new 8.93% Class C
Enhanced Equipment Notes (the "New Class C Notes") for up to
$65,800,000 in aggregate principal amount of outstanding Class C
Enhanced Equipment Notes (the "Old Class C Notes"; the New Class
A Notes, the New Class B Notes and the New Class C Notes are
sometimes collectively referred to as the "New Notes"; the Old
Class A Notes, the Old Class B Notes and the Old Class C Notes
are sometimes collectively referred to as the "Old Notes"; the
New Notes and the Old Notes, collectively, the "Notes").
The Old Notes were issued pursuant to three separate
indentures (each, an "Indenture") dated as of February 15, 1996
between USAir and Wilmington Trust Company, as Indenture Trustee.
The terms of the New Notes are identical in all respects
(including principal amount, interest rate and maturity) to the
terms of the Old Notes for which they may be exchanged in the
Exchange Offer, except that the New Notes are freely transferable
by holders thereof and are issued free from any covenant
regarding registration. The New Notes will evidence the same
debt as the Old Notes and contain terms which are identical to
the terms of the Old Notes that are to be exchanged therefor.
For a complete description of the terms of the New Notes, see
"Description of the Notes." There will be no cash proceeds to
USAir from the Exchange Offer.
- 1 -
<PAGE>
The Old Notes were issued and sold on February 16, 1996 in
transactions not registered under the Securities Act of 1933, as
amended (the "Securities Act"), in reliance upon the exemption
provided in Section 4(2) of the Securities Act (the "Private
Offering"). Accordingly, the Old Notes may not be reoffered,
resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable
exemption from the registration requirements of the Securities
Act is available. The New Notes are being offered hereunder in
order to satisfy the obligations of USAir under a registration
rights agreement (the "Registration Rights Agreement") dated as
of February 15, 1996 between Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc., Chase Securities, Inc. and Lehman Brothers
Inc. (collectively, the "Initial Purchasers") on the one hand and
USAir on the other, relating to the Old Notes. See "The
Exchange Offer--Purposes of the Exchange Offer." New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold and otherwise transferred by
holders thereof (other than any holder which is an "affiliate" of
USAir within the meaning of Rule 405 under the Securities Act)
without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such New Notes are
acquired in the ordinary course of such holders' business and
such holders have no arrangements with any person to participate
in the distribution of such New Notes. Each broker-dealer that
receives New Notes for its own account pursuant to the Exchange
Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The "Letter of
Transmittal" relating to the Exchange Offer states that by so
acknowledging and by delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other
trading activities. USAir will, for a period of 90 days after
the Expiration Date (as defined herein), make this Prospectus
available to any broker-dealer for use in connection with any
such resale. See "Plan of Distribution."
The Notes constitute securities for which there is no
established trading market. Any Old Notes not tendered and
accepted in the Exchange Offer will remain outstanding. USAir
does not currently intend to list the New Notes on any securities
exchange. To the extent that any Old Notes are tendered and
accepted in the Exchange Offer, a holder's ability to sell
untendered Old Notes could be adversely affected. No assurance
can be given as to the liquidity of the trading market for the
Notes.
- 2 -
<PAGE>
The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered for
exchange. The Exchange Offer will expire at 5:00 p.m., New York
City time, on _____________, 1996, unless extended (the
"Expiration Date"). The date of acceptance for exchange of the
Old Notes (the "Exchange Date") will be the first business day
following the Expiration Date. Old Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the
Expiration Date, otherwise such tenders will be irrevocable.
USAir will pay all expenses incident to the Exchange Offer.
See "Risk Factors" for a discussion of certain factors that
should be considered by prospective investors in evaluating the
New Notes.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is ___________, 1996
- 3 -
<PAGE>
AVAILABLE INFORMATION
---------------------
USAir has filed with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-4 (the
"Exchange Offer Registration Statement") under the Securities Act
with respect to the New Notes offered hereby. This Prospectus
does not contain all the information set forth in the Exchange
Offer Registration Statement, certain parts of which are omitted
in accordance with the rules and regulations of the Commission,
and to which reference is hereby made. Statements made in this
Prospectus as to the contents of any contract, agreement or
document referred to are not necessarily complete. With respect
to each such contract, agreement or other document filed as an
exhibit to the Exchange Offer Registration Statement, reference
is made to the exhibit for a more complete description of the
matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. USAir is subject to
the informational requirements of the Securities Exchange Act of
1934, as amended, and in accordance therewith files reports with
the Commission. Such reports and other information concerning
USAir may be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549, Room 1228; The
Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511; and 75 Park Avenue, New York, New
York 10007, 14th Floor. Copies of such material can be obtained
from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such
material may also be inspected and copied at the offices of the
New York Stock Exchange, Inc., 20 Broad Street, New York, New
York 10005.
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED
TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN
THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE
EXCHANGE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY, NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR A SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS
NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
------------
- 4 -
<PAGE>
TABLE OF CONTENTS
-----------------
Page
- ----------------------------------------------------------- ----
Prospectus Summary........................................ 1
Risk Factors.............................................. 28
Use of Proceeds........................................... 47
Description of the Aircraft and the Appraisals............ 48
Selected Financial and Operating Information.............. 50
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 53
Business.................................................. 89
Management................................................ 141
Beneficial Security Ownership............................. 161
The Exchange Offer........................................ 169
Description of the Notes.................................. 180
Plan of Distribution...................................... 208
United States Federal Income Tax Consequences............. 209
Legal Matters............................................. 210
Independent Auditors...................................... 210
Experts................................................... 210
Consolidated Financial Statements......................... 211
------------
- 5 -
<PAGE>
PROSPECTUS SUMMARY
------------------
The following summary does not purport to be complete and is
qualified in its entirety by the detailed information contained
elsewhere in this Prospectus. Capitalized terms used in this
summary and not defined herein shall have the meanings assigned to
them elsewhere in this Prospectus.
The Company
-----------
USAir, a certificated air carrier engaged primarily in the
business of transporting passengers, property and mail, is a
wholly-owned subsidiary of USAir Group, Inc. ("USAir Group").
USAir accounted for approximately 93% of USAir Group's operating
revenues for the fiscal year ended December 31, 1995 and 92% of
USAir Group's operating revenues for the first quarter of 1996.
USAir is USAir Group's principal operating subsidiary. USAir
enplaned more than 57 million passengers in 1995 and was the fifth
largest United States air carrier ranked by revenue passenger miles
("RPMs") in 1995. As of December 31, 1995, USAir provided
regularly scheduled jet service through 108 airports to
approximately 143 cities in the continental United States, Canada,
Mexico, France, Germany and the Caribbean. USAir's executive
offices are located at 2345 Crystal Drive, Arlington, Virginia
22227 (telephone number (703) 418-7000) and its primary connecting
hubs are located at the principal airports in Pittsburgh,
Pennsylvania, Charlotte, North Carolina, Philadelphia,
Pennsylvania, and Baltimore/Washington International Airport
("BWI"). USAir also maintains significant operations at major
airports in the large east coast population centers of Boston, New
York City (LaGuardia Airport ("LaGuardia")) and Washington, D.C.
(National Airport ("Washington National")). When measured by
departures, USAir is the largest or second largest airline at each
of the foregoing airports and is the predominant air carrier in
many smaller eastern cities, such as Albany, Buffalo, Hartford,
Providence, Richmond, Rochester and Syracuse. In addition, USAir
is the leading airline from the Northeast to Florida. As discussed
below in "Business - Significant Impact of Low Cost, Low Fare
Competition," a substantial portion of USAir's RPMs are flown
within or to and from the eastern United States. For fiscal year
1995, approximately 36% of all scheduled flights on the east coast
of the United States were USAir flights. Approximately 64% of
USAir's current flights and 44% of its available seat miles
("ASMs") are represented by intra-east coast flying.
- 6 -
<PAGE>
USAir has an important international alliance with British
Airways Plc ("BA"), a major investor in USAir Group. As of
December 31, 1995, USAir and BA had implemented code sharing from
70 of the 138 airports currently authorized by the United States
Department of Transportation ("DOT"). The USAir/BA alliance also
extends to the sharing of ground services at certain airports and
joint cooperation in areas such as product branding, cargo
services, jet fuel purchasing, frequent traveler programs and
maintenance services.
USAir also code-shares with eleven regional airlines which
operate under the "USAir Express" trade name. USAir has entered
into service agreements with each of the USAir Express carriers.
Through its service agreements with the USAir Express carriers,
USAir provides reservations and, at certain stations, ground
support and other services, in return for service fees. The USAir
Express network feeds traffic into USAir's route system at several
points, including its major hub operations at Pittsburgh,
Charlotte, Philadelphia and BWI. At December 31, 1995, USAir
Express carriers enplaned approximately 9.6 million passengers,
over half of whom connected to USAir flights. USAir also has a
management agreement and code shares with Shuttle, Inc. which
operates under the name "USAir Shuttle." The USAir Shuttle operates
frequent service between LaGuardia and Boston and between LaGuardia
and Washington National.
In January 1996, Stephen M. Wolf was appointed Chairman and
Chief Executive Officer of USAir and of USAir Group. Mr. Wolf
succeeds Seth E. Schofield, who retired after 38 years with USAir.
Mr. Wolf has been a senior executive at United Airlines, Inc.
("United"), The Flying Tiger Line Inc. ("Flying Tigers"), Republic
Airlines, Inc. ("Republic"), Continental Airlines, Inc.
("Continental"), Pan American World Airways ("Pan Am") and American
Airlines, Inc. ("American"). In addition, in February 1996, USAir
announced the executive appointments of Rakesh Gangwal as President
and Chief Operating Officer of USAir and USAir Group and Lawrence
M. Nagin as Executive Vice President- Corporate Affairs and General
Counsel of USAir and USAir Group. Mr. Gangwal has been a senior
officer at Air France and United and Mr. Nagin has held senior
positions at United and Flying Tigers.
- 7 -
<PAGE>
Strategy
- --------
USAir recorded a net loss of $54.9 million for the three
months ended March 31, 1996 compared to a net loss of $101.8
million for the three months ended March 31, 1995. USAir recorded
net income of $33.0 million and operating income of $234.7 million
for the fiscal year ended December 31, 1995 compared with a net
loss of $716.2 million and an operating loss of $517.0 million for
the fiscal year ended December 31, 1994. The year-over-year
improvement reflects a $406.3 million revenue increase coupled with
a decrease in operating expenses of $345.3 million. From 1989
through 1994, USAir incurred substantial losses. Its results of
operations have been adversely affected by, among other factors,
the growth of low cost, low fare competition, particularly in 1994,
and its unit costs, which are the highest of United States air
carriers. USAir has been striving to improve its profitability and
respond to the competitive environment that characterizes the
United States airline industry by:
- Rationalizing the level and geographic distribution of
its capacity;
- Building brand loyalty by improving its product and its
delivery; and
- Reducing its operating costs and aircraft commitments.
Most recently, Stephen M. Wolf, Chairman of the Board of Directors
and Chief Executive Officer of both USAir Group and USAir, and
Rakesh Gangwal, President and Chief Operating Officer of both
companies, have held a series of employee meetings where they
presented their assessment of USAir's competitive position. The
focal point of these meetings was to communicate senior
management's belief that USAir must lower its personnel costs,
increase employee productivity, increase the quality of USAir's
service and customer satisfaction and grow in size to ensure long-
term viability. USAir remains committed to reducing USAir's
personnel costs and improving employee productivity. With regard
to the growth of USAir, USAir believes that internal growth is
preferable but has not excluded other alternatives.
- 8 -
<PAGE>
Capacity and Route Rationalization
- ----------------------------------
Beginning in the spring of 1995, USAir instituted a
significant rationalization of its capacity and routes with the
goals of reducing less profitable non-hub (point-to-point) flying,
emphasizing the quality of departures versus quantity of flights,
reducing excess capacity in strong markets and replacing low demand
jet service with modern turboprop aircraft operated by USAir
Express. The effect of USAir's rightsizing plan has been a
reduction in the number of USAir's departures and its capacity. In
the second half of 1995, departures decreased by 17% and capacity
(as measured by ASMs) decreased 10.8% compared to the second half
of 1994. ASMs decreased by 11.4% in the first three months of 1996
compared to the first three months of 1995. Although USAir's
traffic (as measured by RPMs) also declined as a result of the
rightsizing plan, USAir was successful in retaining a significant
portion of the revenue and traffic from eliminated flights. In the
second half of 1995, USAir achieved a record load factor of 66.2%.
For the full year 1995, USAir's load factor also set a record at
64.7%. USAir's first quarter 1996 load factor was 64.6% (also a
USAir record for the first quarter). For fiscal year 1995, USAir's
departures, ASMs and traffic were down by 10%, 4.7% and 0.9%,
respectively. In addition, by December 31, 1995, USAir non-hub
flying represented less than 10% of its total flying, compared to
approximately 18% at December 31, 1994.
USAir has been seeking to broaden its route portfolio by
leveraging its strong east coast franchise into expanded
transcontinental and international service from the eastern United
States. By diversifying its route structure in this way, USAir can
enhance its long-haul service and increase its average length of
haul. Increasing its length of haul will enable USAir to increase
the average value of tickets sold and reduce the unit cost of
serving each passenger. In 1995, USAir's length of haul increased
4.1% to 664 miles from 638 miles in 1994. Length of haul for the
first three months of 1996 was 673 miles, a 2.1% increase over the
first three months of 1995. Domestically, USAir has added more
flights to the west coast from its hubs. In 1995, USAir retired,
sold, returned or otherwise disposed of 37 operating aircraft while
adding seven Boeing 757s - an aircraft more suitable for
transcontinental operations. At March 31, 1996, USAir operated 34
Boeing 757-200 aircraft and had orders for eight additional 757
aircraft to be delivered in 1998.
- 9 -
<PAGE>
Internationally, USAir has expanded service to the Caribbean
and has re-aligned its international routes in an effort to further
develop Philadelphia and Boston as transatlantic gateways. In this
regard, the DOT recently granted USAir a two-year exemption
authority to operate to Madrid from both Philadelphia and Boston.
USAir intends to begin service to Spain from Philadelphia on June
15, 1996. In addition, USAir recently re-aligned its Frankfurt
service. It increased the number of weekly flights from the East
Coast from 14 to 21 in June 1995 for the summer season and
introduced non-stop service from Philadelphia and Boston. In
February 1996, USAir received final approval from the DOT to serve
Munich, Germany from Philadelphia. USAir will commence Munich
service on May 23, 1996. The number of weekly USAir flights to
Germany will increase to 28 by mid-1996. In April 1996, the DOT
USAir received final approval from the DOT for service to Rome,
Italy from Philadelphia with through service from Los Angeles.
USAir intends to commence Rome service on or about June 1, 1996.
USAir estimates that its transatlantic capacity in 1996 (as
measured by ASMs) will increase by approximately 54% compared to
1995. USAir believes that the further development of international
service from Philadelphia and Boston will enable it to achieve a
competitive advantage by leveraging USAir's existing domestic
network with the strong local transatlantic demand and the
favorable geographic position of these cities.
USAir has been phasing out of the "wet lease" arrangements
with BA and one of the three wet leased Boeing 767-200ER aircraft
was returned to USAir in December 1995. A second aircraft was
returned in February 1996. The remaining aircraft is expected to
be returned to USAir on May 31, 1996. Under the wet lease arrange-
ments, USAir leased three Boeing 767-200ER aircraft, along with
cockpit and cabin crews, to BA in order to serve three routes
between the U.S. and London. Upon termination of the wet lease
arrangements, USAir is utilizing the returned aircraft as part of
USAir's planned expansion of international service. BA did not
exercise its right on January 21, 1996 to purchase additional
preferred stock in USAir Group, as discussed below in "Business-
British Airways Investment Agreement-Provisions Regarding
Additional BA Investments, BA Announcements Regarding No Additional
Investment in USAir Group" and "Risk Factors-Likelihood of No
Further Investment by British Airways."
USAir's reduction in jet aircraft and its continuing efforts
to reduce costs and enhance revenue by eliminating less profitable
routes have resulted in the cessation of or reduction in jet flying
between certain city pairs. In some cases, existing or former jet
routes have been turned over to USAir Express with the goal of
maintaining portions of the revenue base (particularly the hub
connecting traffic) with lower cost operations.
- 10 -
<PAGE>
In 1992, USAir reached an agreement with the creditors of the
Trump Shuttle to manage and operate the Trump Shuttle under the
name "USAir Shuttle" for a period of up to ten years. Under the
agreement, USAir Group has an option to purchase the shuttle
operation on or after October 10, 1996 with an exclusive right to
do so until April 10, 1997. USAir believes that the USAir Shuttle
fosters traveler loyalty towards USAir because of the USAir
Shuttle's participation in USAir's Frequent Traveler Program
("FTP").
Enhanced Customer Service, Performance and Reliability
- ------------------------------------------------------
USAir has undertaken a number of initiatives to build brand
loyalty among its customers with the goal of maintaining and
enhancing its traditional unit revenue premiums over its
competitors. USAir hopes to increase its market share of business
travelers and long-haul customers. The initiatives include:
Focus on Business Traveler. Based upon extensive customer
research, USAir is tailoring its services to meet the demands of
business travelers. USAir is expanding the first-class cabins on
a significant portion of its aircraft, expanding "business centers"
in certain airports, upgrading certain USAir Club facilities and
replacing USAir's on-board phone system to improve service. USAir
also improved business passenger accessibility to its first class
cabins through an expansion program which permits certain
passengers to ride in first class for the price of a full fare
coach ticket. This product is now offered in many of the
transcontinental markets that USAir serves. USAir announced in
April 1996 that it was abandoning its Business Select product, a
business class service offered in certain short-haul markets.
USAir will instead increase the first class cabins on aircraft that
had been modified for Business Select. USAir also believes that
the introduction of its personal travel software, "Priority
TravelWorks", will appeal to many high-volume business travelers by
providing users with more information and greater control over
their travel arrangements.
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<PAGE>
Technology and New Facilities. In addition to "Priority
TravelWorks," USAir is investing in technology that should
positively affect its marketing, operational performance and
customer services. USAir commenced "ticketless travel" (i.e.,
electronic ticketing) in April 1996 in an effort to reduce
distribution costs and increase travelers' convenience and is
actively seeking to expand the scope of ticketless travel to its
international service and on USAir Shuttle flights. In addition,
USAir is testing self-ticketing machines which, if expanded from
the test phase, could further reduce distribution costs and save
time for USAir's customers. Distribution costs currently account
for approximately $1 billion of USAir's annual operating expenses.
USAir has also implemented a new inventory management system that
allows it to better allocate seats within fare levels to maximize
revenues. USAir has created a state-of-the-art operations control
center in Pittsburgh. The center improves decision-making by
coordinating all flight-related functions such as dispatching,
aircraft routing, maintenance and technical support, crew
scheduling and passenger services.
Improved Service Levels. USAir has improved both its
operational performance and attention to customer services. In
1994, USAir ranked ninth in on-time performance among the ten major
United States airlines. USAir improved its operational performance
significantly in 1995 and finished the year third in on-time
performance. USAir is also implementing customer service
enhancements in its international operations and is investing in
the training and development of its customer service employees
through a "Core Curriculum Training Program."
Safety. USAir recently implemented several additional safety
initiatives. In November 1994, USAir created a new position of
Vice President-Corporate Safety and Regulatory Compliance. USAir
has established a new committee of its board of directors, the
Safety Committee, which has oversight of all corporate safety
matters. In addition, USAir retained an aviation consulting firm
to conduct a full audit of USAir's safety operations. In the
opinion of the safety auditors, USAir was being operated safely in
compliance with regulations of the Federal Aviation Administration
(the "FAA").
Cost Reductions
- ---------------
Although USAir has recently demonstrated significantly
improved financial performance, USAir believes that it must
continue to lower its costs (including personnel costs) in order to
compete effectively in a low fare environment.
- 12 -
<PAGE>
Operating Costs. USAir, whose operating costs are the highest
among the United States airlines, is actively pursuing several
initiatives in an effort to further reduce its cost structure.
USAir is working to achieve additional substantial cost savings
through a combination of organizational and structural changes,
reengineering and other initiatives including: centralization of
its purchasing functions; realignment of customer services;
improvements in operations performance to increase crew
productivity; outsourcing of cargo, and communications; and
reengineering of its maintenance operations, finance, reservations,
purchasing, accounts payable, payroll and human resources
functions. USAir has also taken other cost-cutting actions. In
October 1995, USAir closed its Reno, Nevada reservations office as
part of its long-term strategy to reduce costs and improve
productivity. USAir reduced the number of daily departures at
Newark International Airport from 51 as of December 31, 1994 to 14
by December 1995, and plans to eliminate several additional
departures in the coming months, as part of its strategy to use
assets where they can be the most productive. The changes have
resulted in lower staffing levels in customer service and
maintenance.
In February 1995, USAir and several other major U.S. carriers,
including Delta Airlines, Inc. ("Delta"), American, Northwest
Airlines, Inc. ("Northwest") and United, imposed limits on the base
commissions they pay travel agents for domestic air fares. See
"Business - Industry Restructuring and Cost-Cutting." The new
limits on commissions are designed to reduce one of the airlines'
largest expenses. USAir has experienced cost savings due to the
new commission limits.
In March 1994, in an attempt to reduce its annual labor
personnel costs by approximately $500 million through concession
agreements involving wage and benefit reductions, improved
productivity and other cost savings, USAir Group began negotiating
with the unions that represent certain of USAir's employees.
USAir's wages and benefits are the largest single component of its
operating costs (approximately 41% for 1995). In late July 1995,
USAir Group announced that it was ending discussions with the
unions on a wage concession and restructuring package and that it
would concentrate on reducing USAir's labor costs through tradi-
tional collective bargaining. See "Business - Employees." USAir
remains committed to obtaining labor cost reductions.
- 13 -
<PAGE>
Aircraft Commitments. In order to decrease aircraft ownership
costs, facilitate its capacity rationalization plan and reduce its
fleet size and number of fleet types, USAir has deferred new
aircraft deliveries, pursued the sale or lease of certain jet
aircraft and declined to renew leases for certain other aircraft
upon lease expiry. In 1995, USAir reduced its operating fleet by
a net of 37 (including the sale of thirteen Boeing 737-300
aircraft) and eliminated Boeing 727 aircraft from its operating
fleet. USAir recorded a small financial statement gain from the
sales of the above-described 737-300 aircraft to leasing companies.
USAir intends to retire or return to the lessors additional Fokker
F28-4000s and Douglas DC-9-30s in 1996 and 1997.
USAir has no current plans to add new aircraft to its fleet
until January 1998. In May 1994, USAir reached an agreement with
The Boeing Company ("Boeing") to reschedule the delivery of 40
737-300 series aircraft from the 1997 through 2000 time period to
the years 2003 through 2005. In June 1995, USAir reached
agreements with Boeing and Rolls-Royce plc ("Rolls-Royce") to
reschedule the delivery dates for eight 757-200 aircraft from 1996
to 1998. As a result of these recent agreements, USAir's capital
commitments have been substantially reduced for the 1996 to 2000
time period. In addition, USAir has committed financing for a
substantial portion of the purchase price of each of the scheduled
1998 deliveries.
Transaction Overview
--------------------
On February 16, 1996 (the "Closing Date"), USAir issued the
Old Notes, the proceeds of which were used as part of the funds
necessary to repay in full the indebtedness incurred by USAir in
connection with its acquisition of nine Boeing 757-200 aircraft
(each an "Aircraft" and collectively, the "Aircraft"). USAir took
delivery of two of the Aircraft from Boeing in the fourth quarter
of 1994 and seven during 1995. Each of the Aircraft is equipped
with two Rolls-Royce model RB211-535E4 aircraft engines.
The Old Class A Notes, the Old Class B Notes and the Old Class
C Notes were issued in principal amounts not exceeding 32.5%, 45%
and 60%, respectively, on a cumulative basis, of $438,120,000 - the
"Initial Aggregate Appraised Value." "Appraised Value" for an
Aircraft is defined as the lower of the average and median of the
appraisals for such Aircraft as of December 31, 1995 from the
- 14 -
<PAGE>
following three independent aircraft appraisal and consulting firms
commissioned by USAir: AirClaims Limited ("AirClaims"), Aircraft
Information Services, Inc. ("AISI") and BK Associates, Inc. ("BK").
The Initial Aggregate Appraised Value of $438,120,000 was the sum
of the nine Appraised Values.
The Old Notes are and the New Notes will be secured by a
security interest in, among other things, the Aircraft, granted on
the Closing Date by USAir to Wilmington Trust Company, as
collateral agent (the "Collateral Agent") under a Collateral Agency
Agreement (the "Collateral Agency Agreement") entered into by
USAir, the Indenture Trustees, the Liquidity Providers (as defined
herein) and the Collateral Agent. Payments of interest on the
Notes will be supported by three separate Liquidity Facilities (as
defined herein), being provided initially by Westdeutsche
Landesbank Girozentrale, acting through its New York branch
("WestLB New York"), each in an amount sufficient to pay interest
on (but not principal of or premium on) the respective Class of
Notes at the applicable interest rate on three successive
semi-annual Interest Payment Dates (as defined herein).
USAir will make semi-annual payments of interest on, and is
expected to make semi-annual payments of principal of, the Notes
directly to the Collateral Agent. From these payments (as well as
from other payments described herein required to be made by USAir
under the Collateral Agency Agreement and the Liquidity Agreements
(as defined herein)), the Collateral Agent will first reimburse the
Liquidity Providers for amounts owing to such Liquidity Providers
and then pay to the applicable Indenture Trustee for each Class of
Notes interest on and principal of the Notes. The expected final
principal payment date of the Notes is April 15, 2008. Failure to
make an expected payment of principal of the Notes before the Legal
Maturity Date (as defined below) is not an Event of Default (as
defined herein) under the applicable Indenture.
[remainder of page left blank intentionally]
- 15 -
<PAGE>
<TABLE>
<CAPTION>
Summary of Terms of the Notes
Class A Notes Class B Notes Class C Notes
-------------- -------------- -------------
<S> <C> <C> <C>
Aggregate Princi-
pal Amount....... $142,400,000 $54,800,000 $65,800,000
Ratings of Old Notes
on February 16, 1996:
Moody's.......... A2 Baa1 Ba2
S&P.............. A+ A- BBB-
Initial Loan to
Aircraft Value
(cumulative)..... 32.5% 45.0% 60.0%
Expected Average
Life Date........ 02/20/2006 02/20/2006 02/20/2006
Initial Average
Life (in years).. 10.0 10.0 10.0
Interest Payment
Dates............ 04/15 & 10/15 04/15 & 10/15 04/15 & 10/15
Expected Principal
Payment Dates.... 04/15 & 10/15 04/15 & 10/15 04/15 & 10/15
Final Expected
Payment Dates.... 04/15/2008 04/15/2008 04/15/2008
Legal Maturity
Date............. 10/15/2009 10/15/2009 10/15/2009
Minimum Denomi-
nation........... $100,000 $100,000 $100,000
Section 1110 Pro-
tection (1)...... yes yes yes
Liquidity Provider
Ratings.......... A-1+/P-1 A-1+/P-1 A-1+/P-1
Liquidity Facility
Coverage......... 3 semi-annual 3 semi-annual 3 semi-annual
int. pymts. int. pymts. int. pymts.
Initial Liquidity
Facility
Amounts(2)...... $14,439,360 $ 6,165,000 $ 8,813,910
- -----------------------------------------------------------------
(1) The benefits of Section 1110 of the Bankruptcy Code are
available to the Collateral Agent.
(2) The initial available amount of each of the Liquidity
Facilities is sufficient to cover three times the amount of
interest to accrue on the relevant Class of Notes during the first
semi-annual interest period. The aggregate initial amount of the
Liquidity Facilities is $29,418,270.
</TABLE>
- 16 -
<PAGE>
<TABLE>
Aircraft Securing the Notes
---------------------------
The following table sets forth the registration number,
type, in-service date and Appraised Value of each of the
Aircraft:
<CAPTION>
Aircraft
Registration Aircraft Appraised
Number Aircraft Type In-Service Date Values(1)
- ------------ -------------- --------------- ------------
<S> <C> <C> <C>
N625VJ Boeing 757-200 November 1994 $47,710,000
N626AU Boeing 757-200 November 1994 47,920,000
N627AU Boeing 757-200 February 1995 48,330,000
N628AU Boeing 757-200 February 1995 48,330,000
N629AU Boeing 757-200 March 1995 48,740,000
N630AU Boeing 757-200 April 1995 48,750,000
N631AU Boeing 757-200 May 1995 49,170,000
N632AU Boeing 757-200 June 1995 49,380,000
N633AU Boeing 757-200 July 1995 49,790,000
------------
$438,120,000
============
- ------------------------------------------------------------
(1) Appraised Value for each Aircraft means the lower of the
average and median of the appraisals for such Aircraft
commissioned by USAir from AirClaims, AISI and BK as of December
31, 1995. The median appraisal was used in each case.
</TABLE>
[remainder of page left blank intentionally]
- 17 -
<PAGE>
Loan to Value Ratios
--------------------
The following table sets forth loan to value ratios ("LTVs")
for each Class of Notes as of the date specified. The LTV for
any Class of Notes is equal to the outstanding principal amount
of such Class, together in each case with the outstanding
principal amount of the Notes of all Classes senior to such
Class, divided by the "Assumed Aggregate Appraised Value." USAir
does not generally disclose projections of future values. USAir
has no obligation, and does not intend, to prepare updated
projections of the LTVs set forth below.
The table is based on the assumption that the value of each
Aircraft included in the aggregate pool set forth below
depreciates by 2% per year from the Initial Aggregate Appraised
Value. Other rates or methods of depreciation would result in
materially different LTVs and no assurance can be given (i) that
the depreciation rates and method assumed for the purpose of the
table are those most likely to occur or (ii) as to the actual
future value of any Aircraft. The Note balances are calculated
on the assumption that USAir makes all payments of principal when
expected to be made. Thus, the table should not be considered a
forecast or prediction of expected or likely LTVs but simply a
mathematical calculation based on one set of assumptions.
[remainder of page left blank intentionally]
- 18 -
<PAGE>
<TABLE>
Class A
-------
<CAPTION>
Assumed
Aggregate
Appraised Class A Class A
Payment Date Value (1) Balance LTV
- ------------ ----------------- ------------ -------
<S> <C> <C> <C>
Apr. 15, 1996 $438,120,000 $142,400,000 32.5%
Oct. 15, 1996 438,120,000 138,703,000 31.7%
Apr. 15, 1997 429,357,600 137,011,500 31.9%
Oct. 15, 1997 429,357,600 135,320,000 31.5%
Apr. 15, 1998 420,595,200 133,797,650 31.8%
Oct. 15, 1998 420,595,200 132,275,300 31.4%
Apr. 15, 1999 411,832,800 130,895,410 31.8%
Oct. 15, 1999 411,832,800 129,515,520 31.4%
Apr. 15, 2000 403,070,400 128,503,680 31.9%
Oct. 15, 2000 403,070,400 127,491,840 31.6%
Apr. 15, 2001 394,308,000 126,657,177 32.1%
Oct. 15, 2001 394,308,000 124,996,877 31.7%
Apr. 15, 2002 385,545,600 123,842,573 32.1%
Oct. 15, 2002 385,545,600 122,980,798 31.9%
Apr. 15, 2003 376,783,200 120,627,040 32.0%
Oct. 15, 2003 376,783,200 119,285,600 31.7%
Apr. 15, 2004 368,020,800 113,635,200 30.9%
Oct. 15, 2004 368,020,800 110,353,800 30.0%
Apr. 15, 2005 359,258,400 103,923,520 28.9%
Oct. 15, 2005 359,258,400 96,807,604 26.9%
Apr. 15, 2006 350,496,000 88,857,600 25.4%
Oct. 15, 2006 350,496,000 79,804,800 22.8%
Apr. 15, 2007 341,733,600 73,154,400 21.4%
Oct. 15, 2007 341,733,600 63,648,000 18.6%
Apr. 15, 2008 332,971,200 0 0.0%
- -----------------------------
(1) The Assumed Aggregate Appraised Value set forth opposite
April 15, 1996 (but not the Assumed Aggregate Appraised Values
for subsequent periods) is the Initial Aggregate Appraised Value
(see "Description of the Aircraft and the Appraisals"). No
assurance can be given that such value represents the realizable
value of the Aircraft. See "Risk Factors-Limitations Regarding
Aircraft Collateral-Appraisals of Aircraft; Realizable Value" and
"Description of the Aircraft and the Appraisals."
</TABLE>
- 19 -
<PAGE>
<TABLE>
Class B
-------
<CAPTION>
Assumed
Aggregate
Appraised Class B Class B
Payment Date Value (1) Balance LTV
- ------------ ----------------- ------------ -------
<S> <C> <C> <C>
Apr. 15, 1996 $438,120,000 $54,800,000 45.0%
Oct. 15, 1996 438,120,000 53,377,278 43.8%
Apr. 15, 1997 429,357,600 52,726,336 44.2%
Oct. 15, 1997 429,357,600 52,075,393 43.6%
Apr. 15, 1998 420,595,200 51,489,545 44.1%
Oct. 15, 1998 420,595,200 50,903,697 43.6%
Apr. 15, 1999 411,832,800 50,372,672 44.0%
Oct. 15, 1999 411,832,800 49,841,647 43.6%
Apr. 15, 2000 403,070,400 49,452,259 44.2%
Oct. 15, 2000 403,070,400 49,062,871 43.8%
Apr. 15, 2001 394,308,000 48,741,666 44.5%
Oct. 15, 2001 394,308,000 48,102,731 43.9%
Apr. 15, 2002 385,545,600 47,658,518 44.5%
Oct. 15, 2002 385,545,600 47,326,880 44.2%
Apr. 15, 2003 376,783,200 46,421,080 44.3%
Oct. 15, 2003 376,783,200 45,904,852 43.8%
Apr. 15, 2004 368,020,800 43,730,400 42.8%
Oct. 15, 2004 368,020,800 42,467,614 41.5%
Apr. 15, 2005 359,258,400 39,993,040 40.1%
Oct. 15, 2005 359,258,400 37,254,612 37.3%
Apr. 15, 2006 350,496,000 34,195,200 35.1%
Oct. 15, 2006 350,496,000 30,711,398 31.5%
Apr. 15, 2007 341,733,600 28,152,115 29.6%
Oct. 15, 2007 341,733,600 24,493,753 25.8%
Apr. 15, 2008 332,971,200 0 0.0%
- -----------------------------
(1) The Assumed Aggregate Appraised Value set forth opposite
April 15, 1996 (but not the Assumed Aggregate Appraised Values
for subsequent periods) is the Initial Aggregate Appraised Value
(see "Description of the Aircraft and the Appraisals"). No
assurance can be given that such value represents the realizable
value of the Aircraft. See "Risk Factors-Limitations Regarding
Aircraft Collateral-Appraisals of Aircraft; Realizable Value" and
"Description of the Aircraft and the Appraisals."
</TABLE>
- 20 -
<PAGE>
<TABLE>
Class C
-------
<CAPTION>
Assumed
Aggregate
Appraised Class B Class B
Payment Date Value (1) Balance LTV
- ------------ ----------------- ------------ -------
<S> <C> <C> <C>
Apr. 15, 1996 $438,120,000 $65,800,000 60.0%
Oct. 15, 1996 438,120,000 64,091,695 58.5%
Apr. 15, 1997 429,357,600 63,310,089 58.9%
Oct. 15, 1997 429,357,600 62,528,483 58.2%
Apr. 15, 1998 420,595,200 61,825,038 58.8%
Oct. 15, 1998 420,595,200 61,121,592 58.1%
Apr. 15, 1999 411,832,800 60,483,975 58.7%
Oct. 15, 1999 411,832,800 59,846,357 58.1%
Apr. 15, 2000 403,070,400 59,378,807 58.9%
Oct. 15, 2000 403,070,400 59,911,258 58.4%
Apr. 15, 2001 394,308,000 58,525,578 59.3%
Oct. 15, 2001 394,308,000 58,758,388 58.5%
Apr. 15, 2002 385,545,600 57,225,009 59.3%
Oct. 15, 2002 385,545,600 57,826,801 58.9%
Apr. 15, 2003 376,783,200 56,739,180 59.1%
Oct. 15, 2003 376,783,200 55,119,329 58.5%
Apr. 15, 2004 368,020,800 52,508,400 57.0%
Oct. 15, 2004 368,020,800 50,992,135 55.4%
Apr. 15, 2005 359,258,400 48,020,840 53.4%
Oct. 15, 2005 359,258,400 44,732,727 49.8%
Apr. 15, 2006 350,496,000 41,059,200 46.8%
Oct. 15, 2006 350,496,000 36,876,094 42.1%
Apr. 15, 2007 341,733,600 33,803,087 39.5%
Oct. 15, 2007 341,733,600 29,410,382 34.4%
Apr. 15, 2008 332,971,200 0 0.0%
- -----------------------------
(1) The Assumed Aggregate Appraised Value set forth opposite
April 15, 1996 (but not the Assumed Aggregate Appraised Values
for subsequent periods) is the Initial Aggregate Appraised Value
(see "Description of the Aircraft and the Appraisals"). No
assurance can be given that such value represents the realizable
value of the Aircraft. See "Risk Factors-Limitations Regarding
Aircraft Collateral-Appraisals of Aircraft; Realizable Value" and
"Description of the Aircraft and the Appraisals."
</TABLE>
- 21 -
<PAGE>
The Exchange Offer
------------------
Exchange Offer
- --------------
USAir is offering to exchange pursuant to the Exchange Offer
(a) up to $142,400,000 in aggregate principal amount of new 6.76%
Class A Enhanced Equipment Notes for up to $142,400,000 in
aggregate principal amount of outstanding 6.76% Class A Enhanced
Equipment Notes, (b) up to $54,800,000 in aggregate principal
amount of new 7.50% Class B Enhanced Equipment Notes for up to
$54,800,000 in aggregate principal amount of outstanding 7.50%
Class B Enhanced Equipment Notes and (c) up to $65,800,000 in
aggregate principal amount of new 8.93% Class C Enhanced
Equipment Notes for up to $65,800,000 in aggregate principal
amount of outstanding 8.93% Class C Enhanced Equipment Notes.
The terms of the New Notes are identical in all respects
(including principal amount, interest rate and maturity) to the
terms of the Old Notes for which they may be exchanged pursuant
to the Exchange Offer, except that the New Notes are freely
transferable by holders thereof, and are not subject to any
covenant regarding registration under the Securities Act. See
"The Exchange Offer-Terms of the Notes" and "-Terms and
Conditions of the Letter of Transmittal."
Interest Payments
- -----------------
Interest on the New Notes will accrue from the last Interest
Payment Date (defined below) on which interest was paid on the
Old Notes so surrendered or, if no interest has been paid on such
Old Notes, from February 16, 1996.
Minimum Condition
- -----------------
The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered for
exchange.
Expiration Date
- ---------------
The Exchange Offer will expire at 5:00 p.m., New York City
time, on the Expiration Date.
- 22 -
<PAGE>
Exchange Date
- -------------
The date of acceptance for exchange of the Old Notes will be
the first business day following the Expiration Date.
Conditions of the Exchange Offer
- --------------------------------
USAir's obligation to consummate the Exchange Offer will be
subject to certain conditions. See "The Exchange Offer--
Conditions to the Exchange Offer." USAir reserves the right to
terminate or amend the Exchange Offer at any time prior the
Expiration Date upon the occurrence of any such condition.
Withdrawal Rights
- -----------------
Tenders may be withdrawn at any time prior to the Expiration
Date; otherwise, all tenders will be irrevocable.
Procedures for Tendering Notes
- ------------------------------
See "The Exchange Offer--Tender Procedure."
Federal Income Tax Consequences
- -------------------------------
The exchange of Old Notes for New Notes should not be a
taxable exchange for federal income tax purposes. See "United
States Federal Income Tax Consequences."
Effect on Holders of Old Notes
- ------------------------------
As a result of the making of, and upon acceptance for
exchange of all validly tendered Old Notes pursuant to the terms
of, this Exchange Offer, USAir will have fulfilled a covenant
contained in the Registration Rights Agreement, and accordingly
there will be no increase in the interest rate on the Old Notes
pursuant to the terms of the Registration Rights Agreement, and
the holders of the
- 23 -
<PAGE>
Old Notes will have no further registration or other rights under
the Registration Rights Agreement. Holders of the Old Notes who
do not tender their Old Notes in the Exchange Offer will continue
to hold such Old Notes and will be entitled to all the rights and
limitations applicable thereto under the applicable Indenture,
except for any such rights under the Registration Rights
Agreement which by their terms terminate or cease to have further
effectiveness as a result of the making of, and the acceptance
for exchange of all validly tendered Notes pursuant to, the
Exchange Offer. All untendered Old Notes will continue to be
subject to the restrictions on transfer provided for in the Old
Notes and in the applicable Indenture. To the extent that Old
Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Old Notes could be adversely
affected.
Use of Proceeds
- ---------------
There will be no cash proceeds to USAir from the exchange
pursuant to the Exchange Offer.
Terms of the Notes
------------------
New Notes Offered
- -----------------
The form and terms of the New Notes are identical in all
respects (including principal amount, interest rate and maturity)
to the Old Notes except that the New Notes have been registered
under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof and are not subject to any
covenant regarding registration under the Securities Act. The
New Notes will evidence the same debt as the Old Notes and will
be entitled to the benefits of the Indentures. See "Description
of the Notes".
Class A Notes
- -------------
$142,400,000 aggregate principal amount of Class A Enhanced
Equipment Notes.
- 24 -
<PAGE>
Class B Notes
- -------------
$54,800,000 aggregate principal amount of Class B Enhanced
Equipment Notes.
Class C Notes
- -------------
$65,800,000 aggregate principal amount of Class C Enhanced
Equipment Notes.
Interest Payments
- -----------------
Interest Payment Dates
- ----------------------
Each April 15 and October 15, commencing April 15, 1996,
except that, if any such date shall not be a Business Day (as
defined in the Indentures), the Interest Payment Date shall be
the next Business Day.
Interest
- --------
Interest will be paid on each Class of Notes on each
Interest Payment Date at the following interest rates: 6.76% for
the New Class A Notes, 7.50% for the New Class B Notes and 8.93%
for the New Class C Notes. Interest will be calculated assuming
a 360-day year of twelve 30-day months.
[remainder of page left blank intentionally]
- 25 -
<PAGE>
Principal Payments
- ------------------
Principal Payment Dates
- -----------------------
The principal amount of the Notes is due and payable on the
Legal Maturity Date. It is expected that a portion of the
principal amount of each Note will be paid each April 15 and
October 15, commencing October 15, 1996 (each, a "Principal
Payment Date" and, together with the Interest Payment Dates, the
"Payment Dates"). Failure to make an expected payment of
principal before the Legal Maturity Date is not an Event of
Default under the Indentures.
Expected Average Life Date
- --------------------------
The initial expected average life date with respect to the
amortization of each Class of Notes will be February 20, 2006.
Final Expected Payment Date
- ---------------------------
It is expected that the final principal payment on the Notes
will be made on April 15, 2008.
Legal Maturity Date
- -------------------
October 15, 2009 for each Class of Notes (the "Legal
Maturity Date").
Redemption of the Notes
- -----------------------
- 26 -
<PAGE>
Optional Redemption
- -------------------
Any Class of Notes may be redeemed in whole or from time to
time in part at the option of USAir, so long as no Collateral
Access Event (as defined herein) has occurred and is continuing,
at a redemption price equal to the outstanding principal amount
of the Notes to be redeemed, together with accrued interest and,
if any of the Notes are redeemed prior to February 20, 2006, a
Make Whole Premium (as defined herein). See "Description of the
Notes-Redemption." In calculating the Make Whole Premium,
expected payments of principal and interest will be discounted at
the applicable Treasury Yield (as defined herein).
The Notes may be redeemed at par on or after February 20,
2006. Prior to any such redemption, all amounts (if any) then
owing to the Liquidity Providers shall be paid in full.
Mandatory Redemption
- --------------------
Following an Event of Loss (as defined herein), Notes of
every Class shall be redeemed, so long as no Collateral Access
Event has occurred and is continuing, at par plus accrued
interest, in a pro rata amount (based upon the ratio borne by the
initial Appraised Value of the Aircraft subject to such Event of
Loss to the Initial Aggregate Appraised Value). All amounts paid
in connection with any such redemption shall be applied (i) to
the Notes within each Class pro rata in accordance with the then
outstanding principal amount thereof and (ii) pro rata to each of
the unpaid installments of principal of such Notes expected to be
paid on each Principal Payment Date. Prior to any such
redemption, all amounts (if any) then owing to the Liquidity
Providers shall be paid in full. See "Description of the
Notes-Redemption" and "Collateral Agency Agreement-Event of
Loss."
Minimum Denominations
- ---------------------
$100,000 and integral multiples of $1,000 in excess thereof.
- 27 -
<PAGE>
Collateral
- ----------
All amounts payable in respect of the Notes will be secured
pursuant to the Collateral Agency Agreement by a security
interest in, among other things, the Aircraft (collectively, the
"Collateral"). See "Risk Factors-Limitations Regarding Aircraft
Collateral," "Description of the Aircraft and the Appraisals" and
"Description of the Notes-Collateral."
Events of Default
- -----------------
The following constitute Events of Default under each
Indenture: the failure to pay within 15 days of the due date
thereof (i) the outstanding principal amount of the applicable
Class of Notes on the Legal Maturity Date for such Class or (ii)
interest due on any Note on any Interest Payment Date (unless the
Collateral Agent shall have made an Interest Advance with respect
thereto).
Collateral Access Events
- ------------------------
Each Indenture provides that, upon the occurrence and during
the continuance of a Collateral Access Event, the applicable
Indenture Trustee may, subject to notice requirements and grace
periods, accelerate the Notes and, at (but only at) the direction
of the Controlling Party (as defined herein), exercise remedies
against USAir and the Collateral. "Collateral Access Events"
under each Indenture include (subject to notice requirements and
grace periods): (i) the failure by USAir to pay principal of the
applicable Notes when expected, (ii) the failure by USAir to pay
interest or premium on the applicable Notes when due, (iii) the
failure to procure or maintain insurance as provided in the
Collateral Agency Agreement, (iv) the failure to perform certain
covenants under the Collateral Agency Agreement, (v) the falsity
of representations and warranties in the Operative Documents in
any material respect, (vi) certain bankruptcy, insolvency or
reorganization events of USAir and (vii) the occurrence of a
Collateral Access Event under any other Indenture. In addition,
each Indenture provides that the acceleration of one Class of
Notes will result in the acceleration of all of the Notes. The
- 28 -
<PAGE>
Controlling Party shall have the exclusive right to cause and
direct the exercise of remedies following an acceleration of
Notes. See "Description of the Notes-Collateral Agency
Agreement-Collateral Access Events" and "-Collateral Agency
Agreement-Remedies."
Purchase Rights of Noteholders
- ------------------------------
Upon acceleration of the Notes, the holders of each junior
Class of Notes shall have the right to purchase all, but not less
than all, of the Notes of all senior Classes at a purchase price
equal to par plus accrued interest. See "Description of the
Notes-Purchase Rights of Noteholders."
Liquidity Facilities
- --------------------
With respect to each Class of Notes, USAir has entered into
a Liquidity Agreement (collectively, the "Liquidity Agreements")
with the Liquidity Provider for such Class of Notes pursuant to
which such Liquidity Provider has agreed to make advances to the
Collateral Agent (each such advance, an "Interest Advance") to
pay interest on (but not principal of or premium on) the Notes of
such Class in an amount equal, at any time, to three times the
interest payable on such Notes on the next Interest Payment Date
(collectively, the "Liquidity Facilities") to the extent that
payments made by USAir to the Collateral Agent on or prior to the
fifth day after such Interest Payment Date are not sufficient to
pay interest due on such Interest Payment Date on the Notes to
which such Liquidity Facility relates. On the Closing Date, the
amounts available under the Class A Liquidity Facility, the Class
B Liquidity Facility and the Class C Liquidity Facility were
$14,439,360, $6,165,000 and $8,813,910, respectively. The
Liquidity Facilities do not provide for any payment in respect of
principal of or premium on any Class of Notes.
In the event of an acceleration of any Class of Notes the
Liquidity Provider for such Class of Notes shall advance the
entire available amount under such Liquidity Agreement (an
"Acceleration Advance"). The proceeds of each Acceleration
Advance will be deposited into a cash collateral account (each, a
"Cash Collateral Account") maintained at the offices of the
Collateral Agent and used for the same purposes and under the
same circumstances as Interest Advances under the Liquidity
Facility are to be used. See "Description of the Notes-Liquidity
Facilities."
- 29 -
<PAGE>
If at any time the short-term unsecured debt obligations of
a Liquidity Provider are rated lower than A-1 by Standard and
Poor's Ratings Services ("S&P") or lower than P-1 by Moody's
Investors Service, Inc. ("Moody's"), the Collateral Agency
Agreement will provide for replacement of the applicable
Liquidity Facility. If a Liquidity Facility is not replaced in
connection with such a downgrade by S&P or Moody's, a borrowing
in an amount equal to the entire available amount will be made
under such Liquidity Facility (a "Downgrade Advance") and the
proceeds will be deposited into the Cash Collateral Account and
used for the same purposes and under the same circumstances as
Interest Advances under the Liquidity Facility are to be used.
See "Description of the Notes-Liquidity Facilities."
In addition, the Collateral Agency Agreement will provide
for the replacement of a Liquidity Facility (other than a
Liquidity Facility that expires no earlier than 15 days after the
Legal Maturity Date of the applicable Class of Notes) in the
event that it is not extended by the date that is 30 days prior
to the then scheduled expiration date thereof. In such event, a
borrowing in an amount equal to the entire available amount under
such Liquidity Facility will be made (the "Non-Extension
Advance") and the proceeds will be deposited in a Cash Collateral
Account and used for the same purposes and under the same
circumstances as Interest Advances under such Liquidity Facility
are to be used. The initial Liquidity Facilities are scheduled
to expire on February 14, 1997.
Upon an advance of any kind under a Liquidity Facility,
USAir will be obligated to repay to the Liquidity Provider the
amount of such advance together with accrued interest thereon at
the rates and in the manner described herein. Such repayment
obligation and any other amounts payable by USAir under the
Liquidity Agreements will be secured by the Collateral and will
rank senior in right of distribution to all amounts payable to
Noteholders, other than distributions to Noteholders of amounts
advanced in respect of Interest Advances under the respective
Liquidity Facilities.
Liquidity Provider
- ------------------
WestLB New York is serving as the initial Liquidity Provider
for each Class of Old Notes and will serve as Liquidity Provider
for each Class of New Notes. The short-term, unsecured debt
ratings of the Liquidity Providers are A-1+ from S&P and P-1 from
Moody's.
- 30 -
<PAGE>
Subordination of Distributions
- ------------------------------
The Class B Notes are subordinated to the Class A Notes in
right of payment and the Class C Notes are subordinated to the
Class A Notes and the Class B Notes in right of payment. On each
Payment Date, all payments of interest on and principal of the
Class A Notes will be made prior to payments of interest on and
principal of the Class B Notes and payments of interest on and
principal of the Class A Notes and the Class B Notes will be made
prior to payments of interest on and principal of the Class C
Notes. Upon acceleration of the Notes, no payment will be made
on the Class B Notes until all amounts outstanding on or in
respect of the Class A Notes have been paid in full and no
payment will be made on the Class C Notes until all amounts
outstanding on or in respect of the Class A Notes and the Class B
Notes have been paid in full.
Both before and after an acceleration of the Notes, payments
of amounts owing to the Liquidity Providers under the Liquidity
Facilities are payable before any payments may be made to
Noteholders of any Class, except that the Noteholders of each
Class will be entitled to receive and retain amounts available in
respect of Interest Advances under the Liquidity Facility for
such Class of Notes. See "Description of the Notes-Priority of
Distributions."
Intercreditor Rights
- --------------------
At any given time, except as set forth below, only one of
the Class A Indenture Trustee, the Class B Indenture Trustee and
the Class C Indenture Trustee may direct and control the exercise
of remedies in respect of the Collateral (the party so entitled
to act, the "Controlling Party"). Such control will include the
ability to direct the Collateral Agent or applicable Indenture
Trustee as to when, and in what manner, to exercise remedies
under the applicable Indenture.
Except as set forth below, the Class A Indenture Trustee
will be the Controlling Party until all amounts outstanding on or
in respect of the Class A Notes have been paid in full, in which
case the Class B Indenture Trustee will be the Controlling Party
until all amounts outstanding on or in respect of the Class B
Notes have been paid in full, in which case the Class C Indenture
Trustee will be the Controlling Party. Notwithstanding the
- 31 -
<PAGE>
foregoing, if none of the Indenture Trustees acting as
Controlling Party has taken action to exercise remedies in
respect of the Collateral within 24 months following the earlier
of the acceleration of the Notes and the unreimbursed utilization
of the entire available amount under any of the Liquidity
Facilities, the Liquidity Provider for the Class A Notes shall
thereupon become the Controlling Party for all purposes under the
Collateral Agency Agreement until all amounts outstanding in
respect of the Liquidity Facility for the Class A Notes shall
have been paid in full, whereupon the Liquidity Provider for the
Class B Notes shall become the Controlling Party until all
amounts outstanding in respect of the Liquidity Facility for the
Class B Notes shall have been paid in full, whereupon the
Liquidity Provider for the Class C Notes shall become the
Controlling Party until all amounts outstanding in respect of
the Liquidity Facility for the Class C Notes shall have been paid
in full, whereupon the Controlling Party shall be the appropriate
Indenture Trustee.
For a period of nine months after the acceleration of the
Notes, without the consent of a majority in principal amount of
Notes of each Class, if the Indenture Trustee for such Class of
Notes is not the Controlling Party, no Aircraft may be sold if
the net proceeds from such sale would be less than the Minimum
Sale Price for such Aircraft. "Minimum Sale Price" means, with
respect to any Aircraft, the lesser of (i) 75% of the value of
such Aircraft based upon a then-current appraisal and (ii) a pro
rata amount of the total amount then owed by USAir to the
Noteholders and the Liquidity Providers (the allocation for any
such Aircraft shall be based upon the ratio borne by the initial
Appraised Value thereof to the Initial Aggregate Appraised
Value.) See "Description of the Notes-Intercreditor Rights."
Section 1110
- ------------
The Collateral Agent received, on the Closing Date, an
opinion from Fulbright & Jaworski, L.L.P. (special counsel to
USAir) that the Collateral Agent will be entitled to the benefits
of Section 1110 of the Bankruptcy Code ("Section 1110 of the
Bankruptcy Code") with respect to the Aircraft. See "Description
of the Notes-Remedies" for a description of Section 1110 of the
Bankruptcy Code.
- 32 -
<PAGE>
Indenture Trustees
- ------------------
Wilmington Trust Company, Wilmington, Delaware, is acting as
Indenture Trustee, Paying Agent and Registrar for each Class of
Notes.
Collateral Agent
- ----------------
Wilmington Trust Company, Wilmington, Delaware.
Exchange Agent
- --------------
Wilmington Trust Company, Wilmington, Delaware.
RISK FACTORS
------------
In deciding whether to accept the Exchange Offer, holders of
the Old Notes should consider carefully the following specific
risk factors, as well as the other information set forth in this
Prospectus.
Company Related Considerations
------------------------------
Substantial Leverage; Limited Access to New Capital; Liquidity
- --------------------------------------------------------------
USAir is highly leveraged and, as of March 31, 1996, had
long-term debt and capital lease obligations of approximately
$2.7 billion. In addition, as of December 31, 1995, USAir's
minimum lease payment obligations under noncancelable operating
leases totaled approximately $3.4 billion for the years 1996
through 2000 and $6.6 billion thereafter. The ability of USAir
to fulfill these payment obligations will depend upon a variety
of factors, including favorable domestic and international
pricing environments, the absence of adverse general economic
conditions,
- 33 -
<PAGE>
the absence of adverse regulatory changes, continued operating
cost reductions and the ability of USAir to attract new capital.
However, there can be no assurances that any of these factors
will produce an outcome favorable to USAir. For USAir, continued
cost reductions (particularly in personnel costs) are especially
critical in order to enable USAir to become more competitive with
airlines with lower operating costs and those with greater
financial strength.
At March 31, 1996, USAir's unrestricted cash, cash
equivalents and short-term investments totaled approximately $828
million. Factors beyond USAir's control, such as a downturn in
the economy, adverse regulatory changes, intensified industry
fare wars, substantial increases in jet fuel prices or fuel
taxes, adverse weather conditions, negative public perception
regarding safety or further incursions by low cost, low fare
carriers into USAir's markets, could have a material adverse
effect on USAir's prospects, liquidity, financial condition and
results of operations. Because USAir is highly leveraged and
currently has no bank credit or receivables facilities in place
and has limited access to public debt and equity markets, it is
more vulnerable to these factors than are financially stronger
competitors or those with standby funding sources or better
access to such markets. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources." In addition, because of the two
aircraft accidents involving USAir in 1994 and the negative
publicity associated with these accidents and other incidents in
recent years, should any other aircraft accident or incident
involving USAir or its code-share partners occur in the near
future, USAir may be particularly susceptible to adverse
passenger reactions, and its ability to procure sufficient
amounts of insurance on commercially reasonable terms may be
materially impaired.
Loss History
- ------------
Although USAir recorded net income of $33.0 million for
1995, it recorded net losses in excess of $3 billion on revenues
of approximately $36 billion from 1989 through 1994. USAir
recorded a net loss of $54.9 million in the first three months of
1996.
- 34 -
<PAGE>
USAir's cumulative losses through 1994 and in the first
quarter of 1996 have resulted in a common stockholder's deficit
as of March 31, 1996 of $366.1 million. There may be investors
and lenders who have policies that limit or preclude their
investment in or lending to companies with a common stockholder's
deficit and therefore USAir's common stockholder's deficit may
affect its ability to obtain additional financing in the future.
New Chairman and Chief Executive Officer; Other Senior Management
Appointments
- -----------------------------------------------------------------
Seth E. Schofield, a 38-year veteran of USAir, retired in
January 1996 as Chairman and Chief Executive Officer of USAir and
USAir Group. In January 1996, Stephen M. Wolf was appointed by
the board of directors of USAir and USAir Group to serve as
Chairman of the Board and Chief Executive Officer of USAir and of
USAir Group. In addition, Frank L. Salizzoni, retired from his
positions as Director, President and Chief Operating Officer of
USAir and USAir Group in February 1996. Rakesh Gangwal was
appointed by the boards of directors of USAir and USAir Group in
February 1996 to serve as Director, President and Chief Operating
Officer of USAir and USAir Group. Lawrence M. Nagin was
appointed in February 1996 to serve as Executive Vice
President-Corporate Affairs and General Counsel of USAir and
USAir Group. Mr. Nagin replaced James T. Lloyd who was Executive
Vice President and General Counsel of USAir and USAir Group. In
May 1996, John P. Frestel, Jr., Senior Vice President-Human
Resources announced his retirement from USAir, effective July
1996. John R. Long III has been selected as Executive Vice
President-Human Resources and Training. Mr. Long is presently
Executive Vice President-Customer Services of USAir.
Messrs. Wolf and Gangwal have held a series of employee
meetings where these executives presented their assessment of
USAir's competitive position. The focal point of those meetings
was to communicate senior management's belief that USAir must
lower its personnel costs, increase employee productivity,
increase the quality of USAir's customer satisfaction and grow in
size. There has been no determination as to whether and, if so,
to what extent, there may be additional management appointments
or changes in personnel, policies, strategies or day-to-day
management at USAir. Accordingly, in evaluating whether to
accept the Exchange Offer, holders of the Old Notes should bear
in mind that while USAir may continue its current strategies, it
may also consider alternatives,
- 35 -
<PAGE>
which may include, among other things, acquisitions or
dispositions of substantial assets, alliances or business
combinations with another business entity or entities, and
changes in its business or operations such as its route structure
or fleet composition. For further information about Messrs.
Wolf, Gangwal and Nagin, see "Management."
Deferral of Dividends by USAir Group
- ------------------------------------
On September 29, 1994, USAir Group announced that it was
deferring the quarterly dividend payment due September 30, 1994
on the 358,000 outstanding shares of its 9-1/4% Series A
Cumulative Convertible Preferred Stock ("Series A Preferred
Stock"). The Series A Preferred Stock is owned by affiliates of
Berkshire Hathaway Inc. ("Berkshire"). USAir Group has also
deferred quarterly dividend payments on all its other outstanding
series of preferred stock, including the Series F Cumulative
Convertible Senior Preferred Stock (the "Series F Preferred
Stock") and Series T-1 and T-2 Cumulative Convertible
Exchangeable Senior Preferred Stock (the "Series T Preferred
Stock"), both of which are owned by BA, as well as on the
publicly held $437.50 Series B Cumulative Convertible Preferred
Stock (the "Series B Preferred Stock"). On March 13, 1995,
Berkshire announced that it had recorded a pre-tax charge of
$268.5 million to recognize a decline in the value of its
investment in the Series A Preferred Stock that had an original
cost of $358 million. On May 22, 1995, BA announced that it had
made a $200 million provision against its $400 million investment
in preferred stock of USAir Group. USAir Group has not paid a
dividend on its common stock, par value $1.00 per share (the
"Common Stock"), since the second quarter of 1990. As of May 20,
1996, the board of directors of USAir Group had not authorized
the resumption of any dividends on USAir Group's preferred stock
or Common Stock and there can be no assurance when or if such
dividend payments will resume.
Under the terms of the Series A Preferred Stock, Berkshire
has the right to elect two additional directors to the board of
directors of USAir Group after a scheduled dividend payment has
not been paid for thirty days. Berkshire has informed USAir
Group that it does not intend to exercise this right at this
time. Berkshire's Chairman Warren E. Buffett and Vice Chairman
Charles T. Munger served as directors on USAir Group's and
USAir's boards of
- 36 -
PAGE>
directors from January 27, 1993 until November 28, 1995. They
did not stand for re-election as directors in November 1995.
Under the terms of the Series B Preferred Stock, the holders of
that security have the right to elect two additional directors to
the board of directors of USAir Group if six quarterly dividends
are not paid. That right became effective on February 15, 1996.
In May 1996, Berkshire offered to sell the Series A Preferred
Stock to USAir Group. Berkshire has advised that if USAir Group
does not buy back the shares from Berkshire, Berkshire may sell
the Series A Preferred Stock to third parties but Berkshire has
stated it will not knowingly sell the shares to any person who
would own 3% or more of a voting stake in USAir Group as a result
of the purchase. As of March 31, 1996, USAir believes that USAir
Group was legally prohibited from paying dividends on or
redeeming its capital stock in accordance with Section 170 of the
Delaware General Corporation Law. A requisite percentage of
Series B Preferred Stockholders have informed USAir Group that
they would be pursuing the right to elect two additional
directors to USAir Group's board of directors. If Berkshire were
to exercise its right to elect directors and upon the election of
the Series B directors, BA would have the right to designate an
additional nominee for election as director to the board of
directors of USAir Group pursuant to the January 21, 1993
Investment Agreement between USAir Group and BA (as amended, the
"Investment Agreement").
High Personnel Costs
- --------------------
USAir's wages and benefits are the largest single component
of its operating costs (approximately 41% for the year ended
December 31, 1995). USAir's operating costs, and particularly
its personnel costs, are generally higher than those of its
competitors. USAir believes that it must reduce its operating
costs substantially if it is to achieve sustained improved
financial performance. USAir Group began negotiating with the
unions that represent certain of USAir's employees in March 1994
toward its goal of reducing USAir's annual personnel costs by
$500 million through concession agreements involving wage and
benefit reductions, improved productivity and other cost savings.
After reaching agreements in principle with its unions during the
spring of 1995, USAir Group in July 1995 terminated discussions
with the unions on tentative wage concession and restructuring
- 37 -
<PAGE>
packages, which had included equity participation in USAir Group
and representation on USAir Group's board of directors for
USAir's employees, because the Air Line Pilots Association
("ALPA") covering USAir's pilots had made significant additional
demands which were unacceptable. USAir had stated that it
intends to concentrate on reducing its labor costs through
traditional collective bargaining. See "-New Chairman and Chief
Executive Officer; Other Senior Management Changes" and
"Management's Discussion and Analysis of Financial Condition and
Results of Operations - Cost Reduction and Revenue Enhancement
Initiatives." It is not possible to predict whether USAir will
be successful in achieving its desired personnel cost savings.
The contract with the International Association of Machinists
(the "IAM"), covering USAir's mechanics and related employees,
became open for negotiation on October 1, 1995. Talks between
USAir and the IAMs advisory counsel began in late 1995 and
continued during the first quarter of 1996. USAir's contract
with ALPA became open for negotiations on April 30, 1996 and
collective bargaining talks have begun. USAir cannot predict the
outcome of these negotiations at this time or if USAir will be
able to secure meaningful wage and benefit concessions and
productivity improvements from its unionized employee groups.
Possibility of Further Unionization
- -----------------------------------
The Railway Labor Act ("RLA") governs, and the National
Mediation Board (the "NMB") has jurisdiction over, campaigns to
unionize workers. Approximately 65% of USAir's employees are
covered by collective bargaining agreements with various labor
unions, or will be covered by a collective bargaining agreement
for which initial negotiations are in progress. Certain unions
are engaged in efforts to unionize USAir's passenger service
employees. Under the RLA, the NMB could order an election among
a class or craft of eligible employees if a union submitted an
application to the NMB supported by the authorization cards from
at least 35% of the applicable class or craft of employees. If
the NMB ordered an election and a majority of the eligible
employees voted for representation, USAir would be required to
negotiate a collective bargaining agreement with the union that
wins the election. On April 24 and 25, 1996, respectively the
IAM workers and the Communications Workers of America filed
applications with the NMB requesting that an election be held
among USAir's passenger service workers, a class or craft of
approximately 10,000 workers consisting primarily of USAir ticket
counter/gate agents and reservations agents. The NMB is in the
process of determining whether these applications are supported
by sufficient authorization cards to warrant an election. USAir
- 38 -
<PAGE>
cannot predict whether an election will be held among the
passenger service class or craft and the outcome of the election,
if held.
Likelihood of No Future Investments by British Airways
- ------------------------------------------------------
As described in greater detail in "British Airways
Investment Agreement," on January 21, 1993, USAir Group and BA
entered into the Investment Agreement. BA invested approximately
$400 million in certain preferred stock of USAir Group in
accordance with the Investment Agreement. USAir Group has
deferred quarterly dividend payments on all outstanding series of
preferred stock beginning with payments due September 30, 1994.
See "-Deferral of Dividends by USAir Group." The deadline for
BA's election to purchase a certain series of preferred stock of
USAir Group and therefore, to elect to make any further
investment in USAir Group pursuant to the Investment Agreement,
was January 21, 1996 (except that, if the DOT shall approve all
of the transactions contemplated by the Investment Agreement on
or before January 21, 1998, BA may make additional investments in
USAir Group under certain circumstances). BA declined to make any
further investment on or before the January 21, 1996 deadline.
BA stated publicly that it was precluded from making additional
investments under existing DOT policy and that it did not expect
DOT approval to be forthcoming. Pursuant to the Investment
Agreement, BA has the right to maintain its proportionate
ownership of USAir Group's securities under certain circumstances
by purchasing additional shares of certain series. British
Airways has advised USAir Group that it would not exercise the
right (triggered by the issuances of USAir Group Common Stock
pursuant to certain USAir Group benefit plans during the nine
months ended March 31, 1996) to buy additional shares of Series T
Convertible Exchangeable Senior Preferred Stock. See "British
Airways Investment Agreement-Provisions Regarding Additional BA
Investments; BA Announcement Regarding No Additional Investment
in USAir Group and "-Miscellaneous"." In addition, the press and
certain governmental officials of the United States and of the
United Kingdom have suggested that BA and American are involved
in negotiations that may lead to alliances between those two
airlines. American has stated that it has had discussions with a
number of European air carriers regarding alliances. BA has
advised USAir that BA has had discussions with a number of air
carriers worldwide regarding strategic alternatives. USAir
cannot predict whether alliance transactions may be consummated
between BA and any other airlines and if so, how any of the
foregoing might affect USAir.
- 39 -
<PAGE>
Geographical Concentration
- --------------------------
A substantial portion of USAir's operations are to and from
or among cities in the eastern United States. Approximately 64%
of USAir's flights and 44% of its ASMs are represented by
intra-east coast flying. Accordingly, USAir is particularly
susceptible to regional factors such as severe weather,
regionalized downturns in the economy and air traffic control
problems. For example, USAir's revenues were adversely affected
by approximately $55 million as a result of the severe winter
weather during January 1996 and the partial federal government
shutdowns in the first quarter of 1996.
Fokker Aircraft
- ---------------
In March 1996, Fokker Aircraft N.V. ("Fokker"), a Dutch
aircraft manufacturer, was declared bankrupt under the laws of
The Netherlands. In May 1996, Fokker Aircraft U.S.A., Inc.
("FAUSA"), an affiliate of Fokker, advised USAir that it is
winding down its affairs and imminently ceasing operations. As
of December 31, 1995, USAir operated 55 Fokker aircraft.
Although USAir had no outstanding aircraft purchase orders with
Fokker, FAUSA has certain warranty obligations to USAir under
purchase agreements and also supplied aircraft parts and
components to USAir. Although USAir has been advised that
successor entities will supply parts and technical services to
Fokker's airline customers, a disruption in the supply of parts
or components could adversely impact USAir's operations.
Moreover, an adverse market perception of Fokker products could
adversely affect market values of USAir's owned Fokker aircraft
or the ability of USAir to sell or lease retired Fokker products.
As of May 21, 1996, USAir owned 57 Fokker aircraft (20 of which
were operated by lessees of USAir).
- 40 -
<PAGE>
Industry Related Considerations
-------------------------------
General Industry Conditions
- ---------------------------
Demand for air transportation historically has tended to
mirror general economic conditions. During the most recent
economic recession in the United States, the change in industry
capacity failed to mirror the reduction in demand for domestic
air transportation due primarily to continued delivery of new
aircraft and, secondarily, to the operation of certain major U.S.
carriers under the protection of Chapter 11 of the Bankruptcy
Code for extended periods. While industry capacity has leveled
off and the general economy has improved, USAir expects that the
airline industry will remain extremely competitive for the
foreseeable future, primarily due to the dramatic change which
has occurred in industry pricing and which has resulted in
generally lower fares. See "-Significant Impact of Low Cost, Low
Fare Competition."
In 1995, the U.S. airline industry had its best year since
the recession began in July 1990, with several airlines posting
profits, although many of the major carriers continue to be
burdened with large amounts of debt. Unlike the results of some
of its competitors, USAir's results did not improve in 1994.
USAir experienced a pre-tax loss of $716.2 million in 1994. The
entire airline industry experienced further improved results in
1995. USAir's results improved in 1995 as well. Nonetheless,
USAir believes that for the foreseeable future, while the demand
for higher yield "business fares" will remain essentially flat
and relatively inelastic, the lower yield "leisure" market, which
is affected by the general economy, will remain highly price
sensitive. This trend will make it more difficult for the
domestic airlines, including USAir, to sustain meaningful yield
increases in the long run. Therefore, USAir believes it must
reduce its cost structure substantially in order to ensure its
long-term financial stability.
Significant Impact of Low Cost, Low Fare Competition
- ----------------------------------------------------
Most of USAir's operations are in competitive markets.
USAir experiences competition of varying degrees with other air
carriers and with all forms of surface transportation. USAir
competes with at least one major airline on most of its routes
between major cities. Vigorous price competition exists in the
airline industry, and competitors have frequently offered sharply
- 41 -
reduced discount fares in many of these markets. Airlines,
including USAir, use discount fares and other promotions to
stimulate traffic during normally slack travel periods, to
generate cash flow and to increase relative market share in
selected markets. Discount and promotional fares are often
subject to various restrictions such as minimum stay
requirements, advance ticketing, limited seating and refund
penalties. USAir has often elected to match discount or
promotional fares in certain markets in order to compete in those
discounted markets.
The dramatic expansion of low fare competitive service in
many of USAir's markets in the eastern United States during 1994
and USAir's competitive response of reducing its fares up to 70%
in certain affected primary and secondary markets in order to
preserve its market share contributed to large losses in 1994.
In particular, Continental created a high frequency, low fare
product called "Continental Lite." By late 1994, USAir competed
with Continental in primary and secondary markets from which
USAir then generated 46% of its passenger revenue with fare
reductions of up to 70% in certain markets. As discussed below,
in 1995 the airline industry did not generally experience the
deep level of fare discounting prevalent during the last several
years. Continental abandoned its Continental Lite strategy in
1995 and fare levels have somewhat recovered. Nonetheless, USAir
does not believe that there has been a reduction in the public
demand for generally lower air fares. The growth of the
operations of low cost, low fare carriers in USAir's domestic
markets represents an intense competitive challenge for USAir,
which has higher operating costs and fewer financial resources
than many of its competitors. For example, the expansion of
Southwest Airlines, Inc. ("Southwest") into BWI, and in early
1996, Florida, and the growth of ValuJet Airlines, Inc.
("ValuJet") at Washington Dulles and other eastern markets
(including ValuJet's recently commenced service to Pittsburgh and
Charlotte from Atlanta and its expansion to Boston and LaGuardia)
pose a competitive challenge for USAir. USAir currently has low
cost, low fare competition affecting over 45% of its traffic
base. Southwest and ValuJet both have a significant cost
advantage over USAir. In addition, Delta recently announced that
its pilots' union has ratified a new contract that allows for the
creation of a low cost, low fare operation in certain short-haul
markets, principally within the eastern United States. USAir
believes that it must reduce its operating costs substantially if
it is to ensure its long-term financial stability and that
low-cost incursions into markets served by USAir have had a
- 42 -
<PAGE>
material and adverse affect on USAir's financial condition and
results of operations. ValuJet has recently been harmed by
adverse public reaction to a crash of a ValuJet DC-9 in the
Florida Everglades in May 1996 and a related investigation into
the maintenance and operations of ValuJet by the FAA. ValuJet
has temporarily reduced its operations by 50% in order to do a
thorough inspection of its fleet. USAir cannot predict the
result of the ValuJet investigation, the public perception of
ValuJet and whether such circumstances will have a long-term
effect on ValuJet and its operations.
In addition, other low cost carriers may enter other USAir
markets. For example, America West Airlines, Inc. ("America
West") commenced service in April 1994 between Columbus, Ohio,
where it operates a hub, and Philadelphia, where USAir has a hub
operation. Other carriers, including some of the larger
carriers, have also developed or indicated their intent to
develop similar low fare short-haul service, such as United's low
cost, low fare operation in the western United States discussed
below. USAir has stated that it will be competitive on routes
that are important to USAir and has underscored the necessity of
cutting costs to remain competitive with insurgents on these
routes.
Industry Restructuring and Cost-Cutting
- ---------------------------------------
Major carriers that compete with USAir have implemented, or
are in the process of implementing, measures to reduce their
operating costs. For example, United has substantially reduced
its personnel costs as part of a recapitalization transaction
completed in July 1994. United initiated its low cost, low fare
operation in the western U.S. in October 1994. Delta has
recently announced that it has reached agreement with certain of
its employees regarding concessions and has announced progress in
these talks. Delta has also recently turned over several of its
former routes to Delta Connection code-share carriers that have
lower cost structures. American announced a restructuring of its
non-union workforce and is still seeking substantial concessions
and productivity gains from its pilot group. Trans World
Airlines, Inc. ("TWA") has negotiated productivity improvements
with its unionized employees and has recently emerged from
bankruptcy for the second time in less than two years pursuant to
a "pre-packaged"
- 43 -
<PAGE>
reorganization plan approved by a bankruptcy court which reduces
the carrier's debt by approximately 30%. Continental has reduced
capacity and returned non-productive aircraft to lessors. In
early 1995, Southwest announced that its pilots had ratified a
10-year labor contract that provides for no wage increases in the
first five years, providing for grants of stock options to the
pilots instead. USAir expects that the implementation of this
labor contract will further enhance Southwest's low cost
advantage over USAir and other carriers. These actions by
certain of USAir's competitors illustrate the trend among the
major U.S. airlines to restructure in order to reduce their
operating costs and enable them to compete in a low fare
environment. See "Prospectus Summary-Strategy" and "Capacity and
Route Rationalization" above for a discussion of USAir's cost
reduction initiatives.
There are recent examples of companies in the airline
industry which have obtained employee concessions in agreements
that provided for the recapitalization of the companies,
including employee ownership stakes and employee participation in
corporate governance. Most recently, in July 1994, UAL
Corporation ("UAL"), parent of United, consummated the
recapitalization noted above which resulted in majority ownership
and board membership for certain employee groups in exchange for
concessions. In other cases, airlines have filed for bankruptcy
protection under Chapter 11 of the Bankruptcy Code, and some
airlines have ceased operation altogether when their operating
costs remained excessive in relation to their revenues, and their
liquidity became insufficient to sustain their operations.
In 1995, various carriers, including USAir, implemented
cutbacks in service in the eastern U.S. The "intra-east coast"
area represents approximately 64% of USAir's departures and
approximately 44% of its ASMs. USAir has implemented a plan to
cut capacity throughout its system and to emphasize the strength
of its hubs in Pittsburgh, Charlotte, Philadelphia and Baltimore,
as well as other major east coast urban centers. See "Prospectus
Summary-Strategy" and "Capacity and Route Rationalization" above.
The major carriers decreased service in the East by approximately
9.8% year-over-year. However, several smaller carriers increased
the number of departures in this region during the same time
period or have announced plans to introduce or increase service
in this region. The net result was a decrease in jet capacity in
the intra-east coast region of approximately 3.5% for the full
year 1995 from 1994 levels.
- 44 -
<PAGE>
The trend toward globalization of the airline industry has
accelerated in recent years as certain U.S. carriers, including
USAir, have formed marketing and strategic alliances with foreign
carriers. Certain foreign carriers have made substantial invest
ments in U.S. carriers which have frequently been tied to
marketing alliances or, less frequently, reciprocal investments
by the United States carrier in its foreign partner. Foreign
investment in United States air carriers is restricted by statute
and may be subject to review by the DOT and, on antitrust
grounds, by the United States Department of Justice (the "DOJ").
In February 1995, several major U.S. carriers, including
Delta, American, Northwest, United and USAir, imposed limits on
the base commissions they pay travel agents for domestic air
fares. Formerly, most major airlines paid a fixed base
commission of approximately 10% on the price of a ticket for the
distribution of all domestic tickets. The new cap limits base
commission payments to $50 for a round-trip domestic ticket with
a base fare above $500 and $25 for a one-way domestic ticket with
a base fare above $250. The new limits on commissions are
designed to reduce one of the airlines' largest expenses. USAir
has experienced cost savings through its implementation of a
limit on the commissions it pays travel agents for domestic air
fares. As a result of the new limits on commissions, some travel
agents have filed lawsuits against the airlines that imposed
commission caps, including USAir, claiming that the airlines
violated antitrust laws. See "Legal Matters."
Jet Fuel
- --------
Because jet fuel costs represent a significant portion of
USAir's operating costs (approximately 9% for fiscal year 1995),
significant increases in jet fuel costs could materially and
adversely affect USAir's results of operations. Fuel prices
continue to be susceptible to, among other factors, political
events and market factors that USAir cannot control. In the
event of a fuel supply shortage resulting from a disruption of
oil imports or otherwise, higher fuel prices or curtailment of
scheduled service could result.
- 45 -
<PAGE>
In August 1993, the United States increased taxes on
domestic fuel, including aircraft fuel used on domestic routes,
by 4.3 cents per gallon. Airlines were exempt from the tax
increase until October 1, 1995. Pending legislation in Congress
would continue the exemption through September 30, 1997, subject
to termination of the exemption on September 30, 1996 if certain
aviation trust funds are not extended. These aviation trust
funds expired on December 31, 1995 and have not, as of May 20,
1996, been extended. There can be no assurance that the
continuation of the fuel tax exemption will be enacted, or if
enacted, the terms under and the period for which the exemption
will be effective. The additional fuel tax is currently being
collected. Non-extension of the fuel tax exemption would
increase the annual operating expenses of USAir by approximately
$47 million based on projected domestic fuel consumption for
1996.
Regulatory Matters
- ------------------
In the last several years, the FAA has issued a number of
maintenance directives and other regulations relating to, among
other things, retirement of older aircraft, collision avoidance
systems, airborne windshear avoidance systems, noise abatement,
increased inspections and maintenance procedures to be conducted
on older aircraft. See "Business-Regulation." USAir expects to
continue to incur expenditures relating to compliance with noise
and ageing aircraft modifications. In addition, several airports
have increased substantially the rates charged to airlines, and
the ability of airlines to contest these increases has been
restricted by federal legislation, DOT regulations and judicial
decisions.
Additional laws and regulations have been proposed from time
to time which could significantly increase the cost of airline
operations by, for instance, imposing additional restrictions or
requirements on operations. Laws and regulations have also been
considered from time to time that would prohibit, restrict or tax
the ownership of airline routes or takeoff and landing slots.
Also, the award and retention of international routes is governed
by several aviation treaties and agreements between the United
States and foreign governments that are amendable. In addition,
proposals are being considered that would provide that a portion
of the appropriations for the FAA and other aviation governmental
functions be funded pursuant to additional taxes on ticket and
cargo revenue or fees for use of the air traffic control system.
- 46 -
<PAGE>
USAir cannot predict what laws and regulations will be adopted,
what changes to treaties may be effected or whether and how any
of the foregoing might affect USAir, and there can be no
assurance that existing or future laws or regulations will not
adversely affect USAir.
Transaction Considerations
--------------------------
Payments Generally; Scope of Support by Liquidity Facilities
- ------------------------------------------------------------
The Old Notes represent and the New Notes will represent
general payment obligations of USAir. The ability of USAir to
make its expected payments of principal and interest will depend
upon USAir's financial condition. The Liquidity Facilities, each
of which will be in an amount sufficient to pay interest due in
respect of the relevant Class of Notes on three Interest Payment
Dates, are intended to enhance the likelihood of the timely
receipt of interest by the holders of Notes ("Noteholders") in
the event of the failure by USAir to make interest payments on
the Notes. None of the Liquidity Facilities will be available to
pay principal of or premium on any Class of Notes. See
"Description of the Notes-Priority of Distributions" and
"Liquidity Facilities."
Limitations Regarding Aircraft Collateral
- -----------------------------------------
USAir's obligations under the Notes, the Collateral Agency
Agreement, the Indentures and the Liquidity Agreements are
secured by the Collateral, which consists primarily of the
Aircraft.
- 47 -
<PAGE>
Appraisals of Aircraft; Realizable Values
- -----------------------------------------
Appraisals in respect of the Aircraft were prepared by
AirClaims, AISI and BK. Based upon the appraisals of the three
firms, the Aircraft had an Initial Aggregate Appraised Value of
$438,120,000 as of December 31, 1995. See "Description of the
Aircraft and the Appraisals." However, an appraisal is only an
estimate of value and should not be relied upon as a measure of
realizable value; the proceeds realized upon a sale of any
Aircraft may be more or less than its Appraised Value. In
addition, the market value of the Aircraft at any time may be
more or less than their Aggregate Appraised Value. The value of
the Aircraft in the event of the exercise of remedies under the
Collateral Agency Agreement will depend on market and economic
conditions, demand for such Aircraft, the condition of the
Aircraft and other factors at the time. Accordingly, there can
be no assurance that the proceeds realized upon any exercise of
remedies in respect of the Collateral would be sufficient to
satisfy in full payments due on the Notes. If such proceeds were
not sufficient to pay or repay all amounts due on any Class of
Notes, then holders thereof would need to pursue other remedies
against USAir, and their recovery would be limited to amounts
realized in any such proceedings. See "Description of the
Notes-Priority of Distributions."
Maintenance
- -----------
USAir is responsible for the maintenance, service, repair
and overhaul of the Aircraft, as more fully set forth in the
Collateral Agency Agreement. The failure of USAir (or any lessee
of USAir) to adequately maintain, service, repair or overhaul any
of the Aircraft may adversely affect the value of such Aircraft
and thus, upon a liquidation of the Aircraft, may reduce the
proceeds available to repay the holders of the Notes. Under the
Collateral Agency Agreement, the applicable maintenance standards
may vary depending upon the jurisdiction in which an Aircraft is
registered or if an Aircraft is leased by USAir to a lessee.
Notwithstanding compliance by USAir (or any lessee of USAir) with
its obligations under the Collateral Agency Agreement to
adequately maintain, service, repair or overhaul the Aircraft,
the value of the Aircraft may deteriorate. Such a deterioration
in the value of the Aircraft would not, in and of itself,
constitute a breach by USAir of its obligations under the
Collateral Agency Agreement or give rise to the enforcement of
remedies by the Noteholders. See "Description of the Notes-The
Collateral Agency Agreement."
- 48 -
<PAGE>
Insurance
- ---------
USAir is responsible for the maintenance of public
liability, property damage and all-risk aircraft hull insurance
on the Aircraft to the extent described in the Collateral Agency
Agreement; all-risk aircraft hull insurance must at all times be
in an amount not less than the sum of the aggregate outstanding
principal amount of the Notes and the scheduled amount of
interest payable on the Notes on the next Interest Payment Date.
The failure of USAir to adequately insure the Aircraft, or the
retention of self-insurance amounts or deductibles, may adversely
affect the proceeds which could be obtained upon an Event of Loss
and, thus, may reduce the proceeds available to repay the holders
of the Notes.
With respect to any insurance required, USAir may maintain
deductibles and self-insurance amounts to the extent permitted
under the Collateral Agency Agreement. See "Description of the
Notes-Collateral Agency Agreement-Insurance."
Foreclosure
- -----------
The Collateral Agency Agreement does not contain any general
geographic restriction on the ability of USAir (or of any lessee
of USAir) to operate the Aircraft. Although USAir has no current
intention to do so, USAir is permitted, upon compliance with
certain provisions of the Collateral Agency Agreement, to lease
the Aircraft or to register the Aircraft in foreign
jurisdictions. While the Collateral Agent's rights and remedies
in the event of a Collateral Access Event include the right to
obtain possession of the Aircraft, it may be difficult, expensive
and time-consuming for the Collateral Agent to obtain possession,
particularly when an Aircraft located outside the United States
has been registered in a foreign jurisdiction or is leased to a
foreign operator. Any such exercise of the right to foreclose
upon the Aircraft may be subject to the limitations and
requirements of applicable law, including the need to obtain
consents or approvals for deregistration or re-export of the
Aircraft, which may be subject to delays and political risk.
When a defaulting lessee or other permitted transferee is the
subject of a bankruptcy, insolvency or similar event, additional
limitations may apply.
- 49 -
<PAGE>
Furthermore, certain jurisdictions may not accord
recognition to, or recognize the priority of, the Collateral
Agency Agreement or may have no specific laws providing for the
creation, recognition or registration of mortgages over aircraft
such as the Collateral Agency Agreement, or may accord higher
priority to certain other liens or other third party rights over
the Aircraft. Some or all of these factors could limit the
benefits to the Collateral Agent of the security interest in the
Aircraft. See "Description of the Notes-Collateral" and
"-Registration, Possession and Leasing."
Control Over Collateral
- -----------------------
The exercise of remedies under the Collateral Agency
Agreement with respect to the Collateral will be subject to the
control of the Controlling Party. Until all principal, interest
and other amounts payable to the Class A Noteholders shall have
been paid in full, the Class A Indenture Trustee will be the
Controlling Party; thereafter the Class B Indenture Trustee will
be the Controlling Party until all amounts owing to the Class B
Noteholders have been paid in full, whereupon the Class C
Indenture Trustee will be the Controlling Party. Such control by
the Controlling Party will include the ability, subject to
certain limitations, to direct the Collateral Agent in the
exercise of all remedies under the Collateral Agency Agreement
following the occurrence of a Collateral Access Event. In
addition, if an Indenture Trustee acting as Controlling Party has
not taken any action to exercise remedies in respect of the
Collateral within 24 months after the earlier of the acceleration
of the Notes and the unreimbursed utilization of the entire
available amount under any of the Liquidity Facilities, the
Liquidity Provider for the Class A Notes shall thereupon become
the Controlling Party for all purposes under the Collateral
Agency Agreement until all amounts outstanding in respect of the
Liquidity Facility for the Class A Notes shall have been paid in
full, whereupon the Liquidity Provider for the Class B Notes
shall become the Controlling Party until all amounts outstanding
in respect of the Liquidity Facility for the Class B Notes shall
have been paid in full, whereupon the Liquidity Provider for the
Class C Notes shall become the Controlling Party until all
amounts outstanding in respect of the Liquidity Facility for the
Class C Notes shall have been paid in full, whereupon the
Controlling Party shall be the appropriate Indenture Trustee.
See "Description of the Notes-Intercreditor Rights."
- 50 -
<PAGE>
Priority of Distributions
- -------------------------
In general, on each Interest Payment Date prior to the
acceleration of the Notes, amounts owing to the Liquidity
Providers in respect of (x) fees under the Liquidity Facilities,
(y) interest on unreimbursed Interest Advances and (z)
reimbursement of Interest Advances are payable prior to payments
to Noteholders of expected principal of and interest due on any
of the Notes (except for payment of interest made from the
proceeds of Interest Advances (or the portion of other Advances
(as defined in the Collateral Agency Agreement) being applied as
Interest Advances) under the Liquidity Facilities), and expected
principal of and interest due on the Notes are payable in the
following order of priority: expected principal of and interest
on the Class A Notes are payable prior to payments of principal
of and interest on the Class B Notes and expected principal of
and interest on the Class B Notes are payable prior to payments
of principal of and interest on the Class C Notes. Following the
bankruptcy of USAir or the acceleration of the Notes: (i) amounts
owing to the Liquidity Providers are payable prior to payments of
principal of and interest on the Notes (except for payment of
interest made from the proceeds of Interest Advances (or the
portion of other Advances being applied as Interest Advances)
under the Liquidity Facilities), (ii) the total principal of and
interest on the Class A Notes are payable prior to any payments
on account of the Class B Notes and (iii) the total principal of
and interest on the Class B Notes are payable prior to any
payments on account of the Class C Notes.
Limited Market for Notes
- ------------------------
The New Notes are being offered to the holders of the Old
Notes. The Old Notes were offered and sold in February 1996 to
a small number of institutional investors. Prior to the Exchange
Offer, there had been no secondary market for the Old Notes.
There can be no assurance that a secondary market will develop
or, if a secondary market does develop, that it will provide the
Noteholders with liquidity of investment or that it will continue
for the life of the New Notes.
- 51 -
<PAGE>
Consequences of Failure to Exchange
- -----------------------------------
Holders of Old Notes who do not exchange their Old Notes for
New Notes pursuant to the Exchange Offer will continue to be
subject to the restrictions on transfer of such Old Notes as set
forth in the legend thereon as a consequence of the offer or sale
of the Old Notes pursuant to an exemption from, or in a
transaction not subject to, the registration requirements of the
Securities Act and applicable state securities laws. In general,
the Old Notes may not be offered or sold, unless registered under
the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable
state securities laws. USAir does not currently anticipate that
it will register the Old Notes under the Securities Act. Based
on the interpretations by the staff of the Commission, New Notes
issued pursuant to the Exchange Offer in exchange for Old Notes
may be offered for resale, resold or otherwise transferred by
holders thereof (other than any such holder which is an
"affiliate" of USAir within the meaning of Rule 405 under the
Securities Act), provided that such New Notes are acquired in the
ordinary course of such holders' business and such holders have
no arrangement with any person to participate in the distribution
of such New Notes. Each broker-dealer that receives New Notes
for its own account in exchange for Old Notes, where such Old
Notes were acquired by such broker-dealer as a result of market-
making activities or other trading activities, must acknowledge
that it will deliver a prospectus in connection with any resale
or such New Notes. See "Plan of Distribution."
USE OF PROCEEDS
---------------
There will be no cash proceeds to USAir from the exchange
pursuant to the Exchange offer.
- 52 -
<PAGE>
<TABLE>
DESCRIPTION OF THE AIRCRAFT AND THE APPRAISALS
----------------------------------------------
The Aircraft
- ------------
The Aircraft consist of nine Boeing 757-200 aircraft purchased by USAir from Boeing
in the fourth quarter of 1994 and during 1995. USAir's 757 fleet is operated in its North
American route system and between the continental United States and the Caribbean. Each
of USAir's 757-200s is equipped with two Rolls-Royce RB211-535E4 engines and is in
compliance with Stage 3 noise level standards-the most restrictive regulatory standards
currently in effect in the United States for aircraft noise abatement.
The table below sets forth certain additional information for the Aircraft:
Appraisals
----------
<CAPTION>
FAA Mfg. Serial In Service Appraised
Reg. No. Number Date AirClaims AISI BK Values(1)
- --------- ----------- ---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
N625VJ 27246 11/03/94 $45,500,000 $56,610,000 $47,710,000 $47,710,000
N626AU 27303 11/15/94 45,500,000 56,610,000 47,920,000 47,920,000
N627AU 27805 02/01/95 46,400,000 57,210,000 48,330,000 48,330,000
N628AU 27806 02/03/95 47,300,000 57,500,000 48,330,000 48,330,000
N629AU 27807 03/04/95 47,300,000 57,810,000 48,750,000 48,740,000
N630AU 27808 04/01/95 47,300,000 58,100,000 48,750,000 48,750,000
N631AU 27809 05/21/95 47,300,000 58,400,000 49,170,000 49,170,000
N632AU 27810 06/20/95 47,300,000 59,000,000 49,380,000 49,380,000
N633AU 27811 07/16/95 47,300,000 59,000,000 49,790,000 49,790,000
-------------
$438,120,000
=============
- ------------------------------------------------------------------------------------------
[table continued on following page]
- 53 -
<PAGE>
(1) The Initial Aggregate Appraised Value of $438,120,000 is the
sum of the lower of the median and average of the appraisals for
each Aircraft commissioned by USAir from AirClaims, AISI and BK
as of December 31, 1995. The median appraisal was used in each
case.
</TABLE>
Appraised Value
- ---------------
The Appraised Values set forth in the foregoing table were
determined by AirClaims, AISI and BK and by appraisers certified
by ISTAT. Each Appraiser was asked to provide its opinion as to
the fair market value of each Aircraft as of December 31, 1995.
The Aggregate Appraised Value of the Aircraft of $438,120,000
equals the sum of the Appraised Value for each Aircraft. The
Appraised Value for each Aircraft equals the lower of the median
and the average of the three appraisals therefor. All three
appraisals involved "desk-top" analyses with no physical
inspection of the Aircraft or related records. In addition, each
of the Appraisers delivered to USAir a report dated December 31,
1995, copies of which are available from USAir upon request.
[remainder of page left blank intentionally]
- 54 -
<PAGE>
SELECTED FINANCIAL AND OPERATING INFORMATION
--------------------------------------------
SELECTED FINANCIAL INFORMATION (1):
Consolidated Statements of Operations:
<TABLE>
<CAPTION>
Year Ended December 31,
1996*** 1995 1994 1993 1992 1991 1990
------- -------- ------- ------- ------- ------- -------
(In millions)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating Revenues........ $1,740 $6,985 $6,579 $6,623 $6,236 $6,069 $6,138
Operating Expenses........ 1,749 6,750 7,096 6,772 6,621 6,285 6,680
Operating Inc. (Loss) (9) 235 (517) (149) (385) (216) (542)
Income (Loss) before
income taxes and accoun-
ting change............... (55) 37 (716) (375) (590) (284) (427)
Accounting change (2)..... - - - (44) (639) - -
Net Income (Loss)......... (55) 33 (716) (419) (1,228) (284) (427)
Consolidated Balance
Sheet:
Total Assets.............. 6,857 6,824 6,676 6,809 6,718 6,564 6,395
Long-Term Oblig-
ations (3)............ 3,776 3,835 3,889 3,540 3,049 1,956 1,656
Stockholder's Equity
(Deficit)................. (366) (311) (273) 408 862 2,097 2,381
Ratio of Earnings to
Fixed Charges............. 88 1.1 * * * * *
- ----------------------------------------------------------------------------------------
***Three months ended March 31, 1996
</TABLE>
- 55 -
<PAGE>
AIRLINE OPERATING AND FINANCIAL STATISTICS
<TABLE>
<CAPTION>
Year Ended December 31,
1996*** 1995 1994 1993 1992 1991 1990
---------- -------- -------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Scheduled Service
Revenue Passengers
(Millions)......... 12.9 56.7 59.5 53.7 54.7 55.6 60.1
Average Passenger
Journey (Miles).... 673 664 638 656 642 614 592
Revenue Passenger
Miles (Millions).... 8,788 37,618 37,941 35,221 35,097 34,120 35,551
Available Seat
Miles (Millions).... 13,493 58,163 61,027 59,485 59,667 58,261 59,484
Passenger Load
Factor............. 64.6% 64.7% 62.2% 59.2% 58.8% 58.6% 59.8%
Yield................ 17.81c 16.66c 15.61c 17.27c 16.49c 16.67c 16.18c
Break Even Load
Factor (4).......... 67.1% 64.9% 67.3% 61.7% 63.2% 62.7% 64.5%
Revenue per Avai-
lable Seat Mile..... 12.74c 11.80c 10.59c 11.04c 10.38c 10.33c 10.19c
Cost per Available
Seat Mile (4)....... 12.81c 11.40c 11.02c 11.12c 10.85c 10.80c 10.86c
Average Stage
Length (Miles)...... 573 560 536 536 516 495 469
Gallons of Jet Fuel Con-
sumed (Millions).... 266 1,137 1,205 1,161 1,183 1,168 1,283
Cost of Jet Fuel
per Gallon.......... 58.61c 53.23c 53.28c 58.40c 60.94c 65.90c 75.42c
Number of Employees at
End of Period (5)... 39,959 39,900 42,400 45,400 46,200 45,300 49,200
Operating Aircraft at
End of Period....... 396 394 424 441 440 436 454
[table continued on following page]
- 56 -
<PAGE>
***Three months ended March 31, 1996
(1) The selected financial information has been summarized from the
financial statements of USAir included herein and should be read in
conjunction with the notes thereto and in conjunction with the
financial statements contained elsewhere in this Prospectus.
Operating statistics exclude flights operated by USAir under a wet
lease with BA. Financial statistics for the first quarter of 1996
exclude the revenue and expenses (which amounts net to zero)
generated under the BA wet lease.
(2) Cumulative effect of changes in method of accounting for (i)
post-employment benefits other than pensions which was effective as
of January 1, 1993 and (ii) post-retirement benefits other than
pensions (net of income tax benefit of $107 million) effective as
of January 1, 1992.
(3) Long-term obligations include long-term debt, capital leases
and post-retirement benefits other than pensions, non-current.
Long-term debt included $0, $68 million, $0, $105 million, $130
million and $98 million payable to USAir Group at, March 31, 1996,
December 31, 1995, 1994, 1993, 1992 and 1991, respectively. USAir
fully paid its long-term obligation to USAir Group during the
fourth quarter of 1994 and during the first quarter of 1996.
(4) Financial statistics exclude non-recurring charges as well as
revenue and expense generated under the wet lease arrangements with
BA.
(5) Full-time equivalent employees.
* For the years ended December 31, 1994, 1993, 1992, 1991, and
1990, earnings were not sufficient to cover fixed charges.
Additional earnings of approximately $721 million for the year
ended December 31, 1994, $385 million for 1993, $610 million for
1992, $411 million for 1991, and $674 million for 1990 would have
been required to achieve a ratio of 1.0.
**Ratio of earnings to fixed charges is not available for the
quarter ended March 31, 1996.
c = cents
</TABLE>
- 57 -
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
------------------------------------------------
Results of Operations
- ---------------------
The following discussion relates to the financial results and
condition of USAir. USAir is the principal subsidiary of USAir
Group and accounted for approximately 93% of USAir Group's
operating revenues for fiscal year 1995 and 92% for the first three
months of 1996. USAir is a major United States air carrier whose
primary business is transporting passengers, property and mail.
USAir enplaned more than 57 million passengers during 1995 and is
currently the fifth largest domestic air carrier, as measured by
revenue passenger miles. Except where noted, the following
discussion is based primarily upon USAir's financial condition,
results of operations and future prospects.
USAir, whose results include USAir's wholly-owned subsidiary
USAM Corp. ("USAM"), recorded net income of $33.0 million in 1995
compared to a loss of $716.2 million for 1994. USAir recognized a
net loss of $54.9 million for the first three months of 1996
compared to a $101.8 million loss for the same period in 1995.
USAir's improved results in 1995 and for the first quarter of
1996 are mainly attributable to a stable domestic economic climate,
favorable capacity trends in USAir's markets, less fare discounting
and low fare competition and the positive influence of USAir's
cost-reduction and revenue enhancement initiatives. USAir
estimates that severe winter weather within the eastern United
States and the partial shutdowns of the United States government
adversely affected first quarter results by approximately $55
million. The entire domestic airline industry has benefitted from
a stable domestic economic environment and overall favorable
capacity and fare pricing factors. However, USAir's financial
condition, results of operations and future prospects are more
susceptible to an economic downturn and competitive influences than
most of its major competitors due to USAir's high cost structure
amid the growing low cost, low fare environment of the domestic
airline industry.
[remainder of page left blank intentionally]
- 58 -
<PAGE>
Factors Contributing to Improved 1995 Financial Results
- -------------------------------------------------------
USAir realized stronger than anticipated yields (Passenger
Transportation revenue per RPM) in 1995 due in part to a decrease
in industry capacity in the eastern United States and less intense
low fare competition and fare discounting than in recent years.
The eastern U.S. is the primary operating region for USAir and its
regional airline affiliates. In 1995, several major air carriers,
including USAir, implemented reductions in capacity (as measured by
ASMs in the eastern U.S. (see discussion of USAir's capacity
reductions below in "Cost-Reduction and Revenue Enhancement
Initiatives"). Most notably, Continental eliminated its low fare,
"no frills" pricing and marketing strategy, "Continental Lite," in
early 1995. Continental Lite was launched in October of 1993 on
certain routes in the eastern U.S. also served by USAir and was
substantially expanded during 1994 into additional markets also
served by USAir. In an effort to maintain market share, USAir
responded to Continental Lite's competitive threat by selectively
lowering its fares by as much as 70% compared to the fares in
effect prior to Continental Lite's incursion. These fare
reductions affected markets where USAir had previously generated
approximately 46% of its Passenger Transportation revenues. In
addition to Continental's capacity reductions, American and United
also reduced service in the intra-east coast region during 1995.
Overall, during 1995, the mature, established air carriers
decreased capacity in the intra-east coast region by approximately
9.8% versus 1994 levels. However, other air carriers with low
costs of operations and low fare structures ("low cost, low fare"
air carriers) increased capacity in this region during the same
period (see further discussion below in "Current Industry
Conditions - Continued Growth of Low Cost, Low Fare Competition").
The net result was that capacity in the intra-east coast region
decreased by approximately 3.5% year-over-year.
As discussed in further detail below, USAir's recent cost-
reduction and revenue enhancement initiatives contributed positive-
ly to USAir's improved 1995 results. USAir stated in 1994 and
early 1995 that it sought to reduce its annual operating costs by
$1 billion through a combination of labor-related and other cost
reductions. During 1995, USAir achieved its goal of reducing
annual non-labor operating expenses by approximately $500 million
from otherwise expected levels. USAir believes that these savings
will approach $600 million in 1996 from otherwise expected levels.
The anticipated savings in the labor-related areas, the other half
of the targeted annual reduction in operating costs, have not been
realized. USAir's 1995 financial results represent a significant
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improvement over 1994 levels, but USAir believes that it will not
be able to achieve either its short-term or long-term goals without
achieving significant reductions in USAir's personnel costs.
Current Industry Conditions - Continued Growth
of Low Cost, Low Fare Competition
----------------------------------------------
Demand for air transportation has historically mirrored
general economic conditions. During the most recent economic
recession in the United States, the domestic airline industry
experienced a reduction in demand for air transportation without a
corresponding decrease in capacity. The disparity between demand
and capacity was exacerbated by the continued delivery of new
aircraft to domestic air carriers and the operation of certain
major air carriers under the protection of Chapter 11 of the
Bankruptcy Code for extended periods.
The years 1993 through 1995 included the entry and growth of
low cost, low fare air carriers into markets served by USAir and
its regional airline affiliates. Intra-east coast operations
currently represent approximately 64% of USAir's departures and
approximately 44% of its capacity (ASMs). Southwest, a low cost,
low fare air carrier which had not previously provided service to
or within the eastern U.S., inaugurated service from BWI in
September of 1993 at fares substantially below those previously in
place. BWI is one of USAir's hub airports. Southwest expanded
operations from BWI during 1994 and 1995 and initiated service to
Florida from BWI, among other locations, in early 1996. Southwest
also launched intra-Florida service during early 1996. Southwest,
which has a considerable cost advantage over USAir, particularly
with regards to personnel costs, could continue to expand in
markets served by USAir or its regional airline affiliates.
ValuJet, another low cost, low fare air carrier, commenced
operations in October of 1993 by offering service within the intra-
east coast region. By September 30, 1995, ValuJet had 34 aircraft
in its operating fleet and in late 1995 announced that it had
signed an agreement with McDonnell Douglas Corporation for the
purchase of 50 MD-95 aircraft with options for an additional 50 MD-
95 aircraft. Deliveries are scheduled to begin in mid-1999.
ValuJet had announced that it planned to increase its operating
fleet to 60 aircraft by the end of 1996 and its target for the year
2000 was 143 aircraft. ValuJet announced in March 1996 that it
would temporarily slow its growth rate. ValuJet initiated service
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at Boston in 1995 and has recently inaugurated service at
Pittsburgh and Charlotte. USAir and its regional affiliates have
significant operations at these locations. The major airports at
Pittsburgh and Charlotte are USAir's largest hubs. The short-term
effect of ValuJet's expansion into these markets on the Company's
financial condition and future prospects is expected to be minimal
considering the frequency of service ValuJet currently offers.
ValuJet has recently been harmed by adverse public reaction to a
crash of a ValuJet DC-9 in the Florida Everglades in May 1996 and
a related investigation into the maintenance and operations of
ValuJet by the FAA. ValuJet has temporarily reduced its operations
by 50% in order to do a thorough inspection of its fleet. USAir
cannot predict the result of the ValuJet investigation, the public
perception of ValuJet and whether such circumstances will have a
long-term effect on ValuJet and its operations.
In addition to Southwest and ValuJet, other air carriers with
a low cost, low fare strategy have also initiated or announced
intentions to offer or expand service in the intra-east coast
region. Delta has recently announced an agreement with certain
employees that would allow Delta to establish a low cost, low-fare
operation in certain short-haul markets. USAir currently has low
cost, low fare competition affecting over 45% of its traffic base.
In an effort to preserve market share, USAir has typically
responded to the entry of a low cost, low fare competitor into its
markets by matching fares and increasing the frequency of service
in related markets, generally with the result of diluting USAir's
yield in these markets. In some cases USAir has responded by
reducing service in affected markets.
Besides the competitive threat posed by low cost, low fare air
carriers, several of the larger, mature air carriers have developed
or indicated their intention to develop similar low cost, low fare
service. Current industry conditions have forced the larger,
mature air carriers to seek significant cost reductions in order to
remain competitive and financially viable. For example, during
1994, United completed a transaction which traded significant
employee wage concessions and productivity improvements for a
majority ownership stake in the company and seats on its board of
directors. The agreement also allowed United to establish a low
cost, low fare operation labeled "Shuttle by United". The primary
function of this operation is to compete successfully with low
cost, low fare air carriers in mainly secondary or short-haul
markets. During 1993, Continental, TWA and Northwest, were able to
obtain significant wage concessions and productivity improvements
from unionized employees. The employee concessions achieved by
Continental and TWA were obtained in the course of bankruptcy
proceedings of those companies.
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<PAGE>
In 1994, Delta launched a program designed to reduce its unit
operating costs (operating costs per ASM) from approximately 9.30
cents at that time to 7.50 cents by June 1997. Delta announced in
early 1996 that this program to date had helped to reduce unit
costs to 8.61 cents for its fiscal quarter ended December 31, 1995.
Delta's cost reduction program has included significant workforce
reductions. USAir's unit costs were 11.40 cents for 1995. In
addition, Delta has recently announced an agreement with its
pilots, its only unionized employee group, that would include the
establishment of a new low cost, low fare operation centered on
markets serviced by jet aircraft with 100 seats or less. The
stated objective of this new operation, prospectively called "Delta
Express," is to compete effectively with Southwest and ValuJet. A
stated goal of Delta Express would be wage levels approximately 10%
lower than those of Southwest, which has one of the lowest cost
structures in the airline industry. Further, a Delta spokesperson
has stated that Delta would also deploy the new operation to
compete against USAir in certain markets. The ultimate outcome of
Delta's agreement with its pilot's union or its impact on USAir's
ability to obtain similar labor cost reductions is not known at
this time.
The continued growth of Southwest, ValuJet and other low cost,
low fare air carriers in markets served by USAir and its regional
affiliates and the ability of certain other air carriers to lower
their costs of operations continue to pose a growing competitive
threat to USAir. Incursions by low cost, low fare air carriers in
markets served by the Company's airline affiliates are expected to
continue to have an adverse effect on the Company's results of
operations and future prospects and further emphasize the need for
the Company to achieve a significant reduction in USAir's personnel
costs.
Cost-Reduction and Revenue Enhancement Initiatives
--------------------------------------------------
As mentioned above, USAir realized significant savings in non-
labor costs during 1995. These savings involved various
organizational and structural changes, re-engineering, capacity
reductions and other initiatives in support of its three core
business strategies: (1) rationalize the level and geographic
distribution of USAir's capacity; (2) improve USAir's product and
delivery, and; (3) reduce capital requirements and operating costs.
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USAir initiated its "right-sizing" strategy in the Spring of
1995 with the goal of reducing annual system capacity by five
percent and emphasizing the strengths of its hubs at the major
airports in Pittsburgh, Charlotte, Philadelphia and Baltimore, as
well as its operations at other major east coast urban centers.
The capacity reductions focused on either eliminating redundant or
unprofitable routes or replacing jet service on those routes with
service provided by USAir's regional affiliates using turboprop
aircraft. USAir's capacity (ASMs) for 1995 was 4.7% lower than for
1994. Capacity (ASMs) for the second half of 1995, reflecting the
full impact of right-sizing, was 10.8% lower than the comparable
period in 1994. The strengthening of hub operations was achieved
by reducing point-to-point flights (flights between cities that are
not USAir hubs) thereby increasing the utilization of equipment and
personnel at hub locations. The percentage of point-to-point
flights in USAir's schedule was reduced from approximately 18% at
the end of 1994 to about 10% by the end of 1995.
USAir also shifted its focus for transatlantic operations from
Charlotte and Pittsburgh to Boston and Philadelphia to take
advantage of better connecting traffic and the larger population
bases in those cities. Load factors (the percentage of available
seats filled by revenue passengers) for USAir's transatlantic
flights reached historical highs during the second half of 1995.
USAir increased capacity in select transatlantic and transcontinen-
tal markets during 1995 as part of its right-sizing efforts. USAir
has announced that it will begin service to Munich, Germany,
Madrid, Spain and Rome, Italy from Philadelphia in the second
quarter of 1996.
USAir believes that its right-sizing initiatives have produced
substantial financial benefits during 1995 and that those financial
benefits will continue.
USAir has also implemented several programs intended to
enhance its product and level of service. By the end of December
1995, USAir had expanded its code share arrangement with BA to
include 70 of the 138 airports currently authorized by the DOT.
USAir believes that its code sharing arrangement with BA has
produced financial benefits as well as enhanced USAir's image in
the marketplace. BA has publicly stated that its relationship with
USAir has contributed over $150 million in additional revenues and
cost savings. The code sharing arrangement provides USAir with
greater access to international traffic and allows better on-line
connections and coordinated check-in and baggage checking
procedures for its customers.
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<PAGE>
USAir has increased its level of on-time performance among the
major air carriers and has consistently ranked among the top three
air carriers during the second half of 1995, despite the fact that
USAir carried record numbers of passengers during that time period.
In October of 1995, USAir introduced, in conjunction with BA,
personal computer software called "Priority TravelWorks" and
"Executive TravelWorks" that will enable certain high-volume
customers to engage in self-service travel booking through on-line
computer services. USAir introduced a "ticketless" travel option
for customers in April 1996. Besides offering convenience to its
customers, USAir believes that ticketless travel will help reduce
distribution costs which currently account for approximately $1
billion of USAir's annual operating expenses. USAir is working to
expand electronic ticketing to international service and USAir
Shuttle flights. USAir is also working with major computer
reservations systems to make electronic ticketing available to
travel agents.
The Company reached an agreement with The Boeing Company in
1994 which enabled USAir to reschedule the delivery of 40 Boeing
737-series aircraft from the 1997-2000 time period to the years
2003-2005. In addition, as part of the same agreement, USAir
relinquished all of its options to purchase Boeing aircraft during
the 1996-2000 time period. During 1995, USAir reached agreements
with Boeing and Rolls Royce regarding the deferral of eight Boeing
757-200 aircraft deliveries from 1996 to 1998. As part of the
latter Boeing agreements, the delivery dates for progress payments
associated with the previously scheduled 1996 deliveries were
likewise rescheduled. These agreements with Boeing and Rolls Royce
have resulted in a substantial reduction in USAir's expected
capital expenditures for the years 1996 through 2000 (see
additional information regarding the Boeing and Rolls Royce
agreements and scheduled aircraft commitments in Note 4(d) to the
Company's consolidated financial statements). USAir has also
pursued the sale or lease of certain jet aircraft and declined to
renew leases for certain other aircraft upon expiry. In 1995,
USAir added seven 757-200 aircraft to its operating fleet but
eliminated 37 other jet aircraft, including all of its Boeing 727-
200 aircraft. USAir sold thirteen Boeing 737-300 aircraft during
1995.
The other component of the targeted billion dollar reduction
in annual operating costs referred to previously is a significant
reduction in personnel costs. Accordingly, USAir Group began
negotiating with USAir's organized labor groups in March 1994 with
the goal of reducing annual personnel costs by approximately $500
million through voluntary concession agreements involving wage and
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<PAGE>
benefit reductions, improved productivity and other cost savings.
During the Spring of 1995, USAir Group reached agreements in
principle with each of USAir's major unions, but those tentative
agreements were conditioned on, among other things, ratification by
the members of each labor group and the approval of USAir Group's
stockholders and USAir Group's and USAir's boards of directors.
These agreements in principle provided for wage and other conces-
sions in exchange for equity participation in USAir Group, profit
sharing and representation on USAir Group's board of directors for
USAir's labor groups. In July 1995, the membership of the AFA,
which represents USAir's flight attendants, voted not to ratify its
agreement in principle. ALPA which represents USAir's pilots, made
significant additional demands which were unacceptable and
negotiations were thereafter terminated by the Company.
USAir's contract with the employees represented by the IAM
became open for negotiations on October 1, 1995.
Under the Railway Labor Act, a labor contract does not
"expire," but rather becomes amendable on a certain date. Thirty
days prior to that date, either party to the contract may give
notice to the other of its intention to amend the contract, at
which point the collective bargaining process begins. If after a
period of negotiations, the parties cannot reach an agreement, a
federal mediator from the National Mediation Board is brought in to
assist. The process of mediation continues until the National
Mediation Board determines, at its sole discretion, that the
parties have reached an impasse. At that point, the parties enter
a thirty-day "cooling off" period before either party may employ
so-called self-help (e.g., the imposition of contract changes or a
lockout by the company or a strike by the union). While in
negotiations and mediation, both parties are bound by the contrac-
tual terms that were in effect prior to the commencement of the
collective bargaining process.
Personnel costs accounted for approximately 41% of USAir's
operating costs for 1995. USAir currently has the highest unit
labor costs in the domestic airline industry. USAir continues to
believe that its long-term future depends on its success in further
reducing its cost of operations, including personnel costs. USAir
remains committed to obtaining a significant reduction in USAir's
unit labor costs.
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<PAGE>
CEO Succession and Senior Management Changes
--------------------------------------------
In January 1996, USAir Group's and USAir's boards of
directors elected Stephen M. Wolf as Chairman of the Board and
Chief Executive Officer of both companies. Mr. Wolf succeeded Seth
E. Schofield in these capacities. During February 1996, Rakesh
Gangwal was appointed President and Chief Operating Officer of
USAir Group and USAir and Lawrence M. Nagin was appointed Executive
Vice President of Corporate Affairs and General Counsel of both
companies. Messrs. Wolf and Gangwal have recently held a series of
employee meetings where they presented their assessment of USAir's
competitive position. The focal point of these meetings has been
to communicate senior management's belief that USAir must lower its
personnel costs, increase productivity, increase the quality of
USAir's service and customer satisfaction and grow in size to
ensure long-term viability. With regard to the growth of USAir,
USAir believes that internal growth is preferable, but has not
excluded other alternatives.
In May 1996, John P. Frestel, Jr., Senior Vice President-Human
Resources announced that he was retiring from USAir. His duties
will be assumed by John R. Long III, currently Executive Vice
President-Customer Services of USAir.
Discussions With UAL and AMR
----------------------------
USAir Group announced in early October 1995 that it was
engaged in preliminary discussions with both AMR and UAL concerning
possible strategic relationships, up to and including acquisition
of USAir or USAir Group. UAL announced in November 1995 that it
would not pursue the discussions. AMR, which had previously
announced that it would likely not pursue the matter if UAL chose
not to do so, likewise declined to continue the discussions with
the Company.
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<PAGE>
Deferral of Dividends by USAir Group
------------------------------------
USAir Group announced in September 1994 that it had elected to
defer quarterly dividend payments on all outstanding series of its
preferred stock beginning with payments due September 30, 1994.
USAir Group has not paid dividends on its Common Stock since the
second quarter of 1990. As of May 20, 1996, the USAir Group's
board of directors had not authorized the resumption of any
dividends on USAir Group's preferred stock or Common Stock and
there can be no assurance when or if such dividend payments will
resume. As of March 31, 1996, USAir Group believed that it was
legally precluded from paying dividends or repurchasing or
redeeming its capital stock due to the provisions of Section 170 of
the Delaware General Corporation Law (the "Delaware Statute") which
require a Delaware corporation to maintain a capital surplus in
order to pay dividends on or repurchase or redeem its capital
stock. In addition, as of March 31, 1996, USAir Group does not
believe that it can comply with certain provisions of the Delaware
Statute which permit a corporation with a capital deficit to pay
dividends on its capital stock under special circumstances.
Under the terms of the Series A Preferred Stock, its holders,
currently affiliates of Berkshire, have the right to elect two
additional directors to USAir Group's board of directors after a
scheduled dividend payment has not been made for thirty days.
Berkshire has informed USAir Group that it does not intend to
exercise its right at this time. Under the terms of the Series B
Preferred Stock, its holders have the right to elect two additional
directors to USAir Group's board of directors if six quarterly
dividend payments are not paid. That right became effective on
February 15, 1996. A requisite percentage of Series B Preferred
Stock holders informed USAir Group that they would be pursuing the
right to elect two additional directors to the Company's board of
directors. Accordingly, upon the election of the Series B
directors, the holder of the Series F Preferred Stock, the Series
T-1 Cumulative Convertible Exchangeable Senior Preferred Stock,
without par value ("Series T-1 Preferred Stock"), and the Series T-
2 Cumulative Convertible Exchangeable Senior Preferred Stock,
without par value ("Series T-2 Preferred Stock")(the Series T-1 and
Series T-2 Preferred Stock are collectively referred to as the
"Series T Preferred Stock"), an affiliate of BA, would have the
right to nominate an additional director to USAir Group's board of
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<PAGE>
directors pursuant to its Investment Agreement with USAir Group if
Berkshire were to exercise their respective rights to elect
additional directors to USAir Group's board of directors.
The redemption value of the Series A Preferred Stock at March
31, 1996 was $422.3 million (face amount of $358.0 million plus
deferred dividends and interest thereon of $64.3 million). The
redemption values of the Series F and Series T Preferred Stock at
March 31, 1996 were $334.9 million (face amount of $300.0 million
plus deferred dividends and interest thereon at $34.9 million) and
$111.2 million (face amount of $100.7 million plus deferred
dividends and interest thereon of $10.5 million), respectively. The
liquidation preference of the Series B Preferred Stock was $243.5
million (face amount of $213.2 million plus deferred dividends of
$30.3 million) at March 31, 1996.
Industry Globalization and Regulation
-------------------------------------
The trend toward globalization of the airline industry has
accelerated in recent years as certain U.S. and foreign air
carriers have formed marketing alliances. Certain foreign air
carriers have made substantial investments in U.S. air carriers
which have frequently been tied to marketing alliances or, less
frequently, reciprocal investments by the U.S. air carrier in its
foreign partner. Foreign investment in U.S. air carriers is
restricted by statute and may be subject to review by the DOT and,
on antitrust grounds, by the U.S. Department of Justice ("DOJ").
On January 21, 1993, USAir Group and BA entered into the
Investment Agreement under which a wholly-owned subsidiary of BA
has to date purchased certain preferred stock of USAir Group for
$400.7 million. Under the Investment Agreement, USAir and BA have
entered into a code sharing arrangement under which certain
domestic USAir flights, connecting to certain BA transatlantic
flights, may be listed on computerized reservation systems either
under USAir's or BA's two letter designation code, subject to
authorization by the DOT.
The deadline for BA's election to purchase 50,000 shares of
Series C Cumulative Convertible Senior Preferred Stock, without par
value (the "Series C Preferred Stock"), and therefore, subject to
the conditions specified below, to elect to make any further
investment in USAir Group pursuant to the Investment Agreement, was
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<PAGE>
January 21, 1996. Prior to this deadline BA informed USAir Group
that it would not exercise its right to purchase the Series C
Preferred Stock. Because BA did not elect to purchase the Series
C Preferred Stock, the Company currently has the option to redeem
in whole or in part, the Series F Preferred Stock and a like
percentage of the Series T Preferred Stock at the higher of market
value or the price of $10,000 per share, plus accrued dividends.
As mentioned above in "Deferral of Dividends", USAir Group elected
in late September 1994 to defer dividends on its preferred stock
and, as of May 20, 1996, USAir Group's board of directors had not
authorized the resumption of any dividend payments on USAir Group's
capital stock. If the DOT approves all the transactions as
contemplated by the Investment Agreement on or prior to January 21,
1998, BA's purchase of the Series C Preferred Stock may be
accomplished under certain circumstances. The DOT has not yet
approved all the provisions of the Investment Agreement. USAir
Group cannot predict whether or when the purchase of the Series C
Preferred Stock will occur or if BA will make any additional
investment in USAir Group.
In June 1995, the DOT renewed its approval of USAir's and BA's
authority to operate code share service on flights serving 66 U.S.
cities. In addition, the DOT approved an expansion of the USAir
code share authority to 65 new U.S. cities, Bermuda, Nassau and
five Canadian cities. The approval is valid for two years. As of
December 31, 1995, USAir and BA offered code share service to and
from 70 of the 138 airports authorized by the DOT. The DOT may
continue to link further renewals of the code share authorization
to the United Kingdom's ("U.K.") liberalization of U.S. air carrier
access to the U.K. markets. However, the code sharing arrangement
is expressly permitted under the existing bilateral air services
agreement between the U.S. and U.K. USAir expects that the
authorization will be renewed in the future; however, there can be
no assurance that this will occur.
During 1995, the DOT completed its comprehensive examination
of the "high density rule" which limits airline operations at
Chicago O'Hare, New York's LaGuardia and John F. Kennedy
International, and Washington National Airports by restricting the
number of takeoff and landing slots. The DOT has indicated that it
intends to maintain the operating limitations imposed by the rule.
USAir holds a substantial number of slots at LaGuardia and
Washington National.
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<PAGE>
Other
-----
USAir has announced that it is phasing out of the "wet lease"
arrangements with BA by the end of June 1996. Under the wet lease
arrangements, USAir leased Boeing 767-200ER aircraft, along with
cockpit and cabin crews, to BA in order for BA to serve three
routes between the U.S. and London. In conjunction with the
termination of the wet lease arrangements and related to USAir's
relinquishment or divestiture of certain routes to the U.K., BA
agreed to pay USAir a total of $47 million in periodic payments
commencing with the termination of the first of the three wet
leases and continuing annually for nine years. USAir currently
intends to utilize the aircraft returned from BA as part of its
planned 1996 expansion of international service (see "Cost-
Reduction and Revenue Enhancement Initiatives" above). The first
wet lease ended in late December 1995 and, concurrently, BA
remitted the first payment to USAir. A second aircraft was
returned to USAir in February 1996. The final aircraft is
scheduled to be returned on May 31, 1996.
In March 1996, Fokker, a Dutch aircraft manufacturer, was
declared bankrupt under the laws of The Netherlands. Although
USAir had no outstanding aircraft purchase orders with Fokker,
Fokker had certain warranty obligations to USAir under purchase
agreements and also supplied aircraft parts and components to
USAir. Although USAir has been advised that successor entities
will supply parts and technical services to Fokker's airline
customers, a disruption in the supply of parts or components could
adversely impact USAir's operations. An adverse market perception
of Fokker products could adversely affect market values of USAir's
owned Fokker aircraft. As of May 21, 1996, USAir operated 56
Fokker aircraft and owned 57 Fokker aircraft (the latter figure
includes 20 aircraft which are operated by lessees of USAir). See
"Business-Flight Equipment" for additional information.
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Frequent Traveler Program
-------------------------
Under USAir's FTP, participants generally receive mileage
credits equal to the greater of actual miles flown or 500 miles,
effective May 1, 1995 (750 miles before May 1, 1995), for each paid
flight segment on USAir or USAir Express, or actual miles flown on
one of USAir's FTP airline partners. Participants generally
receive a minimum of 500 mileage credits, effective May 1, 1995,
for each paid flight on USAir Shuttle (1,000 miles prior to May 1,
1995). Participants flying on first or business class tickets
generally receive additional credits. Participants may also earn
mileage credits by utilizing certain credit cards, staying at
participating hotels or by renting cars from participating car
rental companies. Mileage credits earned by FTP participants,
which do not expire under current program guidelines, can be
redeemed for various travel awards, including fare discounts, first
class upgrades and tickets on USAir or other airlines participating
in USAir's FTP. Certain awards also include hotel and car rental
awards. Awards may not be brokered, bartered or sold, and have no
cash value.
USAir and its airline partners limit the number of seats
allocated per flight for award recipients through inventory
management techniques. The number of seats available for frequent
travelers varies depending upon flight, day, season and destina-
tion. Award travel for all but USAir's most frequent travelers
generally is not permitted on blackout dates, which correspond to
certain holiday periods in the United States or peak travel dates
to foreign destinations. USAir reserves the right to terminate the
FTP or portions of the program at any time, and the FTP's rules,
partners, special offers, blackout dates, awards and mileage levels
are subject to change without prior notice.
USAir accounts for its FTP under the incremental cost method,
whereby estimated future travel awards are valued at the estimated
average incremental cost of carrying one additional passenger.
Incremental costs include unit costs for passenger food, beverages
and supplies, fuel, reservations, communications, liability
insurance and denied boarding compensation expenses. No profit or
overhead margin is included in the accrual for incremental costs.
The Company periodically reviews the assumptions made to calculate
its FTP liability for reasonableness and makes adjustments to these
assumptions as necessary. No liability is recorded for airline,
hotel or car rental award certificates that are to be honored by
other parties because there is no cost to USAir for such awards.
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<PAGE>
Effective January 1, 1995, USAir increased the minimum mileage
level required for a free domestic flight from 20,000 to 25,000.
FTP participants had accumulated mileage credits for approximately
3,350,000 awards and 3,697,000 awards at December 31, 1995 and
1994, respectively, at the 25,000 mile level required to earn an
award. Because USAir expects that some potential awards will never
be redeemed, the calculations of the accrued liability for
incremental costs at December 31, 1995 and 1994 were based on
approximately 87% and 86%, respectively, of the accumulated
credits. Mileage for FTP participants who have accumulated less
than the minimum number of mileage credits necessary to claim an
award is excluded from the calculation of the accrual. Incremental
changes in FTP liability resulting from redeemed or additional
mileage credits are recorded as part of the regular review process.
USAir's customers redeemed approximately 1,160,000, 927,000
and 841,000 awards for free travel on USAir in 1995, 1994 and 1993,
respectively, representing approximately 9.0%, 7.0% and 8.0% of
USAir's RPMs in those years, respectively. USAir does not believe
that usage of FTP awards results in any significant displacement of
revenue passengers. USAir's exposure to the displacement of
revenue passengers is not significant, as the number of USAir
flights that depart 100% full is minimal. In the second quarter of
1995, the quarter when the highest number of free frequent traveler
trips were flown for the year, for example, fewer than 6.5% of
USAir's flights departed 100% full. During this same quarterly
period, approximately 5.2% of USAir's flights departed 100% full
and also had one or more passengers on board who were traveling on
FTP award tickets.
During 1995, four members of USAir's FTP filed class action
lawsuits against USAir in Illinois, Pennsylvania, California and
New Jersey state courts, alleging breach of contract relating to
changes made to USAir's FTP effective December 31, 1989 and/or
January 1, 1995. A similar lawsuit has been pending in California
state court since 1989. The lawsuits seek unspecified damages and
an injunction against allegedly objectionable changes to USAir's
FTP and any subsequent retroactive changes to the FTP. See "Legal
Matters." USAir denies the allegations made in the lawsuits and
intends to vigorously defend itself. In addition, the DOT has
expressed concern about potential consumer fraud relating to
frequent traveler programs and their restrictions on the use of
awards. It is uncertain whether USAir will be named party in any
further litigation or if the DOT will take any action with respect
to frequent traveler programs. The ultimate resolution of these
lawsuits or potential lawsuits or possible DOT actions and the
potential impact on the Company's results of operations and
financial condition cannot be predicted at this time.
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Results of Operations
- ---------------------
First Quarter of 1996 Compared with First Quarter of 1995
---------------------------------------------------------
USAir recorded a net loss of $54.9 million for the first
quarter of 1996, an improvement of $46.9 million (or 46.1%) over
its $101.8 million loss for the first quarter of 1995.
During the first quarter of 1996, USAir reduced capacity (ASMs) by
11.4% versus first quarter of 1995. For the same comparative
periods, USAir boarded 6.0% fewer scheduled service revenue
passengers and experienced a 4.1% decrease in scheduled service
revenue passenger miles (scheduled service revenue passengers
multiplied by the number of miles that they are flown or "RPMs"),
but realized an 8.8% increase in yield (revenue per RPM) and a 4.9
percentage point increase in load factor (percentage of seats
occupied by revenue passengers). The capacity decrease reflects
USAir's schedule reductions during mid-1995 and the effects of the
harsh weather experienced in the eastern United States during the
first quarter of 1996. The Company estimates that approximately
1.5% of the quarter-over-quarter capacity decrease is due to
weather factors. USAir believes that it has been able to recapture
most of the revenues from flights eliminated as the result of its
schedule reductions. USAir's capacity (ASMs) for full-year 1996 is
expected to be 2.5% less than for full-year 1995.
The increase in yield for the first quarter of 1996 as
compared to the first quarter of 1995 was primarily driven by
capacity and pricing factors that prevailed during the first
quarter of 1995, as well as select fare increases that were put in
place by USAir during the first quarter of 1996. During the first
quarter of 1995, USAir was facing considerable competitive pressure
from the low fare, "no frills" product, "Continental Lite," offered
by Continental. In response to Continental Lite, USAir selectively
reduced fares in certain markets to maintain market share.
Continental eliminated its Continental Lite operation early in the
second quarter of 1995. USAir estimates that its yield will
increase marginally for the second quarter of 1996 as compared to
the second quarter of 1995, but remain relatively flat or decrease
slightly as compared to 1995 results for the remainder of 1996 due
to competitive factors.
- 73 -
<PAGE>
USAir's unit cost, or cost per ASM, was 12.81 cents for the
first quarter of 1996, a 15.6% increase versus the first quarter of
1995. This increase is primarily the result of relatively flat
operating expenses applied over 11.4% less capacity (ASMs). USAir
estimates that its unit cost for full-year 1996 will be
approximately 8% higher than for full-year 1995, reflecting
slightly higher operating expenses and less capacity year-over-
year. However, this estimate is dependent on a number of factors
that are generally outside of the Company's control, including, for
example, aviation fuel prices and weather-related factors.
Operating Revenues
- ------------------
Passenger Transportation - USAir's Passenger Transportation
revenues increased $65.0 million, or 4.4%. USAir's increase is the
result of an 8.8% increase in yield partially offset by a 4.1%
decrease in scheduled service RPMs. As mentioned above, USAir
selectively increased fares during the first quarter of 1996. In
addition to other factors discussed previously, the Company's
Passenger Transportation revenues may have been stimulated by the
expiration of the 10% Federal Transportation Tax on January 1,
1996. USAir stopped collecting this tax from customers when it
lapsed. The Company cannot estimate the dollar impact of the lapse
of this tax on its Passenger Transportation revenues due to the
complexity and number of factors that contribute to the Company's
performance in this area.
Other Operating Revenues - Fees received by USAir from USAir
Express carriers (other than the fees USAir receives from USAir
Group's three wholly-owned regional air carriers) increased due to
higher passenger volumes and a higher per-passenger fee structure.
In addition, USAir had increased revenues from USAir Club
membership renewals (a special renewal incentive program was
offered during the first quarter of 1996) and reservation
cancellation fees. Revenues received from the wet lease arrangement
with British Airways decreased approximately $6.9 million due to
the phase-out of these arrangements. Increases in this category are
largely offset by increases in the Other Operating Expenses
category.
- 74 -
<PAGE>
Operating Expenses
- ------------------
Personnel Costs - Interest rate-driven increases in pension and
post-retirement benefits expenses, contractual wage increases that
USAir's pilot and flight attendant employee groups received in
January 1996 and wage increases received by certain non-contract
employees effective January 1, 1996, combined to more than offset
personnel complement decreases. USAir's pilots and flight
attendants also received contractual wage increases in January 1995
and July 1995, respectively, and USAir's mechanics received
contractual wage increases in March 1995. USAir had approximately
39,959 full-time equivalent employees on March 31, 1996 versus
41,887 full-time equivalent employees on March 31, 1995. The
Company also recognized expenses of approximately $10.1 million
during the first quarter of 1996 related to restricted stock
grants, sign-on bonuses, severance payments and other compensation
related to recent management changes. The Company expects to
recognize additional expenses related to executive compensation
during the second quarter of 1996. The Company did not recognize
expenses related to profit sharing plans during the first quarter
of 1996, but expects to record such expenses from the second
quarter of 1996 through the end of the year, subject to the
Company's profitability and the terms of the profit sharing plans.
Aviation Fuel - Consumption decreased approximately 33 million
gallons, but was offset by the effects of a 6.55 cent increase in
the average cost of aviation fuel per gallon. USAir experienced
even higher aviation fuel prices during April 1996; however, the
Company cannot predict whether or not this trend will continue.
Sustained increases in the price of aviation fuel would have a
materially adverse effect on the Company's results of operations.
Based on current consumption, each one cent increase in USAir's
cost of aviation fuel per gallon translates into an increase of
approximately $11 million in USAir's annual aviation fuel expense.
See Other Operating Expenses below related to federal taxes on
aviation fuel.
Commissions - Decreased primarily due to the effects of the revised
rate structure for commissions paid to travel agencies, which went
into effect during February 1995.
Other Rent and Landing Fees - Decreased due mainly to credits
received by USAir from certain airport facilities related to 1995
activity (these facilities experienced lower operating costs than
expected) and an increase in the sublease of certain facilities to
third parties. USAir also experienced a slight decrease in landing
fees expenses quarter-over-quarter due to capacity reductions.
- 75 -
<PAGE>
Aircraft Maintenance - Efficiencies gained from re-engineering
efforts in USAir maintenance areas and the effects of fewer
operating aircraft in USAir's fleet were more than offset by timing
factors and an increase in the rate-per-engine USAir pays to an
outside contractor to overhaul certain jet engines.
Aircraft Rent - Increased due primarily to two leased Boeing 767-
200ER aircraft re-entering USAir's operating fleet during the first
quarter of 1996. USAir recognized expenses related to these two
aircraft in the Other Operating Expenses category while they were
operated by British Airways (see also Other Operating Revenues).
Depreciation and Amortization - Decreased due mainly to fewer owned
aircraft in USAir's operating fleet. During 1995, USAir sold 13
owned Boeing 737-300 aircraft and took delivery of 7 new Boeing
757-200 aircraft.
Other Operating Expenses - Increased primarily due to additional
Federal taxes on aviation fuel and increases in insurance, de-icing
fluid and communications-related costs. The Federal Excise Tax on
Transportation Fuels, which USAir became obligated to pay beginning
October 1, 1995, totaled approximately $10 million for the first
quarter of 1996. Expenses related to the wet lease arrangements
with British Airways decreased approximately $6.9 million due to
the recent termination of two of the three wet leases (see also
Other Operating Revenues and Aircraft Rent).
Other Income (Expense)
- ----------------------
Interest Income - Increased due mainly to higher Cash and Cash
Equivalents and Short-Term Investments balances period-over-
period.
Interest Expense - Decreased primarily as the result of less long-
term debt outstanding period-over-period. USAir made early debt
repayments totaling approximately $202.1 million during 1995.
- 76 -
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Net cash used for operations was $12.9 million for the first
quarter of 1996. As of March 31, 1996, Cash and Cash Equivalents
totaled $782.7 million and Short-Term Investments totaled $45.5
million. USAir also had $99.0 million deposited in trust accounts
to collateralize letters of credit and worker's compensation
policies at quarter-end.
The Company is highly leveraged. USAir requires substantial
working capital in order to meet scheduled debt and lease payments
and to finance day-to-day operations. In addition, USAir currently
does not have access to a short-term credit or receivables sale
facilities. However, based on current projections, the Company
expects to satisfy its liquidity requirements for the remainder of
1996 through a combination of cash on hand and cash flows from
operations. USAir has committed financing for a significant
portion of the purchase price for each of its scheduled 1998
aircraft deliveries. The Company's expectations are subject to
revision. Changes in certain factors that are generally outside the
Company's control, such as the general economic environment,
intensified competition from low cost, low fare carriers or
operations and the price of aviation fuel, could have a materially
adverse effect on the Company's liquidity, financial condition and
results of operations.
Investing activities during the first quarter of 1996 included
cash outflows of $31.4 for the acquisition of assets ($3.4 million
related to progress payments for Boeing 757-200 aircraft scheduled
for delivery in 1998 and $28.0 million related to the purchase of
rotables, hush kits, computer equipment and various ground support
equipment). The Company's Short-Term Investments increased by $25.7
million during the period and the Other investing uses of cash
category includes $12.2 million related to the purchase of debt
issued by Shuttle, Inc. The net cash used by investing activities
during the first quarter of 1996 was $64.5 million.
Net cash used by financing activities during the first quarter
of 1996 was $19.5 million. USAir sold the Old Notes during the
first quarter of 1996 through a private placement offering under
Securities and Exchange Commission Regulation 144A. USAir used the
proceeds from the offering as part of the funds necessary to repay
in full the indebtedness incurred in connection with certain 757-
200 aircraft delivered to USAir in 1994 and 1995. The transaction
is reflected on the Company's Condensed Consolidated Statements of
- 77 -
<PAGE>
Cash Flows as proceeds from the issuance of debt of $103.0 million
and a "non-cash" issuance of debt of $160.0 million. The non-cash
component reflects proceeds that USAir directed to reduce debt and
pay underwriter's fees at the time of the offering. USAir used cash
proceeds it received from the offering and additional funds to make
debt repayments of approximately $105.5 million immediately
following the offering. The Old Notes are secured by the Aircraft.
In addition to the sale of the Old Notes, the Company made
scheduled debt repayments of approximately $17.0 million during the
first quarter of 1996. USAir also incurred new debt of $4.6 million
associated with progress payments for Boeing 757-200 aircraft
scheduled for delivery in 1998. The $4.6 million is reflected as
non-cash activity in the Company's Condensed Consolidated Statement
of Cash Flows because USAir incurred the related debt in
conjunction with the payment of the progress payments. As mentioned
above, USAir has committed financing for a significant portion of
the purchase price for each of its scheduled 1998 aircraft
deliveries.
As of March 31, 1996, USAir's ratio of current assets to
current liabilities was .59 to 1 and the debt component of USAir's
capitalization structure was greater than 100% due to a net capital
deficiency.
1995 Compared with 1994
-----------------------
USAir recorded net income of $33.0 million for 1995 which
represents an improvement of $749.2 million over its 1994 results.
USAir's yield was 16.66 cents for 1995, a 6.7% improvement
versus 1994. The stronger than anticipated increase in yield
primarily resulted from the effects of the factors discussed in
"Factors Contributing to Improved 1995 Financial Results" above.
USAir's capacity (ASMs) for 1995 decreased by approximately 4.7%.
RPMs, however, decreased less than 1% and USAir's load factor was
64.7% for 1995, a historical high. USAir's unit costs increased to
11.40 cents from 1994's 11.02 cents primarily due to the capacity
reductions that occurred in 1995. USAir's capacity (ASMs) for 1996
is expected to be approximately 3% less than for 1995 reflecting
the full-year effects of USAir's right-sizing initiatives. USAir's
unit costs are expected to increase for 1996 mainly due to higher
Personnel Costs and Aviation Fuel expenses, partially offset by
decreases in certain capacity-related expenses, applied over less
- 78 -
<PAGE>
capacity on a year-over-year basis. USAir's pilot and flight
attendant employees received contractual wage increases in early
1996 and certain USAir non-contract employees received salary
increases effective January 1, 1996.
USAir believes that for the foreseeable future, while demand
for higher yield "business fares" will remain essentially flat and
relatively inelastic, the lower yield "leisure" market will remain
highly price sensitive. The leisure market, which is affected by
general economic conditions, is also the primary target market for
low cost, low fare carriers. The Company expects that low fares
offered by its airline affiliates in response to low cost, low fare
competition in their markets will increase during 1996 and such
competitive actions may have an adverse effect on the Company's
results of operations, liquidity and financial condition.
Although a competitive strength, concentration of significant
operations in the eastern U.S. leaves USAir susceptible to certain
regional conditions that may have an adverse affect on the
Company's results of operations and financial condition.
In August 1993, the United States increased taxes on domestic
fuels, including aircraft fuel used on domestic routes, by 4.3
cents per gallon. Airlines were exempt from the tax increase until
October 1, 1995. Pending legislation in Congress would reinstate
the exemption through September 30, 1997, subject to termination of
the exemption on September 30, 1996 if excise taxes relating to
certain aviation trust funds are not extended. These excise taxes
expired on December 31, 1995 and have not, as of May 20, 1996, been
extended. There can be no assurance that an airline jet fuel tax
exemption will be reinstated, or if reinstated, the terms under and
the period for which the exemption will be effective. The
additional fuel tax is currently being collected. USAir's 1995
results include expenses related to this tax of approximately $11.9
million, recognized as an operating expense, in Other Expense, Net.
The lack of an airline jet fuel tax exemption would increase
USAir's annual operating expenses by approximately $47 million
based on projected domestic fuel consumption for 1996.
- 79 -
<PAGE>
The financial results for 1994 include: (i) a $172.9 million
charge related to USAir's grounded BAe-146 fleet (see below for
additional information related to the reserve for the BAe-146
fleet) and to USAir's decision to cease operations of its remaining
Boeing 727-200 aircraft in 1995 (the last operational 727-200
aircraft was retired from service in September 1995); (ii) a $54.0
million charge for obsolete inventory and rotables to reflect
market values; (iii) a $25.9 million charge related to USAir's
decision to reduce substantially service between Los Angeles and
San Francisco in November 1994; and (iv) a gain of $18.6 million
resulting from the accounting treatment of the hull insurance
recovery on the aircraft lost in the September 1994 accident.
<TABLE>
<CAPTION>
California
Line Item Aircraft Inventory Reduction Other Total
- ------------------ -------- --------- ---------- ------ -------
<S> <C> <C> <C> <C> <C>
Personnel
Costs.......... $ - $ - $ (0.3) $ - $ (0.3)
Aircraft
Rent........... (115.5) - - - (115.5)
Aircraft
Maintenance.... 3.4 - - - 3.4
Depreciation/
Amortization... (21.7) (18.0) (18.2) - (57.9)
Other Operating
Expenses....... (39.1) (36.0) (7.4) - (82.5)
--------- --------- --------- ------ ------
Total Operating... $(172.9) $(54.0) $(25.9) $ - $(252.8)
========= ========= ========= ====== =======
Other Non-Oper-
ating... $ - $- $- $18.6 $ 18.6
========= ========= ========= ====== =======
</TABLE>
In addition to the above charges, USAir recorded a $50
million addition to Passenger Transportation revenue in the fourth
quarter of 1994 to adjust estimates made during the first three
quarters of 1994.
- 80 -
<PAGE>
USAir recognized a $4.1 million unusual item during the fourth
quarter of 1995. This amount, a reduction of Aircraft Rent
expense, reflects a partial reversal of the unusual item recorded
in the fourth quarter of 1994 related to USAir's grounded BAe-146
fleet (see discussion of 1994 unusual items above). The $4.1
million reflects USAir's success subleasing three leased BAe-146
aircraft during the fourth quarter of 1995. USAir expects to
reverse additional amounts previously accrued for dependant on
USAir's success remarketing these aircraft.
Operating Revenues - USAir's Passenger Transportation revenues
increased $345.5 million, (5.8%). USAir's estimates that its
Passenger Transportation revenues were adversely affected during
1994 by approximately $50 million due to unfavorable weather during
the first quarter and approximately $150 million as the result of
the two accidents that occurred during the third quarter. By early
1995, USAir's traffic had recovered from the effects of the
accidents and approached a level more normally associated with
USAir's capacity in the marketplace. USAir's 6.7% yield improve-
ment was sufficient to offset the effects on revenues of a 4.7%
decrease in both revenue passengers and capacity (see related
discussion in "Factors Contributing to Improved 1995 Financial
Results" above).
In March 1993, the U.S. District Court in Atlanta, Georgia
entered a settlement involving USAir and five other U.S. air
carrier defendants in the Domestic Air Transportation Antitrust
Litigation class action lawsuit. The class action suit, which was
filed in July 1990, alleged that the airlines used the Airline
Tariff Publishing Company to signal and communicate air carrier
pricing intentions and otherwise limit price competition for travel
to and from numerous hub airports. Under the terms of the
settlement, the six air carriers paid $45 million in cash and
issued $396.5 million in certificates valid for purchase of
domestic air travel on any of the six airlines. USAir's share of
the cash portion of the settlement, $5 million, was recorded in the
results of operations in the second quarter of 1992. Incremental
cost associated with the settlement will not be material based on
the nominal equivalent free trips associated with the settlement.
The travel certificates may be applied towards travel purchased
between January 1995 and December 1998.
- 81 -
<PAGE>
On October 11, 1994, USAir and seven other air carriers
entered into a settlement agreement with a group of State Attorneys
General resolving similar issues with the states. The settlement
entitles passengers traveling within the United States on state
government business to a 10% discount off the published fares of
each of the settling air carriers and will be available for 18
months from August 16, 1995, or until the combined discount amount
reaches $40 million, whichever first occurs. On May 10, 1995, a
U.S. federal district court judge approved this settlement. USAir
does not expect that this settlement will have a material adverse
effect on its financial condition or results of operations.
USAir's Cargo and Freight revenue decreased $6.7 million
(4.2%). The U.S. Postal Service's increased emphasis on truck
movement of mail in the Northeastern U.S. has resulted in lower
mail volumes and yields. The $67.5 million (13.6%) increase in
USAir's Other Revenue is mainly attributed to an increase in fees
received from participants in USAir's frequent traveler program and
increased revenues from higher volumes and rates for cancellation
and rebooking fees. Revenues from third party aircraft lease and
sublease arrangements also increased during 1995. Overall,
increases in the Other Revenue category were largely offset by
increases in related expenses recognized as Other Expenses, Net
(see below). Revenues associated with USAir's wet lease
arrangements with BA, recognized as Other Revenue, are expected to
decrease in 1996 in conjunction with the phase-out of the wet lease
program (see "Wet Lease Arrangements" above). USAir's results
include certain transactions that are eliminated at the USAir Group
level.
Operating Expenses - USAir's Personnel Costs were relatively
unchanged. USAir recognized approximately $49.7 million of expense
in 1995 associated with the profit share component of the 1992
Salary Reduction Program (see further discussion of this profit
share plan in "Liquidity and Capital Resources" below). Profit
share expense during 1994 was approximately $4.1 million, resulting
from employees receiving certain guaranteed profit share payments
upon termination. Overall, profit share expense and the
contractual wage increases that USAir's pilots, flight attendants
and mechanics received during 1995 were offset by lower personnel
levels. USAir's workforce had approximately 2,500 fewer employees
at December 31, 1995 than at December 31, 1994. Aviation Fuel
expense decreased $37.3 million, a 5.8% decrease. Year-over-year,
the average cost of fuel per gallon was relatively unchanged but
USAir's capacity (ASMs) decreased approximately 4.7%. The
decreased capacity contributed to a 5.6% reduction in fuel
- 82 -
<PAGE>
consumption. Jet fuel prices have increased during the first
quarter of 1996. The cost of jet fuel per gallon is expected to be
higher during 1996 than 1995, however, the price of jet fuel is
dependant on market factors generally outside of the Company's
control. See discussion above related to jet fuel tax legislation.
The Company's Commissions expense decreased $22.1 million (4.0%)
despite an increase in Passenger Transportation revenues primarily
due to the effects of a change in the rate structure for travel
agency commissions that went into effect during early 1995.
USAir's Aircraft Rent decreased $123.3 million (23.7%). Excluding
the unusual items recognized during 1994 and 1995, as discussed
above, USAir's Aircraft Rent decreased $3.7 million (0.9%) mainly
due to fewer leased aircraft year-over-year. The Company's Other
Rent and Landing Fees expense decreased $33.3 million (7.9%)
primarily due to USAir's capacity reductions and credits totalling
approximately $6.0 million received from various airport
authorities during 1995 related to 1994 activity. The Company's
Aircraft Maintenance decreased $40.2 million (12.0%) which resulted
from fewer operating aircraft year-over-year and the positive
impact of USAir's re-engineering efforts in the maintenance areas.
Excluding the effects of the unusual items recognized during 1994,
as discussed above, USAir's Depreciation and Amortization expense
increased $7.8 million (2.4%) in 1995 compared with 1994.
Excluding the effect of the unusual items recognized in 1994, as
discussed above, the Company's Other Expenses, Net increased
approximately $45.4 million (3.2%) largely due to increases in
expenses associated with increased sales activity and increased
taxes on jet fuel (see discussion above related to jet fuel tax
legislation). Increased third party lease and sublease
arrangements have also contributed to the increase in this expense
category (see related discussion above in "Other Revenues").
Decreases in certain capacity-related expenses partially offset
increases in other components of the Other Expense, Net. Expenses
associated with USAir's wet lease of aircraft to BA, recognized as
Other Expenses, Net, are expected to decrease in 1996 in
conjunction with the phase-out of the wet lease program (see "Wet
Lease Arrangements" above). USAir's results include certain
transactions that are eliminated at the USAir Group level.
Other Income (Expense) - The Company's Interest Income
improved by $23.1 million (82.3%) mainly as a result of signifi-
cantly higher cash levels during 1995. The Company's Interest
Expense increased $16.1 million (5.6%) primarily as a result of
interest incurred on debt associated with new aircraft deliveries
during 1994 and 1995. Interest Capitalized decreased $5.0 million
(36.2%) mainly due to USAir's agreement with Boeing to defer the
delivery of certain 757-200 aircraft from 1996 to 1998. Other, Net
was relatively unchanged as the effects of the $18.6 million gain
recognized in 1994 (discussed above) was offset by USAir's improved
- 83 -
<PAGE>
equity results in USAM and gains of approximately $10.7 million
associated with the sale of 13 737-300 aircraft during 1995. USAM
owns 11% of the Galileo International Partnership, which owns and
operates the Galileo Computerized Reservation System ("CRS"), and
21% of the Apollo Travel Services Partnership, which markets the
Galileo CRS in the U.S. and Mexico. On a consolidated basis, USAM
recorded pre-tax income of $34.5 million for 1995.
Income Tax Provision (Credit) - The Company was subject to
Federal alternative minimum tax for 1995 as well as income taxes in
certain states. The Company was not subject to regular Federal
income tax for 1995 as the result of using Federal net operating
loss carryforwards. The results for 1994 do not include any income
tax credit due to Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" ("FAS 109") limitations in
recognizing a current benefit for net operating losses.
The Company implemented Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets and Long-Lived Assets to Be Disposed Of" as of January 1,
1995. The effects, which were negligible, are included in the
Company's results of operations for 1995. In October 1995, the
Financial Accounting Standards Board adopted Statement No. 123
"Accounting for Stock-Based Compensation" ("FAS 123"). This
statement establishes the fair value based method of accounting for
stock compensation. The Company has elected to continue using the
intrinsic value based method of accounting prescribed in Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees."
1994 Compared with 1993
-----------------------
Adverse weather during the first quarter, the two aircraft
accidents which occurred during the third quarter, the intense
competitive environment characterized by the growth of low cost,
low fare airlines in USAir's markets, widespread industry fare
discounting, and USAir's cost structure had a negative effect on
USAir's results of operations during 1994.
USAir recorded a net loss of $716.2 million on revenue of $6.6
billion for 1994, compared with a net loss of $418.8 million on
revenue of $6.6 billion for 1993. USAir estimates that severe
winter weather in the first quarter of 1994 negatively affected its
results of operations by approximately $50 million and that the
effect of the two aircraft accidents during the third quarter of
1994 produced a revenue shortfall of approximately $150 million
from forecast amounts for the third and fourth quarters.
- 84 -
<PAGE>
USAir's 1994 financial results contain $234.2 million of
unusual items as discussed in "1995 Compared with 1994" above.
The financial results for 1993 included: (i) a $43.7 million
charge for the cumulative effect of an accounting change, as
required by Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemployment Benefits;" (ii) a $68.8
million charge for severance, early retirement, and other
personnel-related expenses for a workforce reduction of
approximately 2,500 full-time positions; (iii) a $36.8 million
charge based on a projection of the repayment of certain employee
pay reductions; (iv) a $13.5 million charge for certain airport
facilities at locations where USAir has, among other things,
discontinued or reduced its service; (v) $8.8 million for a loss on
USAir's investment in the Galileo International Partnership, which
operates a computerized reservations system; and (vi) an $18.4
million credit related to non-operating aircraft. The following
table indicates where these items (excluding the accounting change)
appear in USAir's consolidated statement of operations ($ millions,
brackets denote expense):
- 85 -
<PAGE>
<TABLE>
<CAPTION>
Workforce Employee Aircraft/
Line Item Reduction Payback Facilities Galileo Total
- -------------------------------- --------- -------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C>
Personnel Costs................. $(65.6) $(36.8) $ - $ - $(102.4)
Aircraft Maintenance............ - - 18.4 - 18.4
Depreciation and Amortization... - - (13.5) - (13.5)
Other Operating Expenses........ (3.2) - - - (3.2)
--------- -------- ---------- ------- ---------
Total Operating................. $(68.8) $(36.8) $ 4.9 $ - $(100.7)
========= ======== ========== ======= =========
Other Non-Operating............. $ - $ - $ - $(8.8) $ (8.8)
========= ======== ========== ======= =========
Operating Revenues-Increases in traffic which were stimulated by the lower fares during
1994 were not sufficient to offset USAir's lower yields experienced during 1994.
</TABLE>
- 86 -
<PAGE>
As discussed above, severe winter weather in the first quarter
of 1994 had a material adverse effect on USAir's operations and
financial results. Passenger transportation revenue increased
during the second quarter compared with 1993 because increases in
passenger traffic more than offset the dilutive effect of the lower
fares. However, this trend did not continue in the third and fourth
quarters primarily due to the reduced number of passengers
following the two aircraft accidents. By early 1995, USAir's
traffic had largely recovered from the effects of the accidents and
approached a level normally associated with USAir's capacity in the
marketplace.
USAir's Passenger Transportation Revenue decreased $159.6
million (2.6%) in 1994 compared with 1993. Despite the negative
effect of the adverse weather during the first quarter and the two
accidents during the third quarter, USAir's scheduled traffic as
measured by RPMs increased by 7.7% during 1994 on 2.6% of
additional capacity, as measured by ASMs, resulting in a 3.0
percentage point increase in passenger load factor, a measure of
capacity utilization. However, USAir's yield decreased by 9.6% in
1994 compared with 1993 due to several factors including lower
fares resulting from increased competition from low cost, low fare
carriers in USAir's markets and industry fare discounting
promotions.
USAir's Cargo and Freight revenue decreased $10.1 million
(5.9%) due to overall lower volumes and lower mail yields during
1994. The $125.2 million (33.8%) increase in USAir's Other Revenue
is the result of several factors including the wet lease
arrangement between USAir and BA, increased volume and rate for
cancellation and rebooking fees, and fees from companies which
participate in USAir's frequent traveler program. These increases
were largely offset by increases in other operating expenses.
USAir has begun to phase out the wet lease arrangements with BA.
See "Business-British Airways Investment Agreement-U.S.-U.K.
Routes." One each of the three aircraft began the wet lease service
in the months of June 1993, October 1993 and January 1994.
Operating Expenses-USAir's Personnel Costs increased $55.2
million (2.0%). Excluding the effect of the unusual items
discussed and presented in the tables above, USAir's personnel
costs increased $157.3 million (6.1%) in 1994 compared with 1993
due to the expiration during 1993 of employee wage reductions,
subsequent contractual and general salary increases and a lower
discount rate used during 1994 in the calculation of pension and
post-retirement benefit expense. These increases more than offset
- 87 -
<PAGE>
any expense reductions realized as a result of the workforce
reduction during 1994. Aviation Fuel expense decreased $35.6
million (5.2%), which is the result of an 8.8% reduction in the
cost of fuel partially offset by a 3.8% increase in consumption
compared with 1993. USAir's Commissions expense decreased $10.6
million (1.9%) as a result of decreased passenger revenue. See
"Business-Industry Restructuring and Cost-Cutting," and
"Business-Legal Proceedings." USAir's Other Rent and Landing Fees
expense decreased $9.4 million (2.2%) primarily due to lower
operating costs at certain airport facilities. USAir's Aircraft
Rent increased $89.8 million (20.8%). Excluding the effect of the
unusual items discussed and presented in the tables above, USAir's
aircraft rent decreased $25.7 million (6.0%) in 1994 compared with
1993 due to the expiration or renegotiation of several aircraft
leases and additional wet lease service over 1993 levels. USAir's
Aircraft Maintenance increased $26.9 million (8.7%), which resulted
from the $18.4 million credit in 1993 (see above table) and initial
repairs on certain of USAir's newer aircraft in 1994. USAir's
Depreciation and Amortization expense increased $62.0 million
(19.1%). Excluding the effect of the unusual items discussed and
presented in the tables above, USAir's depreciation and
amortization expense increased $17.6 million (5.6%) in 1994
compared with 1993 primarily due to the delivery of new Boeing
757-200 aircraft. USAir's Other Expenses, Net increased $145.1
million (10.8%). Excluding the effect of the unusual items
discussed and presented in the tables above, USAir's Other
Expenses, Net increased $65.8 million (4.9%) in 1994 compared with
1993 largely due to increases in several passenger volume-related
expense categories and expenses related to the increase in USAir's
other revenue category discussed above.
Other Income (Expense) - USAir's Interest Income improved by
$3.3 million (13.1%) as a result of higher cash levels and more
favorable interest rates in 1994. Interest Expense increased $47.2
million (19.8%) primarily as a result of interest incurred on
certain aircraft-secured and unsecured financings completed during
1993. Interest Capitalized decreased $4.0 million (22.5%) because
average deposits for future aircraft deliveries were lower during
1994 compared with 1993. Other, Net reflects a $74.7 million
improvement primarily due to the $18.6 million gain discussed above
and improved equity results from USAir's 11% ownership investment
in the Galileo International Partnership, which owns and operates
the Galileo Computerized Reservation System ("Galileo CRS"), and
USAir's 21% ownership investment in the Apollo Travel Services
Partnership. The Apollo Travel Services Partnership markets the
Galileo CRS in the U.S. and Mexico.
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Effective January 1, 1993, USAir adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). The adoption of FAS 109 resulted in no
cumulative adjustment. Results for 1994 and 1993 do not include
any income tax credit due to the FAS 109 limitations in recognizing
a current benefit for net operating losses. See Note 6 to USAir's
consolidated financial statements for additional information.
Inflation and Changing Prices
- -----------------------------
Inflation and changing prices do not have a significant effect
on USAir's operating revenues and expenses (other than depreciation
and amortization) because such revenues and expenses generally
reflect current price levels.
Depreciation and amortization expense is based on historical
cost. For assets acquired through the purchase of Pacific
Southwest Airlines, USAir's historical cost is based on fair market
value of the assets on May 29, 1987. In the case of Piedmont
Aviation, Inc., USAir's historical cost is based on the fair market
value of the assets on November 5, 1987, reduced by the tax effect
of that portion of fair market value not deductible for tax
purposes in the form of depreciation and amortization. Therefore,
aggregate depreciation and amortization is lower than if this
expense reflected today's replacement costs for existing productive
assets. In evaluating how inflation would increase depreciation
expense, however, consideration should also be given to the
reduction in other operating expenses, such as aircraft maintenance
and aviation fuel, that would be achieved from the operating
efficiencies of newer, more technologically advanced productive
assets.
Liquidity and Capital Resources
- -------------------------------
Cash provided by operations was $578.3 million for the year
ended December 31, 1995. As of December 31, 1995, USAir's
unrestricted cash, cash equivalents and short-term investments
totaled approximately $899.0 million.
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During December 1995, USAir completed a transaction which
enabled it to substitute previously unencumbered aircraft in lieu
of cash deposits for certain workers' compensation liabilities and
letters of credit which are classified as "Other Assets" on USAir's
balance sheet at that date.
Although USAir's liquidity and capital resources improved
considerably during 1995, USAir remains highly leveraged. In order
to meet debt service, lease and other obligations and to finance
daily operations, USAir requires substantial liquidity and working
capital. Developments beyond the control of USAir might occur
which could have a material adverse effect on USAir's prospects,
liquidity, financial condition and results of operations, including
a downturn in the economy, adverse regulatory changes, intensified
industry fare wars, substantial increases in jet fuel prices or
fuel taxes, adverse weather conditions, negative public perception
regarding safety or further incursions by low cost, low fare
carriers into USAir's markets. However, based on current
expectations, USAir believes that its cash balances will be more
than sufficient to meet its liquidity requirements for the
remainder of 1996 and is evaluating the possible redemption or
refinancing of certain debt instruments and capital leases in order
to lower interest and lease expenses. Depending on market, economic
and other factors, USAir's expectations of its liquidity
requirements are subject to change.
Certain USAir employees whose wages and/or benefits were
temporarily reduced during 1992 and 1993 currently participate in
a profit sharing plan (a component of the 1992 Salary Reduction
Program) designed to recompense them for the concessions made
during that time period. The plan will cease to exist after these
employees have been recompensed to the extent permitted under the
provisions of the plan. Estimated savings of approximately $23
million attributable to the suspension of longevity/step increases
will not be subject to repayment through the profit-sharing
program. This profit sharing plan is distinct from two other
profit sharing plans that USAir currently offers in conjunction
with certain of its defined contribution plans and its Employee
Stock Ownership Plan. Payouts are determined based on USAir
Group's pre-tax results for a year, less charges associated with
postretirement benefit expenses other than for pensions. Certain
unusual items are also excluded from the calculation. Based on
USAir Group's 1995 results and the provisions of the profit sharing
plan, USAir recognized charges of approximately $49.7 million for
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this plan in 1995. USAir made a cash payment of approximately
$73.7 million to plan participants in March 1996 for 1995 activity.
The maximum remaining pay-out under this plan after the March 1996
payment, the timing of which is dependant on USAir Group's future
profitability, among other factors, is currently estimated to be no
more than $134.3 million.
As discussed above in "Deferral of Dividends", USAir Group
has deferred dividend payments on all series of its outstanding
preferred stock. The aggregate annual dividend requirements
related to USAir Group's outstanding preferred stock issuances,
each of which has a cumulative dividend feature, currently amount
to approximately $79.2 million. Accordingly, aggregate dividends-
in-arrears as of December 31, 1995, including additional dividends
(interest) on deferred dividends, of approximately $117.7 million
represent a future obligation of USAir Group. In addition, USAir
Group's Series A Preferred Stock is mandatorily redeemable on
August 7, 1999 at $1,000 per share plus accrued dividends (inter-
est). The Series F Preferred Stock and Series T Preferred Stock
are mandatorily redeemable in the year 2008. As of December 31,
1995, the redemption values of the Series A Preferred Stock, Series
F Preferred Stock and Series T Preferred Stock were approximately
$412.1 million, $329.1 million, and $109.6 million, respectively.
Investing activities during 1995 included cash inflows of
$219.8 million from the disposition of assets (primarily from
thirteen Boeing 737-300 aircraft, offset by $142.3 million paid for
the acquisition of assets ($61.7 million cash payments related to
new 757-200 aircraft, $80.6 million cash payments related to the
purchase of rotables, hush kits, and various ground support
equipment). Net cash provided by investing activities for 1995 was
$150.7 million.
Financing activities during 1995 included $278.3 million of
debt payments, including the redemption of USAir's remaining
outstanding 12-7/8% Unsecured Senior Notes (the "12-7/8% Notes").
In addition, USAir incurred debt of $169.7 million associated with
the delivery of seven new Boeing 757-200 aircraft and scheduled
aircraft progress payments for future aircraft deliveries half of
1995. In connection with the deferral of eight 757-200 deliveries
to 1998, USAir rescheduled aircraft the due date of $70.8 million
of previously satisfied aircraft purchase deposits into the future
resulting in a reduction of both debt and equipment deposits.
USAir had a $68.6 million 8.4% note payable to USAir Group related
to USAir Group's purchase of aircraft-secured debt obligations of
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USAir. The $169.7 million, $70.8 million and $68.6 million are
reflected as non-cash activity in USAir's Consolidated Statement of
Cash Flows because USAir experienced an increase or decrease in
fixed assets or equipment deposits concurrently with the increase
or decrease in debt. USAir made early debt payments, including the
redemption of the 12-7/8% Notes, totalling approximately $202.1
million during 1995. Further steps by USAir to prepay debt and
lease obligations are possible.
USAir Group has deferred the dividend payments on all series
of its preferred stock. The current aggregate annual dividend
requirements related to all series of USAir Group's preferred stock
total approximately $79.2 million. There can be no assurance when
or if preferred dividend payments will resume. See "Risk Factors-
Deferral of Dividends by USAir Group" for a discussion of the total
amount of deferred dividends and the effects of the dividend
deferrals on USAir Group's corporate governance.
USAir is a party to certain financial contracts to reduce
exposure to fluctuations in the price of jet fuel and changes in
the U.S. dollar to Japanese Yen conversion rates. Under the jet
fuel arrangements, USAir pays a fixed rate per notional gallon of
fuel and receives in return a floating rate per notional gallon
based on the market rate during the month of settlement. Decreases
in the market cost of jet fuel below the rates specified in the
contracts require USAir to make cash payments. However, USAir
believes these contracts do not present a material risk to USAir's
financial position or liquidity due to the relatively simple terms
of the agreements, their purpose and their short remaining
duration. USAir has reviewed the financial condition of each of
the counterparties to these financial contracts and believes that
the potential for default by any of the current counterparties is
negligible. In prior years, USAir participated in contracts to
reduce exposure to interest rate changes but those contracts
expired during 1995 and were not renewed. See Note 2 to USAir's
consolidated financial statements for additional information.
USAir has received notices from the U.S. Environmental
Protection Agency and various state agencies that it is a
potentially responsible party with respect to the remediation of
existing sites of environmental concern. Negotiations with various
governmental agencies continue concerning known and possible
cleanup sites. USAir has made financial contributions for the
performance of remedial investigations and feasibility studies at
sites in Moira, New York; Escondido, California; and Elkton,
Maryland. The contributions were approximately $200,000 in the
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<PAGE>
aggregate for 1995, 1994 and 1993. USAir believes that the
ultimate resolution of known environmental contingencies should not
have a material adverse effect on its liquidity, financial position
or results of operations based on USAir's experience with similar
environmental sites.
USAir has been identified as a potentially responsible party
("PRP") for environmental contamination at Boston Logan Airport.
There are a number of other PRPs at the site. The Company is
presently unable to assess its proportionate share of contribution,
but does not expect any such contribution to have a material
adverse effect on its financial condition or results of operations.
USAir Group terminated its revolving credit facility with a
group of banks during 1994. USAir Group had historically utilized
such a facility to supplement its and USAir's liquidity from time
to time. In addition, USAir's revolving accounts receivable sale
program expired in December 1994. USAir was unable to sell
receivables under the agreement during 1994 because of failure to
comply with certain financial covenants required to be maintained
in connection with that agreement. USAir had engaged in
discussions with respect to a replacement receivables sale facility
but has elected not to pursue such a financing at this time.
USAir's liquidity and capital resources improved considerably
during 1995. However, USAir is highly leveraged and in order to
meet debt service, lease and other obligations and to finance daily
operations, USAir requires substantial liquidity and working
capital. Developments may occur that are beyond the control of
USAir which could have a material adverse effect on its future
prospects, liquidity and financial condition, including a downturn
in the economy, intensified fare pricing wars, adverse regulatory
changes, substantial increases in jet fuel prices or fuel taxes,
adverse weather conditions, negative public perception regarding
safety, and the further growth and expansion of low cost, low fare
air carriers into markets served by USAir and its regional
affiliates.
USAir anticipates that its 1996 capital expenditures will be
approximately $257 million. Of this amount, approximately $67
million relates to progress payments for future aircraft deliveries
and $35 million relates to the purchase of hush kits for certain
aircraft in order to comply with federal noise and pollution
mandates. USAir expects that it will satisfy its liquidity
requirements for 1996 through a combination of cash flow from
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<PAGE>
operations and cash on hand. As a result of the recent aircraft
delivery deferral agreements with Boeing, the Company's capital
commitments have been substantially reduced for the 1996-2000 time
person (see "Cost-Reduction and Revenue Enhancement Initiatives"
above). USAir currently has committed financing for a significant
portion of the purchase price for each of the scheduled 1998
deliveries of Boeing 757 aircraft.
Except for the Old Notes, USAir's debt securities are
presently rated below investment grade by Standard & Poors and
Moody's. The ratings of USAir's debt securities make it more
difficult and costly for USAir to effect additional financing,
particularly unsecured debt financing.
In February 1996, USAir issued the Old Notes under Securities
and Exchange Commission Regulation 144A. The Private Offering
netted proceeds of approximately $259 million which were used as a
part of the funds necessary to repay in full the indebtedness
incurred in connection with certain 757-200 aircraft delivered to
USAir in 1994 and 1995.
During 1994, USAir's investment in new aircraft acquisitions
and purchase deposits totaled $270.6 million (which includes $224.6
million presented as non-cash on USAir's consolidated statement of
cash flows since debt was incurred upon delivery of aircraft or to
satisfy equipment deposit progress payments). USAir took delivery
of five new Boeing 757-200 aircraft during 1994. USAir invested
$128.9 million in non-aircraft property during 1994 (e.g., ground
support equipment, computer equipment, software, aircraft rotables
and hush kits, and take-off and landing slots), partly offset by
$55.5 million in proceeds from disposition of assets which includes
insurance proceeds related to the jet aircraft involved in the
September 1994 accident. Net cash provided by financing activities
was $70.2 million, which includes $172.2 million net proceeds
received by USAir upon the sale of $175 million principal amount of
9 5/8% Senior Notes due 2001 through an underwritten public
offering, offset by $102.0 million of scheduled debt payments. In
addition, as discussed above, USAir incurred $270.6 million of debt
upon delivery of five 757-200 aircraft and to satisfy equipment
deposit progress payments.
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<PAGE>
During 1993, USAir's investment in new aircraft acquisitions
and purchase deposits totaled $469.2 million (which includes $343.2
million presented as "non-cash" on USAir's consolidated statement
of cash flows because debt was incurred upon delivery of aircraft
or to satisfy equipment deposit progress payments). USAir took
delivery of 11 Boeing 757-200, one Boeing 767-200ER, and six
McDonnell Douglas MD-82 aircraft during the year. The MD-82s were
immediately sold to a third party. In addition, in January 1993
USAir sold two other MD-82 aircraft which had been delivered in the
fourth quarter of 1992. Proceeds from the sale of the MD-82s
approximated $168 million. USAir completed financing arrangements
for, or internally funded, all of its 1993 aircraft expenditures.
The financing arrangements included the $337.7 million issue of
Pass Through Certificates which USAir sold through an underwritten
public offering on November 1, 1993. USAir invested $150.8 million
in non-aircraft property during 1993 (e.g., ground support
equipment, computer equipment, software, aircraft rotables and hush
kits, take-off and landing slots).
On July 8, 1993, USAir sold $300 million principal amount of
10% Senior Notes due 2003 ("10% Notes") through an underwritten
public offering. The offering netted proceeds of approximately $294
million. The 10% Notes are unconditionally guaranteed by USAir
Group.
All net proceeds received by USAir from the sale of the 10%
Notes and the 9-5/8% Notes were added to the working capital of
USAir for general corporate purposes.
As of December 31, 1995, USAir's ratio of current assets to
current liabilities was .60 to 1 and the debt component of USAir's
capitalization structure was greater than 100% due to the existence
of a net capital deficiency.
BUSINESS
--------
USAir, a certificated air carrier engaged primarily in the
business of transporting passengers, property and mail, is the
principal operating subsidiary of USAir Group, and accounted for
approximately 93% of USAir Group's operating revenues for the
fiscal year ended December 31, 1995. USAir enplaned more than 57
million passengers in 1995 and is the fifth largest United States
air carrier ranked by RPMs flown. As of December 31, 1995, USAir
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<PAGE>
provided regularly scheduled jet service through 108 airports to
approximately 143 cities in the continental United States, Canada,
Mexico, France, Germany, and the Caribbean. USAir's executive
offices are located at 2345 Crystal Drive, Arlington, Virginia
22227 (telephone number (703) 418-7000), and its primary connecting
hubs are located at the Pittsburgh, Charlotte/Douglas, Philadelphia
and Baltimore/Washington International Airports. As discussed
below in "Significant Impact of Low Cost, Low Fare Competition," a
substantial portion of USAir's RPMs are flown within or to and from
the eastern United States. USAir also maintains significant
operations at major airports in the large east coast population
centers of Boston, LaGuardia and Washington National. When
measured by departures, USAir is the largest or second largest
airline at each of the foregoing airports and is the predominant
air carrier in many smaller eastern cities, such as Albany,
Buffalo, Hartford, Providence, Richmond, Rochester and Syracuse.
In addition, USAir is the leading airline from the Northeast to
Florida. For fiscal year 1995, approximately 36% of all scheduled
flights on the east coast of the United States were USAir flights.
Approximately 64% of USAir's flights and 44% of its ASMs are
represented by intra-east coast flying.
USAir has an important international alliance with BA, a major
investor in USAir Group. As of December 31, 1995, the two air
carriers had implemented code sharing from 70 of the 138 airports
currently authorized by the United States DOT. The USAir/BA
alliance also extends to the sharing of ground services at certain
airports and joint cooperation in areas such as product branding,
cargo services, jet fuel purchasing, frequent traveler programs and
maintenance services.
USAir also code shares with eleven regional airline affiliates
operating under the "USAir Express" trade name. USAir has entered
into service agreements with each of the USAir Express carriers.
Through its service agreements, USAir provides reservations and, at
certain stations, ground support and other services, in return for
service fees. USAir Group owns three of the USAir Express carriers
- - Piedmont, Allegheny and PSA. The USAir Express network feeds
traffic into USAir's route system at several points, including its
major hub operations at Pittsburgh, Charlotte, Philadelphia and
BWI. At December 31, 1995, USAir Express carriers served 176
airports in the United States, Canada and the Bahamas, including 76
also served by USAir. During 1995, USAir Express' combined
operations enplaned approximately 9.6 million passengers, over half
of whom connected to USAir flights. USAir also has a management
agreement and code shares with Shuttle, Inc. operating under the
name "USAir Shuttle." The USAir Shuttle operates frequent service
between LaGuardia and Boston and between LaGuardia and Washington
National.
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<PAGE>
In January 1996, Stephen M. Wolf was appointed Chairman and
Chief Executive Officer of USAir and of USAir Group. Mr. Wolf
succeeds Seth E. Schofield, who retired after 38 years with USAir.
Mr. Wolf has been a senior executive at United, Flying Tigers,
Republic, Continental, Pan Am and American. In addition, in
February 1996, USAir announced the executive appointments of Rakesh
Gangwal as President and Chief Operating Officer of USAir and USAir
Group and Lawrence M. Nagin as Executive Vice President - Corporate
Affairs and General Counsel of USAir and USAir Group. Mr. Gangwal
has been a senior officer at Air France and United and Mr. Nagin
has held senior positions at United and Flying Tigers.
[remainder of page left blank intentionally]
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Strategy
- --------
USAir recorded a net loss of $54.9 million for the first three
months of 1996 compared to a $101.8 million loss for the first
three months of 1995. USAir recorded net income of $33.0 million
in 1995, its first profitable year since 1988. From 1989 through
1994, USAir incurred substantial losses. Its results of operations
have been adversely affected by, among other factors, the growth of
low cost, low fare competition, particularly in 1994, and its unit
costs, which are among the highest of United States air carriers.
USAir has been striving to improve its profitability and respond to
the competitive environment that characterizes the United States
airline industry by:
- Rationalizing the level and geographic distribution of
capacity;
- Improving product and delivery; and
- Reducing capital requirements and operating costs.
- Most recently, Stephen M. Wolf, Chairman of the Board of
Directors and Chief Executive Officer of both USAir Group and
USAir, and Rakesh Gangwal, President and Chief Operating Officer of
both companies, have held a series of employee meetings where they
presented their assessment of USAir competitive position. The
focal point of these meetings was to communicate senior
management's belief that USAir must lower its personnel costs,
increase employee productivity, increase the quality of USAir's
service and customer satisfaction and grow in size to ensure long-
term viability. USAir remains committed to reducing USAir's
personnel costs and improving employee productivity. With regards
to the grown of USAir, USAir believes that internal growth is
preferable but has not excluded other alternatives.
Capacity and Route Rationalization
- ----------------------------------
Beginning in the spring of 1995, USAir instituted a signifi-
cant rationalization of its capacity and routes with the goal of
reducing less profitable non-hub (point-to-point) flying,
emphasizing the quality of departures versus the quantity of
flights, reducing excess capacity in strong markets and replacing
low demand
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<PAGE>
jet service with modern turboprop aircraft operated by USAir
Express. The effect of USAir's rightsizing plan has been a
reduction in the number of USAir's departures and its capacity. In
the second half of 1995, departures decreased by 17% and capacity
(as measured by ASMs) decreased 10.8% compared to the second half
of 1994. Although USAir's traffic also declined as a result of this
plan, USAir was successful in retaining a significant portion of
the revenue and traffic from eliminated flights. In the second
half of 1995, USAir achieved a record load factor of 66.2%. For
the full year 1995, USAir's load factor also set a record at 64.7%.
Load factors for the first quarters of 1996 and 1995 were 64.6% and
59.7%, respectively, a 4.9 point improvement. For fiscal year 1995,
USAir's departures, capacity and traffic were down by 10%, 4.7% and
0.9%, respectively. In addition, by December 31, 1995, USAir
non-hub flying represented less than 10% of its total flying,
compared to approximately 18% at December 31, 1994.
USAir has been seeking to broaden its route portfolio by
leveraging its strong east coast franchise into expanded transcon-
tinental and international service from the eastern United States.
By diversifying its route structure in this way, USAir can enhance
its long-haul service and increase its average length of haul.
Increasing its average length of haul will enable USAir to increase
the average value of tickets sold and reduce the unit cost of
serving each passenger. In 1995, USAir's average length of haul
increased 4.1% to 664 miles from 638 miles in 1994. Average
lengths of haul were 673 and 659 miles for the first quarters of
1996 and 1995, respectively, an increase of 2.1% year-over-year.
Domestically, USAir has added more flights to the west coast from
its hubs. In 1995, USAir retired, sold, returned or otherwise
disposed of 37 operating aircraft while adding seven Boeing 757-
200s - an aircraft more suitable for transcontinental operations.
At March 31, 1996, USAir operated 34 Boeing 757-200 aircraft and
had orders for eight additional 757-200 aircraft to be delivered in
1998.
Internationally, USAir has expanded service to the Caribbean
and has re-aligned its international routes in an effort to further
develop Philadelphia and Boston as transatlantic gateways. In this
regard, the DOT recently granted USAir a two-year exemption
authority to operate to Madrid, Spain from both Philadelphia and
Boston. USAir intends to begin service to Madrid from Philadelphia
on June 15, 1996. In addition, USAir recently re-aligned its
Frankfurt service. It increased the number of weekly flights from
the East Coast from 14 to 21 in June 1995 for the summer season and
introduced non-stop service from Philadelphia and Boston. In
February 1996, USAir received final approval from the DOT to serve
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Munich, Germany from Philadelphia. USAir will inaugurate its
service to Munich on May 23, 1996. The number of weekly USAir
flights to Germany will increase to 28 by mid-1996. In April 1996,
the DOT granted USAir authority to institute service to Rome, Italy
from Philadelphia with through service from Los Angeles. USAir
intends to inaugurate its service to Rome on June 1, 1996. USAir
estimates that its transatlantic capacity in 1996 (as measured by
ASMs) will increase by approximately 54% compared to 1995. USAir
believes that the further development of international service from
Philadelphia and Boston will enable it to achieve a competitive
advantage by leveraging USAir's existing domestic network with the
strong local transatlantic demand and the favorable geographic
position of these cities.
USAir has been phasing out of the "wet lease" arrangements
with BA. One of the three wet leased Boeing 767-200ER aircraft was
returned to USAir in December 1995. A second aircraft was returned
in February 1996. The remaining aircraft will be returned to USAir
in late May 1996. Under the wet lease arrangements, USAir leased
three Boeing 767-200ER aircraft, along with cockpit and cabin
crews, to BA in order to serve three routes between the U.S. and
London. Upon termination of the wet lease arrangements, USAir
plans to utilize the returned aircraft as part of USAir's planned
expansion of international service, as discussed above. BA did not
exercise its right on January 21, 1996 to purchase additional
preferred stock in USAir Group, as discussed below in "British
Airways Investment Agreement-Provisions Regarding Additional BA
Investments, BA Announcements Regarding No Additional Investment in
USAir Group."
USAir's reduction in jet aircraft and its continuing efforts
to reduce costs and enhance revenue by eliminating less profitable
routes have resulted in the cessation of or reduction in jet flying
between certain city pairs. In some cases, existing or former jet
routes have been turned over to USAir Express with the goal of
maintaining portions of the revenue base (particularly the hub
connecting traffic) with lower cost operations.
In 1992, USAir reached an agreement with the creditors of the
Trump Shuttle to manage and operate the Trump Shuttle under the
name "USAir Shuttle" for a period of up to ten years. Under the
agreement, USAir Group has an option to purchase the shuttle
operation on or after October 10, 1996 with an exclusive right to
do so until April 10, 1997. USAir believes that the USAir Shuttle
fosters traveler loyalty towards USAir because of the USAir
Shuttle's participation in USAir's FTP.
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Enhanced Customer Service, Performance and Reliability
- ------------------------------------------------------
USAir has undertaken a number of initiatives to build brand
loyalty among its customers with the goal of maintaining and
enhancing its traditional unit revenue premiums over its competi-
tors. USAir also hopes to increase its market share of business
travelers and long-haul customers. The initiatives include:
Focus on Business Traveler - USAir is expanding the first-
class cabins on a significant portion of its aircraft, expanding
"business centers" in certain airports, upgrading certain USAir
Club facilities and replacing USAir's on-board phone system to
improve service. USAir also improved business passenger
accessibility to the First Class cabin through expansion of a
program which lets a passenger sit in First Class for the price of
a full fare coach ticket. This product is now available in most
transcontinental markets that USAir serves. USAir also believes
that the introduction of its personal travel software, "Priority
Travel-Works", will appeal to many high-volume business travelers
by providing users with more information and greater control over
their travel arrangements. In April 1996, USAir announced that it
was discontinuing its Business Select service. Business Select was
a business class product offered on certain short-haul flights on
certain Boeing 737-200 aircraft. USAir will instead modify the
cabins on those aircraft to increase the size of the first class
cabin.
Technology and New Facilities - In addition to "Priority
TravelWorks," USAir is investing in technology to positively affect
its marketing, operational performance and customer services. USAir
introduced "ticketless travel" (i.e., electronic ticketing) in
April 1996 in order to cut distribution costs and increase
travelers' convenience. USAir is working to expand electronic
ticketing to international service and USAir Shuttle flights.
USAir is also working with major computer reservation systems to
make electronic ticketing available to travel agents. In addition,
USAir is exploring self-ticketing machines which, if expanded from
the test phase, could further reduce distribution costs and save
time for USAir's customers. USAir has also implemented a new
inventory management system that allows it to better allocate seats
within fare levels to maximize revenues. USAir has created a
state-of-the-art operations control center in Pittsburgh. The
center improves operational decision-making by more closely
coordinating all flight-related functions such as dispatching,
aircraft routing, maintenance and technical support, crew
scheduling and passenger services.
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Improved Service Levels - USAir has improved both its
operational performance and attention to customer services. In
1994, USAir ranked ninth in on-time performance among the ten major
United States airlines. USAir improved its on-time performance in
1995. USAir is also implementing customer service enhancements in
its international operations and is investing in the training and
development of its customer service employees through a "Core
Curriculum Training Program."
Safety - USAir recently implemented several additional safety
initiatives. In November 1994, USAir created a new position of
Vice President-Corporate Safety and Regulatory Compliance. In
1995, USAir established a committee of its board of directors, the
Safety Committee, which has oversight of all corporate safety
matters. In addition, USAir retained an aviation consulting firm,
to conduct a full audit of USAir's safety operations. The audit
was completed in early 1995. In the opinion of the safety
auditors, USAir was being operated safely in compliance with FAA
regulations.
Cost Reductions
- ---------------
Although USAir has recently demonstrated significantly
improved financial performance, USAir believes that it must
continue to lower its costs (including personnel costs) in order to
compete effectively in a low fare environment.
Operating Costs - USAir, whose operating costs are the highest
among the major U.S. airlines, is actively pursuing several
initiatives in an effort to reduce these costs significantly. USAir
is working to achieve or has already achieved substantial cost
savings through a combination of organizational and structural
changes, reengineering and other initiatives including: centraliza-
tion of its purchasing functions; realignment of customer services;
improvements in operations performance to increase crew productivi-
ty; outsourcing of cargo and communications; and reengineering of
its maintenance operations, finance, reservations, purchasing,
accounts payable, payroll and human resources functions.
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USAir has also taken other cost-cutting actions. In October
1995, USAir closed its Reno, Nevada reservations office as part of
its long-term strategy to reduce costs and improve productivity.
The closing affected approximately 260 employees. USAir believes
that the reservations office in San Diego is adequate to handle
west coast customers as well as overflow calls from the East during
irregular operations. USAir reduced the number of daily departures
at Newark International Airport from 51 as of December 31, 1994 to
14 by December 1995, and plans to eliminate several additional
departures in the coming months, as part of its strategy to use
assets where they can be the most productive. The changes have
resulted in lower staffing levels in customer service and mainte-
nance.
In February 1995, USAir and several other major U.S. carriers,
including Delta, American, Northwest and United, imposed limits on
the base commissions they pay travel agents for domestic air fares.
See "-Industry Restructuring and Cost-Cutting." The new limits on
commissions are designed to reduce one of the airlines' largest
expenses. USAir has experienced cost savings due to the new
commission limits.
In March 1994, in an attempt to reduce its annual labor
personnel costs by approximately $500 million through concession
agreements involving wage and benefit reductions, improved
productivity and other cost savings, USAir Group began negotiating
with the unions that represent certain of USAir's employees.
USAir's wages and benefits are the largest single component of its
operating costs (approximately 41% for 1995). In late July 1995,
USAir Group announced that it was ending discussions with the
unions on a wage concession and restructuring package and that it
would concentrate on reducing USAir's labor costs through tradi-
tional collective bargaining. See "Employees" USAir remains
committed to obtaining labor cost reductions.
Aircraft Commitments - In an attempt to reduce aircraft
ownership costs, facilitate its capacity rationalization plan and
reduce its fleet size and number of fleet types, USAir has deferred
certain new aircraft deliveries, pursued the sale or lease of
certain jet aircraft and declined to renew leases for certain other
aircraft upon lease expiry. In 1995, USAir sold, leased, retired
or disposed of 37 operating aircraft (including the sale of
thirteen Boeing 737-300 aircraft) and eliminated all Boeing 727-
200s from its operating fleet. USAir recorded a small financial
statement gain from the sales of the above-described 737-300
aircraft to leasing companies. USAir intends to retire or return
to the lessors additional Fokker F28-4000s and Douglas DC-9-30s in
1996 and 1997.
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<PAGE>
USAir has no current plans to add new aircraft to its fleet
until January 1998. In May 1994, USAir reached an agreement with
Boeing, to reschedule the delivery of 40 737-series aircraft from
the 1997 through 2000 time period to the years 2003 through 2005.
As part of the same agreement, USAir relinquished all of its
options to purchase 737-series, 757-series and 767-series aircraft
during the 1996 through 2000 time period. In June 1995, USAir
reached agreements with Boeing and Rolls Royce to reschedule the
delivery dates for eight 757-200 aircraft from 1996 to 1998. As a
result, USAir's capital commitments have been substantially reduced
for the 1996 to 2000 time period. In addition, with application of
the proceeds from the sale of the Old Notes on February 16, 1996,
USAir has committed financing for a substantial portion of the
purchase price for each of the scheduled 1998 deliveries.
In May 1991, USAir ceased operating its fleet of British
Aerospace BAe-146 ("BAe-146") aircraft and USAir has not resumed
operation of these aircraft. USAir owns one and leases 17 BAe-146
aircraft. Recently, USAir has increased its efforts to remarket
the BAe-146 aircraft. USAir has subleased two BAe-146 aircraft to
European airlines and has entered into a sublease agreement with a
foreign airline for an additional BAe-146 to be delivered in the
second quarter of 1996. USAir has continued to pay rent, insure
(or cause to be insured) the aircraft and perform its other
obligations under the BAe-146 leases, except that, for those BAe-
146s that remain in storage, USAir has not performed mandatory
airworthiness directives on some of those aircraft as required by
such leases. The stored BAe-146s are being preserved in accordance
with FAA-approved procedures and manufacturer guidelines. In the
fourth quarter of 1994, USAir recorded a non-recurring charge of
approximately $132.8 million for the BAe-146 aircraft. As a result
of USAir's ability to sublease some of the grounded aircraft, USAir
reversed $4.1 million of the 1994 charge of $132.8 million for BAe-
146s during the fourth quarter of 1995. As of May 5, 1996, six
BAe-146s have been delivered to, and are being operated by European
airlines. In addition, USAir has entered into lease agreements
with European airlines for five additional BAe-146s to be delivered
in 1996. USAir may make additional reversals if it sells or leases
additional BAe-146 aircraft.
General Industry Conditions
- ---------------------------
Demand for air transportation historically has tended to
mirror general economic conditions. During the most recent economic
recession in the United States, the change in industry capacity
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<PAGE>
failed to mirror the reduction in demand for domestic air transpor-
tation due primarily to continued delivery of new aircraft and,
secondarily, to the operation of certain major U.S. carriers under
the protection of Chapter 11 of the Bankruptcy Code for extended
periods. While industry capacity has leveled off and the general
economy has improved, USAir expects that the airline industry will
remain extremely competitive for the foreseeable future, primarily
due to the dramatic change which has occurred in industry pricing
and which has resulted in generally lower fares. See "-Significant
Impact of Low Cost, Low Fare Competition."
In 1995, the U.S. airline industry had its best year since the
recession began in July 1990, with several airlines posting
profits, although many of the major carriers continue to be
burdened with large amounts of debt. Unlike the results of some of
its competitors, USAir's results did not improve in 1994. USAir
experienced a pre-tax loss of $716.2 million in 1994. The entire
airline industry experienced further improved results in 1995.
USAir's results improved in 1995 as well. Nonetheless, USAir
believes that for the foreseeable future, while the demand for
higher yield "business fares" will remain essentially flat and
relatively inelastic, the lower yield "leisure" market, which is
affected by the general economy, will remain highly price sensi-
tive. This trend will make it more difficult for the domestic
airlines, including USAir, to sustain meaningful yield increases in
the long run. In addition, USAir recorded a net loss in the first
quarter of 1996 while the other United States majors posted
positive earnings for the same period. Therefore, USAir believes
it must reduce its cost structure substantially in order to ensure
its long-term financial stability.
Significant Impact of Low Cost, Low Fare Competition
- ----------------------------------------------------
Most of USAir's operations are in competitive markets. USAir
experiences competition of varying degrees with other air carriers
and with all forms of surface transportation. USAir competes with
at least one major airline on most of its routes between major
cities. Vigorous price competition exists in the airline industry,
and competitors have frequently offered sharply reduced discount
fares in many of these markets. Airlines, including USAir, use
discount fares and other promotions to stimulate traffic during
normally slack travel periods, to generate cash flow and to
increase relative market share in selected markets. Discount and
promotional fares are often subject to various restrictions such as
minimum stay requirements, advance ticketing, limited seating and
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<PAGE>
refund penalties. USAir has often elected to match discount or
promotional fares in certain markets in order to compete vigorously
in those discounted markets.
The dramatic expansion of low fare competitive service in many
of USAir's markets in the eastern United States during 1994 and
USAir's competitive response of reducing its fares up to 70% in
certain affected primary and secondary markets in order to preserve
its market share contributed to large losses in 1994. In particu-
lar, Continental created a high frequency, low fare product called
"Continental Lite." By late 1994, USAir competed with Continental
in primary and secondary markets from which USAir then generated
46% of its passenger revenue with fare reductions of up to 70% in
certain markets. As discussed below, in 1995 the airline industry
did not generally experience the deep level of fare discounting
prevalent during the last several years. Continental abandoned its
Continental Lite strategy in 1995 and fare levels have somewhat
recovered. Nonetheless, USAir does not believe that there has been
a reduction in the public demand for generally lower air fares.
The growth of the operations of low cost, low fare carriers in
USAir's markets in domestic markets represents an intense
competitive challenge for USAir, which has higher operating costs
and fewer financial resources than many of its competitors. For
example, the expansion of Southwest into BWI, and in early 1996,
Florida, and the growth of ValuJet at Washington Dulles and other
eastern markets (including ValuJet's recent expansion to Pittsburgh
and Charlotte from Atlanta and the establishment of operations at
Boston) pose a competitive challenge for USAir. USAir currently
has low cost, low fare competition affecting approximately 40% of
its routes. Southwest and ValuJet both have a significant cost
advantage over USAir. USAir believes that it must reduce its
operating costs substantially if it is to ensure its long-term
financial stability and that low-cost incursions into markets
served by USAir could have a material and adverse affect on USAir's
financial condition and results of operations.
In addition, other low cost carriers may enter other USAir
markets. For example, America West commenced service in April 1994
between Columbus, Ohio, where it operates a hub, and Philadelphia,
where USAir has a hub operation. Other carriers, including some of
the larger carriers, have also developed or indicated their intent
to develop similar low fare short-haul service, such as United's
low cost, low fare operation in the western United States discussed
below. Delta has procured concessions from its pilot union that
would enable Delta to start a low cost, short-haul service to
compete with airlines such as Southwest and ValuJet. Delta is
presently the second largest airline on the East Coast of the
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<PAGE>
United States. It is possible that this service might be
introduced in markets that USAir serves, which may result in
greater competition and lower fares in those markets. USAir has
stated that it will be competitive on routes that are important to
USAir and has underscored the necessity of cutting costs to remain
competitive with insurgents on these routes.
Industry Restructuring and Cost-Cutting
- ---------------------------------------
Major carriers that compete with USAir have implemented, or
are in the process of implementing, measures to reduce their
operating costs. For example, United has substantially reduced its
personnel costs as part of a recapitalization transaction completed
in July 1994. United initiated its low cost, low fare operation in
the western U.S. in October 1994. Delta reached agreement with
certain of its employees regarding concessions. Delta has also
recently turned over several of its former routes to Delta
Connection code-share carriers that have lower cost structures.
American announced a restructuring of its non-union workforce and
is still seeking substantial concessions and productivity gains
from its pilot group. TWA has negotiated productivity improvements
with its unionized employees and has recently emerged from
bankruptcy for the second time in less than two years pursuant to
a "pre-packaged" reorganization plan approved by a bankruptcy court
which reduces the carrier's debt by approximately 30%. Continental
has reduced capacity and returned non-productive aircraft to
lessors. In early 1995, Southwest announced that its pilots had
ratified a 10-year labor contract that provides for no wage
increases in the first five years, providing for grants of stock
options to the pilots instead. USAir expects that the
implementation of this labor contract will further enhance
Southwest's low cost advantage over USAir and other carriers.
These actions by certain of USAir's competitors illustrate the
trend among the major U.S. airlines to restructure in order to
reduce their operating costs and enable them to compete in a low
fare environment. See "Strategy" and "Capacity and Route Rational-
ization" above for a discussion of USAir's cost reduction initia-
tives.
There are recent examples of companies in the airline industry
which have obtained employee concessions in agreements that
provided for the recapitalization of the companies, including
employee ownership stakes and employee participation in corporate
governance. Most recently, in July 1994, UAL, consummated the
recapitalization noted above which resulted in majority ownership
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<PAGE>
and board membership for certain employee groups in exchange for
concessions. In other cases, airlines have filed for bankruptcy
protection under Chapter 11 of the Bankruptcy Code, and some
airlines have ceased operation altogether when their operating
costs remained excessive in relation to their revenues, and their
liquidity became insufficient to sustain their operations.
In 1995, various carriers, including USAir, implemented
cutbacks in service in the eastern U.S. The "intra-east coast"
area represents approximately 64% of USAir's departures and
approximately 44% of its ASMs. USAir has implemented a plan to cut
capacity throughout its system and to emphasize the strength of its
hubs in Pittsburgh, Charlotte, Philadelphia and Baltimore, as well
as other major east coast urban centers. See "Strategy" and
"Capacity and Route Rationalization" above. The major carriers
decreased service in the East by approximately 9.8% year-over-year.
However, several smaller carriers increased the number of depar-
tures in this region during the same time period or have announced
plans to introduce or increase service in this region. The net
result was a decrease in jet capacity in the intra-east coast
region of approximately 3.5% for the full year 1995 from 1994
levels.
The trend toward globalization of the airline industry has
accelerated in recent years as certain U.S. carriers, including
USAir, have formed marketing and strategic alliances with foreign
carriers. Certain foreign carriers have made substantial invest-
ments in U.S. carriers which have frequently been tied to marketing
alliances or, less frequently, reciprocal investments by the U.S.
carrier in its foreign partner. Foreign investment in U.S. air
carriers is restricted by statute and may be subject to review by
the DOT and, on antitrust grounds, by the DOJ.
In February 1995, several major U.S. carriers, including
Delta, American, Northwest, United and USAir, imposed limits on the
base commissions they pay travel agents for domestic air fares.
Formerly, most major airlines paid a fixed base commission of
approximately 10% on the price of a ticket for the distribution of
all domestic tickets. The new cap limits base commission payments
to $50 for a round-trip domestic ticket with a base fare above $500
and $25 for a one-way domestic ticket with a base fare above $250.
The new limits on commissions are designed to reduce one of the
airlines' largest expenses. USAir has experienced cost savings
through its implementation of a limit on the commissions it pays
travel agents for domestic air fares. As a result of the new
limits on commissions, some travel agents have filed lawsuits
against the airlines that imposed commission caps, including USAir,
claiming that the airlines violated antitrust laws. See "Legal
Proceedings."
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<PAGE>
Deferral of Dividends by USAir Group
- ------------------------------------
On September 29, 1994, USAir Group announced that it was
deferring the quarterly dividend payment due September 30, 1994 on
the 358,000 outstanding shares of its Series A Preferred Stock. The
Series A Preferred Stock is owned by affiliates of Berkshire.
USAir Group has also deferred quarterly dividend payments on all of
its other outstanding series of preferred stock, including the
Series F Preferred Stock and the Series T Preferred Stock which is
owned by BA, as well as on the publicly held Series B Preferred
Stock. On March 13, 1995, Berkshire announced that it had recorded
a pre-tax charge of $268.5 million to recognize a decline in the
value of its investment in the Series A Preferred Stock that had an
original cost of $358 million. On May 22, 1995, BA announced that
it had made a $200 million provision against its $400 million
investment in preferred stock of USAir Group. USAir Group has not
paid a dividend on its Common Stock, since the second quarter of
1990. As of May 20, 1996, the board of directors of USAir Group had
not authorized the resumption of any dividends on USAir Group's
preferred stock or Common Stock and there can be no assurance when
or if such dividend payments will resume.
Under the terms of the Series A Preferred Stock, Berkshire has
the right to elect two additional directors to the board of
directors of USAir Group after a scheduled dividend payment has not
been paid for thirty days. Berkshire has informed USAir Group that
it does not intend to exercise this right at this time. Berkshire's
Chairman Warren E. Buffett and Vice Chairman Charles T. Munger
served as directors on USAir Group's and USAir's boards of
directors from January 27, 1993 until November 28, 1995. They did
not stand for re-election as directors in November 1995. Under the
terms of the Series B Preferred Stock, the holders of that security
have the right to elect two additional directors to the board of
directors of USAir Group if six quarterly dividends are not paid.
That right became effective on February 15, 1996. In May 1996,
Berkshire offered to sell the Series A Preferred Stock to USAir
Group. Berkshire has advised that if USAir Group does not buy back
the shares from Berkshire, Berkshire may sell the Series A
Preferred Stock to third parties but Berkshire has stated it will
not knowingly sell the shares to any person who would own 3% or
more of a voting stake in USAir Group as a result of the purchase.
As of March 31, 1996, USAir believes that USAir Group was legally
prohibited from paying dividends on or redeeming its capital stock
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<PAGE>
in accordance with Section 170 of the Delaware General Corporation
Law. A requisite percentage of Series B Preferred Stockholders
informed USAir Group that they would be pursuing the right to elect
two additional directors to the Company's board of directors. If
Berkshire were also to exercise its right to elect two directors,
BA would have the right to designate an additional nominee for
election as director to the board of directors of USAir Group
pursuant to the Investment Agreement between.
Likelihood of No Future Investments by British Airways
- ------------------------------------------------------
As described in greater detail in "British Airways Investment
Agreement" below, on January 21, 1993, USAir Group and BA entered
into the Investment Agreement. BA invested approximately $400
million in certain preferred stock of USAir Group in accordance
with the Investment Agreement. The deadline for BA's election to
purchase a certain series of preferred stock of USAir Group and
therefore, to elect to make any further investment in USAir Group
pursuant to the Investment Agreement, was January 21, 1996 (except
that, if the DOT shall approve all of the transactions contemplated
by the Investment Agreement on or before January 21, 1998, BA may
make additional investments in USAir Group under certain circum
stances). BA declined to make any further investment on or before
the January 21, 1996 deadline. BA stated publicly that it was
precluded from making additional investments under existing DOT
policy and that it did not expect DOT approval to be forthcoming.
Pursuant to the Investment Agreement, BA has the right to maintain
its proportionate ownership of USAir Group's securities under
certain circumstances by purchasing additional shares of certain
series. British Airways has advised USAir Group that it would not
exercise the right (triggered by the issuances of USAir Group
Common Stock pursuant to certain USAir Group benefit plans during
the nine months ended March 31, 1996) to buy additional shares of
Series T Convertible Exchangeable Senior Preferred Stock. See
"Provisions Regarding Additional BA Investments; BA Announcement
Regarding No Additional Investment in USAir Group". In addition,
the press and certain governmental officials of the United States
and of the United Kingdom have suggested that BA and American are
involved in negotiations that may lead to alliances between those
two airlines. American has stated that it has had discussions with
a number of European air carriers regarding alliances. BA has
advised USAir that BA has had discussions with a number of airlines
worldwide regarding strategic alternatives. USAir cannot predict
whether alliance transactions may be consummated between BA and any
other airlines and if so, how any of the foregoing might affect
USAir.
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<PAGE>
Employees
- ---------
At December 31, 1995, USAir employed approximately 39,900
full-time equivalent employees. USAir employed approximately 4,900
pilots, 9,200 maintenance and related personnel, 10,000 station
personnel, 3,900 reservations personnel, 7,700 flight attendants
and 4,200 personnel in other administrative and miscellaneous job
categories. Approximately 26,100, or 65%, of the employees of
USAir are covered by collective bargaining agreements with various
labor unions, or will be covered by a collective bargaining
agreement for which initial negotiations are in progress.
After negotiating with the leaders of its labor groups since
March 1994 in an attempt to reduce its annual personnel costs by
approximately $500 million, USAir Group had reached an agreement in
principle on March 29, 1995 with the negotiating committee of the
Airline Pilots Association ("ALPA"), which represents USAir's
pilots. During the second quarter of 1995, USAir Group reached
agreements in principle with the International Association of
Machinists and Aerospace Workers ("IAM"), the Association of Flight
Attendants ("AFA") and the Transport Workers Union (the "TWU").
The agreements in principle provided for wage and other concessions
in exchange for equity participation in USAir Group and representa-
tion on USAir Group's board of directors for USAir's employees.
The IAM represents USAir's mechanical and related employees and
USAir's fleet service employees. The AFA represents USAir's flight
attendants. The TWU represents USAir's flight crew training
instructors, flight simulator engineers and dispatch employees.
The tentative agreement with the TWU was with respect to only the
flight crew training instructors. Each of the tentative agreements
was subject to many significant conditions, including union
ratification, negotiation and ratification of acceptable agreements
between USAir and its other labor groups, the restructuring of
holdings by other parties and approval of the boards of directors
of USAir Group and USAir and the stockholders of USAir Group. In
July 1995, the members of the AFA voted against ratification of
their agreement in principle. ALPA made significant additional
demands which were unacceptable and negotiations were thereafter
terminated by USAir Group.
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<PAGE>
USAir continues to believe that its long-term future depends
on reduced costs of operation, including especially lower personnel
costs. USAir remains committed to obtaining labor cost reductions.
Talks between USAir and the IAM's advisory counsel continued during
the first quarter of 1996. USAir's contract with ALPA became open
for negotiations on April 30, 1996 and collective bargaining talks
have begun. USAir cannot predict the outcome of these negotiations
at this time or if USAir will be able to secure meaningful wage and
benefit concessions and productivity improvements from its
unionized employee groups.
Historical Cost Reduction Programs
- ----------------------------------
In 1994, USAir implemented measures announced in September
1993 to reduce projected operating costs. These measures included
a workforce reduction of approximately 2,500 full time positions.
However, USAir's ability to implement additional workforce
reductions is currently limited by its existing labor contracts.
Due to the inclusion of "no furlough" provisions in its current
labor agreements with ALPA and the AFA, USAir may not furlough
employees covered by those agreements for specified periods of
time.
In 1992 and 1993, USAir reached agreement on new contracts
with ALPA with respect to USAir's pilot employees, the IAM with
respect to USAir's mechanics and related employees, the AFA with
respect to its flight attendant employees, and the TWU with respect
to 170 flight dispatch employees and approximately 60 USAir flight
simulator engineers. Each contract (except the contract covering
the flight dispatch employees) provided for wage reductions and
suspension of longevity/step increases for a twelve-month period
beginning shortly after the effective date of the contract. The
wages of each such group of employees reverted to pre-reduction
levels at the expiration of the relevant twelve-month period and
were subsequently increased in accordance with the relevant
contract. Pursuant to their contracts, the pilots, the IAM-repres-
ented employees, the flight attendants and the flight simulator
engineers also agreed to participate in contributory managed care
medical and dental programs. The flight dispatch employees also
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<PAGE>
participated in wage reductions, suspensions of longevity/step
increases and contributory managed care medical and dental programs
because of their non-contract status when those measures were
implemented for non-contract employees, as described in the
following paragraph.
None of the above groups of employees, other than a small
group of flight simulator engineers, is currently scheduled to
receive further wage increases under the terms of its contract.
However, members of all such groups, including the mechanics and
related employees and the flight dispatch employees, are entitled
to wage increases based on longevity. Each contract provides for
productivity improvements. The defined benefit pension plans for
the flight dispatch employees and the flight simulator engineers
have been frozen.
In accordance with its previously announced policy, when ALPA
agreed to the cost reduction program described above, USAir
implemented wage reductions and suspension of longevity/step
increases on its non-contract employees for the twelve-month period
commencing in June 1992. Earlier in 1992, USAir had implemented
the contributory managed care medical and dental programs for
non-contract employees. Prior to January 1, 1992, USAir exclusive-
ly paid contributions to the basic defined benefit pension plan for
its non-contract employees. USAir froze this pension plan at the
end of 1991, which resulted in a one-time book gain of approximate-
ly $107 million for 1991. USAir implemented a defined contribution
pension plan for these employees on January 1, 1993, which is
composed of three components: contributions by USAir based on age
and a percentage of salary, a partial match by USAir of employee
contributions to a savings plan and a profit sharing plan.
Taken together, the above measures provided for temporary wage
reductions and suspension of longevity/step increases in wages that
USAir estimates saved approximately $120 million during the period
June 1992 through March 1994. These concessions provided for
productivity improvements which saved USAir approximately $55
million during the same period. All employees affected by these
changes also agreed to participate in contributory managed care
medical and dental programs which result in savings for USAir. In
exchange for the concessions agreed upon by its unionized employ-
ees, USAir included "no furlough" provisions in each of the new
labor agreements with ALPA, the IAM and the AFA, which prohibit (or
prohibited) USAir from furloughing employees hired on or before the
effective date of the agreements through September 30, 1995 in the
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<PAGE>
case of the agreement with the IAM for mechanics and related
employees, through December 31, 1996 in the case of the agreement
with the AFA, and through June 30, 1997 in the case of the
agreement with ALPA.
USAir recorded a non-recurring charge of approximately $36.8
million in the fourth quarter of 1993 based on a projection of the
repayment of the amount of the temporary wage and salary reductions
discussed above in the event that the employees who sustained the
pay cuts leave the employ of USAir. USAir has adjusted and will
adjust this accounting charge in subsequent periods to reflect the
change in the present value of the liability and changes in
actuarial assumptions including, among other things, actual
experience with the rate of attrition for these employees and
whether such employees have received payments under the profit
sharing program discussed in the next paragraph.
In exchange for the temporary wage and salary reductions and
other concessions during a twelve month period in 1992 and 1993
described above, including the freeze of the defined benefit plan
for non-contract employees, affected employees participate in a
profit sharing program and have been granted options to purchase
USAir Group Common Stock. The profit sharing program is designed
to recompense those employees whose pay has been reduced in an
amount equal to (i) two times salary foregone plus; (ii) one times
salary foregone (subject to a minimum of $1,000) for the freeze of
the pension plans described above. Estimated savings of approxi-
mately $23 million attributable to the suspension of longevity/step
increases will not be subject to repayment through the profit
sharing program. Until the maximum payout has been made, annual
pre-tax profits, as defined in the program, of USAir Group would be
distributed to participating employees as follows:
25% of the first $100 million in pre-tax profits;
35% of the next $100 million in pre-tax profits; and
40% of the pre-tax profits exceeding $200 million.
Calculation of profits under the profit sharing plan excludes
charges for postretirement benefit expenses other than for pensions
(approximately $78.6 million for 1995) and certain unusual items.
This program will be in effect until USAir employees are recom-
pensed for two times salary foregone or three times for employees
who also had pension benefits foregone. The plan is independent of
the profit sharing plan which is an element of the new defined
contribution pension plan for non-contract employees discussed
above. Based on USAir Group's 1995 results and the provisions of
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the profit sharing plan, USAir recognized charges of approximately
$49.7 million under this plan in 1995. Since certain amounts have
been expensed in prior years, even though 1995 was USAir's first
profitable year since the inception of the plan, the cash payout
for 1995 will be approximately $73.7 million and will be made to
employees covered by the provisions of this plan in the first
quarter of 1996.
Under the stock option program, employees whose pay was
reduced received options to purchase 50 shares of USAir Group
Common Stock at $15 per share for each $1,000 of salary reduction.
The options became exercisable following the twelve-month period of
the salary reduction program for each group of employees.
Generally, participating employees have five years from the grant
date to exercise such options. As of December 31, 1995, USAir Group
had granted options to purchase approximately five million shares
of Common Stock to USAir employees under the program.
ALPA Contract: Effects of a Change of Control of USAir Group or
USAir
- -------------------------------------------------------------------
USAir's current labor contract with ALPA provides that in the
event of a "change of control" of USAir Group or USAir, ALPA will
have the right to extend the duration of the contract for one, two
or three years at its option beyond the amendable date of the
agreement with across-the-board wage increases of 4.5% on April 30,
1996 and on each anniversary thereof for the following three years.
A "change of control" is defined as a single transaction or
multi-step related transactions through which (i) securities which
constitute and/or are then currently exchangeable into, exercisable
for or convertible into 50% or more of the outstanding Common Stock
(and Common Stock then currently issuable upon the exchange,
exercise or conversion of securities) and/or (ii) 50% or more of
the value of the assets of USAir Group or USAir, are acquired or
held by a single purchaser or a group of purchasers acting in
concert.
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<PAGE>
Unionizing Efforts
- ------------------
During 1994, certain unions engaged in efforts to unionize
USAir's fleet service employees. The Railway Labor Act governs,
and the NMB has jurisdiction over, campaigns to unionize workers.
After the IAM won a runoff election, on July 22, 1994 the NMB
certified the IAM to represent the fleet service class or craft.
Under the Railway Labor Act, which governs labor relations in the
airline industry, USAir is obligated to negotiate a collective
bargaining agreement with the IAM governing the terms and condi-
tions of employment for the fleet service employees. This
obligation does not require USAir to agree to any particular term
or condition sought by the IAM.
On June 3, 1994, after determining that the United Steel
Workers of America ("USWA") had submitted a sufficient number of
authorization cards, the NMB ordered an election among USAir's
passenger service employees, a class or craft of approximately
10,000 workers consisting primarily of USAir's ticket counter/gate
agents and reservations agents, to determine whether the USWA or
other union would represent these employees. The NMB mailed
ballots to eligible passenger service employees on July 19, 1994
and tabulated the ballots on August 18, 1994. Less than a majority
of the eligible passenger service employees voted in favor of
representation and, as a result, no union represents the passenger
service employees at this time. However, certain unions are
engaged in efforts to unionize such employees.
Certain unions are engaged in efforts to unionize USAir's
passenger service employees. Under the RLA, the NMB could order an
election among a class or craft of eligible employees if a union
submitted an application to the NMB supported by the authorization
cards from at least 35% of the applicable class or craft of
employees. If the NMB ordered an election and a majority of the
eligible employees voted for representation, USAir would be
required to negotiate a collective bargaining agreement with the
union that wins the election. On April 25, 1996, the International
Association of Machinists and Aerospace workers and the
Communications Workers of America filed applications with the NMB
requesting that an election be held among USAir's passenger service
workers, a class or craft of approximately 10,000 workers
consisting primarily of USAir ticket counter/gate agents and
reservations agents. The NMB is in the process of determining
whether these applications are supported by sufficient
authorization cards to warrant an election. USAir cannot predict
whether an election will be held among the passenger service class
or craft and the outcome of the election, if held.
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<PAGE>
USAir cannot predict whether any union might submit authoriza-
tion cards to the NMB sufficient to obtain an election among any
unrepresented class or craft of employees.
Status of USAir's Labor Agreements
- ----------------------------------
<TABLE>
<CAPTION>
The following table presents the status of USAir's labor
agreements as of December 31, 1995:
Expiration
Approximate Date Date of
Number of Contract "No-Furlough"
Union Class or Craft Employees Amendable Clause
- ----- ----------------- ----------- --------- -----------
<S> <C> <C> <C> <C>
AFA flight attendants 7,700 1/97 12/31/96
ALPA pilots 4,900 5/96 (2) 6/30/97
IAM mechanics and
related employees 7,800 10/95 (2) 9/30/95
IAM fleet service
employees 5,400 (1) (3) -
TWU flight crew training
instructors, flight
simulator engineers
and dispatch employees 270 8/96-8/97 (4) -
(1) Estimated number of employees who will be covered under this
new contract.
(2) Currently in negotiations.
(3) Initial contract in negotiation.
(4) Separate contracts cover the flight crew training instructors,
the flight simulator engineers and the dispatch employees.
</TABLE>
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<PAGE>
Frequent Traveler Program
- -------------------------
Each major airline, including USAir, has developed a frequent
traveler program that offers its passengers incentives to maximize
travel on that particular carrier. Participants in such programs
typically earn "mileage credits" for every trip they fly that can
be redeemed for airline travel or, in some cases, for other
benefits.
USAir accounts for its FTP under the incremental cost method,
whereby travel awards are valued at the incremental cost of
carrying one additional passenger. Such costs are accrued when FTP
participants accumulate sufficient miles to be entitled to claim
award certificates. Incremental costs include unit costs for
passenger food, beverages and supplies, fuel, reservations,
communications, liability insurance and denied boarding compensa-
tion expenses expected to be incurred on a per passenger basis. No
profit or overhead margin is included in the accrual for incremen-
tal costs. No liability is recorded for airline, hotel or car
rental award certificates that are to be honored by other parties
because there is no cost to USAir for these awards. "Management's
Discussion and Analysis of Financial Condition and Results of
Operations".
Computerized Reservation Systems
- --------------------------------
At December 31, 1992, USAM Corp. ("USAM"), a subsidiary of
USAir, owned 11% of the Covia Partnership ("Covia") which owned and
operated a computerized reservation system ("CRS"). In September
1993, Covia purchased the assets of the corporation that owned and
operated the Galileo CRS which provided CRS services to travel
agent subscribers in Europe. Covia was then separated into three
entities. As a result, at December 31, 1995, USAM owned 11% of the
Galileo International Partnership, approximately 11% of the Galileo
Japan Partnership and approximately 21% of the Apollo Travel
Services Partnership.
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<PAGE>
The Galileo International Partnership owns and operates the
Galileo CRS. Galileo Japan Partnership markets CRS services in
Japan. Apollo Travel Services markets CRS services in the U.S. and
Mexico. Galileo CRS is the second largest of the four CRS systems
in the U.S. based on revenues generated by travel agency subscrib-
ers. A subsidiary of United controls 38% of the partnership, and
the other partners exclusive of USAir's interest are subsidiaries
of BA, Swissair, KLM Royal Dutch Airlines, Alitalia, Air Canada,
Olympic Airways, Austrian Airlines, Aer Lingus and TAP Air
Portugal.
CRSs play a significant role in the marketing and distribution
of airline tickets. Travel agents issue tickets which generate the
majority of USAir's passenger revenues. Most travel agencies use
one or more CRSs to obtain information about airline schedules and
fares and to book their clients' travel.
Maintenance Marketing Joint Venture with BA
- -------------------------------------------
USAir and an affiliate of BA jointly organized Airline
Technical Services L.L.C. on October 12, 1995. The goal of this
venture is the joint marketing in North America, Central America
and South America of contract maintenance, engineering and
technical services for USAir and BA. USAir hopes to enhance the
utilization of maintenance personnel by taking on outside mainte-
nance work, generating revenues associated with its excess
maintenance capacity and BA's experience with contract maintenance.
USAir also hopes that exposure to the competitive marketplace will
lead to productivity improvements by its own maintenance personnel.
Jet Fuel
- --------
All petroleum product prices continue to be subject to
unpredictable economic, political and market factors. Also, the
balance among supply, demand and price has become more reactive to
world market conditions. Accordingly, the price and availability
of jet fuel, as well as other petroleum products, continues to be
unpredictable. Because fuel costs constitute a major expenditure
for USAir (approximately 9% of its operating costs for fiscal year
1995), significant increases in fuel costs could materially and
adversely affect USAir's results of operations.
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<PAGE>
USAir continues to adjust its jet fuel purchasing strategy to
take advantage of the best available prices while attempting to
ensure that supplies are secure. In addition, USAir has entered
into agreements to hedge the price of a portion of its jet fuel
needs, which may have the net effect of increasing or decreasing
USAir's fuel expense.
In August 1993, the United States increased taxes on domestic
fuel, including aircraft fuel used on domestic routes, by 4.3 cents
per gallon. Airlines were exempt from the tax increase until Octo-
ber 1, 1995, and pending legislation in Congress would reinstate
the exemption through September 30, 1997, subject to termination of
the exemption on September 30, 1996 if certain aviation trust funds
are not extended. These aviation trust funds expired on Decem-ber
31, 1995 and have not, as of May 20, 1996, been extended. There
can be no assurance that the fuel tax exemption will be reinstated,
or if reinstated, the terms on which and the period for which the
exemption will be effective. The additional fuel tax is currently
being paid. Non-reinstatement of the fuel tax exemption would
increase the annual operating expenses of USAir by approximately
$47 million based on projected domestic fuel consumption for 1996.
The following table sets forth statistics about USAir's jet
fuel consumption and cost for each of the last four fiscal years:
<TABLE>
<CAPTION>
Gallons Percentage of
Fiscal Consumed Total Cost Average Cost Operating
Year (Millions) (Millions)(1) Per Gallon(1) Expenses(2)
------ -------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
1995 1,137 $605.0 $0.53 9.0%
1994 1,205 $642.3 $0.53 9.4%
1993 1,161 $677.9 $0.58 10.2%
1992 1,183 $720.6 $0.61 11.1%
(1) Cost includes the base cost of fuel and transportation charges.
(2) Operating expenses have been adjusted to exclude non-recurring
and unusual items and expenses generated under the BA wet lease
arrangements.
The cost of jet fuel per gallon for the first quarter of 1996
(58.61c) increased by 12.6% from first quarter of 1995 levels
(52.06c).
</TABLE>
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<PAGE>
Insurance
- ---------
USAir maintains insurance of the types and in amounts deemed
adequate to protect themselves and their property. Principal
coverage includes liability for bodily injury to or death of
members of the public, including passengers; damage to property of
USAir and others; loss of or damage to flight equipment, whether on
the ground or in flight; fire and extended coverage; and workers'
compensation and employer's liability. Coverage for environmental
liabilities is expressly excluded from USAir's insurance policies.
In the third quarter of 1995, USAir's liability insurance was
renewed. Rates increased due to a number of factors, including the
two aircraft accidents in 1994.
Industry Regulation and Airport Access
- --------------------------------------
USAir operates under a certificate of public convenience and
necessity issued by the DOT. Such certificate may be altered,
amended, modified or suspended by the DOT if the public convenience
and necessity so require, or may be revoked for intentional failure
to comply with the terms and conditions of a certificate. The
airline is also regulated by the FAA, a division of the DOT, under
Subtitle VII of 49 U.S.C. 40101 et seq. (the "Act"), primarily in
the areas of flight operations, maintenance, ground facilities and
other technical matters. Pursuant to these regulations, USAir has
established, and the FAA has approved, a maintenance program for
each type of aircraft operated by USAir that provides for the
ongoing maintenance of such aircraft, ranging from frequent routine
inspections to major overhauls.
Recently adopted regulations require phase-out of certain
aircraft and ageing aircraft modifications. Such types of
regulations can significantly increase costs and affect an
airline's ability to compete.
The DOT allows local airport authorities to implement
procedures designed to abate special noise problems, provided such
procedures do not unreasonably interfere with interstate or foreign
commerce or the national transportation system. Certain airports,
including the major airports at Boston, Washington, D.C., Chicago,
Los Angeles, San Diego and San Francisco, have established airport
restrictions to limit noise, including restrictions on aircraft
- 121 -
<PAGE>
types to be used and limits on the number of hourly or daily
operations or the time of such operations. In some instances these
restrictions have caused curtailments in services or increases in
operating costs and such restrictions could limit the ability of
USAir to expand its operations at the affected airports. Local
authorities at other airports are considering adopting similar
noise regulations.
In the last several years, the FAA has issued a number of
maintenance directives and other regulations relating to, among
other things, retirement of older aircraft, collision avoidance
systems, airborne windshear avoidance systems, noise abatement and
increased inspections and maintenance procedures to be conducted on
older aircraft.
Several airports have recently sought to increase substantial-
ly the rates charged to airlines, and the ability of airlines to
contest such increases has been restricted by federal legislation,
DOT regulations and judicial decisions. In addition, legislation
which became effective June 1, 1992 allows public airports to
impose passenger facility charges of up to $3 per departing or
connecting passenger at such airports. With certain exceptions,
these charges are passed on to the airlines' passengers.
The FAA has designated John F. Kennedy, LaGuardia, O'Hare and
Washington National airports as "high density traffic airports" and
has limited the number of departure and arrival slots at those
airports. Currently, slots at the high density traffic airports
may be voluntarily sold or transferred between carriers. The DOT
has in the past reallocated slots to other carriers and reserves
the right to withdraw slots. Various amendments to the slot
system, proposed from time to time by the FAA, members of Congress
and others, could, if adopted, significantly affect operations at
the high density traffic airports or expand slot controls to other
airports. Certain of such proposals could restrict the number of
flights, limit the ownership transferability of slots, increase the
risk of slot withdrawal, or otherwise decrease the value of USAir
slots. USAir holds a substantial number of slots at LaGuardia and
Washington National. These slots are valuable assets and important
in USAir's overall business strategy. USAir cannot predict whether
any of these proposals will be adopted.
- 122 -
<PAGE>
The availability of international routes to United States
carriers is regulated by agreements between the United States and
foreign governments. The United States has in the past generally
followed the practice of encouraging foreign governments to accept
multiple carrier designation on foreign routes, although certain
countries have sought to limit the number of carriers. Foreign
route authorities may become less valuable to the extent that the
United States and other countries adopt "open skies" policies
liberalizing entry on international routes. In February 1995, the
United States and Canada reached a formal agreement which deregu-
lates airline services between Canada and the United States and
provides that Canadian airlines have immediate "open skies" access
to the United States and that U.S. airlines will have limited new
route rights to Vancouver and Montreal for two years and to Toronto
for three years and open skies thereafter. This agreement is
expected to result in significant increased traffic between the
United States and Canada. The agreement provides for two new
Toronto designations in the first year. In October 1995, the DOT
granted to USAir route authority for non-stop service between
Pittsburgh and Toronto. USAir had previously operated this route
under temporary exemption authority. On May 1, 1995, the DOT
granted to USAir the temporary exemption authority to begin twice-
daily roundtrip nonstop service between Washington National and
Toronto once a Canadian carrier entered that market. Air Canada
initiated service on that route beginning in June 1995. In
February 1996, the DOT issued a show cause order awarding USAir
final certification to serve the Washington National to Toronto
route. USAir's authority will be effective pending the DOT's
determination as to which U.S. carrier will receive the final
certification to operate the route. The route will be open to all
carriers in 1997. In addition, in October 1995, the DOT granted
USAir a two-year exemption route authority to operate between
Madrid, Spain and both Philadelphia and Boston. USAir plans to
commence service from Philadelphia to Madrid on June 15, 1996. In
April 1996, the DOT awarded USAir authority to institute service to
Rome, Italy from Philadelphia with through service from Los
Angeles. USAir intends to inaugurate its service to Rome on or
about June 1, 1996. In February 1996, USAir received final
approval from the DOT to institute service to Munich, Germany from
Philadelphia. USAir will inaugurate its Munich service on May 23,
1996.
Many aspects of USAir's operations are subject to increasingly
stringent federal, state and local laws protecting the environment.
Future regulatory developments could affect operations and increase
operating costs in the airline industry, including for USAir.
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<PAGE>
Additional laws and regulations have been proposed or are
contemplated that could significantly affect the cost of airline
operations by, for example, raising fuel taxes, imposing additional
requirements or restrictions on operations or impairing access to
capital markets. For example, proposals are being considered that
would provide that a portion of the appropriations for the FAA and
other aviation governmental functions be funded pursuant to
additional taxes on ticket and cargo revenue or fees for use of the
air traffic control system. USAir cannot predict what laws and
regulations may be adopted or their impact, but the impact could be
significant. Certain regulatory changes, if proposed and adopted,
could materially adversely affect USAir and could require charges
to USAir's financial statements.
British Airways Investment Agreement
- ------------------------------------
The following summary of certain terms of the Investment
Agreement is subject to, and is qualified in its entirety by, the
Investment Agreement and the exhibits thereto, which have previous-
ly been filed with the Commission. BA has invested approximately
$400 million in USAir Group preferred stock in accordance with the
Investment Agreement. On March 7, 1994, BA announced it would make
no additional investments in USAir Group until the outcome of
measures by USAir Group to reduce costs and improve its financial
results was known. On January 19, 1996, BA announced that it would
not exercise its option to make any further investment in USAir
prior to the January 21, 1996 deadline provided in the Investment
Agreement. See "Provisions Regarding Additional BA Investments; BA
Announcement Regarding No Additional Investment in USAir Group."
As of December 31, 1995, BA owned preferred stock in USAir Group
constituting approximately 21.0% of the total voting interest in
USAir Group.
Terms of the Series F Preferred Stock
- -------------------------------------
On January 21, 1993, USAir Group sold, pursuant to the
Investment Agreement, 30,000 shares of USAir Group's Series F
Preferred Stock to BA for an aggregate purchase price of $300
million. The Series F Preferred Stock is convertible into shares
of Common Stock at a conversion price of $19.41 and has a
liquidation preference of $10,000 per share plus an amount equal to
accrued dividends. See "Miscellaneous" for a discussion of an
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<PAGE>
antidilution adjustment to the conversion price of the Series F
Preferred Stock. The Series F Preferred Stock may be converted at
the option of USAir Group at any time after January 21, 1998 if the
average composite closing market price of Common Stock during any
30-day calendar period is at least 133% of the conversion price.
The Series F Preferred Stock is entitled to cumulative quarterly
dividends of 7% per annum when and if declared and to share in
certain other distributions.
USAir Group has deferred quarterly dividend payments on all
its preferred stock beginning with payments due September 30, 1994.
See "Deferral of Dividends by USAir Group." The Series F Preferred
Stock must be redeemed by USAir Group on January 15, 2008. Each
share of the Series F Preferred Stock is entitled to a number of
votes equal to the number of shares of Common Stock into which it
is convertible and votes with the Common Stock and USAir Group's
Series A Preferred Stock and any other capital stock with general
voting rights for the election of directors, as a single class.
Subject to adjustment, 515.2950 shares of Common Stock are issuable
on conversion per share of Series F Preferred Stock (determined by
dividing the $10,000 liquidation preference per share of Series F
Preferred Stock by the $19.41 conversion price), and 15,458,851
shares of Common Stock would be issuable on conversion of all
Series F Preferred Stock. However, under the terms of any USAir
Group preferred stock that is or will be held by BA ("BA Preferred
Stock"), conversion rights (and as a result voting rights) may not
be exercised to the extent that doing so would result in a loss of
USAir Group's or any of its subsidiaries' operating certificates
and authorities under Foreign Ownership Restrictions, as defined
under "Board Representation" below, and it is assumed for this
purpose that Series F Preferred Stock will be fully converted
before any other BA Preferred Stock. Under Foreign Ownership
Restrictions, no more than 25% of USAir Group's voting interest may
be held by persons other than U.S. citizens, including BA. With
respect to dividend rights and rights on liquidation, dissolution
and winding up, the Series F Preferred Stock ranks senior to USAir
Group's Series B Preferred Stock, Junior Participating Preferred
Stock, Series D, no par value, and Common Stock, and pari passu
with BA Preferred Stock and Series A Preferred Stock. See
"Miscellaneous" for information regarding BA's purchase of two
additional series of preferred stock from USAir Group pursuant to
its exercise of optional and preemptive purchase rights under the
Investment Agreement.
- 125 -
<PAGE>
DOT Order Regarding BA's Investment in USAir Group
- --------------------------------------------------
On March 15, 1993, the DOT issued an order (the "DOT Order")
finding, among other things, that "BA's initial investment of $300
million does not impair USAir's citizenship" under Foreign
Ownership Restrictions as defined under "Board Representation"
below. However, the DOT instituted a proceeding to consider
whether USAir will remain a U.S. citizen if the transactions and
acts contemplated by the Investment Agreement, including the
transactions discussed under "Provisions Regarding Additional BA
Investments; BA Announcement Regarding No Additional Investment in
USAir Group" and "Certain Governance Matters" below, are consummat-
ed. The DOT has suspended indefinitely the period for comments
from interested parties to the proceeding pending its resolution of
requests by other airlines for production of additional documents
from USAir. The DOT Order states that the DOT expects and advises
USAir Group and BA not to proceed with the Second Purchase and
Final Purchase, as such terms are defined under "Provisions
Regarding Additional BA Investments; BA Announcement Regarding No
Additional Investment in USAir Group," until the DOT has completed
its review of USAir's citizenship. In any event, on March 7, 1994,
BA announced that it would make no additional investments in USAir
Group until the outcome of measures by USAir Group to reduce its
costs and improve its financial results was known and on January
19, 1996, BA announced that it would not proceed with the Second
Purchase.
Board Representation
- --------------------
USAir Group increased the size of its board of directors by
three on January 21, 1993 and the board filled the newly created
directorships with designees of BA (the size of the board of
directors was subsequently decreased to 15 in 1995). Under the
terms of the Investment Agreement, USAir Group must use its best
efforts to cause BA to be proportionally represented on the board
of directors (on the basis of its voting interest), up to a maximum
- 126 -
<PAGE>
representation of 25% of the total number of authorized directors
("Entire Board"), assuming that such proportional representation is
permitted by then applicable U.S. statutory and DOT regulatory or
interpretative foreign ownership restrictions ("Foreign Ownership
Restrictions"), until the later of the closing of the Second
Purchase, as defined under "Provisions Regarding Additional BA
Investments; BA Announcement Regarding No Additional Investment in
USAir Group" below, and the date on which BA may exercise under
Foreign Ownership Restrictions the rights described under "Certain
Governance Matters" below.
U.S.-U.K. Routes
- ----------------
Under the Investment Agreement, USAir Group agreed that as
promptly as commercially practicable it would divest or, if
divestiture were not possible, relinquish, all licenses, certifi-
cates and authorities for each of its routes between the U.S. and
the U.K. (the "U.K. Routes") at such time as BA and USAir imple-
mented the code sharing arrangement contemplated by the Investment
Agreement discussed below. USAir Group and BA have agreed that
they should attempt to mitigate any negative impact on USAir
employees or communities served by the U.K. Routes and to share any
losses suffered as a result of such divestiture or relinquishment
with due regard to their respective interests. Accordingly, BA has
been operating and marketing certain routes formerly operated by
USAir under a "wet lease." USAir has begun to phase out the wet
lease arrangements with BA. One of the three 767-200ER aircraft
was returned in December 1995 and a second was returned in February
1996. The third aircraft is expected to be returned during May
1996. Under the wet lease arrangements, USAir has leased three
Boeing 767-200ER aircraft, along with cockpit and cabin crews, to
BA in order to serve three routes between the U.S. and London.
Upon termination of the wet lease arrangements, USAir plans to
utilize the returned aircraft as part of its planned 1996 expansion
of international service (See "Capacity and Route Rationalization"
above). In conjunction with the termination of the wet lease
arrangements and related to USAir's relinquishment or divestiture
of the U.K. Routes, BA has agreed to pay USAir a total of $47
million in the form of periodic payments commencing with the
termination of the three wet leases and continuing annually for
nine years. The first periodic payment was received by USAir in
December 1995. The route authorities which USAir was required to
- 127 -
<PAGE>
sell or relinquish were the Philadelphia-London and BWI-London
route authorities purchased by USAir from TWA in April 1992 for $50
million, and its route authority between Charlotte and London.
Assets related to the U.K. Routes were carried on USAir's books at
approximately $45 million at December 31, 1995.
Code Sharing
- ------------
BA and USAir Group entered into a code share agreement on
January 21, 1993 (the "Code Share Agreement") pursuant to which
certain USAir flights carry the airline designator code of both BA
and USAir. Code sharing is a common practice in the airline
industry whereby one carrier places its designator code and sells
tickets on the flights of another carrier (its code sharing
partner). These flights are intended by USAir Group and BA
eventually to include all routes provided for under the bilateral
air services agreement between the U.S. and the U.K. to the extent
possible, consistent with commercial viability and technical
feasibility.
The DOT initially granted approval of the code sharing
agreement between USAir and BA on March 17, 1993 for a period of
one year. The authorizations to USAir and BA were expanded by a
supplemental DOT order on November 12, 1993 to permit code sharing
on flights serving an additional number of U.S. points through
additional U.S. gateways for BA's transatlantic flights. In June
1995, the DOT renewed its approval of USAir's and BA's authority to
operate code share service on flights serving 66 U.S. cities and
Mexico City. USAir has ceased serving Mexico City. In addition,
the DOT approved an expansion of the USAir/BA code share authority
to 65 new U.S. cities, Bermuda, Nassau and five Canadian cities.
The approval is valid for two years. As of December 31, 1995,
USAir and BA had implemented code sharing to 70 of the 138 airports
authorized by the DOT. BA has publicly stated that its relation-
ship with USAir has contributed over $150 million in annual
additional revenues and cost savings. USAir believes that the code
share arrangements have also brought benefits to USAir through
domestic feed from international BA flights. The code share
arrangements with BA are an important part of USAir's strategic and
long-term objectives.
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<PAGE>
USAir believes that (i) the code share cities in the U.S.
receive greater access to international markets; (ii) it has
greater access to international traffic; and (iii) BA's and its
customers benefit from better on-line connections as well as
coordinated check-in and baggage checking procedures. USAir
believes that the code sharing arrangements will generate increased
revenues. The DOT may continue to link further renewals of the
code share authorization to the U.K.'s liberalization of U.S. air
carrier access to the U.K.; however, the code sharing arrangements
contemplated by the Code Share Agreement are expressly permitted
under the bilateral air services agreement between the U.S. and
U.K. Accordingly, USAir expects that the existing code share
authorization will continue to be renewed; however, there can be no
assurance that this will occur. USAir does not believe that the
DOT's failure to renew further the authorization would result in a
material adverse change in its financial condition.
Provisions Regarding Additional BA Investments; BA Announcement
Regarding No Additional Investment in USAir Group
- -------------------------------------------------------------------
On March 7, 1994, BA announced that it would not make any
additional investments in USAir Group until the outcome of measures
by USAir Group to reduce costs and improve its financial results
was known. Under the terms of the Investment Agreement, assuming
the Series F Preferred Stock or any shares issued upon conversion
thereof were outstanding and BA had not sold any shares of
preferred stock issued to it by USAir Group or any Common Stock or
other securities received upon conversion or exchange of the
preferred stock, BA had been entitled at its option to elect to
purchase from USAir Group, on or prior to January 21, 1996, 50,000
shares of Series C Cumulative Convertible Senior Preferred Stock,
without par value ("Series C Preferred Stock"), at a purchase price
of $10,000 per share, to be paid by BA's surrender of the Series F
Preferred Stock and a payment of $200 million (the "Second
Purchase"). BA did not exercise that option.
The Investment Agreement provides that, on or prior to January
21, 1998, assuming that BA had purchased (or was purchasing
simultaneously in accordance with the terms of the Investment
Agreement) Series C Preferred Stock, BA would have the option to
purchase 25,000 (or more in certain circumstances) shares of Series
E Cumulative Convertible Exchangeable Senior Preferred Stock,
without par value ("Series E Preferred Stock"), at a purchase price
of $10,000 per share (the "Final Purchase"). Series E Preferred
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<PAGE>
Stock is exchangeable under certain circumstances at the option of
USAir Group into certain USAir Group debt securities ("BA Notes").
Because BA did not elect prior to January 21, 1996, to make the
Second Purchase, it cannot make the Final Purchase, except that if
the DOT approves all the transactions and acts contemplated by the
Investment Agreement on or prior to January 21, 1998, at the
election of either BA or USAir Group, BA's purchase of the Series
C Preferred Stock and the Series E Preferred Stock would be
consummated under certain circumstances. Because BA did not elect
to purchase the Series C Preferred Stock by January 21, 1996, USAir
Group may at its option redeem, in whole or in part, Series F
Preferred Stock and a like percentage of Series T Preferred Stock
held by BA at the higher of market value or the price of $10,000
per share, plus accrued dividends. As of March 31, 1996, USAir
believes that USAir Group was legally prohibited from paying
dividends on or redeeming its capital stock in accordance with
Section 170 of the Delaware General Corporation Law. USAir cannot
predict whether or when the Second Purchase and Final Purchase will
be consummated or whether or when it will repurchase or redeem its
shares of capital stock.
Terms of the Series C Preferred Stock and Series E Preferred Stock
- ------------------------------------------------------------------
The Series C Preferred Stock and Series E Preferred Stock are
substantially similar to Series F Preferred Stock, except as
follows. Series C Preferred Stock will be convertible into shares
of Class B Common Stock or Non-Voting Class C Stock (as such terms
are defined under "Terms of BA Common Stock" below) at an initial
conversion price of approximately $19.79, subject to Foreign
Ownership Restrictions. Each share of Series C Preferred Stock
will be entitled to a number of votes equal to the number of shares
of Class B Common Stock into which it is convertible, subject to
Foreign Ownership Restrictions. If shares of Series C Preferred
Stock are transferred to a third party, they convert automatically
at the seller's option into either shares of Common Stock or a like
number of shares of Series G Cumulative Convertible Senior
Preferred Stock. Series E Preferred Stock will be convertible into
shares of Common Stock or Non-Voting Class ET Stock (as defined
under "Terms of BA Common Stock" below) at an initial conversion
price of approximately $21.74, subject to increase if the Series E
Preferred Stock is originally issued on or after January 21, 1997,
subject to Foreign Ownership Restrictions. Each share of Series E
Preferred Stock will be entitled to a number of votes equal to the
number of shares of Common Stock into which it is convertible,
subject to Foreign Ownership Restrictions.
- 130 -
<PAGE>
Terms of BA Common Stock
- ------------------------
To the extent permitted by Foreign Ownership Restrictions, an
amendment to USAir Group's charter, which would be filed with the
Delaware Secretary of State immediately prior to the Second
Purchase, which BA has announced it will not complete, would create
three new classes of common stock: Class B Common Stock, par value
$1.00 per share ("Class B Common Stock"), Non-Voting Class C Common
Stock, par value $1.00 per share ("Non-Voting Class C Stock"), and
Non-Voting Class ET Common Stock, par value $1.00 per share
("Non-Voting Class ET Common Stock," collectively with Class B
Common Stock and Non-Voting Class C Common Stock, "BA Common
Stock"), all of which may be held only by BA or one of its
wholly-owned subsidiaries. Except with respect to voting and
conversion rights, the BA Common Stock would be identical to the
Common Stock. Shares of BA Common Stock would convert automatical-
ly to shares of Common Stock upon their transfer to a third party.
Subject to Foreign Ownership Restrictions, Class B Common Stock
would be entitled to one vote per share. After the effectiveness of
the above charter amendment, to the extent permitted by Foreign
Ownership Restrictions, Class B Common Stock would vote as a single
class with Series C Preferred Stock on the election of one-fourth
of the directors and the approval of the holders of Class B Common
Stock and Series C Preferred Stock voting as a single class would
be required for certain matters.
Certain Governance Matters
- --------------------------
Following the Second Purchase, which BA has announced it will
not complete, and assuming these changes are permitted under
Foreign Ownership Restrictions, the above charter amendment would
fix the size of USAir Group's board of directors at 16, one-fourth
of whom would be elected by BA. In addition, the vote of 80% of
the Entire Board of USAir Group would be required for approval of
the following (with certain limited exceptions): (i) any agreement
with the DOT regarding citizenship and fitness matters; (ii) any
annual operating or capital budgets or financing plans; (iii)
incurring capital expenditures not provided for in a budget
approved by the vote of 80% of the Entire Board in excess of $10
million in the aggregate during any fiscal year; (iv) declaring and
paying dividends on any capital stock of USAir Group or any of its
subsidiaries (other than dividends paid only to USAir Group or any
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<PAGE>
wholly-owned subsidiary of USAir Group and any dividends on
preferred stock); (v) making investments in other entities not
provided for in approved budgets in excess of $10 million in the
aggregate during any fiscal year; (vi) incurring additional debt
(other than certain debt specified in the Investment Agreement) not
in an approved financing plan in excess of $450 million in the
aggregate during any fiscal year; (vii) incurring off-balance sheet
liabilities (e.g., operating leases) not in an approved financing
plan in excess of $50 million in the aggregate during any fiscal
year; (viii) appointment, compensation and dismissal of certain
senior executives; (ix) acquisition, sale, transfer or relinquish-
ment of route authorities or operating rights; (x) entering into
material commercial or marketing agreements or joint ventures; (xi)
issuance of capital stock (or debt or other securities convertible
into or exchangeable for capital stock), other than (A) the stock
options granted to employees in return for pay reductions under the
USAir Group 1992 Stock Option Plan, as described under "Employees"
above, (B) to USAir Group or any direct or indirect wholly owned
subsidiary of USAir Group, (C) pursuant to the terms of USAir Group
securities outstanding when a certain amendment to USAir Group's
charter required in connection with consummation of the Second
Purchase becomes effective, or (D) pursuant to the terms of
securities the issuance of which was previously approved by the
vote of 80% of the Entire Board; (xii) acquisition of its own
equity securities other than from USAir Group or its subsidiaries,
or pursuant to sinking funds or an approved financing plan; and
(xiii) establishment of a board committee with power to approve any
of the foregoing. This supermajority vote requirement would allow
four directors, including those elected by BA, to withhold approval
of the actions described above if they believe them to be contrary
to the best interests of USAir. The supermajority vote would not
be required with regard to the foregoing actions to the extent they
involve the enforcement by USAir Group of its rights under the
Investment Agreement.
Following the Second Purchase, which BA has indicated it will
not complete, to the extent permitted under Foreign Ownership
Restrictions, USAir Group and BA would integrate certain of their
respective business operations pursuant to certain "Integration
Principles" included in the Investment Agreement. In addition, to
the extent permitted by Foreign Ownership Restrictions or pursuant
to specific DOT approval, an "Integration Committee," headed by the
chief executive officers of USAir Group and BA and by an Executive
Vice President-Integration of USAir Group, would oversee the
integration subject to the ultimate discretion of USAir Group's
board of directors. As of the Final Purchase, which BA has
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<PAGE>
indicated it will not complete, to the extent permitted by Foreign
Ownership Restrictions, the Investment Agreement provides for the
establishment of a committee ("Appointments Committee") of the
board of directors of USAir Group, composed of USAir Group's chief
executive officer, BA's chief executive officer and another
director serving on both USAir Group's and BA's board of directors,
to handle all employment matters relating to managers at the level
of vice president and above, except for certain senior executives.
BA's governance rights after the Second Purchase and the Final
Purchase, which BA has indicated it will not complete, would be
subject to reduction if BA reduced its holding in USAir Group under
the following circumstances. If BA sold or transferred, in one or
more transactions, BA Preferred Stock, Common Stock or BA Common
Stock (collectively, Common Stock and BA Common Stock are
hereinafter referred to as "Non-Preferred Stock") issued directly
or indirectly upon the conversion thereof such that the aggregate
purchase price of the BA Preferred Stock, BA Notes, Non-Preferred
Stock or other equity securities of USAir Group held by BA and its
directly or indirectly wholly owned subsidiaries following such
sale or transfer (the "BA Holding") was less than both two-thirds
of the aggregate purchase price of all BA Preferred Stock, BA
Notes, Non-Preferred Stock or other equity securities of USAir
Group acquired by BA and its subsidiaries following January 21,
1993 and $750 million (or $500 million if the Final Purchase had
not occurred), then (i) the number of directors elected by the
Class B Common Stock and the Series C Preferred Stock, voting
together as a single class, would be limited to two; (ii) the
directors elected by the Common Stock, Series A Preferred Stock,
Series E Preferred Stock, Series T Preferred Stock, as defined
under "Miscellaneous" below, and other capital stock with voting
rights would no longer be required to include two directors
selected from among the outside directors on the board of directors
of BA; (iii) special class voting rights applicable to the Class B
Common Stock and Series C Preferred Stock would no longer apply;
and (iv) BA would no longer participate in the Appointments
Committee. In addition, if the BA Holding became less than both
one-third of the aggregate purchase price of all BA Preferred
Stock, BA Notes, Non-Preferred Stock or other equity securities of
USAir Group acquired by BA and its subsidiaries following January
21, 1993 and $375 million (or $250 million if the Final Purchase
had not occurred), then the number of directors elected by the
Class B Common Stock and the Series C Preferred Stock, voting
together as a single class, would be reduced to one. If the BA
Holding became less than $100 million, then the Class B Common
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<PAGE>
Stock and the Series C Preferred Stock would no longer vote
together as a single class with respect to the election of any
directors of USAir Group, but would vote together with the Common
Stock, the Series A Preferred Stock and any other class or series
of capital stock with voting rights with respect to the election of
directors of USAir Group.
Miscellaneous
- -------------
Under the terms of the Investment Agreement, BA has the right
to maintain its proportionate ownership of USAir Group's securities
under certain circumstances by purchasing shares of certain series
of Series T Preferred Stock, Common Stock or BA Common Stock.
Pursuant to these provisions, on June 10, 1993, BA purchased (i)
152.1 shares of Series T-1 Preferred Stock for approximately $1.5
million as a result of certain issuances during the period January
21 through March 31, 1993 of Common Stock in connection with the
exercise of certain employee stock options and to certain defined
contribution retirement plans; and (ii) 9,919.8 shares of Series
T-2 Preferred Stock for approximately $99.2 million as a result of
USAir Group's issuance on May 4, 1993 of 11,500,000 shares of
Common Stock for net proceeds of approximately $231 million
pursuant to a public underwritten offering. Because BA partially
exercised its preemptive right in connection with the Common Stock
offering and the offering price was below a certain level, the
conversion price of the Series F Preferred Stock was antidilutively
adjusted on June 10, 1993 from $19.50 to $19.41 per share. As a
result, the Series F Preferred stock is convertible into 15,458,851
shares of Common Stock or Non-Voting Class ET Common Stock. BA
advised USAir Group that it would not exercise
its optional purchase rights under the Investment Agreement to buy
additional series of Series T Preferred Stock triggered by
issuances of Common Stock of USAir Group pursuant to certain USAir
Group benefit plans during 1994 and 1995.
The Investment Agreement also imposes certain restrictions on
BA's right to acquire additional voting securities, participate in
solicitations with respect to USAir Group securities or otherwise
propose or discuss extraordinary transactions concerning USAir
Group. These restrictions remain in effect as long as BA or any of
its affiliates or associates beneficially owns any BA Preferred
Stock, BA Notes or BA Common Stock, and for two years thereafter.
- 134 -
<PAGE>
In addition, the Investment Agreement restricts BA's right to
transfer certain securities and requires that prior to transferring
such securities, BA must, in most cases, first offer to sell the
securities to USAir Group. BA has certain rights to require USAir
Group to register for sale USAir Group securities sold to it
pursuant to the Investment Agreement.
Pursuant to the Investment Agreement, BA has the right to
maintain its proportionate ownership of USAir Group's securities
under certain circumstances by purchasing additional shares of
certain series. British Airways has advised USAir Group that it
would not exercise the right (triggered by the issuances of USAir
Group Common Stock pursuant to certain USAir Group benefit plans
during the nine months ended March 31, 1996) to buy additional
shares of Series T Convertible Exchangeable Senior Preferred Stock.
[remainder of page left blank intentionally]
- 135 -
<PAGE>
Operating Statistics
- --------------------
<TABLE>
USAir's operating statistics during the years 1991 through
1995 and for the first quarter of 1996 (compared to first quarter
1995) are set forth in the following tables (1):
<CAPTION>
Years Ended December 31, 1995 1994 1993 1992 1991
- -----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue Passengers
(Thousands)* 56,674 59,495 53,678 54,655 55,600
Average Passenger
Journey (Miles)* 663.7 637.7 656.2 642.2 613.7
Revenue Passenger
Miles (Millions)* 37,618 37,941 35,221 35,097 34,120
Total Available
Seat Miles** 58,678 61,540 59,841 60,052 58,574
Available Seat Miles
(Millions)* 58,163 61,027 59,485 59,667 58,261
Passenger Load
Factor (2)* 64.7% 62.2% 59.2% 58.8% 58.6%
Break Even Load
Factor (3)(5)** 64.9% 67.3% 61.7% 63.2% 62.7%
Passenger Revenue
Per ASM* 10.78c 9.70c 10.22c 9.70c 9.76c
Total Revenue Per
ASM (4)(5)** 11.80c 10.59c 11.04c 10.38c 10.33c
Cost per ASM (4)(5) 11.40c 11.02c 11.12c 10.85c 10.80c
(6)**
Yield (Revenue Per
RPM)* 16.66c 15.61c 17.27c 16.49c 16.67c
* Scheduled service only (excludes charter flights).
** All service.
c = cents
</TABLE>
- 136 -
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996 1995
- ---------------------------- -------- --------
<S> <C> <C>
Revenue Passengers
(Thousands)* 12,938 13,767
Average Passenger
Journey (Miles)* 673 659
Revenue Passenger
Miles (Millions)* 8,709 9,079
Total Available
Seat Miles** 13,583 15,334
Available Seat Miles
(Millions)* 13,493 15,206
Passenger Load
Factor (2)* 64.6% 59.7%
Break Even Load
Factor (3)(5)** 67.1% 64.0%
Passenger Revenue
Per ASM* 11.50c 9.78c
Total Revenue Per
ASM (4)(5)** 12.74c 10.75c
Cost per ASM (4)(5)
(6)** 12.81c 11.08c
Yield (Revenue Per
RPM)* 17.81c 16.37c
* Scheduled service only (excludes charter flights).
** All service.
c = cents
(1) Statistics include free frequent travelers and the related
miles flown.
(2) Passenger load factor is the percentage of aircraft seating
capacity that is actually utilized (RPMs/ASMs).
(3) Break even load factor represents the percentage of aircraft
seating capacity that must be utilized, based on fares in effect
during the period, for USAir to break even at the pre-tax income
level, adjusted to exclude non-recurring and unusual items.
(4) Adjusted to exclude non-recurring and unusual items.
(5) Financial statistics for 1996, 1995, 1994 and 1993 exclude
revenue and expense generated under the BA wet lease arrangement.
(6) Certain statistics have been recalculated to reflect expense
reclassifications.
</TABLE>
- 137 -
<PAGE>
Flight Equipment
- ----------------
At December 31, 1995, USAir operated the following jet
aircraft:
<TABLE>
<CAPTION>
Passenger Avg. Age Owned Leased
Type Capacity (Years) (1) (2) Total
---- --------- -------- ----- ------ -----
<S> <C> <C> <C> <C> <C>
Boeing 767-200ER(3) 214 7.1 4 5 9
Boeing 757-200 182 5.3 23 11 34
Boeing 737-400 146 6.1 19 35 54
McDonnell Douglas
MD-80 141 13.9 15 16 31
Boeing 737-300 127 8.8 11 74 85
Boeing 737-200 109 13.7 48 16 64
Douglas DC-9-30 101 22.2 48 14 62
Fokker 100 98 5.1 36 4 40
Fokker F28-4000 68 11.2 1 14 15
---- --- --- ---
11.1 205 189 394
==== === === ===
(1) Of the owned aircraft, 123 were pledged as collateral for
various secured financing obligations aggregating $2.3 billion at
December 31, 1995.
(2) The terms of the leases expire between 1996 and 2015.
(3) The above table excludes one owned and one leased 767-200ER
aircraft which USAir leased to BA under a wet lease arrangement at
December 31, 1995.
</TABLE>
USAir is a party to purchase agreements with Boeing and Rolls
Royce that provide for the future acquisition of new jet aircraft
and jet engines. USAir maintains inventories of spare engines,
spare parts, accessories and other maintenance supplies sufficient
to meet its operating requirements.
USAir owned or leased the following aircraft as of Decem-ber
31, 1995, which were parked in storage facilities and not included
in the operating fleet table presented above.
- 138 -
<PAGE>
<TABLE>
<CAPTION>
Avg. Age
Type (Years) Owned Leased Total
---- -------- ----- ------ -----
<S> <C> <C> <C> <C>
British Aerospace
BAe-146-200 10.8 1 14 15
Boeing 727-200 17.1 - 6 6
Boeing 737-200 27.0 4 - 4
Boeing 767-200ER (1) 5.7 - 1 1
Douglas DC-9-30 27.3 10 - 10
Fokker F28-1000 24.0 1 - 1
Fokker F28-4000 12.1 1 1 2
---- -- -- --
17.9 17 22 39
==== == == ==
(1) The 767-200ER aircraft presented in the above table was
returned to USAir by BA during December 1995 in connection with the
phase-out of the wet lease arrangements with BA (See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations"). The aircraft was returned to USAir's operating fleet
in January 1996.
</TABLE>
In addition, as of December 31, 1995, USAir leased or
subleased 16 owned F28-1000 aircraft; two leased Embraer EMB-120
aircraft; ten owned 737-200 aircraft; one owned and one leased 767-
200ER; two owned F28-4000 aircraft, and; three leased BAe-146-200
("BAe-146") aircraft to third parties.
USAir recorded substantial charges in 1994 associated with
repair parts, inventory and future lease payments for certain
parked aircraft (See "Management's Discussion and Analysis of
Financial Condition and Results of Operations").
- 139 -
<PAGE>
USAir is a participant in the Civil Reserve Air Fleet
("CRAF"), a voluntary program administered by the Air Mobility
Command (the "AMC"). The General Services Administration of the
United States government also requires that airlines participate in
CRAF in order to receive United States government business. The
United States government is the largest customer of USAir. USAir
will commit a minimum of four 767-200ER aircraft in support of
military operations, probably for aeromedical missions, as
specified by the AMC. To date, the AMC has not requested USAir to
activate any of its aircraft under CRAF.
Ground Facilities
- -----------------
USAir leases the majority of its ground facilities, including
executive and administrative offices in Arlington, Virginia
adjacent to Washington National; its principal operating, overhaul
and maintenance bases at the Pittsburgh and Charlotte/Douglas
International Airports; major training facilities in Pittsburgh and
Charlotte; central reservations offices in several cities; and line
maintenance bases and local ticket, cargo and administrative
offices throughout its system. USAir owns a building and vacant
land in Fairfax, Virginia, a training facility in Winston-Salem,
North Carolina and reservations facilities in San Diego, California
and Orlando, Florida. USAir's building in Fairfax, Virginia, which
is leased to the U.S. government, and the vacant land are currently
for sale.
Terminal Construction Projects
- ------------------------------
USAir utilizes public airports for its flight operations under
lease arrangements with the government entities that own or control
these airports. Airport authorities frequently require airlines to
execute long-term leases to assist in obtaining financing for
terminal and facility construction. Any future requirements for
new or improved airport facilities and passenger terminals are
likely to require additional expenditures and long-term commit-
ments. Several significant projects which affect large airports on
USAir's route system are discussed below.
- 140 -
<PAGE>
The new terminal at Pittsburgh International Airport commenced
operation in October 1992. The construction cost of the new
terminal, approximately $800 million, was financed largely through
the issuance of airport revenue bonds. As the principal tenant of
the new facility, USAir pays a substantial portion of the cost of
the new terminal through rents and other charges pursuant to a use
agreement which expires in 2018. USAir's terminal rental expense
at Pittsburgh was approximately $44 million annually in 1995. The
new facility has provided additional gate capacity for USAir and
has enhanced the efficiency and quality of its hub services at
Pittsburgh. In addition to the annual terminal rental expense,
USAir is recognizing approximately $13 million in annual rental
expense for property and equipment typically owned by USAir at
other airports. The annual terminal rental expense is subject to
adjustment, depending on the actual airport operating costs, among
other factors.
The East End Terminal at LaGuardia, which cost approximately
$173 million to construct, opened in the third quarter of 1992.
USAir, USAir Express and the USAir Shuttle operations at LaGuardia
are conducted from this terminal and the adjoining USAir Shuttle
terminal. The East End Terminal has 12 jet gates. USAir recogniz-
es approximately $31 million in annual rental expense for this
terminal and is responsible for all maintenance and operating
costs.
In 1993, USAir and the City of Philadelphia reached an
agreement to proceed with certain capital improvements at Philadel-
phia International Airport, where USAir has its third largest hub.
The improvements include approximately $109 million in various
terminal renovations and a new $220 million commuter airline runway
expansion project, exclusive of financing costs. Depending on the
timing of certain federal environmental reviews, USAir expects
construction on the terminal project will be completed in 1998.
The runway expansion project is not expected to be completed until
2000. USAir expects that its annual costs of operations at
Philadelphia International Airport will increase by approximately
$14 million once construction is complete, representing more than
a 40% increase.
The Washington National Airport Authority is currently
undertaking a $1 billion capital development project at Washington
National, which includes construction of a new terminal currently
expected to commence operation in the second quarter of 1997.
Based on current projections, USAir estimates that its annual
operating expenses at Washington National will increase by
approximately $10 million to $12 million.
- 141 -
<PAGE>
Legal Proceedings
- -----------------
USAir is involved in legal proceedings arising out of its two
aircraft accidents that occurred in July and September 1994 near
Charlotte, North Carolina and Pittsburgh, Pennsylvania, respective-
ly. The National Transportation Safety Board ("NTSB") held
hearings beginning in September 1994 relating to the July accident
and January 1995 relating to the September accident. In April
1995, the NTSB issued its finding of probable causes with respect
to the accident near Charlotte. It assigned as probable causes
flight crew errors and the failure of air traffic control to convey
weather and windshear hazard information. The NTSB has not yet
issued its final accident investigation report for the accident
near Pittsburgh. The NTSB, Boeing, the FAA and USAir jointly
conducted flight tests in October 1995 as part of the ongoing
investigation into the cause of this accident. In this regard,
USAir provided a 737-300 aircraft in the collective effort to
simulate the conditions at the time of the accident. More public
hearings were conducted in November 1995. The NTSB has indicated
that a determination of the cause of the accident is not likely
until sometime in 1996. USAir expects that it will be at least two
to three years before the accident litigation and related settle-
ments will be concluded. USAir believes that it is fully insured
with respect to this litigation. Therefore, USAir believes that
the litigation will not have a material adverse effect on USAir's
financial condition or results of operations, although any finding
of fault on USAir's part could create negative publicity and could
tarnish USAir's image.
In December 1995, USAir received a Civil Investigative Demand
("CID") from the DOJ relating to USAir's compliance with the terms
of a consent decree entered into in December 1992, as amended in
September 1994. The consent decree was entered into to resolve
litigation concerning USAir's methods of disseminating fare data to
the Airline Tariff Publishing Company. A CID is a request for
information in the course of an antitrust investigation and does
not constitute the institution of a civil or criminal action. The
CID issued in December 1995 seeks information concerning USAir's
use of travel dates in its fare filings, among other things.
- 142 -
<PAGE>
On March 19, 1993, the U.S. District Court in Atlanta, Georgia
entered a settlement involving USAir and five other U.S. air
carrier defendants in the Domestic Air Transportation Antitrust
Litigation class action lawsuit. The class action suit, which was
filed in July 1990, alleged that the airlines used ATPCo to signal
and communicate carrier pricing intentions and otherwise limit
price competition for travel to and from numerous hub airports.
Under the terms of the settlement, the six air carriers paid $45
million in cash and issued $396.5 million in certificates valid for
purchase of domestic air travel on any of the six airlines.
USAir's share of the cash portion of the settlement, $5 million,
was recorded in results of operations for the second quarter of
1992. The certificates, mailed to approximately 4.1 million
claimants between December 15 and 31, 1994, provide a dollar-for-
dollar discount against the cost of a ticket generally of up to a
maximum of 10% per ticket, depending on the cost of the ticket. It
is possible that this settlement could have a dilutive effect on
USAir's passenger transportation revenue and associated cash flow.
However, due to the interchangeability of the certificates among
the six carriers involved in the settlement, the possibility that
carriers not party to the settlement will honor the certificates,
and the potential stimulative effect on travel created by the
certificates, USAir cannot reasonably estimate the impact of this
settlement on further passenger revenue and cash flows. USAir has
employed the incremental cost method to estimate a range of costs
attributable to the exercise of the certificates, based on the
assumption that the estimated maximum number of certificates to be
redeemed for travel on USAir will be related to USAir's market
share relative to the total market share of the six carriers
involved in the settlement. USAir's estimated percentage of such
market share is less than 9%. Incremental costs include unit costs
for passenger food, beverages and supplies, fuel, reservations,
communications, liability insurance, and denied boarding compensa-
tion expenses expected to be incurred on a per passenger basis.
USAir has estimated that its incremental cost will not be material
based on the equivalent free trips associated with the settlement.
On October 11, 1994, USAir and seven other carriers entered
into a settlement agreement with a group of State Attorneys General
resolving similar issues with the states. The settlement entitles
passengers traveling within the United States on state government
business to a 10% discount off the published fares of each of the
settling carriers and will be available for 18 months from August
16, 1995, or until the combined discount amount reaches $40
- 143 -
<PAGE>
million, whichever first occurs. On May 10, 1995, a U.S. federal
district court judge approved the settlement. USAir does not
expect that this settlement will have a material adverse effect on
its financial condition or results of operations. As was the case
with the settlement of the private antitrust litigation, it is
difficult to predict the amount of discounted state travel that
will occur on USAir. Thus, a dollar impact of the settlement
cannot be estimated.
In February and March 1995, several class action lawsuits were
filed in various federal district courts by travel agencies and a
travel agency trade association alleging that most of the major
U.S. airlines, including USAir, violated the antitrust laws when
they individually capped travel agent base commissions at $50 for
round-trip domestic tickets with base fares above $500 and at $25
for one-way domestic tickets with base fares above $250. The
lawsuits have been consolidated in the federal district of
Minnesota. The plaintiffs are seeking unspecified treble damages
for restraint of trade. The case is expected to go to a jury trial
in 1996. While USAir believes that its actions in establishing a
commission cap were in full compliance with the antitrust laws, the
Company is unable to predict at this time the ultimate resolution
of the litigation or the potential impact on its financial
condition and results of operations.
In October 1995, USAir terminated for cause an agreement with
In-Flight Phone Corporation ("IFPC"). IFPC was USAir's provider of
on-board telephone and interactive data systems (the "IFPC
System"). The agreement contemplated the eventual installation of
the IFPC System on substantially all of USAir's aircraft. The IFPC
System had been installed on approximately 80 aircraft prior to the
date of termination of the agreement. On December 6, 1995, IFPC
filed suit against USAir seeking equitable relief and damages in
excess of $186 million. USAir believes that its termination of its
agreement with IFPC was appropriate and that it is owed in excess
of $10 million by IFPC. On December 7, 1995, USAir successfully
defended IFPC's emergency motion for a temporary restraining order.
On December 13, 1995, IFPC's motion for a preliminary injunction
was denied and IFPC has relinquished its right to appeal that
decision. IFPC's claim for damages remains pending and USAir
intends to imminently file a counterclaim against IFPC for amounts
it is owed by IFPC. USAir is unable to predict at this time the
ultimate resolution or potential financial impact on USAir's
financial condition and results of operations of this lawsuit.
USAir is presently in negotiations with other vendors of on-board
telephone systems.
- 144 -
<PAGE>
During 1995, four members of USAir's FTP filed class action
lawsuits against USAir in Illinois, Pennsylvania, California and
New Jersey state courts, alleging breach of contract relating to
changes made to USAir's FTP effective December 31, 1989 and/or
January 1, 1995. A similar lawsuit has been pending in California
state court since 1989. The lawsuits seek unspecified damages and
an injunction against the allegedly objectionable changes to
USAir's FTP and any subsequent retroactive changes to the FTP.
USAir denies the allegations made in the lawsuits and intends to
vigorously defend itself. The ultimate resolution of these
lawsuits and their potential impact on the Company's financial
condition or results of operations cannot be predicted at this
time.
In May 1995, USAir Group, USAir and the Retirement Income Plan
for Pilots of USAir, Inc. (the "Pilots' Pension Plan") were sued in
federal district court for the District of Columbia by 469 active
and retired USAir pilots. The lawsuit alleges that USAir has
breached its fiduciary duty under the Employee Retirement Income
Security Act ("ERISA") and otherwise violated ERISA by erroneously
calculating benefits under the Pilots' Pension Plan. The plaintiffs
seek, among other things, an injunction restraining USAir and the
Pilots' Pension Plan from allegedly improperly calculating benefits
under the Pilots' Pension Plan and payments to plaintiffs of
benefits allegedly improperly withheld in an amount alleged to be
equal to approximately $70 million, plus interest. USAir believes
that it has properly calculated benefits under the Pilots' Pension
Plan and intends to vigorously defend itself against the allega-
tions made in the lawsuit. Because this lawsuit is in an early
stage of litigation, the Company is unable to predict at this time
its ultimate resolution or potential impact on USAir pension
liability or future funding requirements.
USAir has received notices from the U.S. Environmental
Protection Agency and various state agencies that they are
potentially responsible parties with respect to the remediation of
existing sites of environmental concern. Only two of these sites
have been included on the Superfund National Priorities List.
USAir continues to negotiate with various governmental agencies
concerning known and possible cleanup sites. USAir has made
financial contributions for the performance of remedial investiga-
tions and feasibility studies at sites in Moira, New York;
Escondido, California; and Elkton, Maryland.
[remainder of page left blank intentionally]
- 145 -
<PAGE>
Also, USAir has been identified as a potentially responsible
party ("PRP") for environmental contamination at Boston Logan
Airport. There are a number of other PRPs at the site. The Company
is presently unable to assess its proportionate share of contribu-
tion, but does not expect any such contribution to have a material
adverse effect on its financial condition or results of operations.
Because of changing environmental laws and regulations, the
large number of other potentially responsible parties and certain
pending legal proceedings, it is not possible to reasonably
estimate the amount or timing of future expenditures related to
environmental matters. The Company provides for costs related to
environmental contingencies when a loss is probable and the amount
is reasonably estimable. Although management believes adequate
reserves have been provided for all known contingencies, it is
possible that additional reserves could be required in the future
which could have a material effect on results of operations.
However, the Company believes that the ultimate resolution of known
environmental contingencies should not have a material adverse
effect on its financial position or results of operations based on
its experience with similar environmental sites.
The Equal Employment Opportunity Commission and various state
and local fair employment practices agencies are investigating
charges by certain job applicants, employees and former employees
of USAir involving allegations of employment discrimination in
violation of Federal and state laws. The plaintiffs in these cases
generally seek declaratory and injunctive relief and monetary
damages, including back pay. In some instances they also seek
classification adjustment, compensatory damages and punitive
damages. Such proceedings are in various stages of litigation and
investigation, and the outcome of these proceedings is difficult to
predict. In the Company's opinion, however, the disposition of
these matters is not likely to have a material adverse effect on
its financial condition or results of operations.
[remainder of page left blank intentionally]
- 146 -
<PAGE>
MANAGEMENT
----------
Directors and Executive Officers
- --------------------------------
<TABLE>
The Directors and executive officers of USAir as of May 20,
1996 are as follows:
<CAPTION>
Name Age Position
- -------------------------- --- ---------------------------------
<S> <C> <C>
Bruce R. Aubin............ 65 Senior Vice President-
Maintenance Operations
Robert Ayling............. 49 Director
Robert W. Bogle........... 57 Director
Edwin I. Colodny.......... 69 Director
Mathias J. DeVito......... 65 Director
Robert L. Fornaro......... 43 Senior Vice President-Planning
John P. Frestel, Jr....... 56 Senior Vice President-Human
Resources
Rakesh Gangwal............ 42 Director; President and Chief
Operating Officer
George J.W. Goodman....... 65 Director
John W. Harper............ 55 Senior Vice President-Finance and
Chief Financial Officer
John W. Harris............ 48 Director
Edward A. Horrigan, Jr.... 66 Director
W. Thomas Lagow........... 54 Executive Vice President-Marketing
Robert LeBuhn............. 64 Director
[table continued on following page]
- 147 -
<PAGE>
Name Age Position
- -------------------------- --- ---------------------------------
<S> <C> <C>
John R. Long, III......... 47 Executive Vice President-
Customer Services
Roger P. Maynard.......... 53 Director
John G. Medlin, Jr........ 62 Director
Hanne M. Merriman......... 54 Director
Lawrence M. Nagin......... 55 Executive Vice President-Corporate
Affairs and General Counsel
Robert C. Oaks............ 60 Senior Vice President-Operations
Nancy R. Rohrbach......... 50 Senior Vice President-Public &
Community Relations
Raymond W. Smith.......... 58 Director
Derek M. Stevens.......... 57 Director
Stephen M. Wolf........... 54 Director; Chairman of the Board
and Chief Executive Officer
</TABLE>
Certain Information Concerning Directors and Officers
- -----------------------------------------------------
There are no family relationships among any of the officers
listed above. No officer was selected pursuant to any arrangement
between him or her and any other person. Officers are elected
annually to serve for the following year or until the election and
qualification of their successors. All the executive officers
except Ms. Rohrbach and Messrs. Wolf, Gangwal, Nagin, Lagow, Aubin,
Fornaro and Harper have been actively engaged in the business and
affairs of USAir during the past five years. Mr. Frestel has
announced that he is retiring from USAir in July 1996. Mr. Long
has been selected as Executive Vice President-Human Resources and
Training of USAir, effective upon Mr. Frestel's retirement. See
"Management" for the business experience of the officers listed
above since at least January 1, 1991.
- 148 -
<PAGE>
Each of the Directors of USAir is also a Director of USAir
Group. Messrs. Harper, Nagin and Wolf each holds the same office
at USAir Group as each does at USAir. Ms. Rohrbach is Vice Presi-
dent-Public and Community Relations of USAir Group. Information
with respect to the business experience and affiliations of the
Directors and executive officers of USAir since at least January 1,
1991 is set forth below:
Mr. Aubin was Executive Advisor to the Vice Chairman,
President and Chief Executive Officer of Air Canada prior to
joining USAir and, prior to that position, he served as Senior Vice
President Technical Operations and Chief Technical Officer of Air
Canada. He was elected Senior Vice President-Maintenance Opera-
tions of USAir in January 1994.
Mr. Ayling was appointed Chief Executive of BA in January
1996. He was Director of Marketing and Operations of BA from
September 1991 until his appointment as Group Managing Director of
BA in February 1993 and has been a member of the BA Board of
Directors since 1991. Mr. Ayling is a Director of Sun Alliance and
London Insurance Plc, and is a lawyer by profession.
Mr. Bogle is President and Chief Executive Officer of The
Philadelphia Tribune, the nation's oldest newspaper addressed to
the African American community. He assumed his position in May
1989 and previously held other high-level positions at the
newspaper. In June 1995, Mr. Bogle completed his tenure as
President of the National Newspaper Publishers Association, a trade
association comprising the publishers of 205 Black-owned newspapers
from across the nation. Mr. Bogle is Chairman of the Council of
Trustees at Cheyney University, serves on the Executive Committee
of the greater Philadelphia Chamber of Commerce and is a board
advisor to the United Negro College Fund. He is also a member of
the Executive Committee of the Boy Scouts of America, a member of
the Union League of Philadelphia and a life member of Kappa Alpha
Psi fraternity. Mr. Bogle is Vice Chairman of The Hospitals and
Higher Education Authority of Philadelphia and Vice Chairman of
Amalgamated Publishers, Inc. He serves on the Board of Directors
of The American Red Cross, Presbyterian Medical Center of Philadel-
phia, the Police Athletic League, the Christian Street YMCA and The
American Heart Association. Mr. Bogle is also a founding member of
United Media of Philadelphia, an organization comprised of media
owned and operated by African Americans.
- 149 -
<PAGE>
Mr. Colodny is of counsel to the law firm of Paul, Hastings,
Janofsky & Walker. Paul, Hastings, Janofsky & Walker provides
legal services to USAir. Mr. Colodny retired as Chairman of the
Board of USAir and USAir Group in July 1992. He served as Chief
Executive Officer of USAir from 1975 until retiring as an employee
of USAir in June 1991. Mr. Colodny is a Director of Lockheed
Martin Corporation, Comsat Corporation and Esterline Technologies,
Inc., and is a member of the Board of Trustees of the University of
Rochester.
Mr. DeVito is Chairman of the Board of The Rouse Company (real
estate development and management). He also serves as a Director
of First Maryland Bancorp, Allied Irish Bank plc, and subsidiaries
of The Rouse Company. He is a member of the Board of the Maryland
Institute, College of Art, Chairman of the Board of Empower
Baltimore Management Corporation and former Chairman of the Greater
Baltimore Committee.
Mr. Fornaro was Vice President-Research of Jesup & Lamont
Securities until February 1988, when he became Senior Vice
President-Marketing of Braniff, Inc. In August 1988, Mr. Fornaro
became Senior Vice President-Market Planning of Northwest, the
position he held until February 1992. He was elected Senior Vice
President-Planning of USAir in March 1992.
Mr. Frestel was associated with The Atchison, Topeka & Santa
Fe Railway for 22 years, most recently as Vice President-Personnel
and Labor Relations, and was a Director of that company from June
1988 until his election as Senior Vice President-Human Resources of
USAir in January 1989.
Mr. Gangwal became President and Chief Operating Officer of
USAir and USAir Group on February 19, 1996. Mr. Gangwal had served
as Executive Vice President-Planning and Development of Air France
since November 1994. Mr. Gangwal previously served in a variety of
management roles at United over an eleven-year period, culminating
in the role of Senior Vice President-Planning.
Mr. Goodman is President of Continental Fidelity, Inc., which
provides editorial and investment services. He is the author of a
number of books and articles on finance and economics under the pen
name "Adam Smith" and is the host of a television series of that
name seen on public broadcasting stations in the U.S. and on other
networks abroad. He is a Director of Cambrex Corporation. Mr.
Goodman also serves as a member of the Advisory Committee of the
Center for International Relations at Princeton University and is
a Trustee of the Urban Institute.
- 150 -
<PAGE>
Mr. Harper was Senior Vice President-Marketing and Information
Systems at Axe-Houghton Management (investment management) until
his election as Vice President and Controller of USAir in December
1991. He was elected Senior Vice President-Information Systems of
USAir in October 1992 and Senior Vice President-Finance and Chief
Financial Officer of USAir and USAir Group in 1994.
Mr. Harris is President of The Harris Group (real estate
development). From 1972 through 1991, he was President of The
Bissell Companies, Inc. (real estate development). He is a
Director of Southern Bell Telephone and Telegraph Company and
Dominion Resources, Inc. Mr. Harris is former Chairman of the
Greater Charlotte Chamber of Commerce and a member of the Board of
Trustees of the University of North Carolina and serves on the
boards of several community service organizations.
Mr. Horrigan is the former Chairman of the Board of Directors
of Liggett Group Inc. (consumer products), a position he had held
from May 1993 until his retirement in December 1994. He is also
the retired Vice Chairman of the Board of RJR Nabisco, Inc. and
retired Chairman and Chief Executive Officer of R. J. Reynolds
Tobacco Company (consumer products). He is a Director of the
Haggai Foundation.
Mr. Lagow was Senior Vice President-Market Planning of
Northwest until February 1988, when he became Senior Vice Presi-
dent-Planning of United. Mr. Lagow held that position until he was
elected Executive Vice President-Marketing of USAir in February
1992.
Mr. LeBuhn was the Chairman of Investor International (U.S.),
Inc. (investments) until his retirement in January 1995. He is now
a private investor and is a Director of Acceptance Insurance
Companies, Lomas Financial Corp., Cambrex Corporation and Enzon,
Inc. He is Trustee and President of the Geraldine R. Dodge
Foundation, Morristown, New Jersey, and is a member of the New York
Society of Security Analysts.
Mr. Long served as Senior Vice President-Administration of
USAir until his election as Senior Vice President-Customer
Operations of USAir in June 1989. He was elected Senior Vice
President-Customer Services in March 1991 and Executive Vice
President-Customer Services in May 1992.
- 151 -
<PAGE>
Mr. Maynard has been Director of Investments and Acquisitions
of BA since December 1995. Previously, from 1987, he held various
positions at BA, including Director of Corporate Strategy, Director
of Investor Relations & Marketplace Performance and Executive Vice
President North America. Mr. Maynard is a Director of Qantas
Airways Limited.
Mr. Medlin is Chairman of the Board and, until December 31,
1993, was Chief Executive Officer of Wachovia Corporation (bank
holding company). Mr. Medlin also serves as a Director of
BellSouth Corporation, Burlington Industries, Inc., Media General,
Inc., National Services Industries, Inc., RJR Nabisco Holdings
Corp. and Nabisco Holdings Corp.
Mrs. Merriman is the Principal in Hanne Merriman Associates
(retail business consultants). Previously, she served as President
of Nan Duskin, Inc. (retailing), President and Chief Executive
Officer of Honeybee, Inc., a division of Spiegel, Inc., and
President of Garfinckel's, a division of Allied Stores Corporation.
Mrs. Merriman is a Director of CIPSCO, Inc., Central Illinois
Public Service Company, State Farm Mutual Automobile Insurance
Company, The Rouse Company, Ann Taylor Stores Corporation and T.
Rowe Price Mutual Funds. She is a member of the National Women's
Forum and a Trustee of The American-Scandinavian Foundation. She
was a member of the board of directors of the Federal Reserve Bank
of Richmond, Virginia from 1984 to 1990 and served as Chairman in
1989-1990.
Mr. Nagin practiced law with Skadden, Arps, Slate, Meagher &
Flom from August 1994 until he joined USAir in February 1996. He
previously served in several executive positions at UAL and United
from September 1988 to July 1994, culminating in the role of
Executive Vice President-Corporate Affairs and General Counsel of
UAL and United. From 1980-1988, Mr. Nagin was Senior Vice
President and General Counsel of Flying Tigers.
General Oaks is a retired United States Air Force General. He
was commander of the Air Training Command, the service's organiza-
tion responsible for all initial training, including flight
training, prior to his last post in his 35-year career with the Air
Force, as commander of U.S. Air Forces in Europe. He retired from
the Air Force in 1994 and joined USAir in December 1994 as its Vice
President-Corporate Safety and Regulatory Compliance. He was
elected to his present position in February 1995.
- 152 -
<PAGE>
Ms. Rohrbach served as a member of the White House legislative
liaison team (1981 to 1986) and as Assistant to the President and
Secretary to the Cabinet (1987 to 1988). In 1989 and 1990, she was
a resident fellow at Harvard University's Institute of Politics and
a consultant to the Department of Energy. She was Assistant
Secretary of Labor for Policy during 1991 and 1992 and a public
policy and communications consultant during 1993. Ms. Rohrbach was
elected Vice President-Public and Community Relations of USAir
Group and Senior Vice President-Public and Community Relations of
USAir in January 1994.
Mr. Smith is Chairman of the Board and Chief Executive Officer
of Bell Atlantic Company (telecommunications). Previously, Mr.
Smith had served as Vice Chairman and President of Bell Atlantic
and Chairman of The Bell Telephone Company of Pennsylvania. He is
a member of the Board of Directors of CoreStates Financial Company,
a trustee of the Carnegie Mellon University and is active in many
civic and cultural organizations.
Mr. Stevens has been Chief Financial Officer and a Director of
BA since 1989. From 1981 to 1989, he was Finance Director of TSB
Group plc (financial institution). He is a Director of Commercial
Union Plc.
Mr. Wolf is Chairman of the Board of Directors and Chief
Executive Officer of USAir Group and USAir and was elected to those
positions in January 1996. Immediately prior to joining USAir, Mr.
Wolf was a senior advisor to the investment bank Lazard Freres &
Co. From 1987 to July 1994, Mr. Wolf was chief executive officer
of UAL and United and became Chairman of each in 1988. From 1986
to 1987, Mr. Wolf was Chief Executive Officer of Tiger Internation-
al, Inc. and Flying Tigers. From 1984 to 1986, Mr. Wolf was
President and Chief Executive Officer of Republic. Prior to that
time Mr. Wolf held senior management positions at Continental, Pan
Am and American. Mr. Wolf is a Director of Philip Morris Compa-
nies, R.R. Donnelley & Sons Co. and the Alzheimer's Disease and
Related Disorders Association. He is also a trustee of Northwest-
ern University and Rush-Presbyterian-St. Luke's Medical Center.
[remainder of page left blank intentionally]
- 153 -
<PAGE>
Compensation of Executive Officers
- ----------------------------------
The Summary Compensation Tables below set forth the compen-
sation paid during the years indicated to each of the Chief
Executive Officer and the four remaining most highly compensated
executive officers of USAir Group and USAir:
Summary Compensation Tables
- ---------------------------
<TABLE>
Annual Compensation
-------------------
<CAPTION>
Other
Name and Principal Annual Compen-
Position Year Salary Bonus sation(E)
- -------------------- ---- ----------- ----------- --------
<S> <C> <C> <C> <C>
Seth E. Schofield 1995 $417,908(B) $212,500(D) $228,949
Chairman and Chief 1994 $500,000 $ 0 $116,136
Executive Officer of 1993 $475,635(C) $ 0 $275,601
USAir Group and USAir
Frank L. Salizzoni(A) 1995 $335,600(B) $136,000(D) $ 96,970
President and Chief 1994 $385,769 $ 0 $ 11,020
Operating Officer of 1993 $317,558(C) $ 0 $ 45,374
USAir Group and USAir
W. Thomas Lagow 1995 $325,000 $ 96,688(D) $ -
Executive Vice Presi- 1994 $325,000 $ 0 $ -
dent-Marketing of 1993 $310,058(C) $ 0 $ -
USAir
James T. Lloyd 1995 $275,000 $ 81,813(D) $ 22,417
Executive Vice Presi- 1994 $275,000 $ 0 $ 18,705
dent, General Counsel 1993 $257,365(C) $ 0 $ 73,215
and Secretary of USAir
Group; Executive Vice
President and General
Counsel of USAir
John R. Long III 1995 $275,000 $ 81,813(D) $ 21,847
Executive Vice Presi- 1994 $275,000 $ 0 $ 36,458
dent-Customer 1993 $254,808(C) $ 0 $133,772
Services of USAir
</TABLE>
- 154 -
<PAGE>
<TABLE>
Long-Term Compensation
-----------------------
<CAPTION>
Restricted
Name and Principal Stock All Other
Position Year Awards(F) Options Compensa-
tion(H)
- ------------------- ---- ---------- --------- ----------
<S> <C> <C> <C> <C>
Seth E. Schofield 1995 -- -- $ 89,967
Chairman and Chief 1994 -- -- $ 74,821
Executive Officer 1993 -- -- $ 64,302
of USAir Group
and USAir
Frank L. Salizzoni(A) 1995 -- -- $134,926
President and Chief 1994 -- 100,000(G) $167,160(I)
Operating Officer of 1993 -- -- $ 52,222
USAir Group and USAir
W. Thomas Lagow 1995 $223,125 -- $301,410(J)
Executive Vice Presi- 1994 -- -- $286,225(J)
dent-Marketing of 1993 -- -- $282,521(J)
USAir
James T. Lloyd 1995 $223,125 -- $ 35,441
Executive Vice 1994 -- -- $ 40,424
President, General 1993 -- -- $ 36,188
Counsel and Secretary
of USAir Group; Execu-
tive Vice President
and General Counsel
of USAir
John R. Long III 1995 $223,125 -- $ 31,467
Executive Vice Presi- 1994 -- -- $ 10,693
dent-Customer 1993 -- -- $ 652
Services of USAir
(A) Mr. Salizzoni was named President and Chief Operating
Officer of the USAir Group and USAir effective April 1,
1994.
(B) Amounts disclosed reflect a voluntary pay reduction
incurred by Messrs. Schofield and Salizzoni during 1995 of
$82,092 and $64,400, respectively.
- 155 -
<PAGE>
(C) Amounts disclosed reflect reductions in salary during 1993
of $24,365, $12,250, $14,942, $10,904 and $7,508 for
Messrs. Schofield, Salizzoni, Lagow, Lloyd and Long,
respectively, which were implemented for all USAir officers
for a fifteen-month period commencing on January 1, 1992
and ending on March 29, 1993 pursuant to a comprehensive
cost reduction program at USAir.
(D) Earned in 1995 but paid in 1996.
(E) Amounts disclosed include for (i) 1995, $221,911, $88,210,
$22,417 and $16,870, (ii) 1994, $108,633, $10,391, $18,705,
and $29,410 and (iii) 1993, $271,288, $33,259, $73,215, and
$133,772, received by Messrs. Schofield, Salizzoni, Lloyd
and Long, respectively, to cover incremental tax liability
resulting from income derived from the lapsing of restric-
tions on the disposition of Restricted Stock. Restricted
Stock is Common Stock subject to certain restrictions on
disposition. Any amounts disclosed in the column that are
in excess of the amounts disclosed in the preceding sen-
tence represent income derived from personal travel on
USAir.
(F) On November 28, 1995, each of Messrs. Lagow, Lloyd and Long
were awarded 17,500 shares of Restricted Stock. Amount
shown is based on closing price ($12.75) on such date.
(G) Non-qualified stock option grant on April 1, 1994, the date
Mr. Salizzoni was named President and Chief Operating Offi-
cer of USAir Group and USAir.
(H) Under USAir's split dollar life insurance plan, individual
life insurance coverage is available to the named officers.
In 1993, USAir commenced paying the premium associated with
this coverage. In 1993, 1994 and 1995, USAir paid the re-
mainder of the premium associated with the whole life
component of the coverage. If all assumptions as to life
expectancy and other factors occur in accordance with
projections, USAir expects to recover the premiums it pays
with respect to the whole life component of the coverage.
The following amounts reflect the value of the benefits
accrued during the years indicated, calculated on an
actuarial basis, ascribed to the insurance policies pur-
chased on the lives of the named officers (plus the dollar
value of premiums paid by USAir with respect to term life
insurance): 1995 - Mr.Schofield - $54,135, Mr. Salizzoni
- $38,111, Mr. Lagow - $36,780, Mr. Lloyd - $25,441 and Mr.
Long - $20,794; 1994 - Mr. Schofield - $31,194; Mr.
Salizzoni - $27,722; Mr. Lagow - $10,225; Mr. Lloyd -
$18,424 and Mr. Long - $644; 1993 - Mr. Schofield -
$29,328, Mr. Salizzoni - $26,010, Mr. Lagow - $9,716, Mr.
Lloyd - $17,291 and Mr. Long - $652. During 1993, 1994 and
1995, USAir made contributions to the accounts of Messrs.
Schofield, Salizzoni, Lagow, Lloyd and Long in certain
- 156 -
<PAGE>
defined contribution pension plans in the following
amounts: 1995 $35,652, $96,815, $14,630, $10,000 and
$10,673, respectively, 1994 - $43,627, $38,192, $26,000,
$22,000 and $10,049, respectively, and 1993 - $34,974,
$26,212, $22,805, $18,897 and $0, respectively.
(I) Amount disclosed also reflects $101,246 for reimbursement
of relocation expenses.
(J) Upon the commencement of his employment, USAir agreed to
pay Mr. Lagow $1 million over four years, which amount was
intended to compensate him for restricted stock and stock
options which he forfeited when he left his former employ-
er. The amount disclosed includes the annual installment,
$250,000, of the total payment.
</TABLE>
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal
Year-End Option/SAR Values
- --------------------------------------------------------------
The following table provides information on the number of
USAir Group options held by the named executive officers at
fiscal year-end 1995. None of the officers exercised any options
during 1995. The unexercised options held by one officer was in-
the-money based on the fair market value of the Common Stock on
December 29, 1995 ($13.25).
<TABLE>
Number of
Unexercised
Options/SARs at
Year End (#)
<CAPTION>
Name Exercisable Unexercisable
<S> <C> <C>
Seth E. Schofield 390,569 0
Frank L. Salizzoni 177,800 75,000
W. Thomas Lagow 153,211 0
James T. Lloyd 169,742 0
John R. Long III 100,722 0
</TABLE>
- 157 -
<PAGE>
<TABLE>
Value of
Unexercised
In-the-Money
Options/SARs at
Year End ($)(1)
<CAPTION>
Name Exercisable Unexercisable
- ---------------------- ------------- -------------
<S> <C> <C>
Seth E. Schofield $ 0 $ 0
Frank L. Salizzoni $ 137,500 $ 412,500
W. Thomas Lagow $ 0 $ 0
James T. Lloyd $ 0 $ 0
John R. Long III $ 0 $ 0
</TABLE>
Retirement Benefits
- -------------------
Prior to 1993, USAir's Retirement Plan (the "Retirement
Plan") for its salaried employees was comprised of two qualified
plans. The Retirement Plan was designed so that the two plans,
when aggregated, would provide noncontributory benefits based
upon both years of service and the employee's highest three-year
average annual compensation during the last ten calendar years of
service. The primary plan is a defined benefit plan which pro-
vides a benefit based on the factors mentioned above. The primary
plan is integrated with the Social Security program so that the
benefits provided thereunder are reduced by a portion of the
employee's benefits from Social Security. USAir's contributions
to the primary plan are not allocated to the account of any
particular employee. The primary plan was frozen on December 31,
1991, and accordingly, retirement benefits payable under the plan
were determinable on that date.
The secondary plan is a target benefit defined contribution
plan. The secondary plan was established in 1983 as a result of
changes to the Internal Revenue Code of 1986, as amended (the
"Code"), which lowered the maximum benefit payable from a defined
benefit plan. In the event that the benefit produced under the
primary plan formula cannot be accrued for any employee covered
by such plan because of the limit on benefits payable under
defined benefit plans, contributions were made on behalf of such
employee to the secondary plan. Such contributions were calculat-
ed to provide the benefit produced under the formula in the
- 158 -
<PAGE>
primary plan in excess of such limit, to the extent permitted
under the Code's limitation on the contributions to defined
contribution plans. USAir's contributions to the secondary plan
are allocated to individual employees' accounts. During 1995, no
contributions were made to any executive officer's account. The
secondary plan was also frozen on December 31, 1991.
Under the Retirement Plan, benefits usually begin at the
normal retirement age of 65. The Retirement Plan also provides
benefits for employees electing early retirement from ages 55
through 64. If such an election is made, the benefits may be
reduced to reflect the longer interval over which the benefits
will be paid. Executive officers participate in the Retirement
Plan on the same basis as other employees of USAir.
Contributions to and benefits payable under the Retirement
Plan must be in compliance with the applicable guidelines or
maximums established by the Code. USAir has adopted an unfunded
supplemental plan which will provide those benefits which would
otherwise be payable to officers under the Retirement Plan, but
which, under the Code, are not permitted to be funded or paid
through the qualified plans maintained by USAir. Benefit accruals
under the supplemental plan also ceased upon the freezing of the
Retirement Plan on December 31, 1991. Such supplemental plan
provides that any benefits under the unfunded supplemental plan
will be paid in the form of a single, lump sum payment. Such
supplemental plans are specifically provided for under applicable
law and have been adopted by many corporations under similar
circumstances. Messrs. Schofield, Salizzoni, Lloyd and Long are
currently entitled to receive retirement benefits in excess of
the limitations established by the Code.
- 159 -
<PAGE>
The following table presents the noncontributory benefits
payable per year for life to employees under the Retirement Plan
and the unfunded supplemental plan described above, assuming
normal retirement in the current year. The table also assumes the
retiree would be entitled to the maximum Social Security benefit
in addition to the amounts shown.
<TABLE>
<CAPTION>
Final Earn-
ings as
defined in Noncontributory Pension Based on Years of Service
the Plan 10 Years 15 Years 20 Years 25 Years 30 Years 35 Years
- ---------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 19,507 $ 29,261 $ 39,014 $ 48,768 $ 53,768 $ 53,768
$200,000 43,507 65,261 87,014 108,768 118,768 118,768
$300,000 67,507 101,261 135,014 168,768 183,768 183,768
$400,000 91,507 137,261 183,014 228,768 248,768 248,768
$500,000 115,507 173,261 231,014 288,768 313,768 313,768
$600,000 139,507 209,261 279,014 348,768 378,768 378,768
$700,000 163,507 245,261 327,014 408,768 443,768 443,768
$800,000 187,507 281,261 375,014 468,768 508,768 508,768
The values reflected in the above chart represent the
application of the Retirement Plan formula to the specified
amounts of compensation and years of service. The compensation
covered by the Retirement Plan is salary and bonus, as reported
in the Summary Compensation Table. The credited years of service
under the Retirement Plan through the date of freezing of the
plan (December 31, 1991) for each of the individuals included in
the Summary Compensation Table are as follows: Mr. Schofield-30
years, Mr. Salizzoni-1 year, Mr. Lagow-none, Mr. Lloyd-5 years,
and Mr. Long-16 years.
</TABLE>
- 160 -
<PAGE>
USAir has entered into agreements with Messrs. Schofield,
Salizzoni, Lagow, Lloyd and Long which provide for a supplement
to their retirement benefits under the Retirement Plan. This
supplement is designed to provide such persons with those bene-
fits they would have received had they been employed by USAir for
the minimum number of years to be entitled to full retirement
benefits under the Retirement Plan and provides for pension
benefits to be calculated using their salary of record rather
than the salary in effect under various salary reduction pro-
grams.
Employment Arrangements with Messrs. Wolf, Gangwal and Nagin
- ------------------------------------------------------------
Under his employment arrangements with USAir Group, Mr. Wolf
is entitled to an annual base salary of $500,000. In addition,
Mr. Wolf is eligible for an annual bonus pursuant to the terms of
the Executive Incentive Plan. Bonus eligibility will be based on
performance criteria established by the Human Resources Committee
or payable at the Committee's discretion if they believe perfor-
mance and circumstances are appropriate for such payment. If Mr.
Wolf achieves his target, he will receive a bonus of 50% of
annual base salary, which may be increased for results in excess
of the target up to a maximum bonus of 100% of base salary.
Mr. Wolf is entitled to an award of stock options and
restricted stock, as follows: (i) 1,300,000 stock options effec-
tive January 16, 1996, at an exercise price based on the fair
market value of the stock on January 16, 1996 ($12.1875) with
500,000 options vesting immediately on January 16, 1996, 575,000
options vesting on January 16, 1997, 75,000 options vesting on
January 16, 1998, 75,000 options vesting on January 16, 1999, and
the remaining 75,000 options vesting on January 16, 2000, and
(ii) 325,000 shares of restricted stock, effective January 16,
1996, vesting ratably on the first through fourth anniversaries
of the effective grant date.
USAir Group has entered into a supplemental retirement
agreement with Mr. Wolf which will provide him with a pension
benefit under the formula contained in USAir's frozen defined
benefit pension plan for salaried employees, on the basis that he
had "deemed credited service" under the plan for all of his 29
years of service within the airline industry and without regard
to certain limitations set forth in the Code. Benefits will be
- 161 -
<PAGE>
calculated on the assumption that Mr. Wolf's annual compensation
has been and will remain at the rate of the annual base salary
set forth above and the maximum bonus described above has been
earned. Mr. Wolf became vested in 25% of this supplemental
benefit on the date of his employment and will become incre-
mentally vested in the remainder of this supplemental benefit
ratably over a period of three years from the date of his employ-
ment. This benefit is subject to an offset for benefits payable
as a result of contributions from USAir to the tax-qualified and
non-qualified defined contribution retirement program for sala-
ried employees of USAir.
Under their employment arrangements with USAir Group,
Messrs. Gangwal and Nagin are entitled to annual base salaries of
$400,000 and $340,000, respectively. Upon employment, Mr. Gangwal
became entitled to the purchase and assignment by USAir of an
annuity with an after-tax value of $1 million and Mr. Nagin
received a $275,000 signing bonus. Both Mr. Gangwal and Mr. Nagin
are eligible for an annual bonus pursuant to the terms of USAir
Group's Executive Incentive Plan. Bonus eligibility will be based
on performance criteria to be established by the Human Resources
Committee or payable at the Committee's discretion if they
believe performance and circumstances are appropriate for such
payment. If Mr. Gangwal and Mr. Nagin achieve their targets, they
will receive a bonus of 50% and 35% of their annual base salary,
respectively, which may be increased for results in excess of the
target up to a maximum bonus of 100% and 70% of their base
salaries, respectively. Messrs. Gangwal and Nagin are entitled to
awards of 850,000 and 225,000 stock options, respectively,
effective January 31, 1996, at an exercise price of $14.875 (the
fair market value on January 31, 1996), with 20% of the respec
tive options vesting immediately on such dates and an additional
20% vesting on the first through fourth anniversaries of such
dates.
Messrs. Gangwal and Nagin received 250,000 and 50,000
shares, respectively, of restricted stock, with 50,000 and 10,000
shares, respectively, vesting immediately on February 19 and 6,
1996, respectively, and 20% of each such grant vesting on the
first through fourth anniversaries of such dates.
USAir will enter into a supplemental retirement agreement
with each of Mr. Gangwal and Mr. Nagin which will provide each
with a pension benefit under the formula contained in USAir's
frozen defined benefit pension plan for salaried employees, on
the basis that each had "deemed credited service" under the plan
accruing at the rate of: (1) five (Mr. Gangwal) or four (Mr.
- 162 -
<PAGE>
Nagin) years of "deemed service" for each year of actual service
up through the fifth year of employment of each; and (2) one year
of service for each year of actual service after five years of
employment; up to a maximum of 30 years of credited service. The
benefits will be calculated on actual base salary and the assump-
tion that the maximum bonus described above has been earned. This
benefit is subject to an offset for benefits payable as a result
of contributions from USAir to the tax-qualified and non-quali-
fied defined contribution retirement program for salaried employ
ees of USAir.
The stock options granted to Messrs. Wolf, Gangwal and Nagin
and Mr. Wolf's restricted stock grant are subject to stockholder
approval of a new stock incentive plan. In the event that the
stockholders fail to approve a new plan, Messrs. Wolf, Gangwal
and Nagin are entitled to substitute awards of equivalent econom-
ic value.
In connection with their employment arrangements, each of
Messrs. Wolf, Gangwal and Nagin also received relocation assis-
tance (and, in the case of Messrs. Gangwal and Nagin, tax reim-
bursement related thereto) and became entitled to reimbursement
of fees for certain tax and financial planning advice. Each of
Messr. Wolf's, Gangwal's and Nagin's stock options and restricted
stock and benefits under the supplemental retirement agreement
will vest immediately upon a change-of-control, a termination of
employment without cause or upon resignation for good reason.
USAir Group will enter into agreements substantially similar
to the Employment Contracts (described below) with each of
Messrs. Wolf, Gangwal and Nagin.
Arrangements Concerning Termination of Employment and Change of
Control
- ----------------------------------------------------------------
In connection with their respective retirements, USAir Group
entered into certain arrangements with Messrs. Schofield, Saliz-
zoni and Lloyd.
Pursuant to an agreement approved by the Board of Directors,
in consideration for his past services to USAir and for services
between the date of the letter agreement and the time of his
retirement, USAir agreed to provide Mr. Schofield with (i)
payments required under his employment agreement with USAir Group
- 163 -
<PAGE>
for termination upon mutual agreement paid as if such termination
was by Mr. Schofield for "good reason", (ii) a six-month consult-
ing arrangement and (iii) supplemental pension benefits based on
his salary of record, as described below.
Upon his retirement, Mr. Schofield received an aggregate of
$1,719,231 pursuant to the terms of his Employment Agreement and
became entitled to receive payment for his six-month consulting
arrangement at his salary rate in effect on the date of his
retirement ($500,000).
Mr. Schofield's supplemental pension benefit will be calcu-
lated as follows: (a) the pension benefit calculated under the
benefit formula set forth in the USAir Retirement Plan as if the
Retirement Plan had not been frozen in 1991 and using Mr. Scho-
field's salary of record, rather than reduced salary, for the
years 1992, 1993, 1994 and 1995, less (b) the benefits payable to
Mr. Schofield in the aggregate under any qualified and non-
qualified pension plans of USAir (the "Pension Plans"), to the
extent such benefits are attributable to contributions made by
USAir, and (c) without regard to certain limitations set forth in
the Code. The supplemental benefit payable shall be unfunded and
shall be paid directly from USAir's general assets.
In connection with their resignations as executive officers
effective February 19, 1996 and February 5, 1996, respectively,
Mr. Salizzoni and Mr. Lloyd agreed to remain employees of USAir
through March 31, 1996 and April 4, 1996, respectively, to assist
their successors in transition. During the period of employment
from February 19 through March 31, 1996 in the case of Mr.
Salizzoni and February 5, 1996 through April 4, 1996 in the case
of Mr. Lloyd, each received (or will receive) his base salary and
all other compensation and benefits applicable to his previous
position as a senior officer. Upon their retirements, Mr. Sali-
zzoni received an amount equal to his base salary payable from
April 1, 1996 through the remainder of the "employment period"
ending on November 12, 1999 (an aggregate of $1,446,000) and Mr.
Lloyd received an amount equal to his base salary payable from
April 4, 1996 through the remainder of the "employment period"
ending on June 29, 1999 (an aggregate of $953,077).
USAir agreed to provide Mr. Salizzoni and Mr. Lloyd with (a)
service credit, (b) age credit, and (c) earnings credit at their
respective 1996 base salary rates, through the remainder of the
Employment Period under their Employment Agreements (i.e.,
through November 12, 1999 for Mr. Salizzoni and June 29, 1999 for
- 164 -
<PAGE>
Mr. Lloyd) under their respective supplemental pension arrange-
ments. In addition, certain options held by Mr. Salizzoni lapsed
and certain unvested options (with respect to 75,000 shares)
vested and certain shares of restricted stock held by Mr. Lloyd
were forfeited and the restrictions on certain shares of re-
stricted stock (with respect to 5,250 shares) lapsed.
USAir currently has employment contracts (the "Employment
Contracts") with the executive officers (the "Executives") named
in the Summary Compensation Table who remain employees of USAir
Group. The terms of the Employment Contracts extend until the
earlier of the fourth anniversary thereof or the Executive's
normal retirement date and are subject to automatic one-year
annual extensions on each anniversary date (to the fourth anni-
versary of such anniversary date) unless advance written notice
is given by USAir. In exchange for each Executive's commitment to
devote his or her full business efforts to USAir, the agreements
provide that each Executive will be re-elected to a responsible
executive position with duties substantially similar to those in
effect during the prior year and will receive (1) an annual base
salary at a rate not less than that in effect during the previous
year, (2) incentive compensation as provided in the contract and
(3) insurance, disability, medical and other benefits generally
granted to other officers. In the event of a change of control,
as defined in each Employment Contract, the term of each Employ-
ment Contract is automatically extended until the earlier of the
fourth anniversary of the change of control date or the Execu-
tive's normal retirement date.
The Employment Contracts provide that, should USAir or any
successor fail to re-elect the Executive to his or her position,
assign the Executive to inappropriate duties which result in a
diminution in the Executive's position, authority or responsibil-
ities, fail to compensate the Executive as provided in the
Employment Contract, transfer the Executive in violation of the
Employment Contract, fail to require any successor to USAir to
comply with the Employment Contract or otherwise terminate the
Executive's employment in violation of the Employment Contract,
the Executive may elect to treat such failure as a breach of the
Employment Contract if the Executive then terminates employment.
As liquidated damages as the result of an event not following a
change of control that is deemed to be a breach of the Employment
Contracts, USAir or its successor would be required to pay the
Executive a lump sum equal to his or her annual base salary for
the then remaining term of the Employment Contract, and to
continue granting certain employee benefits for the then remain-
ing term of the Executive's Employment Contract. If the breach
- 165 -
<PAGE>
follows a change of control, the Executive would be entitled to
receive (i) an amount equal to the product of three times the sum
of the Executive's annual base salary plus an annual bonus, (ii)
a lump sum equal to the actuarial equivalent of the pension
benefits which the Executive would have received had he or she
remained employed by USAir until the end of the term of the
Employment Contract, (iii) medical benefits until such time as
the Executive qualifies for group medical benefits from another
employer, (iv) travel benefits for the Executive's life, (v)
reimbursement of reductions in salary sustained by the Executive
as a result of a comprehensive cost reduction program initiated
by USAir in October 1991, and (vi) continuation of certain other
benefits during the remainder of the term of the Employment
Contract. In addition, except under certain circumstances, during
the 30-day period immediately following the first anniversary of
a change of control any Executive could elect to terminate his or
her Employment Contract for any reason and receive the liquidated
damages described in the immediately preceding sentence. Each
Employment Contract provides that if USAir breaches the Employ-
ment Contract, as described above, each Executive shall be
entitled to recover from USAir reasonable attorney's fees in
connection with enforcement of such Executive's rights under the
Employment Contract. Each Employment Contract also provides that
any payments the Executive receives in the event of a termination
after a change of control shall be increased, if necessary, such
that, after taking into account all taxes he or she would incur
as a result of such payments, the Executive would receive the
same after-tax amount he or she would have received had no excise
tax been imposed under Section 4999 of the Code.
Currently, under USAir Group's 1984 Stock Option and Stock
Appreciation Rights Plan (the "1984 Plan") and 1988 Stock Incen-
tive Plan (the "1988 Plan," and together with the 1984 Plan, the
"Plans"), pursuant to which employees of USAir Group and its
subsidiaries have been awarded stock options and stock apprecia-
tion rights with respect to Common Stock and, in the case of the
1988 Plan, shares of Restricted Stock, the occurrence of a change
of control, as defined, would make all granted options immediate-
ly exercisable without regard to the vesting provisions thereof.
In addition, grantees would be able, during the 60-day period
immediately following a change of control, to surrender all
unexercised stock options under the Plans to USAir Group for a
cash payment equal to, in the case of options not issued in
tandem with stock appreciation rights, the excess, if any, of the
fair market value of the Common Stock over the exercise prices of
such stock options or, in the case of options issued in tandem
with stock appreciation rights, the positive value of such stock
appreciation rights.
- 166 -
<PAGE>
Notwithstanding anything to the contrary set forth in any of
USAir Group's or USAir's filings under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that
incorporates by reference this Proxy Statement, in whole or in
part, the following Report and Performance Graph shall not be
incorporated by reference into any such filings.
BENEFICIAL SECURITY OWNERSHIP
-----------------------------
USAir Group owns all the outstanding stock of USAir. The
following information pertains to Common Stock, Series A Pre-
ferred Stock, Series F Preferred Stock, Series T Preferred Stock
and Depositary Shares ("Depositary Shares"), each representing
1/100 of a share of USAir Group's $437.50 Series B Cumulative
Convertible Preferred Stock, without par value ("Series B Pre-
ferred Stock"), beneficially owned by all directors, nominees for
director and executive officers of USAir Group as of January 31,
1996. Unless indicated otherwise, the information refers to
ownership of Common Stock of USAir Group. Unless indicated
otherwise by footnote, the owner exercises sole voting and
investment power over the securities (other than unissued securi-
ties, the ownership of which has been imputed to such owner).
<TABLE>
<CAPTION>
Number of Percent of
Owner Shares(1) Class(2)
----- --------- ----------
Directors
- ---------
<S> <C> <C>
Robert J. Ayling --(3) (3)
Robert W. Bogle 1,500
Edwin I. Colodny 84,512(4)
Mathias J. DeVito 700
Rakesh Gangwal --(5)
George J. W. Goodman 200 Depositary Shares(6)
John W. Harris 400
Edward A. Horrigan, Jr. 500
Robert LeBuhn 8,000
Roger P. Maynard --(3) (3)
John G. Medlin, Jr. 2,000
Hanne M. Merriman 1,500
Raymond W. Smith 500
Derek M. Stevens --(3) (3)
Stephen M. Wolf --(7)
</TABLE>
- 167 -
<PAGE>
<TABLE>
<CAPTION>
Number of Percent of
Owner Shares(1) Class(2)
----- --------- ----------
Executive Officers
- ------------------
<S> <C> <C>
Seth E. Schofield 482,889(8)
Frank L. Salizzoni 192,800(9)
W. Thomas Lagow 185,711(10)
James T. Lloyd 208,992(11)
John R. Long III 129,539(12)
25 directors and
executive officers
of USAir Group as a group 1,687,872.5(13) 2.7%
_________
(1) The persons listed also own a number of Preferred Share
Purchase Rights (the "Rights") equal to their Common Stock
holdings, or, in the case of the Series A Preferred Stock, Series
F Preferred Stock and Series T Preferred Stock, Common Stock
receivable upon conversion. In addition, such Rights are issuable
on a one-for-one basis with respect to shares of Common Stock
receivable upon exercise of stock options or conversion of
Depositary Shares.
(2) Percentages are shown only where they exceed one percent of
the number of shares outstanding and, in the case of Common Stock
holdings, are based on shares of Common Stock outstanding on
January 31, 1996.
(3) A wholly-owned subsidiary of BA is recordholder of 30,000 or
100% of the outstanding shares of Series F Preferred Stock, 152.1
or 100% of the outstanding shares of the Series T-1 Preferred
Stock and 9,919.8 or 100% of the outstanding shares of the Series
T-2 Preferred Stock pursuant to the Investment Agreement dated as
of January 21, 1993 with USAir Group (as amended, the "Investment
Agreement"). Messrs. Ayling, Maynard and Stevens are Chief
Executive, Director of Investments and Acquisitions and Chief
Financial Officer, respectively, of BA and have been designated
by BA to act as directors of USAir and USAir Group pursuant to
the Investment Agreement. Messrs. Ayling, Maynard and Stevens
each disclaims beneficial ownership of Series F Preferred Stock
and Series T Preferred Stock. See the following table for infor-
mation concerning the voting power of Series F Preferred Stock
and Series T Preferred Stock.
(4) The listing of Mr. Colodny's holding includes 40,000 shares
of Common Stock issuable within 60 days of January 31, 1996 upon
exercise of stock options.
(5) See "Management" for a description of Mr. Gangwal's rights
to obtain shares of Common Stock subject to certain restrictions
upon disposition ("Restricted Stock") and stock options.
- 168 -
<PAGE>
(6) Mr. Goodman's holding of Depositary Shares is convertible
into 498.5 shares of Common Stock.
(7) See page 15 for a description of Mr. Wolf's rights to obtain
certain shares of Restricted Stock and stock options.
(8) The listing of Mr. Schofield's holdings includes 390,569
shares of Common Stock issuable within 60 days of January 31,
1996 upon exercise of stock options.
(9) The listing of Mr. Salizzoni's holdings includes 177,800
shares of Common Stock issuable within 60 days of January 31,
1996 upon exercise of stock options.
(10) The listing of Mr. Lagow's holding includes 153,211 shares
of Common Stock issuable within 60 days of January 31, 1996 upon
exercise of stock options.
(11) The listing of Mr. Lloyd's holding includes 163,992 shares
of Common Stock issuable within 60 days of January 31, 1996 upon
exercise of stock options.
(12) The listing of Mr. Long's holding includes 96,472 shares of
Common Stock issuable within 60 days of January 31, 1996 upon
exercise of stock options.
(13) The listing of all directors' and officers' holdings in-
cludes, in the case of Depositary Shares, the number of shares of
Common Stock into which the Depositary Shares are convertible,
and also includes 1,292,893 shares of Common Stock issuable
within 60 days of January 31, 1996 upon exercise of stock options
and 135,500 shares of Restricted Stock.
</TABLE>
Effective December 31, 1995 the retirement Plan for Outside
Directors of USAir Group was terminated and the value of the
accrued benefits for past service was converted into units of
phantom stock of the Corporation ("Deferred Stock Units") based
on the average price of the stock in the month of December 1995.
Set forth below are the number of Deferred Stock Units held by
each director and nominee for director. Although each Deferred
Stock Unit represents the economic equivalent of a share of
Common Stock, no voting rights are attached thereto and the
Deferred Stock Units lack certain other attributes of Common
Stock.
The only persons known to USAir (from Company records and
reports on Schedules 13D and 13G filed with the Commission which
owned, as of April 26, 1996, more than 5% of USAir Group's Common
Stock, Series A Preferred Stock, Series F Preferred Stock and
Series T Preferred Stock are listed below:
- 169 -
<PAGE>
<TABLE>
<CAPTION>
Amount and Percent
Name and Address nature of beneficial of
Title of Class of beneficial owner ownership Class(1)
- ---------------- ----------------------- -------------------- ----------
<S> <C> <C> <C>
Series A Berkshire Hathaway Inc. 358,000(2) 100%(3)
Preferred Stock 1440 Kiewit Plaza
Omaha, Nebraska 68131
Series F BritAir Acquisition Corp. Inc. 30,000(4) 100%(5)
Preferred Stock 75-20 Astoria Blvd.
Jackson Heights, NY 11370
Series T BritAir Acquisition Corp. Inc. 9,919.8(6) 100%(5)
Preferred Stock 75-20 Astoria Blvd.
Jackson Heights, NY 11370
Common Stock Tiger Management Corp. 6,000,000 9.36%
101 Park Avenue, 48th Floor
New York, New York 10178
(table continued on following page)
- 170 -
<PAGE>
Amount and Percent
Name and Address nature of beneficial of
Title of Class of beneficial owner ownership Class(1)
- ---------------- ----------------------- -------------------- ----------
<S> <C> <C> <C>
Common Stock FMR Corp. 4,147,883(7) 6.47%
82 Devonshire Street
Boston, Massachusetts 02109
Common Stock Waddell & Reed 4,766,800(8) 7.44%
6300 Lamar
Shawnee Mission, Kansas 66201
Common Stock The Equitable Companies 5,657,125(9) 9.0%
Incorporated
787 Seventh Avenue
New York, New York 10019
Series B Ryback Management 427,900 10.0%
Preferred Stock 7711 Carondelet
St. Louis, Missouri 63105
Series B Global Bermuda Limited/ 408,000 9.57%
Preferred Stock Merced Partners, MN
601 Carlson Parkway, Ste. 200
Minnetonka, Minnesota 55305
- 171 -
<PAGE>
Amount and Percent
Name and Address nature of beneficial of
Title of Class of beneficial owner ownership Class(1)
- ---------------- ----------------------- -------------------- ----------
<S> <C> <C> <C>
Series B Everest Capital Limited 252,399 5.92%
Preferred Stock Comer House
20 Parliament Street
P.O. Box HM 2458
Hamilton, Bermuda HMJX
Series B Soros Fund Management 218,600 5.13%
Preferred Stock 888 Seventh Avenue, 32nd Flr.
Suite 3300
New York, New York 10106
- 172 -
<PAGE>
(1) Represents percent of class of stock outstanding on April 26,
1996.
(2) Number of shares as to which such person has shared voting
power-358,000; shared dispositive power-358,000.
(3) These shares of Series A Preferred Stock are owned directly by
affiliates of Berkshire, are convertible, under certain circum-
stances and subject to certain antidilution adjustments, into
9,239,944 shares of Common Stock and represent approximately 10.2%
of the combined voting power of the outstanding Common Stock,
Series A Preferred Stock, Series F Preferred Stock and Series T
Preferred Stock, voting as a single class, at the meeting. A number
of Rights, equal to the number of shares of Common Stock into which
the Series A Preferred Stock is convertible, is also owned by this
person.
(4) Number of shares as to which BA has sole voting power and sole
dispositive power - 30,000.
(5) BritAir Acquisition Corp. Inc. is a wholly-owned subsidiary of
BA and owns Series F Preferred Stock and Series T Preferred Stock
pursuant to the Investment Agreement. Series F Preferred Stock and
Series T Preferred Stock are convertible, under certain circum-
stances on or after January 21, 1997 and subject to certain
antidilution adjustments and Foreign Ownership Restrictions, into
a total of 15,458,851 and 3,831,695 shares of Common Stock,
respectively. Together, the Series F Preferred Stock and Series T
Preferred Stock represent approximately 21.2% of the combined
voting power of the outstanding Common Stock, Series A Preferred
Stock, Series F Preferred Stock and Series T Preferred Stock,
voting as a single class, at the meeting. A number of Rights, equal
to the number of shares of Common Stock into which the Series F
Preferred Stock and Series T Preferred Stock are convertible, are
also owned by this person. As disclosed above, three directors of
the Company, Messrs. Ayling, Maynard and Stevens, have been
designated by BA to act as directors of USAir and USAir Group
pursuant to the Investment Agreement and disclaim beneficial
ownership of Series F Preferred Stock and Series T Preferred Stock.
(6) Reflects 152.1 or 100% of the outstanding shares of Series T-1
Preferred Stock and 9,919.8 or 100% of the outstanding shares of
Series T-2 Preferred Stock. BA has sole voting power and sole
dispositive power as to all these outstanding shares of Series T
Preferred Stock.
(7) As set forth in a Schedule 13D amendment dated February 28,
1996, FMR beneficially owns, through Fidelity Management & Research
Company ("Fidelity"), as advisor to fifteen investment companies
and other funds (the "Fidelity Funds"), 6,418,794 shares (including
shares issuable upon the conversion of 71,000 Depositary Shares),
and through Fidelity Management Trust Company, as trustee or
managing agent for various private investment accounts (the
"Accounts"), 733,218 shares (including shares issuable upon the
conversion of 238,500 Depositary Shares). FMR has the sole power to
dispose of the shares held by the Fidelity Funds and the Accounts.
- 173 -
<PAGE>
The power to vote or direct the voting of the shares held by the
Fidelity Funds resides within the boards of trustees of such funds.
Fidelity carries out the voting of such shares under written
guidelines established by such trustees. FMR has sole power to vote
or direct the voting of the shares held by the Accounts.
(8) As set forth in a Schedule 13G dated February 14, 1996, as of
December 31, 1995, Waddell & Reed Investment Management Company has
sole voting power and sole dispositive power over 3,880,300 of
these shares. Each of Waddell & Reed, Inc., Waddell & Reed
Financial Services, Inc., United Investors Management Company,
Liberty National Life Insurance Company and Torchmark Corporation
claims sole voting and dispositive power over 5,385,301 shares.
(9) As set forth in a Schedule 13G dated February 9, 1996, as of
December 31, 1995, the Equitable Life Assurance Society of the
United States has sole voting power and sole dispositive power over
1,379,300 of these shares and Alliance Capital Management L.P. has
sole voting power and sole dispositive power over 4,277,825 of
these shares. Each of the Equitable Life Assurance Society of the
United States and Alliance Capital Management L.P. is an indirect
subsidiary of The Equitable Companies Incorporated.
</TABLE>
[remainder of page left blank intentionally]
- 174 -
<PAGE>
THE EXCHANGE OFFER
------------------
Purpose of the Exchange Offer
- -----------------------------
The Old Notes were originally issued and sold on February 16,
1996 to initial purchaser, who resold the Old Notes to "qualified
institutional buyers" (as defined in Rule 144A under the Securities
Act). In connection with the sale of the Old Notes, USAir and the
Initial Purchasers entered into the Registration Rights Agreement
pursuant to which, USAir agreed to file with the Commission a
registration statement relating to an exchange offer pursuant to
which new notes covered by such registration statement and
containing terms identical in all respects to the terms of the
Notes would be offered in exchange for Notes tendered at the option
of the holders thereof or, if applicable interpretations of the
staff of the Commission did not permit USAir to effect such an
exchange offer, USAir agreed, at its cost, to file a shelf
registration statement covering resales of the Notes (the "Shelf
Registration Statement") and use best efforts to have such Shelf
Registration Statement declared effective and kept effective for a
period of three years from the effective date thereof.
The purpose of the Exchange Offer is to fulfill the Company's
obligations with respect to the Registration Rights Agreement.
Except as otherwise noted herein, this Prospectus may not be used
by any holder of the Old Notes or any holder of the New Notes to
satisfy the registration and prospectus delivery requirements under
the Securities Act that may apply in connection with any resale of
such Old Notes or New Notes. See "Terms of the Exchange" below.
Terms of the Exchange
- ---------------------
The Company hereby offers to exchange, subject to the
conditions set forth herein and in the Letter of Transmittal
accompanying this Prospectus, $1,000 in principal amount of New
Class A Notes for each $1,000 in principal amount of Old Class A
Notes, $1,000 in principal amount of New Class B Notes for each
$1,000 in principal amount of Old Class B Notes and $1,000 in
principal amount of New Class C Notes for each $1,000 in principal
amount of Old Class C Notes. The terms of the New Notes are
- 175 -
<PAGE>
identical in all respects to the terms of the Old Notes for which
they may be exchanged pursuant to this Exchange Offer, except that
the New Notes will generally be freely transferable by holders
thereof and will not be subject to any covenant regarding registra-
tion. The New Notes will evidence the same debt as the Old Notes
and will be entitled to the benefits of the Indenture. See "-
Description of the Exchange Notes".
The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Old Notes being tendered for
exchange.
USAir has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to
whether the New Notes issued pursuant to the Exchange Offer in
exchange for the Old Notes may be offered for sale, resold or
otherwise transferred by any holder without compliance with the
registration and prospectus delivery provisions of the Securities
Act. Instead, based on an interpretation by the staff of the
Commission set forth in a series of no-action letters issued to
third parties, USAir believes that New Notes issued pursuant to the
Exchange Offer in exchange for Old Notes may be offered for sale,
resold and otherwise transferred by any holder of such New Notes
(other than any such holder which is an "affiliate" of USAir within
the meaning of Rule 405 under the Securities Act) without compli-
ance with the registration and prospectus delivery provisions of
the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holder's business and such holder has
no arrangement or understanding with any person to participate in
the distribution of such New Notes. Any holder who tenders in the
Exchange Offer for the purpose of participating in a distribution
of the New Notes cannot rely on such interpretation by the staff of
the Commission and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any
resale transaction. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes, where such Old Notes
were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New
Notes. See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last
Interest Payment Date on which interest was paid on the Old Notes
so surrendered or, if no interest has been paid on such Notes, from
February 16, 1996.
- 176 -
<PAGE>
Tendering holders of the Old Notes shall not be required to
pay brokerage commissions or fees or, subject to the instructions
in the Letter of Transmittal, transfer taxes with respect to the
exchange of the Old Notes pursuant to the Exchange Offer.
Expiration Date; Extensions; Termination; Amendments
- ----------------------------------------------------
The Exchange Offer will expire on the Expiration Date. The
term "Expiration Date" means 5:00 p.m., New York City time, on
___________________, 1996, unless USAir in its sole discretion
extends the period during which the Exchange Offer is open, in
which event the term "Expiration Date" shall mean the latest time
and date on which the Exchange Offer, as so extended by USAir,
shall expire. USAir reserves the right to extend the Exchange
Offer at any time and from time to time by giving oral or written
notice to Wilmington Trust Company (the "Exchange Agent") and by
timely public announcement communicated, unless otherwise required
by applicable law or regulation, by making a release to an
appropriate news agency. During any extension of the Exchange
Offer, all Old Notes previously tendered pursuant to the Exchange
Offer will remain subject to the Exchange Offer.
The Exchange Date will be the first business day following the
Expiration Date. USAir expressly reserves the right to (i)
terminate the Exchange Offer and not accept for exchange any Old
Notes if any of the events set forth below under "Conditions to the
Exchange Offer" shall have occurred and shall not have been waived
by USAir and (ii) amend the terms of the Exchange Offer in any
manner which, in its good faith judgment, is advantageous to the
holders of the Old Notes, whether before or after any tender of the
Old Notes. Unless the Company terminates or extends the Exchange
Offer prior to 5:00 p.m., New York City time, on the Expiration
Date, USAir will exchange the New Notes for the Old Notes on the
Exchange Date.
How to Tender
- -------------
The tender to USAir of Old Notes by a Noteholder pursuant to
one of the procedures set forth below will constitute an agreement
between such holder and USAir in accordance with the terms and
subject to the conditions set forth herein and in the Letter of
Transmittal.
- 177 -
<PAGE>
A Noteholder may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be
deemed to include a facsimile thereof) and delivering the same,
together with the certificate or certificates representing the
Notes being tendered and any required signature guarantees, to the
Exchange Agent at its address set forth in the Letter of Transmit-
tal on or prior to the Expiration Date (or complying with the
procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
If tendered Old Notes are registered in the name of the signer
of the Letter of Transmittal and the New Notes to be issued in
exchange therefor are to be issued in the name of the registered
holder (which term, for the purposes described herein, shall
include any participant in The Depository Trust Company (also
referred to as a "book-entry transfer facility") whose name appears
on a security listing as the owner of Old Notes), the signature of
such signer need not be guaranteed. In any other case, the
tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to USAir and duly
executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a
commercial bank or trust company located or having an office,
branch, agency or correspondent in the United States, or by a
member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc. (any of the
foregoing, an "Eligible Institution"). If the New Notes are to be
delivered to an address other than that of the registered holder
appearing on the note register for the Old Notes, the signature in
the Letter of Transmittal must be guaranteed by an Eligible
Institution.
The method of delivery of Old Notes and all other documents is
at the election and risk of the Noteholder. If sent by mail, it is
recommended that registered mail, return receipt requested, be
used, proper insurance obtained, and the mailing be made suffi-
ciently in advance of the Expiration Date to permit delivery to the
Exchange Agent on or before the Expiration Date.
The Exchange Agent will make a request promptly after the date
of this Prospectus to establish accounts with respect to the Notes
at the book-entry transfer facility for the purpose of facilitating
the Exchange Offer, and subject to the establishment thereof, any
financial institution that is a participant in the book-entry
transfer facility's system may make book-entry delivery of Old
- 178 -
<PAGE>
Notes by causing such book-entry transfer facility to transfer such
Old Notes into the Exchange Agent's accounts with respect to the
Old Notes at the book entry transfer facility in accordance with
the book entry transfer facility's procedures for such transfer.
Although delivery of Old Notes may be effected through book-entry
transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any
required signature guarantee and all other required documents must
in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth on the back cover page of
this Prospectus on or prior to the Expiration Date, or, if the
guaranteed delivery procedures described below are complied with,
within the time period provided under such procedures.
If a Noteholder desires to accept the Exchange Offer and time
will not permit a Letter of Transmittal or Old Notes to reach the
Exchange Agent before the Expiration Date or the procedure for
book-entry transfer cannot be completed on a timely basis, a tender
may be effected if the Exchange Agent has received at its office
listed on the back cover hereof on or prior to the Expiration Date
a letter, telegram or facsimile transmission (receipt confirmed by
telephone and an original delivered by guaranteed overnight
courier) from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the Old Notes
are registered and, if possible, the certificate numbers of the Old
Notes to be tendered, and stating that the tender is being made
thereby and guaranteeing that within five New York Stock Exchange
trading days after the date of execution of such letter, telegram
or facsimile transmission by the Eligible Institution, the Old
Notes, in proper form for transfer (or a confirmation of book-entry
transfer of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible
Institution together with a properly completed and duly executed
Letter of Transmittal (and any other required documents). Unless
Old Notes being tendered by the above-described method are
deposited with the Exchange Agent with the time period set forth
above (accompanied or preceded by a properly completed Letter of
Transmittal and any other required documents), USAir may, at its
option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the
purposes described in this paragraph are available from the
Exchange Agent.
- 179 -
<PAGE>
A tender will be deemed to have been received as of the date
when (i) the tendering Noteholder's properly completed and duly
signed Letter of Transmittal accompanied by the Old Notes (or a
confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at the book-entry transfer facility) is
received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram, or facsimile transmission to similar
effect (as provided above) from an Eligible Institution is received
by the Exchange Agent. Issuances of New Notes in exchange for Old
Notes tendered pursuant to a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as
provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other
required documents) and the tendered Old Notes.
All questions as to the validity, form, eligibility (including
time of receipt) and acceptance for exchange of any tender of Old
Notes will be determined by USAir, whose determination will be
final and binding. USAir reserves the absolute right to reject any
or all tenders not in proper form or the acceptance for exchange of
which may, in the opinion of USAir, be unlawful. USAir also
reserves the absolute right to waive any condition to the Exchange
Offer or any defect or irregularity in the tender of any Old Notes.
None of USAir, the Exchange Agent or any other person will be under
any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such
notification.
Terms and Conditions of the Letter of Transmittal
- -------------------------------------------------
The Letter of Transmittal contains, among other things, the
following terms and conditions, which are part of the Exchange
Offer.
The party tendering Old Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Old Notes to USAir and
irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause the Old Notes to
be assigned, transferred and exchanged. The Transferor represents
- 180 -
<PAGE>
and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire New
Notes issuable upon the exchange of such tendered Old Notes, and
that, when the same are accepted for exchange, USAir will acquire
good and unencumbered title to the tendered Old Notes, free and
clear of all liens, restrictions, charges and encumbrances and not
subject to any adverse claim. The Transferor also warrants that it
will, upon request, execute and deliver any additional documents
deemed by the Exchange Agent or USAir to be necessary or desirable
to complete the exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books
maintained by a book-entry transfer facility. The Transferor
further agrees that acceptance of any tendered Old Notes by USAir
and the issuance of New Notes in exchange therefor shall constitute
performance in full by USAir of its obligations under the Registra-
tion Rights Agreement and that USAir shall have no further
obligations or liabilities thereunder. All authority conferred by
Transferor will survive the death or incapacity of the Transferor
and every obligation of the Transferor shall be binding upon the
heirs, legal representatives, successors, assigns, executors and
administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of
USAir within the meaning of Rule 405 under the Securities Act and
that it is acquiring the New Notes offered herein in the ordinary
course of such Transferor's business and that such Transferor has
no arrangement with any person to participate in the distribution
of such New Notes. Each transferor which is a broker-dealer
receiving New Notes for its own account must acknowledge that it
will deliver a prospectus in connection with any resale of such New
Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwrit-
er" within the meaning of the Securities Act. This Prospectus, as
it may be amended or supplemented from time to time, may be used by
a broker-dealer in connection with resales of New Notes received in
exchange for Old Notes where such Old Notes were acquired by such
broker-dealer as a result of market-making activities or other
trading activities. USAir will, for a period of 90 days after the
Expiration Date, make this Prospectus available to any broker-
dealer for use in connection with any such resale.
- 181 -
<PAGE>
Withdrawal Rights
- -----------------
Tenders of Old Notes pursuant to the Exchange Offer are
irrevocable, except that Old Notes tendered pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration
Date.
To be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the
Exchange Agent at its address set forth on the back cover of this
Prospectus, and with respect to a facsimile transmission, must be
confirmed by telephone and an original delivered by guaranteed
overnight delivery. Any such notice of withdrawal must specify the
person named in the Letter of Transmittal as having tendered Old
Notes to be withdrawn, the certificate numbers of Old Notes to be
withdrawn, the principal amount of Old Notes to be withdrawn, a
statement that such holder is withdrawing his election to have such
Old Notes exchanged, and the name of the registered holder of such
Old Notes, and must be signed by the Noteholder in the same manner
as the original signature on the Letter of Transmittal (including
any required signature guarantees) or be accompanied by evidence
satisfactory to USAir that the person withdrawing the tender has
succeeded to the beneficial ownership of the Old Notes being
withdrawn. The Exchange Agent will return the properly withdrawn
Old Notes promptly following receipt of notice of withdrawal. If
Old Notes have been tendered pursuant to the procedure for book-
entry transfer, any notice of withdrawal must specify the name and
number of the account at the book-entry transfer facility to be
credited with the withdrawn Old Notes or otherwise comply with the
book-entry transfer facility procedure. Any questions as to the
validity of notice of withdrawals, including time of receipt, will
be determined by USAir, and such will be final and binding on all
parties.
Acceptance of Old Notes for Exchange; Delivery of New Notes
- -----------------------------------------------------------
Upon the terms and subject to the conditions of the Exchange
Offer, the acceptance for exchange of Old Notes validly tendered
and not withdrawn and issuance of the New Notes will be made on the
Exchange Date. For the purposes of the Exchange Offer, the Company
shall be deemed to have accepted for exchange validly tendered Old
Notes when, as and if USAir has given oral or written notice
thereof to the Exchange Agent.
- 182 -
<PAGE>
The Exchange Agent will act as agent for the tendering holders
of Old Notes for the purposes of receiving New Notes from USAir and
causing Old Notes to be assigned, transferred and exchanged. Upon
the terms and subject to the conditions of the Exchange Offer,
delivery of New Notes to be issued in exchange for accepted Old
Notes will be made by the Exchange Agent promptly after acceptance
of the tendered Old Notes. Tendered Old Notes not accepted for
exchange by USAir will be returned without expense to the tendering
Noteholders promptly following the Expiration Date or, USAir
terminates the Exchange Offer prior to the Expiration Date,
promptly after the Exchange Offer is so terminated.
Conditions to the Exchange Offer
- --------------------------------
Notwithstanding any other provisions of the Exchange Offer or
any extension of the Exchange Offer, the Company will not be
required to accept for exchange or exchange Old Notes for New Notes
and may terminate the Exchange Offer (by oral or written notice to
the Exchange Agent and by timely public announcement communicated,
unless otherwise required by applicable law or regulation, by
making a release to any appropriate news agency), or, at its
option, modify or otherwise amend the Exchange Offer, if any event
shall occur, which occurrence, in the sole judgment of the Company
and regardless of the circumstances (including any action or
inaction by the Company) giving rise to any such event, makes it
inadvisable to proceed with the Exchange Offer or with such
acceptance for exchange or such exchange, including, but not
limited to, the following:
(a) (i) there shall be threatened, instituted or pending any
action or proceeding before, or any injunction, order, or decree
shall have been issued by, any court or governmental agency or
other governmental regulatory or administrative agency or commis-
sion (x) seeking to restrain, restrict or prohibit the making or
consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, or assessing or seeking any
damages as a result thereof, or (y) resulting in a material delay
in the ability of the Company to accept for exchange or exchange
all or some of the Old Notes, or (ii) any statute, rule, regula-
tion, order or injunction shall be sought, proposed, introduced,
enacted, promulgated or deemed applicable to the Exchange Offer or
any of the transactions contemplated by
- 183 -
<PAGE>
the Exchange Offer by any domestic or foreign government or govern-
mental authority or any action shall have been taken, proposed or
threatened by any domestic or foreign government or governmental
authority or agency or court, that, in the sole judgment of the
Company, might directly or indirectly result in any of the
consequences referred to in clauses (x) or (y) above or, in the
sole judgment of the Company, might result in the Transferors
having obligations with respect to resales and transfers of the New
Notes that are greater than those described in the interpretation
of the SEC described above under the caption "-Terms of the
Exchange" or would otherwise make it inadvisable to proceed with
the Exchange Offer,
(b) there shall have occurred (i) any general suspension of
or general limitation on prices for or trading in securities on any
national securities exchange or the over-the-counter market, (ii)
any limitation by any governmental agency or authority which
adversely affects the ability of the Company to complete the
transactions contemplated by the Exchange Offer, (iii) a declara-
tion of a banking moratorium or any suspension of payments in
respect of banks in the United States or any limitation by any
governmental agency or authority which adversely affects the
extension of credit, or (iv) a commencement of a war, armed
hostilities, or other similar international calamity directly or
indirectly involving the United States, or, in the case of any of
the foregoing existing at the time of the commencement of the
Exchange Offer, a material escalation or worsening thereof; or
(c) any change (or any development involving a prospective
change) shall have occurred or be threatened in the business,
properties, assets, liabilities, financial condition, operation,
results of operations or prospects of the Company that, in the sole
judgment of the Company, is or may be adverse to the Company, or
the Company shall have become aware of facts that, in the sole
judgment of the Company, could adversely affect the value of the
Old Notes or the New Notes.
The Company expressly reserves the right to terminate the
Exchange Offer and not accept for exchange any Old Notes upon the
occurrence of any of the foregoing conditions. In addition, the
Company may amend the Exchange Offer at any time prior to the
Expiration Date if any of the conditions set forth above occur.
Moreover, regardless of whether any of such conditions has
occurred, the Company may amend the Exchange Offer in any manner
which, in its good faith judgment, is advantageous to holders of
the Old Notes.
- 184 -
<PAGE>
The foregoing conditions are for the sole benefit of the
Company and may be waived by the Company, in whole or in part, in
its sole discretion. Any determination made by the Company
concerning an event, development or circumstance described or
referred to above will be final and binding on all parties.
Wilmington Trust Company has been appointed as the Exchange
Agent for the Exchange Offer. All correspondence in connection
with the Exchange Offer and the Letter of Transmittal should be
addressed as follows: By Hand, Overnight Courier or Mail:
Wilmington Trust Company, 1100 North Market Street, Rodney Square
North, Wilmington, Delaware 19890, Attention: David A. Vanaskey,
Jr., Corporate Trust Administration.
Solicitation of Tenders; Expenses
- ---------------------------------
USAir has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments
to brokers, dealers or others for soliciting acceptances of the
Exchange Offer. USAir will, however, pay the Exchange Agent
reasonable and customary fees for its services and will reimburse
it for reasonable out-of-pocket expenses in connection therewith.
USAir will also pay brokerage houses and other custodians, nominees
and fiduciaries the reasonable out-of-pocket expenses incurred by
them in forwarding copies of this and related documents to the
beneficial owners of the Old Notes and in handling or forwarding
tenders for their customers.
No person has been authorized to give any information or to
make any representation in connection with the Exchange Offer other
than those contained in this Prospectus. If given or made, such
information or representations should not be relied upon as having
been authorized by USAir. Neither the delivery of this Prospectus
nor any exchange made hereunder shall, under any circumstances,
create any implication that there has been no change in the affairs
of USAir since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Old Notes in
any jurisdiction in which the making of the Exchange Offer or the
acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, USAir may, at its discretion, take such
action as it may deem necessary to make the Exchange Offer in any
such jurisdiction and extend the Exchange Offer to holders of Old
- 185 -
<PAGE>
Notes in such jurisdiction. In any jurisdiction in which the
securities laws or blue sky laws of which require the Exchange
Offer to be made by a licensed broker or dealer, the Exchange Offer
is being made on behalf of USAir by one or more registered brokers
or dealers which are licensed under the laws of such jurisdiction.
Other
- -----
Participation in the Exchange Offer is voluntary and holders
should carefully consider whether to accept. Noteholders are urged
to consult their financial and tax advisors in making their own
decisions on what action to take.
As a result of the making of, and upon acceptance for exchange
of all validly tendered Old Notes pursuant to the terms of, this
Exchange offer, USAir will have fulfilled a covenant contained in
the Registration Rights Agreement. Noteholders who do not tender
their certificates in the Exchange Offer will continue to hold such
certificates and will be entitled to all the rights, and limita-
tions applicable thereto, under the Indentures, except for any such
rights under the Registration Rights Agreement which by their terms
terminate or cease to have further effectiveness as a result of the
making of this Exchange Offer. See "Description of the Notes".
All untendered Old Notes will continue to be subject to the
restrictions on transfer set forth in the Indentures. To the
extent that Old Notes are tendered and accepted in the Exchange
Offer, the trading market for untendered Old Notes could be
adversely affected.
USAir may in the future seek to acquire untendered Old Notes
in open market or privately negotiated transactions, through subse-
quent exchange offers or otherwise. USAir has no present plan to
acquire any Old Notes which are not tendered in the Exchange Offer.
DESCRIPTION OF THE NOTES
------------------------
The following summaries of certain provisions of the Notes,
the Indentures, the Collateral Agency Agreement, the Liquidity
Agreements and the Registration Rights Agreement do not purport to
be complete and are subject to, and qualified in their entirety by
reference to, all of the provisions thereof. Copies of the
foregoing documents have been filed with the Commission as exhibits
to the Exchange Offer Registration Statement.
- 186 -
<PAGE>
Payment of Principal and Interest
- ---------------------------------
The outstanding principal amount of each class of Notes will
be due and payable on the Legal Maturity Date. Based upon the
expected principal payments described below, it is expected that
the principal amount of the Notes will have been paid in full on or
prior to April 15, 2008. Interest on each Note will accrue from
February 16, 1996 or the most recent date to which interest has
been paid or provided for and will be payable on each Interest
Payment Date. Payments of principal of the Notes are expected to
be made on each Principal Payment Date. Payments by USAir of
principal of and interest and premium, if any, on the Notes will be
made by wire transfer in immediately available funds to the
Collateral Agent. If any Payment Date is not a Business Day,
payments to be made on such Payment Date will be made on the next
Business Day, without additional interest.
Except as provided in the applicable Indenture or in the
Collateral Agency Agreement, all payments to be made by USAir,
including all payments in respect of principal, interest, premium,
Events of Loss and redemptions of the Notes, are payable to the
Collateral Agent for application in accordance with the Collateral
Agency Agreement. All payments on the Notes will be made in the
order of priority described below under "Description of the
Notes-Priority of Distributions."
- 187 -
<PAGE>
Principal Amortization of Class A, Class B and Class C Notes
------------------------------------------------------------
Principal of the Notes of each Class will be due and payable
on the applicable Legal Maturity Date, although it is expected that
payments of principal will be made prior to such date on the dates
and in the amounts set forth below (to the extent that the
Collateral Agent receives funds therefor from USAir):
<TABLE>
Class A Notes
- -------------
<CAPTION>
Class A
Notes
Expected Principal Principal Expected
Payment Date Payments Pool Factor
- ---------------------- ------------- --------------
<S> <C> <C>
April 15, 1996......... $0 1.0000000
October 15, 1996....... 3,697,000 0.9740379
April 15, 1997......... 1,691,500 0.9621594
October 15, 1997....... 1,691,500 0.9502809
April 15, 1998......... 1,522,350 0.9395902
October 15, 1998....... 1,522,350 0.9288996
April 15, 1999......... 1,379,890 0.9192093
October 15, 1999....... 1,379,890 0.9095191
April 15, 2000......... 1,011,840 0.9024135
October 15, 2000....... 1,011,840 0.8953079
April 15, 2001......... 834,663 0.8894465
October 15, 2001....... 1,660,300 0.8777871
April 15, 2002......... 1,154,304 0.8696810
October 15, 2002....... 861,775 0.8636292
April 15, 2003......... 2,353,758 0.8471000
October 15, 2003....... 1,341,440 0.8376798
April 15, 2004......... 5,650,400 0.7980000
October 15, 2004....... 3,281,400 0.7749565
April 15, 2005......... 6,430,280 0.7298000
October 15, 2005....... 7,115,916 0.6798287
April 15, 2006......... 7,950,004 0.6240000
October 15, 2006....... 9,052,800 0.5604270
April 15, 2007......... 6,650,400 0.5137247
October 15, 2007....... 9,506,400 0.4469663
April 15, 2008......... 63,648,000 0.0000000
-------------
$142,400,000
=============
</TABLE>
- 188 -
<PAGE>
<TABLE>
Class B Notes
- -------------
<CAPTION>
Class B Notes
Expected Class B Notes
Expected Principal Principal Expected
Payment Date Payments Pool Factor
- ------------------- ------------- -------------
<S> <C> <C>
April 15, 1996........ $0 1.0000000
October 15, 1996...... 1,422,722 0.9740379
April 15, 1997........ 650,942 0.9621594
October 15, 1997...... 650,942 0.9502809
April 15, 1998........ 585,848 0.9395902
October 15, 1998...... 585,848 0.9288996
April 15, 1999........ 531,025 0.9192093
October 15, 1999...... 531,025 0.9095191
April 15, 2000........ 389,388 0.9024135
October 15, 2000...... 389,388 0.8953079
April 15, 2001........ 321,205 0.8894465
October 15, 2001...... 638,936 0.8777871
April 15, 2002........ 444,212 0.8696810
October 15, 2002...... 331,638 0.8636292
April 15, 2003........ 905,800 0.8471000
October 15, 2003...... 516,228 0.8376798
April 15, 2004........ 2,174,452 0.7980000
October 15, 2004...... 1,262,786 0.7749565
April 15, 2005........ 2,474,574 0.7298000
October 15, 2005...... 2,738,428 0.6798287
April 15, 2006........ 3,059,412 0.6240000
October 15, 2006...... 3,483,802 0.5604270
April 15, 2007........ 2,559,283 0.5137247
October 15, 2007...... 3,658,362 0.4469663
April 15, 2008........ 24,493,754 0.0000000
--------------
$ 54,800,000
==============
</TABLE>
- 189 -
<PAGE>
<TABLE>
<CAPTION>
Class C Notes
- -------------
Class C Notes
Expected Class C
Expected Principal Principal Expected
Payment Date Payments Pool Factor
- ----------------------- --------------- -------------
<S> <C> <C>
April 15, 1996........ $0 1.0000000
October 15, 1996...... 1,708,305 0.9740379
April 15, 1997........ 781,606 0.9621594
October 15, 1997...... 781,606 0.9502809
April 15, 1998........ 703,445 0.9395902
October 15, 1998...... 703,445 0.9288996
April 15, 1999........ 637,618 0.9192093
October 15, 1999...... 637,618 0.9095191
April 15, 2000........ 467,550 0.9024135
October 15, 2000...... 467,550 0.8953079
April 15, 2001........ 385,680 0.8894465
October 15, 2001...... 767,189 0.8777871
April 15, 2002........ 533,379 0.8696810
October 15, 2002...... 398,208 0.8636292
April 15, 2003........ 1,087,621 0.8471000
October 15, 2003...... 619,851 0.8376798
April 15, 2004........ 2,610,929 0.7980000
October 15, 2004...... 1,516,265 0.7749565
April 15, 2005........ 2,971,295 0.7298000
October 15, 2005...... 3,288,113 0.6798287
April 15, 2006........ 3,673,527 0.6240000
October 15, 2006...... 4,183,106 0.5604270
April 15, 2007........ 3,073,008 0.5137247
October 15, 2007...... 4,392,704 0.4469663
April 15, 2008........ 29,410,382 0.0000000
-------------
$65,800,000
=============
</TABLE>
- 190 -
<PAGE>
Ratings of the Old Notes
- ------------------------
At the time of issuance, the Old Class A Notes were rated A2
by Moody's and A+ by S&P, the New Class B Notes were rated Baa1 by
Moody's and A- by S&P and the New Class C Notes were rated Ba2 by
Moody's and BBB- by S&P. The ratings of the Notes address the
likelihood of the timely payment of interest on and the ultimate
repayment of principal of the Notes. The ratings of the Notes were
based primarily on the collateral value of the Aircraft, the
availability of the Liquidity Facilities, the subordination
provisions described herein, the protections afforded creditors
under Section 1110 of the Bankruptcy Code and the ability of USAir
to make expected payments of principal of and interest on the
Notes. Ratings of Notes are not a recommendation to purchase, hold
or sell Notes and do not comment as to market price or suitability
for a particular investor. There is no assurance that the ratings
of any Class of Notes will remain for any given period of time or
that such ratings will not be lowered or withdrawn entirely by
either rating agency. In the event that the rating initially
assigned to any Note is subsequently lowered for any reason, there
is no obligation for USAir to provide any additional credit
enhancement. The reduction, suspension or withdrawal of the
ratings of the Notes will not, in and of itself, constitute a
Collateral Access Event.
Redemption
- ----------
Upon 30 days' written notice to the Collateral Agent and the
applicable Indenture Trustee, USAir may redeem, in whole or from
time to time in part, any Class of Notes at a redemption price
equal to the outstanding principal amount of such Class together
with premium, if any, and accrued interest thereon if, on the
redemption date, there is no Event of Loss with respect to an
Aircraft and no Collateral Access Event has occurred and is
continuing. Each partial redemption shall be effected by a pro
rata reduction of the remaining principal payments of the Class of
Notes being redeemed. The redemption price of any Notes redeemed
before February 20, 2006 will include a Make Whole Premium.
Thereafter, the Notes shall be redeemable at par.
- 191 -
<PAGE>
"Make Whole Premium" means, with respect to any Note (or
portion thereof), the amount (as determined by an independent
investment banker) by which (a) the present value of the remaining
expected payments of principal and interest to the Final Expected
Payment Date of such Note (or portion thereof) computed by
discounting such payments on a semiannual basis on each Interest
Payment Date (assuming a 360-day year of twelve 30-day months)
using a discount rate equal to the Treasury Yield exceeds (b) the
outstanding principal amount of such Note (or portion thereof) plus
accrued interest.
For purposes of determining the Make Whole Premium, "Treasury
Yield" means, at the time of determination with respect to any Note
(or portion thereof), the interest rate (expressed as a semiannual
equivalent and as a decimal and, in the case of United States
Treasury bills, converted to a bond equivalent yield) determined to
be the per annum rate equal to the semiannual yield to maturity for
United States Treasury securities maturing on the Average Life Date
of such Note (or portion thereof), as defined below, and trading in
the public securities markets either as determined by interpolation
between the most recent weekly average yields to maturity for two
series of United States Treasury securities, trading in the public
securities markets, (A) one maturing as close as possible to, but
earlier than, the Average Life Date of such Note (or portion
thereof) and (B) the other maturing as close as possible to, but
later than, the Average Life Date of such Note (or portion
thereof), in each case as published in the most recent H.15(519)
or, if a weekly average yield to maturity for United States
Treasury securities maturing on the Average Life Date of such Note
(or portion thereof) is reported in the most recent H.15(519), such
weekly average yield to maturity as published in such H.15(519).
"H.15(519)" means the weekly statistical release designated as
such, or any successor publication, published by the Board of
Governors of the Federal Reserve System. The date of determination
of a Make Whole Premium shall be the third Business Day prior to
the applicable Redemption Date and the "most recent H.15(519)"
means the H.15(519) published prior to the close of business on the
third Business Day prior to the applicable Redemption Date.
The "Average Life Date" for any Note shall be the date which
follows the time of determination by a period equal to the
Remaining Weighted Average Life. The "Remaining Weighted Average
Life" on a given date with respect to any Note shall be the number
of days which is equal to the quotient obtained by dividing (a) the
sum of each of the products obtained by multiplying (i) the amount
- 192 -
<PAGE>
of each then remaining expected payment of principal of such Note
by (ii) the number of days from and including such determination
date to but excluding the date on which such payment of principal
is expected to be made by (b) the then outstanding principal amount
of such Note.
Following an Event of Loss and so long as no Collateral Access
Event has occurred and is continuing, Notes of every Class shall be
redeemed, at par plus accrued interest, in a pro rata amount (based
upon the ratio borne by the initial Appraised Value of the Aircraft
subject to such Event of Loss to the initial Aggregate Appraised
Value) resulting from such Event of Loss.
All amounts paid to any Class of Notes in connection with any
partial redemption shall be applied (i) to each Note within each
Class pro rata in accordance with the then outstanding principal
amount thereof and (ii) pro rata to each of the then unpaid
installments of principal of such Notes expected to be paid on each
Principal Payment Date.
Prior to any redemption (whether optional or after an Event of
Loss), all amounts (if any) then owing to the Liquidity Providers
shall be paid in full. If a Collateral Access Event has occurred
and is continuing, the proceeds may be subject to distribution as
provided in the second paragraph of "Priority of Distributions."
Substitution of Collateral
- --------------------------
On five days' notice to the Collateral Agent and so long as,
on the date of substitution, no Collateral Access Event has
occurred and is continuing, USAir shall have the option to replace
one or more Aircraft as Collateral under the Collateral Agency
Agreement by substituting either cash or United States Treasury
obligations (the "Alternative Collateral") for such replaced
Aircraft, provided that the ratings of the Notes at such time are
affirmed or raised by S&P and Moody's after taking into account
such substitution. Upon any such substitution, the Alternative
Collateral shall be deemed to be Collateral under the Collateral
Agency Agreement. The amount of Alternative Collateral to be
substituted for each Aircraft shall be equal to (i) an amount
sufficient to pay expected principal, interest and Make Whole
Premium until the Final Expected Payment Date of the Notes (or
redemption date, if applicable), divided by (ii) the quotient
obtained by dividing (x) the sum of the initial Appraised Values of
the Aircraft then comprising the Collateral by (y) the initial
Appraised Value of the Aircraft for which the Alternative Collater-
al is being substituted.
- 193 -
<PAGE>
Liquidity Facilities
- --------------------
USAir has entered into three separate Liquidity Agreements
(one for each Class of Notes) with a Liquidity Provider pursuant to
which such Liquidity Provider has agreed to make advances from time
to time in an aggregate outstanding amount not to exceed three
times the amount of interest due on the respective class of Notes
on the next Interest Payment Date. Except as otherwise provided
below, the Liquidity Facilities will enable the Collateral Agent to
request Interest Advances on the fifth day following any Interest
Payment Date in an amount sufficient to pay interest due on such
Interest Payment Date on the applicable Class of Notes to the
extent that the amount, if any, received by the Collateral Agent on
or prior to such fifth day from USAir is not sufficient to pay such
interest. The amounts initially available under the Class A, the
Class B and the Class C Liquidity Facilities was $14,439,360,
$6,165,000 and $8,813,910, respectively. Each Interest Advance by
a Liquidity Provider under the applicable Liquidity Facility will
reduce pro tanto the amount available to be advanced under such
Liquidity Facility, until such Interest Advance is repaid by USAir
thereunder. The available amount of the Liquidity Facility for
each Class of Notes will be automatically reduced following a
payment of principal of the Notes of such Class to an amount equal
to three times the next interest payment due on such Class of
Notes.
The Collateral Agency Agreement provides that if at any time
the short-term unsecured debt obligations of a Liquidity Provider
are then revised to a rating lower than A-1 by S&P or lower than
P-1 by Moody's, such Liquidity Provider must be replaced by a new
liquidity provider whose short-term unsecured debt obligations are
rated at least A-1 by S&P and P-1 by Moody's. In the event that
any such Liquidity Facility is not replaced within 30 days of such
downgrading and as otherwise provided in the Collateral Agency
Agreement, the Collateral Agent shall request a Downgrade Advance
in an amount equal to all available amounts under such Liquidity
Facility and shall hold the proceeds thereof in the Cash Collateral
Account for the same purposes and under the same circumstances as
Interest Advances under the Liquidity Facility are to be used.
The Collateral Agency Agreement will also provide for the
replacement of each Liquidity Facility (other than a Liquidity
Facility that expires no earlier than 15 days after the Legal
Maturity Date of the applicable Class of Notes) in the event that
- 194 -
<PAGE>
it is not extended at least 30 days prior to its then scheduled
expiration. In the event a Liquidity Facility is not so extended
or replaced within 30 days prior to its then scheduled expiration
date, the Collateral Agent shall request a Non-Extension Advance in
an amount equal to all available amounts thereunder and hold the
proceeds thereof in the Cash Collateral Account to be used for the
same purposes and under the same circumstances as Interest Advances
under the Liquidity Facilities are to be used.
Each of the Liquidity Facilities provides that the Liquidity
Provider's obligations thereunder will expire on the earliest of
(i) February 14, 1997; (ii) the date on which such Liquidity
Provider is provided with certification from the Collateral Agent
that all of the Notes of such Class shall have been paid in full;
(iii) the date on which the applicable Liquidity Provider is
provided with certification from the Collateral Agent that a
replacement liquidity facility has been substituted for the
applicable Liquidity Facility; and (iv) the date on which no amount
is, or may become, available for borrowing under such Liquidity
Facility, due to unreimbursed utilization thereof in accordance
with the terms of such Liquidity Facility. Each Liquidity Facility
provides that the scheduled expiration thereof may be extended, by
agreement of the applicable Liquidity Provider and USAir, for
additional periods of 364 days.
Any replacement liquidity facility shall be an irrevocable
liquidity facility for the same amount and in substantially the
form of the Liquidity Facility being replaced thereby, or in such
other form as shall permit Moody's and S&P to confirm their
respective ratings of the Notes (before downgrading of such
ratings, if any, as a result of a downgrading of a Liquidity
Provider). The short-term unsecured debt of any replacement
liquidity provider will be rated not lower than the above-described
minimums for the Liquidity Facilities.
Upon payment by a Liquidity Provider of the amount specified
in any borrowing under a Liquidity Facility, such Liquidity
Provider will be fully discharged of its obligations under the
Liquidity Facility with respect to such advance and will not
thereafter be obligated to make any further payments under such
Liquidity Facility in respect of such advance to the Collateral
Agent or any other person or entity who makes a demand for payment
in respect of interest on the Notes.
- 195 -
<PAGE>
In the event of an acceleration of any Class of Notes, the
Liquidity Provider for such Class of Notes shall advance the entire
available amount under such Liquidity Agreement as an Acceleration
Advance. The proceeds of an Acceleration Advance shall be held in
the Cash Collateral Account as cash collateral to be used for the
same purposes and under the same circumstances as Interest Advances
under such Liquidity Facility are to be used.
Amounts borrowed under a Liquidity Facility as an Interest
Advance or Acceleration Advance will accrue interest at a rate
equal to the sum of (i) 2.00% per annum and (ii) an interest rate
determined on a daily basis pursuant to the terms of such Liquidity
Facility or, at the option of USAir upon an Interest Advance,
LIBOR, until repaid as specified therein. Amounts borrowed under
a Liquidity Facility as a Downgrade Advance or a Non-Extension
Advance will, until applied by the Collateral Agent in payment of
interest due but unpaid on the applicable Notes, bear interest at
a rate equal to LIBOR or, if greater, at a rate equivalent to the
investment yield earned thereon while on deposit in the Cash
Collateral Account. Any amounts in the Cash Collateral Account
that are applied in payment of interest due but unpaid on the
applicable Notes will, upon being so applied, bear interest until
repaid at the rate described in the first sentence of this
paragraph.
The right of the Liquidity Providers to be repaid for Interest
Advances and, following an acceleration of the Notes, Downgrade
Advances, Non-Extension Advances and Acceleration Advances will
rank senior in right of payment and distributions to the Notes,
except to the extent described under "Priority of Distributions."
The Liquidity Facilities are intended to enhance the likeli-
hood of timely receipt by the Noteholders of the full amount of
interest due on the Notes. The Liquidity Facilities will not
provide protection against risks of loss with respect to the
Collateral and will not provide for payment of any principal of or
premium on the Notes, or more than three times the amount of
interest due on the Notes on the next Interest Payment Date. If
interest payment defaults occur which exceed the amount covered by
or available under the Liquidity Facilities or the Cash Collateral
Account, Noteholders will bear their allocable share of the
deficiencies to the extent that there are no other sources of funds
(including proceeds arising from the exercise of remedies under the
Collateral Agency Agreement) and would need to pursue other
remedies against USAir.
- 196 -
<PAGE>
Liquidity Provider
- ------------------
Westdeutsche Landesbank Girozentrale ("WestLB"), provides
commercial and investment banking services regionally, nationally
and internationally to public, corporate and bank customers.
WestLB is the largest of the German State Banks and, on the basis
of total assets at December 31, 1994, was the third largest bank in
Germany. At December 31, 1994, WestLB had total assets of approxi-
mately DM 276.3 billion ($178.4 billion).
WestLB New York is licensed and subject to supervision and
regulation by the Superintendent of Banks of the State of New York.
WestLB New York is examined by the New York State Banking Depart-
ment and is subject to banking laws and regulations applicable to
a foreign bank that operates a New York branch.
Collateral
- ----------
Under the Collateral Agency Agreement, USAir's obligations to
the Noteholders and to the Liquidity Providers is secured by a
security interest in, among other things, (i) each of the Aircraft;
(ii) all insurance and requisition proceeds and other similar
payments with respect to each of the Aircraft; (iii) all monies and
securities deposited or required to be deposited with the Collater-
al Agent; (iv) the purchase agreements and related documentation to
the extent assignable for each of the Aircraft; (v) all logs,
records and data relating to the Aircraft; and (vi) all proceeds of
the foregoing. See "Description of the Aircraft and Appraisals"
and "-Collateral Agency Agreement."
Registration
- ------------
USAir is required, except under certain circumstances, to keep
the Aircraft registered under the provisions of the Act, and to
record the Collateral Agency Agreement at the FAA registry or the
aircraft registry of other Aeronautics Authorities. The Collateral
Agency Agreement was filed at the FAA on February 16, 1996. Such
recordation of the Collateral Agency Agreement and certain other
documents (including supplements to the Collateral Agency Agree-
ment) afforded the Collateral Agent a perfected first priority
- 197 -
<PAGE>
security interest in each of the Aircraft whenever any such
Aircraft is located in the United States or any of its territories
and possessions and, with certain exceptions, in those jurisdic-
tions that have ratified or adhered to the Convention on the
International Recognition of Rights in Aircraft (the "Convention").
There are no general geographical restrictions on the operation of
the Aircraft by USAir (or by any lessee of USAir). Although USAir
has no current intention to do so, USAir will also have the right,
subject to certain conditions, to register, at its own expense, any
of the Aircraft in certain countries other than the United States.
Prior to any such change in the jurisdiction of registry, the
Collateral Agent shall have received an opinion of counsel to the
effect that (i) the laws of the new country of registration will
recognize USAir's right of ownership and repossession and will give
effect to the security interest in the Aircraft created by the
Collateral Agency Agreement and (ii) the right to repossession by
the Collateral Agent upon the exercise of remedies is valid under
the laws of the country of registration. In addition, subject to
certain limitations, the Aircraft may also be operated by persons
other than USAir under lease or interchange arrangements with USAir
in countries that are not parties to the Convention. In the case
of a Collateral Access Event, the ability of the Collateral Agent
to realize upon its security interest in any such Aircraft could be
adversely affected as a legal or practical matter if such Aircraft
is registered or located outside the United States. See "The
Collateral Agency Agreement-Registration, Leasing and Possession."
The extent to which the Collateral Agent's security interest would
be recognized in an Aircraft located in a country that is not a
party to the Convention, and the extent to which such security
interest would be recognized in a jurisdiction adhering to the
Convention (including the United States) if such Aircraft is
registered in a jurisdiction not a party to the Convention, is
uncertain. Certain jurisdictions may not accord recognition to, or
recognize the priority of, the Collateral Agency Agreement or may
have no specific laws providing for the creation, recognition or
registration of mortgages over aircraft such as the Collateral
Agency Agreement, or may accord higher priority to certain other
liens or other third party rights over the Aircraft. See "Risk
Factors-Limitations Regarding Aircraft Collateral-Foreclosure."
- 198 -
<PAGE>
Intercreditor Rights
- --------------------
At any time, only the Controlling Party may direct and control
the exercise of remedies in respect of the Collateral. Such
control will include the ability to direct the Collateral Agent or
applicable Indenture Trustee as to when and in what manner to
exercise remedies under the applicable Indenture or the Collateral
Agency Agreement, including the remedy of foreclosing on the
Collateral, for the benefit of the Noteholders or the Liquidity
Providers. The New Class A Indenture Trustee will be the Control
ling Party until all amounts outstanding and owing in respect of
the New Class A Notes shall have been paid in full, whereupon the
Class B Indenture Trustee shall be the Controlling Party until all
amounts outstanding and owing in respect of the New Class B Notes
shall have been paid in full, whereupon the Class C Indenture
Trustee will be the Controlling Party. Notwithstanding the
foregoing, if none of the Indenture Trustees acting as Controlling
Party has taken action to exercise remedies in respect of the
Collateral within 24 months following the earlier of the accelera-
tion of the Notes and the unreimbursed utilization of the entire
available amount under any of the Liquidity Facilities, the
Liquidity Provider for the New Class A Notes shall thereupon become
the Controlling Party for all purposes under the Collateral Agency
Agreement until all amounts outstanding in respect of the Liquidity
Facility for the New Class A Notes shall have been paid in full,
whereupon the Liquidity Provider for the New Class B Notes shall
become the Controlling Party until all amounts outstanding in
respect of the Liquidity Facility for the New Class B Notes shall
have been paid in full, whereupon the Liquidity Provider for the
New Class C Notes shall become the Controlling Party until all
amounts outstanding in respect of the Liquidity Facility for the
New Class C Notes shall have been paid in full, whereupon the
Controlling Party shall be the appropriate Indenture Trustee.
For a period of nine months after the acceleration of the
Notes, without the consent of the holders of a majority of the
aggregate unpaid principal amount of each Class, if the Indenture
Trustee for such Class is not the Controlling Party, no Aircraft
may be sold if the net proceeds from such sale would be less than
the Minimum Sale Price for such Aircraft.
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<PAGE>
Priority of Distributions
- -------------------------
Amounts received by the Collateral Agent from USAir shall be
promptly distributed on each Payment Date in the following order or
priority:
(i) such payments as shall be required to pay all accrued and
unpaid fees owed to the Liquidity Providers; (ii) such payments as
shall be required to pay in full the aggregate amount of interest
accrued under the Liquidity Agreements; (iii) such payments as
shall be required to reimburse the Liquidity Providers for any
Interest Advances or, if applicable, to replenish the Cash
Collateral Account up to their maximum required amounts; (iv) such
payments as shall be required to pay in full the amount of interest
then due on or in respect of the New Class A Notes and the amount
of principal expected to be paid in respect of the New Class A
Notes; (v) such payments as shall be required to pay in full the
amount of interest then due on or in respect of the New Class B
Notes and the amount of principal expected to be paid in respect of
the New Class B Notes; (vi) such payments as shall be required to
pay in full the amount of interest then due on or in respect of the
New Class C Notes and the amount of principal expected to be paid
in respect of the New Class C Notes; (vii) such payments as shall
be required to pay in full the aggregate unpaid amounts of fees and
expenses then payable to the Collateral Agent and each Indenture
Trustee pursuant to the terms of the Collateral Agency Agreement
and the applicable Indenture, as the case may be; and (viii) the
balance, if any, to USAir.
Amounts held or received by the Collateral Agent after the
Collateral Agent shall have received a Notice of Acceleration shall
be promptly distributed in the following order of priority:
(i) such payments as shall be required to reimburse the
Collateral Agent for any tax, expense, charge or other loss
incurred by the Collateral Agent in its capacity as such; (ii) such
payment as shall be required to pay all accrued and unpaid fees
owed to the Liquidity Providers; (iii) such payment as shall be
required to pay in full the aggregate amount of interest owed to
the Liquidity Providers; (iv) such payments as shall be required to
pay in full all other amounts owed under the Liquidity Agreements;
(v) such payments as shall be required to reimburse (a) the
Indenture Trustees for any tax, expense, charge or other loss
incurred by the Indenture Trustees in their capacity as such and
(b) the Noteholders for certain payments owed under the Indenture;
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<PAGE>
(vi) such payments as shall be required to pay in full the
aggregate amount of fees and expenses payable to the Collateral
Agent and each Indenture Trustee pursuant to the terms of the
Collateral Agency Agreement and the Indentures, other than those
amounts referred to under (i) and (v) above; (vii) such payments as
shall be required to pay in full the aggregate amount of all
accrued and unpaid interest on the New Class A Notes and then to
pay in full the aggregate outstanding principal of the New Class A
Notes and all other amounts due and owing to the Class A Note-
holders; (viii) such payments as shall be required to pay in full
the aggregate amount of all accrued and unpaid interest on the New
Class B Notes and then to pay in full the aggregate outstanding
principal of the New Class B Notes and all other amounts due and
owing to the Class B Noteholders; and (ix) such payments as shall
be required to pay in full the aggregate amount of all accrued and
unpaid interest on the New Class C Notes and to pay in full the
aggregate outstanding principal of the New Class C Notes and to pay
in full the aggregate outstanding principal of the New Class C
Notes and all other amounts due and owing to the Class C Note-
holders. The balance, if any, shall be distributed to USAir.
Interest Advances under the Liquidity Facilities and withdraw-
als from the Cash Collateral Account in respect of interest on the
Notes will be distributed to the Noteholders notwithstanding the
priority of distributions set forth above and otherwise described
herein.
Under certain circumstances, USAir shall have the right to
redeem all or a portion of any Class of Notes without giving effect
to the above-described priority of distributions. Upon the
occurrence of an Event of Loss, Notes of each Class shall, except
under certain circumstances, be redeemed on a pro rata basis. See
"Description of Notes-Redemption."
Merger, Consolidation and Transfer of Assets
- --------------------------------------------
USAir will be prohibited from consolidating with or merging
into any other corporation or conveying, transferring or leasing
substantially all its assets as an entirety to any corporation or
person, unless, among other things, (i) such corporation or person
is a U.S. citizen and a U.S. certificated air carrier within the
meaning of the Act; (ii) such corporation or person assumes the due
- 201 -
<PAGE>
and punctual performance and observance of each agreement and
condition of the Operative Documents to be performed or observed by
USAir; (iii) no Collateral Access Event would arise as a result of
such transaction; and (iv) USAir shall have delivered to the
Collateral Agent an opinion of counsel concerning certain matters.
There are no provisions in the Indentures, Collateral Agency
Agreement or other documents that would afford the Noteholders
additional protection in the event of a highly leveraged transac-
tion, including transactions effected by management or affiliates,
which may or may not result in a change of control of USAir.
Collateral Access Events
- ------------------------
Collateral Access Events under each Indenture include: (a) the
failure by USAir to make an expected payment of principal or any
payment of interest or premium when due, and the continuation of
such failure unremedied for 15 days, (b) the failure to procure and
maintain property and liability insurance in accordance with the
provisions of the Collateral Agency Agreement and the continuation
of such failure, in the case of maintenance of such insurance,
until the earlier of (i) 30 days after notice to USAir or the
Collateral Agent that such insurance is subject to lapse or
cancellation or (ii) the date such lapse or cancellation is
effective as to the Collateral Agent, (c) operation of the Aircraft
after receipt of notice that the insurance required by the
Collateral Agency Agreement has been canceled, (d) the failure by
USAir to perform any covenants contained in the Collateral Agency
Agreement and the continuation of such failure for a period of 30
days after notice to USAir by the Indenture Trustee or by holders
of 25% of outstanding Notes under such Indenture, unless such
failure is curable and USAir is diligently proceeding to correct
such failure and shall in fact correct such failure within 180 days
after delivery of such notice, (e) any representation or warranty
made by USAir in any Indenture, the Collateral Agency Agreement or
any Liquidity Agreement or in any document or certificate furnished
to the Collateral Agent, an Indenture Trustee or the Noteholders
under such Indenture shall be incorrect in any material respect as
of the date made and shall be material at the time of determination
and shall not have been remedied within 30 days after notice has
been given to USAir by the Indenture Trustee or holders of 25% of
outstanding Notes under such Indenture, (f) the occurrence of
certain events of bankruptcy, reorganization or insolvency of USAir
and (g) a Collateral Access Event under any other Indenture.
- 202 -
<PAGE>
Events of Default
- -----------------
Events of Default under each Indenture are (i) the failure to
pay the principal outstanding on the relevant Class of Notes on the
Legal Maturity Date thereof and the continuation of such failure
for 15 days and (ii) the failure to pay interest on any Interest
Payment Date on such Class of Notes and the continuation of such
failure unremedied for 15 days (unless the Collateral Agent shall
have borrowed an Interest Advance with respect thereto).
Remedies
- --------
Each Indenture will provide that upon the occurrence and
during the continuance of any Collateral Access Event under such
Indenture, the applicable Indenture Trustee may, or upon the
instruction of the holders of a majority in aggregate principal
amount of the relevant Class of Notes shall, declare the unpaid
principal of all of the Notes of such Class outstanding at such
date to be immediately due and payable, together with all accrued
but unpaid interest thereon and all other amounts due in respect
thereof (such declaration being an "acceleration" of the relevant
Class of Notes). Each Indenture provides that upon any accelera-
tion of either of the other Classes of Notes, the Notes issued
under such Indenture shall be automatically accelerated. The
Collateral Agency Agreement provides that upon the Collateral
Agent's receipt of a Notice of Acceleration the Collateral Agent
shall, upon the direction of the Controlling Party, exercise such
remedies available to it under applicable law, including any of the
remedies of a secured party under applicable law or otherwise
provided in the applicable Indenture, as may be directed by the
Controlling Party.
Section 1110 of the Bankruptcy Code provides, among other
things, that the right of a holder of a security interest in
aircraft first placed in service after October 22, 1994 (such as
the Aircraft) granted by a person that is a citizen of the United
States holding an air carrier operating certificate, such as USAir,
to repossess such aircraft in compliance with the terms of the
security agreement is not affected in a Chapter 11 bankruptcy
reorganization case with respect to such person by the automatic
stay provisions of the Bankruptcy Code or any power of the
bankruptcy court to enjoin such repossession unless, within 60 days
after commencement of the case, the debtor agrees, with the court's
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<PAGE>
approval, to perform obligations under the security agreement and
cures all outstanding defaults, including Collateral Access Events,
other than defaults, including Collateral Access Events, relating
to financial condition or bankruptcy. USAir has been advised by
Fulbright & Jaworski L.L.P. that, in the opinion of such counsel,
the Collateral Agent, for the benefit of the Noteholders, would be
entitled to the benefits of Section 1110 of the Bankruptcy Code
with respect to the Aircraft. It is unclear whether, after an
Event of Loss of an engine subject to the lien of an Indenture or
a voluntary substitution of an engine subject to the lien of an
Indenture by USAir, any replacement engine subject to the lien of
the related Indenture would have the benefits of Section 1110 of
the Bankruptcy Code if such aircraft or engine had been first
placed into service on or before October 22, 1994. The right of
the Company to substitute an aircraft upon an Event of Loss with
respect to an Aircraft is subject to the receipt of an opinion of
counsel that the benefits of Section 1110 of the Bankruptcy Code
would continue to be applicable.
Purchase Rights of Noteholders
- ------------------------------
At any time after the delivery to the Collateral Agent of a
Notice of Acceleration which has not been rescinded or withdrawn,
the Class B Noteholders shall have the right to purchase all, but
not less than all, of the New Class A Notes and the Class C
Noteholders shall have the right to purchase all, but not less than
all, of the New Class A Notes and the New Class B Notes. The
purchase price for any Class of Notes shall be equal to the
aggregate principal amount of all Notes of such Class then
outstanding, together with all accrued and unpaid interest (but
without premium, if any) then due and payable to the holders of
such Notes under the applicable Indenture and the other Operative
Documents.
Reports to Noteholders
- ----------------------
Under the terms of the Collateral Agency Agreement and the
Indentures, as applicable, the following reports are required to be
filed with the Collateral Agent and promptly transmitted to the
related Class of Noteholders until the Notes are paid in full: (i)
an annual report of USAir containing its financial statements
audited by its independent certified public accountant, within 120
days after the end of each of its fiscal years and (ii) quarterly
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<PAGE>
reports of USAir containing its unaudited financial statements,
within 60 days after the end of each of the first three quarters of
each of its fiscal years.
Modification of Agreements
- --------------------------
Without the consent of the holders of 50% of the unpaid
principal amount of the Notes under the applicable Indenture and,
if required by the Liquidity Agreements, the applicable Liquidity
Provider, the provisions of the Collateral Agency Agreement or the
applicable Indenture may not be amended or modified, except that
(i) certain provisions of each Indenture and the Collateral Agency
Agreement may be supplemented, amended or modified without the
consent of the Noteholders thereunder to the extent such supple-
ment, amendment or modification, among other things, cures an
ambiguity or subjects other collateral to the lien of the Collater-
al Agency Agreement and (ii) each Indenture Trustee may consent to
any modification or amendment of, addition to or deletion from the
Collateral Agency Agreement or applicable Indenture if such
modification, amendment, addition or deletion does not materially
adversely affect the interests of the Noteholders represented by
such Indenture Trustee. Without the consent of each Noteholder in
an affected Class of Notes, the Collateral Agent may not agree to
any amendments or modifications of any of the Liquidity Agreements
which are materially adverse to the Noteholders. Without the
consent of each Noteholder in an affected Class of Notes and, if
required by the Liquidity Agreements, the applicable Liquidity
Provider, no amendment or modification of the applicable Indenture
may, among other things, (i) reduce the percentage of the aggregate
principal amount of the Notes of such Class necessary to modify or
amend any provision of such Indenture or other Operative Document
or to waive compliance therewith, (ii) reduce the principal amount
of or interest payable on such Note or extend the time when any
such principal or interest is due and payable or otherwise affect
the terms of payment of such Note or (iii) make such Note payable
in a currency other than U.S. dollars. Without the consent of each
Noteholder in an affected Class and each applicable Liquidity
Provider, no amendment or modification of the Collateral Agency
Agreement may, among other things, modify certain provisions of the
Collateral Agency Agreement relating to the distribution of
principal, interest or premium or other monies received or realized
by the Collateral Agent from the Collateral.
USAir may from time to time be a Noteholder with respect to
any of the Notes, but shall not be entitled to vote such Notes in
respect of any matters coming before Noteholders.
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<PAGE>
Certain Payments to Noteholders
- -------------------------------
(a) No payment or distribution shall be made on or in respect
of any obligation owed to a Noteholder under the Operative
Documents, including any payment or distribution of cash, property
or securities after commencement of a bankruptcy case involving
USAir, except directly to the Collateral Agent for application as
provided in the Collateral Agency Agreement. See "-Redemption" and
"-Priority of Distributions."
(b) In the event that a Noteholder shall receive any payment
or distribution on or in respect of any such obligation which it is
not entitled to receive under the applicable Indenture or the
Collateral Agency Agreement, it will hold any amount so received in
trust for the Senior Holders (as defined below) and will forthwith
turn over such payment to the Collateral Agent in the form received
to be applied or held as provided in the Collateral Agency
Agreement. See "-Redemption" and "-Priority of Distributions."
(c) In connection with any foreclosure sale of all or any
part of the Collateral, no Noteholder may "bid-in" or purchase any
part of such Collateral with any Notes held by such Noteholder
unless prior to or contemporaneously with any such purchase by such
Noteholder, the obligations owed to the Senior Holders under the
Operative Documents have been or are being paid in full in dollars
and in immediately available funds (or in such other form as shall
be acceptable to the Senior Holders).
(d) Each Noteholder (and the applicable Indenture Trustee on
behalf of such Noteholder) shall be entitled to receive and retain
any and all amounts paid or payable to such Noteholder with the
proceeds of an Interest Advance under the Liquidity Facilities or
a withdrawal from the Cash Collateral Account to the extent
permitted by the terms of the Collateral Agency Agreement. See
"-Redemption" and "-Priority of Distribution."
The term "Senior Holder" means, until the Liquidity Obliga-
tions (as defined in Appendix A to the Collateral Agency Agreement)
have been paid in full and the commitment to make advances under
the Liquidity Facilities and the Liquidity Agreements has expired
or terminated, the Liquidity Providers, and (i) with respect to the
Class B Noteholders, thereafter, until the Class A Obligations (as
defined in Appendix A to the Collateral Agency Agreement) have been
paid in full, the Class A Noteholders and (ii) with respect to the
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<PAGE>
Class C Noteholders, thereafter, until the Class A and the Class B
Obligations (as defined in Appendix A to the Collateral Agency
Agreement) have been paid in full, the Class A Noteholders and the
Class B Noteholders.
Collateral Agency Agreement
- ---------------------------
Registration, Possession, Leasing
- ---------------------------------
USAir may lease an Aircraft to any United States certificated
air carrier or to foreign air carriers duly organized and operating
pursuant to a license issued under the laws of certain countries
with which the United States government maintains normal diplomatic
relations (and Taiwan) (such United States and foreign air carriers
being the "Permitted Air Carriers"). In addition, subject to
certain limitations, USAir may lease any of the Aircraft to foreign
air carriers that are not Permitted Air Carriers and may transfer
possession of an Aircraft other than by lease, including transfers
in connection with normal interchange and pooling arrangements with
any air carrier, charters, transfers to the United States govern-
ment or foreign governments and transfers in connection with
maintenance or modifications. If the Aircraft are leased or the
possession is otherwise transferred, such Aircraft will remain
subject to the lien of the Collateral Agency Agreement.
USAir is required, except under certain circumstances, to keep
each Aircraft registered under the Act. The Collateral Agency
Agreement under the Act. Such recordation of the Collateral Agency
Agreement (including Collateral Agency Agreement supplements)
provided the Collateral Agent a perfected security interest in the
related Aircraft whenever it is located in the United States or any
of its territories and possessions; the Convention provides that
such security interest will also be recognized, with certain
limited exceptions, in those jurisdictions that have ratified or
adhere to the Convention. Although USAir has no current intention
to do so, USAir will have the right, subject to certain conditions,
at its own expense to register any Aircraft in countries other than
the United States. Prior to any such change in the jurisdiction of
registry, the Collateral Agent shall have received an opinion of
counsel that, among other things, the Collateral Agency Agreement
and the Collateral Agent's right to repossession thereunder are
valid and enforceable under the laws of such country in each case
subject, in certain cases, to certain filings, recordations or
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<PAGE>
other actions. Subject to certain limitations, each Aircraft may
also be operated by USAir or under lease or interchange arrange-
ments in countries that are not parties to the Convention. The
extent to which the related Collateral Agent's security interest
would be recognized in an Aircraft located in a country that is not
a party to the Convention, and the extent to which such security
interest would be recognized in a jurisdiction adhering to the
Convention if the Aircraft is registered in a jurisdiction not a
party to the Convention, is uncertain. Moreover, in the case of a
Collateral Access Event, the ability of the Collateral Agent to
realize upon its security interest in an Aircraft could be
adversely affected as a legal or practical matter if such Aircraft
were registered or located outside the United States.
Liens
- -----
The Aircraft will be maintained by USAir free of any liens,
other than the rights of the Collateral Agent and certain limited
liens permitted under the Collateral Agency Agreement, including
liens for taxes either not yet due and payable or being contested
in good faith; suppliers', mechanics' and other similar liens
arising in the ordinary course of business and either not yet due
and payable or being contested in good faith; judgment liens whose
enforcement has been stayed; salvage and similar rights of insurers
of the Aircraft; and any other lien with respect to which USAir
shall have provided a bond or other security in an amount and under
terms reasonably satisfactory to the Collateral Agent.
Insurance
- ---------
USAir will, at its expense, maintain or cause to be maintained
all-risk aircraft hull insurance covering the Aircraft, and, to the
extent available at reasonable cost, all-risk property damage
insurance covering engines and parts while temporarily removed from
an Aircraft pending replacement, at all times in an amount not less
than the sum of (i) the aggregate outstanding principal amount of
the Notes and (ii) the scheduled amount of interest payable on the
Notes on the next Interest Payment Date. During any period when an
Aircraft is on the ground and not in operation USAir may carry or
cause to be carried in lieu of the insurance required by the
previous sentence, insurance otherwise conforming with the
provisions of said sentence except that the scope of the risks
covered and the type of insurance shall be the same as are from
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<PAGE>
time to time applicable to aircraft owned or leased by USAir of the
same type as such Aircraft similarly on the ground and not in
operation, provided that in all cases full amounts shall not be
less than that described in the immediately preceding sentence.
All policies covering loss of or damage to an Aircraft shall be
made payable to the Collateral Agent for any loss in excess of
$5,000,000. USAir may self-insure a portion of these risks, but in
no case will the self-insurance with respect to all of the aircraft
in USAir's fleet (including the Aircraft) exceed the lesser of 50%
of the largest replacement value of any single aircraft in USAir's
fleet or 1-1/2% of the average aggregate insurable value (during
the preceding calendar year) of all aircraft on which USAir carries
insurance, unless an insurance broker of national standing selected
by USAir and reasonably satisfactory to the Collateral Agent shall
certify that the standard among all other major United States
airlines is a higher level of self-insurance, in which case USAir
may self-insure to such higher level. In addition, USAir will, at
its expense, maintain or cause to be maintained comprehensive
airline liability (including, without limitation, passenger,
contractual, bodily injury and property damage liability) insurance
(exclusive of manufacturer's product liability insurance) and cargo
liability insurance with respect to each Aircraft (i) in amounts
that are not less than the comprehensive airline liability
insurance as is from time to time applicable to aircraft owned and
operated by USAir of the same type as such Aircraft and (ii) of the
types and covering the same risks as are from time to time
applicable to aircraft owned or operated by USAir of the same type
as such Aircraft and which is maintained in effect with insurers of
recognized responsibility; provided that USAir need not maintain
cargo liability insurance, or may maintain such insurance in an
amount less than that specified above for the respective Aircraft
as long as the amount of cargo liability insurance, if any,
maintained with respect to such Aircraft is the same as the cargo
liability insurance, if any, maintained for other aircraft of the
same model as such Aircraft owned or operated by USAir. During any
period when an Aircraft is on the ground and not in operation USAir
may carry or cause to be carried, in lieu of the insurance required
by the previous sentence, insurance otherwise conforming with the
provisions of said sentence except that the amounts of coverage
shall not be required to exceed the amounts of comprehensive
airline liability insurance, and the scope of risks covered and
type of insurance shall be the same, as are from time to time in
effect with respect to aircraft owned or leased by USAir of the
same type as such Aircraft similarly on the ground and not in
operation. USAir may also self-insure a portion of these risks by
means of a deductible or premium adjustment provisions subject to
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<PAGE>
the same limitations described above for insurance for risks of
loss or damage to such Aircraft. USAir is also permitted a
deductible per occurrence not in excess of the prevailing standard
market deductible for similar aircraft. The Collateral Agent, the
Indenture Trustees and the Liquidity Providers will each be named
as additional insured parties under all liability insurance
policies required with respect to the Aircraft. In addition, the
insurance policies will provide that, in respect of the respective
interests of the Collateral Agent, the Indenture Trustees and the
Liquidity Providers, the insurance shall not be invalidated by any
action or inaction of USAir and shall insure the respective
interests of the Collateral Agent, the Indenture Trustees and the
Liquidity Providers as they appear, regardless of any breach or
violation of any warranty, declaration or condition contained in
such policies by USAir. If and to the extent that USAir or a
lessee operates an Aircraft (A) on routes where it maintains war
risk insurance in effect with respect to other similar equipment,
or (B) on routes other than routes within or between the United
States, Canada, Mexico, Bermuda and islands other than Cuba in the
Caribbean Basin where the custom in the industry is to carry such
insurance, USAir or such lessee shall maintain such insurance with
respect to the Aircraft in an amount not less than the lesser of
the aggregate unpaid principal of, together with accrued interest
on, a ratable portion of the Notes of all Classes (based on the
initial Appraised Value of such Aircraft) and the amount of such
insurance customarily carried by corporations engaged in the same
or similar business similarly situated with USAir and with respect
to similar equipment on similar routes; provided that if the
requirement to maintain war risk insurance arises solely by reason
of clause (A) of this sentence, such insurance shall be maintained
in an amount not less than that maintained by USAir or such lessee
on other similar aircraft in its fleet. Unless an Aircraft is
operated or used under a contract with the United States government
pursuant to which the United States government assumes liability
for damage or loss to such Aircraft and to other property or
persons, USAir may not operate or locate any Aircraft outside the
United States and Canada (i) in any war zone or recognized or, in
USAir's reasonable judgment, threatened area of hostilities, unless
such Aircraft is fully covered by war risk insurance, or (ii) in
any area excluded from the insurance coverage required under the
Collateral Agency Agreement. Insurance proceeds, if any, held from
time to time by the Collateral Agent with respect to any Aircraft,
prior to the distribution thereof, will be invested and reinvested
by the Collateral Agent at the direction of USAir (except after the
occurrence and during the continuance of a Collateral Access Event)
in certain investments described in the Collateral Agency Agree-
ment. The net amount of any loss resulting from any such invest-
ments will be paid by USAir.
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<PAGE>
Events of Loss
- --------------
If an Event of Loss occurs with respect to an Aircraft, USAir
shall either redeem a pro rata amount of the outstanding principal
amount of the Notes or USAir shall subject a replacement aircraft
to the lien created by the Collateral Agency Agreement. In the
event USAir elects to replace an Aircraft, it must do so within 120
days of the Event of Loss with a Boeing 757 aircraft of the same or
a more advanced model having a value and utility at least equal to,
and in as good operating condition and repair and as airworthy as,
the Aircraft subject to the Event of Loss, assuming such Aircraft
was in the condition and repair required by the Collateral Agency
Agreement immediately prior to the occurrence of the Event of Loss.
In the event USAir elects not to replace such Aircraft, USAir is
required to redeem, not later than 165 days after the occurrence of
such Event of Loss, a pro rata amount (based on the ratio borne by
the initial Appraised Value of such Aircraft to the initial
Aggregate Appraised Value) of the outstanding principal amount of
the Notes together with accrued and unpaid interest thereon. Upon
such payment the lien of the Collateral Agency Agreement with
respect to such Aircraft shall terminate. The payments made by
USAir shall be deposited with the Collateral Agent.
If an Event of Loss occurs with respect to an Engine (as
defined in the Collateral Agency Agreement) alone, USAir shall
replace such Engine with another engine of the same or an improved
model of the same or another manufacturer and suitable for
installation and use on the Aircraft.
An Event of Loss with respect to the Aircraft or Engine means
any of the following events: (i) payment of an insurance settlement
with respect to such property on the basis of an actual or
constructive total loss; (ii) destruction or damage beyond repair;
provided that if it is not clear whether damage constitutes damage
beyond repair, an Event of Loss will be deemed to occur when it is
determined by USAir that such damage is beyond repair; (iii) theft
or disappearance for a period in excess of 120 days, unless the
location of the Aircraft is known and USAir is diligently pursuing
its recovery; (iv) the condemnation or taking of title to such
Aircraft by the United States government or any foreign government
or instrumentality or agency thereof; (v) the requisition or taking
of use of such Aircraft or airframe by a foreign government or
instrumentality or agency for a continuous period of more than six
months; (vi) with respect to an Engine only, the requisition for
use by any government or the divestiture of title resulting from
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<PAGE>
the installation of such Engine on an airframe leased to USAir or
purchased by USAir subject to a conditional sale agreement; or
(vii) "grounding" of such Aircraft for a period of twelve consecu-
tive months (or such shorter period determined by USAir) due to an
action by a governmental body, unless prior to the expiration of
such period USAir is diligently carrying forward all necessary
steps to permit normal use or in any event, if such "grounding" is
for a period of more than 24 consecutive months.
Indemnification
- ---------------
Subject to certain exceptions, USAir has agreed to indemnify
the Collateral Agent, the Liquidity Providers and the Indenture
Trustees for certain liabilities, losses, fees and expenses and for
certain other matters arising out of the transactions described
herein or relating to the Aircraft.
The Indenture Trustees
- ----------------------
Wilmington Trust Company is the Indenture Trustee under each
of the Indentures. USAir and its affiliates may from time to time
enter into banking and trustee relationships with the Indenture
Trustees and their affiliates. Wilmington Trust Company and its
affiliates may hold Notes in their own names. The Indenture
Trustee's address is Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration. For purposes of meeting the legal requirements of
any jurisdictions in which any part of the Collateral may at the
time be located, each of the Indenture Trustees will have the power
to appoint a co-trustee or separate trustee of all or any part of
the Collateral. To the extent permitted by law, all rights,
powers, duties and obligations conferred or imposed upon such
Indenture Trustee will be conferred or imposed upon and exercised
or performed by such Indenture Trustee and such separate trustee or
co-trustee jointly, or, in any jurisdiction in which such Indenture
Trustee will be incompetent or unqualified to perform certain acts,
singly upon such separate trustee or co-trustee who shall exercise
and perform such rights, powers, duties and obligations solely at
the direction of such Indenture Trustee. Any Indenture Trustee may
resign at any time, in which event a successor Indenture Trustee
will be appointed as provided in the applicable Indenture. USAir
may also remove any Indenture Trustee, if such Indenture Trustee
ceases to be eligible to continue as such under the applicable
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<PAGE>
Indenture or if the Indenture Trustee becomes insolvent. In such
circumstances, a successor Indenture Trustee will be appointed as
provided in the applicable Indenture. Any resignation or removal
of any Indenture Trustee and appointment of a successor Indenture
Trustee will not become effective until acceptance of the appoint-
ment by the successor Indenture Trustee.
The Indenture Trustee has not participated in the preparation
of this Prospectus and assumes no liability for its contents.
The Collateral Agent
- --------------------
Wilmington Trust Company is the Collateral Agent under the
Collateral Agency Agreement. USAir and its affiliates may from
time to time enter into banking and trustee relationships with the
Collateral Agent and its affiliates. Wilmington Trust Company and
its affiliates may hold Notes in their own names. The Collateral
Agent's address is Rodney Square North, 1100 North Market Street,
Wilmington, Delaware 19890-0001, Attention: Corporate Trust
Administration.
For purposes of meeting the legal requirements of any
jurisdictions in which any part of the Collateral may at the time
be located, the Collateral Agent will have the power to appoint a
co-trustee or separate trustee of all or any part of the Collater-
al. To the extent permitted by law, all rights, powers, duties and
obligations conferred or imposed upon the Collateral Agent will be
conferred or imposed upon and exercised or performed by the
Collateral Agent and such separate trustee or co-trustee jointly,
or, in any jurisdiction in which the Collateral Agent will be
incompetent or unqualified to perform certain acts, singly upon
such separate trustee or co-trustee who shall exercise and perform
such rights, powers, duties and obligations solely at the direction
of the Collateral Agent.
The Collateral Agent may resign at any time, in which event a
successor Collateral Agent will be appointed as provided in the
Collateral Agency Agreement. The Liquidity Providers and the
Indenture Trustees, acting together, may remove the Collateral
Agent. USAir may also remove the Collateral Agent. In such
circumstances, a successor Collateral Agent will be appointed as
provided in the Collateral Agency Agreement. Any resignation or
removal of the Collateral Agent and appointment of a successor
Collateral Agent will not become effective until acceptance of the
appointment by the successor Collateral Agent.
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<PAGE>
The Collateral Agent has not participated in the preparation
of this Prospectus and assumes no liability for its contents.
Governing Law
- -------------
Each Indenture, the Old Notes, the Collateral Agency Agree-
ment, the Liquidity Facilities and the Registration Rights
Agreement are governed by, and construed in accordance with, New
York State law. The New Notes will be governed by, and construed
in accordance with, New York State law.
PLAN OF DISTRIBUTION
--------------------
Each broker-dealer that receives New Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such New
Notes. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with
resales of New Notes received in exchange for Old Notes where such
New Notes were acquired as a result of market-making activities or
other trading activities. USAir will, for a period of 90 days
after the Expiration Date, make this Prospectus, as amended or
supplemented, available to any broker-dealer for use in connection
with any such resale.
USAir will not receive any proceeds from any sale of New Notes
by broker-dealers. New Notes received by broker-dealers for their
own account pursuant to the Exchange Offer may be sold from time to
time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the New
Notes or a combination of such methods of resale, at market prices
prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may
be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or conces-
sions from any such broker-dealer and/or the purchasers of any such
New Notes. Any broker-dealer that resells New Notes that were
received by it for its own account pursuant to the Exchange Offer
and any broker or dealer that participates in a distribution of
such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of
new Notes and any commission or concessions received by any such
persons may be deemed to be underwriting compensation under the
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<PAGE>
Securities Act. The Letter of Transmittal states that by acknowl-
edging that it will deliver and by delivering a Prospectus, a
broker-dealer will not be deemed to admit that it is an "underwrit-
er" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, USAir will
promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer
that requests such documents in the Letter of Transmittal. USAir
has agreed in the Registration Rights Agreement to pay all expenses
incident to the Exchange Offer other than commissions or conces-
sions of any brokers or dealers and to indemnify any broker-dealer
that receives New Notes for its own account pursuant to the
Exchange Offer as a result of market making or other trading
activities against certain liabilities including liabilities under
the Securities Act.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
---------------------------------------------
The following summary describes certain United States federal
income tax consequences of the exchange of Old Notes for New Notes
as of the date hereof. Except where noted, it deals only with New
Notes held as "capital assets" and does not deal with special
situations, such as those of dealers in securities, financial
institutions, life insurance companies or foreign holders.
Furthermore, the discussion below is based upon the provisions of
the Internal Revenue Code of 1986 (the "Code") and regulations,
rulings and judicial decisions thereunder as of the date hereof,
and such authorities may be repealed, revoked or modified so as to
result in federal income tax consequences different from those
discussed below. Persons considering the exchange of Old Notes for
New Notes should consult their own tax advisors concerning the
federal income tax consequences in light of their particular
situations as well as any consequences arising under the laws of
any other taxing jurisdiction.
Exchange of Notes
- -----------------
The exchange of Old Notes for New Notes in the Exchange Offer
should not constitute a taxable event to Noteholders. Consequent-
ly, no gain or loss should be recognized by a Noteholder upon
receipt of a New Note, the holding period of the New Note should
include the holding period of the Old Note and the basis of the New
Note should be the same as the basis of the Old Note immediately
before the exchange.
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<PAGE>
LEGAL MATTERS
-------------
The validity of the New Notes will be passed upon for USAir by
Lawrence M. Nagin, Executive Vice President-Corporate Affairs and
General Counsel of USAir. Mr. Nagin's compensation arrangements
with USAir are discussed in "Management-Compensation of Executive
Officers."
INDEPENDENT AUDITORS
--------------------
The consolidated financial statements of USAir as of December
31, 1995 and 1994, and for each of the three years in the period
ended December 31, 1995, appearing in this Prospectus have been
audited by KPMG Peat Marwick LLP, independent auditors, as set
forth in their report thereon appearing elsewhere herein.
EXPERTS
-------
The references to AirClaims, AISI, and BK, and to their
respective appraisal reports, each dated December 31, 1995, are
included herein in reliance upon the authority of each such firm as
an expert with respect to the matters contained in its appraisal
report.
- 216 -
<PAGE>
<TABLE>
USAir, Inc.
Consolidated Financial Statements
---------------------------------
USAir, Inc.
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1996 and 1995 (unaudited)
- ------------------------------------------------------
(in thousands)
- --------------
<CAPTION>
1996 1995
------------- -------------
<S> <C> <C>
Operating Revenues
Passenger transportation $ 1,551,579 $ 1,486,590
Cargo and freight 37,308 40,071
Other 150,728 137,829
------------- -------------
Total Operating Revenues 1,739,615 1,664,490
Operating Expenses
Personnel costs 713,751 693,564
Aviation fuel 155,795 155,637
Commissions 123,535 134,924
Aircraft rent 102,415 100,831
Other rent and landing fees 96,357 102,004
Aircraft maintenance 86,539 74,927
Depreciation and amortization 77,738 83,659
Other, net 392,395 369,248
------------- ------------
Total Operating Expenses 1,748,525 1,714,794
------------- ------------
[table continued on following page]
- 217 -
<PAGE>
<S> <C> <C>
Operating Income (Loss) (8,910) (50,304)
Other Income (Expense)
Interest income 13,410 7,154
Interest expense (71,447) (73,105)
Interest capitalized 1,449 4,165
Other, net 10,860 10,266
-------------- ---------------
Other Income (Expense), Net (45,728) (51,520)
-------------- ---------------
Income (Loss) Before Taxes (54,638) (101,824)
Income Tax Provision (Credit) 292 -
-------------- ---------------
Net Income (Loss) $ (54,930) $ (101,824)
============== ===============
See accompanying Note to condensed consolidated financial statements.
</TABLE>
- 218 -
<PAGE>
<TABLE>
USAir, Inc.
Condensed Consolidated Balance Sheets
March 31, 1996 (unaudited) and December 31, 1995
- ------------------------------------------------
(dollars in thousands except per share amount)
- ----------------------------------------------
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
- --------------------------------- ---------------- ----------------
<S> <C> <C>
Current Assets
- --------------
Cash and cash equivalents $ 782,712 $ 879,613
Short-term investments 45,487 19,831
Receivables, net 444,680 321,755
Materials and supplies, net 213,359 222,245
Prepaid expenses and other 120,647 97,922
------------ ------------
Total current assets 1,606,885 1,541,366
Property and Equipment
- ----------------------
Flight equipment 4,998,231 5,021,520
Ground property and equipment 1,056,173 1,052,706
Less accumulated depreciation
and amortization (2,259,371) (2,222,814)
----------- -----------
3,795,033 3,851,412
Purchase deposits 24,361 17,026
----------- -----------
Property and equipment, net 3,819,394 3,868,438
[table continued on following page]
- 219 -
<PAGE>
<S> <C> <C>
Other Assets
- ------------
Goodwill, net 506,550 510,562
Other intangibles, net 312,792 312,539
Other assets, net 611,833 590,622
------------ -----------
Total other assets 1,431,175 1,413,723
------------ -----------
$ 6,857,454 $ 6,823,527
============ ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Current Liabilities
- -------------------
Current maturities of
long-term debt $ 83,874 $ 77,496
Accounts payable 301,061 325,079
Payable to parent company 176,122 100,344
Traffic balances payable
and unused tickets 875,442 638,019
Accrued expenses 1,308,529 1,435,194
------------ ------------
Total current liabilities 2,745,028 2,576,132
[table continued on following page]
- 220 -
<PAGE>
<S> <C> <C>
Long-term Debt, Net of Current
Maturities
- -----------------------------------
Long-term debt 2,657,587 2,674,376
Note payable - parent company - 67,556
Total Long-term debt, net of
-------------- --------------
current maturities 2,657,587 2,741,932
Deferred Credits and Other Liabilities
- --------------------------------------
Deferred gains, net 376,392 382,995
Postretirement benefits other
than pensions, non-current 1,034,176 1,015,373
Non-current employee benefit
liabilities and other 410,374 418,268
----------- -----------
Total deferred credits
and other liabilities 1,820,942 1,816,636
Stockholder's Equity (Deficit)
- ------------------------------
Common stock, par value $1 per share,
authorized 1,000 shares,
issued and outstanding 1,000 shares 1 1
Paid-in capital 2,416,131 2,416,131
Retained earnings (deficit) (2,704,240) (2,649,310)
Adjustment for minimum
pension liability (77,995) (77,995)
-------------- -------------
Total stockholder's equity (deficit) (366,103) (311,173)
-------------- -------------
$ 6,857,454 $ 6,823,527
============== =============
See accompanying Notes to condensed consolidated financial statements.
- 221 -
</TABLE>
<PAGE>
<TABLE>
USAir, Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995 (unaudited) (in thousands)
<CAPTION>
1996 1995
------------ --------------
<S> <C> <C>
Cash and cash equivalents beginning of period $ 879,613 $ 428,925
Cash flows from operating activities
Net income (loss) (54,930) (101,824)
Adjustments to reconcile net income (loss) to cash provided
by (used for) operating activities
Depreciation and amortization 77,738 83,659
Loss (gain) on disposition of property 3,466 (1,329)
Amortization of deferred gains and credits (6,603) (6,603)
Other (3,448) (1,876)
Changes in certain assets and liabilities
Decrease (increase) in receivables (122,925) (119,762)
Decrease (increase) in materials, supplies,
prepaid expenses and intangible pension assets (11,564) (13,675)
Increase (decrease) in traffic balances payable
and unused tickets 237,423 161,493
Increase (decrease) in accounts payable and
accrued expenses (150,880) (16,575)
Increase (decrease) in postretirement benefits
other than pensions, non-current 18,803 17,174
Net cash provided by (used for)
operating activities (12,920) 682
[table continued on following page]
- 222 -
<PAGE>
<S> <C> <C>
Cash flows from investing activities
Aircraft acquisitions and purchase deposits, net (3,385) (20,531)
Additions to other property (27,979) (17,337)
Proceeds from disposition of property 3,483 36,617
Change in short-term investments (25,695) -
Change in restricted cash and investments 985 2,565
Other (11,903) 177
----------- -----------
Net cash provided by (used for) investing activities (64,494) 1,491
Cash flows from financing activities
Issuance of debt 103,002 -
Reduction of debt (122,489) (15,240)
---------- -----------
Net cash provided by (used for) financing activities (19,487) (15,240)
---------- -----------
Net increase (decrease) in cash and cash equivalents (96,901) (13,067)
---------- -----------
Cash and cash equivalents end of period $ 782,712 $ 415,858
========== ===========
Noncash investing and financing activities
Issuance of debt - refinancing of debt
secured by aircraft $ 159,998 $ -
========== ===========
Reduction of debt - refinancing of debt
secured by aircraft $ 154,422 $ -
========= ========
[table continued on following page]
- 223 -
<PAGE>
<S> <C> <C>
Reduction of parent company debt -
aircraft acquisitions $ 68,641 $ -
========= ========
Issuance of debt - aircraft acquisitions $ 4,585 $ 101,215
========= ========
Underwriter's fees - refinancing of debt
secured by aircraft $ 2,488 $ -
========= ========
See accompanying Notes to condensed consolidated financial statements.
- 224 -
<PAGE>
USAir, Inc.
Note to Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation
---------------------
The accompanying Condensed Consolidated Financial Statements
include the accounts of USAir and its wholly-owned subsidiary USAM
Corp. USAir is a wholly-owned subsidiary of USAir Group.
Management believes that all adjustments necessary for a fair
statement of results have been included in the Condensed Consoli-
dated Financial Statements for the interim periods presented, which
are unaudited. All significant intercompany accounts and transac-
tions have been eliminated. The preparation of financial statements
in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
Certain 1995 amounts have been reclassified to conform with
1996 classifications.
These interim period Condensed Consolidated Financial
Statements should be read in conjunction with the audited Consoli-
dated Financial Statements that follow for the year ended December
31, 1995.
</TABLE>
- 225 -
<PAGE>
Independent Auditors' Report
The Stockholder and Board of Directors
USAir, Inc.:
We have audited the consolidated balance sheets of USAir, Inc. and
subsidiary ("USAir") as of December 31, 1995 and 1994, and the
related consolidated statements of operations, cash flows, and
changes in stockholder's equity (deficit) for each of the years in
the three-year period ended December 31, 1995. These consolidated
financial statements are the responsibility of USAir's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of USAir, Inc. and subsidiary as of December 31, 1995 and
1993, and the results of their operations and their cash flows for
the three-year period ended December 31, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 9 to the consolidated financial statements,
effective January 1, 1993, USAir changed its method of accounting
for postemployment benefits.
KPMG Peat Marwick LLP
Washington, D. C.
February 28, 1996
- 226 -
<PAGE>
<TABLE>
USAir, Inc.
Consolidated Statements of Operations
Years Ended December 31,
(in thousands)
<CAPTION>
1995 1994 1993
- ---------------------------- ------------ ------------ -------------
<S> <C> <C> <C>
Operating Revenues
Passenger transportation $6,267,762 $5,922,223 $ 6,081,788
Cargo and freight 153,651 160,364 170,500
Other 563,463 496,006 370,760
--------- --------- ----------
Total operating revenues 6,984,876 6,578,593 6,623,048
Operating Expenses
Personnel costs 2,751,437 2,753,269 2,698,039
Aviation fuel 605,027 642,305 677,859
Commissions 527,058 549,192 559,793
Aircraft rent 398,063 521,395 431,616
Other rent and landing fees 388,866 422,190 431,591
Aircraft maintenance 295,594 335,791 308,890
Depreciation and amortization 337,066 387,211 325,214
Other, net 1,447,114 1,484,212 1,339,152
--------- --------- ----------
Total operating expenses 6,750,225 7,095,565 6,772,154
--------- --------- ----------
Operating income (loss) 234,651 (516,972) (149,106)
[table continued on following page]
- 227 -
<PAGE>
<S> <C> <C> <C>
Other Income (Expense)
Interest income 51,122 28,044 24,794
Interest expense (301,923) (285,846) (238,628)
Interest capitalized 8,781 13,760 17,754
Other, net 44,767 44,831 (29,862)
--------- --------- ---------
Other income (expense), net (197,253) (199,211) (225,942)
--------- --------- ---------
Income (loss) before taxes and cumulative
effect of accounting changes 37,398 (716,183) (375,048)
Income tax provision (credit) 4,408 - -
--------- --------- ---------
Income (loss) before cumulative effect
of accounting changes 32,990 (716,183) (375,048)
Cumulative effect of change in method of
accounting for postemployment benefits
in 1993 - - (43,749)
---------- ---------- ----------
Net income (loss) $ 32,990 $ (716,183) $ (418,797)
========== ========== =========
See accompanying Notes to consolidated financial statements.
- 228 -
<PAGE>
</TABLE>
<TABLE>
USAir, Inc.
Consolidated Balance Sheets
December 31, (dollars in thousands except per share amount)
<CAPTION>
1995 1994
---- ----
ASSETS
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 879,613 $ 428,925
Short-term investments 19,831 22,133
Receivables, net 321,755 326,012
Materials and supplies, net 222,245 238,481
Prepaid expenses and other 97,922 77,111
--------- ---------
Total current assets 1,541,366 1,092,662
Property and Equipment
Flight equipment 5,021,520 4,914,776
Ground property and equipment 1,052,706 1,040,329
Less accumulated depreciation
and amortization (2,222,814) (2,006,041)
--------- ---------
3,851,412 3,949,064
Purchase deposits 17,026 195,701
--------- ---------
Property and equipment, net 3,868,438 4,144,765
Other Assets
Goodwill, net 510,562 526,615
Other intangibles, net 312,539 319,229
Other assets, net 590,622 592,689
--------- ---------
Total other assets 1,413,723 1,438,533
--------- ---------
$6,823,527 $6,675,960
========= =========
</TABLE>
- 229 -
<PAGE>
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIT)
<S> <C> <C>
Current Liabilities
Current maturities of long-term debt $ 77,496 $ 80,714
Accounts payable 325,079 263,243
Payable to parent company 100,344 85,175
Traffic balances payable and
unused tickets 638,019 591,154
Accrued expenses 1,435,194 1,297,574
---------- ----------
Total current liabilities 2,576,132 2,317,860
Long-Term Debt, Net of Current Maturities
Long-term debt 2,674,376 2,849,488
Note payable - parent company 67,556 -
--------- ---------
Total long-term debt, net of
current maturities 2,741,932 2,849,488
Deferred Credits and Other Liabilities
Deferred gains, net 382,995 409,091
Postretirement benefits other than
pensions, non-current 1,015,373 958,706
Non-current employee benefit liabilities
and other 418,268 414,000
--------- ---------
Total deferred credits and
other liabilities 1,816,636 1,781,797
Stockholder's Equity (Deficit)
Common stock, par value $1 per share,
authorized 1,000 shares, issued and
outstanding 1,000 shares 1 1
Paid-in capital 2,416,131 2,416,131
Retained earnings (deficit) (2,649,310) (2,682,300)
Adjustment for minimum pension liabilit (77,995) (7,017)
--------- ---------
Total stockholder's equity (deficit) (311,173) (273,185)
---------- ---------
$6,823,527 $6,675,960
========= =========
See accompanying Notes to consolidated financial statements.
</TABLE>
- 230 -
<PAGE>
<TABLE>
USAir, Inc.
Consolidated Statements of Cash Flows
Years Ended December 31, (in thousands)
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash and cash equivalents beginning of year $ 428,925 $ 367,835 $ 295,432
Cash flows from operating activities
Net income (loss) 32,990 (716,183) (418,797)
Adjustments to reconcile net income (loss)
to cash provided by (used for) operating
activities
Depreciation and amortization 337,066 387,211 325,214
Loss (gain) on disposition of property (16,654) (16,671) 10,405
Amortization of deferred gains and credits (26,411) (26,382) (26,439)
Other (2,787) (8,080) 26,052
Changes in certain assets and liabilities
Decrease (increase) in receivables 4,257 127,902 (59,916)
Decrease (increase) in materials,
supplies, prepaid expenses and intang-
ible pension assets (68,415) 70,750 32,069
Increase (decrease) in traffic balances
payable and unused tickets 46,865 (68,452) 37,178
Increase (decrease) in accounts payable
and accrued expenses 214,707 326,855 80,838
Increase (decrease) in postretirement
benefits other than pensions, non-current 56,667 51,613 65,833
------- --------- --------
Net cash provided by (used for) operating
activities 578,285 128,563 72,437
Cash flows from investing activities
Aircraft acquisitions and purchase deposits,
net (61,689) (46,022) (125,981)
Additions to other property (80,644) (128,874) (150,793)
Proceeds from disposition of property 219,762 55,540 176,019
Change in short-term investments 2,430 (21,994) -
Change in restricted cash and investments 71,980 2,578 (14,221)
Other (1,134) 1,110 (4,378)
-------- -------- --------
Net cash provided by (used for) investing
activities 150,705 (137,662) (119,354)
Cash flows from financing activities
Issuance of debt - 172,156 329,556
Reduction of debt (278,302) (101,967) (210,236)
-------- -------- --------
[table continued on following page]
- 231 -
<PAGE>
<S> <C> <C> <C>
Net cash provided by (used for)
financing activities (278,302) 70,189 119,320
-------- -------- --------
Net increase (decrease) in cash and
cash equivalents 450,688 61,090 72,403
--------- -------- --------
Cash and cash equivalents end of year $ 879,613 $ 428,925 $ 367,835
======== ======== ========
Noncash investing and financing activities
Issuance of debt for aircraft acquisitions,
net $ 169,725 $ 224,614 $ 343,188
Issuance of parent company debt for aircraft
acquisitions $ 68,640 $ - $ 76,094
Issuance of debt for other property
acquisitions $ - $ - $ 669
Reduction of debt-aircraft purchase
deposits $ 70,837 $ - $ -
Reduction of debt-aircraft related $ - $ - $ 47,685
Reduction of parent company debt applied
to inter-company receivable $ - $ - $ 79,539
Aircraft acquisitions-transfer from
affiliated company $ - $ 3,569 $ 70,700
Other property acquisitions-transfer
from affiliated company $ - $ 7,925 $ -
Aircraft dispositions - transfer to
affiliated company $ - $ 81,913 $ -
Supplemental Information
Cash paid during the year for interest,
net of amounts capitalized $ 290,560 $ 254,199 $ 221,811
======== ======== ========
Cash received during the year for income
tax refunds, net of taxes paid $ (6,329) $ - $ -
======== ======== ========
See accompanying Notes to consolidated financial statements.
</TABLE>
- 232 -
<PAGE>
<TABLE>
USAir, Inc.
Consolidated Statements of Changes in Stockholder's Equity (Deficit)
Three Years Ended December 31, 1995
(in thousands)
<CAPTION>
Adjustment
For
Retained Minimum
Common Paid-In Earnings Pension
Stock Capital (Deficit) Liability Total
------ -------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balance Dec. 31, 1992 $ 1 $2,416,131 $(1,547,320) $ (6,820) $ 861,992
Net income (loss) - - (418,797) - (418,797)
Adjustment for minimum
pension liability - - - (35,144) (35,144)
--- --------- ---------- ------- -------
Balance Dec. 31, 1993 1 2,416,131 (1,966,117) (41,964) 408,051
Net income (loss) - - (716,183) - (716,183)
Adjustment for minimum
pension liability - - - 34,947 34,947
--- --------- ---------- ------- -------
Balance Dec. 31, 1994 1 2,416,131 (2,682,300) (7,017) (273,185)
Net income (loss) - - 32,990 - 32,990
[table continued on following page]
- 233 -
<PAGE>
<S> <C> <C> <C> <C> <C>
Adjustment for minimum
pension liability - - - (70,978) (70,978)
--- --------- ---------- ------- -------
Balance Dec. 31, 1995 $ 1 $2,416,131 $(2,649,310) $(77,995) $(311,173)
=== ========= ========= ====== ========
See accompanying Notes to consolidated financial statements.
</TABLE>
- 234 -
<PAGE>
USAir, Inc.
Notes to Consolidated Financial Statements
------------------------------------------
1. Summary of Significant Accounting Policies
------------------------------------------
(a) Basis of Presentation and Nature of Operations
----------------------------------------------
The accompanying consolidated financial statements include the
accounts of USAir, Inc. ("USAir") and its wholly-owned subsidiary
USAM Corp. ("USAM"). USAir is a wholly-owned subsidiary of USAir
Group, Inc. ("USAir Group" or the "Company"). All significant
intercompany accounts and transactions have been eliminated.
USAir is a major United States air carrier whose primary
business is transporting passengers, property and mail. USAir
operates predominantly in the eastern United States with primary
hubs at the major airports in Pittsburgh, Pennsylvania, Charlotte,
North Carolina, Philadelphia, Pennsylvania and at Baltimore/-
Washington International Airport. USAir also maintains significant
operations at the major airports in Boston, Massachusetts, New
York, New York and Washington, D.C. USAir enplaned more than 57
million passengers during 1995 and is currently the fifth largest
domestic air carrier, as measured by revenue passenger miles
("RPMs").
In the fourth quarter of 1995, USAir and a subsidiary of
British Airways plc ("BA") formed Airline Technical Services, LLC
("ATS"), a Delaware limited liability company, offering joint
aviation maintenance, and technical and engineering expertise in
the Americas. ATS will receive a commission on the contracts it
brokers for USAir and BA. USAir accounts for ATS using the equity
method because it is owned equally by each parent company. No
material activity occurred in 1995.
At December 31, 1992, USAM owned 11% of the Covia Partnership
("Covia") which owned and operated a computerized reservation
system ("CRS"). In September 1993, Covia purchased the assets of
the corporation that owned and operated the Galileo CRS which
provided services to travel agent subscribers in Europe. Covia was
immediately separated into three new entities and, as a result,
USAM owns 11% of the Galileo International Partnership which owns
and operates the Galileo CRS, approximately 11% of the Galileo
Japan Partnership which markets the Galileo CRS in Japan and
- 235 -
<PAGE>
approximately 21% of the Apollo Travel Services Partnership which
markets the Galileo CRS in the U.S. and Mexico. USAM accounts for
these investments using the equity method because it is represented
on the board of directors of each of the partnerships and therefore
participates in policy making processes.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Certain 1994 and 1993 amounts have been reclassified to
conform with 1995 classifications.
(b) Cash and Cash Equivalents and Short-Term Investments
----------------------------------------------------
For financial statement purposes, USAir considers all highly
liquid investments purchased within three months of maturity to be
cash equivalents. Cash and cash equivalents are stated at cost,
which approximates market value. Short-term investments consist of
certificates of deposit and commercial paper purchased with
maturities greater than three months but less than one year. Short-
term investments are stated at cost plus accrued interest, which
approximates market value.
(c) Materials and Supplies
----------------------
Inventories of materials and supplies are valued at average
cost and are charged to operations as consumed. An allowance for
obsolescence is provided for flight equipment expendable and
repairable parts.
(d) Property and Equipment
----------------------
Property and equipment is stated at cost or, if acquired under
capital leases, at the lower of the present value of minimum lease
payments or fair market value at the inception of the lease.
Maintenance and repairs, including the overhaul of aircraft
components, are charged to operating expense as incurred and costs
of major improvements are capitalized for both owned and leased
- 236 -
<PAGE>
assets. Interest related to deposits on aircraft purchase contracts
and facility and equipment construction projects is capitalized as
additional cost of the asset or as leasehold improvement if the
asset is leased. Depreciation and amortization for principal asset
classifications is provided on a straight-line basis to estimated
residual values over estimated depreciable lives. USAir periodical
ly reviews estimated depreciable lives and residual values for
reasonableness and revises its estimates, if necessary.
<TABLE>
<CAPTION>
Depreciable
Assets Lives Residual Values
------ ----------- ---------------
(years) (in millions)
<S> <C> <C>
Aircraft
Boeing 767-200ER 20 $14.0
Boeing 757-200 20 8.0
Boeing 737-300/400 20 7.5
Boeing 737-200 5-17 0.6-5.0
McDonnell Douglas MD-80 20 7.5
Douglas DC-9-30 17 3.0
Fokker 100 20 5.0
Fokker F28-4000 8 2.0
Fokker F28-1000 6 1.0
Turboprop aircraft 15 1.5
Improvements to leased aircraft life of lease -
Ground property, equipment and 1-10 or
leasehold improvements life of lease -
Buildings 30 -
Property acquired under capital lease is amortized on a
straight-line basis over the term of the lease and charged to
Depreciation and Amortization Expense. When property and equipment
is sold or retired, the cost and accumulated depreciation is
removed from the accounts and any gain or loss recognized as Other
Income (Expense).
</TABLE>
- 237 -
<PAGE>
(e) Goodwill and Other Intangibles
------------------------------
Goodwill, the cost in excess of fair value of identified net
assets acquired, is being amortized on a straight-line basis over
40 years. The $629 million goodwill resulting from the acquisition
of Pacific Southwest Airlines ("Pacific Southwest") and Piedmont
Aviation, Inc. ("Piedmont Aviation"), both in 1987, is being
amortized as Depreciation and Amortization Expense. Accumulated
amortization at December 31, 1995 and 1994 related to the Pacific
Southwest and Piedmont Aviation acquisitions was $128 million and
$113 million, respectively. The $11 million goodwill resulting
from USAM's CRS investments is being amortized as other non-
operating expense, consistent with the classification of income or
loss on the investments. USAM's related accumulated amortization
at December 31, 1995 and 1994 was approximately $2 million. USAir
evaluates whether or not goodwill is impaired by comparing the
goodwill balances with estimated future undiscounted cash flows
which, in USAir's judgment, are attributable to the goodwill. This
analysis is performed separately for the goodwill which resulted
from each acquisition.
Intangible assets consist mainly of purchased operating rights
at various airports, purchased route authorities, capitalized
software costs and the intangible assets associated with the
underfunded amounts of certain pension plans. The operating
rights, valued at purchase cost or appraised value if acquired from
Pacific Southwest or Piedmont Aviation, are being amortized over
periods ranging from ten to 25 years as Depreciation and Amortiza-
tion Expense. The purchased route authorities are being amortized
over 25 years as Depreciation and Amortization Expense. Capital-
ized software costs are being amortized as Depreciation and
Amortization Expense over five years, the expected period of
benefit. Accumulated amortization related to intangible assets at
December 31, 1995 and 1994 was $104 million and $80 million,
respectively.
Based on the most recent analyses, USAir believes that
goodwill and other intangible assets were not impaired at Decem-
ber 31, 1995.
- 238 -
<PAGE>
(f) Other Assets, net
-----------------
Other Assets, net consists primarily of non-current pension
assets, the unamortized balance of deferred compensation, restrict-
ed cash and investments and a long-term receivable from BA.
Deferred compensation resulted mainly from USAir's establishment of
an Employee Stock Ownership Plan in 1989 (see Note 8.). Restricted
cash and investments are deposits in trust accounts to collateral-
ize letters of credit and workers' compensation policies and the
long-term receivable from BA resulted from the relinquishment by
USAir of two U.S. to London routes.
In November 1995, USAir entered into a five-year transaction
with a third party pursuant to which USAir agreed to pledge to such
third party from time to time certain flight equipment and
simulators as collateral for up to $70 million aggregate principal
amount of letters of credit to be issued by the third party with
respect to certain workers' compensation obligations of USAir. On
December 15, 1995, USAir pledged ten aircraft to the third party,
resulting in the release of $67.2 million in cash and securities
that had been previously pledged by USAir to letter of credit
providers.
(g) Deferred Gains on Sale and Leaseback Transactions
-------------------------------------------------
Gains on aircraft sale and leaseback transactions are deferred
and amortized over the term of the leases as a reduction of rental
expense.
(h) Passenger Revenue Recognition
-----------------------------
Passenger ticket sales are recognized as revenue when the
transportation service is rendered or the ticket otherwise expires.
At the time of sale, a liability is established (Traffic Balances
Payable and Unused Tickets) and subsequently eliminated either
through carriage of the passenger, through billing from another
carrier which renders the service or by refund to the passenger.
Approximately $31 million and $23 million of amounts owed to
wholly-owned subsidiaries of USAir Group for passenger transporta-
tion revenue are included in Traffic Balances Payable and Unused
Tickets at December 31, 1995 and 1994, respectively.
- 239 -
<PAGE>
(i) Frequent Traveler Awards
------------------------
USAir accrues the estimated incremental cost of providing
outstanding travel awards earned by participants in its Frequent
Traveler Program ("FTP") when participants accumulate sufficient
miles to be entitled to claim award certificates for travel.
(j) Investment Tax Credit
---------------------
Investment tax credit benefits have been recorded using the
"flow-through" method as a reduction of the Federal income tax
provision.
(k) Advertising Costs
-----------------
Advertising costs are expensed when incurred as other
operating expense. Advertising expense for 1995, 1994 and 1993 was
$67 million, $63 million and $59 million, respectively.
2. Financial Instruments
---------------------
(a) Terms of Certain Financial Instruments
--------------------------------------
USAir has entered into hedging arrangements designed to reduce
its exposure to fluctuations in the price of jet fuel. Net
settlements are recorded as adjustments to Aviation Fuel expense.
The total notional number of gallons under these agreements was 38
million and 86 million at December 31, 1995 and 1994, respectively.
Under these arrangements, USAir will pay $0.499 to $0.548 per
notional gallon in 1996 and receive a floating rate per notional
gallon based on current market prices. In 1995 USAir paid $0.496
to $0.521 per notional gallon and received a floating rate per
notional gallon based on current market prices. Decreases in the
market price of fuel to levels below the fixed prices require cash
payments by USAir and cause an increase in USAir's Aviation Fuel
expense. The hedging arrangements represented approximately 8% of
USAir's actual 1995 fuel consumption. USAir is party to such
hedging arrangements with several entities. Although the agree-
ments, which expire in 1996, expose USAir to credit loss in the
event of non-performance by the other parties to the agreements,
USAir does not anticipate such non-performance because of the
favorable creditworthiness status of the other parties. USAir may
continue to enter into such arrangements, depending on market
conditions.
- 240 -
<PAGE>
An aggregate of $32 million of future principal payments of
the Equipment Financing Agreements due 1998 through 2000 are
payable in Japanese Yen. This foreign currency exposure has been
hedged to maturity by participation in foreign currency contracts.
Net settlements will be recorded as adjustments to interest
expense. Although USAir is exposed to credit loss in the event of
non-performance by the counterparty to the contracts, USAir does
not anticipate such non-performance because of the favorable
credit-worthiness status of the other party.
(b) Fair Value of Financial Instruments
-----------------------------------
Unless a quoted market price indicates otherwise, the fair
values of cash and cash equivalents, short-term investments and
other investments generally approximates carrying values because of
the short maturity of these instruments. USAir has estimated the
fair value of long-term debt based on quoted market prices for the
same or similar issues or on the current rates offered to the
Company for debt of similar remaining maturities. The fair values
of energy swap agreements and foreign currency contracts are
obtained from dealer quotes whereby these values represent the
estimated amount USAir would receive or pay to terminate such
agreements.
[remainder of page left blank intentionally]
- 241 -
<PAGE>
The estimated fair values of USAir's financial instruments,
none of which are held for trading purposes, are summarized as
follows (brackets denote a liability):
<TABLE>
<CAPTION>
December 31,
-------------------------------------------
1995 1994
-------------------- --------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
-------- ---------- -------- ----------
(in thousands)
<S> <C> <C> <C> <C>
Cash and cash
equivalents $ 879,613 $ 879,613 $ 428,925 $ 428,925
Short-term
investments 19,831 19,822 22,133 22,078
Restricted cash
and investments* 98,742 98,539 170,686 170,581
Long-term note
receivable* 45,433 33,277 47,000 31,537
Other long-term
investments* 4,607 4,008 1,633 1,144
Long-term debt
(excludes
capital lease
obligations) (2,753,932) (2,564,514) (2,847,878) (2,435,786)
Energy swap agree-
ments:
In a net receiv-
able position - 1,845 - 259
Foreign currency
contracts:
In a net receiv-
able position - 4,050 - 5,352
* Amounts are included in Other Assets on USAir's consolidated
balance sheets.
</TABLE>
- 242 -
<PAGE>
3. Long-Term Debt
--------------
Details of long-term debt are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
Senior Debt:
12 7/8% Senior Debentures due 2000 $ - $ 77,000
10% Senior Notes due 2003 300,000 300,000
9 5/8% Senior Notes due 2001 175,000 175,000
12.15% to 15.23% U.S. Government
Guaranteed Obligations - 3,090
5.7% to 12% Equipment Financing
Agreements, Installments due
1996 to 2016 2,180,430 2,090,064
8.4% Intercompany Aircraft Loan with
USAir Group due 1996 to 2014 68,640 -
8.6% Airport Facility Revenue Bond
due 2022 27,620 27,620
4.0% to 7.1% Aircraft Purchase
Deposit Financing - 172,301
Other 2,242 2,803
--------- ---------
2,753,932 2,847,878
Capital Lease Obligations 65,496 82,324
--------- ---------
Total 2,819,428 2,930,202
Less Current Maturities 77,496 80,714
--------- ---------
$2,741,932 $2,849,488
========= =========
</TABLE>
- 243 -
<PAGE>
<TABLE>
<CAPTION>
Maturities of long-term debt and debt under capital leases
for the next five years are as follows:
(in thousands)
<S> <C>
1996 $ 77,496
1997 88,637
1998 157,287
1999 80,732
2000 125,820
Thereafter 2,289,456
</TABLE>
Interest rates on $492 million principal amount of long-term
debt at December 31, 1995 are subject to adjustment to reflect
prime rate and other rate changes.
Equipment financings totaling $2.3 billion were collateral-
ized by aircraft and engines with a net book value of approxi-
mately $2.4 billion at December 31, 1995.
In February 1996, USAir sold $263 million principal amount
of Enhanced Equipment Notes ("Enhanced Notes") through a private
placement offering under Securities and Exchange Commission
Regulation 144A. The Enhanced Notes are secured by nine 757-200
aircraft. The Enhanced Notes are not reflected in the above
table because they were sold after December 31, 1995.
4. Commitments and Contingencies
-----------------------------
(a) Operating Environment
---------------------
USAir's financial results for 1995 represent a significant
improvement over 1994 results. The improvement is mainly attrib-
utable to a stable domestic economic climate, favorable capacity
trends in USAir's markets, less fare discounting and low fare
competition and the positive influence of USAir's cost-reduction
efforts. However, USAir's financial condition, results of
operations and future prospects are more susceptible to an
economic downturn and competitive influences than most of its
major competitors due to USAir's high cost structure amid the low
cost, low fare environment which characterizes the domestic
airline industry.
- 244 -
<PAGE>
Most of USAir's operations are in competitive markets,
predominately in the Eastern United States. In recent years, air
carriers with low costs of operations and fare structures have
initiated and or expanded into markets served by USAir. In
addition, several of the larger, mature air carriers have devel-
oped or indicated their intention to develop similar low cost,
low fare service. In an effort to preserve market share, USAir
has typically responded to the entry of a low cost, low fare
competitor into its markets by matching fares and increasing the
frequency of service in related markets, generally with the
result of diluting USAir's yield in these markets. USAir cur-
rently has the highest operating costs among the major domestic
air carriers and the growth and expansion of low cost, low fare
carriers in USAir's markets has put considerable pressure on
USAir to reduce operating costs in order to maintain competitive-
ness.
USAir was able to significantly reduce certain non-labor
related operating costs during 1995 through re-engineering
efforts, structural changes and reducing or eliminating capacity
in unprofitable markets, however, USAir has not been successful
to date in achieving meaningful reductions in personnel costs.
USAir believes that its long-term future depends on its success
in further reducing its cost of operations, including personnel
costs.
At December 31, 1995, USAir employed approximately 39,900
full-time equivalent employees. Approximately 65% of USAir's
workforce is covered by collective bargaining agreements with
various unions, or will be covered by collective bargaining
agreements for which initial negotiations are in progress.
USAir's contract with the International Association of Machinists
and Aerospace Workers ("IAM"), which represents USAir's machin-
ists group, is currently open for negotiation and USAir and the
IAM have commenced the collective bargaining process. USAir's
contract with the unions which represent its pilot's and flight
attendant's groups become open for negotiations within the next
year. USAir cannot predict the ultimate outcome of its negotia-
tions with the IAM or if it will be successful in achieving
meaningful wage and benefit concessions from the IAM and its
other organized labor groups.
- 245 -
<PAGE>
Although a competitive strength, the concentration of
significant operations in the eastern U.S. leaves USAir suscepti-
ble to certain regional conditions that may have an adverse
affect on the USAir's results of operations and financial condi-
tion. For example, geographically isolated inclement weather and
the recent partial Federal government shutdowns adversely effect-
ed operating revenues and expenses to a greater degree than some
of USAir's competitors.
The nature of USAir's operations results in reliance on the
availability of aviation fuel. The availability and price of
aviation fuel is largely dependent on the actions of the coun-
tries which compose the Oil Producing and Exporting Countries
("OPEC") cartel. OPEC, which currently controls a significant
amount of the world's known crude oil reserves, can effect the
availability and price of jet fuel through its production and
price-targeting actions. In addition, jet fuel prices are affect-
ed by political events, seasonal factors and other factors that
are generally outside of USAir's control. USAir has a diversified
fuel supplier network and participates in fuel hedging transac-
tions (see Note 2. Fair Value of Financial Instruments for
additional information related to USAir's participation in fuel
hedging contracts) in order to ensure fuel availability and
partially protect USAir from temporary jet fuel price fluctua-
tions.
(b) Leases
------
USAir leases certain aircraft, engines, computer and ground
equipment, in addition to the majority of its ground facilities.
Ground facilities include executive offices, overhaul and mainte-
nance bases and ticket and administrative offices. Public
airports are utilized for flight operations under lease arrange-
ments with the municipalities or agencies owning or controlling
such airports. Substantially all leases provide that the lessee
shall pay taxes, maintenance, insurance and certain other operat-
ing expenses applicable to the leased property. Some leases also
include renewal and purchase options.
In addition, USAir subleases certain leased aircraft and
ground facilities under noncancelable operating leases expiring
in various years through 2021.
- 246 -
<PAGE>
<TABLE>
The following amounts applicable to capital leases are
included in property and equipment:
<CAPTION>
December 31,
---------------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
Flight equipment $192,775 $216,600
Ground property and equipment 4,767 10,961
------- -------
197,542 227,561
Less accumulated amortization 140,212 151,217
------- -------
$ 57,330 $ 76,344
======= =======
</TABLE>
<TABLE>
At December 31, 1995, obligations under capital and noncancel-
able operating leases for future minimum lease payments were as
follows:
<CAPTION>
Capital Operating
Leases Leases
------- ---------
(in thousands)
<S> <C> <C>
1996 $ 21,886 $ 712,087
1997 21,697 724,473
1998 10,687 689,645
1999 10,687 655,665
2000 7,586 645,943
Thereafter 20,094 6,621,172
------- ----------
Total minimum lease payments 92,637 10,048,985
Less sublease rental receipts - 178,901
----------
Total minimum operating lease
payments $9,870,084
==========
Less amount representing interest 27,141
-------
[table continued on following page]
- 247 -
<PAGE>
Present value of future minimum
capital lease payments 65,496
Less current obligations under
capital leases 14,085
-------
Long-term obligations under
capital leases $ 51,411
=======
</TABLE>
Rental expense under operating leases for 1995, 1994 and 1993
was $680 million, $703 million and $739 million, respectively. The
$680 million rental expense for 1995 excludes a credit of $4.1
million related to the leasing of three of USAir's parked BAe-146
aircraft, recorded in the fourth quarter of 1995. The $703 million
rental expense for 1994 excludes charges of $103 million related to
USAir's grounded BAe-146 fleet and $13 million primarily related to
USAir's decision to cease operations of its remaining Boeing 727-
200 aircraft in 1995. See Note 14. - Non-Recurring and Unusual
Items.
USAir also leases certain owned aircraft under noncancelable
operating leases which expire in various years through 2002 to both
third and related parties, primarily subsidiaries of USAir Group.
See Note 11. - Related Party Transactions. The minimum future
rentals to be received by USAir on these leases are: $24.4 million
- - 1996; $16.1 million - 1997; $8.0 million - 1998; $6.2 million -
1999; $5.4 million - 2000; and $6.0 million - thereafter. The
following amounts are applicable to aircraft leased under such
agreements as reflected in flight equipment:
<TABLE>
<CAPTION>
December 31,
-------------------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
Flight equipment $192,198 $152,956
Less accumulated depreciation 75,089 43,283
------- -------
$117,109 $109,673
======= =======
</TABLE>
- 248 -
<PAGE>
(c) Legal Proceedings
-----------------
USAir is involved in legal proceedings arising out of its two
aircraft accidents that occurred in July and September 1994 near
Charlotte, North Carolina and Pittsburgh, Pennsylvania, respective-
ly. The National Transportation Safety Board ("NTSB") held hearings
beginning in September 1994 relating to the July accident and
January 1995 relating to the September accident. In April 1995,
the NTSB issued its finding of probable causes with respect to the
accident near Charlotte. It assigned as probable causes the failure
of air traffic control to convey weather and windshear hazard
information and flight crew errors. The NTSB has not yet issued its
final accident investigation report for the accident near Pitts-
burgh. The NTSB, The Boeing Company ("Boeing"), the Federal
Aviation Administration ("FAA") and USAir jointly conducted flight
tests in October 1995 as part of the ongoing investigation into the
cause of this accident. In this regard, USAir provided a 737-300
aircraft in the collective effort to simulate the conditions at the
time of the accident. More public hearings were conducted in
November 1995. The NTSB has indicated that a determination of the
cause of the accident is not likely until sometime in 1996. USAir
expects that it will be at least two to three years before the
accident litigation and related settlements will be concluded.
USAir believes that it is fully insured with respect to this
litigation. Therefore, USAir believes that the litigation will not
have a material adverse effect on USAir's financial condition or
results of operations, although any finding of fault on USAir's
part could create negative publicity and could tarnish USAir's
image.
In 1989 and 1990, a number of U.S. air carriers, including
USAir, received two Civil Investigative Demands ("CIDs") from the
Department of Justice ("DOJ") related to investigations of price
fixing in the domestic airline industry. A CID is a request for
information in the course of an antitrust investigation and does
not constitute the institution of a civil or criminal action.
The investigations by the DOJ culminated in the filing of a
lawsuit against Airline Tariff Publishing Company ("ATPCo") and
eight major air carriers, including USAir, alleging that the
defendants had agreed to fix prices in violation of Section 1 of
the Sherman Act through the methods used to disseminate fare data
to ATPCo, an airline-owned fare publishing service. To avoid the
costs associated with protracted litigation and an uncertain
- 249 -
<PAGE>
outcome, USAir and another carrier decided to settle the lawsuit by
entering into a consent decree to modify their fare-filing
practices in certain respects and to implement compliance programs
that would include education of employees regarding the carrier's
responsibilities under the consent decree. Accordingly, the consent
decree and the U.S. government's complaint were filed contemporane-
ously in the United States District Court for the District of
Columbia in December 1992. On November 1, 1993, after it had
reviewed comments filed regarding the consent decree, the court
entered the decree. In March 1994, the remaining six air carrier
defendants agreed to the entry of a separate consent decree to
settle the lawsuit. USAir petitioned the Court to have its consent
decree amended to conform with the other settlement and the Court
entered an amended consent decree on September 21, 1994. USAir has
recently received a CID from the DOJ relating to USAir's compliance
with the terms of the consent decree.
On March 19, 1993, the U.S. District Court in Atlanta, Georgia
entered a settlement involving USAir and five other U.S. air
carrier defendants in the Domestic Air Transportation Antitrust
Litigation class action lawsuit. The class action suit, which was
filed in July 1990, alleged that the airlines used ATPCo to signal
and communicate carrier pricing intentions and otherwise limit
price competition for travel to and from numerous hub airports.
Under the terms of the settlement, the six air carriers paid $45
million in cash and issued $396.5 million in certificates valid for
purchase of domestic air travel on any of the six airlines. USAir's
share of the cash portion of the settlement, $5 million, was
recorded in results of operations for the second quarter of 1992.
The certificates, mailed to approximately 4.1 million claimants
between December 15 and 31, 1994, provide a dollar-for-dollar
discount against the cost of a ticket generally of up to a maximum
of 10% per ticket, depending on the cost of the ticket. It is
possible that this settlement could have a dilutive effect on
USAir's passenger transportation revenue and associated cash flow.
However, due to the interchange-ability of the certificates among
the six carriers involved in the settlement, the possibility that
carriers not party to the settlement will honor the certificates,
and the potential stimulative effect on travel created by the
certificates, USAir cannot reasonably estimate the impact of this
settlement on further passenger revenue and cash flows. USAir has
employed the incremental cost method to estimate a range of costs
attributable to the exercise of the certificates, based on the
assumption that the estimated maximum number of certificates to be
redeemed for travel on USAir will be related to USAir's market
share relative to the total market share of the six carriers
- 250 -
<PAGE>
involved in the settlement. USAir's estimated percentage of such
market share is less than 9%. Incremental costs include unit costs
for passenger food, beverages and supplies, fuel, reservations,
communications, liability insurance, and denied boarding compensa-
tion expenses expected to be incurred on a per passenger basis.
USAir has estimated that its incremental cost will not be material
based on the equivalent free trips associated with the settlement.
On October 11, 1994, USAir and seven other carriers entered
into a settlement agreement with a group of State Attorneys General
resolving similar issues with the states. The settlement entitles
passengers traveling within the United States on state government
business to a 10% discount off the published fares of each of the
settling carriers and will be available for 18 months from August
16, 1995, or until the combined discount amount reaches $40
million, whichever first occurs. On May 10, 1995, a U.S. federal
district court judge approved the settlement. USAir does not
expect that this settlement will have a material adverse effect on
its financial condition or results of operations. As was the case
with the settlement of the private antitrust litigation, it is
difficult to predict the amount of discounted state travel that
will occur on USAir. Thus, a dollar impact of the settlement
cannot be estimated.
In February and March 1995, several class action lawsuits were
filed in various federal district courts by travel agencies and a
travel agency trade association alleging that most of the major
U.S. airlines, including USAir, violated the antitrust laws when
they individually capped travel agent base commissions at $50 for
round-trip domestic tickets with base fares above $500 and at $25
for one-way domestic tickets with base fares above $250. The
lawsuits have been consolidated in the federal district of
Minnesota. The plaintiffs are seeking unspecified treble damages
for restraint of trade. The case is expected to go to a jury trial
in 1996. While USAir believes that its actions in establishing a
commission cap were in full compliance with the antitrust laws,
USAir is unable to predict at this time the ultimate resolution of
the litigation or the potential impact on USAir's financial
condition and results of operations.
- 251 -
<PAGE>
In March 1995, a number of U.S. carriers, including USAir,
received CIDs from the DOJ related to an investigation of incen-
tives paid to travel agents over and above the base commission
payments. USAir responded to an earlier CID on this topic during
1994. USAir has complied with the requirements of the CID by
producing documents and responding to interrogatories. Because
this matter is in the investigatory stage, USAir is unable to
predict at this time its ultimate resolution or potential impact on
USAir's financial condition or results of operations.
In May 1995, a number of U.S. air carriers, including USAir,
received CIDs from the DOJ relating to its investigation of
incentive payments to travel agencies and a possible agreement
among these carriers to implement a cap on travel agent base
commissions, which is the subject matter of the suits recently
brought by travel agencies, as discussed above. One of the CIDs
received by USAir sought the production of transcripts of deposi-
tions of any USAir employees taken in connection with the private
litigation relating to the commission caps, together with annexed
exhibits. USAir has complied with the requirements of the CIDs.
USAir does not expect these investigations to have a material
effect on its financial condition and results of operations.
In October 1995, USAir terminated for cause an agreement with
In-Flight Phone Corporation ("IFPC"). IFPC was USAir's provider of
on-board telephone and interactive data systems (the "IFPC
System"). The agreement contemplated the eventual installation of
the IFPC System on substantially all of USAir's aircraft. The IFPC
System had been installed on approximately 80 aircraft prior to the
date of termination of the agreement. On December 6, 1995, IFPC
filed suit against USAir seeking equitable relief and damages in
excess of $186 million. USAir believes that its termination of its
agreement with IFPC was appropriate and that it is owed in excess
of $5 million by IFPC. On December 7, 1995, USAir successfully
defended IFPC's emergency motion for a temporary restraining order.
On December 13, 1995, IFPC's motion for a preliminary injunction
was denied and IFPC has relinquished its right to appeal that
decision. IFPC's claim for damages remains pending and USAir is
presently preparing a counterclaim for amounts it is owed by IFPC.
USAir is unable to predict at this time the ultimate resolution or
potential financial impact on USAir's financial condition and
results of operations of this lawsuit. USAir is presently in
negotiations with other vendors of on-board telephone systems and
currently expects to finalize an agreement in the first quarter of
1996.
- 252 -
<PAGE>
During 1995, four members of USAir's FTP filed class action
lawsuits against USAir in Illinois, Pennsylvania, California and
New Jersey state courts, alleging breach of contract relating to
changes made to USAir's FTP effective December 31, 1989 and/or
January 1, 1995. A similar lawsuit has been pending in California
state court since 1989. The lawsuits seek unspecified damages and
an injunction against the allegedly objectionable changes to
USAir's FTP and any subsequent retroactive changes to the FTP.
USAir denies the allegations made in the lawsuits and intends to
vigorously defend itself. The ultimate resolution of these
lawsuits and their potential impact on USAir's financial condition
and results of operations cannot be predicted at this time.
In May 1995, USAir Group, USAir and the Retirement Income
Plan for Pilots of USAir, Inc. (the "Pilots' Pension Plan") were
sued in federal district court for the District of Columbia by 469
active and retired USAir pilots. The lawsuit alleges that USAir
has breached its fiduciary duty under the Employee Retirement
Income Security Act ("ERISA") and otherwise violated ERISA by
erroneously calculating benefits under the Pilots' Pension Plan.
The plaintiffs seek, among other things, an injunction restraining
USAir and the Pilots' Pension Plan from allegedly improperly
calculating benefits under the Pilots' Pension Plan and payments to
plaintiffs of benefits allegedly improperly withheld in an amount
alleged to be equal to approximately $70 million, plus interest.
USAir believes that it has properly calculated benefits under the
Pilots' Pension Plan and intends to vigorously defend itself
against the allegations made in the lawsuit. Because this lawsuit
is in an early stage of litigation, USAir is unable to predict at
this time its ultimate resolution or potential impact on USAir
Group's pension liability or future funding requirements.
USAir has received notices from the U.S. Environmental
Protection Agency and various state agencies that it is a poten-
tially responsible party with respect to the remediation of
existing sites of environmental concern. Only two of these sites
have been included on the Superfund National Priorities List. USAir
continues to negotiate with various governmental agencies concern-
ing known and possible cleanup sites. USAir has made financial
contributions for the performance of remedial investigations and
feasibility studies at sites in Moira, New York; Escondido,
California; and Elkton, Maryland.
- 253 -
<PAGE>
Also, USAir has been identified as a potentially responsible
party ("PRP") for environmental contamination at Boston Logan
Airport. There are a number of other PRPs at the site. USAir is
presently unable to assess its proportionate share of contribution,
but do not expect any such contribution to have a material adverse
effect on its financial condition or results of operations.
Because of changing environmental laws and regulations, the
large number of other potentially responsible parties and certain
pending legal proceedings, it is not possible to reasonably
estimate the amount or timing of future expenditures related to
environmental matters. USAir provides for costs related to
environmental contingencies when a loss is probable and the amount
is reasonably estimable. Although management believes adequate
reserves have been provided for all known contingencies, it is
possible that additional reserves could be required in the future
which could have a material effect on results of operations.
However, USAir believes that the ultimate resolution of known
environmental contingencies should not have a material adverse
effect on USAir's financial position or results of operations based
on USAir's experience with similar environmental sites.
The Equal Employment Opportunity Commission and various state
and local fair employment practices agencies are investigating
charges by certain job applicants, employees and former employees
of the Company's subsidiaries involving allegations of employment
discrimination in violation of Federal and state laws. The
plaintiffs in these cases generally seek declaratory and injunctive
relief and monetary damages, including back pay. In some instances
they also seek classification adjustment, compensatory damages and
punitive damages. Such proceedings are in various stages of
litigation and investigation, and the outcome of these proceedings
is difficult to predict. In the Company's opinion, however, the
disposition of these matters is not likely to have a material
adverse effect on its financial condition or results of operations.
(d) Aircraft Commitments
--------------------
In June 1995, USAir entered into agreements with Boeing and
Rolls Royce plc ("Rolls Royce") deferring the delivery of eight
757-200 aircraft from 1996 to 1998. As part of these agreements,
the due dates for progress payments associated with the 1996
deliveries were likewise rescheduled. Accordingly, approximately
$71 million of progress payments that had been paid by USAir were
refunded to USAir in the third quarter of 1995. The related long-
term debt which financed the deposits was dissolved.
- 254 -
<PAGE>
The following schedule of USAir's new aircraft deliveries and
scheduled payments at December 31, 1995 (including progress
payments, payments at delivery, buyer furnished equipment, spares,
and capitalized interest) reflects USAir's agreements with Boeing
and Rolls Royce discussed above:
<TABLE>
<CAPTION>
Delivery Period - Firm Orders
--------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
There-
1996 1997 1998 1999 2000 after Total
---- ---- ---- ---- ---- ------ -----
Boeing
757-200 - - 8 - - - 8
737-Series - - - - - 40 40
--- --- --- --- --- ----- -----
Total - - 8 - - 40 48
=== === === === === ===== =====
Payments
(millions) $ 63 $ 74 $254 $ - $ - $1,855 $2,246
=== === === === === ===== =====
In addition, USAir has a commitment to purchase hush kits
for certain of its DC-9-30 aircraft and a substantial portion of
its 737-200 aircraft. The installation of these hush kits will
bring the aircraft into compliance with FAA Stage 3 noise level
re-quirements. The projected payments associated with the pur-
chase of the hush kits are: $43 million - 1996; $30 million -
1997; $30 million - 1998; and $17.0 million - 1999.
USAir has the option of purchasing any other Boeing commer-
cial aircraft type in satisfaction of its obligation to purchase
forty 737-Series aircraft. Such satisfaction would be accom-
plished on an "equivalent-seat" basis.
</TABLE>
- 255 -
<PAGE>
(e) Concentration of Credit Risk
----------------------------
USAir invests available cash in money market securities of
various banks, commercial paper of financial institutions and
other companies with high credit ratings and securities backed by
the United States government.
At December 31, 1995, most of USAir's receivables related to
tickets sold to individual passengers through the use of major
credit cards (44%) or to tickets sold by other airlines (16%) and
used by passengers on USAir or its regional airline affiliates.
These receivables are short-term, generally being settled within
14 days after sale. Bad debt losses, which have been minimal in
the past, have been considered in establishing allowances for
doubtful accounts. USAir does not believe it is subject to any
significant concentration of credit risk.
(f) Guarantees
----------
At December 31, 1995, USAir guaranteed payments of debt and
lease obligations of Piedmont Airlines, Inc. and PSA Airlines,
Inc., wholly-owned subsidiaries of USAir Group, amounting to $103
million.
5. Sale of Receivables
-------------------
The revolving receivables sales facility ("Receivables
Agreement") to which USAir had been a party, expired on December
21, 1994. USAir was unable to sell receivables under the Receiv-
ables Agreement during 1994 because it was in violation of
certain financial covenants. USAir had no outstanding amounts
due under the Receivables Agreement at expiry. The average
dollar amount of outstanding receivable sales during 1993 was
approximately $100 million. USAir has engaged in discussions to
arrange a replacement facility but has elected not to pursue such
a financing at this time.
- 256 -
<PAGE>
6. Income Taxes
------------
Effective January 1, 1993, USAir adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("FAS 109"). FAS 109 required a change from the deferred
method under Accounting Principles Board Opinion No. 11 to the
asset and liability method of accounting for income taxes. No
cumulative adjustment at January 1, 1993, and no income tax
credit for the years ended December 31, 1994 and 1993, were
recognized due to the FAS 109 limitation in recognizing benefits
for net operating losses. USAir files a consolidated Federal
income tax return with its parent USAir Group. USAir Group and
its wholly-owned subsidiaries have executed a tax sharing agree-
ment which allocates tax and tax items, such as net operating
losses and tax credits between members of the group based on
their proportion of taxable income and other items. This tax
sharing and allocation impacts the deferred tax assets and
liabilities reported by each corporation on a separate company
basis. Accordingly, USAir's tax expense is based on its taxable
income (loss), taking into consideration its allocated tax loss
carryforwards and tax credit carryforwards.
The components of the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Current provision:
Federal $4,107 $ - $ -
State 301 - -
----- --- ---
Total current provision 4,408 0 0
----- --- ---
Deferred provision:
Federal - - -
State - - -
----- --- ---
Total deferred provision 0 0 0
----- --- ---
Provision for income taxes $4,408 $ 0 $ 0
===== === ===
</TABLE>
- 257 -
<PAGE>
In 1995, USAir was not subject to regular Federal income tax
as a result of using $22 million in Federal net operating loss
carryforwards. However, USAir was subject to Federal alternative
minimum tax ("AMT") and environmental tax. Approximately $88
million in AMT net operating loss carryforwards and approximately
$17 million in state net operating loss carryforwards were utilized
to reduce the Federal and state tax liabilities.
The significant components of deferred income tax expense
(benefit) for the years ended December 31, 1995, 1994, and 1993,
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Deferred tax expense (benefit)
(exclusive of the other
components listed below) $ 17,779 $(234,269) $(121,847)
Adjustments to deferred tax
assets and liabilities for
enacted changes in tax laws
and rates - - (9,429)
Increase (decrease) for the
year in the valuation
allowance for deferred
tax assets (17,779) 234,269 131,276
------- -------- -------
Total $ 0 $ 0 $ 0
======= ======== =======
</TABLE>
[remainder of page left blank intentionally]
- 258 -
<PAGE>
A reconciliation of taxes computed at the statutory Federal tax
rate on earnings before income taxes to the provision (credit)
for income taxes is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Tax provision (credit)
computed at Federal
statutory rate $ 13,089 $(250,664) $(146,579)
State income tax expense,
net of Federal tax benefit 196 - -
Book expenses not deductible
for tax purposes 15,088 15,691 9,348
Limitation in recognizing
tax benefit of net operating
loss/credits - 234,973 146,660
Utilization of Federal Net
Operating Loss which reduced
valuation allowance (7,778) - -
Adjustments to deferred tax
assets and liabilities
for enacted changes in
tax laws and rates - - (9,429)
Current year temporary differ-
ences which reduced
valuation allowance (20,293) - -
Alternative Minimum tax which
increased valuation allowance 3,384 - -
Other 722 - -
------- ------- --------
Provision for Income Taxes $ 4,408 $ 0 $ 0
======= ======= ========
Effective Tax Rate 12% 0% 0%
======= ======= ========
</TABLE>
[remainder of page left blank intentionally]
- 259 -
<PAGE>
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1995, 1994 and 1993 are presented
below:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in thousands)
<S> <C> <C> <C>
Deferred tax assets:
Leasing transactions $ 168,813 $ 164,513 $ 129,276
Tax benefits purchased
/sold 67,348 76,784 79,434
Gain on sale and lease-
back transactions 146,387 154,246 162,400
Employee benefits 487,050 484,347 429,312
Net operating loss carry-
forwards 627,357 657,870 508,240
Alternative minimum tax
credit carryforwards 25,819 20,881 20,881
Investment tax credit
carryforwards 48,720 47,880 47,880
Other deferred tax assets 118,521 99,368 61,210
--------- --------- ---------
Total gross deferred
tax assets 1,690,015 1,705,889 1,438,633
Less valuation allowance (785,306) (803,085) (568,816)
--------- --------- ---------
Net deferred tax assets 904,709 902,804 869,817
Deferred tax liabilities:
Equipment depreciation
and amortization 871,056 866,356 840,584
Other deferred tax
liabilities 33,653 36,448 29,233
--------- --------- ---------
Total deferred tax
liabilities 904,709 902,804 869,817
--------- --------- ---------
Net deferred tax
liabilities $ 0 $ 0 $ 0
========= ========= =========
</TABLE>
- 260 -
<PAGE>
Included in "Other Deferred Tax Assets" above for 1995, 1994
and 1993 are approximately $22 million, $16 million and $0,
respectively, of tax assets which originate from subsidiaries of
USAir Group in accordance with USAir's Tax Sharing Agreement.
The valuation allowance for deferred tax assets as of January
1, 1993, was $438 million. The valuation allowance increased $131
million in 1993, $234 million in 1994 and decreased $18 million in
1995.
At December 31, 1995, USAir had unused net operating losses of
$1.6 billion for Federal tax purposes, which expire in the years
2005 to 2009. USAir also has available, to reduce future taxes
payable, $653 million alternative minimum tax net operating losses
expiring in the years 2007 to 2009, $49 million of investment tax
credits expiring in the years 2002 to 2003, and $26 million of
alternative minimum tax credits which do not expire. The Federal
income tax returns of USAir through 1986 have been examined and
settled with the Internal Revenue Service.
7. Stockholder's Equity and Dividend Restrictions
----------------------------------------------
USAir Group owns all of the outstanding common stock of USAir.
USAir's board of directors has not authorized the payment of
dividends to USAir Group since 1988. In addition, USAir, organized
under the Laws of the State of Delaware, may be subject to certain
legal prohibitions on the payment of dividends on its capital
stock. At December 31, 1995, USAir believes that it was legally
prohibited from paying dividends to USAir Group due to the
provisions of Section 170 of Delaware General Corporation Law
("Delaware Law"), which require a company to maintain a capital
surplus in order to pay dividends on its capital stock. In
addition, as of December 31, 1995, USAir does not believe that it
can comply with certain provisions of Delaware Law which permit a
company with a capital deficit to pay dividends under special
circumstances. In order to for USAir to return to a capital
surplus position it must realize substantial profits or increase
its equity through other measures such as the sale of addition
common stock.
Covenants related to USAir's 10% and 9 5/8% Senior Unsecured
Notes currently do not permit the payment of dividends by USAir to
USAir Group. However, these covenants do not restrict USAir from
loaning or advancing funds to USAir Group.
- 261 -
<PAGE>
The provisions of Statement of Accounting Standards No. 87,
"Employers' Accounting for Pensions," require the recognition of an
additional minimum liability for each defined benefit plan for
which the accumulated benefit obligation exceeds plan assets. This
amount has been recognized by USAir as a long-term liability with
an offsetting intangible asset (see Note 1.(e)). Because the
intangible asset recognized may not exceed the amount of unrecog-
nized prior service cost on an individual plan basis, the balance
is reported as a separate reduction of Stockholder's Equity
(Deficit) at December31, 1995 and 1994. See also Note 9.
8. Employee Stock Ownership Plan
-----------------------------
In August 1989, USAir established an Employee Stock Ownership
Plan ("ESOP"). USAir Group sold 2,200,000 shares of its Common
Stock to an Employee Stock Ownership Trust (the "Trust") to hold on
behalf of USAir's employees, exclusive of officers, in accordance
with the terms of the Trust and the ESOP. The trustee placed those
shares in a suspense account pending their release and allocation
to employees. USAir provided financing to the Trust in the form
of a 9 3/4% loan for $111.4 million for its purchase of shares and
USAir contributed an additional $2.2 million to the Trust. USAir
makes a yearly contribution to the Trust sufficient to cover the
Trust's debt service requirement. The contributions are made in
amounts equal to the periodic loan payments as they come due, less
dividends available for loan payment. Since the Company did not
pay dividends on any shares held by the Trust for the years ended
December 31, 1995, 1994 and 1993, the Trust did not utilize
dividends to service its debt during those periods. The initial
maturity of the loan is 30 years. As the loan is repaid over time,
the trustee systematically releases shares of the common stock from
the suspense account and allocates them to participating employees.
Each participant's allocation is based on the participant's
compensation, the total compensation of all ESOP participants and
the total number of shares being released. For each year after
1989, a minimum of 71,933 shares are released from the suspense
account and allocated to participant accounts. If USAir's return
on sales equals or exceeds four percent in a given year, more
shares are released and repayment of the loan is accelerated.
Annual contributions made by USAir, and therefore loan repayments
made by the Trust, were $11.4 million in each of 1995, 1994 and
1993. The interest portion of these contributions was $10.4
million in 1995, $10.5 million in 1994 and $10.5 million in 1993.
- 262 -
<PAGE>
Approximately 510,000 shares of USAir Group Common Stock have been
released or committed to be released as of December 31, 1995.
USAir recognized approximately $4 million of compensation expense
related to the ESOP in each of 1995, 1994 and 1993 based on shares
allocated to employees (the "shares allocated" method). Deferred
compensation related to the ESOP amounted to approximately $87
million, $91 million and $95 million at December 31, 1995, 1994 and
1993, respectively.
In October 1995, the Financial Accounting Standards Board
adopted Statement No. 123 "Accounting for Stock-Based Compensation"
("FAS 123"). This statement establishes the fair value based
method of accounting for stock-based compensation. USAir has
elected to continue using the intrinsic value based method of
accounting prescribed in Accounting Principles Board opinion No.
25, "Accounting for Stock Issued to Employees", as permitted by FAS
123.
9. Employee Benefit Plans
----------------------
(a) Pension Plans
-------------
USAir has several pension plans in effect covering substan-
tially all employees. One qualified defined benefit plan covers
USAir maintenance employees and provides benefits of specified
amounts based on periods of service. Qualified defined benefit
plans for substantially all other employees provide benefits based
on years of service and compensation. The qualified defined
benefit plans are funded, on a current basis, to meet the minimum
funding requirements of the Employee Retirement Income Security Act
of 1974.
The defined benefit pension plan for USAir non-contract
employees was frozen at the end of 1991 for all non-contract
participants, resulting in a one-time book gain of approximately
$107 million in 1991. All non-contract plan participants became
100% vested at the time of the freeze. As a result of this plan
curtailment, the accrual of service costs related to defined
benefits for USAir non-contract and certain other employees ceased
at the end of 1991. USAir implemented a defined contribution
pension plan for non-contract employees in January 1993.
[remainder of page left blank intentionally]
- 263 -
<PAGE>
The funded status of the qualified defined benefit plans at
December 31, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1995 1994
Plans in Which Plans in Which
----------------- -----------------
Plan Accumu- Plan Accumu-
Assets lated Assets lated
Exceed Benefits Exceed Benefits
Accumu- Exceed Accumu- Exceed
lated Plan lated Plan
Benefits Assets Benefits Assets
-------- ------ -------- ------
(in millions)
<S> <C> <C> <C> <C>
Fair value of plan assets $ 993 $1,419 $1,690 $ 183
Actuarial present value of:
Vested benefit obligation 929 1,603 1,513 242
Nonvested benefit obliga-
tion 29 22 27 17
----- ----- ----- -----
Accumulated benefit
obligation based
on salaries to date 958 1,625 1,540 259
Additional benefits
based on estimated
future salary levels 130 598 470 -
----- ----- ----- -----
Projected benefit
obligation 1,088 2,223 2,010 259
----- ----- ----- -----
Projected benefit obliga-
tion in excess of fair
value of plan assets (95) (804) (320) (76)
Unrecognized net transition
asset (2) (34) (29) (12)
Unrecognized prior service
cost - 66 (15) 69
Unrecognized net loss 312 571 358 15
----- ----- ----- -----
[table continued on following page]
- 264 -
<PAGE>
Pension (liability) pre-
paid before adjustment 215 (201) (6) (4)
Adjustment to recognize
minimum liability* - (149) - (72)
----- ----- ----- -----
Pension (liability) pre-
paid as adjusted and
recognized in consoli-
dated balance sheets $ 215 $ (350) $ (6) $ (76)
===== ===== ===== =====
* See Note 7.
</TABLE>
The weighted average discount rate used to determine the
actuarial present value of the projected benefit obligation was
7.25% and 9.00% as of December 31, 1995 and 1994, respectively. The
expected long-term rate of return on plan assets used in 1995 was
9.0% to 9.5% and 9.5% in 1994. Rates of 3% to 6% were used to
estimate future salary levels. As of December 31, 1995, plan
assets consisted of approximately 7% in cash equivalents and short-
term debt investments, 26% in equity investments, and 67% in fixed
income and other investments. As of December 31, 1994, plan assets
consisted of approximately 10% in cash equivalents and short-term
debt investments, 27% in equity investments, and 63% in fixed
income and other investments. Plan assets as of December 31, 1995
included 205 shares of USAir Group Common Stock. Plan assets as of
December 31, 1994 did not include shares of USAir Group Common
Stock.
The following items are the components of the net periodic
pension cost for the qualified defined benefit plans:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in millions)
<S> <C> <C> <C>
Service cost (benefits
earned during the period) $ 92 $ 124 $ 90
Interest cost on projected
benefit obligation 216 216 188
Actual return on plan assets (539) 48 (224)
Net amortization and deferral 371 (254) 40
---- ---- ----
Net periodic pension cost $ 140 $ 134 $ 94
==== ==== ====
</TABLE>
- 265 -
<PAGE>
Net pension cost for 1993 presented above excludes a charge of
approximately $33.9 million related to "early-out" incentive
programs offered to a limited number of USAir employees during the
years. No such charges were incurred in 1995 or 1994.
Non-qualified supplemental pension plans are established for
certain employee groups, which provide incremental pension payments
from USAir's funds so that total pension payments equal amounts
that would have been payable from USAir's principal pension plans
if it were not for limitations imposed by Federal income tax
regulations.
[remainder of page left blank intentionally]
- 266 -
<PAGE>
The following table sets forth the non-qualified plans' status
at December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
(in millions)
<S> <C> <C>
Fair value of plan assets $ - $ -
Actuarial present value of:
Vested benefit obligation 30 30
Nonvested benefit obligation 2 2
--- ---
Accumulated benefits based on
salaries to date 32 32
Additional benefits based on
estimated future salary levels 2 1
---- ----
Projected benefit obligation 34 33
---- ----
Projected benefit obligation in
excess of fair value of plan assets (34) (33)
Unrecognized prior service cost 3 1
Unrecognized net loss 8 2
---- ----
Pension (liability) prepaid
before adjustment (23) (30)
Adjustment to recognize minimum
liability* (11) (5)
---- ----
Unfunded accrued supplementary costs
as adjusted and recognized in
consolidated balance sheets $ (34) $ (35)
==== ====
* See Note 7.
</TABLE>
- 267 -
<PAGE>
Net periodic supplementary pension cost for the non-quali-
fied supplemental pension plans included the following compo-
nents:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
(in millions)
<S> <C> <C> <C>
Service cost (benefits earned
during the period) $ - $ - $ -
Interest cost on projected benefit
obligation 2 2 2
Actual return on plan assets - - -
Net amortization and deferral (1) 21 12
--- --- ---
Net periodic supplementary pension
cost $ 1 $ 23 $14
=== === ===
The discount rate used to determine the actuarial present
value of the projected benefit obligation was 7.25% and 9.00% as of
December 31, 1995 and 1994, respectively. A rate of 3% was used to
estimate future salary levels.
In addition to the qualified and non-qualified defined benefit
plans described above, USAir also contributes to certain defined
contribution plans. USAir contributions are based on a formula
which considers the age and pre-tax earnings of each employee and
the amount of employee contributions. In addition, certain
qualified defined contribution plans contain a component for profit
sharing contributions if USAir Group achieves certain pre-tax
margin levels. USAir's expense related to the defined contribution
plans, excluding expense for the ESOP Plan, was $64 million, $43
million and $42 million for 1995, 1994 and 1993, respectively. The
1995 contribution expense reflects a new employer match contribu-
tion for certain collective bargaining groups. USAir made no
contributions to its defined contribution plans related to profit
sharing in 1995, 1994 or 1993, since USAir Group did not achieve
the prescribed pre-tax margin level.
[remainder of page left blank intentionally]
- 268 -
<PAGE>
(b) Postretirement Benefits Other Than Pensions
-------------------------------------------
USAir offers medical and life insurance benefits to employees
hired prior to March 29, 1993 who retire from the Company and their
eligible dependents. The medical benefits provided by USAir are
coordinated with Medicare benefits. Retirees generally contribute
amounts towards the cost of their medical expenses based on years
of service with USAir. USAir provides uninsured death benefit
payments to survivors of retired employees for stated dollar
amounts, or in the case of retired pilot employees, death benefit
payments determined by age and level of pension benefit. The plans
for postretirement medical and death benefits are funded on the
pay-as-you-go basis.
The following table sets forth the financial status of the
plans as of December 31, 1995 and 1994:
</TABLE>
<TABLE>
<CAPTION>
1995 1994
---- ----
(in millions)
<S> <C> <C>
Accumulated Postretirement Benefit
Obligation (APBO):
Retirees $ 338 $ 245
Fully eligible active plan participants 176 144
Other plan participants 482 306
----- ----
Total APBO 996 695
Unrecognized prior service credit 155 167
Unrecognized net gain (loss) (112) 123
----- ----
Accrued postretirement benefit cost $1,039 $ 985
===== ====
</TABLE>
- 269 -
<PAGE>
<TABLE>
<CAPTION>
The components of net periodic postretirement benefit cost are
as follows:
1995 1994 1993
---- ---- ----
(in millions)
<S> <C> <C> <C>
Service cost (benefits attributed to
employee service during the period) $ 29 $ 36 $ 31
Interest cost on APBO 65 60 56
Net amortization and deferral (15) (12) (12)
--- --- ---
Net periodic postretirement benefit
cost $ 79 $ 84 $ 75
=== === ===
</TABLE>
The postretirement benefit expense for 1993 presented above
excludes a charge of approximately $15.5 million related to "early-
out" programs offered to a limited number of employees during the
year. No such charges were incurred in 1995 or 1994.
The discount rate used to determine the APBO was 7.25%, 9.00%
and 7.75% at December 31, 1995, 1994 and 1993, respectively. The
average rates of annual compensation increase used to calculate the
APBO ranged from 3% to 6% at December 31, 1995, 1994 and 1993. The
assumed health care cost trend rate used in measuring the APBO was
8.5% in 1995, declining by 1% per year after 1995 to an ultimate
rate of 4.5%. If the assumed health care cost trend rates were
increased by 1 percentage point, the APBO at December 31, 1995
would be increased by 10% and 1995 periodic postretirement benefit
costs would increase 13%.
(c) Postemployment Benefits
-----------------------
USAir adopted Statement of Financial Accounting Standards No.
112, "Employers' Accounting for Postemployment Benefits" ("FAS
112"), during 1993. FAS 112 requires the use of an accrual method
to recognize postemployment benefits such as disability-related
benefits. The cumulative effect at January 1, 1993 of adopting FAS
112 was $43.7 million.
- 270 -
<PAGE>
10. Profit Sharing
--------------
In exchange for temporary wage and salary reductions and other
concessions during a twelve month period in 1992 and 1993,
including certain ongoing work rule and medical benefits conces-
sions and the freeze of the defined benefit plan for non-contract
employees, certain USAir employees participate in a profit sharing
program and have been granted options to purchase USAir Group
common stock. The profit sharing program is designed to recompense
those USAir employees whose pay had been reduced in an amount equal
to (i) two times salary forgone plus (ii) one time salary forgone
(subject to a minimum of $1,000) for the freeze of the pension
plans for non-contract employees. Until the maximum payout has been
made, annual pre-tax profits, as defined in the program, of USAir
Group will be distributed to participating employees as follows:
25% of the first $100 million in pre-tax profits; 35% of the next
$100 million in pre-tax profits; and 40% of the pre-tax profits
exceeding $200 million.
The calculation of pre-tax profits under the profit sharing
plan excludes FAS 106 charges (approximately $78.6 million for
1995) and certain unusual items. This program will be in effect
until USAir employees are recompensed for salary and pension
benefits foregone. Because USAir Group recorded a pre-tax profit
for 1995, USAir recognized charges of approximately $49.7 million
under this plan in 1995 (certain amounts have been expensed in
prior years even though 1995 was USAir's first profitable year
since inception of the plan). Under the terms of the plan, the
cash payout for 1995 of approximately $73.7 million was made to
employees covered by the provision of this plan in the first
quarter of 1996.
USAir's ESOP and Defined Contribution Retirement Program each
have profit sharing components. Under the ESOP, each eligible
USAir employee receives a certain number of USAir Group Common
Stock shares based on each participant's compensation relative to
the total compensation of all participants and the number of USAir
Group Common Stock shares in the allocation pool. When USAir's
return on sales equals or exceeds certain prescribed levels, USAir
increases its contribution, which effectively increases the number
of USAir Group Common Stock shares in the allocation pool (see Note
8. - Employee Stock Ownership Plan). Under the Defined Contribu-
tion Retirement Program, USAir makes additional contributions to a
participant's account when USAir Group achieves certain prescribed
pre-tax margin levels (see Note 9. - Employee Benefit Plans). USAir
did not make any profit sharing contributions in connection with
the profit sharing components of the ESOP or the Defined Contribu-
tion Retirement Program in 1995, 1994 or 1993.
- 271 -
<PAGE>
11. Related Party Transactions
--------------------------
(a) Parent Company
--------------
As of December 31, 1995, USAir had a $68.6 million 8.4% note
payable to USAir Group related to USAir Group's purchase of
aircraft-secured debt obligations of USAir. USAir repaid the note
in February 1996. During 1994, USAir Group financed three aircraft
for USAir. USAir repaid this obligation, including interest, in
December 1994.
USAir's balance sheet line item, Payable to Parent Company,
includes intercompany loans from USAir Group which arise in the
normal course of business. These loans bear interest at market
rates which are reset quarterly.
Net interest expense related to the notes payable and
intercompany loans was $7.8 million, $11.3 million and $1.3 million
for the years 1995, 1994 and 1993, respectively.
(b) Regional Airline Subsidiaries of USAir Group
--------------------------------------------
USAir engages in certain transactions with Allegheny Airlines,
Inc. ("Allegheny"), Piedmont Airlines, Inc., and PSA Airlines,
Inc., wholly-owned regional airline subsidiaries of USAir Group.
USAir provides various services to these entities including
passenger handling, contract training and catering. USAir
recognized other operating revenues of approximately $46.5 million,
$43.5 million and $50.3 million related to these services for the
years 1995, 1994 and 1993, respectively. These regional airlines
also perform passenger and ground handling for USAir at certain
airports for which USAir recognized other operating expenses of
approximately $21.0 million and $15.3 million for the years 1995
and 1994, respectively.
USAir leases or subleases certain turboprop aircraft to these
entities. USAir recognized other operating revenues related to
these arrangements of approximately $18.7 million, $22.0 million
and $14.1 million for the years 1995, 1994 and 1993, respectively.
USAir entered into a sale-leaseback arrangement with Allegheny
during 1994 involving certain turboprop aircraft (in return, USAir
subleases these same aircraft back to Allegheny). USAir recognized
other operating expenses related to the lease of these aircraft
from Allegheny of approximately $9.8 million and $3.1 million for
1995 and 1994, respectively.
- 272 -
<PAGE>
USAir's receivables from and payables to these regional
airlines were approximately $9.6 million and $1.6 million,
respectively, at December 31, 1995 and $8.7 million and $1.3
million, respectively, at December 31, 1994. USAir's Traffic
Balances Payable liability included $30.8 million and $22.9 million
at December 31, 1995 and 1994, respectively, representing passen-
gers flown by the regional subsidiaries on behalf of USAir during
the month of December in each of those years.
(c) Other USAir Group Subsidiaries
------------------------------
USAir leases certain aircraft to USAir Group's wholly-owned
subsidiary USAir Leasing and Services, Inc. ("Leasing"). Leasing
subleases these aircraft to third parties. USAir recognized other
operating revenues related to these arrangements of approximately
$4.6 million, $2.2 million and $0.7 million for the years 1995,
1994 and 1993, respectively.
USAir purchases a portion of its aviation fuel from USAir
Group's wholly-owned subsidiary USAir Fuel Corporation ("Fuel
Corp."), which acts as a fuel wholesaler to USAir in certain
circumstances. USAir's aviation fuel purchases were approximately
$104.9 million, $57.8 million and $9.7 million for the years 1995,
1994 and 1993, respectively. USAir's accounts payable to Fuel
Corp. was $20.7 million and $5.6 million at December 31, 1995 and
1994, respectively.
(d) British Airways plc
-------------------
On January 21, 1993, USAir Group and BA entered into an
Investment Agreement under which a wholly-owned subsidiary of BA
purchased certain series of convertible preferred stock and BA
entered into code sharing and wet lease arrangements with USAir. At
December 31, 1995, BA's total voting interest in USAir Group was
approximately 21.0%.
USAir wet leases 767-200ER aircraft, including cockpit and
cabin crews, to BA in order to serve three routes between the U.S.
and London. The wet lease arrangements are scheduled to end by May
31, 1996 (the first of the three wet lease arrangements ended in
December 1995 and a second wet lease ended in February 1996). USAir
recognized other operating revenues of approximately $63.6 million,
$60.7 million and $17.1 million for the years 1995, 1994, and 1993,
respectively, related to the wet lease arrangements. These revenues
were offset by an equal amount of other operating expense.
- 273 -
<PAGE>
USAir also has various agreements with BA for ground handling
at certain airports, contract training and other services. USAir
recognized other operating revenues of approximately $4.9 million,
$6.4 million and $2.4 million for the years 1995, 1994 and 1993,
respectively, related to the services USAir performed for BA.
USAir's current receivables from and payables to BA were
approximately $11.5 million and $5.3 million, respectively, at
December 31, 1995 and $11.0 million and $4.5 million, respectively,
at December 31, 1994.
USAir also had a long-term receivable from BA related to two
U.S. to London routes that USAir relinquished at the time of
implementation of a code sharing arrangement with BA. The balance
of the receivable was approximately $45.4 million and $47.0 million
at December 31, 1995 and 1994, respectively. Payments began in
December 1995 in conjunction with the termination of the first wet
lease arrangement and continue annually for nine years.
12. Selected Quarterly Financial Data (Unaudited)
---------------------------------------------
The following table presents selected quarterly financial data
for 1995 and 1994:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
------- ------- ------- -------
(in millions)
<S> <C> <C> <C> <C>
1995
Operating revenues $1,664 $1,852 $1,743 $1,725
Operating income (loss) $ (50) $ 135 $ 66 $ 84
Net income (loss) $ (102) $ 85 $ 17 $ 34
===== ===== ===== =====
1994
Operating revenues $1,589 $1,763 $1,642 $1,584
Operating income (loss) $ (135) $ 60 $ (164) $ (278)
Net income (loss) $ (190) $ 1 $ (196) $ (332)
===== ===== ===== =====
See Note 14. - Non-Recurring and Unusual Items.
Note: The sum of the four quarters may not equal yearly totals
due to rounding of quarterly results.
</TABLE>
- 274 -
<PAGE>
13. Supplemental Balance Sheet Information
--------------------------------------
<TABLE>
The components of certain accounts in the accompanying
balance sheets are as follows:
<CAPTION>
December 31,
-----------------
1995 1994
---- ----
(in thousands)
<S> <C> <C>
(a) Cash and cash equivalents:
Cash $ 11,298 $ 16,946
Cash equivalents, at cost which
approximates market 868,315 411,979
------- -------
$ 879,613 $ 428,925
======= =======
(b) Receivables, net:
Accounts receivable $ 333,859 $ 335,234
Less allowance for doubtful
accounts 12,104 9,222
------- -------
$ 321,755 $ 326,012
======= =======
(c) Materials and supplies, net:
Materials and supplies $ 383,910 $ 408,308
Less allowance for obsolescence 161,665 169,827
------- -------
$ 222,245 $ 238,481
======= =======
(d) Accrued expenses:
Salaries and wages $ 342,391 $ 258,426
Rents 479,749 477,972
All other 613,054 561,176
--------- ---------
$1,435,194 $1,297,574
========= =========
Note:
Certain 1994 amounts have been reclassified to conform with 1995
classifications.
</TABLE>
- 275 -
<PAGE>
14. Non-Recurring and Unusual Items
-------------------------------
(a) 1995
----
In the fourth quarter of 1995, USAir reversed $4.1 million of
the $132.8 million non-recurring charge related to its grounded
BAe-146 fleet that was recorded in the fourth quarter of 1994 (see
Note 14.(b) below). The reversal reflects the successful re-
marketing by USAir of three of these aircraft. USAir will reverse
additional amounts related to the 1994 non-recurring charge in
future periods dependent upon its success and the terms at which
the remaining 15 grounded BAe-146 aircraft are subleased or
otherwise disposed.
(b) 1994
----
USAir's results for 1994 include (i) a $132.8 million charge
related to its grounded BAe-146 fleet, recorded in the fourth
quarter of 1994; (ii) a $54.0 million charge for obsolete inventory
and rotables to reflect market value, recorded in the fourth
quarter of 1994; (iii) a $50 million addition to Passenger
Transportation revenue in the fourth quarter of 1994 to adjust
estimates made during the first three quarters of 1994; (iv) a
$40.1 million charge primarily related to USAir's decision to cease
operations of its remaining Boeing 727-200 aircraft in 1995,
recorded in the third quarter of 1994; (v) a $25.9 million charge
related to USAir's decision to substantially reduce service between
Los Angeles and San Francisco and close its San Francisco crew
base, recorded in the third quarter of 1994; and (vi) an $18.6
million gain resulting from the accounting treatment of the hull
insurance recovery on the aircraft lost in the September accident,
recorded in the third quarter of 1994.
(c) 1993
----
USAir's results for 1993 include non-recurring charges of (i)
$43.7 million for the cumulative effect of an accounting change, as
required by FAS 112 which was adopted during the third quarter of
1993, retroactive to January 1, 1993; (ii) $68.8 million for
severance, early retirement and other personnel-related expenses
recorded primarily during the third quarter of 1993 in connection
with a workforce reduction of approximately 2,500 full-time
positions between November 1993 and the first quarter of 1994;
- 276 -
<PAGE>
(iii) $36.8 million based on a projection of the repayment of
certain employee pay reductions, recorded in the fourth quarter of
1993; (iv) $13.5 million for certain airport facilities at
locations where USAir has, among other things, discontinued or
reduced its service, recorded in the fourth quarter of 1993; (v)
$8.8 million for a loss on USAir's investment in the Galileo
International Partnership, which operates a computerized reserva-
tion system, recorded in the fourth quarter of 1993; and (vi) $18.4
million credit related to non-operating aircraft, recorded in the
second quarter of 1993.
- 277 -
<PAGE>
No dealer, salesperson or other individual has been authorized
to give any information or make any representations, other than
those contained in this Prospectus, in connection with the offering
covered by this Prospectus. If given or made, such information or
representations must not be relied upon as having been authorized
by USAir, Inc. This Prospectus does not constitute an offer to
sell, or a solicitation of an offer to buy, the securities covered
hereby in any jurisdiction where, or to any person to whom, it is
unlawful to make such an offer or solicitation to such person.
Neither the delivery of this Prospectus nor any exchange made
hereunder shall, under any circumstances, create any implication
that there has not been any change in the facts set forth in this
Prospectus or in the affairs of USAir, Inc. since the date hereof.
TABLE OF CONTENTS
-----------------
Page
- ----------------------------------------------------------- ----
Prospectus Summary........................................ 1
Risk Factors.............................................. 28
Use of Proceeds........................................... 47
Description of the Aircraft and the Appraisals............ 48
Selected Financial and Operating Information.............. 50
Management's Discussion and Analysis of
Financial Condition and Results of Operations.......... 53
Business.................................................. 89
Management................................................ 141
Beneficial Security Ownership............................. 161
The Exchange Offer........................................ 169
Description of the Notes.................................. 180
Plan of Distribution...................................... 208
United States Federal Income Tax Consequences............. 209
Legal Matters............................................. 210
Independent Auditors...................................... 210
Experts................................................... 210
Consolidated Financial Statements......................... 211
------------
- 278 -
<PAGE>
USAIR, INC.
EXCHANGE OFFER
$263,000,000
Offer to Exchange 6.76% Class A Enhanced Equipment Notes, 7.50%
Class B Enhanced Equipment Notes and 8.93% Class C Enhanced
Equipment Notes for any and all outstanding 6.76% Class A Enhanced
Equipment Notes, 7.50% Class B Enhanced Equipment Notes and 8.93%
Class C Enhanced Equipment Notes.
------------
PROSPECTUS
------------
- 279 -
<PAGE>
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
--------------------------------------
Item 20. Indemnification of Directors and Officers
-----------------------------------------
Section 145 of the Delaware Statute provides that a corpora-
tion may indemnify any person who was or is a party or is threat-
ened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal or investiga-
tive (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and
reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith a d in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceed-
ing, had no reasonable cause to believe his conduct was unlawful.
Section 145 further provides that a corporation similarly may
indemnify any such person serving in any such capacity who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or to the right of the
corporation to procure a judgment in its favor, against expenses
actually and reasonably occurred in connection with the defense of
settlement of such action or suit if he acted in good faith and in
a manner he reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification
shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to the corpora- -
tion unless and only to the extent that the Delaware Court of
Chancery or such other court in which such action or suit was
brought shall determinate upon application that, despite the
adjudication of liability but in view of all the circumstances of
the case, such person is fairly and reasonably entitled to
indemnity for such expenses when the Court of Chancery or such
other court shall deem proper.
- 280 -
<PAGE>
Section 102(b)(7) of the Delaware Statute permits a corpora-
tion to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a direction, provided that such provision shall
not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii)
under Section 174 of the Delaware Statute (relating to unlawful
payment of dividends and unlawful stock purchase and redemption) or
(iv) for any transaction from which the director derived an
improper personal benefit, USAir's certificate of incorporation
include such a provision.
Item 21. Exhibits and Financial Statement Schedules
-------------------------------------------
(a) The following documents are filed as part of this
Registration Statement:
1. Financial Statements
--------------------
The following consolidated financial statements of USAir are
included in Part II, Item 8B. of this report:
- Consolidated Statements of Operations for the Three Months
Ended March 31, 1996 and 1995 (unaudited)
- Consolidated Statements of Operations for each of the Three
Years Ended December 31, 1995
- Consolidated Balance Sheets as of December 31, 1995 and 1994
- Consolidated Statements of Cash Flows for each of the Three
Years Ended December 31, 1995
- Consolidated Statements of Changes in Stockholder's Equity
(Deficit) for each of the Three Years Ended December 31, 1995
- Notes to Consolidated Financial Statements
- 281 -
<PAGE>
(this space intentionally left blank)
3. Exhibits
--------
Designation Description
- ----------- -----------
3.1 Restated Certificate of Incorporation of USAir (incorp-
orated by reference to Exhibit 3.1 to USAir's Registra-
tion Statement on Form 8-B dated January 27, 1983).
3.2 By-laws of USAir (incorporated by reference to Exhibit
3.5 to USAir's Annual Report on Form 10-K for the year
ended December 31, 1995).
4.1 Amended Certificate of Designation, Preferences, and
Rights of the Series D of Junior Preferred Stock of
USAir Group (incorporated by reference to Exhibit 4(c)
to USAir Group's Current Report on Form 8-K dated
August 11, 1989).
4.2 Certificate of Designation of Series A Cumulative
Convertible Preferred Stock of USAir Group (incorpo-
rated by reference to Exhibit 4(b) to USAir Group's
Current Report on Form 8-K dated August 11, 1989).
4.3 Certificate of Designation of Series B Cumulative
Convertible Preferred Stock of USAir Group (incorporated
by reference to Exhibit 3.3 to Amendment No. 4 to USAir
Group's Registration Statement on Form S-3 (Registration
No. 33-39540) dated May 17, 1991).
- 282 -
<PAGE>
4.4 Agreement between USAir Group and Berkshire Hathaway
Inc. dated August 7, 1989 (incorporated by reference to
Exhibit 4(a) to USAir Group's Current Report on Form 8-K
dated August 11, 1989).
4.5 Certificate of Designation of Series F Cumulative
Convertible Senior Preferred Stock of USAir Group
(incorporated by reference to Exhibit 28.2 to USAir
Group's Current Report on Form 8-K dated January 21,
1993).
4.6 Form of Certificate of Designation of Series T Cumula-
tive Exchangeable Convertible Senior Preferred Stock of
USAir Group (incorporated by reference to Appendix VII
to USAir Group's Proxy Statement dated April 26, 1993).
USAir is not filing any instrument (with the exception
of holders of exhibits 10.1(a-c)) defining the rights
of holders of long-term debt because the total amount of
securities authorized under each such instrument does
not exceed ten percent of the total assets of USAir.
Copies of such instruments will be furnished to the
Securities and Exchange Commission upon request.
5.1 Purchase Agreement dated February 9, 1996 among USAir
and the Initial Purchasers.
5.2 Registration Rights Agreement, dated as of February 15,
1996, among USAir and the Initial Purchasers.
5.3 Collateral Agency Agreement, dated as of February 15,
1996, among USAir, the Collateral Agent, the Class A, B
and C Indenture Trustees and the Class A, B and C
Liquidity Providers.
5.4 Class A Indenture, dated as of February 15, 1996,
between USAir and the Class A Indenture Trustee.
5.5 Class B Indenture, dated as of February 15, 1996,
between USAir and the Class B Indenture Trustee.
5.6 Class C Indenture, dated as of February 15, 1996,
between USAir and the Class C Indenture Trustee.
5.7 Liquidity Agreement, dated as of February 15, 1996,
among USAir, the Class A Liquidity Provider and the
Collateral Agent.
- 283 -
<PAGE>
5.8 Liquidity Agreement, dated as of February 15, 1996,
among USAir, the Class B Liquidity Provider and the
Collateral Agent.
5.9 Liquidity Agreement, dated as of February 15, 1996,
among USAir, the Class C Liquidity Provider and the
Collateral Agent.
5.10 Opinion of Lawrence M. Nagin, as to the legality of the
New Notes.
5.11 Tax opinion of Ginsburg, Feldman and Bress.
5.13 Opinion of Fulbright & Jaworski, L.L.P.
10.1(a) Supplemental Agreement No. 16, dated July 19, 1990, to
Purchase Agreement No. 1102 between USAir and The Boeing
Company (incorporated by reference to Exhibit 10.2(a) to
USAir Group's Annual Report on Form 10-K for the year
ended December 31, 1990).
10.1(b) Supplemental Agreement No. 17, dated November 28, 1990,
to Purchase Agreement No. 1102 between USAir and The
Boeing Company (incorporated by reference to Exhibit
10.2(b) to USAir Group's Annual Report on Form 10-K for
the year ended December 31, 1990).
10.1(c) Supplemental Agreement No. 18, dated December 23, 1991,
to Purchase Agreement No. 1102 between USAir and The
Boeing Company (incorporated by reference to Exhibit
10.2(c) to USAir Group's Annual Report on Form 10-K for
the year ended December 31, 1991).
10.2 Purchase Agreement No. 1725 dated December 23, 1991
between USAir and The Boeing Company (incorporated by
reference to Exhibit 10.3 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December
31, 1991).
10.3 Executive Incentive Compensation Plan of USAir Group,
Inc. as amended and restated December 1, 1995 (incorpo-
rated by reference to Exhibit 10.4 to USAir Group's and
USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.4 USAir, Inc. Officers' Supplemental Benefit Plan (incor-
porated by reference to Exhibit 10.5 to USAir's Annual
Report on Form 10-K for the year ended December 31,
1980).
- 284 -
<PAGE>
10.5 USAir, Inc. Supplementary Retirement Benefit Plan
(incorporated by reference to Exhibit 10.5 to USAir
Group's Annual Report on Form 10-K for the year ended
December 31, 1989).
10.6 USAir, Inc. Supplemental Executive Defined Contribution
Plan (incorporated by reference to Exhibit 10.6 to USAir
Group's Annual Report on Form 10-K for the year ended
December 31, 1994).
10.7 USAir Group's 1984 Stock Option and Stock Appreciation
Rights Plan (incorporated by reference to Exhibit A to
USAir Group's Proxy Statement dated March 30, 1984).
10.8 USAir Group's 1988 Stock Incentive Plan (incorporated by
reference to Exhibit 10.15 to USAir Group's Annual
Report on Form 10-K for the year ended December 31,
1987).
10.9 USAir Group's 1992 Stock Option Plan (incorporated by
reference to Exhibit A to USAir Group's Proxy Statement
dated March 30, 1992).
10.10 USAir Group's 1996 Stock Incentive Plan (incorporated by
reference to Exhibit A to USAir Group's Proxy Statement
dated April 15, 1996).
10.11 Employment Agreement between USAir and its Chief Execu-
tive Officer (incorporated by reference to Exhibit 10.11
to USAir Group's and USAir's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.12 Employment Agreement between USAir and its President and
Chief Operating Officer (incorporated by reference to
Exhibit 10.12 to USAir Group's and USAir's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.13 Employment Agreement between USAir and its Executive
Vice President-Corporate Affairs and General Counsel
(incorporated by reference to Exhibit 10.13 to USAir
Group's and USAir's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.14 Agreement between USAir and its Chief Executive Officer
with respect to certain employment arrangements
(incorporated by reference to Exhibit 10.14 to USAir
Group's and USAir's Annual Report on Form 10-K for the
year ended December 31, 1995).
- 285 -
<PAGE>
10.15 Agreement between USAir and its President and Chief
Operating Officer with respect to certain employment
arrangements (incorporated by reference to Exhibit 10.15
to USAir Group's and USAir's Annual Report on Form 10-K
for the year ended December 31, 1995).
10.16 Agreement between USAir and its Executive Vice Presi-
dent-Corporate Affairs and General Counsel with respect
to certain employment arrangements (incorporated by
reference to Exhibit 10.16 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December
31, 1995).
10.17 Employment Agreement between USAir and its former Chief
Executive Officer, as amended by a severance agreement
(incorporated by reference to Exhibit 10.17 to USAir
Group's and USAir's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.18 Employment Agreement between USAir and its former
President and Chief Operating Officer, as amended by a
severance agreement (incorporated by reference to
Exhibit 10.18 to USAir Group's and USAir's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.19 Employment Agreement between USAir and its former
Executive Vice President, General Counsel and Secretary,
as amended by a severance agreement (incorporated by
reference to Exhibit 10.19 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December
31, 1995).
10.20 Employment Agreement between USAir and its Executive
Vice President-Marketing (incorporated by reference to
Exhibit 10.20 to USAir Group's and USAir's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.21 Trust Agreement dated as of April 1, 1992 between USAir
and Wachovia Bank of North Carolina, N.A. providing for
certain compensation arrangements for the Executive Vice
President-Marketing (incorporated by reference to
Exhibit 10.21 to USAir Group's and USAir's Annual Report
on Form 10-K for the year ended December 31, 1995).
10.22 Employment Agreement between USAir and its Executive
Vice President-Customer Services (incorporated by
reference to Exhibit 10.22 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December
31, 1995).
- 286 -
<PAGE>
10.23 Agreement between USAir and its Chief Executive Officer
providing supplemental retirement benefits (incorporated
by reference to Exhibit 10.23 to USAir Group's and
USAir's Annual Report on Form 10-K for the year ended
December 31, 1995).
10.24 Agreement between USAir and its President and Chief
Operating Officer providing supplemental retirement
benefits (incorporated by reference to Exhibit 10.24 to
USAir Group's and USAir's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.25 Agreement between USAir and its Executive Vice Presi-
dent-Corporate Affairs and General Counsel providing
supplemental retirement benefits (incorporated by
reference to Exhibit 10.25 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December
31, 1995).
10.26 Agreement between USAir and its former Chief Executive
Officer providing supplemental retirement benefits
(incorporated by reference to Exhibit 10.26 to USAir
Group's and USAir's Annual Report on Form 10-K for the
year ended December 31, 1995).
10.27 Agreement between USAir and its former President and
Chief Operating Officer providing supplemental retire-
ment benefits (incorporated by reference to Exhibit
10.27 to USAir Group's and USAir's Annual Report on Form
10-K for the year ended December 31, 1995).
10.28 Agreement between USAir and its former Executive Vice
President, General Counsel and Secretary providing
supplemental retirement benefits (incorporated by
reference to Exhibit 10.28 to USAir Group's and USAir's
Annual Report on Form 10-K for the year ended December
31, 1995).
10.29 Agreement between USAir and its Executive Vice Presi-
dent-Marketing providing supplemental retirement
benefits (incorporated by reference to Exhibit 10.29 to
USAir Group's and USAir's Annual Report on Form 10-K for
the year ended December 31, 1995).
10.30 Employment Agreement between USAir and its Executive
Vice President-Customer Services providing retirement
benefits (incorporated by reference to Exhibit 10.30 to
USAir Group's and USAir's Annual Report on Form 10-K for
the year ended December 31, 1995).
- 287 -
<PAGE>
21 Subsidiary of USAir.
23.1 Consent of KPMG Peat Marwick LLP to the incorporation of
their report concerning certain financial statements
contained of USAir in this report in certain registra-
tion statements.
23.2 Consent of Fulbright & Jaworski, L.L.P. to the incorpor-
ation of their legal opinion covering certain matters of
New York law and Section 1110 of the Federal Bankruptcy
Code.
24.1 Powers of Attorney signed by the directors of USAir,
Inc. authorizing their signatures on this registration
statement.
99.1 Letter of Transmittal
Item 22. Undertakings
------------
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration
Statement:
i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment hereof) which, individually or in the
aggregate, represent a fundamental change to such
information in the Registration Statement;
iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement.
- 288 -
<PAGE>
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securi-
ties offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(b) Insofar as indemnification for liabilities arising
under the Securities Act may be permitted to directors, officers,
partners and controlling persons of the registrant pursuant to the
foregoing provisions, or otherwise, the registrants have been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer, partner or controlling
person of any of the registrants in the successful defense of any
action, suit or proceeding) is asserted by such director, officer,
partner or controlling person in connection with the securities
being registered, the registrants will, unless in the opinion of
its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in
the Securities Act and will be governed by the final adjudication
of such issue.
- 289 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized
in Arlington, Virginia on May 21, 1996.
USAir, Inc.
By: /s/Stephen M. Wolf
---------------------------
Stephen M. Wolf
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following
persons on behalf of USAir, Inc. and in the capacities and on the
dates indicated.
May 21, 1996 By: /s/Stephen M. Wolf
-----------------------------
Stephen M. Wolf
Chairman and Chief
Executive Officer
(Principal Executive Officer)
May 21, 1996 By: /s/John W. Harper
-----------------------------
John W. Harper
Senior Vice President-Finance
and Chief Financial Officer
(Principal Financial Officer)
May 21, 1996 By: /s/James A. Hultquist
-----------------------------
James A. Hultquist
Controller
(Principal Accounting Officer)
May 21, 1996 By: *
-----------------------------
Robert J. Ayling
Director
- 290 -
<PAGE>
May 21, 1996 By: *
-----------------------------
Robert W. Bogle
Director
May 21, 1996 By: *
-----------------------------
Edwin I. Colodny
Director
May 21, 1996 By: *
-----------------------------
Mathias J. DeVito
Director
May 21, 1996 By: *
-----------------------------
Rakesh Gangwal
Director
May 21, 1996 By: *
-----------------------------
George J. W. Goodman
Director
May 21, 1996 By: *
-----------------------------
John W. Harris
Director
May 21, 1996 By: *
-----------------------------
Edward A. Horrigan, Jr.
Director
May 21, 1996 By: *
-----------------------------
Robert LeBuhn
Director
May 21, 1996 By: *
-----------------------------
Roger P. Maynard
Director
- 291 -
<PAGE>
May 21, 1996 By: *
-----------------------------
John G. Medlin, Jr.
Director
May 21, 1996 By: *
-----------------------------
Hanne M. Merriman
Director
May 21, 1996 By: *
-----------------------------
Raymond W. Smith
Director
May 21, 1996 By: *
-----------------------------
Derek M. Stevens
Director
By: /s/John W. Harper
---------------------
John W. Harper
Attorney-In-Fact
- 292 -
Exhibit 5.1
USAIR, INC.
PURCHASE AGREEMENT
February 9, 1996
Morgan Stanley & Co.
Incorporated, Salomon Brothers Inc,
Chase Securities, Inc. and
Lehman Brothers Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs:
USAIR, INC., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Manager") and the other
several purchasers named in Schedule I hereto (together with the
Manager, the "Purchasers") (i) $142,400,000 aggregate principal
amount of its 6.76% Class A Enhanced Equipment Notes (the "Class
A Notes"), (ii) $54,800,000 aggregate principal amount of its
7.50% Class B Enhanced Equipment Notes (the "Class B Notes") and
(iii) $65,800,000 aggregate principal amount of its 8.93% Class C
Enhanced Equipment Notes (the "Class C Notes", together with the
Class A Notes and the Class B Notes, the "Notes").
The Class A Notes, the Class B Notes and the Class C Notes
will be issued under indentures to be dated as of February 15,
1996 (respectively, the "Class A Indenture", the "Class B
Indenture" and the "Class C Indenture" and, collectively, the
"Indentures"), each between the Company and Wilmington Trust
Company, as indenture trustee.
As used in this Agreement, capitalized terms not otherwise
defined herein shall have the meanings specified in Appendix A to
the Collateral Agency Agreement dated as of February 15, 1996
between the Company, Wilmington Trust Company and the other
parties named therein (the "Collateral Agreement").
The Notes will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act"), in
reliance on exemptions therefrom.
<PAGE>
The Purchasers and their direct and indirect transferees
will be entitled to the benefits of a Registration Rights
Agreement between USAir, Inc. and the Purchasers, to be dated the
Closing Date (as defined below) and to be substantially in the
form attached hereto as Exhibit A. For the purposes hereof,
"Basic Documents" shall be deemed to include the Registration
Rights Agreement.
In connection with the sale of the Notes, the Company has
prepared a preliminary offering memorandum (the "Preliminary
Memorandum") and will prepare a final offering memorandum (as
such offering memorandum may be amended or supplemented, the
"Final Memorandum" and, together with the Preliminary Memorandum,
each a "Memorandum") setting forth or including a description of
the terms of the Notes, the terms of the offering and a
description of the Company and its business.
1. Representations and Warranties. The Company represents
and warrants to, and agrees with, you that as of the date hereof:
(a) As of their respective dates and at all times
subsequent thereto up to the Closing Date (as defined
below), the Preliminary Memorandum did not contain and the
Final Memorandum will not contain any untrue statement of a
material fact or omit to state a material fact necessary to
make the statements therein, in the light of the
circumstances under which they were made, not misleading,
except that the representations and warranties set forth in
this Section 1(a) do not apply to statements or omissions in
either Memorandum based upon information relating to any
Purchaser furnished to the Company in writing by such
Purchaser through you expressly for use therein.
(b) Neither the Company nor any affiliate (as defined
in Rule 501(b) of Regulation D under the Securities Act, an
"Affiliate") of the Company has directly, or through any
agent, (i) sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any security (as
defined in the Securities Act) which is or will be
integrated with the sale of the Notes in a manner that would
require the registration under the Securities Act of the
Notes or (ii) engaged in any form of general solicitation or
general advertising in connection with the offering of the
Notes (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering
within the meaning of section 4(2) of the Securities Act.
(c) The Company is not an "investment company" or an
entity "controlled" by an "investment company", as such
terms are defined in the Investment Company Act of 1940, as
amended.
<PAGE>
(d) None of the Company, its Affiliates or any person
acting on its or their behalf (other than the Purchasers)
has engaged in any directed selling efforts (as that term is
defined in Regulation S under the Securities Act
("Regulation S")) with respect to the Notes, and the Company
and its Affiliates and any person acting on its or their
behalf (other than the Purchasers) have complied with the
offering restrictions requirement of Regulation S.
(e) The Company is subject to Section 13 or 15(d) of
the Exchange Act.
(f) No securities of the same class (within the
meaning of Rule 144A(d)(3) under the Securities Act) as the
Notes are listed on any national securities exchange
registered under Section 6 of the Exchange Act or quoted in
a U.S. automated inter-dealer quotation system.
(g) It is not necessary in connection with the offer,
sale and delivery of the Notes to the Purchasers in the
manner contemplated by this Agreement to register the Notes
under the Securities Act or to qualify the Indentures under
the Trust Indenture Act of 1939, as amended.
(h) The Company has complied with all provisions of
Section 517.075, Florida Statutes (Chapter 92-198, Laws of
Florida).
(i) The execution and delivery by the Company of this
Agreement and the Basic Documents to which the Company is or
will be a party, the issuance and sale of the Notes, the
consummation by the Company of the transactions contemplated
herein and therein and in the Final Memorandum and
compliance with the terms hereof and thereof do not and will
not result in any violation of the charter or by-laws of the
Company and do not and will not conflict with or violate, or
result in a breach of any of the terms or provisions of, or
constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any
property or assets of the Company under (A) any indenture,
mortgage or loan agreement, or any other agreement or
instrument to which the Company is a party or by which it
may be bound or to which any of its properties may be
subject (except for such conflicts, breaches, defaults,
liens, charges or encumbrances that, in the aggregate, would
not have a material adverse effect on the financial
condition or on the earnings or business affairs of the
Company, (B) any existing applicable law, rule or regulation
<PAGE>
(other than the securities or Blue Sky laws of the various
states) or (C) any judgment, order or decree of any
government, governmental instrumentality or court, domestic
or foreign, having jurisdiction over the Company or any of
its properties.
(j) No authorization, approval, consent, license,
order of or registration with, or the giving of notice to,
any government, governmental instrumentality or court,
domestic or foreign, or other regulatory body or authority
(other than with respect to the securities or Blue Sky laws
of the various states) is required to be obtained or made by
the Company for the valid authorization, issuance, sale and
delivery of the Notes or for the valid authorization,
execution, delivery and performance by the Company of this
Agreement, each of the other Basic Documents to which the
Company is a party or the Notes or the consummation of the
transactions contemplated by this Agreement and such Basic
Documents.
(k) This Agreement has been duly authorized, executed
and delivered by the Company.
(l) The Basic Documents to which the Company is or
will be a party have been authorized and will constitute,
when duly executed and delivered by the Company (assuming
that such Basic Documents constitute valid and binding
obligations of each other party thereto), valid and binding
obligations of the Company, enforceable against the Company
in accordance with their terms, except to the extent that
enforceability thereof may be limited by (A) bankruptcy,
insolvency, reorganization, moratorium or other similar laws
now or hereafter in effect relating to creditors' rights
generally and (B) general principles of equity (regardless
of whether enforceability is considered in a proceeding at
law or in equity).
(m) The Notes have been duly authorized by the
Company, and when executed and authenticated in accordance
with the provisions of the applicable Indentures and
delivered to and paid for by the Purchasers in accordance
with the terms of this Agreement, the Notes will be entitled
to the benefits of the Collateral Agreement and the
applicable Indenture subject to the terms thereof and will
be valid and binding obligations of the Company enforceable
against the Company in accordance with their terms, except
to the extent that enforceability thereof may be limited by
<PAGE>
(A) bankruptcy, insolvency, reorganization, moratorium or
other similar laws now or hereafter in effect relating to
creditors' rights generally and (B) general principles of
equity (regardless of whether enforceability is considered
in a proceeding at law or in equity); the forms of the Notes
conform in all material respects to the description thereof
contained in the Final Memorandum.
(n) Each Basic Document conforms in all material
respects to the description thereof contained in the
Memorandum.
(o) No Appraiser is an affiliate of the Company or has
a substantial interest, direct or indirect, in the Company.
None of the officers and directors of any of the Appraisers
is connected with the Company or any of its affiliates as an
officer, employee, promoter, underwriter, trustee, partner,
director or person performing similar functions.
2. Offering. You have advised the Company that the
Purchasers will make an offering of the Notes purchased by the
Purchasers hereunder on the terms to be set forth in the Final
Memorandum as soon as practicable after this Agreement is entered
into as in your judgment is advisable.
3. Purchase and Delivery. The Company hereby agrees to
sell to the several Purchasers, and the Purchasers, upon the
basis of the representations and warranties herein contained, but
subject to the conditions hereinafter stated, agree, severally
and not jointly, to purchase from the Company the respective
principal amount of Notes set forth in Schedule I hereto opposite
their names at an aggregate purchase price equal to $260,511,900.
Payment for the Notes shall be made against delivery of the
Notes at a closing (the "Closing") to be held at the office of
Shearman & Sterling, 599 Lexington Avenue, New York, New
York 10022, at 10:00 a.m., local time, on February 16, 1996 or at
such other time or such other date as shall be designated in
writing by you. The time and date of such payment are herein
referred to as the Closing Date. Payment for the Notes shall be
made by wire transfer of immediately available funds to an
account specified by the Company.
Certificates for the Notes shall be in definitive or global
form and registered in such names and in such denominations as
you shall request in writing not less than two full business days
prior to the Closing Date. The Notes shall be delivered to you
on the Closing Date for the respective accounts of the several
Purchasers, with any transfer taxes payable in connection with
the transfer of the Notes to the Purchasers duly paid, against
payment of the purchase price therefor.
<PAGE>
4. Conditions to Closing. The several obligations of the
Purchasers hereunder are subject to the accuracy of and
compliance with the representations and warranties of the Company
contained herein as of the date hereof and the Closing Date, to
the accuracy of the statements of the officers of the Company
made in any certificate furnished pursuant to the provisions
hereof, to the performance by the Company of its covenants and
other obligations hereunder and to the following further
conditions:
(a) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not
have occurred any downgrading in the rating accorded any of
the securities of the Company by Moody's Investors Service,
Inc. or Standard & Poor's Corporation, nor shall any notice
have been given of (i) any intended or potential downgrading
or (ii) any review or possible change in such rating.
(b) Subsequent to the execution and delivery of this
Agreement and prior to the Closing Date, there shall not
have occurred any material adverse change, or any
development involving a material adverse change, in the
financial condition or in the earnings or business affairs
of the Company from that set forth or contemplated in the
Preliminary Memorandum, that, in your reasonable judgment,
makes it impracticable to market the Notes on the terms and
in the manner contemplated in the Final Memorandum.
(c) You shall have received on the Closing Date a
certificate, dated the Closing Date and signed by a Vice
President or Treasurer of the Company, to the effect (i) set
forth in clause (a) above, (ii) that the representations and
warranties of the Company contained herein are true and
correct as of the Closing Date, (iii) that there shall not
have occurred any material adverse change, or any
development involving a material adverse change, in the
financial condition or in the earnings or business affairs
of the Company from that set forth in the Final Memorandum,
and (iv) that the Company shall have performed all of its
obligations to be performed hereunder on or prior to the
Closing Date.
(d) You shall have received on the Closing Date an
opinion, dated the Closing Date, from the General Counsel of
the Company, in form satisfactory to you and your counsel,
to the effect that:
<PAGE>
(i) The Company has been duly incorporated and is
validly existing as a corporation in good standing
under the laws of the State of Delaware and has full
corporate power and authority under such laws to own
its properties, to conduct its business as described
in the Final Memorandum, to enter into each of the
Basic Documents and to perform its obligations
thereunder; and the Company is duly qualified to
transact business as a foreign corporation in good
standing in each jurisdiction in which its ownership of
property or the conduct of its business requires such
qualification (except where the failure to so qualify
would not have a material adverse effect upon the
Company);
(ii) The Company is an "air carrier" and a
"citizen of the United States" within the meaning of
the Aviation Act of 1958, as amended, and is "an air
carrier operating under a certificate of convenience
and necessity issued by the Civil Aeronautics Board"
within the meaning of 11 U.S.C. Section 1110;
(iii) The statements in the Final Memorandum as
to the routes that the Company presently operates or is
authorized to operate are correct in all material
respects. Except as disclosed in the Final Memorandum,
no action or proceeding has been instituted or to my
knowledge, has been threatened by the United States
Department of Transportation, the Federal Aviation
Administration or the aeronautical authorities of any
other country that would impair USAir's ability to
operate such routes;
(iv) This Agreement has been duly authorized,
executed and delivered by the Company;
(v) No authorization, approval, consent, license,
order of, or registration with, or the giving of notice
to, any government, governmental instrumentality, or
court, domestic or foreign, or other regulatory body or
authority (other than with respect to the securities or
Blue Sky laws of the various states and with respect to
any registration, filing or recording that may be
required under the Federal Aviation Act) is required to
be obtained or made by the Company for the valid
authorization, issuance, sale and delivery of the Notes
or for the valid authorization, execution, delivery and
<PAGE>
performance by the Company of this Agreement and each
of the Basic Documents to which the Company is a party
or the consummation of the transactions contemplated by
this Agreement and such Basic Documents, except such as
may be required pursuant to the Registration Rights
Agreement;
(vi) The execution and delivery by the Company of
this Agreement and the Basic Documents to which the
Company is or will be a party, the issuance and sale of
the Notes, the consummation by the Company of the
transactions contemplated herein and therein and in the
Final Memorandum and compliance with the terms hereof
and thereof do not and will not result in any violation
of the charter or by-laws of the Company and do not and
will not conflict with or violate, or result in a
breach of any of the terms or provisions of, or
constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon
any property or assets of the Company under (A) any
indenture, mortgage or loan agreement, or any other
agreement or instrument known to such counsel, to which
the Company is a party or by which either it be bound
or to which any of its properties may be subject
(except for such conflicts, breaches, defaults, liens,
charges or encumbrances that, in the aggregate, would
not have a material adverse effect on the financial
condition or on the earnings or business affairs of the
Company), (B) any existing applicable law, rule or
regulation (other than the securities or Blue Sky laws
of the various states, as to which such counsel need
express no opinion) or (C) any judgment, order or
decree known to such counsel of any government,
governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of
its properties;
(vii) Except as disclosed in the Final
Memorandum, no default exists in the performance or
observance of any material obligation, agreement,
covenant or condition contained in any contract,
indenture, loan agreement, note, lease or other
agreement or instrument that is described or referred
to in the Final Memorandum;
<PAGE>
(viii) Except as disclosed in the Final
Memorandum, there is no action, suit or proceeding
before or by any government, governmental
instrumentality or court, domestic or foreign, now
pending or, to the knowledge of such counsel,
threatened against or affecting the Company that might
reasonably be expected to result in any material
adverse change in the financial condition or in the
earnings or business affairs of the Company, or that
could adversely affect the consummation of the
transactions contemplated by this Agreement or any of
the other Basic Documents to which the Company is a
party;
(ix) Such counsel believes that (except for the
financial statements and other financial and
statistical data included therein or omitted therefrom,
as to which such counsel need not express any opinion)
the Final Memorandum, as of its date did not, and as of
the date such opinion is delivered does not, contain
any untrue statement of a material fact or omit to
state a material fact necessary in order to make the
statements therein, in light of the circumstances under
which they were made, not misleading;
(x) The Notes, the Collateral Agreement, the
Registration Rights Agreement, the Liquidity Agreements
and each Indenture conform in all material respects to
the descriptions thereof contained in the Final
Memorandum;
(xi) It is not necessary in connection with the
offer, sale and delivery of the Notes to the Purchasers
under this Agreement or in connection with the initial
resale of such Notes by the Purchasers in accordance
with Section 6 of this Agreement to register the Notes
under the Securities Act or to qualify the Notes under
the Trust Indenture Act of 1939, as amended (it being
understood that no opinion is expressed as to any
subsequent resale of any of the Notes); and
(xii) The statements set forth under the heading
"Description of the Notes" in the Memorandum, insofar
as such statements purport to summarize certain
provisions of the Notes, the Liquidity Facilities, the
Indenture, the Collateral Agreement and the
Registration Rights Agreement, provide a fair summary
of such provisions.
<PAGE>
(xiii) Except for the filing with the Federal
Aviation Administration under the Aviation Act of the
Collateral Agency Agreement, as supplemented by
Collateral Agency Agreement Supplement No. 1 or in
Virginia under the Uniform Commercial Code of UCC-1
financing statements describing the Collateral, which
Federal Aviation Administration and Uniform Commercial
Code filings taken together are adequate to perfect the
Lien of the Collateral Agency Agreement on the
Collateral, no further recording or filing in the
United States of America or any state thereof of any
Basic Document, or related documents, nor of any
financing statements with respect thereto, nor any
other action, is necessary or advisable in order to
establish, perfect and maintain perfected in the United
States of America or any state thereof the Lien of the
Collateral Agent in the Collateral under the Collateral
Agency Agreement or the assignment of certain of the
rights of the Company in the Boeing Purchase Agreement
and the Bills of Sale under the Collateral Agency
Agreement in favor of the Collateral Agent as against
the Company or any third party.
(xiv) The Collateral Agency Agreement, as
supplemented by Collateral Agency Agreement Supplement
No. 1, is in due form for recording in accordance with
the Aviation Act. The Collateral Agency Agreement, as
so supplemented, creates for the benefit of the
Noteholders a valid security interest in the Collateral
in the United States (other than in respect of monies
and securities referenced in the Granting Clauses of
the Collateral Agency Agreement prior to the deposit
thereof with the Collateral Agent).
(xv) UCC-1 financing statements with respect to
the Collateral have been duly filed in Arlington
County, Virginia and with the Virginia State
Corporation Commission and constitute all filings
required in the Commonwealth of Virginia for the
purposes described in paragraph (xiii) or otherwise in
connection with the consummation of the transactions
contemplated by the Collateral Agency Agreement or any
other of the Basic Documents.
<PAGE>
(e) You shall have received on the Closing Date an
opinion, dated the Closing Date, of Fulbright & Jaworski
L.L.P., counsel for the Company, to the effect that:
(i) The Notes, the Collateral Agreement and each
Indenture conform in all material respects to the
descriptions thereof contained in the Final Memorandum;
(ii) Each of the Registration Rights Agreement,
the Collateral Agreement, the Indentures and the
Liquidity Agreements is a valid and binding agreement
of the Company, enforceable against the Company in
accordance with their respective terms except to the
extent that enforceability thereof may be limited by
(A) bankruptcy, insolvency, reorganization, moratorium
or other similar laws now or hereafter in effect
relating to creditors' rights generally and (B) general
principles of equity (regardless of whether
enforceability is considered in a proceeding at law or
in equity and except that such counsel expresses no
opinion with respect to Section 5 of the Registration
Rights Agreement providing for indemnification and
contribution);
(iii) The Notes, when executed and authenticated
in accordance with the provisions of the applicable
Indenture and delivered to and paid for by the
Purchasers in accordance with the terms of this
Agreement, will be entitled to the benefits of the
applicable Indenture subject to the terms thereof and
will be valid and binding obligations of the Company,
enforceable against the Company in accordance with
their terms except to the extent that enforceability
thereof may be limited by (A) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights
generally and (B) general principles of equity
(regardless of whether enforceability is considered in
a proceeding at law or in equity);
(iv) Except for (i) the registration, filing or
recording under the Federal Aviation Act, referred to
in paragraph (v) below, and (ii) the filing of Uniform
Commercial Code financing statements (and subject to
the timely filing in the future of continuation
statements with respect thereto) contemplated by this
Agreement and the Basic Documents, no further
<PAGE>
registration, filing or recording of any document is
necessary under the laws of the United States of
America or the State of New York to create the security
interest in the Aircraft and the other Collateral in
favor of the Collateral Agent, described in the
Granting Clause of the Collateral Agreement;
(v) The Collateral Agreement, as supplemented, is
in due form for filing in accordance with the Federal
Aviation Act. The Collateral Agreement, as
supplemented, validly creates for the benefit of the
Collateral Agent the security interest in the
Collateral which the Granting Clauses of the Collateral
Agreement purport to create;
(vi) In a proceeding under Chapter 11 of the
Bankruptcy Code involving the Company as a debtor, the
Collateral Agent would be entitled to the benefits of
11 U.S.C. Section 1110 with respect to the security interest
granted by the Collateral Agreement in the Aircraft;
(vii) No authorization, approval, consent,
license, order of, or registration with, or the giving
of notice to, any government, governmental
instrumentality, or court, domestic or foreign, or
other regulatory body or authority (other than with
respect to the securities or Blue Sky laws of the
various states and with respect to any registration,
filing or recording that may be required under the
Federal Aviation Act) is required to be obtained or
made by the Company for the valid issuance of the Notes
under the Indentures or the consummation of the
transactions contemplated by this Agreement and such
Basic Documents, except such as may be required
pursuant to the Registration Rights Agreement;
(viii) The execution and delivery by the Company
of the Basic Documents to which the Company is or will
be a party and the consummation by the Company of the
transactions contemplated herein and therein and in the
Final Memorandum and compliance with the terms hereof
and thereof do not and will not conflict with or
violate any existing applicable law, rule or regulation
(other than the securities or Blue Sky laws of the
various states, as to which such counsel need express
no opinion) of the United States and of the State of
New York;
<PAGE>
(ix) The statements set forth under "Description
of the Notes-Events of Default" in the Memorandum,
insofar as such statements purport to summarize
provisions of Section 1110 of the Bankruptcy Code,
provide a fair summary of such provisions; and
(x) The Collateral Agreement and the Indentures
constitute the legal, valid and binding agreements of
the Collateral Agent and the Indenture Trustees,
enforceable against the Collateral Agent and the
Indenture Trustees in accordance with their terms
except to the extent that enforceability thereof may be
limited by (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in
effect relating to creditors' rights generally and (B)
general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or
in equity).
(f) You shall have received on the Closing Date an
opinion or opinions, dated the Closing Date, of internal
counsel for West LB and/or of White & Case, special counsel
for West LB, in form and substance satisfactory to you.
(g) You shall have received on the Closing Date an
opinion, dated the Closing Date, of Crowe & Dunlevy, special
FAA counsel, in form and substance satisfactory to you.
(h) You shall have received on the Closing Date an
opinion, dated the Closing Date, of Richards, Layton &
Finger, counsel for Wilmington Trust Company ("WTC"), to the
effect that:
(i) WTC is a banking corporation duly organized
and validly existing good standing under the laws of
the State of Delaware and has the corporate power and
authority to execute, deliver and perform, as Indenture
Trustee or Collateral Agent, as the case may be, the
Basic Documents to which it is a party and the Notes;
(ii) Each of the Basic Documents to which WTC is
a party has been duly authorized, executed and
delivered by WTC, as Indenture Trustee or Collateral
Agent, as the case may be, and constitutes the legal,
valid and binding obligation of WTC, as Indenture
Trustee or Collateral Agent, as the case may be,
enforceable against WTC, as Indenture Trustee or
Collateral Agent, as the case may be, in accordance
with its terms;
<PAGE>
(iii) No authorization, consent or approval of,
notice to or filing with, or the taking of any other
action in respect of, any governmental authority or
agency of the United States or the State of Delaware
governing the banking or trust power of WTC is required
for the execution, delivery or performance by WTC, as
Indenture Trustee or Collateral Agent, as the case may
be, of the Basic Documents to which WTC is a party or
the Notes; and
(iv) Neither the execution, delivery or
performance by WTC, as Indenture Trustee or Collateral
Agent, as the case may be, of the Basic Documents to
which it is a party or the Notes, nor compliance with
the terms and provisions thereof, conflicts with or
results in a breach or violation of any of the terms,
conditions or provisions of any law, governmental rule
or regulation of the United States or the State of
Delaware governing the banking or trust powers of WTC
or, to such counsel's knowledge, any order, writ,
injunction or decree of any court or governmental
authority against WTC or by which it or any of its
properties is bound or, to such counsel's knowledge,
any indenture, mortgage, contract or other agreement or
instrument to which WTC is a party or by which it or
any of its properties is bound, or constitutes a
default thereunder.
(i) You shall have received on the Closing Date an
opinion, dated the Closing Date, of Shearman & Sterling,
counsel for the Purchasers, to the effect that the opinions
delivered pursuant to Sections 4(d), (e), (f), (g) and (h)
are appropriately responsive to the requirements of this
Agreement, except, specifying the same, to the extent waived
by the Purchasers, and with respect to the issuance and sale
of the Notes and other related matters as you may reasonably
require.
(j) You shall have received on the date of this
Agreement a letter dated such date and on the Closing Date a
letter dated the Closing Date, in each case in form and
substance satisfactory to you, from the Company's
independent public accountants, containing statements and
information of the type ordinarily included in accountants'
"comfort letters" to underwriters with respect to the
financial statements and certain other financial or
statistical data and certain financial information contained
in the Final Memorandum.
<PAGE>
5. Covenants of the Company. In further consideration of
the agreements of the Purchasers herein contained, the Company
covenants as follows:
(a) To furnish to you, without charge, during the
period mentioned in paragraph (c) below, as many copies of
the Final Memorandum and any supplements and amendments
thereto as you may reasonably request.
(b) Before amending or supplementing the Preliminary
Memorandum or the Final Memorandum, to furnish to you a copy
of each such proposed amendment or supplement.
(c) If, at any time prior to the completion of the
resale of the Notes by you to purchasers, any event shall
occur as a result of which it is necessary to amend or
supplement the Final Memorandum in order to make the
statements therein, in the light of the circumstances
existing when such Final Memorandum is delivered to a
purchaser, not misleading, or if it is necessary to amend or
supplement such Final Memorandum to comply with law,
forthwith to prepare and furnish, at its own expense, to the
Purchasers, either amendments or supplements to such Final
Memorandum so that the statements in such Final Memorandum
as so amended or supplemented will not, in the light of the
circumstances existing when such Final Memorandum is
delivered to a purchaser, be misleading or so that such
Final Memorandum, as so amended or supplemented, will comply
with law. Neither the consent of the Purchasers to, nor any
Purchaser's delivery of, any such amendment or supplement
shall constitute a waiver of any of the conditions set forth
in Section 4.
(d) To endeavor to qualify the Notes for offer and
sale under the securities or Blue Sky laws of such
jurisdictions as you shall reasonably request and to
maintain such qualification for as long as you shall
reasonably request and to pay all expenses (including fees
and disbursements of counsel) in connection with such
qualification and in connection with the determination of
the eligibility of the Notes for investment under the laws
of such jurisdictions as you may designate, as well as all
expenses payable in connection with the review (if any) of
the offering of the Notes by the National Association of
Securities Dealers, Inc. (including filing fees and fees and
expenses of counsel for the Purchasers in connection
therewith).
<PAGE>
(e) Whether or not any sale of such Notes is
consummated, to pay all expenses incident to the performance
of its obligations under this Agreement, including: (i) the
preparation of each Memorandum and all amendments and
supplements thereto, (ii) the preparation, issuance and
delivery of the Notes, (iii) the fees and disbursements of
the Company's counsel and accountants and the Indenture
Trustee and its counsel, (iv) the expenses of qualifying
such Notes under securities or Blue Sky laws in accordance
with the provisions of Section 5(d), including filing fees
and the fees and disbursements of counsel for the Purchasers
in connection therewith and in connection with the
preparation, printing and distribution of this Agreement,
the Basic Documents and any Blue Sky or legal investment
memoranda, (v) the printing and delivery to the Purchasers
in quantities as hereinabove stated of copies of the
Memorandum and any amendments or supplements thereto, (vi)
any fees charged by rating agencies for the rating of such
Notes, (vii) the reasonable fees and disbursements of
counsel for the Purchasers in excess of $50,000, (viii) all
fees and expenses relating to appraisals of the Aircrafts,
and (ix) all other costs and expenses incident to the
performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section.
(f) During the period beginning on the date of this
Agreement and continuing to the Closing Date, not to offer
publicly any debt securities of the Company or warrants to
purchase debt securities of the Company substantially
similar to the Notes, without the prior written consent of
the Purchasers.
(g) Neither the Company nor any Affiliate will sell,
offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the
Securities Act) which could be integrated with the sale of
the Notes in a manner which would require the registration
under the Securities Act of such Notes.
(h) Not to solicit any offer to buy or offer or sell
the Notes by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D
under the Securities Act) or in any manner involving a
public offering within the meaning of section 4(2) of the
Securities Act.
<PAGE>
(i) While any of the Notes remain outstanding, to make
available, upon request, to any seller of such Notes the
information specified in Rule 144A(d)(4) under the
Securities Act, unless the Company is then subject to
Section 13 or 15(d) of the Exchange Act.
(j) None of the Company, its Affiliates or any person
acting on its or their behalf (other than the Purchasers)
will engage in any directed selling efforts (as that term is
defined in Regulation S) with respect to the Notes, and the
Company and its Affiliates and each person acting on its or
their behalf (other than the Purchasers) will comply with
the offering restrictions of Regulation S.
6. Offering of Notes; Restrictions on Transfer. (a) Each
Purchaser, severally and not jointly, represents and warrants
that such Purchaser is a qualified institutional buyer as defined
in Rule 144A under the Securities Act (a "QIB"). Each Purchaser,
severally and not jointly, agrees with the Company that (i) it
will not solicit offers for, or offer or sell, such Notes by any
form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act) or in
any manner involving a public offering within the meaning of
section 4(2) of the Securities Act and (ii) it will solicit
offers for such Notes only from, and will offer such Notes only
to, persons that it reasonably believes to be (A) in the case of
offers inside the United States, (x) QIBs or (y) other
institutional accredited investors (as defined in Rule 501(a)
(1), (2), (3) or (7) under the Securities Act) ("institutional
accredited investors") that, prior to their purchase of the
Notes, deliver to such Purchaser a letter containing the
representations and agreements set forth in the Final Memorandum
under the caption "Transfer Restrictions" and (B) in the case of
offers outside the United States, to persons other than U.S.
persons ("foreign purchasers", which term shall include dealers
or other professional fiduciaries in the United States acting on
a discretionary basis for foreign beneficial owners (other than
an estate or trust)) that, in each case, in purchasing such Notes
are deemed to have represented and agreed as provided in the
Final Memorandum under the caption "Transfer Restrictions".
(b) Each Purchaser, severally and not jointly, represents,
warrants and agrees with respect to offers and sales outside the
United States that:
(i) it understands that no action has been or will be
taken in any jurisdiction by the Company that would permit a
public offering of the Notes, or possession or distribution
of either Memorandum or any other offering or publicity
material relating to the Notes, in any country or
jurisdiction where action for that purpose is required;
<PAGE>
(ii) such Purchaser will comply with all applicable
laws and regulations in each jurisdiction in which it
acquires, offers, sells or delivers Notes or has in its
possession or distributes either Memorandum or any such
other material, in all cases at its own expense;
(iii) the Notes have not been and will not be
registered under the Securities Act and may not be offered
or sold within the United States or to, or for the account
or benefit of, U.S. persons except in accordance with
Regulation S under the Securities Act or pursuant to an
exemption from the registration requirements of the
Securities Act;
(iv) such Purchaser has offered the Notes and will
offer and sell the Notes (A) as part of their distribution
at any time and (B) otherwise until 40 days after the later
of the commencement of the offering of the Notes and the
Closing Date, only in accordance with Rule 903 of Regulation
S or another exemption from the registration requirements of
the Securities Act. Accordingly, neither such Purchaser,
its Affiliates nor any persons acting on its or their behalf
have engaged or will engage in any directed selling efforts
(within the meaning of Regulation S) with respect to the
Notes, and any such Purchaser, its Affiliates and any such
persons have complied and will comply with the offering
restrictions requirements of Regulation S;
(v) such Purchaser (A) has not offered or sold and
will not offer or sell any Notes to persons in the United
Kingdom except to persons whose ordinary activities involve
them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of
their businesses or otherwise in circumstances which have
not resulted and will not result in an offer to the public
in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995 (the "Regulations");
(B) has complied and will comply with all applicable
provisions of the Financial Services Act 1986 and the
Regulations with respect to anything done by it in relation
to the Notes in, from or otherwise involving the United
Kingdom; and (C) has only issued or passed on and will only
issue or pass on to any person in the United Kingdom any
document received by it in connection with the issue of the
Notes if that person is of a kind described in Article 11(3)
of the Financial Services Act 1986 (Investment
Advertisements) (Exemptions) Order 1995 or is a person to
whom such document may otherwise lawfully be issued or
passed on; and
<PAGE>
(vi) such Purchaser understands that the Notes have
not been and will not be registered under the Securities and
Exchange Law of Japan, and represents that it has not
offered or sold, and agrees that it will not offer or sell,
any Notes, directly or indirectly, in Japan or to any
resident of Japan except (A) pursuant to an exemption from
the registration requirements of the Securities and Exchange
Law of Japan and (B) in compliance with any other applicable
requirements of Japanese law.
Terms used in this Section 6 have the meanings given to them by
Regulation S.
7. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each Purchaser, and each
person, if any, who controls such Purchaser within the meaning of
either section 15 of the Securities Act or section 20 of the
Exchange Act, from and against any and all losses, claims,
damages and liabilities caused by any untrue statement or alleged
untrue statement of a material fact contained in any Memorandum
(as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by any omission
or alleged omission to state therein a material fact necessary to
make the statements therein in light of the circumstances under
which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Purchaser
furnished to the Company in writing by such Purchaser through you
expressly for use therein.
(b) Each Purchaser agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its
officers and each person, if any, who controls the Company within
the meaning of either section 15 of the Securities Act or
Section 20 of the Exchange Act to the same extent as the
foregoing indemnity from the Company to such Purchaser, but only
with reference to information relating to such Purchaser
furnished to the Company in writing by such Purchaser through you
expressly for use in either Memorandum or any amendments or
supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in
respect of which indemnity may be sought pursuant to either
paragraph (a) or (b) above, such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may
be sought (the "indemnifying party") in writing and the
<PAGE>
indemnifying party, upon request of the indemnified party, shall
retain counsel reasonably satisfactory to the indemnified party
to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay
the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the
indemnified party shall have agreed to the retention of such
counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be
liable for the fees and expenses of more than one firm (in
addition to any local counsel) for all such indemnified parties
and that all such fees and expenses shall be reimbursed as they
are incurred. Such firm shall be designated in writing by Morgan
Stanley & Co. Incorporated in the case of parties indemnified
pursuant to paragraph (a) above and by the Company in the case of
parties indemnified pursuant to paragraph (b) above. The
indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled
with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by
reason of such settlement or judgment. No indemnifying party
shall, without the prior written consent of the indemnified
party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder
by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all
liability on claims that are the subject matter of such
proceeding.
(d) To the extent the indemnification provided for in
paragraph (a) or (b) of this Section 7 is unavailable to an
indemnified party or insufficient in respect of any losses,
claims, damages or liabilities, then each indemnifying party
under such paragraph, in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable
by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate
to reflect the relative benefits received by the Company, on the
<PAGE>
one hand, and the Purchasers, on the other hand, from the
offering of the Notes or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Purchasers on the
other hand in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative
benefits received by the Company on the one hand and the
Purchasers on the other hand in connection with the offering of
such Notes shall be deemed to be in the same respective
proportions as the net proceeds from the offering of such Notes
(before deducting expenses) received by the Company and the total
discounts and commissions received by the Purchasers in respect
thereof bear to the aggregate offering price of the Notes. The
relative fault of the Company on the one hand and of the
Purchasers on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the
Company or by the Purchasers and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Purchasers' respective
obligations to contribute pursuant to this Section 7 are several
in proportion to the respective principal amount of Notes they
have purchased hereunder, and not joint.
(e) The Company and the Purchasers agree that it would not
be just or equitable if contribution pursuant to this Section 7
were determined by pro rata allocation (even if the Purchasers
were treated as one entity for such purpose) or by any other
method of allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in
paragraph (d) above shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
Notwithstanding the provisions of this Section 7, no Purchaser
shall be required to contribute any amount in excess of the
amount by which the total price at which the Notes resold by it
in the initial placement of such Notes were offered to investors
exceeds the amount of any damages that such Purchaser has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
<PAGE>
of section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. The indemnity and contribution
provisions contained in this Section 7 and the representations
and warranties of the Company contained in this Agreement shall
remain operative and in full force and effect regardless of (i)
any termination of this Agreement, (ii) any investigation made by
or on behalf of the Purchasers or any person controlling the
Purchasers or by or on behalf of the Company, its officers or
directors or any person controlling the Company and (iii)
acceptance of and payment for any of the Notes. The remedies
provided for in this section 7 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
8. Termination. This Agreement shall be subject to
termination in your absolute discretion, by oral notice confirmed
in writing, given by you to the Company, which notice cites one
of the specific events set forth below that has occurred, if (a)
after the execution and delivery of this Agreement and prior to
the Closing Date (i) trading generally shall have been suspended
on or by, as the case may be, any of the New York Stock Exchange,
the American Stock Exchange, the National Association of
Securities Dealers, Inc., or the Chicago Board of Options
Exchange, (ii) trading of any securities of the Company shall
have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal
or New York State authorities or (iv) there shall have occurred
any outbreak or escalation of hostilities or any change in
financial markets or any calamity or crisis that, in your
reasonable judgment, is material and adverse and (b) in the case
of any of the events specified in clauses (a)(i) through (iv),
such event singly or together with any other such event makes it,
in your reasonable judgment, impracticable to market the Notes on
the terms and in the manner contemplated in the Final Memorandum.
9. Miscellaneous. If, on the Closing Date, any one or more
of the Purchasers shall fail or refuse to purchase Notes that it
has or they have agreed to purchase hereunder on such date, and
the aggregate principal amount of Notes which such defaulting
Purchaser or Purchasers agreed but failed or refused to purchase
is not more than one-tenth of the aggregate principal amount of
Notes to be purchased on such date, the other Purchasers shall be
obligated severally in the proportions that the principal amount
of Notes set forth opposite their respective names in Schedule I
bears to the aggregate principal amount of Notes set forth
<PAGE>
opposite the names of all such non-defaulting Purchasers, or in
such other proportions as you may specify, to purchase the Notes
which such defaulting Purchaser or Purchasers agreed but failed
or refused to purchase on such date; provided that in no event
shall the principal amount of Notes that any Purchaser has agreed
to purchase pursuant to this Agreement be increased pursuant to
this Section 9 by an amount in excess of one-ninth of such
principal amount of Notes without the written consent of such
Purchaser. If, on the Closing Date any Purchaser or Purchasers
shall fail or refuse to purchase Notes which it or they have
agreed to purchase hereunder on such date and the aggregate
principal amount of Notes with respect to which such default
occurs is more than one-tenth of the aggregate principal amount
of Notes to be purchased on such date and arrangements
satisfactory to you and the Company for the purchase of such
Notes are not made within 36 hours after such default, this
Agreement shall terminate without liability on the part of any
non-defaulting Purchaser or of the Company. In any such case
either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in
order that the required changes, if any, in the Final Memorandum
or in any other documents or arrangements may be effected. Any
action taken under this paragraph shall not relieve any
defaulting Purchaser from liability in respect of any default of
such Purchaser under this Agreement.
All notices and other communications under this Agreement
shall be in writing, unless otherwise stated herein, and shall be
deemed to have been duly given if delivered, mailed or
transmitted by any standard form of telecommunication. Notices
to you shall be directed to you, c/o Morgan Stanley & Co.
Incorporated, 1585 Broadway, New York, New York 10036, Attention:
Legal Department; and notices to the Company shall be directed to
it at USAir, Inc., Crystal Park Four, 2345 Crystal Drive,
Arlington, VA 22227, Attention: Treasurer.
This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be
deemed a part of this Agreement.
<PAGE>
Please confirm your agreement to the foregoing by signing in
the space provided below for that purpose and returning to us a
copy hereof, whereupon this Agreement shall constitute a binding
agreement between us.
Very truly yours,
USAIR, INC.
By /s/Thomas A. Fink
-------------------------
Thomas A. Fink
Treasurer
Agreed, February 9, 1996
Morgan Stanley & Co. Incorporated
Acting on behalf of itself and
the several Purchasers named herein.
By /s/Gerard Pasciucco
---------------------------------
Gerard Pasciucco
Managing Director
<PAGE>
SCHEDULE I
-----------
Morgan Stanley & Salomon Brothers
Co. Incorporated Inc.
---------------- -----------------
Principal Amount
of Class A Notes $35,600,000 $35,600,000
Principal Amount
of Class B Notes $13,700,000 $13,700,000
Principal Amount
of Class C Notes $16,450,000 $16,450,000
----------- -----------
$65,750,000 $65,750,000
=========== ===========
Chase Securities Lehman Brothers
Inc. Inc.
---------------- -----------------
Principal Amount
of Class A Notes $35,600,000 $35,600,000
Principal Amount
of Class B Notes $13,700,000 $13,700,000
Principal Amount
of Class C Notes $16,450,000 $16,450,000
----------- -----------
$65,750,000 $65,750,000
=========== ===========
<PAGE>
EXHIBIT A
FORM OF REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of February 16, 1996, between USAIR, INC., a
Delaware corporation (the "Company"), MORGAN STANLEY & CO.
INCORPORATED (the "Manager"), SALOMON BROTHERS INC, CHASE
SECURITIES, INC. and LEHMAN BROTHERS INC. (together with the
Manager, the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated February 9, 1996, between the Company and the Purchasers
(the "Purchase Agreement"), which provides for the sale by the
Company to the Purchasers of (i) $142,400,000 aggregate principal
amount of its 6.76% Class A Equipment Notes (the "Class A
Notes"), (ii) $54,800,000 aggregate principal amount of its 7.50%
Class B Equipment Notes (the "Class B Notes") and (iii)
$65,800,000 aggregate principal amount of its 8.93% Class C
Equipment Notes (the "Class C Notes", together with the Class A
Notes and the Class B Notes, the "Notes"). In order to induce
the Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide to the Purchasers and their direct and
indirect transferees the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, terms not
otherwise defined shall have the following meanings or if not
defined herein, as defined in the Collateral Agency Agreement
dated February 15, 1996, among the Company, Wilmington Trust
Company and the other parties named therein:
"Applicable Indenture" shall mean, (i) with respect to the
Class A Notes, the Class A Holders or the Class A Indenture
Trustee, the Class A Indenture, (ii) with respect to the Class B
Notes, the Class B Holders or the Class B Indenture Trustee, the
Class B Indenture and (iii) with respect to the Class C Notes,
the Class C Holders or the Class C Indenture Trustee, the Class C
Indenture.
<PAGE>
"Class A Exchange Notes" shall mean securities issued by the
Company under the Class A Indenture of equal outstanding
principal amount as and containing terms identical to the Class A
Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Class A Notes or, if
no such interest has been paid, from February 16, 1996, (ii) the
transfer restrictions thereon shall be modified or eliminated, as
appropriate and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Holders of the Class A Notes in exchange for such
Class A Notes pursuant to the Exchange Offer.
"Class A Holder" shall mean each Purchaser, for so long as it
owns any Class A Registrable Notes, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of Class A Registrable Notes under the Class A Indenture;
provided that for purposes of Sections 4 and 5 of this Agreement,
the term "Class A Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"Class A Indenture" shall mean the Class A Trust Indenture
relating to the Class A Notes dated as of February 15, 1996
between the Company and the Class A Indenture Trustee, as the
same may be amended from time to time in accordance with the
terms thereof.
"Class A Indenture Trustee" shall mean Wilmington Trust
Company, not in its individual capacity except as expressly set
forth in the Class A Indenture, but solely as Indenture Trustee
under the Class A Indenture, together with any successor
Indenture Trustee under the terms of the Class A Indenture.
"Class A Notes" shall have the meaning set forth in the second
paragraph of this Agreement.
"Class A Registrable Notes" shall mean the Class A Notes;
provided, however, that the Class A Notes shall cease to be Class
A Registrable Notes upon the earlier to occur of (i) the
consummation of the Exchange Offer, (ii) a Registration Statement
with respect to such Class A Notes shall have been declared
effective under the Securities Act and such Class A Notes shall
have been disposed of pursuant to such Registration Statement,
(iii) such Class A Notes shall have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act or (iv) such Class A
Notes shall have ceased to be outstanding.
<PAGE>
"Class B Exchange Notes" shall mean securities issued by the
Company under the Class B Indenture of equal outstanding
principal amount as and containing terms identical to the Class B
Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Class B Notes or, if
no such interest has been paid, from February 16, 1996, (ii) the
transfer restrictions thereon shall be modified or eliminated, as
appropriate and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Holders of the Class B Notes in exchange for such
Class B Notes pursuant to the Exchange Offer.
"Class B Holder" shall mean each Purchaser, for so long as it
owns any Class B Registrable Notes, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of Class B Registrable Notes under the Class B Indenture;
provided that for purposes of Sections 4 and 5 of this Agreement,
the term "Class B Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"Class B Indenture" shall mean the Class B Trust Indenture
relating to the Class B Notes dated as of February 15, 1996
between the Company and the Class B Indenture Trustee, as the
same may be amended from time to time in accordance with the
terms thereof.
"Class B Indenture Trustee" shall mean Wilmington Trust
Company, not in its individual capacity except as expressly set
forth in the Class B Indenture, but solely as Indenture Trustee
under the Class B Indenture, together with any successor
Indenture Trustee under the terms of the Class B Indenture.
"Class B Notes" shall have the meaning set forth in the second
paragraph of this Agreement.
"Class B Registrable Notes" shall mean the Class B Notes;
provided, however, that the Class B Notes shall cease to be Class
B Registrable Notes upon the earlier to occur of (i) the
consummation of the Exchange Offer, (ii) a Registration Statement
with respect to such Class B Notes shall have been declared
effective under the Securities Act and such Class B Notes shall
have been disposed of pursuant to such Registration Statement,
(iii) such Class B Notes shall have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act or (iv) such Class B
Notes shall have ceased to be outstanding.
<PAGE>
"Class C Exchange Notes" shall mean securities issued by the
Company under the Class C Indenture of equal outstanding
principal amount as and containing terms identical to the Class C
Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Class C Notes or, if
no such interest has been paid, from February 16, 1996, (ii) the
transfer restrictions thereon shall be modified or eliminated, as
appropriate and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Holders of the Class C Notes in exchange for such
Class C Notes pursuant to the Exchange Offer.
"Class C Holder" shall mean each Purchaser, for so long as it
owns any Class C Registrable Notes, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of Class C Registrable Notes under the Class C Indenture;
provided that for purposes of Sections 4 and 5 of this Agreement,
the term "Class C Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"Class C Indenture" shall mean the Class C Trust Indenture
relating to the Class C Notes dated as of February 15, 1996
between the Company and the Class C Indenture Trustee, as the
same may be amended from time to time in accordance with the
terms thereof.
"Class C Indenture Trustee" shall mean Wilmington Trust
Company, not in its individual capacity except as expressly set
forth in the Class C Indenture, but solely as Indenture Trustee
under the Class C Indenture, together with any successor
Indenture Trustee under the terms of the Class C Indenture.
"Class C Notes" shall have the meaning set forth in the second
paragraph of this Agreement.
"Class C Registrable Notes" shall mean the Class C Notes;
provided, however, that the Class C Notes shall cease to be Class
C Registrable Notes upon the earlier to occur of (i) the
consummation of the Exchange Offer, (ii) a Registration Statement
with respect to such Class C Notes shall have been declared
effective under the Securities Act and such Class C Notes shall
have been disposed of pursuant to such Registration Statement,
(iii) such Class C Notes shall have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act or (iv) such Class C
Notes shall have ceased to be outstanding.
"Closing Date" shall mean the Closing Date as defined in the
Purchase Agreement.
<PAGE>
"Company" shall have the meaning set forth in the preamble and
also includes the Company's successors.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Notes for Registrable Notes pursuant to Section 2(a)
hereof.
"Exchange Offer Registration" shall mean a registration under
the Securities Act effected in accordance with Section 2(a)
hereof.
"Exchange Offer Registration Statement" shall mean an exchange
offer registration statement on Form S-4 (or, if applicable, on
another appropriate form), and all amendments and supplements to
such registration statement, in each case including the
Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchange Notes" shall mean, together, the Class A Exchange
Notes, the Class B Exchange Notes and the Class C Exchange Notes.
"Holder" shall mean a Class A Holder, a Class B Holder or a
Class C Holder.
"Indenture" shall mean the Class A Indenture, the Class B
Indenture or the Class C Indenture, as applicable, and when used
in the plural shall mean, together, the Class A Indenture, the
Class B Indenture and the Class C Indenture.
"Indenture Trustee" shall mean the Class A Indenture Trustee,
the Class B Indenture Trustee or the Class C Indenture Trustee as
applicable, and when used in the plural shall mean, together, the
Class A Indenture Trustee, the Class B Indenture Trustee and the
Class C Indenture Trustee.
"Majority Holders" shall mean, together, the Holders of a
majority in aggregate principal amount of each class of
Registrable Notes then outstanding; provided that whenever the
consent or approval of Holders of a specified percentage of any
such Class of Registrable Notes is required hereunder,
Registrable Notes held by the Company or any of its affiliates
(as such term is defined in Rule 405 under the Securities Act)
(other than the Purchasers or subsequent holders of Registrable
Notes if such subsequent holders are deemed to be such affiliates
solely by reason of their holding of such Registrable Notes)
shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage or
amount.
<PAGE>
"Manager" shall have the meaning set forth in the preamble.
"Notes" shall have the meaning set forth in the second
paragraph of this Agreement.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency
or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and
any such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Notes
covered by a Shelf Registration Statement, and by all other
amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Purchaser" shall have the meaning set forth in the preamble.
"Registrable Notes" shall mean, together, the Class A
Registrable Notes, the Class B Registrable Notes and the Class C
Registrable Notes.
"Registration Expenses" shall mean, except as provided in the
Purchase Agreement, any and all expenses incurred incident to
performance of or compliance by the Company with this Agreement,
including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection
with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of one counsel for any
underwriters in connection with blue sky qualification of any of
the Exchange Notes or Registrable Notes), (iii) all expenses of
any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement,
any Prospectus, any amendments or supplements thereto, (iv) the
reasonably incurred out-of-pocket fees and expenses incurred by
any underwriter in connection with the preparation of any
underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this
Agreement, (v) all rating agency fees, (vi) all fees and
disbursements relating to the qualification of the Indentures
<PAGE>
under applicable securities laws, (vii) the fees and reasonably
incurred out-of-pocket disbursements of the Indenture Trustees
and their counsel, (viii) the fees and disbursements of counsel
for the Company and, in the case of a Shelf Registration
Statement, the fees and reasonably incurred out-of- pocket
disbursements of one counsel for the Holders (which counsel, in
the latter case, shall be selected by the Majority Holders and
which counsel may also be counsel for the Purchasers) and (ix)
the fees and disbursements of the independent public accountants
of the Company and any partnership or joint venture in which the
Company or any of its subsidiaries is a partner, including the
expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, but excluding
fees of counsel to the underwriters (other than fees and expenses
set forth in clause (ii) above) or the Holders (other than fees
and expenses set forth in clause (viii) above) and underwriting
discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement
of the Company that covers any of the Exchange Notes or
Registrable Notes pursuant to the provisions of this Agreement,
and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Shelf Registration" shall mean a registration effected in
accordance with Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions
of Section 2(b) of this Agreement that covers all of the
Registrable Notes (but no other securities unless approved by the
Person or Persons who have requested the Company to file the
Shelf Registration Statement) on an appropriate form under Rule
415 under the Securities Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in
each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference
therein.
<PAGE>
"Underwriter" shall have the meaning set forth in Section 2(c)
of this Agreement.
"Underwritten Registration" or "Underwritten Offering" shall
mean a registration in which Registrable Notes are sold to an
Underwriter for reoffering to the public.
2. Registration Under the Securities Act. (a) Exchange
Offer Registration. To the extent not prohibited by any
applicable law or applicable interpretation of the Staff of the
SEC, the Company shall use its best efforts (i) to cause to be
filed after the Closing Date an Exchange Offer Registration
Statement covering the offer by the Company to the Holders to
exchange (A) all of the Class A Registrable Notes for Class A
Exchange Notes, (B) all of the Class B Registrable Notes for
Class B Exchange Notes and (C) all of the Class C Registrable
Notes for Class C Exchange Notes and (ii) to have such
Registration Statement remain effective until the closing of the
Exchange Offer. The Company shall commence the Exchange Offer
promptly after the Exchange Offer Registration Statement has been
declared effective by the SEC and use its best efforts to have
the Exchange Offer consummated not later than 60 days after such
effective date. The Company shall commence the Exchange Offer by
mailing the related exchange offer Prospectus and accompanying
documents to each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Registrable Notes validly tendered will
be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be
each business day during a period of at least 20 days from the
date such notice is mailed) (the "Exchange Dates");
(iii) that any Registrable Note not tendered will remain
outstanding and continue to accrue interest, but will not
retain any rights under this Agreement;
(iv) that Holders electing to have a Registrable Note
exchanged pursuant to the Exchange Offer will be required to
surrender such Registrable Note, together with the enclosed
letters of transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New York)
specified in the notice prior to the close of business on the
last Exchange Date; and
<PAGE>
(v) that Holders will be entitled to withdraw their
election, not later than the close of business on the last
Exchange Date, by sending to the institution and at the
address (located in the Borough of Manhattan, The City of New
York) specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder,
the principal amount of Registrable Notes delivered for
exchange, and a statement that such Holder is withdrawing his
election to have such Notes exchanged.
As soon as practicable after the last Exchange Date, the
Company or its agent shall:
(i) accept for exchange Registrable Notes or portions
thereof tendered and not validly withdrawn pursuant to the
Exchange Offer;
(ii) deliver, or cause to be delivered, to the Class A
Indenture Trustee for cancellation all Class A Registrable
Notes or portions thereof so accepted for exchange by the
Company, and issue, and cause the Class A Indenture Trustee to
promptly authenticate and mail to each Class A Holder, Class A
Exchange Notes equal in principal amount to the principal
amount of the Class A Registrable Notes surrendered by such
Class A Holder;
(iii) deliver, or cause to be delivered, to the Class B
Indenture Trustee for cancellation all Class B Registrable
Notes or portions thereof so accepted for exchange by the
Company, and issue, and cause the Class B Indenture Trustee to
promptly authenticate and mail to each Class B Holder, Class B
Exchange Notes equal in principal amount to the principal
amount of the Class B Registrable Notes surrendered by such
Class B Holder; and
(iv) deliver, or cause to be delivered, to the Class C
Indenture Trustee for cancellation all Class C Registrable
Notes or portions thereof so accepted for exchange by the
Company, and issue, and cause the Class C Indenture Trustee to
promptly authenticate and mail to each Class C Holder, Class C
Exchange Notes equal in principal amount to the principal
amount of the Class C Registrable Notes surrendered by such
Class C Holder.
<PAGE>
The Company shall use its best efforts to complete the
Exchange Offer as provided above and shall comply with the
applicable requirements of the Securities Act, the Exchange Act
and other applicable laws and regulations in connection with the
Exchange Offer. The Exchange Offer shall not be subject to any
conditions, other than that the Exchange Offer does not violate
applicable law or any applicable interpretation of the Staff of
the SEC and that no order of any governmental agency or court of
competent jurisdiction would be violated by consummating the
Exchange Offer. The Company shall inform the Purchasers of the
names and addresses of the Holders to whom the Exchange Offer is
made, and the Purchasers shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate
the tender of Registrable Notes in the Exchange Offer.
(b) Shelf Registration. (i) In the event that (A) the
Company determines that the Exchange Offer Registration provided
in Section 2(a) above is not available or may not be consummated
as soon as practicable after the last Exchange Date because it
would violate applicable law or the applicable interpretations of
the staff of the SEC or because it would materially interfere
with other business activities of the Company, or (B) in the
opinion of counsel for the Purchasers or the Company a
Registration Statement must be filed and a Prospectus must be
delivered by the Purchasers in connection with any offering or
sale of Registrable Notes, the Company shall use its best efforts
to cause to be filed as soon as practicable after such
determination, date or notice of such opinion of counsel is given
to the Company, as the case may be, a Shelf Registration
Statement providing for the sale by the Holders of all of the
Registrable Notes, and to have such Shelf Registration Statement
declared effective by the SEC. In the event the Company is
required to file a Shelf Registration Statement solely as a
result of the matters referred to in clause (B) of the preceding
sentence, the Company shall file and have declared effective by
the SEC both an Exchange Offer Registration Statement pursuant to
Section 2(a) with respect to all Registrable Notes and a Shelf
Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement to the
extent permitted by applicable law) with respect to offers and
sales of Registrable Notes held by the Holders after completion
of the Exchange Offer. The Company agrees to use its best
efforts to keep the Shelf Registration Statement continuously
effective until the third anniversary of the Closing Date or such
shorter period that will terminate when all of the Registrable
Notes covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement. The Company
further agrees to supplement or amend the Shelf Registration
<PAGE>
Statement, if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such
Shelf Registration Statement or by the Securities Act or by any
other rules and regulations thereunder for shelf registration or
if reasonably requested by a Holder with respect to information
relating to such Holder, and to use its best efforts to cause any
such amendment to become effective and such Shelf Registration
Statement to become usable as soon as thereafter practicable.
The Company agrees to furnish to the Holders of Registrable Notes
copies of any such supplement or amendment promptly after its
being used or filed with the SEC.
(ii) Each Holder whose Registrable Notes are covered by a
Shelf Registration Statement filed pursuant to this Section 2(b)
agrees, upon the request of the managing Underwriter in any
Underwritten Offering permitted pursuant to this Agreement, not
to effect any public sale or distribution of securities of the
Company of the same class as the Registrable Notes included in
such Shelf Registration Statement (except as part of such
registration), including a sale pursuant to Rule 144 under the
Securities Act, during the 10-day period prior to, and during the
90-day period beginning on, the closing date of any such
Underwritten Offering made pursuant to such Shelf Registration
Statement, to the extent timely notified in writing by the
Company or such Underwriter(s).
The foregoing provision shall not apply to any Holder of
Registrable Notes if such Holder is prevented by applicable
statute or regulation from entering into any such agreement;
provided, however, that any such Holder shall undertake, in its
request to participate in any such Underwritten Offering, not to
effect any public sale or distribution of any of its Registrable
Notes not sold in such Underwritten Offering, commencing on the
date of sale of such Registrable Notes unless it has provided 45
days' prior written notice of such sale or distribution to the
Underwriter(s).
(iii) The Company agrees not to effect any public or private
offer, sale or distribution of securities of the same quality and
nature as the Registrable Notes, including a sale pursuant to
Regulation D under the Act, during the 10-day period prior to,
and during the 90-day period beginning on, the closing date of
each Underwritten Offering permitted pursuant to Section 3(q)
hereof made pursuant to the Shelf Registration Statement, to the
extent timely notified in writing by the Underwriter(s), and to
use its best efforts to cause each holder of securities of the
same quality and nature as the Registrable Notes purchased from
the Company at any time on or after the date of this Agreement to
agree not to effect any public sale or distribution of any such
<PAGE>
securities during such period (except as part of such
registration), including a sale pursuant to Rule 144 under the
Securities Act.
(c) The Holders of Registrable Notes covered by a Shelf
Registration Statement who desire to do so may sell such
Registrable Notes in an Underwritten Offering. In any such
Underwritten Offering, the investment banker or investment
bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Majority Holders
of the Registrable Notes included in such offering.
(d) Expenses. The Company shall pay all reasonably incurred
Registration Expenses in connection with the registration
pursuant to Section 2(a) or 2(b). Each Holder shall pay all
underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder's
Registrable Notes pursuant to the Shelf Registration Statement.
(e) Effective Registration Statement. An Exchange Offer
Registration Statement pursuant to Section 2(a) hereof or a Shelf
Registration Statement pursuant to Section 2(b) hereof will not
be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has
been declared effective, the offering of Registrable Notes
pursuant to a Shelf Registration Statement is interfered with by
any stop order, injunction or other order or requirement of the
SEC or any other governmental agency or court, such Shelf
Registration Statement will be deemed not to have been effective
during the period of such interference until the offering of
Registrable Notes pursuant to such Registration Statement may
legally resume.
(f) Increase in Interest Rate. In the event that, for any
reason, either (i) the Exchange Offer is not consummated or (ii)
a Shelf Registration Statement is not declared effective (each, a
"Registration Event"), in either case, on or prior to August 16,
1996, the interest rate on each Class of Notes shall be
temporarily increased by one-half of one percent per annum for
the semiannual period commencing October 15, 1996. The one-half
of one percent per annum increase over the original interest rate
on the Notes will be permanent (and will apply to all future
interest periods and to the Exchange Notes) if a Registration
Event has not occurred on or prior to February 16, 1997.
<PAGE>
(g) Specific Enforcement. Without limiting the remedies
available to the Purchasers and the Holders, the Company
acknowledges that any failure by the Company to comply with its
obligations under Section 2(a) and Section 2(b) hereof may result
in material irreparable injury to the Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that,
in the event of any such failure, any Purchaser or any Holder may
obtain such relief as may be required to specifically enforce the
Company's obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration
Statements pursuant to Sections 2(a) and 2(b) hereof, the Company
shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement
on the appropriate form under the Securities Act, which form
(x) shall be selected by the Company and (y) shall, in the
case of a Shelf Registration, be available for the sale of the
Registrable Notes by the selling Holders thereof and (z) shall
comply as to form in all material respects with the
requirements of the applicable form and include all financial
statements required by the SEC to be filed therewith, and use
its best efforts to cause such Registration Statement to
become effective and remain effective in accordance with
Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as
may be necessary to (x) keep such Registration Statement
effective for the applicable period under this Agreement, and
(y) cause each Prospectus to be supplemented by any required
prospectus supplement and, as so supplemented, to be filed
pursuant to Rule 424 under the Securities Act and (z) keep
each Prospectus current during the period described under
Section 4(3) and Rule 174 under the Securities Act that is
applicable to transactions by brokers or dealers with respect
to the Registrable Notes or Exchange Notes;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes, to counsel for the Purchasers, to
counsel for the Holders and to each Underwriter of an
Underwritten Offering of Registrable Notes, if any, and each
such Underwriter's Counsel, without charge, as many copies of
each Prospectus, including each preliminary Prospectus, and
any amendment or supplement thereto and such other documents
<PAGE>
as such Holder or Underwriter may reasonably request, in order
to facilitate the public sale or other disposition of the
Registrable Notes; and the Company consents to the use of such
Prospectus and any amendment or supplement thereto in
accordance with applicable law by each of the selling Holders
of Registrable Notes and any such Underwriters in connection
with the offering and sale of the Registrable Notes covered by
and in the manner described in such Prospectus or any
amendment or supplement thereto in accordance with applicable
law;
(d) use its best efforts to register or qualify the
Registrable Notes under all applicable state securities or
"blue sky" laws of such jurisdictions as any Holder of
Registrable Notes covered by a Registration Statement shall
reasonably request in writing by the time the applicable
Registration Statement is declared effective by the SEC, to
cooperate with such Holders in connection with any filings
required to be made with the National Association of
Securities Dealers, Inc. and do any and all other acts and
things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Notes owned by such Holder;
provided, however, that the Company shall not be required to
(i) qualify as a foreign corporation or as a dealer in
securities in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (ii) file any
general consent to service of process or (iii) subject itself
to taxation in any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder
of Registrable Notes, counsel for the Holders and counsel for
the Purchasers promptly and, if requested by any such Holder,
confirm such advice in writing, (i) when a Shelf Registration
Statement has become effective and when any post-effective
amendments and supplements thereto have been filed and become
effective, (ii) of any request by the SEC or any state
securities authority for amendments and supplements to a Shelf
Registration Statement and Prospectus or for additional
information after the Shelf Registration Statement has become
effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the
effectiveness of a Shelf Registration Statement or the
initiation of any proceedings for that purpose, (iv) if,
between the effective date of a Shelf Registration Statement
and the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of the Company
contained in any underwriting agreement, securities sales
<PAGE>
agreement or other similar agreement, if any, relating to such
offering cease to be true and correct in all material respects
or if the Company receives any notification with respect to
the suspension of the qualification of the Registrable Notes
for sale in any jurisdiction or the initiation of any
proceeding for such purpose, (v) of the happening of any event
during the period a Shelf Registration Statement is effective
which makes any statement made in such Shelf Registration
Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such
Shelf Registration Statement or Prospectus in order to make
the statements therein not misleading, and (vi) of any
determination by the Company that a post-effective amendment
to a Shelf Registration Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal
of any order suspending the effectiveness of a Registration
Statement at the earliest possible moment and provide prompt
notice to each Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes, without charge, at least one
conformed copy of each Registration Statement and any
post-effective amendment thereto (without documents
incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely
preparation and delivery of certificates representing
Registrable Notes to be sold and not bearing any restrictive
legends and enable such Registrable Notes to be in such
denominations (consistent with the provisions of the
Applicable Indenture) and registered in such names as the
selling Holders may reasonably request at least two business
days prior to the closing of any sale of Registrable Notes;
(i) in the case of a Shelf Registration, upon the
occurrence of any event contemplated by Section 3(e)(v)
hereof, use its best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the
related Prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable
Notes, such Prospectus will not contain any untrue statement
of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances
<PAGE>
under which they were made, not misleading; the Company agrees
to notify each Holder to suspend use of the Prospectus as
promptly as practicable after the occurrence of such an event,
and each Holder hereby agrees to suspend use of the Prospectus
until the Company has amended or supplemented the Prospectus
to correct such misstatement or omission;
(j) within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a
Prospectus or any document which is to be incorporated by
reference into a Registration Statement or a Prospectus after
initial filing of a Registration Statement, provide copies of
such document to the Purchasers and their counsel (and, in the
case of a Registration Statement, the Holders and their
counsel) and make such of the representatives of the Company
as shall be reasonably requested by the Purchasers or their
counsel (and, in the case of a Registration Statement, the
Holders or their counsel) available for discussion of such
document, and shall not at any time file or make any amendment
to the Registration Statement, any Prospectus or any amendment
of or supplement to a Registration Statement or a Prospectus
or any document which is to be incorporated by reference into
a Registration Statement or a Prospectus, of which the
Purchasers and their counsel (and, in the case of a
Registration Statement, the Holders and their counsel) shall
not have previously been advised and furnished a copy or in a
form to which the Purchasers or their counsel (and, in the
case of a Registration Statement, the Holders or their
counsel) shall object;
(k) obtain a CUSIP number for all Exchange Notes or
Registrable Notes, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indentures to be qualified under the Trust
Indenture Act of 1939 (the "TIA") in connection with the
registration of the Exchange Notes or Registrable Notes, as
the case may be, cooperate with the Indenture Trustees and the
Holders to effect such changes to the Indentures as may be
required for the Indentures to be so qualified in accordance
with the terms of the TIA and execute, and use its best
efforts to cause the Indenture Trustees to execute, all
documents as may be required to effect such changes, and all
other forms and documents required to be filed with the SEC to
enable the Indentures to be so qualified in a timely manner;
<PAGE>
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the
Registrable Notes, any Underwriters participating in any
disposition pursuant to such Shelf Registration Statement, and
attorneys and accountants designated by the Holders, at
reasonable times and in a reasonable manner, all financial and
other records, pertinent documents and properties of the
Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably
requested by any such representative, Underwriter, attorney or
accountant in connection with a Shelf Registration Statement;
(n) in the case of a Shelf Registration, use its reasonable
best efforts to cause all Registrable Notes to be listed on
any securities exchange or any automated quotation system on
which similar securities issued by the Company are then listed
if requested by the Majority Holders, to the extent such
Registrable Notes satisfy applicable listing requirements;
(o) use its reasonable best efforts to cause the Exchange
Notes or Registrable Notes, as the case may be, to be rated by
two nationally recognized statistical rating organizations (as
such term is defined in Rule 436(g)(2) under the Securities
Act);
(p) if reasonably requested by any Holder of Registrable
Notes covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective
amendment such information with respect to such Holder as such
Holder reasonably requests to be included therein and (ii)
make all required filings of such Prospectus supplement or
such post-effective amendment as soon as the Company has
received satisfactory notification of the matters to be
incorporated in such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in
connection therewith (including those requested by the
Majority Holders of the class of Registrable Notes being sold)
in order to expedite or facilitate the disposition of such
Registrable Notes including, but not limited to, an
Underwritten Offering and in such connection, (i) to the
extent possible, make such representations and warranties to
the Holders and any Underwriters of such Registrable Notes
with respect to the business of the Company and its
subsidiaries and its or its subsidiaries' joint ventures, the
Registration Statement, Prospectus and documents incorporated
by reference or deemed incorporated by reference, if any, in
<PAGE>
each case, in form, substance and scope as are customarily
made by issuers to underwriters in underwritten offerings and
confirm the same if and when requested, (ii) obtain opinions
of counsel to the Company (which counsel and opinions, in
form, scope and substance, shall be reasonably satisfactory to
the Holders of a majority in principal amount of the
Registrable Notes to be sold in such Underwritten Offering and
any Underwriters and their respective counsel) addressed to
each selling Holder and Underwriter, if any, of Registrable
Notes, covering the matters customarily covered in opinions
requested in underwritten offerings, (iii) obtain "cold
comfort" letters from the independent certified public
accountants of the Company (and, if necessary, any other
certified public accountant of any subsidiary of the Company
or any joint venture in which the Company or any of its
subsidiaries is a partner, or of any business acquired by the
Company for which financial statements and financial data are
or are required to be included in the Registration Statement)
addressed to each selling Holder and Underwriter, if any, of
Registrable Notes, such letters to be in customary form and
covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings,
and (iv) deliver such documents and certificates as may be
reasonably requested by the Holders of a majority in principal
amount of the Registrable Notes being sold or the
Underwriters, and which are customarily delivered in
underwritten offerings, to evidence the continued validity of
the representations and warranties of the Company made
pursuant to clause (i) above and to evidence compliance with
any customary conditions contained in an underwriting
agreement.
In the case of a Shelf Registration Statement, the Company may
require each Holder of Registrable Notes to furnish to the
Company such information regarding the Holder and the proposed
distribution by such Holder of such Registrable Notes as the
Company may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e)(v)
hereof, such Holder will forthwith discontinue disposition of
Registrable Notes pursuant to a Shelf Registration Statement
until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the
Company (at its expense) all copies in its possession, other than
<PAGE>
permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Notes current at the time of
receipt of such notice. If the Company shall give any such
notice to suspend the disposition of Registrable Securities
pursuant to a Registration Statement, the Company shall extend
the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of
days during the period from and including the date of the giving
of such notice to and including the date when the Holders shall
have received copies of the supplemented or amended Prospectus
necessary to resume such dispositions.
4. Participation of Broker-Dealers in Exchange Offer. (a)
The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Notes for its own account in
the Exchange Offer in exchange for Notes that were acquired by
such broker-dealer as a result of market making or other trading
activities (a "Participating Broker-Dealer") may be deemed to be
an "underwriter" within the meaning of the Securities Act and
must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange
Notes.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration
Statement includes a plan of distribution containing a statement
to the above effect and the means by which Participating
Broker-Dealers may resell the Exchange Notes, without naming the
Participating Broker-Dealers or specifying the amount of Exchange
Notes owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery
obligation under the Securities Act in connection with resales of
Exchange Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the Securities Act.
(b) In light of Section 4(a) above, notwithstanding the other
provisions of this Agreement, the Company agrees that the
provisions of this Agreement as they relate to a Shelf
Registration shall also apply to an Exchange Offer Registration
to the extent, and with such reasonable modifications thereto as
may be reasonably requested by the Purchasers or by one or more
Participating Broker-Dealers, in each case as provided in clause
(ii) below, in order to expedite or facilitate the disposition of
any Exchange Notes by Participating Broker-Dealers consistent
with the positions of the Staff recited in Section 4(a) above;
provided that:
<PAGE>
(i) the Company shall not be required to amend or
supplement the Prospectus contained in the Exchange Offer
Registration Statement, as would otherwise be contemplated by
Section 3(i), for a period exceeding 180 days after the last
Exchange Date (as extended by the number of days during such
180 day period from, and including the date of, the giving by
the Company of a notice pursuant to Section 3(e)(v) of this
Agreement to, and including the date when, the Company shall
have made available to the Holders copies of a supplemented or
amended Prospectus pursuant to Section 3(i) hereof) and
Participating Broker-Dealers shall not be authorized by the
Company to deliver and shall not deliver such Prospectus after
such period in connection with the resales contemplated by
this Section 4; and
(ii) the application of the Shelf Registration procedures
set forth in Section 3 of this Agreement to an Exchange Offer
Registration, to the extent not required by the positions of
the Staff of the SEC or the Securities Act and the rules and
regulations thereunder, will be in conformity with the
reasonable request to the Company in writing by the Purchasers
or with the reasonable request in writing to the Company by
one or more broker-dealers who certify to the Purchasers and
the Company in writing that they are, or anticipate that they
will be, Participating Broker-Dealers; provided that in
connection with such application of the Shelf Registration
procedures set forth in Section 3 to an Exchange Offer
Registration, the Company shall be obligated (A) to deal only
with one entity representing the Participating Broker-Dealers,
which shall be the Manager unless it elects not to act as such
representative, (B) to pay the fees and expenses of only one
counsel representing the Participating Broker-Dealers, which
shall be counsel to the Purchasers unless such counsel elects
not to so act, and (C) to cause to be delivered only one, if
any, "cold comfort" letter with respect to the Prospectus in
the form existing on the last Exchange Date and with respect
to each subsequent amendment or supplement, if any, effected
during the period specified in clause (i) above.
(c) The Purchasers shall have no liability to the Company or
any Holder with respect to any request that they may make
pursuant to Section 4(b) above.
<PAGE>
5. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each Purchaser, each Holder
and each person, if any, who controls a Purchaser or any Holder
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment
thereto) pursuant to which Exchange Notes or Registrable Notes
were registered under the Securities Act, including all documents
incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to
make the statements therein in light of the circumstances under
which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such
untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Purchaser or any
Holder furnished to the Company in writing by any Purchaser
through you or any selling Holder expressly for use therein.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Purchasers, and the
other selling Holders, and each of their respective directors and
officers who sign the Registration Statement and each Person, if
any, who controls the Company, the Purchasers, and any other
selling Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to the
Purchasers and the Holders, but only with reference to
information relating to such Holder furnished to the Company in
writing by such Holder expressly for use in the Registration
Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in
respect of which such person is entitled to indemnity pursuant to
either paragraph (a) or (b) above, such person (the "indemnified
party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified
<PAGE>
party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay
the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be
liable for (A) the fees and expenses of more than one separate
firm (in addition to any local counsel) for all Purchasers and
all persons, if any, who control any Purchasers within the
meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act, (B) the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Company,
its directors, its officers who sign the Registration Statement
and each person, if any, who controls the Company within the
meaning of either such Section and (C) the fees and expenses of
more than one separate firm (in addition to any local counsel)
for all Holders and all persons, if any, who control any Holders
within the meaning of either such Section, and that all such fees
and expenses shall be reimbursed as they are incurred. In such
case involving the Purchasers and such persons who control the
Purchasers, such firm shall be designated in writing by the
Manager. In such case involving the Holders and such persons who
control Holders, such firm shall be designated in writing by the
Majority Holders. In all other cases, such firm shall be
designated by the Company. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be
a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of
such proceeding.
<PAGE>
(d) If the indemnification provided for in paragraph (a) or
(b) of this Section 5 is unavailable to or insufficient to hold
harmless an indemnified party, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the indemnifying party or parties
on the one hand and of the indemnified party or parties on the
other hand in connection with such statements or omissions that
resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative
fault of the Company and the Holders shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by the Company or by the Holders and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this
Section 5(d) are several in proportion to the respective
principal amount of Registrable Notes of such Holder that were
registered pursuant to the applicable Registration Statement.
(e) The Company and each Holder agree that it would not be
just or equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in paragraph
(d) above shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to
indemnify or contribute any amount in excess of the amount by
which the total price at which the Registrable Notes sold by such
Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or
remedies provided which may otherwise be available to any
indemnified party at law or in equity.
<PAGE>
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Purchaser, any Holder
or any person controlling any Purchaser or any Holder, or by or
on behalf of the Company, its officers or directors or any person
controlling the Company, (iii) acceptance of any of the Exchange
Notes and (iv) any sale of Registrable Notes pursuant to a Shelf
Registration Statement.
6. Miscellaneous. (a) No Inconsistent Agreements. The
Company has not entered into, and on or after the date of this
Agreement will not enter into, any agreement which is
inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the
Company's other issued and outstanding securities under any such
agreements.
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
Company has obtained the written consent of Majority Holders
affected by such amendment, modification, supplement, waiver or
consent; provided, however, that no amendment, modification,
supplement, waiver or consent to the departure with respect to
the provisions of Section 5 hereof shall be effective as against
any Holder of Registrable Notes unless consented to in writing by
such Holder of Registrable Notes.
(c) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or
any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to the Company
by means of a notice given in accordance with the provisions of
this Section 6(c), which address initially is, with respect to
each Purchaser, c/o Morgan Stanley & Co. Incorporated, at the
address set forth in the Purchase Agreement; and (ii) if to the
Company, initially at the Company's address set forth in the
Purchase Agreement and thereafter at such other address, notice
of which is given in accordance with the provisions of this
Section 6(c).
<PAGE>
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and on the next business
day if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to
each Indenture Trustee, at the address specified in the
Applicable Indenture.
(d) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and
transferees of each of the parties, including, without limitation
and without the need for an express assignment, subsequent
Holders; provided that nothing herein shall be deemed to permit
any assignment, transfer or other disposition of Registrable
Notes in violation of the terms of the Purchase Agreement. If
any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such
Registrable Notes shall be held subject to all of the terms of
this Agreement, and by taking and holding such Registrable Notes,
such Person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the
benefits hereof. Each Purchaser (in its capacity as a Purchaser)
shall have no liability or obligation to the Company with respect
to any failure by any other Holder to comply with, or any breach
by any other Holder of, any of the obligations of such other
Holder under this Agreement.
(e) Purchases and Sale of Notes. The Company shall not, and
shall use its best efforts to cause its affiliates (as defined in
Rule 405 under the Securities Act), not to purchase and then
resell or otherwise transfer any Notes.
(f) Third Party Beneficiary. The Holders shall be third
party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Purchasers, on the other hand,
and the Purchasers and the Holders shall have the right to
enforce such agreements directly to the extent they deem such
enforcement necessary or advisable to protect the rights of the
Purchasers or the Holders hereunder.
<PAGE>
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first written above.
USAIR, INC.
By:
Name:
Title:
Confirmed and accepted as of
the date first above written:
Morgan Stanley & Co. Incorporated
Acting severally on behalf of
itself and the several Purchasers
named herein.
By:
Name:
Title:
Exhibit 5.2
REGISTRATION RIGHTS AGREEMENT
Dated as of February 16, 1996
between
USAIR, INC.,
and
MORGAN STANLEY & CO. INCORPORATED,
SALOMON BROTHERS INC,
CHASE SECURITIES, INC.,
and
LEHMAN BROTHERS INC.
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of February 16, 1996, between USAIR, INC., a
Delaware corporation (the "Company"), MORGAN STANLEY & CO.
INCORPORATED (the "Manager"), SALOMON BROTHERS INC, CHASE
SECURITIES, INC. and LEHMAN BROTHERS INC. (together with the
Manager, the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement
dated February 9, 1996, between the Company and the Purchasers
(the "Purchase Agreement"), which provides for the sale by the
Company to the Purchasers of (i) $142,400,000 aggregate principal
amount of its 6.76% Class A Equipment Notes (the "Class A
Notes"), (ii) $54,800,000 aggregate principal amount of its 7.50%
Class B Equipment Notes (the "Class B Notes") and (iii)
$65,800,000 aggregate principal amount of its 8.93% Class C
Equipment Notes (the "Class C Notes", together with the Class A
Notes and the Class B Notes, the "Notes"). In order to induce
the Purchasers to enter into the Purchase Agreement, the Company
has agreed to provide to the Purchasers and their direct and
indirect transferees the registration rights set forth in this
Agreement. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree
as follows:
1. Definitions. As used in this Agreement, terms not
otherwise defined shall have the following meanings or if not
defined herein, as defined in the Collateral Agency Agreement
dated February 15, 1996, among the Company, Wilmington Trust
Company and the other parties named therein:
"Applicable Indenture" shall mean, (i) with respect to the
Class A Notes, the Class A Holders or the Class A Indenture
Trustee, the Class A Indenture, (ii) with respect to the Class B
Notes, the Class B Holders or the Class B Indenture Trustee, the
Class B Indenture and (iii) with respect to the Class C Notes,
the Class C Holders or the Class C Indenture Trustee, the Class C
Indenture.
<PAGE>
"Class A Exchange Notes" shall mean securities issued by the
Company under the Class A Indenture of equal outstanding
principal amount as and containing terms identical to the Class A
Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Class A Notes or, if
no such interest has been paid, from February 16, 1996, (ii) the
transfer restrictions thereon shall be modified or eliminated, as
appropriate and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Holders of the Class A Notes in exchange for such
Class A Notes pursuant to the Exchange Offer.
"Class A Holder" shall mean each Purchaser, for so long as it
owns any Class A Registrable Notes, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of Class A Registrable Notes under the Class A Indenture;
provided that for purposes of Sections 4 and 5 of this Agreement,
the term "Class A Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"Class A Indenture" shall mean the Class A Trust Indenture
relating to the Class A Notes dated as of February 15, 1996
between the Company and the Class A Indenture Trustee, as the
same may be amended from time to time in accordance with the
terms thereof.
"Class A Indenture Trustee" shall mean Wilmington Trust
Company, not in its individual capacity except as expressly set
forth in the Class A Indenture, but solely as Indenture Trustee
under the Class A Indenture, together with any successor
Indenture Trustee under the terms of the Class A Indenture.
"Class A Notes" shall have the meaning set forth in the
second paragraph of this Agreement.
"Class A Registrable Notes" shall mean the Class A Notes;
provided, however, that the Class A Notes shall cease to be Class
A Registrable Notes upon the earlier to occur of (i) the
consummation of the Exchange Offer, (ii) a Registration Statement
with respect to such Class A Notes shall have been declared
effective under the Securities Act and such Class A Notes shall
have been disposed of pursuant to such Registration Statement,
(iii) such Class A Notes shall have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act or (iv) such Class A
Notes shall have ceased to be outstanding.
<PAGE>
"Class B Exchange Notes" shall mean securities issued by the
Company under the Class B Indenture of equal outstanding
principal amount as and containing terms identical to the Class B
Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Class B Notes or, if
no such interest has been paid, from February 16, 1996, (ii) the
transfer restrictions thereon shall be modified or eliminated, as
appropriate and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Holders of the Class B Notes in exchange for such
Class B Notes pursuant to the Exchange Offer.
"Class B Holder" shall mean each Purchaser, for so long as it
owns any Class B Registrable Notes, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of Class B Registrable Notes under the Class B Indenture;
provided that for purposes of Sections 4 and 5 of this Agreement,
the term "Class B Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"ClassB Indenture" shall mean the Class B Trust Indenture
relating to the Class B Notes dated as of February 15, 1996
between the Company and the Class B Indenture Trustee, as the
same may be amended from time to time in accordance with the
terms thereof.
"Class B Indenture Trustee" shall mean Wilmington Trust
Company, not in its individual capacity except as expressly set
forth in the Class B Indenture, but solely as Indenture Trustee
under the Class B Indenture, together with any successor
Indenture Trustee under the terms of the Class B Indenture.
"Class B Notes" shall have the meaning set forth in the
second paragraph of this Agreement.
"Class B Registrable Notes" shall mean the Class B Notes;
provided, however, that the Class B Notes shall cease to be Class
B Registrable Notes upon the earlier to occur of (i) the
consummation of the Exchange Offer, (ii) a Registration Statement
with respect to such Class B Notes shall have been declared
effective under the Securities Act and such Class B Notes shall
have been disposed of pursuant to such Registration Statement,
(iii) such Class B Notes shall have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act or (iv) such Class B
Notes shall have ceased to be outstanding.
<PAGE>
"Class C Exchange Notes" shall mean securities issued by the
Company under the Class C Indenture of equal outstanding
principal amount as and containing terms identical to the Class C
Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Class C Notes or, if
no such interest has been paid, from February 16, 1996, (ii) the
transfer restrictions thereon shall be modified or eliminated, as
appropriate and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Holders of the Class C Notes in exchange for such
Class C Notes pursuant to the Exchange Offer.
"Class C Holder" shall mean each Purchaser, for so long as it
owns any Class C Registrable Notes, and each of its successors,
assigns and direct and indirect transferees who become registered
owners of Class C Registrable Notes under the Class C Indenture;
provided that for purposes of Sections 4 and 5 of this Agreement,
the term "Class C Holder" shall include Participating
Broker-Dealers (as defined in Section 4(a)).
"Class C Indenture" shall mean the Class C Trust Indenture
relating to the Class C Notes dated as of February 15, 1996
between the Company and the Class C Indenture Trustee, as the
same may be amended from time to time in accordance with the
terms thereof.
"Class C Indenture Trustee" shall mean Wilmington Trust
Company, not in its individual capacity except as expressly set
forth in the Class C Indenture, but solely as Indenture Trustee
under the Class C Indenture, together with any successor
Indenture Trustee under the terms of the Class C Indenture.
"Class C Notes" shall have the meaning set forth in the
second paragraph of this Agreement.
"Class C Registrable Notes" shall mean the Class C Notes;
provided, however, that the Class C Notes shall cease to be
Class C Registrable Notes upon the earlier to occur of (i) the
consummation of the Exchange Offer, (ii) a Registration Statement
with respect to such Class C Notes shall have been declared
effective under the Securities Act and such Class C Notes shall
have been disposed of pursuant to such Registration Statement,
(iii) such Class C Notes shall have been sold to the public
pursuant to Rule 144(k) (or any similar provision then in force,
but not Rule 144A) under the Securities Act or (iv) such Class C
Notes shall have ceased to be outstanding.
<PAGE>
"Closing Date" shall mean the Closing Date as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble
and also includes the Company's successors.
"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended from time to time.
"Exchange Offer" shall mean the exchange offer by the Company
of Exchange Notes for Registrable Notes pursuant to Section 2(a)
hereof.
"Exchange Offer Registration" shall mean a registration under
the Securities Act effected in accordance with Section 2(a)
hereof.
"Exchange Offer Registration Statement" shall mean an
exchange offer registration statement on Form S-4 (or, if
applicable, on another appropriate form), and all amendments and
supplements to such registration statement, in each case
including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Exchange Notes" shall mean, together, the Class A Exchange
Notes, the Class B Exchange Notes and the Class C Exchange Notes.
"Holder" shall mean a Class A Holder, a Class B Holder or a
Class C Holder.
"Indenture" shall mean the Class A Indenture, the Class B
Indenture or the Class C Indenture, as applicable, and when used
in the plural shall mean, together, the Class A Indenture, the
Class B Indenture and the Class C Indenture.
"Indenture Trustee" shall mean the Class A Indenture Trustee,
the Class B Indenture Trustee or the Class C Indenture Trustee as
applicable, and when used in the plural shall mean, together, the
Class A Indenture Trustee, the Class B Indenture Trustee and the
Class C Indenture Trustee.
"Majority Holders" shall mean, together, the Holders of a
majority in aggregate principal amount of each class of
Registrable Notes then outstanding; provided that whenever the
consent or approval of Holders of a specified percentage of any
such Class of Registrable Notes is required hereunder,
Registrable Notes held by the Company or any of its affiliates
<PAGE>
(as such term is defined in Rule 405 under the Securities Act)
(other than the Purchasers or subsequent holders of Registrable
Notes if such subsequent holders are deemed to be such affiliates
solely by reason of their holding of such Registrable Notes)
shall not be counted in determining whether such consent or
approval was given by the Holders of such required percentage or
amount.
"Manager" shall have the meaning set forth in the preamble.
"Notes" shall have the meaning set forth in the second
paragraph of this Agreement.
"Person" shall mean an individual, partnership, corporation,
trust or unincorporated organization, or a government or agency
or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a
Registration Statement, including any preliminary prospectus, and
any such prospectus as amended or supplemented by any prospectus
supplement, including a prospectus supplement with respect to the
terms of the offering of any portion of the Registrable Notes
covered by a Shelf Registration Statement, and by all other
amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble.
"Purchaser" shall have the meaning set forth in the preamble.
"Registrable Notes" shall mean, together, the Class A
Registrable Notes, the Class B Registrable Notes and the Class C
Registrable Notes.
"Registration Expenses" shall mean, except as provided in the
Purchase Agreement, any and all expenses incurred incident to
performance of or compliance by the Company with this Agreement,
including without limitation: (i) all SEC, stock exchange or
National Association of Securities Dealers, Inc. registration and
filing fees, (ii) all fees and expenses incurred in connection
with compliance with state securities or blue sky laws (including
reasonable fees and disbursements of one counsel for any
underwriters in connection with blue sky qualification of any of
the Exchange Notes or Registrable Notes), (iii) all expenses of
any Persons in preparing or assisting in preparing, word
<PAGE>
processing, printing and distributing any Registration Statement,
any Prospectus, any amendments or supplements thereto, (iv) the
reasonably incurred out-of-pocket fees and expenses incurred by
any underwriter in connection with the preparation of any
underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this
Agreement, (v) all rating agency fees, (vi) all fees and
disbursements relating to the qualification of the Indentures
under applicable securities laws, (vii) the fees and reasonably
incurred out-of-pocket disbursements of the Indenture Trustees
and their counsel, (viii) the fees and disbursements of counsel
for the Company and, in the case of a Shelf Registration
Statement, the fees and reasonably incurred out-of- pocket
disbursements of one counsel for the Holders (which counsel, in
the latter case, shall be selected by the Majority Holders and
which counsel may also be counsel for the Purchasers) and (ix)
the fees and disbursements of the independent public accountants
of the Company and any partnership or joint venture in which the
Company or any of its subsidiaries is a partner, including the
expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, but excluding
fees of counsel to the underwriters (other than fees and expenses
set forth in clause (ii) above) or the Holders (other than fees
and expenses set forth in clause (viii) above) and underwriting
discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Notes by a Holder.
"Registration Statement" shall mean any registration
statement of the Company that covers any of the Exchange Notes or
Registrable Notes pursuant to the provisions of this Agreement,
and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time.
"Shelf Registration" shall mean a registration effected in
accordance with Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions
of Section 2(b) of this Agreement that covers all of the
Registrable Notes (but no other securities unless approved by the
Person or Persons who have requested the Company to file the
<PAGE>
Shelf Registration Statement) on an appropriate form under Rule
415 under the Securities Act, or any similar rule that may be
adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in
each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference
therein.
"Underwriter" shall have the meaning set forth in Section
2(c) of this Agreement.
"Underwritten Registration" or "Underwritten Offering" shall
mean a registration in which Registrable Notes are sold to an
Underwriter for reoffering to the public.
2. Registration Under the Securities Act. (a) Exchange
Offer Registration. To the extent not prohibited by any
applicable law or applicable interpretation of the Staff of the
SEC, the Company shall use its best efforts (i) to cause to be
filed after the Closing Date an Exchange Offer Registration
Statement covering the offer by the Company to the Holders to
exchange (A) all of the Class A Registrable Notes for Class A
Exchange Notes, (B) all of the Class B Registrable Notes for
Class B Exchange Notes and (C) all of the Class C Registrable
Notes for Class C Exchange Notes and (ii) to have such
Registration Statement remain effective until the closing of the
Exchange Offer. The Company shall commence the Exchange Offer
promptly after the Exchange Offer Registration Statement has been
declared effective by the SEC and use its best efforts to have
the Exchange Offer consummated not later than 60 days after such
effective date. The Company shall commence the Exchange Offer by
mailing the related exchange offer Prospectus and accompanying
documents to each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Agreement and that all Registrable Notes validly tendered will be
accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be
each business day during a period of at least 20 days from the
date such notice is mailed) (the "Exchange Dates");
(iii) that any Registrable Note not tendered will remain
outstanding and continue to accrue interest, but will not retain
any rights under this Agreement;
<PAGE>
(iv) that Holders electing to have a Registrable Note
exchanged pursuant to the Exchange Offer will be required to
surrender such Registrable Note, together with the enclosed
letters of transmittal, to the institution and at the address
(located in the Borough of Manhattan, The City of New York)
specified in the notice prior to the close of business on the
last Exchange Date; and
(v) that Holders will be entitled to withdraw their
election, not later than the close of business on the last
Exchange Date, by sending to the institution and at the address
(located in the Borough of Manhattan, The City of New York)
specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Registrable Notes delivered for exchange, and
a statement that such Holder is withdrawing his election to have
such Notes exchanged.
As soon as practicable after the last Exchange Date, the
Company or its agent shall:
(i) accept for exchange Registrable Notes or portions
thereof tendered and not validly withdrawn pursuant to the
Exchange Offer;
(ii) deliver, or cause to be delivered, to the Class A
Indenture Trustee for cancellation all Class A Registrable Notes
or portions thereof so accepted for exchange by the Company, and
issue, and cause the Class A Indenture Trustee to promptly
authenticate and mail to each Class A Holder, Class A Exchange
Notes equal in principal amount to the principal amount of the
Class A Registrable Notes surrendered by such Class A Holder;
(iii) deliver, or cause to be delivered, to the Class B
Indenture Trustee for cancellation all Class B Registrable Notes
or portions thereof so accepted for exchange by the Company, and
issue, and cause the Class B Indenture Trustee to promptly
authenticate and mail to each Class B Holder, Class B Exchange
Notes equal in principal amount to the principal amount of the
Class B Registrable Notes surrendered by such Class B Holder; and
(iv) deliver, or cause to be delivered, to the Class C
Indenture Trustee for cancellation all Class C Registrable Notes
or portions thereof so accepted for exchange by the Company, and
issue, and cause the Class C Indenture Trustee to promptly
authenticate and mail to each Class C Holder, Class C Exchange
Notes equal in principal amount to the principal amount of the
Class C Registrable Notes surrendered by such Class C Holder.
<PAGE>
The Company shall use its best efforts to complete the Exchange
Offer as provided above and shall comply with the applicable
requirements of the Securities Act, the Exchange Act and other
applicable laws and regulations in connection with the Exchange
Offer. The Exchange Offer shall not be subject to any
conditions, other than that the Exchange Offer does not violate
applicable law or any applicable interpretation of the Staff of
the SEC and that no order of any governmental agency or court of
competent jurisdiction would be violated by consummating the
Exchange Offer. The Company shall inform the Purchasers of the
names and addresses of the Holders to whom the Exchange Offer is
made, and the Purchasers shall have the right, subject to
applicable law, to contact such Holders and otherwise facilitate
the tender of Registrable Notes in the Exchange Offer.
(b) Shelf Registration. (i) In the event that (A) the
Company determines that the Exchange Offer Registration provided
in Section 2(a) above is not available or may not be consummated
as soon as practicable after the last Exchange Date because it
would violate applicable law or the applicable interpretations of
the staff of the SEC or because it would materially interfere
with other business activities of the Company, or (B) in the
opinion of counsel for the Purchasers or the Company a
Registration Statement must be filed and a Prospectus must be
delivered by the Purchasers in connection with any offering or
sale of Registrable Notes, the Company shall use its best efforts
to cause to be filed as soon as practicable after such
determination, date or notice of such opinion of counsel is given
to the Company, as the case may be, a Shelf Registration
Statement providing for the sale by the Holders of all of the
Registrable Notes, and to have such Shelf Registration Statement
declared effective by the SEC. In the event the Company is
required to file a Shelf Registration Statement solely as a
result of the matters referred to in clause (B) of the preceding
sentence, the Company shall file and have declared effective by
the SEC both an Exchange Offer Registration Statement pursuant to
Section 2(a) with respect to all Registrable Notes and a Shelf
Registration Statement (which may be a combined Registration
Statement with the Exchange Offer Registration Statement to the
extent permitted by applicable law) with respect to offers and
sales of Registrable Notes held by the Holders after completion
of the Exchange Offer. The Company agrees to use its best
efforts to keep the Shelf Registration Statement continuously
effective until the third anniversary of the Closing Date or such
shorter period that will terminate when all of the Registrable
Notes covered by the Shelf Registration Statement have been sold
pursuant to the Shelf Registration Statement. The Company
<PAGE>
further agrees to supplement or amend the Shelf Registration
Statement, if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such
Shelf Registration Statement or by the Securities Act or by any
other rules and regulations thereunder for shelf registration or
if reasonably requested by a Holder with respect to information
relating to such Holder, and to use its best efforts to cause any
such amendment to become effective and such Shelf Registration
Statement to become usable as soon as thereafter practicable.
The Company agrees to furnish to the Holders of Registrable Notes
copies of any such supplement or amendment promptly after its
being used or filed with the SEC.
(ii) Each Holder whose Registrable Notes are covered by a
Shelf Registration Statement filed pursuant to this Section 2(b)
agrees, upon the request of the managing Underwriter in any
Underwritten Offering permitted pursuant to this Agreement, not
to effect any public sale or distribution of securities of the
Company of the same class as the Registrable Notes included in
such Shelf Registration Statement (except as part of such
registration), including a sale pursuant to Rule 144 under the
Securities Act, during the 10-day period prior to, and during the
90-day period beginning on, the closing date of any such
Underwritten Offering made pursuant to such Shelf Registration
Statement, to the extent timely notified in writing by the
Company or such Underwriter(s).
The foregoing provision shall not apply to any Holder of
Registrable Notes if such Holder is prevented by applicable
statute or regulation from entering into any such agreement;
provided, however, that any such Holder shall undertake, in its
request to participate in any such Underwritten Offering, not to
effect any public sale or distribution of any of its Registrable
Notes not sold in such Underwritten Offering, commencing on the
date of sale of such Registrable Notes unless it has provided 45
days' prior written notice of such sale or distribution to the
Underwriter(s).
(iii) The Company agrees not to effect any public or private
offer, sale or distribution of securities of the same quality and
nature as the Registrable Notes, including a sale pursuant to
Regulation D under the Act, during the 10-day period prior to,
and during the 90-day period beginning on, the closing date of
each Underwritten Offering permitted pursuant to Section 3(q)
hereof made pursuant to the Shelf Registration Statement, to the
extent timely notified in writing by the Underwriter(s), and to
use its best efforts to cause each holder of securities of the
<PAGE>
same quality and nature as the Registrable Notes purchased from
the Company at any time on or after the date of this Agreement to
agree not to effect any public sale or distribution of any such
securities during such period (except as part of such
registration), including a sale pursuant to Rule 144 under the
Securities Act.
(c) The Holders of Registrable Notes covered by a Shelf
Registration Statement who desire to do so may sell such
Registrable Notes in an Underwritten Offering. In any such
Underwritten Offering, the investment banker or investment
bankers and manager or managers (the "Underwriters") that will
administer the offering will be selected by the Majority Holders
of the Registrable Notes included in such offering.
(d) Expenses. The Company shall pay all reasonably incurred
Registration Expenses in connection with the registration
pursuant to Section 2(a) or 2(b). Each Holder shall pay all
underwriting discounts and commissions and transfer taxes, if
any, relating to the sale or disposition of such Holder's
Registrable Notes pursuant to the Shelf Registration Statement.
(e) Effective Registration Statement. An Exchange Offer
Registration Statement pursuant to Section 2(a) hereof or a Shelf
Registration Statement pursuant to Section 2(b) hereof will not
be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has
been declared effective, the offering of Registrable Notes
pursuant to a Shelf Registration Statement is interfered with by
any stop order, injunction or other order or requirement of the
SEC or any other governmental agency or court, such Shelf
Registration Statement will be deemed not to have been effective
during the period of such interference until the offering of
Registrable Notes pursuant to such Registration Statement may
legally resume.
(f) Increase in Interest Rate. In the event that, for any
reason, either (i) the Exchange Offer is not consummated or (ii)
a Shelf Registration Statement is not declared effective (each, a
"Registration Event"), in either case, on or prior to August 16,
1996, the interest rate on each Class of Notes shall be
temporarily increased by one-half of one percent per annum for
the semiannual period commencing October 15, 1996. The one-half
of one percent per annum increase over the original interest rate
on the Notes will be permanent (and will apply to all future
interest periods and to the Exchange Notes) if a Registration
Event has not occurred on or prior to February 16, 1997.
<PAGE>
(g) Specific Enforcement. Without limiting the remedies
available to the Purchasers and the Holders, the Company
acknowledges that any failure by the Company to comply with its
obligations under Section 2(a) and Section 2(b) hereof may result
in material irreparable injury to the Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that,
in the event of any such failure, any Purchaser or any Holder may
obtain such relief as may be required to specifically enforce the
Company's obligations under Section 2(a) and Section 2(b) hereof.
3. Registration Procedures. In connection with the
obligations of the Company with respect to the Registration
Statements pursuant to Sections 2(a) and 2(b) hereof, the Company
shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement
on the appropriate form under the Securities Act, which form (x)
shall be selected by the Company and (y) shall, in the case of a
Shelf Registration, be available for the sale of the Registrable
Notes by the selling Holders thereof and (z) shall comply as to
form in all material respects with the requirements of the
applicable form and include all financial statements required by
the SEC to be filed therewith, and use its best efforts to cause
such Registration Statement to become effective and remain
effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and
post-effective amendments to each Registration Statement as may
be necessary to (x) keep such Registration Statement effective
for the applicable period under this Agreement, and (y) cause
each Prospectus to be supplemented by any required prospectus
supplement and, as so supplemented, to be filed pursuant to Rule
424 under the Securities Act and (z) keep each Prospectus current
during the period described under Section 4(3) and Rule 174 under
the Securities Act that is applicable to transactions by brokers
or dealers with respect to the Registrable Notes or Exchange
Notes;
(c) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes, to counsel for the Purchasers, to
counsel for the Holders and to each Underwriter of an
Underwritten Offering of Registrable Notes, if any, and each such
Underwriter's Counsel, without charge, as many copies of each
Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as such
Holder or Underwriter may reasonably request, in order to
<PAGE>
facilitate the public sale or other disposition of the
Registrable Notes; and the Company consents to the use of such
Prospectus and any amendment or supplement thereto in accordance
with applicable law by each of the selling Holders of Registrable
Notes and any such Underwriters in connection with the offering
and sale of the Registrable Notes covered by and in the manner
described in such Prospectus or any amendment or supplement
thereto in accordance with applicable law;
(d) use its best efforts to register or qualify the
Registrable Notes under all applicable state securities or "blue
sky" laws of such jurisdictions as any Holder of Registrable
Notes covered by a Registration Statement shall reasonably
request in writing by the time the applicable Registration
Statement is declared effective by the SEC, to cooperate with
such Holders in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. and do
any and all other acts and things which may be reasonably
necessary or advisable to enable such Holder to consummate the
disposition in each such jurisdiction of such Registrable Notes
owned by such Holder; provided, however, that the Company shall
not be required to (i) qualify as a foreign corporation or as a
dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d), (ii)
file any general consent to service of process or (iii) subject
itself to taxation in any such jurisdiction if it is not so
subject;
(e) in the case of a Shelf Registration, notify each Holder
of Registrable Notes, counsel for the Holders and counsel for the
Purchasers promptly and, if requested by any such Holder, confirm
such advice in writing, (i) when a Shelf Registration Statement
has become effective and when any post-effective amendments and
supplements thereto have been filed and become effective, (ii) of
any request by the SEC or any state securities authority for
amendments and supplements to a Shelf Registration Statement and
Prospectus or for additional information after the Shelf
Registration Statement has become effective, (iii) of the
issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Shelf Registration
Statement or the initiation of any proceedings for that purpose,
(iv) if, between the effective date of a Shelf Registration
Statement and the closing of any sale of Registrable Notes
covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales
agreement or other similar agreement, if any, relating to such
offering cease to be true and correct in all material respects or
<PAGE>
if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Notes for sale
in any jurisdiction or the initiation of any proceeding for such
purpose, (v) of the happening of any event during the period a
Shelf Registration Statement is effective which makes any
statement made in such Shelf Registration Statement or the
related Prospectus untrue in any material respect or which
requires the making of any changes in such Shelf Registration
Statement or Prospectus in order to make the statements therein
not misleading, and (vi) of any determination by the Company that
a post-effective amendment to a Shelf Registration Statement
would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration
Statement at the earliest possible moment and provide prompt
notice to each Holder of the withdrawal of any such order;
(g) in the case of a Shelf Registration, furnish to each
Holder of Registrable Notes, without charge, at least one
conformed copy of each Registration Statement and any
post-effective amendment thereto (without documents incorporated
therein by reference or exhibits thereto, unless requested);
(h) in the case of a Shelf Registration, cooperate with the
selling Holders of Registrable Notes to facilitate the timely
preparation and delivery of certificates representing Registrable
Notes to be sold and not bearing any restrictive legends and
enable such Registrable Notes to be in such denominations
(consistent with the provisions of the Applicable Indenture) and
registered in such names as the selling Holders may reasonably
request at least two business days prior to the closing of any
sale of Registrable Notes;
(i) in the case of a Shelf Registration, upon the occurrence
of any event contemplated by Section 3(e)(v) hereof, use its best
efforts to prepare a supplement or post-effective amendment to a
Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of
the Registrable Notes, such Prospectus will not contain any
untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; the
Company agrees to notify each Holder to suspend use of the
Prospectus as promptly as practicable after the occurrence of
such an event, and each Holder hereby agrees to suspend use of
the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission;
<PAGE>
(j) within a reasonable time prior to the filing of any
Registration Statement, any Prospectus, any amendment to a
Registration Statement or amendment or supplement to a Prospectus
or any document which is to be incorporated by reference into a
Registration Statement or a Prospectus after initial filing of a
Registration Statement, provide copies of such document to the
Purchasers and their counsel (and, in the case of a Registration
Statement, the Holders and their counsel) and make such of the
representatives of the Company as shall be reasonably requested
by the Purchasers or their counsel (and, in the case of a
Registration Statement, the Holders or their counsel) available
for discussion of such document, and shall not at any time file
or make any amendment to the Registration Statement, any
Prospectus or any amendment of or supplement to a Registration
Statement or a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a
Prospectus, of which the Purchasers and their counsel (and, in
the case of a Registration Statement, the Holders and their
counsel) shall not have previously been advised and furnished a
copy or in a form to which the Purchasers or their counsel (and,
in the case of a Registration Statement, the Holders or their
counsel) shall object;
(k) obtain a CUSIP number for all Exchange Notes or
Registrable Notes, as the case may be, not later than the
effective date of a Registration Statement;
(l) cause the Indentures to be qualified under the Trust
Indenture Act of 1939 (the "TIA") in connection with the
registration of the Exchange Notes or Registrable Notes, as the
case may be, cooperate with the Indenture Trustees and the
Holders to effect such changes to the Indentures as may be
required for the Indentures to be so qualified in accordance with
the terms of the TIA and execute, and use its best efforts to
cause the Indenture Trustees to execute, all documents as may be
required to effect such changes, and all other forms and
documents required to be filed with the SEC to enable the
Indentures to be so qualified in a timely manner;
(m) in the case of a Shelf Registration, make available for
inspection by a representative of the Holders of the Registrable
Notes, any Underwriters participating in any disposition pursuant
to such Shelf Registration Statement, and attorneys and
accountants designated by the Holders, at reasonable times and in
a reasonable manner, all financial and other records, pertinent
documents and properties of the Company, and cause the respective
officers, directors and employees of the Company to supply all
information reasonably requested by any such representative,
Underwriter, attorney or accountant in connection with a Shelf
Registration Statement;
<PAGE>
(n) in the case of a Shelf Registration, use its reasonable
best efforts to cause all Registrable Notes to be listed on any
securities exchange or any automated quotation system on which
similar securities issued by the Company are then listed if
requested by the Majority Holders, to the extent such Registrable
Notes satisfy applicable listing requirements;
(o) use its reasonable best efforts to cause the Exchange
Notes or Registrable Notes, as the case may be, to be rated by
two nationally recognized statistical rating organizations (as
such term is defined in Rule 436(g)(2) under the Securities Act);
(p) if reasonably requested by any Holder of Registrable
Notes covered by a Registration Statement, (i) promptly
incorporate in a Prospectus supplement or post-effective
amendment such information with respect to such Holder as such
Holder reasonably requests to be included therein and (ii) make
all required filings of such Prospectus supplement or such
post-effective amendment as soon as the Company has received
satisfactory notification of the matters to be incorporated in
such filing; and
(q) in the case of a Shelf Registration, enter into such
customary agreements and take all such other actions in
connection therewith (including those requested by the Majority
Holders of the class of Registrable Notes being sold) in order to
expedite or facilitate the disposition of such Registrable Notes
including, but not limited to, an Underwritten Offering and in
such connection, (i) to the extent possible, make such
representations and warranties to the Holders and any
Underwriters of such Registrable Notes with respect to the
business of the Company and its subsidiaries and its or its
subsidiaries' joint ventures, the Registration Statement,
Prospectus and documents incorporated by reference or deemed
incorporated by reference, if any, in each case, in form,
substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if
and when requested, (ii) obtain opinions of counsel to the
Company (which counsel and opinions, in form, scope and
substance, shall be reasonably satisfactory to the Holders of a
majority in principal amount of the Registrable Notes to be sold
in such Underwritten Offering and any Underwriters and their
respective counsel) addressed to each selling Holder and
Underwriter, if any, of Registrable Notes, covering the matters
customarily covered in opinions requested in underwritten
offerings, (iii) obtain "cold comfort" letters from the
independent certified public accountants of the Company (and, if
<PAGE>
necessary, any other certified public accountant of any
subsidiary of the Company or any joint venture in which the
Company or any of its subsidiaries is a partner, or of any
business acquired by the Company for which financial statements
and financial data are or are required to be included in the
Registration Statement) addressed to each selling Holder and
Underwriter, if any, of Registrable Notes, such letters to be in
customary form and covering matters of the type customarily
covered in "cold comfort" letters in connection with underwritten
offerings, and (iv) deliver such documents and certificates as
may be reasonably requested by the Holders of a majority in
principal amount of the Registrable Notes being sold or the
Underwriters, and which are customarily delivered in underwritten
offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to
clause (i) above and to evidence compliance with any customary
conditions contained in an underwriting agreement.
In the case of a Shelf Registration Statement, the Company
may require each Holder of Registrable Notes to furnish to the
Company such information regarding the Holder and the proposed
distribution by such Holder of such Registrable Notes as the
Company may from time to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder
agrees that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 3(e)(v)
hereof, such Holder will forthwith discontinue disposition of
Registrable Notes pursuant to a Shelf Registration Statement
until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof, and, if
so directed by the Company, such Holder will deliver to the
Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the
Prospectus covering such Registrable Notes current at the time of
receipt of such notice. If the Company shall give any such
notice to suspend the disposition of Registrable Securities
pursuant to a Registration Statement, the Company shall extend
the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of
days during the period from and including the date of the giving
of such notice to and including the date when the Holders shall
have received copies of the supplemented or amended Prospectus
necessary to resume such dispositions.
<PAGE>
4. Participation of Broker-Dealers in Exchange Offer. (a)
The Staff of the SEC has taken the position that any
broker-dealer that receives Exchange Notes for its own account in
the Exchange Offer in exchange for Notes that were acquired by
such broker-dealer as a result of market making or other trading
activities (a "Participating Broker-Dealer") may be deemed to be
an "underwriter" within the meaning of the Securities Act and
must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange
Notes.
The Company understands that it is the Staff's position that
if the Prospectus contained in the Exchange Offer Registration
Statement includes a plan of distribution containing a statement
to the above effect and the means by which Participating
Broker-Dealers may resell the Exchange Notes, without naming the
Participating Broker-Dealers or specifying the amount of Exchange
Notes owned by them, such Prospectus may be delivered by
Participating Broker-Dealers to satisfy their prospectus delivery
obligation under the Securities Act in connection with resales of
Exchange Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the Securities Act.
(b) In light of Section 4(a) above, notwithstanding the
other provisions of this Agreement, the Company agrees that the
provisions of this Agreement as they relate to a Shelf
Registration shall also apply to an Exchange Offer Registration
to the extent, and with such reasonable modifications thereto as
may be reasonably requested by the Purchasers or by one or more
Participating Broker-Dealers, in each case as provided in clause
(ii) below, in order to expedite or facilitate the disposition of
any Exchange Notes by Participating Broker-Dealers consistent
with the positions of the Staff recited in Section 4(a) above;
provided that:
(i) the Company shall not be required to amend or supplement
the Prospectus contained in the Exchange Offer Registration
Statement, as would otherwise be contemplated by Section 3(i),
for a period exceeding 180 days after the last Exchange Date (as
extended by the number of days during such 180 day period from,
and including the date of, the giving by the Company of a notice
pursuant to Section 3(e)(v) of this Agreement to, and including
the date when, the Company shall have made available to the
Holders copies of a supplemented or amended Prospectus pursuant
to Section 3(i) hereof) and Participating Broker-Dealers shall
not be authorized by the Company to deliver and shall not deliver
such Prospectus after such period in connection with the resales
contemplated by this Section 4; and
<PAGE>
(ii) the application of the Shelf Registration procedures
set forth in Section 3 of this Agreement to an Exchange Offer
Registration, to the extent not required by the positions of the
Staff of the SEC or the Securities Act and the rules and
regulations thereunder, will be in conformity with the reasonable
request to the Company in writing by the Purchasers or with the
reasonable request in writing to the Company by one or more
broker-dealers who certify to the Purchasers and the Company in
writing that they are, or anticipate that they will be,
Participating Broker-Dealers; provided that in connection with
such application of the Shelf Registration procedures set forth
in Section 3 to an Exchange Offer Registration, the Company shall
be obligated (A) to deal only with one entity representing the
Participating Broker-Dealers, which shall be the Manager unless
it elects not to act as such representative, (B) to pay the fees
and expenses of only one counsel representing the Participating
Broker-Dealers, which shall be counsel to the Purchasers unless
such counsel elects not to so act, and (C) to cause to be
delivered only one, if any, "cold comfort" letter with respect to
the Prospectus in the form existing on the last Exchange Date and
with respect to each subsequent amendment or supplement, if any,
effected during the period specified in clause (i) above.
(c) The Purchasers shall have no liability to the Company or
any Holder with respect to any request that they may make
pursuant to Section 4(b) above.
5. Indemnification and Contribution. (a) The Company
agrees to indemnify and hold harmless each Purchaser, each Holder
and each person, if any, who controls a Purchaser or any Holder
within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities caused by any untrue
statement or alleged untrue statement of a material fact
contained in any Registration Statement (or any amendment
thereto) pursuant to which Exchange Notes or Registrable Notes
were registered under the Securities Act, including all documents
incorporated therein by reference, or caused by any omission or
alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or caused by any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (as
amended or supplemented if the Company shall have furnished any
amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to
make the statements therein in light of the circumstances under
which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such
<PAGE>
untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Purchaser or any
Holder furnished to the Company in writing by any Purchaser
through you or any selling Holder expressly for use therein.
(b) Each Holder agrees, severally and not jointly, to
indemnify and hold harmless the Company, the Purchasers, and the
other selling Holders, and each of their respective directors and
officers who sign the Registration Statement and each Person, if
any, who controls the Company, the Purchasers, and any other
selling Holder within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Company to the
Purchasers and the Holders, but only with reference to
information relating to such Holder furnished to the Company in
writing by such Holder expressly for use in the Registration
Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto).
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in
respect of which such person is entitled to indemnity pursuant to
either paragraph (a) or (b) above, such person (the "indemnified
party") shall promptly notify the person against whom such
indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party, upon request of the indemnified party,
shall retain counsel reasonably satisfactory to the indemnified
party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay
the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any indemnified party shall
have the right to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such
indemnified party unless (i) the indemnifying party and the
indemnified party shall have mutually agreed to the retention of
such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include both the indemnifying
party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual
or potential differing interests between them. It is understood
that the indemnifying party shall not, in connection with any
proceeding or related proceedings in the same jurisdiction, be
liable for (A) the fees and expenses of more than one separate
firm (in addition to any local counsel) for all Purchasers and
all persons, if any, who control any Purchasers within the
meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act, (B) the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Company,
<PAGE>
its directors, its officers who sign the Registration Statement
and each person, if any, who controls the Company within the
meaning of either such Section and (C) the fees and expenses of
more than one separate firm (in addition to any local counsel)
for all Holders and all persons, if any, who control any Holders
within the meaning of either such Section, and that all such fees
and expenses shall be reimbursed as they are incurred. In such
case involving the Purchasers and such persons who control the
Purchasers, such firm shall be designated in writing by the
Manager. In such case involving the Holders and such persons who
control Holders, such firm shall be designated in writing by the
Majority Holders. In all other cases, such firm shall be
designated by the Company. The indemnifying party shall not be
liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be
a final judgment for the plaintiff, the indemnifying party agrees
to indemnify the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No
indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of
such proceeding.
(d) If the indemnification provided for in paragraph (a) or
(b) of this Section 5 is unavailable to or insufficient to hold
harmless an indemnified party, then each indemnifying party under
such paragraph, in lieu of indemnifying such indemnified party
thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to
reflect the relative fault of the indemnifying party or parties
on the one hand and of the indemnified party or parties on the
other hand in connection with such statements or omissions that
resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative
fault of the Company and the Holders shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by the Company or by the Holders and the parties' relative
intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section
5(d) are several in proportion to the respective principal amount
of Registrable Notes of such Holder that were registered pursuant
to the applicable Registration Statement.
<PAGE>
(e) The Company and each Holder agree that it would not be
just or equitable if contribution pursuant to this Section 5 were
determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
considerations referred to in paragraph (d) above. The amount
paid or payable by an indemnified party as a result of the
losses, claims, damages and liabilities referred to in paragraph
(d) above shall be deemed to include, subject to the limitations
set forth above, any legal or other expenses reasonably incurred
by such indemnified party in connection with investigating or
defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Holder shall be required to
indemnify or contribute any amount in excess of the amount by
which the total price at which the Registrable Notes sold by such
Holder exceeds the amount of any damages that such Holder has
otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such
fraudulent misrepresentation. The remedies provided for in this
Section 5 are not exclusive and shall not limit any rights or
remedies provided which may otherwise be available to any
indemnified party at law or in equity.
The indemnity and contribution provisions contained in this
Section 5 shall remain operative and in full force and effect
regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Purchaser, any Holder
or any person controlling any Purchaser or any Holder, or by or
on behalf of the Company, its officers or directors or any person
controlling the Company, (iii) acceptance of any of the Exchange
Notes and (iv) any sale of Registrable Notes pursuant to a Shelf
Registration Statement.
6. Miscellaneous. (a) No Inconsistent Agreements. The
Company has not entered into, and on or after the date of this
Agreement will not enter into, any agreement which is
inconsistent with the rights granted to the Holders of
Registrable Notes in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the
Company's other issued and outstanding securities under any such
agreements.
<PAGE>
(b) Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be
amended, modified or supplemented, and waivers or consents to
departures from the provisions hereof may not be given unless the
Company has obtained the written consent of Majority Holders
affected by such amendment, modification, supplement, waiver or
consent; provided, however, that no amendment, modification,
supplement, waiver or consent to the departure with respect to
the provisions of Section 5 hereof shall be effective as against
any Holder of Registrable Notes unless consented to in writing by
such Holder of Registrable Notes.
(c) Notices. All notices and other communications provided
for or permitted hereunder shall be made in writing by
hand-delivery, registered first-class mail, telex, telecopier, or
any courier guaranteeing overnight delivery (i) if to a Holder,
at the most current address given by such Holder to the Company
by means of a notice given in accordance with the provisions of
this Section 6(c), which address initially is, with respect to
each Purchaser, c/o Morgan Stanley & Co. Incorporated, at the
address set forth in the Purchase Agreement; and (ii) if to the
Company, initially at the Company's address set forth in the
Purchase Agreement and thereafter at such other address, notice
of which is given in accordance with the provisions of this
Section 6(c).
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally
delivered; five business days after being deposited in the mail,
postage prepaid, if mailed; when answered back, if telexed; when
receipt is acknowledged, if telecopied; and on the next business
day if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands, or other communications
shall be concurrently delivered by the person giving the same to
each Indenture Trustee, at the address specified in the
Applicable Indenture.
(d) Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and
transferees of each of the parties, including, without limitation
and without the need for an express assignment, subsequent
Holders; provided that nothing herein shall be deemed to permit
any assignment, transfer or other disposition of Registrable
Notes in violation of the terms of the Purchase Agreement. If
<PAGE>
any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such
Registrable Notes shall be held subject to all of the terms of
this Agreement, and by taking and holding such Registrable Notes,
such Person shall be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this
Agreement and such Person shall be entitled to receive the
benefits hereof. Each Purchaser (in its capacity as a Purchaser)
shall have no liability or obligation to the Company with respect
to any failure by any other Holder to comply with, or any breach
by any other Holder of, any of the obligations of such other
Holder under this Agreement.
(e) Purchases and Sale of Notes. The Company shall not, and
shall use its best efforts to cause its affiliates (as defined in
Rule 405 under the Securities Act), not to purchase and then
resell or otherwise transfer any Notes.
(f) Third Party Beneficiary. The Holders shall be third
party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Purchasers, on the other hand,
and the Purchasers and the Holders shall have the right to
enforce such agreements directly to the extent they deem such
enforcement necessary or advisable to protect the rights of the
Purchasers or the Holders hereunder.
(g) Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to
be an original and all of which taken together shall constitute
one and the same agreement.
(h) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise
affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of
New York.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable, the
validity, legality and enforceability of any such provision in
every other respect and of the remaining provisions contained
herein shall not be affected or impaired thereby.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
USAIR, INC.
By: /s/Thomas A. Fink
--------------------------
Name: Thomas A. Fink
Title: Treasurer
Confirmed and accepted as of
the date first above written:
Morgan Stanley & Co. Incorporated
Acting severally on behalf of
itself and the several Purchasers
named herein.
By: /s/Thomas F. Cahill, Jr.
-----------------------------
Name: Thomas F. Cahill, Jr.
Title: Principal
Exhibit 5.3
<PAGE>
COLLATERAL AGENCY AGREEMENT
Dated as of
February 15, 1996
among
USAIR, INC.,
WILMINGTON TRUST COMPANY,
as Class A Indenture Trustee, Class B Indenture Trustee,
and Class C Indenture Trustee,
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH,
as Class A Liquidity Provider, Class B Liquidity Provider,
and Class C Liquidity Provider,
and
WILMINGTON TRUST COMPANY,
as Collateral Agent
<PAGE>
TABLE OF CONTENTS
Page
GRANTING CLAUSE.............................................. 1
HABENDUM CLAUSE.............................................. 3
ARTICLE I. DEFINITIONS...................................... 5
SECTION 1.1. Definitions.................................... 5
ARTICLE II. CASH COLLATERAL ACCOUNT; CONTROLLING PARTY...... 5
SECTION 2.1. [Reserved]..................................... 5
SECTION 2.2. Cash Collateral Account........................ 5
SECTION 2.3. [Reserved]..................................... 6
SECTION 2.5. Redemptions.................................... 6
SECTION 2.6. Designated Representatives..................... 7
SECTION 2.7. Controlling Party.............................. 8
ARTICLE III. RECEIPT, DISTRIBUTION AND APPLICATION
OF INCOME FROM THE COLLATERAL............. 9
SECTION 3.1. Written Notice of Distribution................. 9
SECTION 3.2. Regular Distribution on Payment Dates.......... 11
SECTION 3.3. Payments After Notice of Acceleration, Etc..... 12
SECTION 3.4. Other Payments................................. 14
SECTION 3.5. Payments to the Indenture Trustees; Liquidity
Providers.................................. 14
SECTION 3.6. Liquidity Facility............................. 15
ARTICLE IV. COVENANTS OF THE COMPANY........................ 20
SECTION 4.1. Liens.......................................... 20
SECTION 4.2. Possession, Operation and Use, Maintenance,
Registration and Insignia................. 21
SECTION 4.3. Inspection..................................... 27
SECTION 4.4. Replacement and Pooling of Parts; Alterations,
Modifications and Additions;
Substitution of Engines................... 27
SECTION 4.5. Loss, Destruction or Requisition............... 31
SECTION 4.6. Insurance...................................... 36
SECTION 4.7. Filings........................................ 41
SECTION 4.8. Corporate Existence............................ 41
SECTION 4.9. Merger, Consolidation, Etc..................... 41
<PAGE>
ARTICLE V. EXERCISE OF REMEDIES............................. 42
SECTION 5.1. Directions from the Controlling Party.......... 42
SECTION 5.2. Remedies with Respect to Collateral............ 42
SECTION 5.3. Provisions Regarding Sale...................... 45
SECTION 5.4. Remedies Cumulative............................ 46
SECTION 5.5. Discontinuance of Proceedings.................. 46
SECTION 5.6. Waiver of Past Collateral Access Events;
Rescission of Acceleration................ 46
SECTION 5.7. [Reserved]..................................... 47
SECTION 5.8. Undertaking for Costs.......................... 47
ARTICLE VI. DUTIES OF THE COLLATERAL AGENT; AGREEMENTS OF
INDENTURE TRUSTEES, ETC.................... 47
SECTION 6.1. Notice of Collateral Access Events;
Other Notices.................................. 47
SECTION 6.2. Action upon Instructions; Financing
Statements................................ 48
SECTION 6.3. Indemnification................................ 48
SECTION 6.4. No Duties Except as Specified in Collateral
Agreement or Instructions................. 48
SECTION 6.5. Notice from Liquidity Provider
and Indenture Trustees.................... 49
SECTION 6.6. Recording, Deposit of Collateral, etc.......... 49
ARTICLE VII. THE COMPANY AND THE COLLATERAL AGENT........... 49
SECTION 7.1. Acceptance of Trusts and Duties................ 49
SECTION 7.2. Absence of Duties.............................. 49
SECTION 7.3. No Representations or Warranties
as to Documents........................... 50
SECTION 7.4. No Segregation of Monies; No Interest......... 50
SECTION 7.5. Reliance; Agents; Advice of Counsel........... 50
SECTION 7.6. Capacity in Which Acting...................... 51
SECTION 7.7. [Reserved].................................... 51
SECTION 7.8. May Become Noteholder......................... 51
SECTION 7.9. Further Assurances............................ 51
SECTION 7.10. Collateral Agent Required; Eligibility........ 51
SECTION 7.11. Money to Be Held in Trust..................... 52
ARTICLE VIII. INDEMNIFICATION OF COLLATERAL AGENT........... 52
SECTION 8.1. Scope of Indemnification....................... 52
ARTICLE IX. SUCCESSORS; SEPARATE COLLATERAL AGENTS.......... 53
SECTION 9.1. Replacement of Collateral Agent;
Appointment of Successor................... 53
SECTION 9.2. Appointment of Separate Collateral Agents...... 54
<PAGE>
ARTICLE X. SUPPLEMENTS AND AMENDMENTS TO
THIS COLLATERAL AGREEMENT.................... 57
SECTION 10.1. Amendments, Waivers, etc...................... 57
SECTION 10.2. Collateral Agent Protected.................... 58
SECTION 10.3. Effect of Supplemental Agreements............. 58
SECTION 10.4. Notice to Rating Agencies..................... 58
ARTICLE XI. MISCELLANEOUS .................................. 58
SECTION 11.1. Termination of Collateral Agreement........... 58
SECTION 11.2. No Legal Title to Collateral
in Secured Parties....................... 59
SECTION 11.3. Collateral Agreement for Benefit of Company,
Collateral Agent and Secured Parties...... 59
SECTION 11.4. Notices....................................... 59
SECTION 11.5. Severability.................................. 60
SECTION 11.6. No Oral Modifications or Continuing Waivers... 60
SECTION 11.7. Successors and Assigns........................ 60
SECTION 11.8. Headings...................................... 60
SECTION 11.9. Governing Law; Counterpart Form............... 60
SECTION 11.10 In Service Date............................... 60
SECTION 11.11. Substitution of Collateral.................... 60
Appendix A - Definitions
Exhibit A - Form of Collateral Agency Agreement Supplement
Exhibit B - Schedule of Countries
<PAGE>
COLLATERAL AGENCY AGREEMENT dated as of February 15, 1996,
among USAIR, INC., a Delaware corporation (the "Company"),
WILMINGTON TRUST COMPANY, a Delaware banking corporation, as
Class A Indenture Trustee, WILMINGTON TRUST COMPANY, a Delaware
banking corporation, as Class B Indenture Trustee, WILMINGTON
TRUST COMPANY, a Delaware banking corporation, as Class C
Indenture Trustee, WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK
BRANCH, as Class A Liquidity Provider, WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH, as Class B Liquidity Provider,
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH, as Class C
Liquidity Provider and WILMINGTON TRUST COMPANY, a Delaware
banking corporation, not in its individual capacity except as
expressly set forth herein, but solely as Collateral Agent
hereunder (in such capacity, together with its successors, the
"Collateral Agent").
WHEREAS, all capitalized terms used herein and not defined
herein shall have the respective meanings referred to in Appendix
A hereto;
WHEREAS, pursuant to the Class A Indenture, the Class B
Indenture and the Class C Indenture, the Company proposes to
issue (i) to the Class A Noteholders the Class A Notes, (ii) to
the Class B Noteholders the Class B Notes and (iii) to the Class
C Noteholders the Class C Notes, respectively;
WHEREAS, (i) pursuant to the Class A Liquidity Agreement,
the Class A Liquidity Provider proposes to establish in favor of
the Collateral Agent, for the benefit of the Class A Noteholders,
the Class A Liquidity Facility, (ii) pursuant to the Class B
Liquidity Agreement, the Class B Liquidity Provider proposes to
issue in favor of the Collateral Agent, for the benefit of the
Class B Noteholders, the Class B Liquidity Facility and (iii)
pursuant to the Class C Liquidity Agreement, the Class C
Liquidity Provider proposes to establish in favor of the
Collateral Agent, for the benefit of the Class C Noteholders, the
Class C Liquidity Facility; and
WHEREAS, all things necessary to make this Collateral Agency
Agreement the valid, binding and legal obligation of the Company,
for the uses and purposes herein set forth and in accordance with
its terms, have been done and performed and have happened;
<PAGE>
GRANTING CLAUSE
NOW, THEREFORE, THIS COLLATERAL AGENCY AGREEMENT
WITNESSETH, that, to secure the prompt payment of the principal
of, Make Whole Premium (if any) and interest (including, without
limitation, Post Petition Interest) on, and all other amounts due
with respect to, all Notes from time to time outstanding under
the Indentures and the prompt payment of all Liquidity
Obligations (including, without limitation, Post Petition
Interest) from time to time outstanding under the Liquidity
Agreements and the Basic Documents and the performance and
observance by the Company of all the agreements, covenants and
provisions for the benefit of the Noteholders and the Liquidity
Providers herein and in the Indentures, the Liquidity Agreements
and the Notes contained, and the prompt payment of any and all
amounts from time to time owing under each Indenture and under
each Liquidity Agreement and the other Basic Documents by the
Company to the Noteholders, the Indenture Trustees and the
Liquidity Providers (collectively, the "Secured Obligations"),
and for the uses and purposes and subject to the terms and
provisions hereof, and in consideration of the premises and of
the covenants herein contained, and of the acceptance of the
Notes by the Noteholders, and the issuance by the Liquidity
Providers of the Liquidity Facilities and of the sum of $1 paid
to the Company by the Collateral Agent at or before the delivery
hereof, the receipt whereof is hereby acknowledged, the Company
has granted, sold, assigned, transferred, conveyed, pledged and
confirmed, and does hereby grant, assign, transfer, convey,
pledge and confirm, unto the Collateral Agent and its successors
and assigns, for the security and benefit of the Noteholders, the
Indenture Trustees and the Liquidity Providers as aforesaid, a
first priority security interest in all estate, right, title and
interest of the Company in, to and under the following described
property, rights and privileges (which, collectively, including
all property hereafter specifically subjected to the Lien of this
Collateral Agreement by any agreement supplemental hereto, or
otherwise expressly subject to the terms and provisions hereof,
shall constitute the "Collateral"), to wit:
The Airframes and Engines, each of which Engines is of 750
or more rated takeoff horsepower or the equivalent of such
horsepower, and in the case of such Engines, whether or not any
such Engines shall be installed in or attached to any Airframe or
any other airframe, and the parts, together with all accessories,
equipment, parts and appurtenances appertaining or attached to
the Airframes and Engines, whether now owned or hereafter
acquired, and all substitutions, modifications, improvements,
accessions and accumulations to the Airframes, the Engines and
the Parts;
<PAGE>
(a) All logs, records and data, non-proprietary manuals
supplied to the Company by vendors and manufacturers (to the
extent the same can be so assigned without the consent of any
such vendor or manufacturer) and inspection, modification,
maintenance and overhaul records and other documents, in each
case, maintained in respect of the Airframes or Engines,
including without limitation all such logs, records, data and
other documents maintained pursuant to requirements of the FAA or
any other Aeronautical Authority;
(b) The Boeing Purchase Agreement and the Bills of Sale to
the extent the same relate to continuing rights of the Company in
respect of any warranty, indemnity or agreement, express or
implied, as to title, materials, workmanship, design or patent
infringement or related matters with respect to the Airframes or
the Engines (reserving to the Company, however, all of the
Company's other rights and interest in and to the Boeing Purchase
Agreement) together with all rights, powers, privileges, options
and other benefits of the Company thereunder (subject to such
reservation) with respect to the Airframes or the Engines,
including, without limitation, the right to make all waivers and
agreements, to give and receive all notices and other instruments
or communications, to take such action upon the occurrence of a
default thereunder, including the commencement, conduct and
consummation of legal, administrative or other proceedings, as
shall be permitted thereby or by law, and to do any and all other
things which the Company is or may be entitled to do thereunder
(subject to such reservation), subject, with respect to the
Boeing Purchase Agreement, to the terms and conditions of the
Manufacturer's Consent;
All proceeds with respect to the requisition of title to an
Aircraft or any part thereof or any other property described in
any of these Granting Clauses or from the sale or other
disposition of an Aircraft or such part of other property
described in any of these Granting Clauses by the Collateral
Agent pursuant to the terms of this Collateral Agreement, and all
insurance proceeds with respect to an Aircraft or any part
thereof, but excluding any insurance maintained by the Company
and not required under Section 4.6;
All moneys and securities now or hereafter paid or deposited
or required to be paid or deposited to or with the Collateral
Agent by or for the account of the Company pursuant to any term
of any Basic Document (including any amounts held in the Cash
Collateral Accounts, but excluding Investment Earnings) or held
or required to be held by the Collateral Agent hereunder or
thereunder; and
All proceeds of the foregoing.
<PAGE>
PROVIDED, HOWEVER, that notwithstanding any of the foregoing
provisions, so long as no Collateral Access Event shall have
occurred and be continuing under any Indenture, (a) the
Collateral Agent shall not take or cause to be taken any action
contrary to the Company's right hereunder to quiet enjoyment of
the Airframes and Engines, and to possess, use, retain and
control the Airframes and Engines and all revenues, income and
profits derived therefrom, and (b) the Company shall have the
right, to the exclusion of the Collateral Agent, with respect to
the Boeing Purchase Agreement, to exercise in the Company's name
all rights and powers of the buyer under the Boeing Purchase
Agreement (other than to amend, modify or waive any of the
warranties or indemnities contained therein, except in a manner
which provides additional rights, benefits or privileges to the
Company) and to retain any recovery or benefit resulting from the
enforcement of any warranty or indemnity under the Boeing
Purchase Agreement; and provided further that, notwithstanding
the occurrence or continuation of a Collateral Access Event under
any Indenture, the Collateral Agent shall not enter into any
amendment of the Boeing Purchase Agreement which would increase
the obligations of the Company thereunder.
HABENDUM CLAUSE
TO HAVE AND TO HOLD ALL and singular and aforesaid property
unto the Collateral Agent its successors and assigns, in trust
for the benefit and security of the Noteholders, the Indenture
Trustees and the Liquidity Providers and for the uses and
purposes and subject to the terms and provisions set forth in
this Collateral Agreement; provided that, the Lien of this
Collateral Agreement shall be subject to discharge as provided in
Section 11.1.
It is expressly agreed that anything herein contained to the
contrary notwithstanding, the Company shall remain liable under
the Purchase Agreement and the Basic Documents to perform all of
the obligations assumed by it thereunder, all in accordance with
and pursuant to the terms and provisions thereof, and the
Collateral Agent, the Indenture Trustees, the Noteholders and the
Liquidity Providers shall have no obligation or liability under
any thereof by reason of or arising out of the assignment
hereunder, nor shall the Collateral Agent, any Indenture Trustee,
the Noteholders or any Liquidity Provider be required or
obligated in any manner to perform or fulfill any obligations of
the Company under or pursuant to the Boeing Purchase Agreement or
any of the Basic Documents, except as therein or herein expressly
provided, to make any payment, or to make any inquiry as to the
nature or sufficiency of any payment received by it, or present
or file any claim, or take any action to collect or enforce the
payment of any amounts which may have been assigned to it or to
which it may be entitled at any time or times.
<PAGE>
The Company does hereby constitute the Collateral Agent the
true and lawful attorney of the Company, irrevocably, with full
power (in the name of the Company or otherwise) to ask, require,
demand, receive, compound and give acquittance for any and all
monies and claims for monies (in each case including insurance
and requisition proceeds) due and to become due under or arising
out of the Basic Documents and all other property which now or
hereafter constitutes part of the Collateral, to endorse any
checks or other instruments or orders in connection therewith and
to file any claims or to take any action or to institute any
proceedings which the Collateral Agent may deem to be necessary
or advisable in the premises; provided that the Collateral Agent
shall not exercise any such rights except upon the occurrence and
during the continuance of a Collateral Access Event under any
Indenture;
The Company agrees that at any time and from time to
time, upon the written request of the Collateral Agent or any
Secured Party, the Company will promptly and duly execute and
deliver or cause to be duly executed and delivered any and all
such further instruments and documents as the Collateral Agent or
such Secured Party may reasonably deem desirable in obtaining the
full benefits of the assignment hereunder and of the rights and
powers granted herein.
IT IS HEREBY COVENANTED AND AGREED by and between the
parties hereto as follows:
ARTICLE I.
DEFINITIONS
SECTION 1.1. Definitions. All capitalized terms used
herein shall have the respective meanings set forth or referred
to in Appendix A hereto. Unless otherwise specified, Section and
Article references are to Sections and Articles of this
Collateral Agreement.
ARTICLE II
CASH COLLATERAL ACCOUNT; CONTROLLING PARTY
SECTION 2.1. [Reserved].
SECTION 2.2. Cash Collateral Account. (a) The Collateral
Agent shall establish and maintain in its name the Cash
Collateral Accounts pursuant to and under the circumstances set
forth in Section 3.6(f).
<PAGE>
(b) Funds on deposit in the Cash Collateral Accounts shall
be invested and reinvested by the Collateral Agent pursuant to
the applicable Liquidity Provider's written instruction in
Eligible Investments selected by such Liquidity Provider if such
investments are reasonably available and, to the extent of the
amount of interest payable on the applicable Notes on the next
Payment Date, having maturities no later than the Business Day
immediately preceding such Payment Date. Unless otherwise
expressly provided in this Collateral Agreement (including,
without limitation, Section 3.6(f)), any Investment Earnings
shall be deposited in the Cash Collateral Accounts when received
by the Collateral Agent. The Company shall be liable for any
loss of principal resulting from any investment, reinvestment or
liquidation required to be made under this Collateral Agreement.
Neither the Liquidity Provider or the Collateral Agent shall be
liable for any such loss other than, in the case of the
Collateral Agent, by reason of its willful misconduct or gross
negligence. Eligible Investments and any other investment
required to be made hereunder shall be held to their maturities
except that any such investment may be sold (without regard to
its maturity) by the Collateral Agent without instructions
whenever such sale is necessary to make a distribution required
under this Collateral Agreement. Uninvested funds held hereunder
shall not earn or accrue interest.
(c) The Collateral Agent shall possess all right, title and
interest in all funds on deposit from time to time in the Cash
Collateral Accounts and in all proceeds thereof (including all
income thereon) and all such funds, investments, proceeds and
income shall be part of the Collateral, subject to the rights of
the Liquidity Providers to withdraw Investment Earnings pursuant
to Section 3.6(f). The Cash Collateral Accounts shall be under
the sole dominion and control of the Collateral Agent for the
benefit of the Noteholders and the Liquidity Providers, as their
interests may appear. If, at any time, any of the Cash
Collateral Accounts ceases to be an Eligible Deposit Account, the
Collateral Agent shall within 10 Business Days (or such longer
period, not to exceed 30 calendar days, as to which each Rating
Agency may consent) establish a new Cash Collateral Account as an
Eligible Deposit Account and shall transfer any cash and/or any
investments to such new Cash Collateral Account. So long as
Wilmington Trust Company is an Eligible Institution, the Cash
Collateral Accounts shall be maintained with it as Eligible
Deposit Accounts.
SECTION 2.3. [Reserved]
<PAGE>
SECTION 2.4. Termination of Interest in Collateral. As
provided in each Indenture, a Noteholder shall not, as such, have
any further interest in, or other right with respect to, the
Collateral when and if the principal amount of and Make Whole
Premium, if any, and interest on and other amounts due under all
Notes held by such Noteholder and all other sums due to such
Noteholder under the Basic Documents shall have been paid in
full. A Liquidity Provider shall not, as such, have any further
interest in, or other right with respect to, the Collateral when
and if all Liquidity Obligations owed to such Liquidity Provider
shall have been paid in full and the commitment of such Liquidity
Provider under the applicable Liquidity Agreement shall have
expired or terminated.
SECTION 2.5. Redemptions.
(a) (i) The Collateral Agent shall promptly calculate the
amount of the related redemption of the Notes under Section
3.01(a) or (b) of each Indenture and shall promptly send to the
Class A Indenture Trustee, Class B Indenture Trustee and Class C
Indenture Trustee a Written Notice of such amount. Such notice
shall also set the Redemption Date, which shall be a Business Day
at least fifteen days after the date of such Written Notice.
(ii) If no Collateral Access Event has occurred and is
continuing under any Indenture and (in case of redemption
pursuant to Section 3.01(b) of any Indenture) no Event of Loss
has occurred with respect to any Aircraft as to which the Company
has not, as of the applicable Redemption Date, complied with
Section 4.5(a), the Collateral Agent shall make distributions of
any amounts held by it on the Redemption Date on account of a
redemption of the Notes pursuant to Section 3.01 of each
Indenture in the following order of priority: first, in the
manner provided in clauses "first", "second" and "third" of
Section 3.2; second, to the Class A Indenture Trustee in an
amount equal to the unpaid principal amount of the Class A Notes
to be redeemed, plus interest accrued thereon until the date of
redemption, plus the Make Whole Premium (if any) for the Class A
Notes in accordance with Article III of the Class A Indenture;
third, to the Class B Indenture Trustee, in an amount equal to
the unpaid principal amount of the Class B Notes to be redeemed,
plus interest accrued thereon until the date of redemption, plus
the Make Whole Premium (if any) for the Class B Notes in
accordance with Article III of the Class B Indenture; fourth, to
the Class C Indenture Trustee in an amount equal to the unpaid
principal amount of the Class C Notes to be redeemed, plus
interest accrued thereon until the date of redemption, plus the
Make Whole Premium (if any) for the Class C Notes in accordance
with Article III of the Class C Indenture; and fifth, any
remaining amounts shall be held by the Collateral Agent for
distribution in accordance with Section 3.2.
<PAGE>
(iii) If a Collateral Access Event has occurred and is
continuing under any Indenture but no Class of Notes has been
Accelerated, (A) amounts otherwise payable to the Indenture
Trustees pursuant to Section 2.5(a)(ii) for distribution pursuant
to Article III of the Applicable Indenture shall be used to
redeem the Class A Notes as if no Collateral Access Event had
occurred and the Class A Notes were to be ratably redeemed on
such scheduled Redemption Date and (B) the portion of such amount
remaining after giving effect to clause (A) will not be
distributed until the earliest of (x) 60 days after the receipt
of such proceeds, (y) the date on which all Collateral Access
Events under the Indentures have been cured or waived and (z) the
Acceleration of any Class of Notes. If any Class of Notes is
Accelerated before such 60th day, the remaining portion of such
proceeds will be distributed in accordance with Section 3.3.
Otherwise, on the earlier of the two dates set forth in clauses
(x) and (y) above, the remaining portion of such proceeds will be
used to redeem the Notes specified in the notice of redemption
delivered pursuant to Section 3.02 of the Applicable Indenture as
if no Collateral Access Event had occurred.
(b) The Company shall give Written Notice to the Collateral
Agent of any optional redemption (in whole or in part) of the
outstanding Notes of any Class pursuant to Section 3.01(b) of the
Applicable Indenture (an "Optional Note Redemption"). Such
Written Notice shall set forth (i) the aggregate principal amount
of Notes to be so redeemed plus accrued interest to the date of
redemption and Make Whole Premium, if any, and (ii) the
Redemption Date. On the related Redemption Date, the Company
shall cause to be deposited with the Collateral Agent the
Redemption Price plus accrued interest to the date of redemption
and Make Whole Premium, if any, relating to Section 3.01(b) of
the Applicable Indenture.
SECTION 2.6. Designated Representatives. (a) With the
delivery of this Collateral Agreement, each Indenture Trustee
shall furnish to the Collateral Agent, and from time to time
thereafter may furnish to the Collateral Agent at its discretion
or upon the Collateral Agent's request (which request shall not
be made more than one time in any 12-month period) shall furnish
to the Collateral Agent, a certificate (a "Trustee Incumbency
Certificate") of an authorized signatory of such Indenture
Trustee certifying as to the incumbency and specimen signatures
of the officers of such Indenture Trustee and the attorney-in-
fact and agents of such Indenture Trustee (the "Trustee
Representatives") authorized to give Written Notices on behalf of
such Indenture Trustee hereunder. Until the Collateral Agent
receives a subsequent Trustee Incumbency Certificate, it shall be
entitled to rely on the last Trustee Incumbency Certificate
delivered to it hereunder.
<PAGE>
(b) With the delivery of this Collateral Agreement, each
Liquidity Provider shall furnish to the Collateral Agent, and
from time to time thereafter may furnish to the Collateral Agent
at its discretion or upon the Collateral Agent's request (which
request shall not be made more than one time in any 12-month
period) shall furnish to the Collateral Agent, a certificate (an
"LP Incumbency Certificate") of the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary of such
Liquidity Provider certifying as to the incumbency and specimen
signatures of any officer, attorney-in-fact, agent or other
designated representative of such Liquidity Provider (the "LP
Representatives") authorized to give Written Notices on behalf of
such Liquidity Provider hereunder. Until the Collateral Agent
receives a subsequent LP Incumbency Certificate, it shall be
entitled to rely on the last LP Incumbency Certificate delivered
to it hereunder.
SECTION 2.7. Controlling Party. (a) Subject to the terms
and conditions hereof, the Controlling Party shall have full
right, power and authority to act, on its own behalf and on
behalf of the Non-Controlling Parties, with respect to the
exercise of the remedies granted to the Controlling Party and the
Collateral Agent hereunder, and the Controlling Party is
authorized to direct the Collateral Agent in the exercise of, or
to refrain from directing the Collateral Agent in the exercise
of, the remedies granted to the Collateral Agent hereunder. The
Controlling Party shall have the right to direct the time, method
and place of conducting any proceeding for any remedy available
to the Collateral Agent; provided, however, that
(i) such direction shall not be in conflict with any rule
of law or with this Collateral Agreement and would not involve
the Collateral Agent in personal liability or expense, and
(ii) the Collateral Agent may, but is not obligated to, take
any other action in connection therewith deemed proper by the
Collateral Agent which is not inconsistent with such direction.
(b) The Person who shall be the "Controlling Party"
hereunder shall be determined as follows: (i) from the date
hereof until all principal, interest, Make Whole Premium (if any)
and all other amounts due on the Class A Notes and to the holders
thereof under the Basic Documents shall have been paid in full
(the "Class A Note Termination Date"), the Class A Indenture
Trustee shall be the "Controlling Party" hereunder; (ii) from the
Class A Note Termination Date, until all principal, interest,
Make Whole Premium (if any) and all other amounts due on the
Class B Notes and to the holders thereof under the Basic
Documents shall have been paid in full (the "Class B Note
<PAGE>
Termination Date"), the Class B Indenture Trustee shall be the
"Controlling Party" hereunder; and (iii) from the Class B Note
Termination Date, until all principal, interest, Make Whole
Premium (if any) and all other amounts due on the Class C Notes
and to the holders thereof under the Basic Documents shall have
been paid in full (the "Class C Note Termination Date"), the
Class C Indenture Trustee shall be the "Controlling Party"
hereunder.
(c) Notwithstanding the foregoing, a Liquidity Provider
shall become the Controlling Party if no Indenture Trustee acting
as Controlling Party pursuant to Section 2.7(b) has taken any
action to exercise remedies in respect of the Collateral within
24 months after the earlier of (i) the Acceleration of any Class
of Notes and (ii) the date on which the Available Liquidity
Commitment under any Liquidity Facility has been fully utilized
as a result of Interest Advances or an Acceleration Advance. In
any such instance, the Class A Liquidity Provider shall be the
Controlling Party until all amounts owed to such Liquidity
Provider under the Class A Liquidity Agreement have been paid in
full; whereupon the Class B Liquidity Provider shall the
Controlling Party until all amounts owed to such Liquidity
Provider under the Class B Liquidity Agreement have been paid in
full; whereupon the Class C Liquidity Provider shall be the
Controlling Party until all amounts owed to such Class C
Liquidity Provider under the Class C Liquidity Agreement have
been paid in full.
(d) The exercise of remedies by the Controlling Party under
this Agreement shall be expressly limited by Section 5.1.
(e) The Controlling Party shall not be entitled to require
or obligate any Non-Controlling Party to provide funds necessary
to exercise any right or remedy hereunder.
(f) The Collateral Agent shall give written notice to all
of the other parties to this Collateral Agreement promptly upon a
change in the identity of the Controlling Party. Each of the
parties hereto agrees that it shall not exercise any of the
rights of the Controlling Party at such time as such party is not
the Controlling Party hereunder; provided, however, that nothing
herein contained shall prevent or prohibit any Non-Controlling
Party from exercising such rights as shall be specifically
granted to such Non-Controlling Party hereunder and under the
other Basic Documents.
<PAGE>
ARTICLE III
RECEIPT, DISTRIBUTION AND APPLICATION OF
INCOME FROM THE COLLATERAL
SECTION 3.1. Written Notice of Distribution. No later than
3:00 P.M. (New York time) on the second Business Day immediately
preceding each Payment Date, each of the following Persons shall
deliver to the Collateral Agent and the Company a Written Notice
setting forth the following information as at the close of
business on such Business Day:
(i) With respect to the Class A Notes, the Class A
Indenture Trustee shall separately set forth the amounts
specified in clause "fourth" of Section 3.2;
(ii) With respect to the Class B Notes, the Class B
Indenture Trustee shall separately set forth the amounts
specified in clause "fifth" of Section 3.2;
(iii) With respect to the Class C Notes, the Class C
Indenture Trustee shall separately set forth the amounts
specified in clause "sixth" of Section 3.2;
(iv) With respect to each Liquidity Facility, the
applicable Liquidity Provider shall separately set forth the
amounts specified in clauses "first", "second" and "third" of
Section 3.2; and
(v) With respect to each Indenture Trustee, such Indenture
Trustee shall set forth the amounts specified in clause "seventh"
of Section 3.2 with respect to such Indenture Trustee.
The notices required under this Section 3.1(a) may be in the
form of a schedule or similar document provided to the Collateral
Agent by the parties referenced therein or by any one of them
stating that, unless there has been a prepayment of the Notes,
such schedule or similar document is to remain in effect until
any substitute notice or amendment shall be given to the
Collateral Agent by the party providing such notice.
(b) Following the receipt by the Collateral Agent from an
Indenture Trustee of an Acceleration Notice, the Collateral Agent
shall request the following information from the following
Persons, and each of the following Persons shall, upon the
request of the Collateral Agent, deliver a Written Notice to the
Collateral Agent setting forth for such Person the following
information:
<PAGE>
(i) With respect to the Class A Notes, the Class A
Indenture Trustee shall separately set forth the amounts
specified in clauses "fifth" (relating to indemnity payments made
by the Class A Noteholders) and "seventh" of Section 3.3;
(ii) With respect to the Class B Notes, the Class B
Indenture Trustee shall separately set forth the amounts
specified in clauses "fifth" (relating to indemnity payments made
by the Class B Noteholders) and "eighth" of Section 3.3;
(iii) With respect to the Class C Notes, the Class C
Indenture Trustee shall separately set forth the amounts
specified in clauses "fifth" (relating to indemnity payments made
by the Class C Noteholders) and "ninth" of Section 3.3;
(iv) With respect to each Liquidity Facility, the
applicable Liquidity Provider shall separately set forth the
amounts specified in clauses "second, "third" and "fourth" of
Section 3.3; and
(v) With respect to each Indenture, such Indenture Trustee
shall set forth the amounts specified in clause "sixth" of
Section 3.3.
(c) At such time as an Indenture Trustee or a Liquidity
Provider shall have received all amounts owing to it (and, in the
case of an Indenture Trustee, the Noteholders for which it is
acting) pursuant to Section 3.2 or 3.3, as applicable, and, in
the case of a Liquidity Provider, its commitment under the
related Liquidity Agreement shall have terminated, such Person
shall, by a Written Notice, so inform the Collateral Agent and
each other party to this Collateral Agreement.
(d) As provided in Section 7.5, the Collateral Agent shall
be fully protected in relying on any of the information set forth
in a Written Notice provided by any Indenture Trustee or any
Liquidity Provider pursuant to paragraphs (a) through (c) above
and shall have no independent obligation to verify, calculate or
recalculate any amount set forth in any Written Notice delivered
in accordance with such paragraphs.
(e) Any Written Notice delivered by an Indenture Trustee or
a Liquidity Provider, as applicable, pursuant to Section 3.1(b)
or 3.1(c), if made prior to 12:00 noon (New York City time) shall
be effective on the date delivered (or if delivered later shall
be effective as of the next Business Day) and shall be effective
if written or if given telephonically (confirmed promptly in
writing). Subject to the terms of this Collateral Agreement, the
<PAGE>
Collateral Agent shall as promptly as practicable comply with any
such instructions; provided, however, that any withdrawal and
transfer pursuant to any instruction received after 12:00 noon
(New York City time) on any Business Day may be made on the next
succeeding Business Day.
(f) In the event the Collateral Agent shall not receive
from any Person any information set forth in paragraphs (a) or
(b) above which is required to enable the Collateral Agent to
make a distribution to such Person pursuant to Section 3.2 or
3.3, the Collateral Agent shall request such information and,
failing to receive any such information, the Collateral Agent
shall not make such distribution(s) to such Person. In such
event, the Collateral Agent shall make distributions pursuant to
clauses "first" through "seventh" of Section 3.2 and clauses
"first" through "ninth" of Section 3.3 to the extent it shall
have sufficient information to enable it to make such
distributions, and shall continue to hold any funds remaining,
after making such distributions, until the Collateral Agent shall
receive all necessary information to enable it to distribute any
funds so withheld.
(g) On such dates (but not more frequently than monthly) as
any Liquidity Provider or any Indenture Trustee shall request,
the Collateral Agent shall send to such party a written statement
reflecting all amounts on deposit with the Collateral Agent
pursuant to Section 3.1(f) hereof.
SECTION 3.2 Regular Distribution on Payment Dates. Except
as otherwise provided in Sections 2.5, 3.1(f) and 3.3, amounts
received by the Collateral Agent from the Company shall be
promptly distributed on each Payment Date in the following order
of priority and in accordance with the information provided to
the Collateral Agent pursuant to Section 3.1(a);
first, such payment as shall be required to pay all accrued
and unpaid Liquidity Fees owed to each Liquidity Provider shall
be distributed to the Liquidity Providers pari passu on the basis
of the amount of Liquidity Fees owed to each Liquidity Provider;
second, such payment as shall be required to pay in full the
aggregate amount of interest accrued on all Liquidity Obligations
at the rate provided in the applicable Liquidity Agreement shall
be distributed to the Liquidity Providers pari passu on the basis
of the amount of Liquidity Obligations owed to each Liquidity
Provider;
<PAGE>
third, such payment as shall be required to reimburse the
Liquidity Providers in an amount equal to the amount of any
Interest Advances under the Liquidity Agreements or, if
applicable, to replenish the Cash Collateral Accounts up to their
respective Required Amounts pari passu on the basis of the
amounts of such reimbursements and replenishment;
fourth, such payment as shall be required to pay in full the
aggregate outstanding amount of interest then due on the Class A
Notes and the aggregate outstanding amount of principal scheduled
to be paid in respect of the Class A Notes pursuant to Section
2.09 of the Class A Indenture shall be distributed to the Class A
Indenture Trustee;
fifth, such payment as shall be required to pay in full the
aggregate outstanding amount of interest then due on the Class B
Notes and the aggregate outstanding amount of principal scheduled
to be paid in respect of the Class B Notes pursuant to Section
2.09 of the Class B Indenture shall be distributed to the Class B
Indenture Trustee;
sixth, such payment as shall be required to pay in full the
aggregate outstanding amount of interest then due on the Class C
Notes and the aggregate outstanding amount of principal scheduled
to be paid in respect of the Class C Notes pursuant to Section
2.09 of the Class C Indenture shall be distributed to the Class C
Indenture Trustee;
seventh, such payment as shall be required to pay in full
the aggregate unpaid amount of fees and expenses payable to the
Collateral Agent and each Indenture Trustee pursuant to the terms
of this Collateral Agreement and the Applicable Indenture, as the
case may be, shall be distributed to the Collateral Agent and
such Indenture Trustee; and
eighth, the balance, if any, of any such payment remaining
thereafter shall be distributed to the Company.
SECTION 3.3 Payments After Notice of Acceleration, Etc.
Except as otherwise provided in Sections 3.1(f) and 3.6(b),
amounts held or received by the Collateral Agent after the
Collateral Agent shall have received a Notice of Acceleration
shall be promptly distributed by the Collateral Agent in the
following order of priority:
first, such payment as shall be required to reimburse the
Collateral Agent for any tax, expense, charge or other loss
incurred by the Collateral Agent (to the extent not previously
reimbursed) (including, without limitation, the expenses of any
sale, taking or other proceeding, attorneys' fees and expenses,
<PAGE>
court costs, and any other expenditures incurred or expenditures
or advances made by the Collateral Agent in the protection,
exercise or enforcement of any right, power or remedy or any
damages sustained by the Collateral Agent, liquidated or
otherwise, upon the Collateral Access Event giving rise to such
Acceleration) shall be applied by the Collateral Agent in
reimbursement of such expenses;
second, such payment remaining as shall be required to pay
all accrued and unpaid Liquidity Fees shall be distributed to
each Liquidity Provider pari passu on the basis of the amount of
Liquidity Fees owed to each Liquidity Provider;
third, such payment remaining as shall be required to pay
accrued and unpaid interest (including, without limitation, Post
Petition Interest) on the Liquidity Obligations as provided in
the Liquidity Agreements shall be distributed to each Liquidity
Provider pari passu on the basis of the amount of such accrued
and unpaid interest owed to each Liquidity Provider;
fourth, such payment remaining as shall be required to pay
in full all Liquidity Obligations then due (other than amounts
payable pursuant to clause "second" or "third" of this Section
3.3) shall be distributed to each Liquidity Provider pari passu
on the basis of the amount of Liquidity Obligations owed to each
Liquidity Provider;
fifth, such payment as shall be required to reimburse (i)
each Indenture Trustee for any tax, expense, charge or other loss
incurred (to the extent not previously reimbursed and including,
without limitation, the expenses of any sale, taking or other
proceeding, attorneys' fees and expenses, court costs, and any
other expenditures incurred or expenditures or advances made by
the Indenture Trustee in the protection, exercise or enforcement
of any right, power or remedy or any damages sustained by the
Indenture Trustee, liquidated or otherwise, upon the Collateral
Access Event giving rise to such Acceleration under the
Applicable Indenture) and (ii) each Noteholder for payments made
pursuant to Section 6.3 hereof and Section 7.03(d) of each
Indenture in respect of amounts described in clauses "first" and
"fifth" of this Section 3.3, shall be (x) in the case of
reimbursements under clause (i) hereof, distributed to the
applicable Indenture Trustee for its own account and (y) in the
case of reimbursements under clause (ii) hereof, distributed to
the applicable Indenture Trustee for the account of such
Noteholder;
<PAGE>
sixth, such payment remaining as shall be required to pay in
full the aggregate amount of fees and expenses payable to the
Collateral Agent and each Indenture Trustee pursuant to the terms
of this Agreement, or the Applicable Indenture, as the case may
be (other than amounts payable pursuant to clauses "first" and
"fifth" of this Section 3.3), shall be distributed to the
Collateral Agent or such Indenture Trustee, as the case may be;
seventh, such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest,
including Post Petition Interest and the Note Interest Carryover
Amount, to the date of distribution on the Class A Notes and then
to pay in full the aggregate outstanding amount of principal of
the Class A Notes and all other amounts due and owing to the
Class A Noteholders under the Class A Indenture, shall be
distributed to the Class A Indenture Trustee;
eighth, such payment remaining as shall be required to pay
in full the aggregate amount of all accrued but unpaid interest,
including Post Petition Interest and the Note Interest Carryover
Amount to the date of distribution on the Class B Notes and then
to pay in full the aggregate outstanding amount of principal of
the Class B Notes and all other amounts due and owing to the
Class B Noteholders under the Class B Indenture, shall be
distributed to the Class B Indenture Trustee;
ninth, such payment remaining as shall be required to pay in
full the aggregate amount of all accrued but unpaid interest,
including Post Petition Interest and the Note Interest Carryover
Amount to the date of distribution on the Class C Notes and then
to pay in full the aggregate outstanding amount of principal of
the Class C Notes and all other amounts due and owing to the
Class C Noteholders under the Class C Indenture, shall be
distributed to the Class C Indenture Trustee; and
tenth, the balance, if any, of any such payment remaining
thereafter shall be distributed to the Company.
SECTION 3.4. Other Payments. Any payments received or held
by the Collateral Agent for which no provision as to the
application thereof is made in this Collateral Agreement shall be
distributed by the Collateral Agent (i) to the extent received or
realized at any time prior to the payment in full of all Secured
Obligations, in the order of priority specified in Section 3.3
and (ii) to the extent received or realized at any time after
payment in full of all Secured Obligations, in the following
order of priority: first, in the manner provided in clause
"first" of Section 3.3, and second, in the manner provided in
clause "tenth" of Section 3.3.
<PAGE>
SECTION 3.5. Payments to the Indenture Trustees; Liquidity
Providers. Any amounts distributed hereunder to any Liquidity
Provider shall be paid to the Liquidity Provider by wire transfer
of funds to the address in the United States such Liquidity
Provider shall provide to the Collateral Agent. The Collateral
Agent shall provide a Written Notice of any such transfer to the
applicable Liquidity Provider at the time of such transfer. Any
amounts distributed hereunder by the Collateral Agent to any
Indenture Trustee which shall not be the same institution as the
Collateral Agent shall be paid to such Indenture Trustee by wire
transfer funds at the address such Indenture Trustee shall
provide to the Collateral Agent.
SECTION 3.6. Liquidity Facility. (a) If on the date which
is five days after any Payment Date the Collateral Agent shall
not have sufficient funds for the payment of any amounts due and
owing on such Payment Date in respect of accrued interest on the
Class A Notes, the Class B Notes or the Class C Notes (at the
Stated Interest Rate for such Class of Notes), the Collateral
Agent shall, except as otherwise provided in Section 3.6(f),
request a drawing (each such drawing, an "Interest Advance")
under the Liquidity Facility with respect to such Class of Notes
in an amount equal to the lesser of (i) an amount sufficient to
pay the amount of such accrued interest (at the Stated Interest
Rate for such Class of Notes) and (ii) the Available Liquidity
Amount under such Liquidity Facility, and shall forthwith pay
such amount to the Indenture Trustee with respect to such Class
of Notes.
(b) Application of Interest Advances. Notwithstanding
anything to the contrary contained in this Collateral Agreement,
(i) all payments received by the Collateral Agent in respect of
an Interest Advance under the Class A Liquidity Facility and all
amounts withdrawn by the Collateral Agent from the Class A Cash
Collateral Account, and payable in each case to the Class A
Noteholders, shall be promptly distributed to the Class A
Indenture Trustee, (ii) all payments received by the Collateral
Agent in respect of an Interest Advance under the Class B
Liquidity Facility and all amounts withdrawn by the Collateral
Agent from the Class B Cash Collateral Account, and payable in
each case to the Class B Noteholders, shall be promptly
distributed to the Class B Indenture Trustee and (iii) all
payments received by the Collateral Agent in respect of an
Interest Advance under the Class C Liquidity Facility and all
amounts withdrawn by the Collateral Agent from the Class C Cash
Collateral Account, and payable in each case to the Class C
Noteholders, shall be promptly distributed to the Class C
Indenture Trustee.
<PAGE>
(c) Downgrade Advances. If at any time the short-term
unsecured debt rating of any Liquidity Provider is then rated by
either Rating Agency lower than the Trigger Rating, within 10
days after the receipt of notice by the Collateral Agent and the
Company of such fact from the Liquidity Provider as required by
Section 5.03 of the Liquidity Agreement, the Company shall (i)
cause such downgraded Liquidity Provider (the "Downgraded
Facility") to be replaced by a Replacement Liquidity Provider and
(ii) cause such Replacement Liquidity Provider to issue and
deliver to the Collateral Agent a Replacement Liquidity Facility.
If a Downgraded Facility has not been replaced in accordance with
the terms of this paragraph and Section 3.6(e) within 30 days of
such downgrading, the Collateral Agent shall, subject to Section
3.6(d), on such 30th day (or if such 30th day is not a Business
Day, on the next succeeding Business Day) request a drawing in
accordance with such Downgraded Facility (such drawing, a
"Downgrade Advance") of all available and undrawn amounts
thereunder. Amounts drawn under any Downgraded Facility as
provided in the immediately preceding sentence shall be
maintained and invested as provided in Section 3.6(f).
(d) Non-extension Advances. If, prior to the Note
Termination Date with respect to any Class of Notes, the
Liquidity Facility with respect to such Class of Notes is
scheduled to expire on a date (the "Stated Expiration Date")
prior to the date that is 15 days after the Final Scheduled
Payment Date for such Class of Notes, then, no less than 30 days
prior to such Stated Expiration Date the Company shall deliver to
the Collateral Agent a Replacement Liquidity Facility for such
Class of Notes. If, on or before such 30th day the Company shall
not have delivered to the Collateral Agent a Replacement
Liquidity Facility for such Class of Notes, the Collateral Agent
shall on such 30th day, in accordance with the terms of the
expiring Liquidity Facility, request a drawing under such
expiring Liquidity Facility (such drawing, a "Non-extension
Advance") of all available and undrawn amounts thereunder.
Amounts drawn under any Liquidity Facility as provided in the
immediately preceding sentence shall be maintained and invested
in accordance with Section 3.6(f).
(e) Issuance of Replacement Liquidity Facility. In
addition to the circumstances described in Sections 3.6(c) and
(d), in the event that a Liquidity Provider requests the payment
of any amounts pursuant to Section 3.01 or 3.02 of the applicable
Liquidity Agreement, and whether or not a Collateral Access Event
under any Indenture has occurred and is continuing, the Company
may at its option substitute a Replacement Liquidity Facility for
such Liquidity Facility or the corresponding Cash Collateral
Account. In the event of a Downgrade Advance or Non-extension
<PAGE>
Advance, the Liquidity Provider (with respect to the relevant
Liquidity Facility) may, at its option, substitute a Replacement
Liquidity Facility for the relevant Cash Collateral Account. No
such Replacement Liquidity Facility or Liquidity Agreement shall
become effective, and neither such Replacement Liquidity Facility
nor such Liquidity Agreement shall be deemed a "Liquidity
Facility" or a "Liquidity Agreement", respectively, under the
Basic Documents, unless and until (i) the Company shall have
satisfied each of the conditions referred to in the immediately
following paragraph and (ii) if such Replacement Liquidity
Facility or related Liquidity Agreement shall materially
adversely affect the rights, remedies, interests or obligations
of the Class A Noteholders, the Class B Noteholders or the Class
C Noteholders under any of the Basic Documents, the Collateral
Agent shall have consented, in writing, to the issuance of such
Replacement Liquidity Facility and the execution of such related
Liquidity Agreement.
In connection with the issuance of each Replacement
Liquidity Facility as aforesaid, the Company shall (x) prior to
the issuance of such Replacement Liquidity Facility, obtain
written confirmation from each of the Rating Agencies that such
Replacement Liquidity Facility will not cause a reduction of the
then rating of the Notes by such Rating Agency (without regard to
the ratings of any Liquidity Provider being replaced pursuant to
Section 3.6(c)), (y) prior to the issuance of such Replacement
Liquidity Facility, pay all Liquidity Obligations then owing to
the replaced Liquidity Provider (which payment may be made
pursuant to a drawing under the Replacement Liquidity Facility,
or otherwise) and (z) cause the issuer of the Replacement
Liquidity Facility to deliver the Replacement Liquidity Facility
to the Collateral Agent, together with a legal opinion opining
that such Replacement Liquidity Facility is an enforceable
obligation of the Replacement Liquidity Provider. Upon
completion of the events referred to in the immediately preceding
sentence, the Collateral Agent shall surrender the replaced
Liquidity Facility to the replaced Liquidity Provider for
cancellation thereof. Upon satisfaction of the conditions set
forth in this Section 3.6(e) such Replacement Liquidity Provider
shall be deemed to be a Liquidity Provider with the rights
(including, without limitation, the benefit of the Lien of this
Collateral Agreement) and obligations of a Liquidity Provider
hereunder and under the other Basic Documents, the reimbursement
or other agreement(s) pursuant to which the Replacement Liquidity
Facility has been issued shall be deemed to be a Liquidity
Agreement hereunder and such Replacement Liquidity Facility shall
be deemed to be a Liquidity Facility under the Basic Documents.
<PAGE>
(f) Cash Collateral Accounts; Withdrawals; Investments. In
the event the Collateral Agent shall draw all available amounts
under the Class A Liquidity Facility, the Class B Liquidity
Facility or the Class C Liquidity Facility pursuant to Section
3.6(c), 3.6(d) or 3.6(i), amounts so drawn shall be deposited by
the Collateral Agent in the Class A Cash Collateral Account, the
Class B Cash Collateral Account or the Class C Cash Collateral
Account, respectively. Amounts so deposited shall be invested in
Eligible Investments in accordance with Section 2.2(b).
Investment Earnings on amounts on deposit in the Class A Cash
Collateral Account, the Class B Cash Collateral Account or the
Class C Cash Collateral Account as a result of any drawings under
Section 3.6(c), 3.6(d) or 3.6(i) shall be paid to the Class A
Liquidity Provider, the Class B Liquidity Provider or the Class C
Liquidity Provider, respectively, from time to time, on the
request of such Liquidity Provider. The Collateral Agent shall
promptly inform the applicable Liquidity Provider of the amount
of any such Investment Earnings upon the Liquidity Provider's
request therefor. In addition, from and after the date funds are
so deposited, the Collateral Agent shall make withdrawals from
such account as follows:
(i) on each Payment Date, the Collateral Agent shall, to
the extent it shall not have received funds to pay accrued and
unpaid interest on the Class A Notes (at the Stated Interest Rate
for the Class A Notes) from any other source, withdraw (to the
extent available) from the Class A Cash Collateral Account and
pay to the Class A Indenture Trustee an amount necessary to pay
accrued and unpaid interest (at the Stated Interest Rate for the
Class A Notes) on such Class A Notes;
(ii) on each Payment Date, the Collateral Agent shall, to
the extent it shall not have received funds to pay accrued and
unpaid interest on the Class B Notes (at the Stated Interest Rate
for the Class B Notes) from any other source, withdraw (to the
extent available) from the Class B Cash Collateral Account and
pay to the Class B Indenture Trustee an amount necessary to pay
accrued and unpaid interest (at the Stated Interest Rate for the
Class B Notes) on such Class B Notes;
(iii) on each Payment Date, the Collateral Agent shall, to
the extent it shall not have received funds to pay accrued and
unpaid interest on the Class C Notes (at the Stated Interest Rate
for the Class C Notes) from any other source, withdraw (to the
extent available) from the Class C Cash Collateral Account and
pay to the Class C Indenture Trustee an amount necessary to pay
accrued and unpaid interest (at the Stated Interest Rate for the
Class C Notes) on such Class C Notes;
<PAGE>
(iv) on each date on which any or all of the principal
amount of the Class A Notes shall have been paid pursuant to
Section 2.5, 3.2 or 3.3, and promptly following each date on
which the Collateral Agent shall be notified by the Class A
Indenture Trustee that there has occurred an optional redemption
of the Class A Notes pursuant to Section 3.01(b) of the Class A
Indenture, the Collateral Agent shall withdraw from the Class A
Cash Collateral Account an amount equal to the excess, if any, of
the amount on deposit in such account over the Required Amount
(with respect to the Class A Liquidity Facility) and shall pay
such amount to the Class A Liquidity Provider unless such amount
has previously been repaid to the Class A Liquidity Provider as a
Liquidity Obligation, in which case, such amount shall be held by
the Collateral Agent for distribution in accordance with
Section 3.2, 3.3 or 3.4, as the case may be;
(iv) on each date on which any or all of the principal
amount of the Class B Notes shall have been paid pursuant to
Section 2.5, 3.2 or 3.3, and promptly following each date on
which the Collateral Agent shall be notified by the Class B
Indenture Trustee that there has occurred an optional redemption
of the Class B Notes pursuant to Section 3.01(b) of the Class B
Indenture, the Collateral Agent shall withdraw from the Class B
Cash Collateral Account an amount equal to the excess, if any, of
the amount on deposit in such account over the Required Amount
(with respect to the Class B Liquidity Facility) and shall pay
such amount to the Class B Liquidity Provider unless such amount
has previously been repaid to the Class B Liquidity Provider as a
Liquidity Obligation, in which case, such amount shall be held by
the Collateral Agent for distribution in accordance with Section
3.2, 3.3 or 3.4, as the case may be;
(v) on each date on which any or all of the principal
amount of the Class C Notes, shall have been paid pursuant to
Section 2.5, 3.2 or 3.3, and promptly following each date on
which the Collateral Agent shall be notified by the Class C
Indenture Trustee that there has occurred an optional redemption
of the Class C Notes pursuant to Section 3.01(b) of the Class C
Indenture, the Collateral Agent shall withdraw from the Class C
Cash Collateral Account an amount equal to the excess, if any, of
the amount on deposit in such account over the Required Amount
(with respect to the Class C Liquidity Facility) and shall pay
such amount to the Class C Liquidity Provider unless such amount
has previously been repaid to the Class C Liquidity Provider as a
Liquidity Obligation, in which case, such amount shall be held by
the Collateral Agent for distribution in accordance with
Section 3.2, 3.3 or 3.4, as the case may be as the case may be;
<PAGE>
(vii) if a Replacement Liquidity Facility for any Class of
Notes shall be delivered to the Collateral Agent following the
date on which funds have been deposited into the Cash Collateral
Account for such Class of Notes, the Collateral Agent shall pay
amounts on deposit in such Cash Collateral Account to the
replaced Liquidity Provider unless such amount has previously
been repaid to the such replaced Liquidity Provider as a
Liquidity Obligation, in which case, such amount shall be held by
the Collateral Agent; and
(viii) when the Collateral Agent shall have been notified
by the Liquidity Provider for any Class of Notes that the
Liquidity Obligations owed to such Liquidity Provider have been
paid in full and by the Indenture Trustee for such Class of Notes
that the Notes of such Class have been paid in full together with
all interest thereon, the Collateral Agent shall withdraw all
amounts on deposit in the Cash Collateral Account for such Class
of Notes for payment to such Liquidity Provider unless such
amount has previously been repaid to the such Liquidity Provider
as a Liquidity Obligation, in which case, such amount shall be
held by the Collateral Agent and hold any remaining amounts for
distribution in accordance with Section 3.2, 3.3 or 3.4, as the
case may be.
(g) Reinstatement. In the event that at any time prior to
receipt by the Collateral Agent of a Notice of Acceleration funds
are withdrawn from any Cash Collateral Account pursuant to
clauses (i), (ii) or (iii) of Section 3.6(f), then funds received
by the Collateral Agent prior to such Notice of Acceleration
shall be deposited in such Cash Collateral Account as provided in
clause "third" of Section 3.2 and applied in accordance with
Section 3.6(f) hereof.
(h) [Reserved.]
(i) Acceleration Advance. Upon Acceleration, each
Liquidity Provider shall make an Acceleration Advance under its
Liquidity Facility, in an amount equal to the Available Liquidity
Commitment at the time. Amounts so drawn shall be invested and
applied in accordance with Section 3.6(f).
(j) Reduction of Stated Amount. Promptly following each
date on which any or all of the principal amount of any Class of
Notes shall have been paid pursuant to Section 3.2 or 3.3, and
promptly following each date of a redemption of any Class of
Notes pursuant to Section 3.01 of the Applicable Indenture, the
Collateral Agent shall, if the Liquidity Agreement with respect
to such Class of Notes shall provide for reductions of the
Commitment thereunder and if such reductions are not automatic,
<PAGE>
request the Liquidity Provider for such Class of Notes to reduce
such Commitment to an amount equal to the Required Amount with
respect to such Liquidity Facility (as calculated by the
Collateral Agent after giving effect to such payment). Each such
request shall be made in accordance with the provisions of the
Liquidity Agreement with respect to such Class of Notes, as
applicable.
(k) Relation to Subordination Provisions. Interest
Advances under the Liquidity Facilities and withdrawals from the
Cash Collateral Accounts in respect of interest on the Notes of
any Class will be distributed to the Indenture Trustee for such
Class of Notes, notwithstanding any provision to the contrary
contained in Section 3.2 and Section 3.3.
ARTICLE IV
COVENANTS OF THE COMPANY
SECTION 4.1. Liens.
The Company will not directly or indirectly create,
incur, assume or suffer to exist any Lien on or with respect to
any Airframe or Engine or any of the other Collateral or title
thereto or any interest therein except (a) the Lien of this
Collateral Agreement and the rights of the parties to the other
Basic Documents; (b) the rights of others under agreements or
arrangements to the extent expressly permitted in Sections 4.2(b)
and 4.4(c); (c) Liens for Taxes either not yet due or being
contested in good faith by appropriate proceedings so long as
such proceedings do not involve a material danger of the sale,
forfeiture or loss of any Airframe or Engine or any of the other
Collateral; (d) Liens of suppliers, mechanics, workers,
repairers, employees, airport operators, air traffic control
authorities or other like Liens arising in the ordinary course of
business and for amounts the payment of which is either not yet
delinquent or is being contested in good faith by appropriate
proceedings, so long as such proceedings do not involve a
material danger of the sale, forfeiture or loss of any Airframe
or Engine or any of the other Collateral; (e) Liens arising out
of judgments or awards against the Company with respect to which
at the time there shall have been secured a stay of execution;
(f) salvage and similar rights of insurers under policies of
insurance maintained with respect to any Aircraft; (g) any other
Lien with respect to which the Company shall have provided a bond
or other security in an amount and under terms reasonably
satisfactory to the Collateral Agent (it being agreed that unless
such bond is issued by a nationally recognized bonding agency or
such other security is an Eligible Investment, the Collateral
<PAGE>
Agent shall consult with the Liquidity Providers prior to
accepting such bond or other security); and (h) any Agent's
Liens. Liens described in clauses (a) through (h) above are
referred to herein as "Permitted Liens." The Company shall
promptly, at its own expense, take such action as may be
necessary to duly discharge (by bonding or otherwise) any Lien
other than a Permitted Lien arising at any time.
SECTION 4.2. Possession, Operation and Use, Maintenance,
Registration and Insignia.
(a) General.
Except as otherwise expressly provided herein, the Company
shall be entitled to operate, use, locate, employ or otherwise
utilize or not utilize any Airframe, Engine or Parts in any
lawful manner or place in accordance with the Company's business
judgment.
(b) Possession.
The Company shall not lease, or otherwise in any manner
deliver, relinquish or transfer possession of, any Airframe or
Engine to any Person or install any Engine, or permit any Engine
to be installed, on any airframe other than an Airframe so long
as such Engine is subject to the Lien of this Collateral
Agreement without the prior consent of the Collateral Agent,
except that the Company may, without the prior consent of the
Collateral Agent:
(i) enter into a charter or wet lease or other similar
arrangement with respect to an Aircraft under which the Company
has operational control of such Airframe and any Engines
installed thereon in the course of the Company's business (which
shall not be considered a transfer of possession hereunder);
provided that the Company's obligations hereunder shall continue
in full force and effect notwithstanding any such charter or wet
lease or other similar arrangement;
(ii) deliver possession of an Airframe or any Engine or any
Part to the manufacturer thereof or to any organization for
testing, service, repair, maintenance, overhaul work or other
similar purposes or for alterations or modifications or additions
required or permitted by the terms of this Collateral Agreement;
<PAGE>
(iii) subject an Airframe and any Engines installed thereon
to interchange agreements or any Engine to interchange or pooling
agreements or arrangements, in each case which are customary in
the United States airline industry and applicable to other
similar property owned by or leased to the Company in the course
of its airline business with any air carrier; provided that (A)
no such agreement or arrangement shall under any circumstances
result in, contemplate or require the transfer of title to an
Aircraft, Airframe or Engine constituting a part of an Aircraft
and (B) if the Company's title to any Engine shall be divested
under any such agreement or arrangement, such divestiture shall
be deemed to be an Event of Loss with respect to such Engine and
the Company shall comply with Section 4.04(e) in respect thereof;
(iv) install an Engine on an airframe owned by the Company
free and clear of all Liens except (A) Permitted Liens, (B) those
which apply only to the engines (other than the Engines),
appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on
such airframe, and (C) those created by the rights of other air
carriers under interchange or pooling agreements or other
arrangements customary in the United States airline industry
which do not contemplate, permit or require the transfer of title
to such airframe or engines installed thereon;
(v) install an Engine on an airframe leased to the Company
or purchased by the Company subject to a conditional sale or
other security agreement, provided that such airframe is free and
clear of all Liens except (x) the rights of the parties to the
lease, conditional sale or other security agreement and (y) Liens
of the type permitted under clause (iv) above, and such lease,
conditional sale or other security agreement effectively provides
(or the Company shall obtain from the lessor or secured party of
such airframe a separate agreement) that such Engine shall not
thereby become subject to the lien of such lease, conditional
sale or other security agreement, notwithstanding the
installation thereof on such airframe;
(vi) install an Engine on an airframe owned by the Company,
leased by the Company or purchased by the Company subject to a
conditional sale or other security agreement under circumstances
where neither clause (iv) nor clause (v) above is applicable,
provided that any divestiture of title to such Engine resulting
from such installation shall be deemed an Event of Loss with
respect to such Engine and the Company shall comply with Section
4.04(e);
<PAGE>
(vii) transfer possession of an Airframe or Engine to the
United States of America or any instrumentality thereof pursuant
to the Civil Reserve Air Fleet Program (as established and
administered pursuant to Executive Order 11490, as amended, as
superseded by United States Executive Order No. 12656) or any
similar or substitute program;
(viii) transfer possession of an Airframe or Engine to the
United States of America, or to a foreign government, when
required by Applicable Law in the circumstances referred to in
clause (e) of the definition of an Event of Loss (it being
understood that nothing in this clause (viii) shall relieve the
Company from its obligations under Section 4.4(e) or 4.5(a), as
the case may be, if such transfer becomes an Event of Loss);
(ix) transfer possession of an Airframe or Engine to the
United States of America or any instrumentality or agency thereof
(to the extent the obligations of such instrumentality or agency
are backed by the full faith and credit of the United States of
America) pursuant to a lease, contract or other instrument; and
(x) so long as no Collateral Access Event under any
Indenture, or Potential Collateral Access Event relating to
Section 6.01 (i), 6.01(vi), 6.01(vii), or 6.01(viii) of any
Indenture, shall have occurred and be continuing, and subject to
the provisions of the immediately following paragraph, enter into
a lease with respect to any Engine or any Airframe and Engines or
engines then installed on such Airframe to any Permitted Air
Carrier or any other foreign air carrier which, in the case of
any foreign air carrier, is not the subject of a petition filed
under any bankruptcy laws or other insolvency laws in effect at
the time such lease is entered into and is organized and
operating under the laws of a country (other than Taiwan) with
which the United States maintains normal diplomatic relations;
provided that, in the case only of a lease to a foreign air
carrier that is not a Permitted Air Carrier, the Collateral Agent
receives at the time of such lease an Opinion of Counsel to the
effect that there exist no possessory rights in favor of the
lessee under the laws of such lessee's country which would, upon
bankruptcy or insolvency of or other default by the Company or
the lessee, prevent the return of such Engine or Airframe and
such Engine or engine to the Collateral Trustee in accordance
with and when permitted by the terms of Section 5.2 upon the
exercise by the Collateral Trustee of its remedies pursuant to
such Section;
<PAGE>
provided, that (1) the rights of any transferee who receives
possession by reason of a transfer permitted by this Section
4.2(b) (other than by a transfer of an Engine which is deemed an
Event of Loss) shall be subject and subordinate to all the terms
of this Collateral Agreement, (2) the Company shall remain
primarily liable for the performance of all of the terms of this
Collateral Agreement and all the terms and conditions of this
Collateral Agreement and the other Basic Documents shall remain
in effect and (3) no lease or transfer of possession otherwise in
compliance with this Section 4.2(b) shall (x) result in any
registration or reregistration of an Aircraft except to the
extent permitted by Section 4.2(c) or the maintenance, operation
or use thereof except in compliance with Sections 4.2(c) and
4.2(d) or (y) permit any action not permitted to the Company
hereunder.
In the case of any lease permitted under this Section
4.2(b), the Company will include in such lease appropriate
provisions which (t) make such lease expressly subject and
subordinate to all of the terms of this Collateral Agreement,
including the rights of the Collateral Agent to avoid such lease
in the exercise of its rights to repossession of the Airframes
and Engines hereunder; (u) expressly prohibit any subleasing of
any Airframe or Engine subject thereto; (v) require that any
Airframe or Engine subject thereto be maintained in accordance
with a maintenance program approved by the Aeronautical Authority
applicable thereto; (w) require the lessee to comply with the
terms of Section 4.6; and (x) require that any Airframe or Engine
subject thereto be used in accordance with the limitations
applicable to the Company's possession and use provided in this
Collateral Agreement. Except as otherwise provided herein and
without in any way relieving the Company from its primary
obligation for the performance of its obligations under this
Collateral Agreement, the Company may in its sole discretion
permit a lessee to exercise any or all rights which the Company
would be entitled to exercise under Sections 4.2 and 4.4, and may
cause a lessee to perform any or all of the Company's obligations
under Article IV, and the Collateral Agent agrees to accept
actual and full performance thereof by a lessee in lieu of
performance by the Company.
In the event the Collateral Agent shall have received from
the lessor or secured party of any airframe (other than an
Airframe) leased to the Company or purchased by the Company
subject to a conditional sale or other security agreement a
written agreement which provides that the lessor or secured party
under such agreement shall not acquire or claim any right, title
or interest in any Engine by reason of the installation of such
Engine on such airframe at any time while such Engine is subject
<PAGE>
to the security interest in favor of the Collateral Agent, and
the lease or conditional sale or other security agreement
covering such airframe also covers an engine or engines owned by
the lessor under such lease or subject to a security interest in
favor of the secured party under such conditional sale or other
security agreement, the Collateral Agent hereby agrees for the
benefit of such lessor or secured party that, so long as such
lessor or secured party does not acquire or claim any such right,
title or interest, the Collateral Agent will not acquire or
claim, as against such lessor or secured party, any right, title
or interest in any such engine or engines owned by the lessor
under such lease or subject to a security interest in favor of
the secured party under such conditional sale or other security
agreement as the result of such engine or engines being installed
on the Airframe at any time while such engine or engines are
owned by such lessor or are subject to such lease or conditional
sale or other security agreement or security interest in favor of
such secured party.
The Collateral Agent hereby agrees for the benefit of the
lessor or secured party of any engine or engines leased to the
Company or owned by the Company subject to a conditional sale or
other security agreement, which lease or conditional sale or
other security agreement does not also cover an airframe, that
the Collateral Agent will not acquire or claim, as against such
lessor or secured party, any right, title or interest in any such
engine or engines owned by the lessor under such lease or subject
to a security interest in favor of the secured party under such
conditional sale or other security agreement as the result of
such engine or engines being installed on an Airframe at any time
while such engine or engines are owned by such lessor or are
subject to such lease or conditional sale or other security
agreement or security interest in favor of such secured party.
(c) Operation and Use.
So long as an Airframe or Engine is subject to the Lien
of this Collateral Agreement, the Company shall not operate, use
or locate such Airframe or Engine, or suffer such Airframe or
Engine to be operated, used or located, (i) in any area excluded
from coverage by any insurance required by the terms of Section
4.6, except in the case of a requisition by the United States of
America where the Company obtains indemnity from the United
States of America against substantially the same risks and for at
least the amounts of the insurance required by Section 4.6
covering such area, or (ii) outside the United States or Canada
in any recognized or, in the Company's reasonable judgment,
threatened area of hostilities unless covered by war risk and
<PAGE>
allied perils insurance, or in either case unless such Airframe
or Engine is operated or used under contract with the government
of the United States or any agency or instrumentality thereof (to
the extent the obligations of such agency or instrumentality are
backed by the full faith and credit of the United States of
America) under which contract such government assumes liability
for substantially the same risks in at least the same amounts as
would be covered by such insurance. So long as an Airframe or
Engine is subject to the Lien of this Collateral Agreement, the
Company shall not permit such Airframe or Engine to be used or
operated in violation of any Applicable Law or in violation of
any airworthiness certificate, license or registration relating
to such Aircraft or Engine issued by any competent governmental
authority, unless (i) the validity thereof is being contested in
good faith and by appropriate proceedings which do not involve a
material danger of the sale, forfeiture or loss of such Airframe
or Engine or a material danger of the loss of the Collateral
Agent's security interest in such Airframe or Engine or (ii) it
is not possible for the Company to comply with the laws of a
jurisdiction other than the United States (or other than any
jurisdiction in which an Aircraft is then registered) because of
a conflict with the applicable laws of the United States (or such
jurisdiction in which such Aircraft is then registered).
(d) Maintenance and Repair.
So long as an Airframe or Engine is subject to the Lien of
this Collateral Agreement, the Company shall (i) service, repair,
maintain, overhaul and test such Airframe and Engine (and any
engine which is not an Engine but which is installed on an
Aircraft) or cause the same to be done in accordance with a
maintenance program approved by the Aeronautical Authority (and
in compliance with all airworthiness directives thereof), and
shall keep or cause to be kept such Airframe and Engine (x) in
good operating condition, ordinary wear and tear excepted, as may
be necessary to enable the airworthiness certification of such
Aircraft to be maintained in good standing at all times under the
applicable rules and regulations of the Aeronautical Authority,
except when aircraft of the same type, model or series as such
Aircraft (powered by engines of the same type as those with which
the Airframe shall be equipped at the time of grounding)
registered in the same country have been grounded by the
Aeronautical Authority; provided, however, that if the
airworthiness certificate of an Aircraft shall be withdrawn,
then, subject to the provisions of Section 4.5, so long as the
Company is taking or causing to be taken all necessary action to
promptly correct the condition which caused such withdrawal or
such grounding, no Collateral Access Event under any Indenture
<PAGE>
shall arise from such withdrawal. Nothing herein shall be deemed
to prevent the Company from taking an Aircraft out of service for
maintenance or modifications permitted hereunder or storage in
accordance with applicable Aeronautical Authority requirements
and sound practice for such storage. The Company shall maintain
or cause to be maintained in the English language all records,
logs and other documents required by the Aeronautical Authority
to be maintained in respect of each Aircraft.
(e) Registration.
The Company upon the Closing Date shall cause each Aircraft
to be duly registered in its name under the Aviation Act and
except as otherwise permitted by this Section 4.2(e) at all times
thereafter shall cause each Aircraft to remain so registered. In
the event the Company leases an Aircraft to a Permitted Air
Carrier operating pursuant to a license issued under the laws of
a country other than the United States, the Company may cause
such Aircraft to be appropriately re-registered under the laws of
such country, provided that no Collateral Access Event under any
Indenture, or Potential Collateral Access Event relating to
Section 6.01(i), 6.01(vi), 6.01(vii) or 6.01(viii) of any
Indenture, shall have occurred and be continuing and the
Collateral Agent receives the opinions of counsel referred to
below. In connection with any such re-registration, the Company
shall, at its cost and to the extent permitted by the laws of
such country, cause the interests of the Collateral Agent in the
Aircraft to be duly registered or recorded under the laws of such
country and at all times thereafter to remain so duly registered
or recorded unless and until changed as provided herein, and
shall cause to be done at all times all other acts (including the
filing, recording and delivery of any document or instrument and
the payment of any sum) necessary or, by reference to prudent
industry practice in such country, advisable in order to
establish and perfect the Collateral Agent's interest in and to
such Aircraft as against the Company, any Permitted Air Carrier
or any third parties in such jurisdiction. Prior to any such
re-registration under the laws of a foreign country and at no
expense or liability to the Collateral Agent, the Collateral
Agent shall have received a favorable Opinion of Counsel to it to
the effect that (i) the laws of the new country of registration
will recognize the Company's right of ownership and repossession
under the lease entered into with such lessee and will give
effect to the Lien and security interest created by this
Collateral Agreement and (ii) this Collateral Agreement and the
Collateral Agent's Lien and right to repossession thereunder is
valid and enforceable under the laws of such country.
Concurrently with any such change in registration, the Collateral
<PAGE>
Agreement shall have been duly filed in all offices in such
country necessary to perfect and protect the rights of the
Collateral Agent and the Collateral Agent shall have received a
satisfactory Opinion of Counsel with respect to such filing and
any refiling requirements in such country.
The Collateral Agent shall execute and deliver all such
documents as the Company may reasonably request and otherwise
cooperate with the Company for the purpose of effecting,
continuing or (as provided in this Section 4.2(e)) changing the
registration of each Aircraft.
(f) Insignia.
The Company shall maintain or cause to be maintained in the
cockpit of each Airframe in a location reasonably adjacent to the
airworthiness certificate and on each Engine, a metal nameplate
identifying the security interest of the Collateral Agent in the
Aircraft, as follows:
"Subject to a security interest in favor of
Wilmington Trust Company, as Collateral Agent"
The Company will not allow the name of any Person other than the
Collateral Agent, or its respective successors or assigns, to be
placed on any Airframe or Engine as a designation that might be
interpreted as a claim of ownership or of any security interest
therein, except that the Company or any permitted lessee may
operate the Airframes and Engines in its livery, including its
name and logo.
SECTION 4.3. Inspection.
At all reasonable times so long as an Aircraft is subject to
the Lien of this Collateral Agreement, upon at least 15 days'
prior notice to the Company and at a time and place reasonably
acceptable to the Company, the Collateral Agent or its authorized
representative may at its own expense and risk conduct a visual
walk-around inspection of such Aircraft and any Engine and may
inspect the books, logs and records of the Company relating to
the operation and maintenance thereof; provided that (a) any such
inspection shall be subject to the safety, security and workplace
rules applicable at the location where such inspection is
conducted and any applicable governmental rules or regulations,
(b) in the case of an inspection during a maintenance visit, such
inspection shall not in any respect interfere with the normal
conduct of such maintenance visit or extend the time required for
such maintenance visit or, in any event, at any time interfere
<PAGE>
with the use or operation of any Airframe or Engine or with the
normal conduct of the Company's or a permitted lessee's business,
and (c) the Company shall not be required to undertake or incur
any additional liabilities in connection with any such
inspection. All information obtained in connection with any such
inspection shall be held confidential by the Collateral Agent and
shall not be furnished or disclosed by it to anyone other than
its bank examiners, regulators, auditors, accountants, agents and
legal counsel, and except as may be required by an order of any
court or administrative agency or by any statute, rule,
regulation or order of any governmental authority or as may be
necessary to enforce the terms of this Collateral Agreement. The
Collateral Agent shall have no duty to make any such inspection
and shall not incur any liability or obligation by reason of not
making any such inspection. No inspection under this Section 4.3
shall relieve the Company of any of its obligations under this
Collateral Agreement.
SECTION 4.4. Replacement and Pooling of Parts; Alterations,
Modifications and Additions; Substitution of Engines.
(a) Replacement of Parts.
Except as otherwise provided in the proviso to the third
sentence of Section 4.4(d) or if an Airframe or an Engine to
which a Part relates has suffered an Event of Loss, the Company,
at its own cost and expense, will so long as such Airframe or
Engine is subject to the Lien of this Collateral Agreement
promptly replace all Parts that may from time to time become worn
out, lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use for any reason
whatsoever. In addition, in the ordinary course of maintenance,
service, repair, overhaul or testing, the Company, at its own
cost and expense, may remove any Parts, whether or not worn out,
lost, stolen, destroyed, seized, confiscated, damaged beyond
repair or permanently rendered unfit for use; provided that the
Company, at its own cost and expense, shall, except as otherwise
provided in the proviso to the third sentence of Section 4.4(d),
replace such Parts as promptly as practicable with replacement
Parts or temporary replacement parts as provided in Section
4.4(c). All replacement Parts shall be free and clear of all
Liens except for Permitted Liens and shall be in as good
operating condition as, and shall have a value and utility at
least equal to, the Parts replaced assuming such replaced Parts
were in the condition and repair required to be maintained by the
terms hereof.
<PAGE>
(b) Parts.
Except as otherwise provided in the proviso to the third
sentence of Section 4.4(d), any Part at any time removed from an
Airframe or Engine shall remain subject to the Lien of this
Collateral Agreement, no matter where located, until such time as
such Part shall be replaced by a Part that has been incorporated
or installed in or attached to such Airframe or Engine and that
meets the requirements for replacement Parts specified in Section
4.4(a). Immediately upon any replacement Part becoming
incorporated or installed in or attached to such Airframe or
Engine as provided in Section 4.4(a), without further act, (i)
the replaced Part shall thereupon be free and clear of all rights
of the Collateral Agent and shall no longer be deemed a Part
hereunder, and (ii) such replacement Part shall become subject to
this Collateral Agreement and be deemed part of such Airframe or
Engine, as the case may be, for all purposes hereof to the same
extent as the Parts originally incorporated or installed in or
attached to such Airframe or Engine.
(c) Pooling or Parts Leasing.
Any Part removed from an Airframe or Engine as provided in
Section 4.4(a) may be subjected by the Company to a pooling or
parts leasing agreement or arrangement of a type customary in the
airline industry entered into in the ordinary course of the
Company's business with any air carrier; provided that the part
replacing such removed Part shall be incorporated or installed in
or attached to such Airframe or Engine in accordance with
Sections 4.4(a) and 4.4(b) as promptly as practicable after the
removal of such removed Part. In addition, any temporary
replacement part when incorporated or installed in or attached to
an Airframe or any Engine in accordance with Section 4.4(a) may
be owned by another airline or vendor as customary in the United
States airline industry, subject to a pooling or parts leasing
arrangement; provided that the Company, at its expense within a
commercially reasonable time, either (i) causes such temporary
replacement part to become subject to the Lien of this Collateral
Agreement, free and clear of all Liens except Permitted Liens, at
which time such temporary replacement part shall become a Part or
(ii) replaces such temporary replacement part by incorporating or
installing in or attaching to such Airframe or Engine a further
replacement Part owned by the Company free and clear of all Liens
except Permitted Liens and which shall become subject to the Lien
of this Collateral Agreement in accordance with Section 4.4(b).
<PAGE>
(d) Alterations, Modifications and Additions.
The Company, at its own expense, shall make alterations and
modifications in and additions to each Airframe and Engine as may
be required to be made from time to time by Applicable Law
regardless of upon whom such requirements are, by their terms,
nominally imposed; provided that the Company may, in good faith,
contest the validity or application of any such standard in any
reasonable manner which does not materially adversely affect the
Lien of this Collateral Agreement. In addition, the Company, at
its own expense, may from time to time make or cause to be made
such alterations and modifications in and additions to any
Airframe or Engine as the Company may deem desirable in the
proper conduct of its business (including, without limitation,
removal of Parts); provided that no such alteration, modification
or addition diminishes, in the Company's reasonable judgment, the
value, utility, condition, airworthiness or remaining useful life
of such Airframe or Engine below the value, utility, condition,
airworthiness or remaining useful life thereof immediately prior
to such alteration, modification or addition, assuming such
Airframe or Engine was then in the condition required to be
maintained by the terms of this Collateral Agreement, except that
the value (but not the utility, condition, airworthiness or
remaining useful life) of any Aircraft may be reduced by the
value of Parts which the Company deems obsolete or no longer
suitable or appropriate for use in such Aircraft which shall have
been removed and not replaced, if the aggregate value of all such
obsolete or unsuitable Parts removed from such Aircraft and not
replaced shall not exceed $500,000. All Parts incorporated or
installed in or attached or added to any Airframe or Engine as
the result of any alteration, modification or addition effected
by the Company shall be free and clear of any Liens except
Permitted Liens and become subject to the Lien of this Collateral
Agreement; provided that, the Company may, at any time so long as
an Airframe or Engine is subject to the Lien of this Collateral
Agreement, remove any such Part from such Airframe or an Engine
if (i) such Part is in addition to, and not in replacement of or
in substitution for, any Part originally incorporated or
installed in or attached to such Airframe or Engine at the time
of delivery thereof hereunder or any Part in replacement of, or
in substitution for, any such original Part, (ii) such Part is
not required to be incorporated or installed in or attached or
added to such Airframe or Engine pursuant to the terms of Section
4.2(d) or the first sentence of this Section 4.4(d) and (iii)
such Part can be removed from such Airframe or Engine without
diminishing or impairing the value, condition, utility,
airworthiness or remaining useful life which such Airframe or
Engine would have had at the time of removal had such alteration,
<PAGE>
modification or addition not been effected by the Company,
assuming the Aircraft was otherwise maintained in the condition
required by this Collateral Agreement. Upon the removal by the
Company of any such Part as above provided, title thereto shall,
without further act, be free and clear of all rights of the
Collateral Agent and such Part shall no longer be deemed a Part
hereunder.
(e) Substitution of Engines.
The Company shall have the right at its option at any time,
on at least 30 days' prior notice to the Collateral Agent, to
substitute, and if an Event of Loss shall have occurred with
respect to an Engine, shall within 60 days of the occurrence of
such Event of Loss and on at least five days' prior notice to the
Collateral Agent substitute, a Replacement Engine for any Engine
not then installed or held for use on the Aircraft of which it is
part. In such event, immediately upon the effectiveness of such
substitution on the date set forth in such notice and without
further act, (i) the Replacement Engine shall be owned by the
Company and free and clear of all Liens (other than Permitted
Liens), (ii) the replaced Engine shall thereupon be free and
clear of all rights of the Collateral Agent and the Lien of this
Collateral Agreement and shall no longer be deemed an Engine
hereunder, and (iii) such Replacement Engine shall become subject
to this Collateral Agreement and be deemed part of an Aircraft
for all purposes hereof to the same extent as the Engine
originally installed on or attached to such Airframe. The
Company's right to make a replacement hereunder shall be subject
to the fulfillment (which may be simultaneous with such
replacement) of the following conditions precedent at the
Company's sole cost and expense and the Collateral Agent agrees
to cooperate with the Company to the extent necessary to enable
it to timely satisfy such conditions:
(i) the following documents shall be duly authorized,
executed and delivered by the respective party or parties
thereto, and an executed counterpart of each shall be delivered
to the Collateral Agent:
(A) a Collateral Agreement Supplement covering the
Replacement Engine, which shall have been duly filed for
recordation pursuant to the Aviation Act or such other Applicable
Law of the jurisdiction other than the United States in which the
Aircraft of which such Engine is a part is registered in
accordance with Section 4.2(e), as the case may be;
<PAGE>
(B) a full warranty bill of sale (as to title), covering
the Replacement Engine, executed by the former owner thereof in
favor of the Company (or, at the Company's option, other evidence
of the Company's ownership of such Replacement Engine, reasonably
satisfactory to the Collateral Agent); and
(C) Uniform Commercial Code financing statements covering
the security interests created by this Collateral Agreement (or
any similar statements or other documents required to be filed or
delivered pursuant to the laws of the jurisdiction in which such
Aircraft may be registered) as are deemed necessary or desirable
by counsel for the Collateral Agent to protect the security
interests of the Collateral Agent in the Replacement Engine;
(ii) the Company shall cause to be delivered to the
Collateral Agent, if requested by it, an Opinion of Counsel to
the effect that the Lien of this Collateral Agreement continues
to be in full force and effect with respect to the Replacement
Engine; and
(iii) the Company shall deliver to the Collateral Agent an
Officer's Certificate stating that in the opinion of such signer,
all conditions precedent provided for in this Section 4.4(e)
relating to such replacement have been complied with.
Upon satisfaction of all conditions to such substitution,
(x) the Collateral Agent shall execute and deliver to the Company
such documents and instruments, prepared at the Company's
expense, as the Company shall reasonably request to evidence the
release of such replaced Engine from the Lien of this Collateral
Agreement, (y) the Collateral Agent shall assign to the Company
all claims it may have against any other Person relating to any
Event of Loss giving rise to such substitution and (z) the
Company shall receive all insurance proceeds (other than those
reserved to others under Section 4.6(f)) and proceeds in respect
of any Event of Loss giving rise to such replacement to the
extent not previously applied to the purchase price of the
Replacement Engine as provided in Sections 4.6(e)(A) and
4.5(d)(B).
SECTION 4.5. Loss, Destruction or Requisition.
(a) Event of Loss With Respect to the Airframe.
Upon the occurrence of an Event of Loss with respect to an
Airframe, the Company shall forthwith (and in any event within 30
days after such occurrence) give the Collateral Agent notice of
such Event of Loss. The Company shall, within 60 days after such
occurrence, give the Collateral Agent notice of its election to
<PAGE>
perform one of the following options (it being agreed that if the
Company shall not have given the Collateral Agent such notice of
such election, the Company shall be deemed to have elected to
perform the option identified in the following clause (ii)):
(i) subject to the satisfaction of the closing conditions
contained in Section 4.5(c), on a date not more than 120 days
after the occurrence of the Event of Loss, cause to be subjected
to the Lien of this Collateral Agreement, in replacement of the
Airframe and Engines with respect to which the Event of Loss
occurred, a Replacement Airframe (together with the same number
of Replacement Engines as the number of Engines, if any, which
were subject to such Event of Loss), such Replacement Airframe
and Replacement Engines to be free and clear of all Liens except
Permitted Liens and to have a value, utility and remaining useful
life at least equal to, and being in as good operating condition
and repair and airworthiness as, the Airframe and Engines, if
any, so replaced (assuming such Airframe and Engines were in the
condition and repair required by the terms hereof); provided that
if the Company shall not perform its obligation to effect such
replacement under this clause (i) during the 120-day period of
time provided herein, it shall give the Collateral Agent notice
to such effect upon or before the expiration of such period of
time and shall pay the amounts required to be paid pursuant to
clause (ii) below not later than 165 days after the occurrence of
the Event of Loss; or
(ii) make a payment to the Collateral Agent for purposes of
allowing a distribution under Section 2.5 in order to prepay
Notes in accordance with Section 3.01(a) of each Indenture on a
date specified at least 30 days in advance by the Company, which
date shall be not more than 165 days after the occurrence of the
Event of Loss, and upon such payment, the Collateral Agent shall,
at the cost and expense of the Company, release from the Lien of
this Collateral Agreement the Airframe and the Engine or engines,
if any, attached to the Airframe subject to the Event of Loss, by
executing and delivering to the Company such documents and
instruments as the Company may reasonably request to evidence
such release.
(b) Effect of Replacement.
Should the Company have provided a Replacement Aircraft as
provided for in Section 4.5(a)(i), (i) the Lien of this
Collateral Agreement shall continue with respect to such
Replacement Aircraft as though no Event of Loss had occurred;
(ii) the Collateral Agent shall, at the cost and expense of the
Company, release from the Lien of this Collateral Agreement the
replaced Airframe and the Engine or engines, if any, attached to
<PAGE>
the replaced Airframe upon the occurrence of the Event of Loss by
executing and delivering to the Company such documents and
instruments as the Company may reasonably request to evidence
such release; and (iii) in the case of a replacement upon an
Event of Loss, the Collateral Agent shall assign to the Company
all claims the Collateral Agent may have against any other Person
arising from the Event of Loss and the Company shall receive all
insurance proceeds (other than those reserved to others under
Section 4.6(f)) and proceeds from any award in respect of
condemnation, confiscation, seizure or requisition, including any
investment interest thereon, to the extent not previously applied
to the purchase price of the Replacement Aircraft as provided in
Sections 4.5(d)(A) and 4.6(e)(C).
(c) Conditions to Airframe Replacement.
The Company's right to substitute a Replacement Aircraft as
provided in Section 4.5(a)(i) shall be subject to the
fulfillment, at the Company's sole cost and expense, in addition
to the conditions contained in such Section 4.5(a)(i), of the
following conditions precedent:
(i) on the date when the Replacement Aircraft is subjected
to the Lien of this Collateral Agreement (such date being
referred to in this Section 4.5 as the "Replacement Closing
Date"), no Collateral Access Event under any Indenture, and no
Potential Collateral Access Event relating to Section 6.01(i),
6.01(vi), 6.01(vii), or 6.01(viii) of any Indenture, shall have
occurred and be continuing;
(ii) on the Replacement Closing Date the following
documents shall have been duly authorized, executed and delivered
by the respective party or parties thereto and shall be in full
force and effect, and an executed counterpart of each thereof
(or, in the case of the FAA Bill of Sale (or a comparable
document, if any, of another Aeronautical Authority, if
applicable) and full warranty bill of sale referred to below, a
photocopy thereof) shall have been delivered to the Collateral
Agent:
(A) a Collateral Agreement Supplement covering the
Replacement Aircraft, which shall have been duly filed for
recordation pursuant to the Federal Aviation Act or such other
Applicable Law of such jurisdiction other than the United States
in which the Replacement Aircraft is to be registered in
accordance with Section 4.2(e), as the case may be;
(B) an FAA Bill of Sale (or a comparable document, if any,
of another Aeronautical Authority, if applicable) covering the
Replacement Aircraft, executed by the former owner thereof in
favor of the Company;
<PAGE>
(C) a full warranty (as to title) bill of sale, covering
the Replacement Aircraft, executed by the former owner thereof in
favor of the Company (or, at the Company's option, other evidence
of the Company's ownership of such Replacement Aircraft,
reasonably satisfactory to the Collateral Agent); and
(D) Uniform Commercial Code financing statements (or any
similar statements or other documents required to be filed or
delivered pursuant to the laws of the jurisdiction in which the
Replacement Aircraft may be registered in accordance with Section
4.2(e)) as are deemed necessary or desirable by counsel for the
Collateral Agent to protect the security interests of the
Collateral Agent in the Replacement Aircraft;
(iii) the Replacement Aircraft shall be of the same series
as the Aircraft or an improved model of such aircraft of the
Manufacturer, shall have a value and utility at least equal to,
and be in as good operating condition and repair as, the Airframe
and any Engines replaced (assuming such Airframe and Engines were
in the condition required by the terms hereof) as evidenced by
the Independent Appraisal referred to in Section 4.5(c)(vii)(1);
(iv) the Collateral Agent (acting directly or by
authorization to its special counsel) shall have received
satisfactory evidence as to the compliance with Section 4.6 with
respect to the Replacement Aircraft;
(v) on the Replacement Closing Date, (A) the Company shall
cause the Replacement Aircraft to be subject to the Lien of this
Collateral Agreement free and clear of Liens (other than
Permitted Liens), (B) the Replacement Aircraft shall have been
duly certified by the Aeronautical Authority as to type and
airworthiness in accordance with the terms of this Collateral
Agreement and (C) application for registration of the Replacement
Aircraft in accordance with Section 4.2(e) shall have been duly
made with the Aeronautical Authority and the Company shall have
authority to operate the Replacement Aircraft;
(vi) the Collateral Agent at the expense of the Company,
shall have received (acting directly or by authorization to its
special counsel) (A) an Opinion of Counsel, addressed to the
Collateral Agent, to the effect that the Replacement Airframe and
Replacement Engine, if any, has or have duly been made subject to
the Lien of this Collateral Agreement, that all required action
has been taken in order to maintain, and such action shall
maintain, the effectiveness and priority (to the extent the same
existed immediately prior to the occurrence of such Event of
Loss, assuming the Company was in compliance with all relevant
terms hereof) of the security interests in the Airframe, the
<PAGE>
Engines and title thereto created by this Collateral Agreement
and that the protections afforded to the Collateral Agent by 11
U.S.C. Section 1110 will not be less than such protections immediately
prior to the occurrence of such Event of Loss and (B) an opinion
of qualified FAA counsel (or counsel in jurisdiction outside the
United States where the Aircraft may be registered in accordance
with Section 4.2(e)), addressed to the Collateral Agent, as to,
in the case of FAA counsel, the due recordation of the Collateral
Agreement Supplement and all other documents or instruments the
recordation of which is necessary to perfect and protect the
rights of the Collateral Agent in the Replacement Aircraft or, in
the case of counsel in another jurisdiction, the taking of all
action necessary in such jurisdiction for such purposes; and
(vi) the Collateral Agent (acting directly or by
authorization to special counsel) shall have received:
(1) an Independent Appraisal with respect to the Replacement
Aircraft; and
(2) an Officer's Certificate stating that in the opinion of
the signer, all conditions precedent provided for in this
Collateral Agreement relating to such replacement have been
complied with.
(d) Non-Insurance Payments Received on Account of an Event
of Loss.
With respect to any Aircraft, as between the Collateral
Agent and the Company, any payments on account of an Event of
Loss (other than insurance proceeds or other payments the
application of which is provided for in this Section 4.5 or
elsewhere in this Collateral Agreement, as the case may be, or
payments in respect of damage to the business or property of the
Company) with respect to any Aircraft or an Engine or any Part
received at any time by the Collateral Agent or by the Company
from any governmental authority or other Person will be applied
as follows:
(A) if such payments are received with respect to an Event
of Loss with respect to an Aircraft, and the Airframe which is a
part of such Aircraft, or such Airframe and the Engines or
engines installed thereon, are being replaced by the Company
pursuant to Section 4.5(a)(i), such payments shall be paid over
to, or retained by, the Company; provided that, if the Company
has not completed such replacement, such payments shall be paid
over to, or retained by, the Collateral Agent as security, and
upon completion of, or in connection with a closing for, such
replacement, be paid over to the Company;
<PAGE>
(B) if such payments are received with respect to an Event
of Loss with respect to an Engine or Part that has been or is
being replaced by the Company pursuant to the terms hereof, such
payments shall be paid over to, or retained by, the Company; and
(C) if such payments are received with respect to an Event
of Loss with respect to an Aircraft, and if the Airframe which is
a part of such Aircraft, or such Airframe and the Engines or
engines installed thereon, have not been and will not be replaced
as contemplated by Section 4.5(a), such payments shall be paid to
the Collateral Agent for purposes of allowing a distribution
under Section 2.5 towards the prepayment of the Notes required
pursuant to Section 3.01(a) of the Indentures and after the Notes
and all other amounts payable to the Collateral Agent and the
Collateral Agent and the Noteholders under Section 3.01(a) of the
Indentures and the other Basic Documents shall have been paid in
full, the balance, if any, of such payment shall be promptly paid
over to or retained by the Company.
(a) Requisition for Use.
In the event of a requisition for use by any government of
any Airframe and the Engines, if any, or engines installed on
such Airframe while such Airframe is subject to the Lien of this
Collateral Agreement, the Company shall promptly notify the
Collateral Agent of such requisition and all of the Company's
obligations under this Collateral Agreement shall continue to the
same extent as if such requisition had not occurred except to the
extent that the performance or observance of any obligation by
the Company shall have been prevented or delayed by such
requisition; provided that the Company's obligations under this
Section 4.5 with respect to the occurrence of an Event of Loss,
for the payment of money and under Section 4.6 (except while an
assumption of liability by the government of the United States of
the scope referred to in Section 4.2(c) is in effect) shall not
be reduced or delayed by such requisition. Any payments received
by the Collateral Agent or the Company from such government with
respect to such requisition of use shall be paid over to, or
retained by, the Company. In the event of an Event of Loss of an
Engine resulting from the requisition for use by a government of
such Engine (but not an Airframe), the Company will replace such
Engine hereunder by complying with the terms of Section 4.4(e)
and any payments received by the Collateral Agent or the Company
from such government with respect to such requisition shall be
paid over to, or retained by, the Company.
<PAGE>
(e) Certain Payments to be Held As Security.
Any amount referred to in this Section 4.5 or Section 4.6
which is payable to the Company shall not be paid to the Company,
or, if it has been previously paid directly to the Company, shall
not be retained by the Company, if at the time of such payment a
Collateral Access Event under any Indenture, or a Potential
Collateral Access Event relating to Sections 6.01(i), 6.01(vi),
6.01(vii) or 6.01(viii) of any Indenture, shall have occurred and
be continuing, but shall be paid to and held by the Collateral
Agent as security for the obligations of the Company under this
Collateral Agreement and the Basic Documents, and at such time as
there shall not be continuing any such Collateral Access Event or
Potential Collateral Access Event such amount and any gain
realized as a result of Eligible Investments required to be made
pursuant to Section 7.12 shall be paid over to the Company.
SECTION 4.6. Insurance.
(a) Public Liability and Property Damage Insurance.
Subject to the rights of the Company under Section
4.6(d), the Company shall, without expense to the Collateral
Agent or the Noteholders, maintain or cause to be maintained in
effect at all times as long as an Aircraft is subject to the Lien
of this Collateral Agreement with insurers of recognized
responsibility public liability insurance (including, without
limitation, bodily injury, passenger legal liability, cargo
liability, property damage, contractual liability and product
liability coverage but excluding manufacturer's product liability
coverage) with respect to such Aircraft in an amount not less
than the amount the Company may carry from time to time on other
similar aircraft in its fleet, but not less than the amount
evidenced by the certificates of insurance issued by the
Company's independent insurance broker delivered to the
Collateral Agent on the Closing Date; provided that an agreement
of the United States Government to insure against or indemnify
for substantially the same risks to at least the same amount
shall satisfy the requirements of this Section 4.6(a); provided
further that, the Company need not maintain cargo liability
insurance, or may maintain such insurance in an amount less than
that specified above for an Aircraft as long as the amount of
cargo liability insurance, if any, maintained with respect to
such Aircraft is the same as the cargo liability insurance, if
any, maintained for other aircraft of the same model as such
Aircraft owned or operated by the Company. During any period
when an Aircraft is on the ground and not in operation the
Company may carry or cause to be carried, in lieu of the
insurance required by this Section, insurance otherwise
<PAGE>
conforming with the provisions of this Section except that the
amounts of coverage shall not be required to exceed the amounts
of comprehensive airline liability insurance, and the scope of
risks covered and type of insurance shall be the same, as are
from time to time in effect with respect to aircraft owned or
leased by the Company of the same type as the Aircraft similarly
on the ground and not in operation. Such insurance shall be of
the type usually carried by the Company with respect to similar
aircraft and engines, and covering risks of the kind customarily
insured against by the Company.
(b) Insurance Against Loss or Damage to the Aircraft and
Engines.
Subject to the rights of the Company under Section
4.6(d), the Company shall, without expense to the Collateral
Agent or any Noteholders, maintain or cause to be maintained in
effect at all times during which an Aircraft is subject to the
Lien of this Collateral Agreement with insurers of recognized
responsibility all risk, agreed value, ground and flight hull
insurance, which may exclude war risks and allied perils,
covering each Aircraft for an amount not less than the Insurance
Amount. To the extent available at reasonable cost, such hull
insurance or other personal property insurance of the Company
shall cover Engines or engines and Parts temporarily removed from
such Airframe, pending replacement by installation of the same or
similar Engines, engines or Parts on such Airframe but such
insurance need not cover an Engine while attached to an airframe
not owned, leased or operated by the Company or a permitted
lessee. Such insurance shall be of the type usually carried by
the Company with respect to similar aircraft and engines, and
covering risks of the kind customarily insured against by the
Company. If and to the extent that the Company or a lessee
operates an Aircraft either (A) on routes where it maintains war
risk insurance in effect with respect to other similar owned or
leased aircraft in its fleet, or (B) on routes (other than routes
within or between the United States, Canada, Mexico, Bermuda and
islands other than Cuba in the Caribbean Basin) where the custom
in the industry is to carry war risk and/or allied perils
insurance, the Company or such lessee shall maintain or cause to
be maintained such insurance in effect with respect to such
Aircraft in an amount equal to the lesser of the Insurance Amount
or the amount of such insurance customarily carried by
corporations engaged in the same or similar business similarly
situated with the Company and owning or operating similar
aircraft and engines on such routes or similar routes; provided
that if the requirement to maintain war risk insurance arises
under clause (A) of this sentence, such insurance shall be
maintained in an amount not less than that maintained by the
<PAGE>
Company or such lessee on similar aircraft in its fleet. An
agreement by the United States Government to insure against or
indemnify for substantially the same risks to at least the same
amount will satisfy any of the requirements of this Section
4.6(b). During any period when an Aircraft is on the ground and
not in operation the Company may carry or cause to be carried, in
lieu of the insurance required by this Section, insurance
otherwise conforming hereto except that the scope of the risks
covered and type of insurance shall be the same as are from time
to time applicable to aircraft owned or leased by the Company of
the same type as the Aircraft similarly on the ground and not in
operation in an amount at least equal to the Pro Rata Amount.
(c) Additional Insured; Loss Payment.
The Company shall cause all policies of insurance carried in
accordance with this Section 4.6 to name the Collateral Agent,
the Indenture Trustees and the Liquidity Providers as additional
insured as their respective interests may appear. Such policies
shall provide with respect to such additional insured that (i)
none of its interests in such policies shall be invalidated by
any act or omission or breach or violation of warranty,
declaration or condition contained in such policies by the
Company; (ii) no cancellation or lapse of coverage for nonpayment
of premium or otherwise, and no substantial change of coverage
which adversely affects the interests of such additional insured,
shall be effective as to such additional insured until 30 days
(or such lesser period as may be applicable in the case of any
war risk coverage) after receipt by such additional insured of
written notice from the insurers of such cancellation, lapse or
change; (iii) the Collateral Agent shall have no liability for
premiums, commissions, calls, assessments or advances with
respect to such policies; (iv) such policies will be primary
without any right of contribution from any other insurance
carried by such additional insured; and (v) the insurers waive
any rights of set-off, counterclaim, deduction or subrogation
against such additional insured. Each liability policy shall
provide that all the provisions thereof, except the limits of
liability, shall operate in the same manner as if there were a
separate policy covering such additional insured and provide that
the exercise by the insurer of rights of subrogation derived from
rights retained by the Company will not delay payment of any
claim that would otherwise be payable but for such rights of
subrogation. Each hull policy shall name the Collateral Agent as
loss payee as long as this Collateral Agreement shall remain in
effect; provided that so long as the insurers shall not have
received written notice that a Collateral Access Event under any
Indenture has occurred and is continuing, if insurance proceeds
in the aggregate equal $5,000,000 or less, then such proceeds
<PAGE>
shall be payable to the Company and, notwithstanding the
foregoing, all amounts of (i) any proceeds which in the aggregate
exceed $5,000,000, (ii) any proceeds in respect of a total loss
or an Event of Loss or (iii) any proceeds with respect to any
single loss after the insurers shall have received written notice
that a Collateral Access Event under any Indenture has occurred
and is after continuing, shall be payable to the Collateral Agent
as long as the Aircraft suffering such loss shall not have been
released from the Lien of this Collateral Agreement.
(d) Deductibles and Self-Insurance.
The Company may from time to time self-insure, by way of
deductible or premium adjustment provisions in insurance policies
or otherwise, the risks required to be insured against pursuant
to this Section 4.6 in such amounts as are then self-insured with
respect to similar owned or leased aircraft in the Company's
fleet but in no case shall such self-insurance in the aggregate
exceed for any year (i) 50% of the largest replacement value of
any single aircraft on which the Company at the time carries
insurance or (ii) 1-1/2% of the aggregate insurable value (during
the preceding calendar year) of all aircraft on which the Company
carries insurance, whichever is less, unless an insurance broker
of national standing selected by the Company and reasonably
satisfactory to the Collateral Agent shall certify that the
standard among all other major United States airlines is a higher
level of self-insurance, in which case the Company may
self-insure to such higher level. A deductible per occurrence
used to reduce handling costs that is not in excess of the
prevailing standard market deductible for similar aircraft shall
be permitted in addition to the self-insurance.
(e) Application of Hull Insurance Proceeds.
Subject to Section 4.5(f), as between the Collateral Agent
and the Company, any payments received under policies of hull or
other property insurance required to be maintained by the Company
pursuant to Section 4.6(b), shall be applied as follows:
(A) if such payments are received with respect to loss or
damage (including an Event of Loss with respect to an Engine) not
constituting an Event of Loss with respect to an Airframe,
payments in the aggregate of $5,000,000 or less shall be paid
over to or retained by the Company and, subject to Section
4.6(c), the entire amount of any payments, if such payments in
the aggregate are greater than $5,000,000 shall be paid over to
or retained by the Collateral Agent for payment to the Company
only upon performance of its repair or replacement obligation;
<PAGE>
(B) if such payments are received with respect to an Event
of Loss with respect to an Airframe and such Airframe is not
being replaced by the Company pursuant to Section 4.5(a)(i), so
much of such payments as shall not exceed the Pro Rata Amount and
other amounts required to be paid by the Company pursuant to
Section 4.5(a)(ii) shall be applied in reduction of the Company's
obligation to pay such amounts if not already paid by the
Company, and to reimburse the Company if such amounts shall have
been paid, and the balance, if any, of such payments shall be
promptly paid over to or retained by the Company; and
(C) if such payments are received with respect to an
Airframe, or an Airframe and Engines or engines installed
thereon, and such Airframe, or Airframe and Engines or such
engines are being replaced by the Company pursuant to Section
4.5(a)(i), such payments shall be paid over to, or retained by
the Company; provided that, if the Company has not completed such
replacement, such payments shall be paid over to, or retained by,
the Collateral Agent as security, and upon completion of, or in
connection with a closing for, such replacement, be paid over to
or retained by the Company.
(f) Insurance for Own Account.
Nothing in this Section 4.6 shall prohibit the Collateral
Agent or the Company from obtaining insurance with respect to the
Aircraft for its own account (including, without limitation, in
the case of the Company, hull insurance under the same policies
maintained pursuant to this Section 4.6 in amounts in excess of
those required to be maintained pursuant to this Section 4.6) and
any proceeds payable thereunder shall be payable as provided in
the insurance policy relating thereto; provided that no such
insurance may be obtained which would limit or otherwise
adversely affect the availability, coverage or payment of any
insurance required to be obtained or maintained pursuant to this
Section 4.6, it being understood that all salvage rights to the
Airframes and Engines shall remain with the Company's insurers at
all times.
(g) Reports, etc.
The Company will, so long as an Aircraft is subject to the
Lien of this Collateral Agreement, furnish to the Collateral
Agent evidence of renewal of the insurance policies required
pursuant to this Section 4.6 prior to the cancellation, lapse or
expiration of such insurance policies and, on or before the
renewal dates of the insurance policies carried by the Company
pursuant to this Section 4.6, a report signed by a firm of
aircraft insurance brokers, not affiliated with the Company,
<PAGE>
appointed by the Company and reasonably satisfactory to the
Collateral Agent, setting forth the insurance carried with
respect to such Aircraft (including public liability insurance)
and stating the opinion of such firm that the insurance then
carried and maintained on such Aircraft (including public
liability insurance) complies with the terms hereof and that such
renewal insurance will on and after the effective date thereof so
comply with the terms hereof; provided that all information
contained in such report shall be held confidential by the
Collateral Agent, and shall not be furnished or disclosed by them
to anyone except the Noteholders, their agents and
representatives (provided that any recipient of such information
shall agree for the benefit of the Company to hold all such
information similarly confidential) or as may be required by
Applicable Law; and provided further that if such report is not
already being provided by such firm on an annual basis, upon the
request of the Collateral Agent, the Company shall request its
insurers to provide such report on such basis. The Company will
cause such firm to give prompt written advice to the Collateral
Agent of any default in the payment of any premium and of any
other act or omission on the part of the Company of which it has
knowledge and which would in such firm's opinion invalidate or
render unenforceable, in whole or in any material part, any
insurance on an Aircraft. The Company will also cause such firm
to advise the Collateral Agent in writing at least 30 days prior
to the termination or cancellation of, or material adverse change
in, such insurance carried and maintained on any Aircraft
pursuant to this Section 4.6.
SECTION 4.7. Filings.
So long as any Notes or any other Secured Obligations
remain unpaid, the Company will take, or cause to be taken, at
the Company's cost and expense, such action with respect to the
recording, filing, rerecording and refiling of this Collateral
Agreement, each Collateral Agreement Supplement and any financing
statements or other instruments as are necessary or requested by
the Collateral Agent and will take such further action as the
Collateral Agent may from time to time reasonably request and, in
each case, as is appropriate, to maintain, so long as this
Collateral Agreement is in effect, the perfection of the security
interest created by this Collateral Agreement, and will furnish
to the Collateral Agent timely notice of the necessity of such
action, together with such instruments, in execution form, and
such other information as may be required to enable the
Collateral Agent to take such action.
<PAGE>
SECTION 4.8. Corporate Existence.
So long as the Notes or any other Secured Obligations
remain unpaid, the Company shall at all times maintain its
corporate existence, except as permitted by Section 4.9; and it
shall do or cause to be done all things necessary to preserve and
keep in full force and effect its corporate rights, powers,
privileges and franchises, except for any corporate right, power,
privilege or franchise that it determines is no longer necessary
or desirable in the conduct of its business and the loss of which
will not materially adversely affect or diminish the rights of
the Collateral Agent under this Collateral Agreement; provided
that, the Company shall, so long as the Notes or any other
Secured Obligations remain unpaid, maintain at all times to the
extent generally available an air carrier operating certificate
issued by the United States Secretary of Transportation pursuant
to Chapter 447 of the Aviation Act or any successor provision if
and so long as such a certificate is a condition to entitlement
of benefits under 11 U.S.C. Section 1110.
SECTION 4.9. Merger, Consolidation, Etc.
So long as any Notes or any other Secured Obligations remain
unpaid, the Company shall not consolidate with or merge into any
other corporation or convey, sell, transfer or lease all or
substantially all its assets as an entirety to any Person,
whether in a single transaction or a series of related
transactions, unless:
(i) The corporation formed by such consolidation or into
which it is merged or the Person which acquires by conveyance,
purchase, transfer or lease all or substantially all its assets
as an entirety shall be a corporation organized and validly
existing under the laws of the United States or any jurisdiction
thereof and shall after such merger or consolidation be a
Certificated Air Carrier, and shall have executed and delivered
to the Collateral Agent an agreement in form and substance
reasonably satisfactory to the Collateral Agent containing an
assumption by such successor corporation of the due and punctual
performance and observance of each agreement and condition of the
Basic Documents;
(ii) No Collateral Access Event under any Indenture shall
arise as a result of such asset sale, lease, conveyance,
transfer, merger or consolidation; and
<PAGE>
(iii) The Company shall have delivered to the Collateral
Agent an Officer's Certificate and an opinion of its General
Counsel or other counsel reasonably satisfactory to the
Collateral Agent (which opinion may be subject to customary
exceptions and may rely, as to factual matters, on an Officer's
Certificate of the successor to the Company stating that such
consolidation, merger, conveyance, sale, transfer or lease and
the assumption agreement mentioned in clause (i) above comply
with this Section 4.9 and that such assumption agreement has been
duly authorized, executed and delivered by such successor
corporation and constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms.
No such lease, conveyance, sale, transfer, merger or
consolidation shall have the effect of releasing the Company or
any such successor corporation from its liability hereunder or
under the other Basic Documents. Nothing contained herein shall
permit any lease or other arrangement for the use, operation or
possession of the Aircraft except in compliance with the
applicable provisions hereof. Upon any consolidation or merger,
or any conveyance, sale, transfer or lease of all or
substantially all the assets of the Company, as an entirety in
accordance with this Section 4.9, the successor corporation
formed by such consolidation or into which the Company is merged
or to which such conveyance, transfer or lease is made shall
succeed to, and be substituted for, and may exercise every right
and power of, the Company under this Collateral Agreement and the
other Basic Documents with the same effect as if such successor
corporation had been named as the Company herein and therein.
ARTICLE V
EXERCISE OF REMEDIES
SECTION 5.1. Directions from the Controlling Party. The
Controlling Party shall direct the Collateral Agent in the
exercise of remedies available to the Collateral Agent under this
Article V; provided that during the period ending on the date
which is nine months after the Acceleration of any Class of
Notes, without the consent of the holders of at least a majority
of the aggregate outstanding principal amount of the Notes of
each Class if the Indenture Trustee for such Class of Notes is
not acting as the Controlling Party, no Aircraft may be sold if
the net proceeds from such sale would be less than the Minimum
Sale Price for such Aircraft.
<PAGE>
SECTION 5.2. Remedies with Respect to Collateral. If the
Notes of any Class have been accelerated following a Collateral
Access Event under any Indenture with respect thereto, the
Collateral Agent may be directed by the Controlling Party to do
one or more of the following:
(a) cause the Company, upon the written demand of the
Collateral Agent and at the Company's expense, to deliver
promptly, and the Company shall deliver promptly, possession of
all or such part of any Airframe, Engine or other Collateral as
the Collateral Agent may so demand to the Collateral Agent or its
order, at such location on the Company's route system within the
continental United States as the Collateral Agent may request, or
the Collateral Agent, at its option, may enter upon the premises
where all or any part of any Airframe, Engine or any other
Collateral is located and take immediate possession (to the
exclusion of the Company and all Persons claiming under or
through the Company) of and remove the same, together with any
engine which is not an Engine but which is installed on an
Airframe, subject to all of the rights of the owner, lessor or
secured party of such engine; and in connection with any such
delivery or repossession, the Company will provide storage for
the Aircraft at such location to the extent facilities for such
purpose are reasonably available to the Company at such time;
provided that if an Airframe is returned with an engine (which is
not an Engine) installed thereon, such engine, if owned by the
Company, may at the option of the Collateral Agent be exchanged
with the Company for an Engine in accordance with the provisions
of Section 4.4(e) hereof by summary proceedings or otherwise;
(b) subject to Section 5.3, sell all or any part of an
Airframe or any Engine at public or private sale, whether or not
the Collateral Agent shall at the time have possession thereof,
as the Collateral Agent may determine, or lease or otherwise
dispose of all or any part of an Airframe or Engine as the
Collateral Agent, in its sole discretion, may determine, all free
and clear of any rights or claims of whatsoever kind of the
Company; provided that the Company shall be entitled at any time
prior to any such disposition to redeem the Collateral by paying
in full all of the Secured Obligations;
(c) in connection with its exercise of remedies hereunder,
the Collateral Agent may commence legal proceedings for and
obtain the appointment of a receiver or receivers (to the extent
such appointment is customary or otherwise advisable in such
jurisdiction) to take possession of an Airframe, any Engine or
any other Collateral pending the sale thereof pursuant either to
the power of sale given in this Section or to a judgment, order
or decree made in any judicial proceeding for the foreclosure or
involving the enforcement of this Collateral Agreement;
<PAGE>
(d) the Collateral Agent may terminate and avoid any lease
by the Company of any Airframe or any Engine by notice to the
Company and the lessee; and
(e) exercise any or all of the rights and powers and pursue
any and all remedies of a secured party under the Uniform
Commercial Code of the State of New York or otherwise under
Applicable Law.
Upon every taking of possession of Collateral under this
Section 5.2, the Collateral Agent may, from time to time, at the
expense of the Company, make all such expenditures for
maintenance, storage, insurance, leasing, control, management,
disposition, repairs, replacements, alterations, additions and
improvements to and of the Collateral, as it may deem proper. In
each such case, the Collateral Agent shall have the right to
maintain, store, insure, lease, control, modify, alter, sell,
transfer, convey or otherwise dispose of or manage the Collateral
and to exercise all rights and powers of the Company relating to
the Collateral in connection therewith, as the Collateral Agent
shall deem appropriate, including the right to enter into any and
all such agreements with respect to the maintenance, insurance,
storage, leasing, control, management, disposition, modification
or alteration of the Collateral or any part thereof as the
Collateral Agent may determine; and the Collateral Agent shall be
entitled to collect and receive directly all tolls, rents,
revenues, issues, income, products and profits of the Collateral
and every part thereof, without prejudice, however, to the right
of the Collateral Agent under any provision of this Collateral
Agreement to collect and receive all cash held by, or required to
be deposited with, the Collateral Agent hereunder. Such tolls,
rents, revenues, issues, income, products and profits shall be
applied to pay the expenses of storage, leasing, control,
management or disposition of the Collateral, and of all
maintenance, repairs, replacements, alterations, additions and
improvements, and to make all payments which the Collateral Agent
may be required or may elect to make, if any, for taxes,
assessments, insurance or other proper charges upon the
Collateral or any part thereof (including the employment of
engineers and accountants to examine, inspect and make reports
upon the properties and books and records of the Company), and
all other payments which the Collateral Agent may be required or
authorized to make under any provision of this Collateral
Agreement, as well as just and reasonable compensation for the
services of the Collateral Agent, and of all Persons properly
engaged and employed by the Collateral Agent.
<PAGE>
In addition, the Company shall be liable for all legal fees
and other costs and expenses incurred by the Collateral Agent in
connection with any Collateral Access Event under any Indenture
or the exercise of remedies hereunder with respect thereto,
including all costs and expenses incurred in connection with the
retaking or return of an Airframe or any Engine or any other
Collateral in accordance with the terms hereof or under
Applicable Law, which amounts shall, until paid, be secured by
the Lien of this Collateral Agreement.
In connection with the exercise of remedies under this
Section 5.2, at the request of the Collateral Agent the Company
shall promptly execute and deliver to the Collateral Agent such
instruments of title and other documents as the Collateral Agent
may deem necessary or advisable to enable the Collateral Agent or
an agent or representative designated by the Collateral Agent, at
such time or times and place or places as the Collateral Agent
may specify, to obtain possession of all or any part of the
Collateral to which the Collateral Agent shall at the time be
entitled. If the Company shall for any reason fail to execute
and deliver such instruments and documents after such request by
the Collateral Agent, the Collateral Agent may obtain a judgment
conferring on the Collateral Agent the right to immediate
possession and requiring the Company to execute and deliver such
instruments and documents to the Collateral Agent, to the entry
of which judgment the Company hereby specifically consents to the
fullest extent it may lawfully do so.
Nothing in the foregoing shall affect the right of each
Noteholder to receive all payments of principal of, and interest
and premium on, the Notes held by such Noteholders and all other
amounts owing to such Noteholder as and when the same may be due
and are payable in accordance with Article III. Nothing in this
Section shall diminish the rights of the Company under the
Granting Clauses.
SECTION 5.3. Provisions Regarding Sale.
In connection with any sale of Collateral pursuant to
Section 5.2, the Collateral Agent shall give the Company at least
10 days' prior notice of any public sale or of the date on or
after which any private sale will be held, which notice the
Company hereby agrees is reasonable notice. The Noteholders,
whether acting directly or through the Collateral Agent, shall be
entitled at any sale pursuant to Section 5.2, to credit against
the purchase price bid at such sale by such Noteholders all or
any part of the unpaid Secured Obligations owing to such
Noteholders and secured by the Lien of this Collateral Agreement,
provided that no Noteholder shall so credit such amounts, unless
<PAGE>
prior to or contemporaneously with any such purchase by such
Noteholder, any outstanding Liquidity Obligations and any
obligations owed to any Noteholders having a higher priority of
distribution pursuant to Section 3.3 have been or are being paid
in full.
In connection with any such sale:
(i) The Collateral Agent may make and deliver to the
purchaser or purchasers a good and sufficient deed, bill of sale
and instrument of assignment and transfer of the property sold;
(ii) All right, title, interest, claim and demand
whatsoever, either at law or in equity or otherwise, of the
Company of, in and to the property so sold shall be divested.
Such sale shall be a perpetual bar both at law and in equity
against the Company, its successors and assigns, and against any
and all Persons claiming or who may claim the property sold or
any part thereof from, through or under the Company, its
successors or assigns;
(iii) The receipt of the Collateral Agent or of the Person
making such sale shall be a sufficient discharge to the purchaser
or purchasers at such sale for its or their purchase money, and
such purchaser or purchasers, and its or their assigns or
personal representatives, shall not, after paying such purchase
money and receiving such receipt of the Collateral Agent or of
such Person, be obliged to see to the application of such
purchase money or be in any way answerable for any loss,
misapplication or nonapplication thereof; and
(iv) The Company will not take any action to direct the
order in which the Collateral or any part thereof shall be sold,
or to hinder, delay or impede the exercise of any rights of the
Collateral Agent pursuant to the terms hereof.
SECTION 5.4. Remedies Cumulative. Each and every right,
power and remedy given to the Collateral Agent specifically or
otherwise in this Collateral Agreement shall be cumulative and
shall be in addition to every other right, power and remedy
herein specifically given or now or hereafter existing at law, in
equity or by statute, and each and every right, power and remedy
whether specifically herein given or otherwise existing may,
subject always to the terms and conditions hereof, be exercised
from time to time and as often and in such order as may be deemed
expedient by the Collateral Agent, as appropriate, and the
exercise or the beginning of the exercise of any power or remedy
shall not be construed to be a waiver of the right to exercise at
<PAGE>
the same time or thereafter any other right, power or remedy. No
delay or omission by the Collateral Agent in the exercise of any
right, remedy or power or in the pursuit of any remedy shall
impair any such right, power or remedy or be construed to be a
waiver of any default or to be an acquiescence therein.
SECTION 5.5. Discontinuance of Proceedings. In case the
Collateral Agent shall have instituted any proceeding to enforce
any right, power or remedy under this Collateral Agreement by
foreclosure, entry or otherwise, and such proceedings shall have
been discontinued or abandoned for any reason or shall have been
determined adversely to the Person instituting such proceeding,
then and in every such case the Company, the Collateral Agent,
each Indenture Trustee and each Liquidity Provider shall, subject
to any determination in such proceedings, be restored to their
former positions and rights hereunder with respect to the
Collateral, and all rights, remedies and powers of the Collateral
Agent shall continue as if no such proceedings had been
instituted.
SECTION 5.6. Waiver of Past Collateral Access Events;
Rescission of Acceleration. Upon the waiver of all Collateral
Access Events and Potential Collateral Access Events under all
Indentures in accordance with the respective terms thereof, the
Indenture Trustees shall withdraw any notice of a Collateral
Access Event or Potential Collateral Access Event previously
delivered hereunder, and each such Collateral Access Event and
Potential Collateral Access Event shall be deemed cured for all
purposes of this Collateral Agreement.
(b) Upon any rescission, waiver or annulment of the
Acceleration of the Notes under any Indenture in accordance with
the terms thereof, the Indenture Trustee acting thereunder shall
withdraw any Notice of Acceleration previously delivered by it
thereunder.
SECTION 5.7. [Reserved]
SECTION 5.8. Undertaking for Costs. In any suit for the
enforcement of any right or remedy under this Collateral
Agreement or in any suit against the Collateral Agent for any
action taken or omitted by it as Collateral Agent, 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 access reasonable costs, including
reasonable attorneys' fees and expenses, against any party
litigant in the suit, having due regard to the merits and good
faith of the claims or defenses made by the party litigant. The
provisions of this Section do not apply to a suit instituted by
<PAGE>
the Collateral Agent, a Liquidity Provider or an Indenture
Trustee, a suit instituted by any Noteholder pursuant to Section
6.07 of the Indentures or a suit by Noteholders holding more than
10% of the outstanding aggregate principal amount of the Class A
Notes, Class B Notes or Class C Notes.
ARTICLE VI
DUTIES OF THE COLLATERAL AGENT;
AGREEMENTS OF INDENTURE TRUSTEES, ETC.
SECTION 6.1. Notice of Collateral Access Events; Other
Notices.
(a) In the event the Collateral Agent shall have actual
knowledge of a Collateral Access Event or Potential Collateral
Access Event under any Indenture, as promptly as practicable
after the occurrence of any such Collateral Access Event or
Potential Collateral Access Event, the Collateral Agent shall
transmit by mail to the Company, the Rating Agencies, the
Liquidity Providers and the Indenture Trustees, notice of such
Collateral Access Event or Potential Collateral Access Event
unless such Collateral Access Event or Potential Collateral
Access Event shall have been cured or waived. Subject to Article
V and Sections 6.3 and 10.1, the Collateral Agent shall take such
action, or refrain from taking such action, with respect to any
such Collateral Access Event or Potential Collateral Access Event
(including with respect to the exercise of any rights or remedies
hereunder) as the Collateral Agent shall be instructed in writing
by the Controlling Party. In the event the Collateral Agent
shall at any time enforce this Collateral Agreement, the
Collateral Agent shall forthwith notify the Indenture Trustees,
the Company, the Rating Agencies and the Liquidity Providers.
For all purposes of this Collateral Agreement, in the absence of
actual knowledge on the part of an officer in its corporate trust
department, the Collateral Agent shall not be deemed to have
knowledge of any Collateral Access Event or Potential Collateral
Access Event under any Indenture unless notified in writing by
the Company, one or more Indenture Trustees, one or more
Liquidity Providers or one or more Noteholders.
(b) The Collateral Agent will furnish to each Liquidity
Provider and any Indenture Trustee who provides a written request
to the Collateral Agent asking to receive the same, promptly upon
receipt thereof, duplicates or copies of all reports, notices,
requests, demands, certificates, financial statements and other
instruments received from the Company to the extent the same
shall not have been otherwise directly distributed to such
Liquidity Provider or Indenture Trustee, as applicable, pursuant
to the express provision of any other Basic Document.
<PAGE>
SECTION 6.2. Action upon Instructions; Financing
Statements.
Subject to the terms of Section 6.3, upon the written
instructions at any time and from time to time of the Controlling
Party, the Collateral Agent shall take such of the following
actions as may be specified in such instructions: (i) exercise
such election or option, or make such decision or determination
or give such notice, consent, waiver or approval or exercise such
right, remedy or power or take such other action hereunder or
permitted to be exercised, made, given or taken by the Collateral
Agent in respect of any part or all of the Collateral as shall be
specified in such instructions and (ii) take such other action in
respect of the subject matter of this Collateral Agreement as is
consistent with the terms hereof and the other Basic Documents.
SECTION 6.3. Indemnification.
The Collateral Agent shall not be required to take any
action or refrain from taking any action under Section 6.1 (other
than the first sentence thereof), 6.2 or 6.6 or Article V unless
the Collateral Agent shall have been indemnified (to the extent
satisfactory to the Collateral Agent) by the Secured Parties, or
any of them, against any liability, cost or expense (including
counsel fees and expenses) which may be incurred in connection
therewith. The Collateral Agent shall not be under any
obligation to take any action under this Collateral Agreement and
nothing contained in this Collateral Agreement shall require the
Collateral Agent to expend or risk its own funds or otherwise
incur any financial liability in the performance of any of its
duties hereunder or in the exercise of any of its rights or
powers if it shall have reasonable grounds for believing that
repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. The Collateral
Agent shall not be required to take any action under Section 6.1
(other than the first sentence thereof), 6.2 or 6.6 or Article V,
nor shall any other provision of this Collateral Agreement be
deemed to impose a duty on the Collateral Agent to take any
action, if the Collateral Agent shall have been advised by
counsel that such action is contrary to the terms hereof or is
otherwise contrary to law.
<PAGE>
SECTION 6.4. No Duties Except as Specified in Collateral
Agreement or Instructions.
The Collateral Agent shall not have any duty or obligation
to take or refrain from taking any action under, or in connection
with, this Collateral Agreement or any part of the Collateral,
except as expressly provided by the terms of this Collateral
Agreement or as expressly provided in written instructions from
the Controlling Party as provided in this Collateral Agreement;
and no implied duties or obligations shall be read into this
Collateral Agreement against the Collateral Agent. The
Collateral Agent agrees that it will, in its individual capacity
and at its own cost and expense (but without any right of
indemnity in respect of any such cost or expense under Section
8.1 hereof) promptly take such action as may be necessary to duly
discharge all Liens ("Agent's Liens") on any part of the
Collateral which result from claims against it in its individual
capacity which are unrelated to the administration of the
Collateral or which arise out of acts or omissions which are not
expressly contemplated by this Collateral Agreement.
SECTION 6.5. Notice from Liquidity Provider and Indenture
Trustees.
If any Liquidity Provider or Indenture Trustee has notice of
a Collateral Access Event or Potential Collateral Access Event,
such Person shall promptly give notice to the others and to the
Collateral Agent, provided, however, that no such Person shall
have any liability hereunder as a result of its failure to
deliver any such notice.
SECTION 6.6. Recording, Deposit of Collateral, etc.
(a) The Company will take or cause to be taken all action
required or desirable to maintain, preserve and protect the Lien
on the Collateral granted by this Collateral Agreement,
including, but not limited to, causing all financing statements,
mortgages and other instruments of further assurance, including
continuation statements covering security interests in personal
property, to be promptly recorded, registered and filed, and at
all times to be kept recorded, registered and filed, and will
execute and file such financing statements and cause to be issued
and filed such continuation statements, all in such manner and in
such places as may be required by law fully to preserve and
protect the rights of the Noteholders, the Indenture Trustees,
the Collateral Agent and the other Secured Parties under this
Collateral Agreement and the Indentures to all property
comprising the Collateral.
<PAGE>
(b) The Company will from time to time promptly pay and
discharge all mortgage and financing and continuation statement
recording and/or filing fees, charges and taxes relating to this
Collateral Agreement and the Indentures, any amendments thereto
and any other instruments of further assurance.
ARTICLE VII
THE COMPANY AND THE COLLATERAL AGENT
SECTION 7.1. Acceptance of Trusts and Duties. Wilmington
Trust Company hereby accepts the duties hereby created and
applicable to the Collateral Agent and agrees to perform the same
but only upon the terms of this Collateral Agreement and agrees
to receive and disburse all monies received by it constituting
part of the Collateral in accordance with the terms hereof. The
Collateral Agent shall not be answerable or accountable under any
circumstances, except (a) for its own willful misconduct or
negligence, (b) as provided in Section 2.2 or the last sentence
of Section 6.4 and (c) for liabilities that may result from the
material inaccuracy of any representation or warranty of the
Collateral Agent made in its individual capacity in any Basic
Document. The Collateral Agent shall not be liable for any error
of judgment made in good faith by a Responsible Officer of the
Collateral Agent, unless it is proved that the Collateral Agent
was negligent in ascertaining the pertinent facts.
SECTION 7.2. Absence of Duties. The Collateral Agent,
except in accordance with written instructions furnished pursuant
to Section 6.1 or 6.2, and except as provided in, and without
limiting the generality of, Sections 6.3 and 6.4, shall have no
duty (a) to see to any recording or filing of this Collateral
Agreement or any other document, or to see to the maintenance of
any such recording or filing, or (b) to see to the payment or
discharge of any Lien of any kind against any part of the
Collateral.
SECTION 7.3. No Representations or Warranties as to
Documents. The Collateral Agent in its individual capacity does
not make nor shall be deemed to have made any representation or
warranty as to the validity, legality or enforceability of this
Collateral Agreement or any other Basic Document or as to the
correctness of any statement contained in any thereof, except for
the representations and warranties of the Collateral Agent, made
in its individual capacity, under any Basic Document to which it
is a party. The Noteholders and the Liquidity Providers make no
representation or warranty hereunder whatsoever.
<PAGE>
SECTION 7.4. No Segregation of Monies; No Interest. Any
monies paid to or retained by the Collateral Agent pursuant to
any provision hereof and not then required to be distributed to
any Indenture Trustee, any Liquidity Provider or the Company as
provided in Articles II and III need not be segregated in any
manner except to the extent required by such Articles II and III
and by law, and the Collateral Agent shall not (except as
otherwise provided in Section 2.2) be liable for any interest
thereon; provided, however, that any payments received or applied
hereunder by the Collateral Agent shall be accounted for by the
Collateral Agent so that any portion thereof paid or applied
pursuant hereto shall be identifiable as to the source thereof.
SECTION 7.5. Reliance; Agents; Advice of Counsel.
The Collateral Agent shall not incur liability to anyone in
acting upon any signature, instrument, notice, resolution,
request, consent, order, certificate, report, opinion, bond or
other document or paper believed by it to be genuine and believed
by it to be signed by the proper party or parties. As to the
aggregate unpaid principal amount of Notes of any Class, the
Collateral Agent may for all purposes hereof rely on a
certificate signed by any Responsible Officer of the applicable
Indenture Trustee, and such certificate shall constitute full
protection to the Collateral Agent for any action taken or
omitted to be taken by it in good faith in reliance thereon. As
to any fact or matter relating to the Liquidity Providers or the
Indenture Trustees the manner of ascertainment of which is not
specifically described herein, the Company and the Collateral
Agent may for all purposes hereof rely on a certificate, signed
by a duly authorized officer of the applicable Liquidity Provider
or Indenture Trustee, as the case may be, as to such fact or
matter, and such certificate shall constitute full protection to
the Collateral Agent for any action taken or omitted to be taken
by it in good faith in reliance thereon. The Collateral Agent
shall assume, and shall be fully protected in assuming, that the
Company, each of the Liquidity Providers and each of the
Indenture Trustees are authorized to enter into this Collateral
Agreement and to take all action to be taken by them pursuant to
the provisions hereof, and shall not inquire into the
authorization of the Company, each of the Liquidity Providers and
each of the Indenture Trustees with respect thereto. In the
administration of the trusts hereunder, the Collateral Agent may
execute any of the trusts or powers hereof and perform its powers
and duties hereunder directly or through agents or attorneys and
may, at the expense of the Collateral, consult with counsel,
accountants and other skilled persons to be selected and retained
by it, and the Collateral Agent shall not be liable for the acts
or omissions of any agent appointed with due care or for anything
done, suffered or omitted in good faith by it in accordance with
the advice or written opinion of any such counsel, accountants or
other skilled persons.
<PAGE>
SECTION 7.6. Capacity in Which Acting.
The Collateral Agent acts hereunder solely as agent herein
and not in its individual capacity, except as otherwise expressly
provided in the Basic Documents.
SECTION 7.7. [Reserved].
SECTION 7.8. May Become Noteholder. The institution acting
as Collateral Agent hereunder may become a Noteholder and have
all rights and benefits of a Noteholder to the same extent as if
it were not the institution acting as the Collateral Agent.
SECTION 7.9. Further Assurances. At any time and from time
to time, upon the request of the Collateral Agent, the Company
shall promptly and duly execute and deliver any and all such
further instruments and documents as may be specified in such
request and as are necessary to perfect, preserve or protect the
security interests and assignments created or intended to be
created hereby.
SECTION 7.10 Collateral Agent Required; Eligibility.
There shall at all times be a Collateral Agent hereunder
which shall be a corporation organized and doing business under
the laws of the United States of America or of any State or the
District of Columbia having a combined capital and surplus of at
least $100,000,000 (or having a combined capital and surplus in
excess of $3,000,000 and the obligations of which, whether now in
existence or hereafter incurred, are fully and unconditionally
guaranteed by a corporation organized and doing business under
the laws of the United States, any State thereof or of the
District of Columbia and having a combined capital and surplus of
at least $100,000,000), if there is such an institution willing
and able to perform the duties of the Collateral Agent hereunder
upon reasonable or customary terms. Such corporation shall be a
"citizen of the United States" within the meaning of the Aviation
Act and shall be authorized under the laws of the United States
or any State thereof or of the District of Columbia to exercise
corporate trust powers and shall be subject to supervision or
examination by Federal, State or District of Columbia
authorities. If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of any
of the aforesaid supervising or examining authorities, then, for
the purposes of this Section 7.10, the combined capital and
surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of
condition so published.
<PAGE>
In case at any time the Collateral Agent shall cease to be
eligible in accordance with the provisions of this Section, the
Collateral Agent shall resign immediately in the manner and with
the effect specified in Section 9.2.
SECTION 7.11. Money to Be Held in Trust.
All monies deposited with or held by the Collateral Agent
pursuant to this Collateral Agreement shall be held in trust for
the benefit of the Secured Parties entitled to such monies.
SECTION 7.12. Funds Held by Collateral Agent; Investments.
At any time and from time to time, so long as no Collateral
Access Event under any Indenture shall have occurred and be
continuing, the Collateral Agent shall, upon the written
instructions of the Company, invest and reinvest in Eligible
Investments as specified in the written instructions of the
Company, any monies on deposit with the Collateral Agent as part
of the Collateral (other than monies on deposit from time to time
in the Cash Collateral Accounts), and sell any Eligible
Investments, in either case, at such prices, including accrued
interest, as are set forth in the written instructions of the
Company, and until so sold shall hold the same in trust as part
of the Collateral; provided that, the Company shall upon demand
pay to the Collateral Agent the amount of any loss realized upon
maturity, sale or other disposition of Eligible Investments and,
so long as no Collateral Access Event under any Indenture, or
Potential Collateral Access Event relating to Section 6.01(i),
6.01(vi), 6.01(vii) or 6.01(viii) of any Indenture, shall have
occurred and be continuing, be entitled to receive from the
Collateral Agent, and the Collateral Agent shall promptly pay to
the Company, any profit, income interest, dividend or gain
realized upon maturity, sale or other disposition of any Eligible
Investment (other than Investment Earnings). The Collateral
Agent shall not be responsible for any losses on any investments
or sales of Eligible Investments made pursuant to the procedure
specified in this Section 7.12.
<PAGE>
ARTICLE VIII
INDEMNIFICATION OF COLLATERAL AGENT
SECTION 8.1. Scope of Indemnification.
The Company hereby agrees to pay, assume liability for, and
indemnify, protect, defend, save and keep harmless the Collateral
Agent and each Indenture Trustee, in their individual and trust
capacities (each, an "Indemnitee") from and against any and all
Expenses from time to time be imposed, incurred by or asserted
against such Indemnitee (whether or not such is also indemnified
or insured against by any other person) as a result of (A) the
manufacture, purchase, acceptance or rejection of any Airframe or
Engine; (B) any Aircraft (or any portion thereof) or any Engine
installed on an airframe or any engine installed on an Airframe
whether or not arising out of the ownership, delivery,
nondelivery, storage, lease, sublease, possession, use, non-use,
operation, maintenance, modification, alteration, condition,
replacement, repair, substitution, sale, return or other
disposition, registration, reregistration or airworthiness of an
Aircraft including, without limitation, latent or other defects,
whether or not discoverable, strict tort liability and any claim
for patent, trademark or copyright infringement; or (C) the
failure by the Company to perform or observe any covenant,
condition or agreement contained herein or in any of the Basic
Documents, or the falsity of any representation or warranty of
the Company contained herein or in any other Basic Document;
provided that, the foregoing indemnity shall not extend to any
Expense to the extent attributable to (1) the failure by an
Indemnitee to perform or observe any agreement, covenant or
condition in this Collateral Agreement or any other Basic
Document; (2) the bad faith, wilful misconduct or negligence of,
an Indemnitee; (3) the breach of any contractual obligation by,
or the falsity or inaccuracy or breach of any representation or
warranty of, an Indemnitee; (4) other than during the
continuation of any Collateral Access Event, the authorization or
giving or withholding of any future amendments, supplements,
waivers or consents with respect to this Collateral Agreement
unless such amendments, supplements, waivers or consents (a) are
requested by the Company or (b) are required pursuant to the
terms of this Collateral Agreement (unless such requirements
results from the actions of the an Indemnitee); (5) except to the
extent attributable to acts or events occurring prior thereto,
acts or events which occur after the payment by the Company of
all amounts payable by the Company pursuant hereto and pursuant
to the Indentures; (6) (A) a disposition by an Indemnitee
(voluntary or involuntary) of all or any part of its interest in
an Airframe or any Engine other than as contemplated or permitted
<PAGE>
by this Collateral Agreement or (B) a disposition of an
Indemnitee's interest in the Basic Documents other than in each
of (A) and (B) during the continuance of a Collateral Access
Event; or (7) any and all Taxes relating or attributable to fees
received as compensation in connection with the transactions
contemplated hereby and by the other Basic Documents. After an
Indemnitee receives notice of any claim or commencement of any
action, suit, or proceeding against it or otherwise becomes aware
of any matter for which indemnification will be sought hereunder,
if such party elects to make a claim hereunder, it shall notify
the Company in writing within 10 days after receiving such notice
or becoming so aware and the Company shall, at its election, be
entitled to assume control of any such proceeding. If the
Company so elects to assume control, it shall not be liable for
any additional fees and expenses of counsel for an Indemnitee,
except to the extent such counsel is retained with the prior
consent of the Company. Failure to timely give such notice shall
not waive any right to indemnification, except only to the extent
of any damage or loss suffered by the Company by reason of delay
in receiving such notice. The obligations of the Company
pursuant to this Article VIII shall survive the termination of
this Agreement.
ARTICLE IX
SUCCESSORS; SEPARATE COLLATERAL AGENTS
SECTION 9.1. Replacement of Collateral Agent; Appointment
of Successor. (a) The Collateral Agent may resign at any time
by so notifying the Indenture Trustees, the Company and the
Liquidity Providers. The Controlling Party (with the consent of
the Indenture Trustees and the Liquidity Providers which are not
at such time the Controlling Party) may remove the Collateral
Agent by so notifying the Collateral Agent and may appoint a
successor Collateral Agent. The Company shall remove the
Collateral Agent if:
(1) the Collateral Agent fails to comply with Section 7.10;
(2) the Collateral Agent is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the
Collateral Agent or its property; or
(4) the Collateral Agent otherwise becomes incapable of
acting.
<PAGE>
If the Collateral Agent resigns or is removed or if a
vacancy exists in the office of Collateral Agent for any reason
(the Collateral Agent in such event being referred to herein as
the retiring Collateral Agent), the Company shall promptly
appoint a successor Collateral Agent.
A successor Collateral Agent shall deliver a written
acceptance of its appointment to the retiring Collateral Agent
and to the Company. Thereupon the resignation or removal of the
retiring Collateral Agent shall become effective, and the
successor Collateral Agent shall have all the rights, powers and
duties of the Collateral Agent under this Collateral Agreement.
The successor Collateral Agent shall mail a notice of its
succession to the Administrator, the Liquidity Providers and the
Indenture Trustees. The retiring Collateral Agent shall promptly
transfer its rights under all of the Liquidity Facilities and all
of the property held by it as Collateral Agent to the successor
Collateral Agent, subject to the Lien provided for herein.
If a successor Collateral Agent does not take office within
60 days after the retiring Collateral Agent resigns or is
removed, the retiring Collateral Agent, the Company or one or
more of the Indenture Trustees may petition any court of
competent jurisdiction for the appointment of a successor
Collateral Agent.
If the Collateral Agent fails to comply with Section 7.10
(to the extent applicable), one or more of the Indenture Trustees
or one or more of the Liquidity Providers may petition any court
of competent jurisdiction for the removal of the Collateral Agent
and the appointment of a successor Collateral Agent.
Notwithstanding the replacement of the Collateral Agent
pursuant to this Section 9.1, the Company's obligations under
Section 8.1 hereof shall continue for the benefit of the retiring
Collateral Agent.
No appointment of a successor Collateral Agent shall be
effective unless and until the Rating Agencies shall have
delivered a Ratings Confirmation.
SECTION 9.2. Appointment of Separate Collateral Agents.
(a) At any time or times, for the purpose of meeting any
legal requirements of any jurisdiction in which any part of the
Collateral may at the time be located or in which any action of
the Collateral Agent may be required to be performed or taken or
if the Collateral Agent shall be advised by counsel satisfactory
to it that such action is necessary or prudent in the interests
of the Secured Parties, or in the event the Collateral Agent
<PAGE>
shall have been requested to do so by the Controlling Party, the
Collateral Agent, by an instrument in writing signed by it, and
without the concurrence of the Company, may appoint one or more
individuals or corporations to act as separate collateral agent
or separate collateral agents or co-collateral agent, acting
jointly with the Collateral Agent, or to act as separate
collateral agent or collateral agents, of all or any part of the
Collateral, with such powers as may be provided in an agreement
supplemental hereto.
(b) The Collateral Agent, and, at the request of the
Collateral Agent, the Company, shall execute, acknowledge and
deliver all such instruments as may be required by the legal
requirements of any jurisdiction or by any such separate
collateral agent or separate collateral agents or co-collateral
agent for the purpose of more fully confirming such title, rights
or duties to such separate collateral agent or separate
collateral agents or co-collateral agent and the Company hereby
makes, constitutes and appoints the Collateral Agent its agent
and attorney-in-fact for it and in its name, place and stead to
execute, acknowledge and deliver the same in the event that the
Company shall not itself execute and deliver the same within 20
days after receipt by it of such request so to do. Upon the
acceptance in writing of such appointment by any such separate
collateral agent or separate collateral agents or co-collateral
agent, it, he, she or they shall be vested with such title to the
Collateral or any part thereof, and with such rights and duties,
as shall be specified in the instrument of appointment, jointly
with the Collateral Agent (except insofar as local law makes it
necessary for any such separate collateral agent or separate
collateral agents or co-collateral agent to act alone) subject to
all the terms of this Collateral Agreement. Any separate
collateral agent or separate collateral agents or co-collateral
agent may, at any time by an instrument in writing, constitute
the Collateral Agent its or their attorney-in-fact and agent with
full power and authority to do all acts and things and to
exercise all discretion on its or their behalf and in its or
their name. In case any such separate collateral agent or co-
collateral agent shall die, become incapable of acting, resign or
be removed, the title to the Collateral and all assets, property,
rights, powers, trusts, obligations and duties of such separate
collateral agent or co-collateral agent shall, so far as
permitted by law, vest in and be exercised by the Collateral
Agent, without the appointment of a successor to such separate
collateral agent or co-collateral agent unless and until a
successor is appointed.
<PAGE>
(c) All provisions of this Collateral Agreement, including
without limitation Article VII, which are for the benefit of the
Collateral Agent shall extend to and apply to each separate
collateral agent or co-collateral agent appointed pursuant to the
foregoing provisions of this Section 9.2.
(d) Every separate collateral agent and co-collateral agent
hereunder shall, to the extent permitted by law, be appointed and
act and the Collateral Agent shall act, subject to the following
provisions and conditions:
(i) all rights, powers, duties and obligations conferred
upon the Collateral Agent in respect of the receipt, custody,
investment and payment of monies, and drawings and other actions
contemplated to be taken under each of the Liquidity Facilities
shall be exercised solely by the Collateral Agent;
(ii) all other rights, powers, duties and obligations
conferred or imposed upon the Collateral Agent shall be conferred
or imposed upon and exercised or performed by the Collateral
Agent and such separate collateral agent or separate collateral
agents or co-collateral agent jointly except to the extent that,
under any law of any jurisdiction in which any particular act or
acts are to be performed, the Collateral Agent shall be
incompetent or unqualified to perform such act or acts, in which
event such rights, powers, duties and obligations (including the
holding of title to the Collateral in any such jurisdiction)
shall be exercised and performed by such separate collateral
agent or separate collateral agents or co-collateral agent;
(iii) no power hereby given to, or with respect to which it
is hereby provided may be exercised by, any such separate
collateral agent or separate collateral agents or co-collateral
agent shall be exercised hereunder by such Person except jointly
with, or with the consent of, the Collateral Agent; and
(iv) no collateral agent hereunder shall be personally
liable by reason of any act or omission of any other collateral
agent hereunder.
If at any time the Collateral Agent shall deem it no longer
necessary or prudent in order to conform to any such law, or take
any such action or shall be advised by such counsel that it is no
longer legally required or necessary or prudent in the interest
of the Secured Parties or in the event the Collateral Agent shall
have been requested to do so by the Controlling Party, the
Collateral Agent shall execute and deliver an agreement
supplemental hereto and all other instruments and agreements
necessary or proper to remove any separate collateral agent or
separate collateral agents or co-collateral agent.
<PAGE>
(e) Any request, approval or consent in writing by the
Collateral Agent to any separate collateral agent or separate
collateral agents or co-collateral agent shall be sufficient
warrant to such separate collateral agent or separate collateral
agents or co-collateral agent, as the case may be, to take such
action as may be so requested, approved or consented to.
(f) Notwithstanding any other provision of this Section
9.2, the powers of any separate collateral agent or separate
collateral agents or co-collateral agent appointed pursuant to
this Section 9.2 shall not in any case exceed those of the
Collateral Agent hereunder.
ARTICLE X.
SUPPLEMENTS AND AMENDMENTS TO THIS
COLLATERAL AGREEMENT
SECTION 10.1. Amendments, Waivers, etc.
(a) This Collateral Agreement may not be supplemented,
amended or modified without the consent of the Company, each
Indenture Trustee (acting with the consent of a majority in
interest of the Noteholders under the Applicable Indenture), the
Collateral Agent and, each Liquidity Provider; provided, however,
that this Agreement may be supplemented, amended or modified
without the consent of any Indenture Trustee or any Noteholder
for the following purposes: (a) to convey, transfer, assign,
mortgage or pledge any property or assets to the Collateral Agent
as security for the Secured Obligations; succession of another Person to the
Company or successive successions, and the assumption by the successor Person
of the covenants, agreements and obligations of the Company hereunder;
(d) to add to the covenants of the Company such further
covenants, restrictions, conditions or provisions as the Company
and the Collateral Agent shall consider to be for the protection
of the Noteholders, and to make the occurrence, or the occurrence
and continuance, of a default in any such additional covenants,
restrictions, conditions or provisions a Collateral Access Event
permitting the enforcement of all or any of the several remedies
provided herein or in this Collateral Agreement; provided,
however, that in respect of any such additional covenant,
restriction, condition or provision such supplemental agreement
may provide for a particular period of grace after default (which
period may be shorter or longer than that allowed in the case of
the other defaults) or may provide for an immediate enforcement
upon such a Collateral Access Event or may limit the remedies
available to the Indenture Trustees or the Collateral Agent upon
such a Collateral Access Event or may limit the right of the
<PAGE>
Noteholders to waive such a Collateral Access Event; to
surrender any rights or power conferred herein upon the Company;
to cure any ambiguity or to correct or supplement any provision
contained herein which may be defective or inconsistent with any
other provision contained herein or in the other Basic Documents;
to correct or amplify the description of any property at any time
subject to the Lien of this Collateral Agreement or better to
assure, convey and confirm unto the Collateral Agent any property
subject or required to be subject to the Lien of this Collateral
Agreement; and to amend or supplement any provision contained in
this Collateral Agreement or in any supplemental agreement if
such amendment or supplement shall not materially adversely
affect the Noteholders or shall confer benefits upon the
Noteholders. Notwithstanding the foregoing, without the consent
of each Noteholder and each Liquidity Provider, no supplement,
amendment or modification of this Collateral Agreement may (a)
reduce the percentage of the aggregate principal amount of any
Notes of any Class necessary to consent to modify or amend any
provision of this Agreement or to waive compliance therewith or
(b) modify Section 2.5, 3.2 or 3.3, relating to the distribution
of monies received or realized by the Collateral Agent. Without
the consent of each Noteholder in an affected Class, the
Collateral Agent shall not consent to any amendment or
modification of any Liquidity Agreement which would have a
material adverse effect on such Noteholders. Nothing contained
in this Section shall require the consent of an Indenture Trustee
to the extent that all Secured Obligations in respect of the
Indenture to which such Indenture Trustee is a party shall have
been irrevocably paid in full.
SECTION 10.2. Collateral Agent Protected.
If, in the opinion of the institution acting as the
Collateral Agent hereunder, any document required to be executed
pursuant to the terms of Section 10.1 adversely affects any
right, duty, immunity or indemnity with respect to it under this
Collateral Agreement or any Liquidity Facility, the Collateral
Agent may in its discretion decline to execute such document.
SECTION 10.3. Effect of Supplemental Agreements. Upon the
execution of any agreement supplemental hereto pursuant to the
provisions hereof, this Collateral Agreement shall be deemed to
be and shall be modified and amended in accordance therewith and
the respective rights, limitations of rights, obligations, duties
and immunities under this Collateral Agreement of the parties
hereto shall be determined, exercised and enforced hereunder
subject in all respects to such modifications and amendments, and
all the terms and conditions of any such supplemental agreement
shall be deemed to be and shall be part of the terms and
<PAGE>
conditions of this Collateral Agreement for any and all purposes.
In executing or accepting any supplemental agreement permitted by
this Article X, the Collateral Agent shall be entitled to
receive, and shall be fully protected in relying upon, an opinion
of counsel stating that the execution of such supplemental
agreement is authorized or permitted by this Collateral
Agreement. The Collateral Agent may, but shall not be obligated
to, enter into any such supplemental agreement which affects the
Collateral Agent's own rights, duties or immunities under this
Collateral Agreement or otherwise.
SECTION 10.4. Notice to Rating Agencies.
Promptly following its receipt of each amendment, consent,
modification, supplement or waiver contemplated by Article X
hereof, the Collateral Agent shall send a copy thereof to each
Rating Agency.
ARTICLE XI.
MISCELLANEOUS
SECTION 11.1. Termination of Collateral Agreement.
Upon (or at any time after) payment in full of the principal
of, and interest and Make Whole Premium, if any, on, and all
other amounts due under the Basic Documents, or otherwise due to,
each of the Liquidity Providers and the Noteholders of all Notes
and provided that there shall then be no other amounts due to the
Noteholders, the Indenture Trustees, the Liquidity Providers and
the Collateral Agent hereunder or otherwise secured hereby, and
that the commitment of the Liquidity Providers under the
Liquidity Facilities and the Liquidity Agreements shall have
expired or been terminated, the Collateral Agent shall execute
and deliver to the Company an appropriate instrument releasing
the Collateral from the assignment and pledge thereof hereunder,
and the Collateral Agent shall execute and deliver such
instrument as aforesaid and, at the Company's expense, shall
execute and deliver such other instruments or documents as may be
reasonably requested by the Company to give effect to such
release; provided, however, that this Collateral Agreement and
the trusts created hereby shall earlier terminate and this
Collateral Agreement shall be of no further force or effect upon
any sale or other final disposition by the Collateral Agent of
all property part of the Collateral and the final distribution by
the Collateral Agent of all monies or other property or proceeds
constituting part of the Collateral in accordance with the terms
hereof. Except as aforesaid or otherwise provided, this
Collateral Agreement and the trusts created hereby shall continue
in full force and effect in accordance with the terms hereof.
<PAGE>
SECTION 11.2. No Legal Title to Collateral in Secured
Parties.
No Secured Party shall have legal title to any part of the
Collateral. No transfer, by operation of law or otherwise, of
any Note or other right, title and interest of any Secured Party
in and to the Collateral or hereunder shall operate to terminate
this Collateral Agreement or entitle such Secured Party or any
successor or transferee of such holder to an accounting or to the
transfer to it of legal title to any part of the Collateral.
SECTION 11.3. Collateral Agreement for Benefit of Company,
Collateral Agent and Secured Parties.
Nothing in this Collateral Agreement, whether express or
implied, shall be construed to give to any Person other than the
Company, the Collateral Agent and the Secured Parties any legal
or equitable right, remedy or claim under or in respect of this
Collateral Agreement or the Collateral.
SECTION 11.4. Notices.
Unless otherwise expressly specified or permitted by the
terms hereof, all notices, requests, demands, authorizations,
directions, consents, waivers or documents provided or permitted
by this Collateral Agreement to be made, given, furnished or
filed shall be in writing, mailed by certified mail, postage
prepaid, or by confirmed telecopy and (i) if to the Collateral
Agent, addressed to it at its office at Wilmington Trust Company,
Rodney Square North, 1100 North Market Street, Wilmington, DE
19890-0001, Attention: Corporate Trust Administration, Telecopy:
(302) 651-8882, (ii) if to the Company, addressed to it at its
office at USAir, Inc., Crystal Park Four, 2345 Crystal Drive,
Arlington, VA 22227, Attention: Treasurer, Telecopy:
(703) 418-5936 and (iii) if to any Secured Party, addressed to
such party at such address as such party shall have furnished by
notice to the Company and the Collateral Agent. Whenever any
notice in writing is required to be given by the Company or the
Collateral Agent or any Secured Party to any of the other of
them, such notice shall be deemed given and such requirement
satisfied when such notice is received, if such notice is
received, if such notice is mailed by certified mail, postage
prepaid or by courier service or is sent by confirmed telecopy
addressed as provided above. Any party hereto may change the
address to which notices to such party will be sent by giving
notice of such change to the other parties to this Collateral
Agreement.
<PAGE>
SECTION 11.5. Severability.
Any provision of this Collateral Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such
provision in any other jurisdiction.
SECTION 11.6. No Oral Modifications or Continuing Waivers.
No terms or provisions of this Collateral Agreement may be
changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party or other Person against
whom enforcement of the change, waiver, discharge or termination
is sought and any other party or other Person whose consent is
required pursuant to this Collateral Agreement and any waiver of
the terms hereof shall be effective only in the specific instance
and for the specific purpose given.
SECTION 11.7. Successors and Assigns.
All covenants and agreements contained herein shall be
binding upon, and inure to the benefit of, each of the parties
hereto and the successors and assigns of each, all as herein
provided. Any request, notice, direction, consent, waiver or
other instrument or action by any Secured Party shall bind the
successors and assigns of such Secured Party.
SECTION 11.8. Headings.
The headings of the various Articles and Sections herein and
in the table of contents hereto are for convenience of reference
only and shall not define or limit any of the terms or provisions
hereof.
SECTION 11.9. Governing Law; Counterpart Form.
This Collateral Agreement shall in all respects be governed
by, and construed in accordance with, the law of the State of New
York, including all matters of construction, validity and
performance. This Collateral Agreement may be executed by the
parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all such
counterparts shall together constitute but one and the same
instrument.
<PAGE>
SECTION 11.10 In Service Date.
The Company represents and warrants that each Aircraft was
first placed in service on the date specified for such Aircraft
under the heading "Offering Memorandum Summary - Aircraft
Securing the Notes" in the Offering Memorandum.
SECTION 11.11. Substitution of Collateral.
The Company shall have the right, upon five days' prior
notice to the Collateral Agent, to deposit with the Collateral
Agent, as trust funds in trust, specifically pledged for the
benefit of the Secured Parties as "Collateral" under this
Collateral Agreement, (1) money, (2) U.S. Government Obligations
or (3) any combination of money or U.S. Government Obligations
(any of the items in clauses (1), (2) and (3) being referred to
as "Substitute Collateral") and upon such deposit, upon the
request of the Company, the Collateral Agent shall execute and
deliver to the Company an appropriate instrument releasing one or
more Aircraft from the Lien of this Collateral Agreement;
provided that the Collateral Agent shall only release an Aircraft
from the Lien of this Collateral Agreement to the extent that:
(a) for each Aircraft as to which the Company has requested
such release, an Investment Banker has delivered a written
verification to the Collateral Agent that such Substitute
Collateral (including, in the case of U.S. Government
Obligations, through the payment of interest and principal in
respect thereof in accordance with their terms) will provide
money in an amount sufficient to pay the Pro Rata Amount, plus
interest and premium (if any) payable in respect of such Pro Rata
Amount on the dates such payments of principal, premium or
interest are or are to become due until the Maturity Date
(including as a result of redemption in respect of which
irrevocable notice has been given to an Indenture Trustee on or
prior to the date of such deposit);
(b) on the date of such substitution, no Collateral Access
Event shall have occurred and be continuing;
(c) the Company has delivered to the Collateral Agent
confirmations from each of the Rating Agencies to the effect
that after giving effect to such substitution, the rating
assigned to each Class of Notes by such Rating Agency will not be
lower than such rating immediately prior to such substitution;
and
(d) the Company shall have executed such documents, if any,
as the Collateral Agent may reasonably request in order to
subject such Substitute Collateral to the Lien of this Agreement.
* * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Collateral Agreement to be duly executed by their respective
officers thereunto duly authorized, as of the day and year first
above written, and acknowledge that this Collateral Agreement has
been made and delivered in the City of New York, and this
Collateral Agreement has become effective only upon such
execution and delivery.
USAIR, INC.
By: /s/Thomas A. Fink
-------------------------------
Name: Thomas A. Fink
Title: Treasurer
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: /s/W. Chris Sponenberg
-------------------------------
W. Chris Sponenberg
Title: Financial Services Officer
WILMINGTON TRUST COMPANY,
as Class A Indenture Trustee
By: /s/W. Chris Sponenberg
-------------------------------
W. Chris Sponenberg
Title: Financial Services Officer
WILMINGTON TRUST COMPANY,
as Class B Indenture Trustee
By: /s/W. Chris Sponenberg
-------------------------------
W. Chris Sponenberg
Title: Financial Services Officer
WILMINGTON TRUST COMPANY,
as Class C Indenture Trustee
By: /s/W. Chris Sponenberg
-------------------------------
W. Chris Sponenberg
Title: Financial Services Officer
<PAGE>
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH,
as Class A Liquidity Provider
By: /s/Brigitte Thieme
--------------------------------
Title: Managing Director
By: /s/Cordula Kraska-Hoernemann
--------------------------------
Title: Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH,
as Class B Liquidity Provider
By: /s/Brigitte Thieme
--------------------------------
Title: Managing Director
By: /s/Cordula Kraska-Hoernemann
--------------------------------
Title: Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH,
as Class C Liquidity Provider
By: /s/Brigitte Thieme
--------------------------------
Title: Managing Director
By: /s/Cordula Kraska-Hoernemann
--------------------------------
Title: Vice President
<PAGE>
Exhibit A to
Collateral Agency Agreement
FORM OF COLLATERAL AGENCY
AGREEMENT SUPPLEMENT NO. ___
Collateral Agency Agreement Supplement No. ___,
dated____________________, 19___ ("Collateral Agreement
Supplement"), of USAir, Inc. (the "Company").
W I T N E S S E T H :
WHEREAS, the Collateral Agency Agreement, dated as of
February 15, 1996 (the "Collateral Agreement") between the
Company; Wilmington Trust Company, as Class A Indenture Trustee;
Wilmington Trust Company, as Class B Indenture Trustee,
Wilmington Trust Company, as Class C Indenture Trustee;
Westdeutsche Landesbank, New York Branch, as Class A Liquidity
Provider, Westdeutsche Landesbank, New York Branch, as Class B
Liquidity Provider; Westdeutsche Landesbank, New York Branch, as
Class C Liquidity Provider and Wilmington Trust Company, not in
its individual capacity except as expressly set forth therein,
but solely as Collateral Agent thereunder (in such capacity,
together with its successors, the "Collateral Agent"), provides
for the execution and delivery of supplements thereto
substantially in the form hereof which shall particularly
describe the Aircraft (such term and other defined terms in the
Collateral Agreement being used herein with the same meanings),
and shall specifically grant a security interest in the Aircraft
to the Collateral Agent; and
WHEREAS, the Collateral Agreement relates to the Airframes
and Engines respectively described in Annexes A-I attached hereto
and made a part hereof, and a counterpart of the Collateral
Agreement is attached to and made a part of this Collateral
Agreement Supplement; and
WHEREAS, the Company hereby acknowledges that the Aircraft
respectively referred to in Annexes A-I attached hereto and made
a part hereof have been delivered to the Company and are included
in the property of the Company covered by the terms and
conditions of the Collateral Agreement subject to the security
interest created thereunder;
<PAGE>
NOW, THEREFORE, in order to secure the prompt payment of the
principal of, Make Whole Premium (if any), and interest
(including, without limitation, Post Petition Interest) on, and
all other amounts due with respect to, all Notes from time to
time outstanding under the Indentures and the prompt payment of
all Liquidity Obligations (including, without limitation, Post
Petition Interest) from time to time outstanding under the
Liquidity Agreements and the Basic Documents and the performance
and observance by the Company of all the agreements, covenants
and provisions for the benefit of the Noteholders and the
Liquidity Providers in the Collateral Agreement and in the
Indentures, the Liquidity Agreements and the Notes contained, and
the prompt payment of any and all amounts from time to time owing
under each Indenture and under each Liquidity Agreement and the
other Basic Documents by the Company to the Noteholders, the
Indenture Trustees and the Liquidity Providers, and for the uses
and purposes and subject to the terms and provisions hereof, and
in consideration of the premises and of the covenants herein
contained, and of the acceptance of the Notes by the Noteholders,
and the issuance by the Liquidity Providers of the Liquidity
Facilities, and of the sum of $1.00 paid to the Company by the
Collateral Agent at or before the delivery hereof, the receipt
whereof is hereby acknowledged, the Company has granted, and does
hereby grant, a security interest in the property comprising the
Airframes and Engines described respectively in the Annexes A-I
attached hereto, whether or not any such Engines shall be
installed in or attached to an Airframe or any other aircraft, to
the Collateral Agent, its successors and assigns, in trust for
the benefit of the Secured Parties.
To have and to hold all and singular the aforesaid property
unto the Collateral Agent, its successors and assigns, in trust
for the benefit and security of the Secured Parties and for the
uses and purposes and subject to the terms and provisions set
forth in the Collateral Agreement.
This Supplement shall be construed as supplemental to the
Collateral Agreement and shall form a part thereof, and is hereby
incorporated by reference therein and is hereby ratified,
approved and confirmed.
This Supplement is being delivered in the State of New York
and shall be governed by New York law.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Supplement
No. ___ to be duly executed by one of its duly authorized
officers, as of the day and year first above written.
USAIR, INC.
By: __________________________
Title:
<PAGE>
Annex __
DESCRIPTION OF AIRFRAME AND ENGINES
AIRFRAME
FAA
Registration Manufacturer's
Manufacturer Model Number Serial No.
- ------------ ----- ------------ --------------
ENGINES
Manufacturer's
Manufacturer Model Serial No.
- ------------ ----- --------------
Each Engine is of 750 or more "rated take-off horsepower" or the
equivalent of such horsepower.
<PAGE>
Exhibit B to
Collateral Agency
Agreement
SCHEDULE OF COUNTRIES
---------------------
Australia
Austria
Bahamas
Belgium
Bermuda
Canada
Germany
Finland
India
Indonesia
Ireland
Jamaica
Japan
Liechtenstein
Malaysia
Mexico
Monaco
Netherlands
New Zealand
Singapore
Spain
Taiwan
United Kingdom
Vietnam
Exhibit 5.4
- -----------------------------------------------------------------
USAIR ENHANCED EQUIPMENT NOTES
Class A Notes
-------------------------------
INDENTURE
Dated as of February 15, 1996
-------------------------------
WILMINGTON TRUST COMPANY
Indenture Trustee
- -----------------------------------------------------------------
<PAGE>
Reconciliation and tie between the Indenture, dated as February
15, 1996, relating to the USAir Enhanced Equipment Notes (Class
A) and the Trust Indenture Act of 1939. This reconciliation
section does not constitute part of the Trust Indenture.
Trust Indenture Act Indenture
of 1939 Section Section
- -------------------- -----------
310 (a) (1) 7.12
(a) (2) 7.12
312 (a) 8.02
(c) 11.15
313 (a) 7.07
314 (a) 4.04
(b) 4.04
(c) (1) 11.01
(c) (2) 11.01
(d) (1) Not Applicable
(d) (2) Not Applicable
(d) (3) Not Applicable
(e) 11.02
15 (b) 7.06
(e) 6.12
316 (a) (last sentence) 1.01
(a) (1) (A) 6.10
(a) (1) (B) 6.11
(b) 6.06
(c) 11.04(c)
317 (a) (1) 6.03(i)
(a) (2) 6.11
(b) 4.03
318 (a) 11.16
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.... 1
SECTION 1.01. Definitions........................... 1
SECTION 1.02. Rules of Construction................. 1
ARTICLE II. THE NOTES.................................... 2
SECTION 2.01. Notes; Form and Dating................ 2
SECTION 2.02. Restrictive Legends................... 3
SECTION 2.03. Execution, Authentication and
Delivery............................. 5
SECTION 2.04. Transfer and Exchange................. 6
SECTION 2.06. Special Transfer Provisions........... 8
SECTION 2.07. Mutilated, Destroyed, Lost
or Stolen Notes...................... 12
SECTION 2.08. Persons Deemed Owner.................. 13
SECTION 2.09. Payment of Principal and Interest..... 13
SECTION 2.10. Revision of Expected
Principal Amounts and Payment Dates.. 14
SECTION 2.11. Liquidity Facility Distribution....... 14
SECTION 2.12. Registrar and Paying Agent............ 15
SECTION 2.13. Temporary Notes....................... 15
SECTION 2.14. Cancellation.......................... 16
SECTION 2.15. CUSIP Numbers......................... 16
SECTION 2.16. Purchase Upon Acceleration............ 16
ARTICLE III. REDEMPTION.................................. 18
SECTION 3.01. Redemptions........................... 18
SECTION 3.02. Notice of Redemption.................. 18
SECTION 3.03. Effect of Notice of Redemption........ 19
SECTION 3.04. Payment of Redemption Price........... 19
ARTICLE IV. COVENANTS.................................... 20
SECTION 4.01. Payment of Principal and Interest..... 20
SECTION 4.02. Maintenance of Office or Agency....... 20
SECTION 4.03. Money for Payments to Be Held
in Trust............................. 20
SECTION 4.04. Reports by the Company................ 21
<PAGE>
ARTICLE V. SATISFACTION AND DISCHARGE..................... 23
SECTION 5.01. Satisfaction and Discharge
of Indenture.......................... 23
SECTION 5.02. Application of Trust Mone.y............ 24
SECTION 5.03. Repayment of Moneys Held by
Paying Agent.......................... 24
ARTICLE VI. REMEDIES...................................... 24
SECTION 6.01. Collateral Access Events............... 24
SECTION 6.02. Acceleration of Maturity; Rescission
and Annulment......................... 27
SECTION 6.03. Collection of Indebtedness and Suits
for Enforcement by Indenture Trustee.. 28
SECTION 6.04. Remedies; Priorities................... 30
SECTION 6.05. Limitation of Suits.................... 30
SECTION 6.06. Unconditional Rights of Noteholders to
Receive Principal and Interest........ 31
SECTION 6.07. Restoration of Rights and Remedies..... 31
SECTION 6.08. Rights and Remedies Cumulative......... 31
SECTION 6.09. Delay or Omission Not a Waiver......... 32
SECTION 6.10. Control by Noteholders................. 32
SECTION 6.11. Waiver of Existing Defaults............ 32
SECTION 6.12. Undertaking for Costs.................. 33
SECTION 6.13. Waiver of Stay or Extension Laws....... 33
SECTION 6.14. Action on Notes........................ 33
ARTICLE VII. THE INDENTURE TRUSTEE........................ 34
SECTION 7.01. Duties of Indenture Trustee............ 34
SECTION 7.02. Directions to Collateral Agent......... 35
SECTION 7.03. Rights of Indenture Trustee............ 35
SECTION 7.04. Individual Rights of
Indenture Trustee..................... 36
SECTION 7.05. Indenture Trustee's Disclaimer......... 36
SECTION 7.06. Notice of Collateral Access Events..... 37
SECTION 7.07. Reports by Indenture Trustee
to Holders............................ 37
SECTION 7.08. Compensation and Indemnity............. 37
SECTION 7.09. Replacement of Indenture Trustee....... 38
SECTION 7.10. Successor Indenture Trustee
by Merger............................. 39
SECTION 7.11. Appointment of Co-Trustee or
Separate Trustee...................... 39
SECTION 7.12. Trustee Eligibility.................... 40
SECTION 7.13. Information to Collateral Agent........ 41
<PAGE>
ARTICLE VIII. NOTEHOLDERS' LISTS AND REPORTS.............. 41
SECTION 8.01. Company to Furnish Indenture Trustee
Names and Addresses of Noteholders.... 41
SECTION 8.02. Preservation of Information; Communi-
cations to Noteholders................ 41
ARTICLE IX. SUPPLEMENTAL INDENTURES AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS................ 42
SECTION 9.01. Amendments; Waivers, etc. of Documents;
Direction to Collateral Agent........ 42
SECTION 9.02. Trustees Protected.................... 43
SECTION 9.03. [Reserved]............................ 43
SECTION 9.04. No Noteholder Consent Necessary for
Indenture Supplement, etc............ 43
SECTION 9.05. Payment for Consent................... 45
SECTION 9.06. Effect of Supplemental Indenture...... 45
SECTION 9.07. Notation on Notes in Respect of
Supplemental Indentures.............. 45
SECTION 9.08. Notice to Rating Agencies............. 45
ARTICLE X. COLLATERAL AGREEMENT........................... 45
SECTION 10.01. Collateral Agreement.................. 45
SECTION 10.02. Release upon Termination of the
Company's Obligations................ 46
SECTION 10.03. Notice of Successor Collateral
Agent................................ 46
ARTICLE XI. MISCELLANEOUS................................. 46
SECTION 11.01. Compliance Certificates and
Opinions, etc........................ 46
SECTION 11.02. Statements Required in Certificate
or Opinion........................... 47
SECTION 11.03. Form of Documents Delivered to
Indenture Trustee.................... 47
SECTION 11.04. Acts of Noteholders................... 48
SECTION 11.05. Notices, etc., to Indenture Trustee,
Company and Rating Agencies.......... 49
SECTION 11.06. Notices to Noteholders; Waiver........ 49
SECTION 11.07. Effect of Headings and Table of
Contents............................. 50
SECTION 11.08. Successors and Assigns................ 50
SECTION 11.09. Separability.......................... 50
SECTION 11.10. Benefits of Indenture................. 50
<PAGE>
SECTION 11.11. GOVERNING LAW......................... 51
SECTION 11.12. Counterparts.......................... 51
SECTION 11.13. Recording of Indenture................ 51
SECTION 11.14. Disclosure of Names and Addresses
of Holders .......................... 51
SECTION 11.15. Trust Indenture Act Controls.......... 51
SECTION 11.16. Exchange Offer....................... 51
APPENDICES AND EXHIBITS
Appendix A Definitions
Exhibit A Form of Registered Note
Exhibit B Form of Note
Exhibit C Principal Payment Dates and Amounts
Exhibit D Form of Certificate for Unlegended Notes
Exhibit E Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors
Exhibit F Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S
Exhibit G Form of Opinion of Counsel for Issuance of Registered
Notes
<PAGE>
This INDENTURE dated as of February 15, 1996, between USAIR,
INC., a Delaware corporation (the "Company"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, solely as trustee
and not in its individual capacity except as expressly provided
herein (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Noteholders of
the Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. For all purposes of this
Indenture, capitalized terms used herein shall have the meanings
set forth in Appendix A attached hereto and shall be subject to
the rules of usage set forth at the beginning thereof. Unless
otherwise specified, Section and Article references herein are
Sections or Articles, as the case may be, of this Indenture.
SECTION 1.02. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) all other terms used herein which are defined
in the Trust Indenture Act, either directly or by
reference therein, have the meanings assigned to them
therein; except that the "obligor" within the meaning
of the Trust Indenture Act shall be the Company for all
purposes of this Indenture;
(iii) an accounting term not otherwise defined has
the meaning assigned to it in accordance with generally
accepted accounting principles as in effect from time
to time;
(iv) "or" is not exclusive;
(v) "including" means "including without
limitation"; and
(vi) words in the singular include the plural and
words in the plural include the singular.
<PAGE>
ARTICLE II
THE NOTES
SECTION 2.01. Notes; Form and Dating. (a) The Notes and
the Indenture Trustee's certificate of authentication in respect
thereof shall be substantially in the form annexed hereto as
Exhibit B; provided that, any Class A Registered Note, if and
when issued, and the Indenture Trustee's certificate of
authentication in respect thereof shall be substantially in the
form of Exhibit A. The Notes shall be issued in an aggregate
principal amount equal to $142,400,000 and shall bear interest at
the Stated Interest Rate. The principal of each Note shall be
due and payable in full on the Maturity Date, provided that,
subject to Section 2.10, the principal of the Notes is expected
to be paid prior to such date, subject to Section 2.09(a), in
installments, on such Payment Dates and in such amounts as set
forth in Exhibit C hereto.
(b) The Notes shall be in registered form and may have
notations, legends or endorsements required by law to which the
Company is subject or by usage. The Company shall approve the
form of the Notes and any notation, legend or endorsement on the
Notes. Each Note shall be dated the date of its authentication.
(c) The terms and provisions contained in the respective
forms of the Notes annexed hereto as Exhibits A (in the case of
Class A Registered Notes) and B (in the case of Notes other than
Class A Registered Notes) shall constitute, and are hereby
expressly made, a part of this Indenture. Each of the Company
and the Indenture Trustee, by its execution and delivery of this
Indenture, expressly agrees to the terms and provisions of the
Notes applicable to it and to be bound thereby.
(d) The Notes offered and sold in reliance on Rule 144A
shall be issued initially in the form of a single permanent
global Note in registered form, substantially in the form set
forth in Exhibit B (the "U.S. Global Note"), deposited with the
Indenture Trustee, as custodian for the Depositary, duly executed
by the Company and authenticated by the Indenture Trustee as
hereinafter provided. The aggregate principal amount of the U.S.
Global Note may from time to time be increased or decreased by
adjustments made on the records of the Indenture Trustee, as
custodian for the Depositary or its nominee, as hereinafter
provided.
<PAGE>
(e) The Notes offered and sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of
a single temporary global Note in registered form substantially
in the form set forth in Exhibit B (the "Temporary Offshore
Global Note") deposited with the Indenture Trustee, as custodian
for the Depositary, duly executed by the Company and
authenticated by the Indenture Trustee as hereinafter provided.
At any time following March 27, 1996 (the "Offshore Notes
Exchange Date"), upon receipt by the Indenture Trustee and the
Company of a certificate substantially in the form of Exhibit D
hereto, a single permanent global Note in registered form
substantially in the form set forth in Exhibit B (the "Permanent
Offshore Global Note"; and together with the Temporary Offshore
Global Note, the "Offshore Global Notes") duly executed by the
Company and authenticated by the Indenture Trustee as hereinafter
provided shall be deposited with the Indenture Trustee, as
custodian for the Depositary, and the Note Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of any Temporary Offshore Global Note in an
amount equal to the principal amount of the beneficial interest
in such Temporary Offshore Global Note transferred.
(f) The Notes offered and sold in reliance on Regulation D
under the Securities Act shall be issued in the form of permanent
certificated Notes in registered form in substantially the form
set forth in Exhibit B (the "U.S. Physical Notes"). Notes issued
pursuant to Section 2.07 in exchange for interests in any
Offshore Global Note shall be in the form of permanent
certificated Notes in registered form substantially in the form
set forth in Exhibit B (the "Offshore Physical Notes"). The
Offshore Physical Notes, U.S. Physical Notes and the Registered
Physical Notes are sometimes collectively herein referred to as
the "Physical Notes".
(g) Class A Registered Notes shall be issued initially in
the form of a single temporary or permanent global Note in
registered form substantially in the form set forth in Exhibit A
(with "Registered Global Note"), deposited with the Indenture
Trustee, as custodian for the Depository, duly executed by the
Company and authenticated by the Indenture Trustee as hereinafter
provided. Class A Registered Notes issued pursuant to
Section 2.07 in exchange for any Registered Global Note shall be
in the form of permanent certificated Class A Registered Notes in
registered form substantially in the form set forth in Exhibit A
(the "Registered Physical Note").
<PAGE>
(h) The definitive Notes shall be in registered form and
shall be typed, printed, lithographed or engraved or produced by
any combination of these methods or may be produced in any other
manner, all as determined by the officers executing such Notes,
as evidenced by their execution of such Notes.
SECTION 2.02. Restrictive Legends. (a) Each Global Note
(except any Registered Global Note) and each U.S. Physical Note
shall bear the following legend on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN "INSTITUTIONAL
ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT,
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS NOTE OR THE LAST DATE ON WHICH THIS
NOTE WAS HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR,
INC., RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO USAIR, INC., OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
APPLICABLE INDENTURE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE APPLICABLE
INDENTURE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE VALUE OF NOTES AT THE TIME OF TRANSFER
OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTANCE
TO USAIR, INC. THAT SUCH TRANSFER IS IN COMPLIANCE THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
<PAGE>
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS NOTE WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS
HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR, INC., THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE APPLICABLE INDENTURE TRUSTEE.
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE APPLICABLE INDENTURE TRUSTEE AND USAIR, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
APPLICABLE INDENTURE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Global Note (except any Registered Global Note)
shall also bear the following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO
USAIR, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION
2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Delivery. (a)
The Notes shall be executed on behalf of the Company by any of
its Responsible Officers. The signature of any such Responsible
Officer on the Notes may be manual or facsimile.
(b) Notes bearing the manual or facsimile signature of
individuals who were at any time Responsible Officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
(c) The Indenture Trustee shall upon Company Order
authenticate and deliver Notes in the aggregate principal amount
of $142,400,000. The aggregate principal amount of the Notes
outstanding at any time may not exceed such amount, except as
provided in Section 2.07. The Indenture Trustee shall upon
Company Order authenticate and deliver Registered Notes of equal
outstanding principal amount. The Indenture Trustee shall be
entitled to receive any Officer's Certificate and any Opinion of
Counsel of the Company that it may reasonably request in
connection with the authentication of such Registered Notes,
including, without limitation, in the case of the original
issuance of Registered Notes, an Opinion of Counsel dated the
date thereof substantially to the effect set forth in Exhibit G
hereto. The Notes shall be issuable as registered Notes in the
minimum denomination of $100,000 and in integral multiples of
$1,000 in excess thereof.
(d) No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there
appears on such Note a certificate of authentication
substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall
be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
<PAGE>
SECTION 2.04. Transfer and Exchange. The Notes are
issuable only in registered form. A Noteholder may transfer a
Note by written application to the Note Registrar stating the
name of the proposed transferee and otherwise complying with the
terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a
Noteholder only upon, final acceptance and registration of the
transfer by the Note Registrar in the Note Register. Prior to
the registration of any transfer by a Noteholder as provided
herein, the Company, the Indenture Trustee, and any agent of the
Company shall treat the person in whose name the Note is
registered as the owner thereof for all purposes whether or not
the Note shall be overdue, and neither the Company, the Indenture
Trustee, nor any such agent shall be affected by notice to the
contrary. Furthermore, the Depositary shall, by acceptance of a
Global Note, agree that transfers of beneficial interests in such
Global Note may be effected only through a book-entry system
maintained by the Depositary (or its agent), and that ownership
of a beneficial interest in the Note shall be required to be
reflected in a book entry. When Notes are presented to the Note
Registrar or a co-Note Registrar with a request to register the
transfer or to exchange them for an equal principal amount of
Notes of other authorized denominations (including an exchange of
Notes for Registered Notes), the Note Registrar shall register
the transfer or make the exchange as requested if its
requirements for such transactions are met; provided that no
exchanges of Notes for Registered Notes shall occur until a
Registration Statement shall have been declared effective by the
Commission and that any Notes that are exchanged for Registered
Notes shall be cancelled by the Indenture Trustee. To permit
registrations of transfers and exchanges in accordance with the
terms, conditions and restrictions hereof, the Company shall
execute and the Indenture Trustee shall authenticate Notes at the
Note Registrar's request. No service charge shall be made for
any registration of transfer or exchange or redemption of the
Notes, but the Company or the Indenture 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 other similar governmental charge
payable upon exchanges pursuant to Section 2.13 or 9.07).
SECTION 2.05. Book Entry Provisions for Global Notes. (a)
Each Global Note shall be issued in registered form and initially
shall (i) be registered in the name of the Depositary for such
Global Notes or the nominee of such Depositary, (ii) be delivered
to the Indenture Trustee as custodian for such Depositary and,
(iii) except with respect to the Registered Global Note, bear
legends as set forth in Section 2.02.
<PAGE>
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Note, as the case may be, held on their behalf by
the Depositary, or the Indenture Trustee as its custodian, or
under or any Global Note, as the case may be, and the Depositary
may be treated by the Company, the Indenture Trustee and any
agent of the Company or the Indenture Trustee as the absolute
owner of such Global Note, as the case may be, for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Indenture Trustee or any agent of the
Company or the Indenture Trustee, from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of any Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to the
Depositary, its successors or their respective nominees.
Beneficial interests in any Global Note may be transferred in
accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 2.06. In addition,
Physical Notes shall be delivered to all beneficial owners in
exchange for their beneficial interests in such Global Note, as
the case may be, if (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary for such
Global Note, as the case may be, and a successor depositary is
not appointed by the Company within 90 days of such notice or
(ii) a Collateral Access Event has occurred and is continuing and
the Noteholders holding at least a majority of the aggregate
outstanding principal amount of the Notes have caused the
Depositary to make such a request of the Note Registrar.
(c) Any beneficial interest in one of the Global Notes that
is transferred to a person who takes delivery in the form of an
interest in the other Global Note will, upon transfer, cease to
be an interest in such Global Note and become an interest in the
other Global Note and, accordingly, will thereafter be subject to
all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for
as long as it remains such an interest.
<PAGE>
(d) In connection with any transfer of a beneficial
interest in the U.S. Global Note to a transferee receiving U.S.
Physical Notes pursuant to paragraph (b) of this Section, the
Note Registrar shall reflect on its books and records the date
and a decrease in the principal amount of such U.S. Global Note
in an amount equal to the principal amount of the beneficial
interest in such U.S. Global Note to be transferred, and the
Company shall execute, and the Indenture Trustee shall
authenticate and deliver, one or more U.S. Physical Notes of like
tenor and amount.
(e) In connection with the transfer of the entire U.S.
Global Note, Offshore Global Note or Registered Global Note to
beneficial owners pursuant to paragraph (b) of this Section, such
U.S. Global Note, Offshore Global Note or Registered Global Note,
as the case may be, shall be deemed to be surrendered to the
Indenture Trustee for cancellation, and the Company shall
execute, and the Indenture Trustee shall authenticate and
deliver, to each beneficial owner identified by the Depositary in
exchange for its beneficial interest in such U.S. Global Note,
Offshore Global Note or Registered Global Note, as the case may
be, an equal aggregate principal amount of U.S. Physical Notes,
Offshore Physical Notes or Registered Physical Notes, as the case
may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b) or (d)
of this Section shall, except as otherwise provided by paragraph
(f) of Section 2.06, bear the legend regarding transfer
restrictions applicable to a U.S. Physical Note set forth in
Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an
interest in an Offshore Global Note pursuant to paragraph (b) of
this Section shall, except as otherwise provided by paragraph (f)
of Section 2.06, bear the legends regarding transfer restrictions
set forth in Section 2.02(a).
(h) The registered holder of any Offshore Global Note may
grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent
Members, to take any action which a Noteholder is entitled to
take under this Indenture or the Notes.
SECTION 2.06 Special Transfer Provisions. (a) Transfers
to Non-QIB Institutional Accredited Investors. The following
provisions shall apply with respect to the registration of any
proposed transfer of a Note (other than a Class A Registered
Note) to any Institutional Accredited Investor which is not a QIB
(excluding transfers to or by Non-U.S. Persons):
<PAGE>
(i) The Note Registrar shall register the transfer of
any Note, whether or not such Note bears the Private
Placement Legend, if (x) the requested transfer is at least
three years after the later of the original issue date of
the Notes and the last date on which such Note was held by
the Company or any affiliate of the Company or (y) the
proposed transferee has delivered to the Note Registrar a
certificate substantially in the form of Exhibit E hereto
and the aggregate principal amount of the Notes being
transferred is at least $100,000.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon
receipt by the Note Registrar of (x) the documents, if any,
required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and a decrease in the principal amount
of such U.S. Global Note in an amount equal to the principal
amount of the beneficial interest in such U.S. Global Note
to be transferred, and the Company shall execute, and the
Indenture Trustee shall authenticate and deliver, one or
more U.S. Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Note (other than a Class A Registered Note) to a QIB
(excluding transfers to or by Non-U.S. Persons):
(i) If the Note to be transferred consists of U.S.
Physical Notes or an interest in any Temporary Offshore
Global Note, except if exchanged for a Class A Registered
Note in the Exchange Offer, the Note Registrar shall
register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the
Company and the Note Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to
a transferee who has signed the certification provided for
on the form of Note stating, or has otherwise advised the
Company and the Note Registrar in writing, that it is
purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A.
<PAGE>
(ii) If the proposed transferee is an Agent Member,
and the Note to be transferred consists of U.S. Physical
Notes or an interest in the Temporary Offshore Global Note,
upon receipt by the Note Registrar of the documents referred
to in clause (i) and instructions given in accordance with
the Depositary's and the Note Registrar's procedures, the
Note Registrar shall reflect on its books and records the
date and an increase in the principal amount of the U.S.
Global Note in an amount equal to the principal amount of
such U.S. Physical Notes or the interest in such Temporary
Offshore Global Note, as the case may be, to be transferred,
and the Indenture Trustee shall cancel such Physical Notes
or decrease the amount of such Temporary Offshore Global
Note so transferred.
(c) Transfers of Interests in the Temporary Offshore
Global Note. The following provisions shall apply with respect
to registration of any proposed transfer of interests in the
Temporary Offshore Global Note:
(i) The Note Registrar shall register the transfer of
any such Note (x) if the proposed transferee is a Non-U.S.
Person and the proposed transferor has delivered to the Note
Registrar a certificate substantially in the form of Exhibit
F hereto or (y) if the proposed transferee is a QIB and the
proposed transferor has checked the box provided for on the
form of such Note stating, or has otherwise advised the
Company and such Note Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided
for on the form of Note stating, or has otherwise advised
the Company and the Note Registrar in writing, that it is
purchasing such Note for its own account or an account with
respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member,
upon receipt by the Note Registrar of the documents referred
to in clause (i)(y) above and instructions given in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and
<PAGE>
an increase in the principal amount of the U.S. Global Note
in an amount equal to the principal amount of the Temporary
Offshore Global Note to be transferred, and the Indenture
Trustee shall decrease the amount of the Temporary Offshore
Global Note.
(d) Transfers of Interests in the Permanent Offshore
Global Note, Offshore Physical Notes and Registered Class A Note.
With respect to any transfer of interests in any Permanent
Offshore Global Note, Offshore Physical Notes or Class A
Registered Note, the Note Registrar shall register such transfer
without requiring any additional certification.
(e) Transfers to Non-U.S. Persons at any Time. The
following provisions shall apply with respect to any transfer of
a Note (other than a Class A Registered Note) to a Non-U.S.
Person:
(i) Prior to March 27, 1996, the Note Registrar shall
register any proposed transfer of a Note to a Non-U.S.
Person upon receipt of a certificate substantially in the
form of Exhibit F hereto from the proposed transferor.
(ii) On and after March 27, 1996, the Note Registrar
shall register any proposed transfer to any Non-U.S. Person
if such Note to be transferred is a U.S. Physical Note or an
interest in the U.S. Global Note, upon receipt of a
certificate substantially in the form of Exhibit F from the
proposed transferor.
(iii) (a) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon
receipt by the Note Registrar of (x) the documents, if any,
required by paragraph (ii) and (y) instructions in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and a decrease in the principal amount
of such U.S. Global Note in an amount equal to the principal
amount of the beneficial interest in such U.S. Global Note
to be transferred, and (b) if the proposed transferee is an
Agent Member, upon receipt by the Note Registrar of
instructions given in accordance with the Depositary's and
the Note Registrar's procedures, the Note Registrar shall
reflect on its books and records the date and an increase in
the principal amount of the Offshore Global Note in an
amount equal to the principal amount of the U.S. Physical
Note or the U.S. Global Note, as the case may be, to be
transferred, and the Indenture Trustee shall cancel the
Physical Note, if any, so transferred or decrease the amount
of such U.S. Global Note.
<PAGE>
(f) Private Placement Legend. Upon the transfer, exchange
or replacement of Notes not bearing the Private Placement Legend,
the Note Registrar shall deliver Notes that do not bear the
Private Placement Legend. Upon the transfer, exchange or
replacement of Notes bearing the Private Placement Legend, the
Note Registrar shall deliver only Notes that bear the Private
Placement Legend unless either (i) the circumstances contemplated
by paragraph (a)(i)(x) or (e)(ii) of this Section 2.06 exist or
(ii) there is delivered to the Note Registrar an opinion of
counsel reasonably satisfactory to the Company and the Note
Registrar to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Note bearing the
Private Placement Legend, each Noteholder of such a Note
acknowledges the restrictions on transfer of such Note set forth
in this Indenture and in the Private Placement Legend and agrees
that it will transfer such Note only as provided in this
Indenture. The Note Registrar shall not register a transfer of
any Note unless such transfer complies with the restrictions on
transfer of such Note set forth in this Indenture. In connection
with any transfer of Notes (other than Class A Registered Notes),
each Noteholder agrees by its acceptance of the Notes to furnish
the Note Registrar or the Company such certifications, legal
opinions or other information as either of them may reasonably
require to confirm that such transfer is being made pursuant to
an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that
the Note Registrar shall not be required to determine (but may
rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
The Note Registrar shall retain copies of all letters,
notices and other written communications received pursuant to
Section 2.05 or this Section 2.06. The Company shall have the
right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the
giving of reasonable written notice to the Note Registrar.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Notes.
If (i) any mutilated Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its
satisfaction of the destruction, loss or theft of any Note, and
(ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Company and the
Indenture Trustee harmless, then, in the absence of notice to the
Company, the Note Registrar or the Indenture Trustee that such
Note has been acquired
<PAGE>
by a bona fide purchaser, and provided that the requirements of
Section 8-405 of the Uniform Commercial Code are met, the Company
shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note;
provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become or within seven
days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Company
may pay such destroyed, lost or stolen Note when so due or
payable or upon the Redemption Date without surrender thereof.
If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in
lieu of which such replacement Note was issued presents for
payment such original Note, the Company and the Indenture Trustee
shall be entitled to recover such replacement Note (or such
payment) from the Person to whom it was delivered or any Person
taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person,
except a bona fide purchaser, and shall be entitled to recover
upon the security or indemnity provided therefor to the extent of
any loss, damage, cost or expense incurred by the Company or the
Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this
Section, the Company may require the payment by the Noteholder of
such Note of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note
shall constitute an original additional contractual obligation of
the Company, whether or not the mutilated, destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes.
<PAGE>
SECTION 2.08. Persons Deemed Owner. Prior to due
presentment for registration of transfer of any Note, the
Company, the Indenture Trustee and any agent of the Company or
the Indenture Trustee may treat the Person in whose name any Note
is registered (as of the day of determination) as the owner of
such Note for the purpose of receiving payments of principal of
and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the
Company, the Indenture Trustee nor any agent of the Company or
the Indenture Trustee shall be affected by notice to the
contrary.
SECTION 2.09. Payment of Principal and Interest. (a) The
Company shall make principal payments in respect of the Notes on
each Payment Date as set forth on Exhibit C. The Company shall
unconditionally pay in full any outstanding principal of the
Notes (including the Note Principal Carryover Amount), and
accrued but unpaid interest thereon (including the Note Interest
Carryover Amount), on the Maturity Date.
(b) The Notes shall accrue interest at the Stated Interest
Rate on the principal amount thereof remaining unpaid from time
to time from and including the date of issuance to be excluding
the date of payment. Interest will be calculated on the basis of
a 360-day year of twelve 30-day months and shall be paid on each
Payment Date to the Person in whose name such Note (or one or
more predecessor Notes) is registered on the Record Date, by wire
transfer in immediately available funds to the account designated
by such person, with respect to Notes registered on the Record
Date in the name of the nominee of the Depositary (initially,
such nominee to be Cede & Co.), payment will be made by wire
transfer in immediately available funds to the account designated
by such nominee. The funds represented by any such checks
returned undelivered shall be held in accordance with Section
4.03. The final installment of principal of each Note will be
payable only upon presentation and surrender of such Note and
shall specify the place where such Note may be presented and
surrendered for payment of such installment.
(c) If a principal installment of the Notes expected to be
paid on any Payment Date (and the Note Principal Carryover Amount
for such Payment Date) is not paid in full on such Payment Date,
such unpaid principal amount shall be payable (together with
interest thereon) on or prior to the immediately following
Payment Date. If interest accrued on the Notes during the period
commencing on the immediately preceding Payment Date and ending
on any Payment Date (and the Note Interest Carryover Amount for
such Payment Date) is not paid in full on such Payment Date, such
unpaid amount (but without any interest on such amount) shall be
payable on or prior to the immediately following Payment Date.
<PAGE>
(d) Payments made by the Company pursuant to Section
2.09(a) and (b) shall be applied in the following order of
priority: (i) to pay the Note Interest Carryover Amount on the
Notes, (ii) to pay accrued and unpaid interest (other than the
Note Interest Carryover Amount) on the Notes, (iii) to pay the
Note Principal Carryover Amount of the Notes and (iv) to pay any
other principal amounts owing on the Notes. All payments on the
Notes shall be made pro rata to the Noteholders entitled thereto
based upon the outstanding principal amount of the Notes held by
such Noteholder.
(e) If any sum payable under the Notes or under this
Indenture falls due on a day which is not a Business Day, then
such sum shall be payable on the next succeeding Business Day
without additional interest as a result of such extension.
(f) The principal, interest and premium, if any, in respect
of each Note will be payable by the Company in U.S. dollars in
immediately available funds at the principal corporate trust
administration office of the Collateral Agent.
SECTION 2.10. Revision of Expected Principal Amounts and
Payment Dates. In the event that the Notes are redeemed in part
pursuant to Section 3.01, the amounts of principal expected to be
paid on any Payment Date for the Notes subsequent to the date of
such redemption will be revised as follows: the amount of
principal expected to be paid on each such subsequent Payment
Date for the Notes shall be equal to the difference of (x) the
amount of principal due on such Payment Date prior to such
revision minus (y) the amount equal to the product of (I) the
amount of principal due on such Payment Date prior to such
revision and (II) a fraction, the numerator of which is the
amount of principal paid on the Notes in connection with such
redemption, and the denominator of which is the aggregate
principal amount of such Notes prior to such redemption.
Exhibit C hereto will be revised as contemplated above and,
as so revised, will be binding on the parties hereto and the
Noteholders and be controlling for all purposes of this Indenture
and the Notes. The Company shall cause the Indenture Trustee to
prepare a new schedule of expected principal payments and the
Payment Dates therefor for the Notes within 10 Business Days
after the partial redemption of the Notes and deliver a copy of
such schedule to each Noteholder pursuant to Section 11.05. If
the Notes, the Class B Notes and the Class C Notes have been
redeemed at the option of the Company prior to any revision of
the expected principal payment schedule described above, such
schedule for the Class B Notes and the Class C Notes will be
revised as if such redemption had not occurred. If any of the
Notes, the Class B Notes or the Class C Notes have been redeemed
in part at the option of the Company, each succeeding principal
payment of such Class will be ratably reduced.
<PAGE>
SECTION 2.11. Liquidity Facility Distribution. Each
payment received by the Indenture Trustee pursuant to Section
3.6(a) or (f) of the Collateral Agreement shall be promptly
applied by the Indenture Trustee to accrued interest due and
payable on the Notes at the Stated Interest Rate and if the
amount received shall be insufficient to pay all such amounts due
and payable in full, such amount received shall be distributed
pro rata among the Notes, without priority of any Note over any
other, based upon the amount of such accrued interest due and
payable on each Note. The Indenture Trustee and each Noteholder
acknowledge and agree that they shall have no right or interest
in any payment received by the Class B Indenture Trustee or the
Class C Indenture Trustee pursuant to Section 3.6(a) or (f) of
the Collateral Agreement.
SECTION 2.12. Registrar and Paying Agent. The Company
shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange (the "Note
Registrar"), an office or agency where Notes may be presented for
payment (the "Paying Agent") and an office or agency where
notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served, which shall be, except in
case of the original Indenture Trustee, in the Borough of
Manhattan, The City of New York. The Company shall cause the
Note Registrar to keep a register of the Notes and of their
transfer and exchange (the "Note Register"). The Company may
have one or more co-Note Registrars and one or more additional
Paying Agents.
The Company shall enter into an appropriate agency agreement
with any agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to
such agent. The Company shall give prompt written notice to the
Indenture Trustee of the name and address of any such agent and
any change in the address of such agent. If the Company fails to
maintain a Note Registrar, Paying Agent and/or agent for service
of notices and demands, the Indenture Trustee shall act as such
Note Registrar, Paying Agent and/or agent for service of notices
and demands for so long as such failure shall continue. The
Company may remove any agent upon written notice to such agent
and the Indenture Trustee; provided that no such removal shall
become effective until (i) the acceptance of an appointment by a
successor agent to such agent as evidenced by an appropriate
agency agreement entered into by the Company and such successor
agent and delivered to the Indenture Trustee or (ii) notification
to the Indenture Trustee that the Indenture Trustee shall serve
as such agent until the appointment of a successor agent in
accordance with clause (i) of this proviso. The Company or any
<PAGE>
Affiliate of the Company may act as Paying Agent, Note Registrar
or co-Note Registrar, and/or agent for service of notice and
demands; provided, however, that neither the Company nor any
Affiliate of the Company shall act as Paying Agent in connection
with the defeasance of the Notes or the discharge of this
Indenture under Article V.
The Company initially appoints the Indenture Trustee as Note
Registrar, Paying Agent, authenticating agent and agent for
service of notice and demands. If, at any time, the Indenture
Trustee is not the Note Registrar, the Note Registrar shall make
available to the Indenture Trustee on or before each Payment Date
and at such other times as the Indenture Trustee may reasonably
request, the names and addresses of the Noteholders as they
appear in the Note Register.
SECTION 2.13. Temporary Notes. Until definitive Notes are
ready for delivery, the Company may prepare and the Indenture
Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may
have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the
temporary Notes, as evidenced by their execution of such
temporary Notes. If temporary Notes are issued, the Company will
cause definitive Notes to be prepared without unreasonable delay.
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 of the Company designated
for such purpose pursuant to Section 4.02, without charge to the
Noteholder. Upon surrender for cancellation of any one or more
temporary Notes the Company shall execute and the Indenture
Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall be
entitled to the same benefits under this Indenture as definitive
Notes.
SECTION 2.14. Cancellation. The Company at any time may
deliver to the Indenture Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever, and may
deliver to the Indenture Trustee for cancellation any Notes
previously authenticated hereunder which the Company has not
issued and sold. The Note Registrar and the Paying Agent shall
forward to the Indenture Trustee any Notes surrendered to them
for transfer, exchange or payment. The Indenture Trustee shall
cancel all Notes surrendered for transfer, exchange, payment or
cancellation and shall dispose of them in accordance with its
<PAGE>
normal procedure or the written instructions of the Company;
provided, however, the Indenture Trustee shall not be required to
destroy such Notes. The Company may not issue new Notes to
replace Notes it has paid in full or delivered to the Indenture
Trustee for cancellation.
SECTION 2.15. CUSIP Numbers. The Company in issuing the
Notes may use "CUSIP" and "CINS" numbers (if then generally in
use), and the Indenture Trustee shall use CUSIP numbers or CINS
numbers, as the case may be, in notices of redemption or exchange
as a convenience to Noteholders; provided that any such notice
may state that no representation is made as to the correctness of
such numbers either as printed on such Notes or as contained in
any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on such
Notes.
SECTION 2.16. Purchase Upon Acceleration. By acceptance
of its Note, each Noteholder agrees that at any time after any
Acceleration of the Notes, the Class B Notes or the Class C Notes
which has not been rescinded or withdrawn,
(i) each Class B Noteholder shall have the right to
purchase all, but not less than all, of the Notes upon
fifteen days written notice to the Indenture Trustee and
each other Class B Noteholder, provided that (A) if prior to
the end of such fifteen day period any other Class B
Noteholder notifies such purchasing Class B Noteholder that
such other Class B Noteholder wants to participate in such
purchase, then such other Class B Noteholder may join with
the purchasing Class B Noteholder to purchase all, but not
less than all, of the Notes pro rata based on the
outstanding principal amount of the Class B Notes held by
each such Class B Noteholder and (B) if prior to the end of
such fifteen day period any other Class B Noteholder fails
to notify the purchasing Class B Noteholder of such other
Class B Noteholder's desire to participate in such a
purchase, then such other Class B Noteholder shall lose its
right to purchase the Notes pursuant to this Section 2.16;
and
(ii) each Class C Noteholder shall have the right
(which shall not expire upon any purchase of the Notes
pursuant to clause (i) of this Section 2.16) to purchase
all, but not less than all, of the Notes and the Class B
Notes upon fifteen days written notice to the Indenture
Trustee, the Class B Indenture Trustee and each other Class
C Noteholder, provided that (A) if prior to the end of such
<PAGE>
fifteen day period any other Class C Noteholder notifies
such purchasing Class C Noteholder that such other Class C
Noteholder wants to participate in such purchase, then such
other Class C Noteholder may join with the purchasing Class
C Noteholder to purchase all, but not less than all, of the
Notes and the Class B Notes pro rata based on the
outstanding principal amount of the Class C Notes held by
each such Class C Noteholder and (B) if prior to the end of
such fifteen day period any other Class C Noteholder fails
to notify the purchasing Class C Noteholder of such other
Class C Noteholder's desire to participate in such a
purchase, then such other Class C Noteholder shall lose its
right to purchase the Notes and the Class B Notes pursuant
to this Section 2.16.
The purchase price with respect to the Notes shall be equal
to the aggregate unpaid principal amount of all Notes then
Outstanding, together with accrued and unpaid interest thereon to
the date of payment without any Make Whole Premium and all other
sums then due and payable to the Noteholders under this Indenture
and the other Basic Documents or on or in respect of its Notes;
provided, however, that no such purchase of Notes shall be
effective unless the purchaser shall certify to the Indenture
Trustee that contemporaneously with such purchase, such purchaser
is purchasing, pursuant to the terms of each Applicable
Indenture, the Outstanding Notes, Class B Notes and Class C Notes
which are senior to the securities held by such purchaser. Each
payment of the purchase price of the Notes referred to in the
first sentence hereof shall be made to an account or accounts
designated by the Indenture Trustee and each such purchase shall
be subject to the terms of this Section 2.16. Each Noteholder
agrees by its acceptance of its Note that it will, subject to
Section 2.04 hereof, upon payment from such Class B Noteholder(s)
or Class C Noteholders(s), as the case may be, of the purchase
price set forth in the first sentence of this paragraph,
forthwith sell, assign, transfer and convey to the purchaser
thereof (without recourse, representation or warranty of any kind
except for its own acts), all of the right, title and interest of
such Noteholder in, the Indenture, the other Basic Documents and
all Notes held by such Noteholder (excluding all right, title and
interest under any of the foregoing to the extent such right,
title or interest is with respect to an obligation not then due
and payable as respects any action or inaction or state of
affairs occurring prior to such sale) and the purchaser shall
assume all of such Noteholder's obligations under this Indenture
and the other Basic Documents. The Notes will be deemed to be
purchased on the date payment of the purchase price is made
notwithstanding the failure of the Noteholders to deliver any
<PAGE>
Notes (whether in the form of Physical Notes or beneficial
interests in Global Notes) and, upon such a purchase (i) the only
rights of the Noteholders will be to deliver the Notes to the
purchaser and receive the purchase price for such Notes and (ii)
if the purchaser shall so request, such Noteholder will comply
with all the provisions of Section 2.04 hereof to enable new
Notes to be issued to the purchaser in such denominations as it
shall request. All charges and expenses in connection with the
issuance of any such new Notes shall be borne by the purchaser
thereof.
SECTION 2.17. Other Provisions Regarding Payment. By
acceptance of its Note, each Noteholder agrees that in the event
such Noteholder shall receive any payment or distribution
(whether in cash, securities or other property) on or in respect
of any obligation which it is not entitled to receive hereunder
or under the Collateral Agreement, it shall hold any amount so
received in trust for the benefit of any Person having a higher
priority of distribution pursuant to Section 2.5, 3.2 or 3.3 of
the Collateral Agreement and shall promptly remit such payment or
distribution to the Collateral Agent for application as provided
in the Collateral Agreement.
ARTICLE II
REDEMPTION
SECTION 3.01. Redemptions. (a) The Notes shall be
mandatorily redeemed in whole or ratably in part at the
Redemption Price, together with accrued interest thereon to the
Redemption Date, but without any Make Whole Premium, upon the
occurrence of an Event of Loss with respect to an Aircraft, not
later than 165 days after the occurrence of such Event of Loss,
if no Collateral Access Event has occurred and is continuing, and
the Company elects not to exercise its rights under Section 4.5
of the Collateral Agreement to provide a Replacement Aircraft.
The principal amount of each Note to be redeemed pursuant to this
Section 3.01(a) will be equal to the Pro Rata Amount multiplied
by a fraction (i) the numerator of which will be equal to the
aggregate outstanding principal amount of such Note and (ii) the
denominator of which will be equal to the sum of the aggregate
outstanding principal amount of all of the Notes, the Class B
Notes and the Class C Notes.
<PAGE>
(b) So long as no Event of Loss has occurred with respect
to any Aircraft as to which the Company has not, as of the
applicable Redemption Date, complied with Section 4.5(a) of the
Collateral Agreement, the Company may redeem the Notes in whole
or in part at the Redemption Price for such Notes together with
accrued interest thereon until the Redemption Date, plus the Make
.Whole Premium (if any) for such Notes.
(c) All amounts paid in connection with any redemption of
Notes (whether pursuant to this Section 3.01(a) or Section
3.01(b)) shall be applied to each Note pro rata in accordance
with the then outstanding principal amount thereof.
SECTION 3.02. Notice of Redemption. (a) If the Notes are
to be redeemed pursuant to Section 3.01(b), the Company shall
notify the Collateral Agent and the Indenture Trustee in writing
of the Redemption Date in an Officer's Certificate at least 30
days before the Redemption Date (unless a shorter period shall be
satisfactory to the Indenture Trustee).
(b) The Indenture Trustee shall mail a notice of redemption
(whether pursuant to Section 3.01(a) or 3.01(b)) by first class
mail to each Noteholder at least 15 days before the Redemption
Date promptly after the Indenture Trustee shall have received the
Written Notice from the Collateral Agent delivered pursuant to
Section 2.5(a)(i) or 2.5(b) of the Collateral Agreement.
The notice shall state:
(i) the Redemption Date (which, in the case of a
redemption pursuant to Section 3.01(a), shall be determined
pursuant to Section 2.5(a)(i) of the Collateral Agreement
and, in the case of a redemption pursuant to Section
3.01(b), shall be specified in the notice to the Indenture
Trustee given under subsection (a) above and the Written
Notice to the Collateral Agent given pursuant to Section
2.5(b) of the Collateral Agreement) and the Record Date
therefor;
(ii) the Redemption Price for each $1,000 initial
principal amount of Notes;
(iii) the reason for the redemption; and
<PAGE>
(iv) that, unless the Company defaults in making the
redemption payment, interest on the portion of the principal
amount of each Note to be redeemed will cease to accrue on
and after the Redemption Date and the only remaining right
of the Noteholders with respect to such portion is to
receive payment of the Redemption Price plus accrued
interest to the Redemption Date and, in the case of a
redemption pursuant to Section 3.01(b), the Make Whole
Premium.
SECTION 3.04. Effect of Notice of Redemption. Once notice
of redemption is mailed, the portion of the principal amount of
each Note called for redemption will become due and payable on
the Redemption Date and at the Redemption Price, plus accrued
interest to the Redemption Date and, in the case of a redemption
pursuant to Section 3.01(b), the Make Whole Premium.
Notice of redemption shall be deemed to be given when
mailed, whether or not the Noteholder receives the notice. In
any event, failure to give such notice, or any defect therein,
shall not affect the validity of the proceedings for the
redemption of Notes held by Noteholders to whom such notice was
properly given.
SECTION 3.04. Payment of Redemption Price. The Redemption
Price together with accrued interest thereon and the Make Whole
Premium (if any) shall be distributed by the Collateral Agent to
the Indenture Trustee on the Redemption Date pursuant to Section
2.5(a)(ii) or (iii) or Section 2.5(b) of the Collateral
Agreement, as the case may be. Any amounts received by the
Indenture Trustee shall be applied in the following order of
priority: (i) to pay interest accrued to the Redemption Date on
the portion of the principal amount of each Note to be redeemed,
(ii) to pay the Redemption Price and (iii) to pay the Make Whole
Premium (if any).
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Principal and Interest. The
Company will duly and punctually pay the principal of and
interest or premium, if any, on the Notes in accordance with the
terms of the Notes and this Indenture. Amounts properly withheld
under the Code by any Person from a payment to any Noteholder of
interest, premium (if any) and/or principal shall be considered
as having been paid by the Company to such Noteholder for all
<PAGE>
purposes of this Indenture. The unpaid principal of each Note,
together with interest accrued thereon, shall be due and payable
in full on the Maturity Date.
SECTION 4.02. Maintenance of Office or Agency. The
Company will maintain, except in the case of Wilmington Trust
Company, in the Borough of Manhattan, The City of New York, an
office or agency where Notes may be surrendered for registration
of transfer or exchange, and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be
served. The Company hereby initially appoints Wilmington Trust
Company to serve as its agent for the foregoing purposes. The
Company will give prompt written notice to the Indenture Trustee
of the location, and of any change in the location, of any such
office or agency. If at any time the Company shall fail to
maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust
Office, and the Company hereby appoints the Indenture Trustee as
its agent to receive all such surrenders, notices and demands.
SECTION 4.03. Money for Payments to Be Held in Trust. The
Company will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an
instrument in which such Paying Agent shall agree with the
Indenture Trustee (and if the Indenture Trustee acts as Paying
Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of the
principal of and Make Whole Premium, if any, and interest
and all other amounts due with respect to the Notes in trust
for the benefit of the Persons entitled thereto and the
Indenture Trustee until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and pay
such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default
by the Company in the making of any payment required to be
made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee,
forthwith pay to the Indenture Trustee all sums so held in
trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it
in trust for the payment of Notes if at any time it ceases
to meet the standards required to be met by a Paying Agent
at the time of its appointment; and
<PAGE>
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on
any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting
requirements in connection therewith.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, by Company Order direct any Paying Agent to pay to the
Indenture Trustee all sums held in trust by such Paying Agent,
such sums to be held by the Indenture Trustee upon the same
trusts as those upon which the sums were held by such Paying
Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Subject to applicable laws with respect to escheat of funds,
any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note
and remaining unclaimed for two years after such amount has
become due and payable shall be discharged from such trust, and
the Indenture Trustee or such Paying Agent, as the case may be,
shall give prompt notice of such occurrence to the Company and
shall release such money to the Company on Company Request; and
the Noteholder of such Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof
(but only to the extent of the amounts so paid to the Company),
and all liability of the Indenture Trustee or such Paying Agent
with respect to such trust money shall thereupon cease; provided,
however, that the Indenture Trustee or such Paying Agent, before
being required to make any such repayment, may at the expense of
the Company 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, notice
that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company. The Indenture
Trustee may also adopt and employ, at the expense of the Company,
any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment
to Noteholders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in
moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the
last address of record for each such Noteholder).
<PAGE>
SECTION 4.04. Reports by the Company. The Company shall:
(a) file with the Indenture Trustee, within 30 days after
the Company is required to file the same with the SEC, copies of
the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as
the SEC may from time to time by rules and regulations prescribe)
which the Company is required to file with the SEC pursuant to
section 13 or section 15(d) of the Exchange Act; or, if the
Company is not required to file information, documents or reports
pursuant to either of such sections, then to file with the
Indenture Trustee and the SEC, in accordance with rules and
regulations prescribed by the SEC, such of the supplementary and
periodic information, documents and reports which may be required
pursuant to Section 13 of the Exchange Act, as amended, in
respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and
regulations;
(b) file with the Indenture Trustee, within 60 days after
the end of each of the first three fiscal quarters in each fiscal
year of the Company, unaudited consolidated balance sheets of the
Company and its subsidiaries (if any) as of the end of such
quarter and related consolidated statements of income,
shareholder's equity and cash flows of the Company and its
subsidiaries (if any) for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter,
provided that so long as the Company is subject to the reporting
provisions of the Exchange Act, a copy of the Company's quarterly
report on Form 10-Q will satisfy this requirement;
(c) file with the Indenture Trustee and the SEC, in
accordance with the rules and regulations prescribed by the SEC,
such additional information, documents and reports with respect
to compliance by the Company with the conditions and covenants
provided for in this Agreement, as may be required by such rules
and regulations, including, in the case of annual reports, if
required by such rules and regulations, certificates or opinions
of independent public accountants, conforming to the requirements
of Section 11.02;
(d) transmit to all Noteholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act,
such summaries of any information, documents and reports required
to be filed by the Company pursuant to subsections (a) and (b) of
this Section 4.04 as may be required by rules and regulations
prescribed by the SEC;
<PAGE>
(e) furnish to the Indenture Trustee, not less often than
annually, a brief certificate from its principal executive
officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's compliance
with all conditions and covenants under this Indenture (it being
understood that for purposes of this paragraph (d), such
compliance shall be determined without regard to any period of
grace or requirement of notice provided under this Indenture);
and
(f) furnish to the Indenture Trustee:
(1) promptly after the execution and delivery of each
Collateral Agreement Supplement, an Opinion of Counsel
either stating that in the opinion of such counsel such
Collateral Agreement Supplement has been properly recorded
and filed so as to make effective the Lien intended to be
created thereby, and reciting the details of such action, or
stating that in the opinion of such counsel no such action
is necessary to make such Lien effective; and
(2) at least annually after the execution and delivery
of this Indenture, an Opinion of Counsel either stating that
in the opinion of such counsel such action with respect to
the recording, filing, re-recording, and refiling of the
Collateral Agreement, each the Collateral Agreement
Supplement entered into hereunder and any other instrument,
and all other action has been taken as is necessary to
maintain the Lien of this Indenture, and reciting the
details of such action, or stating that in the opinion of
such counsel no such action is necessary to maintain such
Lien.
The Indenture Trustee shall promptly remit to the
Noteholders and the Liquidity Providers a copy of any report,
document or other information delivered to the Indenture Trustee
by the Company pursuant to this Section 4.04.
<PAGE>
ARTICLE V.
SATISFACTION AND DISCHARGE
SECTION 5.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect
to the Notes except as to (i) rights of registration of transfer
and exchange, (ii) substitution of mutilated, destroyed, lost or
stolen Notes, (iii) rights of Noteholders to receive payments of
principal thereof and interest and Make Whole Premium (if any)
thereon, (iv) Section 4.03, (v) the rights and immunities of the
Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 7.08), (vi) the obligations of
the Indenture Trustee under Section 5.02 and (vii) the rights of
Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of
them, and the Indenture Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the
Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or
stolen and that have been replaced or paid as provided in
Section 2.07 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 4.03)
have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes not theretofore delivered to the
Indenture Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable in full at the
Final Scheduled Payment Date within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Indenture
Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of
the Company, and the Company, in the case of (i), (ii)
or (iii) above, has irrevocably deposited or caused to
be irrevocably deposited with the Indenture Trustee
cash or direct obligations of or obligations guaranteed
<PAGE>
by the United States of America (which will mature
prior to the date such amounts are payable), in trust
for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for
cancellation as of such day of discharge or when due on
the Final Scheduled Payment Date or Redemption Date (if
Notes shall have been called for redemption in whole
pursuant to Article III), as the case may be;
(B) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(C) the Company has delivered to the Indenture Trustee
an Officers' Certificate, an Opinion of Counsel and a certificate
from a firm of certified public accountants, and each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied
with.
SECTION 5.02. Application of Trust Money. All moneys
deposited with the Indenture Trustee pursuant to Section 5.01
hereof 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, as the
Indenture Trustee may determine, to the Noteholders of the
particular Notes for the payment or redemption of which such
moneys have been deposited with the Indenture Trustee, of all
sums due and to become due thereon for principal and interest;
but such moneys need not be segregated from other funds except to
the extent required herein or in the Collateral Agreement or
required by law.
SECTION 5.03. Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture
with respect to the Notes, all moneys then held by any Paying
Agent other than the Indenture Trustee under the provisions of
this Indenture with respect to such Notes shall, upon demand of
the Company, be paid to the Indenture Trustee to be held and
applied according to Section 4.03 and thereupon such Paying Agent
shall be released from all further liability with respect to such
moneys.
<PAGE>
ARTICLE VI.
REMEDIES
SECTION 6.01. Collateral Access Events. "Collateral Access
Event", wherever used herein, means any one of the following
events (whatever the reason for such Collateral Access Event and
whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body) and any such Collateral Access Event
referred to in clause (i) below to the extent relating to the
failure of the Company to pay (A) the outstanding principal
amount of Notes on the Maturity Date or (B) any interest due on
any Note on a Payment Date (unless the Collateral Agent shall
have made an Interest Advance under Section 3.6(a) of the
Collateral Agreement and distributed such funds to the Applicable
Indenture Trustee pursuant to Section 3.6(b) of the Collateral
Agreement) shall constitute an "Event of Default":
(i) The Company shall fail to make any payment when
due of principal or premium, if any, or interest on, any
Note, and such failure shall continue unremedied for a
period of 15 days;
(ii) The Company shall fail to procure and maintain
property or liability insurance with respect to the
Collateral complying with the provisions of Section 4.6 of
the Collateral Agreement or such insurance shall be canceled
or lapse; provided that such lapse or cancellation shall not
constitute a Collateral Access Event until the earlier of
(i) 30 days after receipt by the Collateral Agent of written
notice of such lapse or cancellation or (ii) the date that
such lapse or cancellation is effective as to the Collateral
Agent;
(iii) The Company shall operate an Aircraft after
having received notice that the insurance required by
Section 4.6 of the Collateral Agreement lapsed or has been
canceled;
(iv) The Company shall fail to observe or perform any
of its covenants or obligations in the Collateral Agreement,
and such failure shall continue for a period of 30 days
after delivery of notice of such failure from the Indenture
Trustee to the Company or from the Noteholders of at least
25% of the Outstanding Amount of the Notes, unless such
failure is curable and the Company shall, after the delivery
of such notice, then be diligently proceeding to correct
such failure and shall in fact correct such failure within
180 days after delivery of such notice;
<PAGE>
(v) Any representation or warranty made by the
Company or in any of the Basic Documents or in any document
or certificate furnished to the Indenture Trustee or any
Noteholder in connection herewith or therewith or pursuant
hereto or thereto, shall prove to have been incorrect in any
material respect when made and shall remain material at the
time in question and shall not be remedied within 30 days
after notice thereof has been given to the Company by the
Indenture Trustee or from the Noteholders of at least 25% of
the Outstanding Amount of the Notes;
(vi) The Company shall consent to the appointment of
or taking possession by a receiver, assignee, custodian,
sequestrator, trustee or liquidator (or other similar
official) of itself or of a substantial part of its property
or the Company shall admit in writing its inability to pay
its debts generally as they come due (as provided in 11
U.S.C. Section 303(h)(1)), or shall make a general assignment for
the benefit of its creditors, or the Company shall file a
voluntary petition in bankruptcy or a voluntary petition or
answer seeking liquidation, reorganization or other relief
with respect to itself or its debts under the Federal
bankruptcy laws, as now or hereafter constituted or any
other applicable Federal or state bankruptcy, insolvency or
other similar law, or shall consent to the entry or order
for relief in an involuntary case under any such law or the
Company shall file an answer admitting the material
allegations of a petition filed against it in any such
proceeding, or shall otherwise seek relief under the
provisions of any now existing or future Federal or state
bankruptcy, insolvency or other similar law providing for
the reorganization or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors;
(vii) An order, judgment or decree shall be entered in
any proceedings by any court of competent jurisdiction
appointing, without the consent of the Company, a receiver,
trustee or liquidator of the Company or of any substantial
part of its property, or any substantial part of the
property of the Company shall be sequestered, and any such
order, judgment, decree, appointment or sequestration shall
remain in force undismissed, unstayed or unvacated for a
period of 90 days after the date of entry thereof;
(viii) petition against the Company in a proceeding
under the Federal bankruptcy laws or other insolvency laws,
as now or hereafter in effect, shall be filed and shall not
be withdrawn or dismissed within 90 days thereafter, or,
<PAGE>
under the provisions of any law providing for reorganization
or winding up of corporations which may apply to the
Company, any court of competent jurisdiction shall assume
jurisdiction, custody or control of the Company of any
substantial part of its property and such jurisdiction,
custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of 90 days;
(ix) the Class A Liquidity Facility shall cease to be
in full force and effect and the amount to be drawn thereon
has not been reduced to zero or the funds, if any, on
deposit in the Class A Cash Collateral Account shall have
become subject to any writ, judgment, warrant of attachment,
execution or similar process which shall not have been
stayed, vacated, discharged or dismissed within 30 days from
the entry thereof;
(x) a Collateral Access Event under any other
Indenture shall have occurred and be continuing.
provided that, notwithstanding anything to the contrary in this
Indenture, any failure of the Company to perform or observe any
covenant, condition or agreement therein shall not constitute a
Collateral Access Event under clause (vi) above if such failure
is caused solely by reason of an event referred to in the
definition of "Event of Loss" so long as the Company, is
continuing to comply with the applicable terms of Section 4.5 of
the Collateral Agreement.
SECTION 6.02. Acceleration of Maturity; Rescission and
Annulment. If a Collateral Access Event occurs as a result of
clauses (vi), (vii) or (viii) of Section 6.01, then the unpaid
principal of all Notes, together with interest accrued but unpaid
thereon and all other amounts due to the Noteholders, will be
Accelerated. In addition, if the Class B Notes or the Class C
Notes become Accelerated, then the unpaid principal amount of all
the Notes, together with interest accrued but unpaid thereon and
all other amounts due in respect thereof, will be Accelerated.
If any other Collateral Access Event should occur and be
continuing, the Indenture Trustee or holders of a majority in
Outstanding Amount of the Notes may Accelerate the principal of
the Notes. Such Acceleration may be rescinded by the holders of
a majority in principal amount of the Notes then outstanding as
set forth below.
<PAGE>
At any time after such declaration of acceleration of
maturity has been made and before a judgment or decree for
payment of the money due has been obtained by the Indenture
Trustee as hereinafter in this Article VI provided, the
Noteholders of Notes representing a majority of the Outstanding
Amount of the Notes, by written notice to the Company and the
Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Company has paid or caused to be paid to the
Indenture Trustee a sum sufficient to pay
(A) all payments of principal of and interest on
all Notes and all other amounts that would then be due
and payable hereunder or upon such Notes if the
Collateral Access Event giving rise to such
Acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel; and
(ii) all Collateral Access Events, other than the
nonpayment of the principal of the Notes that has become due
solely by such Acceleration, have been cured or waived as
provided in Section 6.11.
No such rescission shall affect any subsequent default
or impair any right consequent thereto.
SECTION 6.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee. (a) The Company shall be
liable to the Indenture Trustee for all reasonable legal fees and
other reasonable costs and expenses incurred by the Indenture
Trustee in connection with any Collateral Access Event on the
exercise of remedies hereunder with respect thereto.
(b) In the event the Indenture Trustee is the
Controlling Party, in case the Company shall fail forthwith to
pay such amounts upon such demand, the Indenture Trustee, in its
own name and as trustee of an express trust, may institute a
Proceeding for the collection of the sums so due and unpaid, and
may prosecute such Proceeding to judgment or final decree, and
may enforce the same against the Company or other obligor upon
such Notes and collect in the manner provided by law out of the
property of the Company or other obligor upon such Notes,
wherever situated, the moneys adjudged or decreed to be payable.
<PAGE>
(c) If a Collateral Access Event occurs and is
continuing, the Indenture Trustee may, as more particularly
provided in Section 6.04, in its discretion, proceed to protect
and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most
effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy or legal or equitable right
vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the
Company or any other obligor upon the Notes or any Person having
or claiming an ownership interest in the Collateral, Proceedings
under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or other similar law, or
in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official
shall have been appointed for or taken possession of the Company
or its property or such other obligor or Person, or in case of
any other comparable judicial Proceedings relative to the Company
or other obligor upon the Notes, or to the creditors or property
of the Company or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be
due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section,
shall be entitled and empowered, by intervention in such
Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect
of the Notes and to file such other papers or documents as
may be necessary or advisable in order to have the claims of
the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Noteholders in any
election of a trustee, a standby trustee or Person
performing similar functions in any such Proceedings;
<PAGE>
(iii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute all amounts received with respect to the claims
of the Noteholders and of the Indenture Trustee on their
behalf; and
(iv) 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 Indenture Trustee or the Noteholders
allowed in any judicial proceedings relative to the Company,
its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar
official in any such Proceeding is hereby authorized by each
Noteholder to make payments to the Indenture Trustee, and, in the
event that the Indenture Trustee shall consent to the making of
payments directly to such Noteholders, to pay to the Indenture
Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture
Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to
authorize the Indenture Trustee to authorize or consent to or
vote for or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Noteholder or to
authorize the Indenture Trustee to vote in respect of the claim
of any Noteholder in any such proceeding except, as aforesaid, to
vote for the election of a trustee in bankruptcy or similar
Person.
(f) All rights of action and of asserting claims under
this Indenture, or under any of the Notes, may be enforced by the
Indenture Trustee without the possession of any of the Notes or
the production thereof in any trial or other Proceedings relative
thereto, and any such action or Proceedings instituted by the
Indenture Trustee shall be brought in its own name as trustee of
an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the
Indenture Trustee, each predecessor Indenture Trustee and their
respective agents and attorneys, shall be for the ratable benefit
of the Noteholders.
(g) In any Proceedings brought by the Indenture
Trustee (and also any Proceedings involving the interpretation of
any provision of this Indenture to which the Indenture Trustee
<PAGE>
shall be a party), the Indenture Trustee shall be held to
represent all the Noteholders, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
(h) The Indenture Trustee may file such proofs of
claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
and of the Noteholders allowed in any judicial proceedings
relating to the Company, its creditors, or its property.
(i) Notwithstanding any other provision hereof, if any
payment of principal of the Notes shall not be made when and as
the same shall become due and payable, or if any payment of
interest on the Notes shall not be made when the same shall
become due and payable and such failure shall continue for the
period prescribed in Section 6.01(a), the Indenture Trustee shall
be entitled to recover judgment, in its own name and as trustee
of an express trust upon the Notes for the whole amount of such
principal or interest, as the case may be, remaining unpaid.
SECTION 6.04. Remedies; Priorities. (a) If the Notes shall
have been Accelerated, the Indenture Trustee shall act as the
Controlling Party under the Collateral Agreement unless all
amounts owing to the Noteholders have been paid in full, subject
to the rights of the Liquidity Providers to become the
Controlling Party under certain circumstances set forth in the
Collateral Agreement.
(b) If the Indenture Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money
or property in accordance with Section 2.09(d).
The Indenture Trustee may fix a record date and payment
date for any payment to Noteholders pursuant to this Section. At
least 15 days before such record date, the Company shall mail to
each Noteholder and the Indenture Trustee a notice that states
the record date, the payment date and the amount to be paid.
SECTION 6.05. Limitation of Suits. No Noteholder shall
have any right to institute any Proceeding, judicial or
otherwise, with respect to this Indenture, the Collateral
Agreement or any Notes, or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(i) such Noteholder has previously given written
notice to the Indenture Trustee of a continuing Collateral
Access Event;
<PAGE>
(ii) the Noteholders of not less than 25% of the
Outstanding Amount of the Notes have made written request to
the Indenture Trustee to institute such Proceeding in
respect of such Collateral Access Event in its own name as
Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to
the Indenture Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in complying
with such request;
(iv) the Indenture Trustee for 60 days after its
receipt of such notice, request and offer of indemnity has
failed to institute such Proceedings; and
(v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such
60-day period by the Noteholders of a majority of the
Outstanding Amount of the Notes;
it being understood and intended that no one or more Noteholders
shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture or the Collateral
Agreement to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or
preference over any other Noteholders or to enforce any right
under this Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of
Noteholders, each representing less than a majority of the
Outstanding Amount of the Notes, the Indenture Trustee in its
sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture,
and shall have no liability to any person for such action or
inaction.
SECTION 6.06. Unconditional Rights of Noteholders to
Receive Principal and Interest. Notwithstanding any other
provisions in this Indenture, the right of any Noteholder to
receive payment of the principal of and interest, if any, on the
Note held by it on or after the respective due dates thereof
expressed in such Notes or in this Indenture (or, in the case of
redemption, on or after the Redemption Date) and to institute
suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the
consent of such Noteholder.
<PAGE>
SECTION 6.07. Restoration of Rights and Remedies. If the
Indenture Trustee or any Noteholder has instituted any Proceeding
to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason or
has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Company, the
Indenture Trustee and the Noteholders shall, subject to any
determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee and the
Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 6.08. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Indenture Trustee
or to the Noteholders 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 6.09. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee or any Noteholder to exercise
any right or remedy accruing upon any Potential Collateral Access
Event or Collateral Access Event shall impair any such right or
remedy or constitute a waiver of any such Potential Collateral
Access Event or Collateral Access Event or an acquiescence
therein. Every right and remedy given by this Article VI or by
law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee or by the Noteholders, as the
case may be.
SECTION 6.10. Control by Noteholders. The Noteholders
holding a majority of the Outstanding Amount of the Notes may
direct the time, method and place of conducting any Proceeding
for any remedy available to the Indenture Trustee or exercising
any trust or power conferred on the Indenture Trustee hereunder
with respect to the Notes. However, the Indenture Trustee may
refuse to follow any direction that conflicts with law or this
Indenture that is unduly prejudicial to the rights of the
Noteholders so affected or that would subject the Indenture
Trustee to personal liability.
<PAGE>
SECTION 6.11. Waiver of Existing Defaults. The Noteholders
of not less than a majority Outstanding Amount of the Notes, by
notice to the Indenture Trustee, may waive on behalf of the
Noteholders any existing Potential Collateral Access Event or
Collateral Access Event and its consequences except (i) a
Potential Collateral Access Event or Collateral Access Event in
the payment of the principal of or Make Whole Premium, if any, or
interest on any Notes or (ii) in respect of a covenant or
provision in this Agreement which pursuant to Section 9.01 cannot
be amended or modified without the consent of each Noteholder
affected thereby.
Upon any such waiver, such Potential Collateral Access Event
shall cease to exist and be deemed to have been cured and not to
have occurred, and any Collateral Access arising therefrom shall
be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Potential Collateral Access Event or
Collateral Access Event or impair any right consequent thereto.
The Indenture Trustee may file such proofs of claim and
other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee and of the
Holders allowed in any judicial proceedings relating to any
obligor on the Certificates, its creditors, or its property.
SECTION 6.12. Undertaking for Costs. All parties to this
Indenture agree, and each Noteholder by such Noteholder's
acceptance of its Notes shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in
any suit against the Indenture Trustee for any action taken or
omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable
costs, including reasonable attorneys' fees and expenses, against
any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to
(a) any suit instituted by the Indenture Trustee, (b) any suit
instituted by any Noteholder, or group of Noteholders, in each
case holding in the aggregate more than 10% of the Outstanding
Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such
Note and in this Indenture (or, in the case of redemption, on or
after the Redemption Date).
<PAGE>
SECTION 6.13. Waiver of Stay or Extension Laws. The
Company for itself and all who may claim under it waives, to the
extent that it lawfully may, all right to have the property in
the Collateral marshalled upon any foreclosure thereof, and
agrees that any court having jurisdiction to foreclose the
Collateral Agreement may order the sale of the Collateral as an
entirety.
If any law referred to in this Section 6.13 and now in
force, of which the Company or its successors might take
advantage despite this Section 6.13, shall hereafter be repealed
or cease to be in force, such law shall not thereafter be deemed
to constitute any part of the contract herein contained or to
preclude the application of this Section 6.13.
SECTION 6.14. Action on Notes. The Indenture Trustee's
right to seek and recover judgment on the Notes or under this
Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this
Indenture. Neither any rights or remedies of the Indenture
Trustee nor the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Company or by
the levy of any execution under such judgment upon any portion of
the Collateral or upon any of the assets of the Company. Any
money or property collected by the Indenture Trustee shall be
applied in accordance with Section 2.09(d).
ARTICLE VII.
THE INDENTURE TRUSTEE
SECTION 7.01. Duties of Indenture Trustee. (a) If a
Collateral Access Event has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in
it by this Indenture and the Collateral Agreement 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 such person's own affairs.
(b) Except during the continuance of a Collateral Access
Event:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in
this Indenture and no implied covenants or obligations shall
be read into this Indenture against the Indenture Trustee;
and
<PAGE>
(ii) in the absence of bad faith on its part, the
Indenture 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
Indenture Trustee and conforming to the requirements of this
Indenture; however, in the case of any such certificates or
opinions which by any provision hereof are specifically
required to be furnished to the Indenture Trustee, the
Indenture Trustee shall examine the certificates and
opinions to determine whether or not they conform on their
face to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from
liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible
Officer unless it is proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Indenture 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 6.10 or otherwise from Noteholders under the
Indenture.
(d) Every provision of this Indenture that in any way
relates to the Indenture Trustee is subject to paragraphs (a),
(b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest
on any money received by it except as the Indenture Trustee may
agree in writing with the Company.
(f) Money held in trust by the Indenture Trustee need not
be segregated from other funds except to the extent required by
law or the terms of this Indenture or the Collateral Agreement.
(g) No provision of this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if
it shall have reasonable grounds to believe that repayments of
such funds or adequate indemnity satisfactory to it against such
loss, liability or expense is not reasonably assured to it.
<PAGE>
(h) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Indenture Trustee shall be subject to the provisions of this
Section 7.01.
SECTION 7.02. Directions to Collateral Agent. The
Indenture Trustee may, and upon the request of a Majority in
Interest of the Noteholders shall, take such actions (including
the giving of direction or notice) as are permitted or required
to be taken by the Indenture Trustee under the Collateral
Agreement including, but not limited to, the following:
(i) sending notice of a Collateral Access Event
(which, if required by the Collateral Agreement, shall
specify the applicable section of the Indenture under which
any such event arises);
(ii) sending a Notice of Acceleration pursuant to
Section 4.2(a) of the Collateral Agreement;
(iii) when the Indenture Trustee is the Controlling
Party pursuant to the terms of the Collateral Agreement
directing the Collateral Agent in the exercise of remedies
under the Collateral Agreement; and
(iv) removing the Collateral Agent pursuant to Section
9.2 of the Collateral Agreement;
provided, however, that without the consent of each Noteholder,
the Indenture Trustee will not take any action which, pursuant to
Section 9.01 hereof, expressly requires the consent of each
Noteholder affected thereby.
SECTION 7.03. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper
person. The Indenture Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of
Counsel. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
<PAGE>
(c) The Indenture Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a custodian or
nominee, and the Indenture Trustee shall not be responsible for
any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(d) The Indenture Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Noteholders,
unless such Noteholders shall have offered to the Indenture
Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(e) The Indenture 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; provided,
however, that the Indenture Trustee's conduct does not constitute
wilful misconduct, negligence or bad faith.
(f) The Indenture Trustee may consult with counsel of
its selection, and the advice or opinion of counsel with respect
to legal matters relating to this Indenture and the Notes shall
be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(g) The Indenture Trustee shall not be responsible for
ascertaining whether any transfer pursuant to Sections 2.04, 2.05
or 2.06 complies with securities or blue sky laws, including,
without limitation, the Securities Act of 1933, as amended;
provided, however, that to the extent the Indenture Trustee is to
receive a certificate with respect to a transfer pursuant to
Sections 2.04, 2.05 or 2.06, the form of which is attached
hereto, the Indenture Trustee shall be responsible for ensuring
that such certificate meets the requirements for such as set
forth in this Indenture.
SECTION 7.04. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may
become the owner or pledgee of the Notes and may otherwise deal
with the Company or its affiliates with the same rights it would
have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with
like rights. However, the Indenture Trustee must comply with
Section 7.12.
<PAGE>
SECTION 7.05. Indenture Trustee's Disclaimer. The
Indenture Trustee shall not be (i) responsible for and makes no
representation as to the validity or adequacy of the Collateral,
this Indenture or the Notes, (ii) accountable for the Company's
use of the proceeds from the Notes and (iii) responsible for any
statement of the Company in the Indenture or in any document
issued in connection with the sale of the Notes or in the Notes
other than the Indenture Trustee's certificate of authentication.
SECTION 7.06. Notice of Collateral Access Events. If a
Collateral Access Event occurs and is continuing and if it is
actually known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall (i) promptly send written notice
thereof to the Company and (ii) within 90 days after it occurs,
mail to each Noteholder, the Collateral Agent and each Liquidity
Provider, in the manner and to the extent provided in Section
11.06, notice of all such Collateral Access Events which are not
cured. Except in the case of a default in the payment of the
principal of, Make Whole Premium, if any, or interest on, the
Notes, the Indenture Trustee shall be protected in withholding
the notice required under clause (ii) above (except from a
Liquidity Provider) if and so long as the executive committee or
trust committee of directors of the Indenture Trustee and/or
Responsible Officers thereof in good faith determines that
withholding such notice is in the interest of the Noteholders.
In addition, if on any day when the Indenture Trustee is required
to make any payment on or in respect of the Notes of the
character described in Section 6.01(i) and on such day does not
or is unable to make the full amount of such payment, the
Indenture Trustee shall on the next following Business Day give
notice thereof to the Company.
SECTION 7.07. Reports by Indenture Trustee to Holders.
Within 60 days after May 15 of each year commencing with the year
1996, so long as any Notes are Outstanding under this Agreement,
the Indenture Trustee shall transmit to the Holders as provided
in Section 313(c) of the Trust Indenture Act a brief report dated
as of such May 15 if required by Section 313(a) of the Trust
Indenture Act.
SECTION 7.08. Compensation and Indemnity. The Company
shall pay to the Indenture Trustee from time to time such
compensation for its services as shall be separately agreed to by
the Company and the Indenture Trustee. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in
<PAGE>
addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents,
counsel, accountants and experts. The Company shall indemnify
the Indenture Trustee in its trust and individual capacities
against any and all loss, damage, claim, tax (excluding any taxes
imposed on the compensation received by the Indenture Trustee for
its services hereunder), liability or expense (including the fees
and expenses of counsel) of any kind and nature whatsoever
incurred by it in connection with the acceptance and
administration of this trust and the performance of its duties
hereunder. The Indenture Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Indenture Trustee may have
separate counsel and the Company shall pay the fees and expenses
of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own wilful
misconduct, negligence or bad faith.
The Company's payment obligations to the Indenture Trustee
pursuant to this Section shall survive the discharge of this
Indenture. When the Indenture Trustee incurs expenses after the
occurrence of a Collateral Access Event specified in Section
6.01(vi), (vii) or (viii), the expenses are intended to
constitute expenses of administration under Title 11 of the
United States Code or any other applicable Federal or state
bankruptcy, insolvency or similar law.
SECTION 7.09. Replacement of Indenture Trustee. No
resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee shall become
effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 7.09. The Indenture
Trustee may resign at any time by giving at least 30 days prior
written notice to the Company, the Collateral Agent and each
Liquidity Provider. The Noteholders of a majority in Outstanding
Amount of the Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor
Indenture Trustee. The Company shall remove the Indenture
Trustee if:
(i) the Indenture Trustee is adjudged a bankrupt or
insolvent;
(ii) a receiver or other public officer takes charge
of the Indenture Trustee or its property; or
<PAGE>
(iii) the Indenture Trustee otherwise becomes incapable
of acting.
If the Indenture Trustee resigns or is removed or if a
vacancy exists in the office of Indenture Trustee for any reason
(the Indenture Trustee in such event being referred to herein as
the retiring Indenture Trustee), the Company shall promptly
appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee
and to the Company. Thereupon the resignation or removal of the
retiring Indenture Trustee shall become effective, and the
successor Indenture Trustee shall have all the rights, powers and
duties of the Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession
to the Noteholders, the Collateral Agent and each Liquidity
Provider. The retiring Indenture Trustee shall promptly transfer
all property held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within
60 days after the retiring Indenture Trustee resigns or is
removed, the retiring Indenture Trustee, the Company or the
Noteholders of a majority in Outstanding Amount of the Notes may
petition any court of competent jurisdiction for the appointment
of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section, the Company's obligations under Section
7.08 shall continue for the benefit of the retiring Indenture
Trustee.
SECTION 7.10. Successor Indenture Trustee by Merger. If
the Indenture Trustee consolidates with, merges or converts into,
or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation
or banking association without any further act shall be the
successor Indenture Trustee. The Indenture Trustee shall provide
the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall
succeed to the trusts created by this Indenture any of the Notes
shall have been authenticated but not delivered, any such
successor to the Indenture Trustee may adopt the certificate of
<PAGE>
authentication of any predecessor trustee, and deliver such Notes
so authenticated; and in case at that time any of the Notes shall
not have been authenticated, any successor to the Indenture
Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor to the
Indenture Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Notes or in this
Indenture provided that the certificate of the Indenture Trustee
shall have.
SECTION 7.11. Appointment of Co-Trustee or Separate
Trustee. (a) Notwithstanding any other provisions of this
Indenture, at any time, for the purpose of meeting any legal
requirement of any jurisdiction in which any part of the
Collateral may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments
to appoint one or more Persons reasonably acceptable to the
Company to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the
Collateral, and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders, such title to
the Collateral, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations,
rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall
be required to meet the terms of eligibility as a successor
trustee under Section 7.12 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be
required under Section 7.09 hereof.
(b) Every separate trustee and co-trustee shall, to
the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Indenture Trustee shall be
conferred or imposed upon and exercised or performed by the
Indenture Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture
Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or
any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Indenture
Trustee;
<PAGE>
(ii) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee
hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of
the then separate trustees and co-trustees, as effectively as if
given to each of them. Every instrument appointing any separate
trustee or co-trustee shall refer to this Agreement and the
conditions of this Article VII. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument
of appointment, either jointly with the Indenture Trustee or
separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting
the liability of, or affording protection to, the Indenture
Trustee. Every such instrument shall be filed with the Indenture
Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact
with full power and authority, to the extent not prohibited by
law, to do any lawful act under or in respect of this Indenture
on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Indenture Trustee,
to the extent permitted by law, without the appointment of a new
or successor trustee.
SECTION 7.12. Trustee Eligibility. This Indenture shall at
all times have an Indenture Trustee which shall be eligible to
act as Trustee under Section 310(a) of the Trust Indenture Act
and (i) shall have a combined capital and surplus of at least
$75,000,000 or (ii) shall have a combined capital and surplus in
excess of $5,000,000 and its obligations, whether now in
existence or hereafter incurred, are fully and unconditionally
guaranteed by a corporation organized and doing business under
the laws of the United States, any State or Territory thereof or
of the District of Columbia and having a combined capital and
surplus of at least $75,000,000. If such corporation publishes
reports of conditions at least annually, pursuant to law or to
the requirements of Federal, State, Territorial, or District of
Columbia supervising or examining authority, then for the
<PAGE>
purposes of this Section 7.12, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of conditions
so published. In case at any time the Indenture Trustee shall
cease to be eligible in accordance with the provisions of this
Section 7.12, the Indenture Trustee shall resign immediately in
the manner and with the effect specified in Section 7.09.
SECTION 7.13. Information to Collateral Agent. The
Indenture Trustee shall promptly, and in no event later than the
dates and times specified in Section 3.1 of the Collateral
Agreement, deliver to the Collateral Agent the information
required pursuant to such Section 3.1 in connection with the
payment of any amounts provided for therein.
ARTICLE VIII.
NOTEHOLDERS' LISTS AND REPORTS
SECTION 8.01. Company to Furnish Indenture Trustee Names
and Addresses of Noteholders. The Company will furnish or cause
to be furnished to the Indenture Trustee (a) not more than five
days after each Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and
addresses of the Noteholders as of such Record Date and (b) at
such other times as the Indenture Trustee may request in writing,
within 30 days after receipt by the Company of any such request,
a list of similar form and content as of a date not more than 10
days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no
such list shall be required to be furnished.
SECTION 8.02. Preservation of Information; Communications
to Noteholders. (a) The Indenture 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 the Noteholders,
which list shall be available to the Company for inspection. If
the Indenture Trustee is not the Registrar, the Registrar shall
furnish (and the Company shall cause the Registrar to furnish) to
the Indenture Trustee semi-annually on or before each Payment
Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as
the Indenture Trustee may reasonably require, containing all the
information in the possession or control of the Registrar as to
the names and addresses of the Noteholders.
<PAGE>
SECTION 8.03. Any Noteholder (who has owned a Note for at
least six months) may, by written request to the Indenture
Trustee, obtain access to the list of all Noteholders from the
Indenture Trustee for the purpose of communicating with such
Noteholders with respect to their rights under the Indenture or
the Notes. The Indenture Trustee may elect not to afford the
requesting Noteholder access to such list if it agrees to mail
the desired communication or proxy, on behalf and at the expense
of the requesting Noteholder, to all Noteholders of record.
ARTICLE IX.
SUPPLEMENTAL INDENTURES AND AMENDMENTS TO
THIS INDENTURE AND OTHER DOCUMENTS
SECTION 9.01. Amendments; Waivers, etc. of Documents;
Direction to Collateral Agent. (a) At any time and from time to
time, (i) the Company (but only with the written consent of each
Liquidity Provider, if required by the terms of the applicable
Liquidity Agreement) and the Indenture Trustee (but only with the
written consent of a Majority in Interest of the Noteholders) may
execute a supplement hereto for the purpose of adding provisions
to, or changing or eliminating provisions of, this Indenture
(including any appendix or schedule hereto) and (ii) the
Indenture Trustee (but only with the written consent of a
Majority in Interest of the Noteholders) may consent to or
execute a written amendment of or supplement to, or waiver or
consent under, the Collateral Agreement, the Class B Indenture or
the Class C Indenture; provided, however, that, without the
consent of each Noteholder and, if required by the terms of the
Liquidity Agreement, the Liquidity Provider, no such amendment,
supplement, waiver or consent shall
(A) modify any of the provisions of Section 6.11, this
Section 9.01 or the definitions of the terms "Majority in
Interest", "Outstanding," or "Outstanding Amount" contained
herein or in any other Basic Document,
(B) reduce the amount or extend the time of payment of
any amount owing or payable under any Note (including,
without limitation, any principal of any Note expected to be
paid on any Payment Date) or increase or reduce the Make
Whole Premium or interest payable on any Note or otherwise
affect the terms of payment of any Note,
(C) modify, amend or supplement the provisions of
Section 2.5, 3.2, 3.3, 3.6 or 10.1 of the Collateral
Agreement or
<PAGE>
(D) make any Note payable in money other than Dollars.
This Section 9.01 shall not apply to any indenture or indentures
supplemental hereto to the extent permitted by, and complying
with the terms of Section 7.11 or 9.04. Notwithstanding the
foregoing, without the consent of each Noteholder, no such
amendment, supplement, waiver or modification of the terms of any
agreement or document shall expressly permit the creation of any
Lien on the Collateral or any part thereof ranking prior to or on
a parity with the Lien of the Collateral Agreement, or deprive
any Noteholder of the benefit of the Lien of the Collateral
Agreement on the Collateral, except as provided in Sections 6.1
and 6.2 of the Collateral Agreement or in connection with the
exercise of remedies under Article V of the Collateral Agreement.
It shall not be necessary for the consent of the
Noteholders under this Section 9.01 to approve the particular
form of any proposed supplement or amendment to this Indenture,
the Collateral Agreement or any Basic Document, but it shall be
sufficient if such consent shall approve the substance thereof.
(b) The Indenture Trustee agrees that, without the
consent of affected Class B Noteholders and Class C Noteholders,
the provisions of Section 2.16 and this Section 9.01(b) may not
be amended, supplemented or modified in a manner that would
adversely affect the rights of such Class B Noteholders or Class
C Noteholders.
SECTION 9.02. Trustees Protected. If, in the opinion of
the institution acting as the Indenture Trustee hereunder, any
document required to be executed pursuant to the terms of Section
9.01 hereof adversely affects any right, duty, immunity or
indemnity with respect to it under this Indenture, the Collateral
Agreement or the other Basic Documents, the Indenture Trustee in
its discretion may decline to execute such document. In
executing, or accepting the additional trusts created by any
supplemental indenture permitted by this Article IX or the
modification thereby of the trusts created by this Indenture, the
Indenture Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized
or permitted by this Indenture.
SECTION 9.03. [Reserved]
<PAGE>
SECTION 9.04. No Noteholder Consent Necessary for Indenture
Supplement, etc. The Company and the Indenture Trustee may enter
into an indenture or indentures supplemental hereto and
agreements supplemental to the Collateral Agreement or the
Indenture Trustee may consent to an amendment or supplement to or
waiver or consent under, the Class B Indenture or the Class C
Indenture for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge
any property or assets to the Collateral Agent as security
for the Secured Obligations;
(b) to evidence the succession of another Person to
the Company, or successive successions, and the assumption
by the successor Person of the covenants, agreements and
obligations of the Company, and in the Collateral Agreement,
the Notes and the other Basic Documents;
(c) to add to the covenants of the Company such
further covenants, restrictions, conditions or provisions as
the Company and the Indenture Trustee shall consider to be
for the protection of the Noteholders, and to make the
occurrence, or the occurrence and continuance, of a default
in any such additional covenants, restrictions, conditions
or provisions a Collateral Access Event permitting the
enforcement of all or any of the several remedies provided
herein or in the Collateral Agreement; provided, however,
that in respect of any such additional covenant,
restriction, condition or provision such supplemental
indenture or agreement may provide for a particular period
of grace after default (which period may be shorter or
longer than that allowed in the case of the other defaults)
or may provide for an immediate enforcement upon such a
Collateral Access Event or may limit the remedies available
to the Indenture Trustee or the Collateral Agent upon such a
Collateral Access Event or may limit the right of the
Noteholders to waive such a Collateral Access Event;
(d) to surrender any rights or power conferred herein
or in the Collateral Agreement upon the Company;
(e) to cure any ambiguity or to correct or supplement
any provision contained herein or in the Collateral
Agreement, the Class B Indenture, the Class C Indenture or
which may be defective or inconsistent with any other
provision contained herein or therein;
<PAGE>
(f) to correct or amplify the description of any
property at any time subject to the Lien of the Collateral
Agreement or better to assure, convey and confirm unto the
Collateral Agent any property subject or required to be
subject to the Lien of the Collateral Agreement; and
(g) to amend or supplement any provision contained
herein, in the Collateral Agreement, the Class B Indenture,
the Class C Indenture or in any supplemental indenture or
agreement if such amendment or supplement shall not
materially adversely affect the Noteholders or shall confer
benefits upon the Noteholders.
The Indenture Trustee is hereby authorized to join in the
execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be contained
therein and to accept the conveyance, transfer, assignment,
mortgage or pledge of any property thereunder or under the
Collateral Agreement, but the Indenture Trustee shall not be
obligated to enter into any such supplemental indenture which
adversely affects the Indenture Trustee's own rights, duties or
immunities under this Indenture or otherwise, whether in its
trust or individual capacity.
Any supplemental indenture or supplemental agreement under
this Section 9.04 may be executed without the consent of the
Noteholders, notwithstanding any of the provisions of Section
9.01.
Promptly after the execution by the Company and the
Indenture Trustee of any supplemental indenture or supplemental
agreement pursuant to this Section 9.04, the Indenture Trustee
shall mail a notice thereof by first-class mail to each Liquidity
Provider at its address as provided herein and to the Noteholders
at their addresses as they shall appear on the Note Register of
the Note Registrar, setting forth in general terms the substance
of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such
supplemental indenture.
SECTION 9.05. Payment for Consent. Neither the Company nor
any of its Affiliates shall, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or
otherwise, to any Noteholder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of
this Indenture, the Collateral Agreement or the Notes unless such
consideration is offered to be paid to all Noteholders that so
consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or
agreement.
<PAGE>
SECTION 9.06. Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the
provisions hereof, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective
rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Indenture Trustee, the Company, and
the Noteholders shall therefore be determined, exercised and
enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.07. Notation on Notes in Respect of Supplemental
Indentures. Notes authenticated and delivered after the
execution of any supplemental indenture pursuant to the
provisions of this Article may bear a notation in form approved
by the Indenture Trustee as to any matter provided for by such
supplemental indenture. If the Company or the Indenture Trustee
shall so determine, new Notes so modified as to conform, in the
opinion of the Company and the Indenture Trustee, to any
modification of this Indenture contained in any such supplemental
indenture may be prepared by the Company, authenticated by the
Indenture Trustee and delivered in exchange for the Outstanding
Notes.
SECTION 9.08. Notice to Rating Agencies. No less than one
Business Day prior to its execution of each amendment, consent,
modification, supplement or waiver contemplated by Article IX
hereof, the Company shall send a copy thereof to each Rating
Agency.
ARTICLE X
COLLATERAL AGREEMENT
SECTION 10.01. Collateral Agreement. (a) In order to
secure the due and punctual payment of the Secured Obligations,
the Company, the Indenture Trustee, the Class B Indenture
Trustee, the Class C Indenture, the Liquidity Providers and the
Collateral Agent have entered into the Collateral Agreement to
create the Liens created therein and for related matters. The
Company and the Indenture Trustee, hereby agree that the
Collateral Agent holds the Collateral in trust for the benefit of
the Noteholders, the Indenture Trustee and the other Secured
Parties pursuant to the terms of the Collateral Agreement.
<PAGE>
(b) Each Noteholder, by accepting a Note, agrees to
all of the terms and provisions of the Collateral Agreement as
the same may be amended from time to time pursuant to the
provisions thereof and of this Indenture.
(c) As more fully set forth in the Collateral
Agreement, the Noteholders, and the Indenture Trustee on behalf
of such Noteholders, have rights in and to the Collateral which
are as provided therein subordinate to the rights of the
Liquidity Providers in and to the Collateral and prior to the
rights of (i) the holders of the Class B Notes and the Class B
Indenture Trustee on behalf of such holders and (ii) the holders
of the Class C Notes and the Class C Indenture Trustee on behalf
of such holders, in and to the Collateral.
(d) As amongst the Noteholders, the Collateral as now
or hereafter constituted shall be held for the equal and ratable
benefit of the Noteholders without preference, priority or
distinction of any thereof over any other by reason of difference
in time of issuance, sale or otherwise, as security for the
Notes.
SECTION 10.02. Release upon Termination of the Company's
Obligations. In the event that this Indenture shall be satisfied
and discharged in accordance with Section 5.01, the Indenture
Trustee shall deliver to the Collateral Agent a notice stating
that the Indenture Trustee, on behalf of the Noteholders,
disclaims and gives up any and all rights it has in or to the
Collateral and any rights it has under the Collateral Agreement
and, upon and after the receipt by the Collateral Agent of such
notice, the Collateral Agent shall not be deemed to hold the
Collateral on behalf of the Indenture Trustee for the benefit of
the Noteholders.
SECTION 10.03. Notice of Successor Collateral Agent. In
the case of any appointment of a successor to the Collateral
Agent pursuant to the Collateral Agreement or any merger,
conversion, consolidation or sale of all or substantially all of
the corporate trust business of the Collateral Agent pursuant to
the Collateral Agreement, the Indenture Trustee shall give prompt
written notice thereof to each Noteholder.
<PAGE>
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions, etc.
Upon any application or request by the Company to the Indenture
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Indenture Trustee (i) an
Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed
action have been complied with and (ii) an Opinion of Counsel
stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with except that, in the
case of any such application or request as to which the
furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion
need be furnished.
SECTION 11.02. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that the person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person,
he or she has made such examination or investigation as is
necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion
of such person, such condition or covenant has been complied
with.
SECTION 11.03. Form of Documents Delivered to Indenture
Trustee. In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
<PAGE>
Any certificate or opinion of an Responsible Officer of the
Company may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion
is based are erroneous. Any such certificate of an Responsible
Officer or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company,
stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
Whenever in this Indenture, in connection with any
application or certificate or report to the Indenture Trustee, it
is provided that the Company shall deliver any document as a
condition of the granting of such application, or as evidence of
the Company's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or
report (as the case may be), of the facts and opinions stated in
such document shall in such case be conditions precedent to the
right of the Company to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall
not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or
opinion contained in any such document as provided in Article
VII.
SECTION 11.04. Acts of Noteholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such
Noteholders in person or by agents duly appointed in writing; and
except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby
expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
<PAGE>
Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 7.01) conclusive in favor of the
Indenture Trustee and the Company, if made in the manner provided
in this Section.
(b) The fact and date of the execution by any person
of any such instrument or writing may be proved in any manner
that the Indenture Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes
held by any Person, and date of holding the same, shall be proved
by the Note Register. If the Company shall solicit from the
Noteholders any request, demand, authorization, direction,
notice, consent, waiver or other Act, the Company may, at its
option, in or pursuant to a board resolution, fix in advance a
record date for the determination of Noteholders entitled to give
such request, demand, authorization, direction, notice, consent,
waiver or other Act, but the Company shall have no obligation to
do so. Notwithstanding Section 316(c) of the Trust Indenture
Act, such record date shall be the record date specified in or
pursuant to such board resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of
Noteholders generally in connection therewith and not later than
the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such
record date, but only the Noteholders of record at the close of
business on such record date shall be deemed to be Noteholders
for the purposes of determining whether Noteholders of the
requisite proportion of Outstanding Notes have authorized or
agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Notes shall be computed as of such record
date; provided that, no such authorization, agreement or consent
by the Noteholders on such record date shall be deemed effective
unless it shall become effective pursuant to the provisions of
this Indenture not later than eleven months after the record
date.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Noteholder of any
Notes shall bind the Noteholder of every Note issued upon the
registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Note.
<PAGE>
SECTION 11.05. Notices, etc., to Indenture Trustee, Company
and Rating Agencies. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders or other
documents provided or permitted by this Indenture to be made
upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the
Company shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with the
Indenture Trustee and received at its Corporate Trust
Office, or
(b) The Company by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder
if in writing and mailed, first-class, postage prepaid, to
the Company addressed to: USAir, Inc., Crystal Park Four,
2345 Crystal Drive, Arlington, VA 22227 Attention:
Treasurer, or at any other address previously furnished in
writing to the Indenture Trustee by the Company.
Notices required to be given to the Rating Agencies by the
Company or the Indenture Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested
to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., Airline Analyst, 99 Church Street, New
York, New York 10007 and (ii) in the case of S&P at the following
address: Standard & Poor's Rating Group, 26 Broadway (20th
Floor), New York, New York 10004, Attention: Corporate
Finance/Transportation Ratings Group; or as to each of the
foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 11.06. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such
notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class,
postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such
notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in
the manner herein provided shall conclusively be presumed to have
been duly given.
<PAGE>
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive
such notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by
Noteholders shall be filed with the Indenture Trustee but such
filing shall not be a condition precedent to the validity of any
action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it
shall be impractical to mail notice of any event to Noteholders
when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be
deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other
rights or obligations created hereunder, and shall not under any
circumstance constitute a Collateral Access Event.
SECTION 11.07. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction
hereof.
SECTION 11.08. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Company shall
bind its successors and assigns, whether so expressed or not.
All agreements of the Indenture Trustee in this Indenture
shall bind its successors, co-trustees and agents of the
Indenture Trustee.
SECTION 11.09. Separability. 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 11.10. Benefits of Indenture. Nothing in this
Indenture or in the Notes, express or implied, shall give to any
Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any
part of the Collateral, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
<PAGE>
SECTION 11.11. GOVERNING LAW. THIS INDENTURE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 11.12. Counterparts. This Indenture may be
executed in any number of counterparts, each of which so executed
shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.13. Recording of Indenture. If this Indenture
is subject to recording in any appropriate public recording
offices, such recording is to be effected by the Company and at
its expense accompanied by an Opinion of Counsel to the effect
that such recording is necessary either for the protection of the
Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the Indenture
Trustee under this Indenture.
SECTION 11.14. Disclosure of Names and Addresses of
Holders. Every Noteholder, by receiving and holding a Note,
agrees with the Company and the Indenture Trustee that neither
the Company or the Indenture Trustee nor any agent of any of them
shall be deemed to be in violation of any existing law, or of any
law hereafter enacted which does not specifically refer to
Section 312 of the Trust Indenture Act, by reason of the
disclosure of any such information as to the names and addresses
of the Noteholders in accordance with Section 312 of the Trust
Indenture Act, regardless of the source from which such
information was derived, and that the Indenture Trustee shall not
be held accountable by reason of mailing any material pursuant to
a request made under Section 312 of the Trust Indenture Act.
SECTION 11.15. Trust Indenture Act Controls. After the
effectiveness of the Registration Statement, this Indenture shall
be governed by the provisions of the Trust Indenture Act of 1939,
as amended.
SECTION 11.16. Exchange Offer. The provisions of Sections
4.04(c), (d), (e) and (f), 7.07, 11.14, 11.15 and 11.16 shall not
have any force or effect until such time as any Notes have been
exchanged for Class A Registered Notes pursuant to the Exchange
Offer.
* * *
<PAGE>
IN WITNESS WHEREOF, the Company and the Indenture
Trustee have caused this Indenture to be duly executed by their
respective officers, thereunto duly authorized, all as of the day
and year first above written.
USAIR, INC.
By: /s/Thomas A. Fink
---------------------------------
Name: Thomas A. Fink
Title: Treasurer
WILMINGTON TRUST COMPANY, not in
its individual capacity except as
expressly provided herein but
solely as Indenture Trustee
By: /s/W. Chris Sponenberg
--------------------------------
Name: W. Chris Sponenberg
Title: Financial Services Officer
<PAGE>
APPENDIX A
----------
(a) For all purposes of the Basic Documents the following
terms shall have the following meanings (such definitions to be
equally applicable to both the singular and plural forms of the
terms defined unless otherwise set forth herein). Any agreement
referred to below shall mean such agreement as amended, restated,
supplemented, waived or modified from time to time as permitted
by the terms thereof and of any other Basic Document. A
reference to a Person below includes its permitted successors and
assigns.
(b) As used in this Appendix A and in any certificate or
other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Appendix A or in any such
certificate or other document, and accounting terms partly
defined in this Appendix or in any such certificate or other
document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting
terms in this Appendix A or in any such certificate or other
document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions
contained in this Appendix A or in any such certificate or other
document shall control.
(c) The words "hereof", "herein", "hereunder" and words of
similar import when used in any Basic Document shall refer to
such Basic Document in which the word appears, as a whole and not
to any particular provision of such Basic Document; Section and
Exhibit references contained in this Appendix A are references to
Sections and Exhibits in the document in which the reference
appears unless otherwise specified; and the term "including"
shall mean "including without limitation".
"Acceleration" means, with respect to the amounts payable in
respect of any Class of Notes, the declaration of such amounts to
be immediately due and payable. "Accelerate" and "Accelerated"
have meanings correlative to the foregoing.
"Acceleration Advance" with respect to any Liquidity
Facility has the meaning assigned to such term in the applicable
Liquidity Agreement.
<PAGE>
"Act" has the meaning specified in Section 11.04(a) of the
Indentures.
"Advance" with respect to any Liquidity Facility has the
meaning assigned to such term in the applicable Liquidity
Agreement.
"Aeronautical Authority" means as of any time of
determination, the FAA or other governmental airworthiness
authority having jurisdiction over the Aircraft or the Airframe
and Engines or engines attached thereto under the laws of the
country in which the Airframe is then registered.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under
common control with such Person. For the purposes of this
definition, "control" (including "controlled by" and "under
common control with") means the power, directly or indirectly, to
direct or cause the direction of the management and policies of
such Person whether through the ownership of voting securities or
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent's Lien" has the meaning given to such term in
Section 6.4 of the Collateral Agreement.
"Agent Members" means members of or participants in the
Depository.
"Aircraft" means an Airframe together with the two Engines
whether or not either of such Engines may at the time be
installed on such Airframe or installed on any other airframe or
any other aircraft.
"Airframe" means (A) any Boeing Model 757-2B7 aircraft
(excluding the Engines and any other engines which may from time
to time be installed thereon, but including any and all Parts
which may from time to time be incorporated or installed in, or
attached to such aircraft, and including any and all Parts
removed therefrom so long as the removed Parts remain subject to
the Lien of the Indenture under the terms of Section 4.4 of the
Collateral Agreement) identified by U.S. registration number and
manufacturer's serial number in the Collateral Agreement
Supplement executed and delivered on the Closing Date, so long as
a Replacement Airframe shall not have been substituted therefor
pursuant to Section 4.5 of the Collateral Agreement, and (B) a
Replacement Airframe, so long as another Replacement Airframe
shall not have been substituted therefor pursuant to Section 4.5
of the Collateral Agreement.
<PAGE>
"Appendix" means this Appendix A.
"Applicable Indenture" means, (i) with respect to the Class
A Notes, the Class A Noteholders or the Class A Indenture
Trustee, the Class A Indenture, (ii) with respect to the Class B
Notes, the Class B Noteholders or the Class B Indenture Trustee,
the Class B Indenture and (iii) with respect to the Class C
Notes, the Class C Noteholders or the Class C Indenture Trustee,
the Class C Indenture.
"Applicable Law" means all applicable laws, treaties,
judgments, decrees, injunctions, writs and orders of any court,
governmental agency or authority and rules, regulations, orders,
directives, licenses and permits of any governmental body,
instrumentality, agency or authority.
"Appraisal" means a fair market value appraisal (which may
be a "desktop" appraisal) on the basis of an arm's-length
transaction between an informed and willing purchaser under no
compulsion to buy and an informed and willing seller under no
compulsion to sell and both having knowledge of all relevant
facts performed by any Appraiser or any other nationally
recognized appraiser selected by the Company and reasonably
acceptable to the Collateral Agent.
"Appraised Value" means at any time with respect to any
Aircraft, the appraised value thereof as set forth in the most
recent Appraisal, provided that initially, the Appraised Value of
any Aircraft means the lower of the average or the median of the
three appraisals provided by the Appraisers for such Aircraft.
"Appraisers" means Air Claims Limited, Aircraft Information
Services, Inc. and BK Associates, Inc.
"Available Liquidity Commitment" with respect to any
Liquidity Facility, has the meaning given to such term in the
Liquidity Agreement relating to such Liquidity Facility.
"Average Life Date" means, with respect to any Note, the
date which follows such date of determination by a period equal
to the Remaining Average Life of such Note.
"Aviation Act" means Subtitle VII of Title 49 of the United
States Code or any subsequent legislation that amends,
supplements or supersedes the Aviation Act.
"Basic Documents" means each of the Liquidity Agreements,
the Collateral Agreement, the Indentures and the Notes, together
with exhibits and schedules included with any of the foregoing.
<PAGE>
"Bills of Sale" means the FAA Bills of Sale and the Warranty
Bills of Sale.
"Boeing Purchase Agreement" means the agreement between the
Company and the Manufacturer relating to the purchase by the
Company of the Aircraft, as originally executed and as thereafter
modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the
Aircraft.
"Book Entry Notes" means, when used in any Indenture, a
beneficial interest in the Notes issued thereunder, ownership and
transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05 of such Indenture.
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks in any of New York or the
jurisdictions in which any of the Collateral Agent, Indenture
Trustee or the Company have their chief executive offices are
authorized or required by law, executive order or governmental
decree to be closed.
"Cash Collateral Account" means, at any time, (i) when used
in the Class A Liquidity Agreement, the Class A Cash Collateral
Account, (ii) when used in the Class B Liquidity Agreement, the
Class B Cash Collateral Account, (iii) when used in the Class C
Liquidity Agreement, the Class C Cash Collateral Account, (iv)
when used in all other Basic Documents, the Class A Cash
Collateral Account, the Class B Cash Collateral Account or the
Class C Cash Collateral Account, as applicable, and (v) when used
in the plural, the Class A Cash Collateral Account, the Class B
Cash Collateral Account and the Class C Cash Collateral Account,
collectively.
"Certificated Air Carrier" means the United States "air
carrier" within the meaning of the Act, operating pursuant to an
operating certificate issued under Chapter 447 of the Act.
"Class" means each of the Class A Notes, the Class B Notes
and the Class C Notes.
"Class A Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class A
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
<PAGE>
"Class A Committed Facility" means the lending commitment of
the Class A Liquidity Provider evidenced by the Class A Liquidity
Agreement.
"Class A Indenture" means the Class A Trust Indenture dated
as of February 15, 1996 between the Company and the Class A
Indenture Trustee.
"Class A Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class A Indenture, but solely as Indenture Trustee under the
Class A Indenture, together with any successor Indenture Trustee
under the terms of the Class A Indenture.
"Class A Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class A Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class A Liquidity Facility, the
reimbursement agreement related to such Replacement Liquidity
Facility.
"Class A Liquidity Facility" means, initially, the Class A
Committed Facility and, from and after the expiration or earlier
replacement of the Class A Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class A Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class A Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class A Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class A Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
"Class A Noteholder" means, at any time, any holder of one
or more Class A Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class A Notes" means (i) prior to the exchange of any Class
A Notes for Class A Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class A Indenture Trustee under the Class A Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class A Indenture and (ii) after the
exchange of any Class A Notes for Class A Registered Notes
pursuant to the Exchange Offer, the Class A Registered Notes and
any Class A Notes not exchanged pursuant to the Exchange Offer.
<PAGE>
"Class A Registered Notes" means any Notes issued by the
Company and authenticated by the Class A Indenture Trustee under
the Class A Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefore or replacement thereof
pursuant to the terms of the Class A Indenture.
"Class B Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class B
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
"Class B Committed Facility" means the lending commitment of
the Class B Liquidity Provider evidenced by the Class B Liquidity
Agreement.
"Class B Indenture" means the Class B Trust Indenture dated
as of February 15, 1996 between the Company and the Class B
Indenture Trustee.
"Class B Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class B Indenture, but solely as Indenture Trustee under the
Class B Indenture, together with any successor Indenture Trustee
under the terms of the Class B Indenture.
"Class B Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class B Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class B Liquidity Facility, the
agreement related to such Replacement Liquidity Facility.
"Class B Liquidity Facility" means, initially, the Class B
Committed Facility and, from and after the expiration or earlier
replacement of the Class B Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class B Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class B Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class B Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class B Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
<PAGE>
"Class B Noteholder" means, at any time, any holder of one
or more Class B Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class B Notes" means (i) prior to the exchange of any Class
B Notes for Class B Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class B Indenture Trustee under the Class B Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class B Indenture and (ii) after the
exchange of any Class B Notes for Class B Registered Notes
pursuant to the Exchange Offer, the Class B Registered Notes and
any Class B Note not exchanged pursuant to the Exchange Offer.
"Class B Registered Notes" means any Notes issued by the
Company and authenticated by the Class B Indenture Trustee under
the Class B Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefor or replacement thereof pursuant
to the terms of the Class B Indenture.
"Class C Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent and maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class C
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
"Class C Committed Facility" means the lending commitment of
the Class C Liquidity Provider evidenced by the Class C Liquidity
Agreement.
"Class C Indenture" means the Class C Trust Indenture dated
as of February 15, 1996 between the Company and the Class C
Indenture Trustee.
"Class C Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class C Indenture, but solely as Indenture Trustee under the
Class C Indenture, together with any successor Indenture Trustee
under the terms of the Class C Indenture.
"Class C Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class C Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class C Liquidity Facility, the
agreement related to such Replacement Liquidity Facility."
<PAGE>
"Class C Liquidity Facility" means, initially, the Class C
Committed Facility and, from and after the expiration or earlier
replacement of the Class C Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class C Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class C Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class C Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class C Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
"Class C Noteholder" means, at any time, any holder of one
or more Class C Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class C Notes" means (i) prior to the exchange of any Class
C Notes for Class C Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class C Indenture Trustee under the Class C Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class C Indenture and (ii) after the
exchange of any Class C Notes for Class C Registered Notes
pursuant to the Exchange Offer, the Class C Registered Notes and
any Class C Notes not exchanged pursuant to the Exchange Offer.
"Class C Registered Notes" means any Notes issued by the
Company and authenticated by the Class C Indenture Trustee under
the Class C Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefor or replacement thereof pursuant
to the terms of the Class C Indenture.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to
time a Clearing Agency effects book-entry transfers and pledges
of securities deposited with the Clearing Agency.
"Closing Date" means February 16, 1996.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated
thereunder.
<PAGE>
"Collateral" has the meaning assigned to such term in the
granting clause of the Collateral Agreement.
"Collateral Access Event" means (i) for purposes of the
Class A Indenture, any Collateral Access Event under Section 6.01
of the Class A Indenture, (ii) for purposes of the Class B
Indenture, any Collateral Access Event under Section 6.01 of the
Class B Indenture and (iii) for purposes of the Class C
Indenture, any Collateral Access Event under Section 6.01 of the
Class C Indenture.
"Collateral Agent" means Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity
except as expressly set forth in the Collateral Agreement, but
solely as Collateral Agent under the Collateral Agreement.
"Collateral Agreement" means the Collateral Agency Agreement
dated as of February 15, 1996 among the Company, the Collateral
Agent, each Liquidity Provider and each Indenture Trustee.
"Commission" means the Securities and Exchange Commission.
"Committed Facility" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Committed Facility,
(ii) when used in the Class B Liquidity Agreement, the Class B
Committed Facility, (iii) when used in the Class C Liquidity
Agreement, the Class C Committed Facility, (iv) when used in all
other Basic Documents, the Class A Committed Facility, the Class
B Committed Facility or the Class C Committed Facility, as
applicable, and (v) when used in the plural, the Class A
Committed Facility, the Class B Committed Facility and the Class
C Committed Facility, collectively.
"Commitment" with respect to any Liquidity Facility has the
meaning assigned to such term in the applicable Liquidity
Agreement.
"Company" means USAir, Inc., a Delaware corporation, and,
subject to the provisions hereof, its permitted successors and
assigns.
"Company Order" and "Company Request" mean a written order
or request signed in the name of the Company by any one of its
Responsible Officers and delivered to the Applicable Indenture
Trustee.
"Controlling Party" means the Person entitled to act as such
pursuant to the terms of Section 2.7 of the Collateral Agreement.
<PAGE>
"Corporate Trust Office" of any Indenture Trustee means the
principal office of such Person located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration or such other office at which such
Person's corporate trust business shall be administered and which
such person shall have specified by notice in writing to the
Collateral Agent, the Liquidity Provider and the Noteholders of
the related Class.
"Depository" means the Depository Trust Company, a New York
corporation.
"Depository Agreement" means the Agreement among the
Company, the Indenture Trustees, and the Depositary Trust Company
dated February 16, 1996.
"Designated Representatives" means the Trustee
Representatives and the LP Representatives identified under
Section 2.6 of the Collateral Agreement.
"Dollars" means United States dollars.
"Downgrade Advance" (i) when used in any Liquidity Facility
has the meaning assigned to such term in the applicable Liquidity
Agreement and (ii) when used in any other Basic Document has the
meaning assigned to such term in Section 3.6(c) of the Collateral
Agreement.
"Downgraded Facility" has the meaning assigned to such term
in Section 3.6(c) of the Collateral Agreement.
"Drawn Down Facility" has the meaning assigned to such term
in Section 5.6(b) of the Collateral Agreement.
"Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust
account with the corporate trust department of a depository
institution organized under the laws of the United States of
America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited
in such account, so long as any of the securities of such
depository institution has a long-term, unsecured debt rating
from each Rating Agency of at least A-3 or its equivalent.
<PAGE>
"Eligible Institution" means (a) the corporate trust
department of the Collateral Agent or any Indenture Trustee or
(b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank),
which has a long-term unsecured debt rating of at least A-3 or
its equivalent.
"Eligible Investments" means (i) direct obligations of the
United States of America or agencies thereof where such
obligations are guaranteed by the United States government, and
having a final maturity of one year or less from date of purchase
thereof; (ii) certificates of deposit issued by, bankers'
acceptances of, or time deposits with, any bank, trust company or
national banking association incorporated or doing business under
the laws of the United States of America or one of the states
thereof having combined capital and surplus and retained earnings
as of its last report of condition of at least $100,000,000 and
having a short term debt rating of B or better by Keefe, Bruyette
& Woods, Inc. and having a final maturity of one year or less
from date of purchase thereof; (iii) commercial paper of any
holding company of a bank, trust company or national banking
association described in (ii) and commercial paper of any
corporation or finance company incorporated or doing business
under the laws of the United States of America or any state
thereof having a rating assigned to such commercial paper of A-1
or better by S&P or P1 by Moody's (or, if neither such
organization shall rate such commercial paper at any time, a
rating equal to the highest ratings assigned by any nationally
recognized rating organization in the United States of America)
and having a final maturity of 270 days or less from the date of
purchase thereof; (iv) U.S. dollar-denominated certificates of
deposit issued by the European subsidiaries of any bank, trust
company or national banking association described in (ii) and
having a final maturity of 90 days or less from the date of
purchase thereof; or (v) repurchase agreements with any financial
institution having combined capital and surplus and retained
earnings as of its last report of condition of at least
$100,000,000 when subject to an executed master repurchase
agreement and which are fully collateralized by obligations
described in clause (i) above where delivery must be taken, and
having a final maturity of 90 days or less from the date of
purchase thereof; provided that, except for investments described
in clauses (i) and (v) above, no more than the greater of
$10,000,000 or 50% of the principal amount may be invested as
"Eligible Investments" in any one corporation, bank holding
company, bank, trust company or national banking association at
any given time. If none of the above investments are available,
the entire amount to be invested may be used to purchase Federal
Funds overnight from an entity described in (ii) above.
<PAGE>
"Engine" means with respect to any Airframe: (A) one of the
two Rolls-Royce RB211-535E4 aircraft engines identified by
manufacturer's serial number in the Collateral Agreement
Supplement executed and delivered on the Closing Date, so long as
a Replacement Engine shall not have been substituted therefor
pursuant to Section 4.4 or 4.5 of the Collateral Agreement and
(B) a Replacement Engine, so long as another Replacement Engine
shall not have been substituted therefor pursuant to Section 4.4
or 4.5 of the Collateral Agreement, whether or not such Engine or
Replacement Engine, as the case may be, is from time to time
installed on such Airframe or installed on another airframe, and
including, in each case all Parts incorporated or installed in or
attached thereto and any and all Parts removed therefrom so long
as such Parts remain subject to the Lien of the Collateral
Agreement under the terms of Section 4.4 thereof. The term
"Engines" means, as of any date of determination, the two engines
each of which is an Engine on that date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" means (i) for purposes of the Class A
Indenture, any Event of Default as defined in Section 6.01 of the
Class A Indenture, (ii) for purposes of the Class B Indenture,
any Event of Default as defined in Section 6.01 of the Class B
Indenture and (iii) for purposes of the Class C Indenture, any
Event of Default as defined in Section 6.01 of the Class C
Indenture.
"Event of Loss" with respect to any Aircraft, Airframe or
Engine means any of the following events:
a) with respect to such property, payment of an insurance
settlement with respect to such property on the basis of an
actual or constructive total loss;
b) with respect to such property, destruction or damage
beyond repair (provided, that if it is not clear whether damage
constitutes damage beyond repair, an Event of Loss will be deemed
to occur when it is determined by the Company that such damage is
beyond repair);
c) with respect to such property, theft or disappearance
for a period in excess of 120 days, unless the location of such
property is known and the Company is diligently pursuing the
recovery of such property;
<PAGE>
d) with respect to such property, condemnation or taking of
title to such property by the United States government or any
foreign government or instrumentality or agency thereof;
e) with respect to an Airframe only, the requisition or
taking of use of such Airframe by a foreign government or
instrumentality or agency thereof for a continuous period of more
than six consecutive months;
f) with respect to an Engine only, the requisition or
taking of use thereof by any government or instrumentality or
agency thereof, or any divestiture of title or ownership deemed
to be an Event of Loss with respect to an Engine under Section
4.2(b)(iii) or 4.2(b)(vi) of the Collateral Agreement; or
g) with respect to any of such property, as a result of any
rule, regulation, order or other action by the Aeronautical
Authority, the use of such property for the transportation of
passengers shall have been prohibited for a period of 12
consecutive months (or such shorter period if it is determined by
the Company that such property can not be restored to normal use
during such twelve month period), unless the Company prior to
expiration of such period shall be diligently carrying forward
all necessary steps to permit the normal use of such property, or
in any event, if such use shall have been prohibited for a period
of more than 24 consecutive months;
provided that, in the case of an event referred to in clauses
(c), (d), (e) or (f) above with respect to an Airframe, if such
property shall be returned to the Company in usable condition
prior to the applicable date for replacement, then such event
shall, at the option of the Company, not constitute an Event of
Loss.
An Event of Loss with respect to an Aircraft shall be deemed
to have occurred if an Event of Loss has occurred with respect to
the Airframe which is a part thereof.
"Exchange Offer" means the offer the Company is required to
make pursuant to the Registration Rights Agreement to exchange
Class A Notes for Class A Registered Notes, the Class B Notes for
the Class B Registered Notes and Class C Notes for Class C
Registered Notes, as applicable.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
"Expenses" means any and all liabilities, obligations,
losses, damages, settlements, claims, actions, suits, penalties,
costs and expenses (including reasonable legal fees and
expenses), of whatsoever kind and nature.
"FAA" means the United States Federal Aviation
Administration.
"FAA Bill of Sale" with respect to an Aircraft, means the
bill of sale on AC Form 8050-2 executed by the Manufacturer in
favor of the Company and dated the date of delivery of such
Aircraft from the Manufacturer to the Company.
"Federal Aviation Administration" or "FAA" means the United
States Federal Aviation Administration or any successor thereto
administering the functions of the Federal Aviation
Administration under the Federal Aviation Act.
"Final Scheduled Payment Date" means for each Class of
Notes, the last scheduled Payment Date for such Class specified
in Exhibit C to the Applicable Indenture.
"Global Notes" means, when used in any Indenture, the
Offshore Global Notes, the U.S. Global Notes and the Registered
Notes issued thereunder, collectively.
"Indenture" means (i) when used in the Class A Indenture,
the Class A Indenture, (ii) when used in the Class B Indenture,
the Class B Indenture, (iii) when used in the Class C Indenture,
the Class C Indenture, (iv) when used in all other Basic
Documents, the Class A Indenture, the Class B Indenture or the
Class C Indenture, as applicable, and (v) when used in the
plural, the Class A Indenture, the Class B Indenture and the
Class C Indenture, collectively.
"Indenture Trustee" means, at any time, (i) when used in the
Class A Indenture, the Class A Indenture Trustee, (ii) when used
in the Class B Indenture, the Class B Indenture Trustee, (iii)
when used in the Class C Indenture, the Class C Indenture
Trustee, (iv) when used in all other Basic Documents, the Class A
Indenture Trustee, the Class B Indenture Trustee or the Class C
Indenture Trustee, as applicable, and (v) when used in the
plural, the Class A Indenture Trustee, the Class B Indenture
Trustee and the Class C Indenture Trustee, collectively.
<PAGE>
"Independent", when used with respect to an engineer,
Appraiser or other expert, means an engineer, Appraiser or other
expert who (i) is in fact independent, (ii) does not have any
direct financial interest or any material indirect financial
interest in the Company or any Affiliate of the Company, and
(iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions.
"Initial Aggregate Appraisal Value" means the aggregate of
each Initial Appraised Value.
"Initial Appraised Value" means for each Aircraft the value
set forth opposite such Aircraft as follows:
<TABLE>
<CAPTION>
Aircraft Initial Appraised Value
-------- -----------------------
<S> <C>
N625VJ $47,710,000
N626AU 47,920,000
N627AU 48,330,000
N628AU 48,330,000
N629AU 48,740,000
N630AU 48,750,000
N631AU 49,170,000
N632AU 49,380,000
N633AU 49,790,000
</TABLE>
"Insurance Amount" means, at any time of determination, the
sum of (i) the Pro Rata Amount plus (ii) the amount of interest
to accrue on the Pro Rata Amount as of the next scheduled Payment
Date.
"Institutional Accredited Investor" means an institutional
investor that is an "accredited investor" within the meaning set
forth in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Interest Advance" if used in any Liquidity Facility has the
meaning assigned to such term in such Liquidity Facility and if
used in any other Basic Document has the meaning assigned to such
term in Section 3.6(a) of the Collateral Agreement.
<PAGE>
"Investment Banker" means an independent investment banking
institution of national standing appointed by the Company.
"Investment Earnings" means investment earnings on funds on
deposit in the Cash Collateral Account net of losses and
investment expenses of the Collateral Agent in making such
investments.
"Lien" means any mortgage, pledge, lien, charge,
encumbrance, lease, exercise of rights, security interest or
claim.
"Liquidity Agreement" means, (i) when used in the singular,
the Class A Liquidity Agreement, the Class B Liquidity Agreement
or the Class C Liquidity Agreement, as applicable, and (ii) when
used in the plural, the Class A Liquidity Agreement, the Class B
Liquidity Agreement and the Class C Liquidity Agreement,
collectively.
"Liquidity Facility" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Liquidity Facility,
(ii) when used in the Class B Liquidity Agreement, the Class B
Liquidity Facility, (iii) when used in the Class C Liquidity
Agreement, the Class C Liquidity Facility, (iv) when used in the
other Basic Documents, the Class A Liquidity Facility, the Class
B Liquidity Facility or the Class C Liquidity Facility, as
applicable, and (v) when used in the plural, the Class A
Liquidity Facility, the Class B Liquidity Facility and the Class
C Liquidity Facility, collectively.
"Liquidity Facility Notice of Termination" with respect to
any Liquidity Facility has the meaning assigned to such term in
such Liquidity Facility.
"Liquidity Facility Termination Date" with respect to any
Liquidity Facility has the meaning assigned to such term in such
Liquidity Facility.
"Liquidity Fee" with respect to any Liquidity Facility has
the meaning assigned to such term in Section 2.03 of the
Liquidity Agreement relating to such Liquidity Facility.
"Liquidity Obligations" has the meaning given to such term
in the applicable Liquidity Agreement.
<PAGE>
"Liquidity Provider" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Liquidity Provider,
(ii) when used in the Class B Liquidity Agreement, the Class B
Liquidity Provider, (iii) when used in the Class C Liquidity
Agreement, the Class C Liquidity Provider, (iv) when used in all
other Basic Documents, the Class A Liquidity Provider, the Class
B Liquidity Provider or the Class C Liquidity Provider, as
applicable, and (v) when used in the plural, the Class A
Liquidity Provider, the Class B Liquidity Provider and the Class
C Liquidity Provider, collectively.
"Liquidity Provider Information" with respect to any
Liquidity Agreement has the meaning assigned to such term in
Section 7.05(a) of such Liquidity Agreement.
"LP Incumbency Certificate" has the meaning assigned to such
term in Section 2.6(b) of the Collateral Agreement.
"LP Representatives" has the meaning assigned to such term
in Section 2.6(d) of the Collateral Agreement.
"Majority in Interest" means, as of any date of the
determination thereof, (i) with respect to the Class A
Noteholders, the holders of more than 50% in aggregate unpaid
principal amount of all Class A Notes Outstanding as of such
date, (ii) with respect to the Class B Noteholders, the holders
of more than 50% in aggregate unpaid principal amount of all
Class B Notes Outstanding as of such date and (iii) with respect
to the Class C Noteholders, the holders of more than 50% in
aggregate unpaid principal amount of all Class C Notes
Outstanding as of such date. For purposes of the foregoing, with
respect to the Notes issued and authenticated under each
Indenture, the proviso contained in the definition of
"Outstanding" shall apply.
"Make Whole Premium" means, with respect to the redemption
of any Note, the amount which the Investment Banker determines as
of the third Business Day prior to the applicable Redemption Date
to be the amount by which (i) the aggregate unpaid principal
amount of, plus all accrued but unpaid interest on, such Note is
exceeded by (ii) the sum of the present values of all the
remaining scheduled payments of principal and interest from the
applicable Redemption Date to the Final Scheduled Payment Date of
such Note, computed by discounting such payments on a semi-annual
basis on each Payment Date at a rate equal to the Treasury Rate,
based on a 360 day year of twelve 30-day months; provided that,
with respect to the Class A Notes, Class B Notes and Class C
Notes, the Make Whole Premium will equal zero on and after the
Original Average Life Date.
<PAGE>
"Manufacturer" means The Boeing Company, a Delaware
corporation and its successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
the Manufacturer relating to certain rights under the Purchase
Agreement assigned to the Collateral Agent as security under the
Granting Clauses of this Indenture.
"Maturity Date" means, (i) with respect to the Class A
Notes, October 15, 2009; (ii) with respect to the Class B Notes,
October 15, 2009; and (iii) with respect to the Class C Notes,
October 15, 2009.
"Minimum Sale Price" means, with respect to any Aircraft at
any time, the lesser of (i) 75% of the Appraised Value of such
Aircraft based upon the most recent Appraisal and (ii) the
product of (a) the Secured Obligations and (b) the quotient of
(A) the Initial Appraised Value for such Aircraft and (B) the
Initial Aggregate Appraised Value (excluding any Aircraft no
longer subject to the Lien of the Collateral Agreement).
"Moody's" means Moody's Investors Service, Inc.
"Non-Controlling Parties" means the Class B Indenture
Trustee, the Class C Indenture Trustee, the Class A Liquidity
Provider, the Class B Liquidity Provider and the Class C
Liquidity Provider at such times as any of such Persons shall not
be the Controlling Party in accordance with Section 2.7(b) of the
Collateral Agreement.
"Non-Excluded Taxes" with respect to any Liquidity Agreement
shall have the meaning set forth in Section 3.03 of such
Liquidity Agreement.
"Non-Extension Advance" (i) when used in any Liquidity
Facility has the meaning assigned to such term in the applicable
Liquidity Agreement and (ii) when used in any other Basic
Document has the meaning assigned to such term in 3.6(d) of the
Collateral Agreement.
"Non-U.S. Person" means a Person who is not a "U.S. Person"
as defined in Regulation S.
<PAGE>
"Note Interest Carryover Amount" for the Notes of any Class
means, with respect to any Payment Date (the "Current Payment
Date"), the sum of (i) any unpaid interest accrued on such Notes
during the semi-annual period ending on the immediately preceding
Payment Date (the "Past Payment Date"), plus (ii) the unpaid Note
Interest Carryover Amount as of the Past Payment Date, in each of
clause (i) and (ii), after giving effect to the payments on the
Past Payment Date in accordance with Article II or III of the
Collateral Agreement.
"Note Principal Carryover Amount" for the Notes of any Class
means, with respect to any Payment Date, the sum of (i) any
unpaid principal on such Notes expected to be paid on the
immediately preceding Payment Date and (ii) the unpaid Note
Principal Carryover Amount as of such preceding Payment Date, in
each of clause (i) and (ii), after giving effect to the payments
on such preceding Payment Date in accordance with Article II or
III of the Collateral Agreement.
"Note Register" with respect to any Indenture has the
meaning assigned to such term in Section 2.12 of such Indenture.
"Note Registrar" with respect to each Class of Notes issued
and authenticated under the Applicable Indenture, means the
registrar maintained and appointed for such Class pursuant to
Section 2.12 of such Applicable Indenture.
"Note Termination Date" means the Class A Note Termination
Date, the Class B Note Termination Date or the Class C Note
Termination Date, as applicable.
"Noteholder" means, at any time, (i) for purposes of the
Class A Indenture, any holder of one or more Class A Notes issued
and authenticated under the Class A Indenture, (ii) for purposes
of the Class B Indenture, any holder of one or more Class B Notes
issued and authenticated under the Class B Indenture, (iii) for
purposes of the Class C Indenture, any holder of one or more
Class C Notes issued and authenticated under the Class C
Indenture and (iv) for purposes of any other Basic Document, any
holder of one or more of the Class A Notes, the Class B Notes or
the Class C Notes. Reference to a holder of a given Class of
Note shall mean such Person in such capacity and not in its
capacity as the holder of any other Class of Note.
<PAGE>
"Notes" means, at any time, (i) for purposes of the Class A
Indenture, the Class A Notes, (ii) for purposes of the Class B
Indenture, the Class B Notes, (iii) for purposes of the Class C
Indenture, the Class C Notes and (iv) for purposes of the other
Basic Documents and this Appendix A, the Class A Notes, the Class
B Notes and the Class C Notes, collectively, and in each case,
any such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Applicable Indenture.
"Notice of Acceleration" means (i) notice from the Class A
Indenture Trustee that the Class A Notes have become Accelerated
in accordance with the terms of the Class A Indenture, (ii)
notice from the Class B Indenture Trustee that the Class B Notes
have become Accelerated in accordance with the terms of the Class
B Indenture and (iii) notice from the Class C Indenture Trustee
that the Class C Notes have become Accelerated in accordance with
the terms of the Class C Indenture.
"Offering Memorandum" means any offering memorandum or other
document used in connection with the offering and sale of the
Notes (including, without limitation, the Offering Memorandum
dated February 9, 1996 relating to the Notes).
"Officer's Certificate" of any Person means a certification
signed by a Responsible Officer of such Person.
"Offshore Global Note" means, when used in any Indenture,
the Permanent Offshore Global Note and the Temporary Offshore
Global Note issued thereunder, collectively.
"Offshore Notes Exchange Date" means March 27, 1996.
"Offshore Physical Notes" means, when used in any Indenture,
the Notes issued pursuant to Section 2.07 of such Indenture in
exchange for interests in an Offshore Global Note.
"Opinion of Counsel" means, unless otherwise provided in a
Basic Document, a written opinion of legal counsel who may be
such counsel as may be designated by the Person on whose behalf
such opinion is being given whether or not such counsel is an
employee of such Person, and who shall be reasonably acceptable
to the recipient or recipients of such opinion.
"Optional Note Redemption" has the meaning assigned to such
term in Section 2.5(d) of the Collateral Agreement.
"Original Average Life Date" means (i) with respect to the
Class A Notes, February 20, 2006, (ii) with respect to the Class
B Notes, February 20, 2006 and (iii) with respect to the Class C
Notes, February 20, 2006.
<PAGE>
"Other Committed Facility" means, at any time, (i) when used
in the Class A Liquidity Agreement, the Class B Committed
Facility and the Class C Committed Facility, (ii) when used in
the Class B Liquidity Agreement, the Class A Committed Facility
and the Class C Committed Facility and (iii) when used in the
Class C Liquidity Agreement, the Class A Committed Facility and
the Class B Committed Facility.
"Other Liquidity Agreements" means, at any time, (i) when
used in the Class A Liquidity Agreement, the Class B Liquidity
Agreement and the Class C Liquidity Agreement, (ii) when used in
the Class B Liquidity Agreement, the Class A Liquidity Agreement
and the Class C Liquidity Agreement and (iii) when used in the
Class C Liquidity Agreement, the Class A Liquidity Agreement and
the Class B Liquidity Agreement.
"Other Liquidity Providers" means, at any time, (i) when
used in the Class A Liquidity Agreement, the Class B Liquidity
Provider and the Class C Liquidity Provider, (ii) when used in
the Class B Liquidity Agreement, the Class A Liquidity Provider
and the Class C Liquidity Provider and (iii) when used in the
Class C Liquidity Agreement, the Class A Liquidity Provider and
the Class B Liquidity Provider.
"Outstanding" means, with respect to the Notes issued and
authenticated under each Indenture, all Notes theretofore
authenticated and delivered under such Indenture except:
(i) Notes theretofore canceled by the Note Registrar
under such Indenture or delivered to the Indenture Trustee
or the Note Registrar, under such Indenture for
cancellation;
(ii) Notes in exchange for or in lieu of which other
Notes have been authenticated and delivered pursuant to such
Indenture, unless proof satisfactory to the applicable
Indenture Trustee is presented that such Notes or are held
by a bona fide purchaser; and
(iii) Notes or portions thereof the payment for
which money in the necessary amount has been theretofore
deposited with the applicable Indenture Trustee or any
Paying Agent in trust for the Noteholders (provided,
however, that if such Notes or are to be redeemed, notice of
such redemption has been duly given pursuant to the
applicable Indenture or provision therefor, satisfactory to
the Indenture Trustee);
<PAGE>
provided, however, that in determining whether the holders of the
requisite Outstanding Amount of the Notes have given any request,
demand, authorization, direction, notice, consent or waiver
hereunder or under any Basic Document, Notes owned by the Company
or any Affiliate of the Company shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the
applicable Indenture Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the applicable Indenture
Trustee knows to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
applicable Indenture Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Company or
any Affiliate of the Company.
"Outstanding Amount" means the aggregate principal amount of
all Notes Outstanding at the date of determination.
"Parts" means all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of
whatever nature other than complete Engines or engines, which are
from time to time incorporated or installed in or attached to the
Airframe or any Engine, exclusive of any items leased by the
Company from third parties and not required in the navigation of
the Aircraft.
"Paying Agent" with respect to the Class A Notes, the Class
B Notes and the Class C Notes issued and authenticated under the
Applicable Indenture, means the paying agent maintained and
appointed for such Notes pursuant to Section 2.12 of such
Applicable Indenture, who shall initially be the Applicable
Indenture Trustee with respect to such Class.
"Payment Dates" means April 15, 1996 and thereafter each
succeeding April 15 and October 15 of each year; provided,
however, if any such day shall not be a Business Day, the Payment
Date shall be the next succeeding Business Day.
"Permanent Offshore Global Note" means, when used in any
Indenture, the permanent offshore global note in registered form
substantially in the form of Exhibit B to such Indenture.
"Permitted Air Carrier" means (i) a Certificated Aircraft
Carrier or (ii) a foreign air carrier duly organized and
operating pursuant to a license issued under the laws of its home
country, which country is a party to the Convention on the
International Recognition of Rights in Aircraft (Geneva 1948) or
is listed on Exhibit B to the Collateral Agreement.
<PAGE>
"Permitted Liens" has the meaning given such term in Section
4.1 of the Collateral Agreement.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, trustee,
unincorporated organization or government or any agency or
political subdivision thereof.
"Physical Notes" means, when used in any Indenture, the
Offshore Physical Notes and the U.S. Physical Notes issued
thereunder, collectively.
"Post Petition Interest", with respect to any Secured
Obligation, means interest on such Secured Obligation accruing
after the commencement of any proceeding of the type referred to
in Section 6.01(vi), 6.01(vii) or 6.01(viii) of each Indenture.
"Potential Collateral Access Event" means (i) for purposes
of the Class A Indenture, any occurrence that is, or with notice
or the lapse of time or both would become, a Collateral Access
Event under the Class A Indenture, (ii) for purposes of the Class
B Indenture, any occurrence that is or with notice or lapse of
time or both would become, a Collateral Access Event under the
Class B Indenture and (iii) for purposes of the Class C
Indenture, any occurrence that is, or with notice or the lapse of
time or both would become, a Collateral Access Event under the
Class C Indenture.
"Private Placement Legend" means the restrictive legend set
forth at Section 2.02(a) of the Applicable Indenture.
"Pro Rata Amount" shall mean, at any time of determination
for any Aircraft, the product of (i) the aggregate outstanding
principal amount of the Notes and (ii) the quotient of (A) the
Initial Appraised Value for such Aircraft and (B) the Initial
Aggregate Appraised Value (excluding any Aircraft no longer
subject to the Lien of the Collateral Agreement).
"Proceeding" means any suit in equity, action at law or
other judicial or administrative proceeding.
"Purchase Agreement" means the agreement dated February 9,
1996, among the Purchasers and the Company.
"Purchasers" means Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc, Chase Securities, Inc. and Lehman Brothers
Inc.
<PAGE>
"QIB" and "Qualified Institutional Buyer" mean a qualified
institutional buyer as defined in Rule 144A under the Securities
Act.
"Rating Agencies" means, collectively, at any time, each
nationally recognized rating agency which shall have been
requested by the Company to rate the Notes and which shall then
be rating the Notes. The initial Rating Agencies will be Moody's
and S&P.
"Ratings Confirmation" means, with respect to any action
proposed to be taken, a written confirmation from each of the
Rating Agencies that such action would not result in (i) a
reduction of the rating for any Class of Notes below the then
current rating for such Class of Notes or (ii) a withdrawal or
suspension of the rating of any Class of Notes.
"Record Date" means, with respect to a Payment Date, the
close of business on the last day of the immediately preceding
calendar month. With respect to any Redemption Date, the Record
Date means the close of business on the day immediately preceding
such Redemption Date.
"Redemption Date" means the date specified by the Collateral
Agent pursuant to Section 2.5 of the Collateral Agreement or the
date specified pursuant to Section 3.02 of the Applicable
Indenture.
"Redemption Price" for any Note of any Class means (i) in
the case of a redemption of the Notes pursuant to Section 3.01(a)
of the Applicable Indenture, an amount equal to the unpaid
principal amount of such Note multiplied by a fraction (x) the
numerator of which will be equal to the principal amount of the
Notes of such Class to be redeemed and (y) the denominator of
which will be equal to the aggregate outstanding principal amount
of the Notes of such Class and (ii) in the case of a redemption
of the Notes pursuant to Section 3.01(b) of the Applicable
Indenture, the outstanding principal amount of such Note.
"Registered Note" means, when used in any Indenture, any
securities issued by the Company under the Indenture of equal
outstanding principal amount as and containing terms identical to
the Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Notes or, if no such
interest has been paid, from the Closing Date, (ii) the transfer
restrictions thereon shall be modified or eliminated, as
appropriate, and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Noteholders in exchange for such Notes pursuant to
the Exchange Offer.
<PAGE>
"Registered Physical Notes" means, when used in any
Indenture, the Notes issued pursuant to Section 2.07 of such
Indenture in exchange for interests in a Registered Global Note.
"Registration Event" has the meaning given to such term in
the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of February 15, 1996 by and between the
Company and the Purchasers as such agreement may be amended,
modified or supplemented from time to time.
"Registration Statement" means any registration statement of
the Company, together with all amendments and supplements
thereto, that covers any of the Registered Notes pursuant to the
provisions of the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act
and any successor regulation thereto.
"Remaining Weighted Average Life" means on a given date with
respect to any Note, the number of days which is equal to the
quotient obtained by dividing (a) the sum of each of the products
obtained by multiplying (i) the amount of each then remaining
scheduled payment of principal of such Note by (ii) the number of
days from and including such determination date to but excluding
the date on which such payment of principal is scheduled to be
made by (b) the then outstanding principal amount of such Note.
"Replacement Aircraft" means any Aircraft of which a
Replacement Airframe is part.
"Replacement Airframe" means a Boeing 757-200 series
aircraft (except Engines or engines from time to time installed
thereon), or a more advanced model, having a value and utility at
least equal to, and in as good operating condition and as
airworthy as, the Airframe it is replacing, assuming such
Airframe was in the condition required by the terms of this
Indenture, which shall have been made subject to the Lien of the
Collateral Agreement pursuant to Section 4.5 thereof.
"Replacement Closing Date" has the meaning given such term
in Section 4.5(c) of the Collateral Agreement.
<PAGE>
"Replacement Engine" means a Rolls-Royce or engine of the
same model engine (or engine of the same or another manufacturer
of a comparable or an improved model and suitable for
installation and use on the applicable Airframe) which has a
value and utility at least equal to the Engine which it is
replacing, assuming such Engine was of the value and utility
required by the terms of the Collateral Agreement and which shall
have been made subject to the Lien of the Collateral Agreement
pursuant to Section 4.4 or 4.5 thereof.
"Replacement Liquidity Facility" means, for any Liquidity
Facility, an irrevocable facility issued by a Replacement
Liquidity Provider in substantially the form of such Liquidity
Facility which is being replaced, including reinstatement
provisions, or in such other form (including a letter of credit
facility) as shall permit the Rating Agencies to confirm in
writing their respective then ratings of the Securities, in a
face amount equal to the Required Amount for such Liquidity
Facility.
"Replacement Liquidity Provider" means a Person having
unsecured short-term debt ratings issued by both Ratings Agencies
which are not lower than the Trigger Rating.
"Required Amount" with respect to each Liquidity Facility
means, for any day, the sum of the aggregate amount of interest
at the Stated Interest Rate for the Class of Notes covered
thereby that would be payable on such Class of Notes on each of
the three Payment Dates immediately following such day or, if
such day is a Payment Date, on such day and the succeeding two
Payment Dates, in each case calculated on the basis of the
principal of such Class of Notes Outstanding on such date and
without regard to expected future payments of principal on such
Class of Notes.
"Responsible Officer" means (i) with respect to the
Collateral Agent and each of the Indenture Trustees, any officer
in the corporate trust administration department of the
Collateral Agent or such Indenture Trustee or any other officer
customarily performing functions similar to those performed by
the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of his
knowledge of and familiarly with a particular subject, (ii) with
respect to the Company, the Chairman, the Vice Chairman, the
President, any Vice President, Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary and (iii) with respect to each
Liquidity Provider, the Treasurer, any Assistant Treasurer,
Secretary or Assistant Secretary.
<PAGE>
"Restricted Global Note" means, when used in any Indenture,
the restricted global note in registered form substantially in
the form of Exhibit B to such Indenture.
"Rule 144A" means Rule 144A under the Securities Act and any
successor rule thereto.
"Rule 904" means Rule 904 under the Securities Act and any
successor rule thereto.
"S&P" means Standard & Poor's Rating Group, a division of
McGraw-Hill Inc.
"Secured Obligations" has the meaning assigned to such term
in the granting clause of the Collateral Agreement.
"Secured Parties" means, collectively, the Collateral Agent,
the Indenture Trustees, the Noteholders and the Liquidity
Providers.
"Securities Act" means the United States Securities Act of
1933, as amended from time to time and any successor thereto.
"Stated Expiration Date" if used in any Liquidity Facility
has the meaning assigned to such term in such Liquidity Facility
and if used in any other Basic Document has the meaning assigned
to such term in Section 3.6(d) of the Collateral Agreement.
"Stated Interest Rate" means (i) with respect to the Class A
Notes, 6.76%, (ii) with respect to the Class B Notes, 7.50% and
(iii) with respect to the Class C Notes, 8.93% (in each case, the
"Original Rate"); provided that, in the event that a Registration
Event does not occur on or prior to August 16, 1996, each such
Original Rate shall be temporarily increased by 0.5%, such
increase to be effective as of October 15, 1996 until the next
Payment Date; provided that in the event a Registration Event has
not occurred on or prior to February 16, 1997, such increase
shall be permanent (including with respect to the Registered
Notes).
"Taxes" means any and all fees (including, without
limitation, license, documentation and registration fees), taxes
(including, without limitation, income, gross receipts, sales,
rental, use, turnover, value added, property (tangible and
intangible), excise and stamp taxes), licenses, levies, imposts,
duties, recording charges or fees, charges, assessments or
withholdings of any nature whatsoever, together with any
assessments, penalties, fines, additions to tax and interest
thereof (each, individually, a "Tax").
<PAGE>
"Temporary Offshore Global Note" means, when used in any
Indenture, the temporary global Note issued thereunder and
offered and sold in offshore transactions in reliance on
Regulation S pursuant to such Indenture.
"Transferee" shall have the meaning assigned to such term in
Section 7.08(b) of each Liquidity Agreement.
"Treasury Regulations" means regulations, including proposed
or temporary regulations, promulgated under the Code. References
herein to specific provisions of proposed or temporary
regulations shall include analogous provisions of final Treasury
Regulations or other successor Treasury Regulations.
"Treasury Rate" means, with respect to any Notes, a per
annum rate (expressed as a semi-annual equivalent and as a
decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield), determined to be the per
annum rate equal to the semi-annual yield to maturity for United
States Treasury securities maturing on the Average Life Date of
such Notes, as determined by interpolation between the most
recent weekly average yields to maturity for two series of United
States Treasury securities trading in public securities markets,
(A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Note and (B) the other maturing as
close as possible to, but later than, the Average Life Date of
such Note, in each case as published in the most recent H.15(519)
(or, if a weekly average yield to maturity for United States
Treasury securities maturing on the Average Life Date of such
Note is reported in the most recent H.15(519), as published in
H.15(519)). H.15(519) means the weekly statistical release
designated as such, or any successor publication, published by
the Board of Governors of the Federal Reserve System. The most
recent H.15(519) means the latest H.15(519) which is published
prior to the close of business on the third Business Day
preceding the scheduled Redemption Date.
"Trigger Rating" means in the case of any Liquidity
Provider, a short term unsecured debt rating of A-1 by S&P or P-1
by Moody's.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended (15 U.S.C. Sections 77aaa-77bbb), as in effect on the date
hereof (unless otherwise specifically provided herein).
"Trustee Incumbency Certificate" has the meaning assigned to
such term in Section 2.6(a) of the Collateral Agreement.
<PAGE>
"Trustee Representatives" has the meaning assigned to such
term in Section 2.6(a) of the Collateral Agreement.
"U.S. Global Note" means, when used in any Indenture, the
permanent global Note in registered form that will initially be
issued for the Notes sold in reliance on Rule 144A pursuant to
such Indenture.
"U.S. Government Obligations" means securities that are
direct obligations of the United States of America or agencies or
instrumentalities thereof for the payment of which the full faith
and credit of the United States of America is pledged which are
not callable or redeemable.
"U.S. Physical Notes" means, when used in any Indenture, the
Notes offered and sold in reliance on Regulation D under the
Securities Act issued in the form of permanent certificated notes
in registered form in substantially the form set forth in Exhibit
B of such Indenture.
"Warranty Bill of Sale" with respect to an Aircraft, means
the full warranty bill of sale executed by the Manufacturer in
favor of the Company and dated the date of delivery of such
Aircraft from the Manufacturer to the Company.
"WestLB" means Westdeutsche Landesbank Girozentrale, New
York Branch.
"Written Notice" from (i) each Indenture Trustee, or any
Liquidity Provider, means a written instrument executed by the
Designated Representative of such Person, and (ii) the Collateral
Agent means a written instrument executed by a Person designated
in the Certificate of Wilmington Trust Company delivered on the
Closing Date.
<PAGE>
EXHIBIT
A
REGISTERED
$_________________*
No. ______________
CUSIP
NO.
[Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the issuer or its agent for registration
of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC) - ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]**
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AND
REDEEMABLE AS SET FORTH HEREIN AND IN THE INDENTURE.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
USAIR ENHANCED EQUIPMENT NOTES
CLASS A 6.76% NOTES
USAir, Inc., a corporation organized and existing under the
laws of the State of Delaware (herein referred to as the
"Company"), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum of
____________________________ DOLLARS on _________________ (the
"Maturity Date"); provided that, subject to Section 2.09(a) of
the Indenture, the Company promises to pay on each Payment Date
prior to the Maturity Date an amount equal to the amount set
forth in Exhibit C to the Indenture (as such Exhibit C may be
revised in accordance with Section 2.10 of the Indenture)
opposite such Payment Date for
the Class A Notes multiplied by a fraction (i) the numerator of
which shall be equal to the outstanding principal amount of this
- -------------------------------
* This amount is subject to decrease or increase from time to
time pursuant to the Indenture governing this Note to give effect
to transfers, redemptions or exchanges up to the aggregate
principal amount set forth on the face hereof.
** Insert for each Global Note
A-1
<PAGE>
Note and (ii) the denominator of which shall be equal to the
outstanding principal amount of the Class A Notes, in each case,
immediately before such Payment Date. This Note will bear
interest at the rate of 6.76% per annum until the principal
hereof is paid in full. The Company will pay, subject to Section
2.09(a) of the Indenture, interest on the unpaid principal of
this Note until the principal of this Note is paid or made
available for payment, on each Payment Date, commencing on April
15, 1996. In the event that, for any reason, either (i) the
Exchange Offer is not consummated or (ii) a Registration
Statement is not declared effective (each, a "Registration
Event"), in either case, on or prior to August 16, 1996, the
interest rate on the Notes shall be increased by one-half of one
percent per annum beginning October 15, 1996. Following the
occurrence of a Registration Event, commencing on the next
interest payment date thereafter relating to the Notes (or, in
the event of the occurrence of a Registration Event following
August 16, 1996, on April 15, 1997), the interest rate on the
Notes will be reduced to the original interest rate; provided,
however, that if a Registration Event has not occurred on or
prior to February 16, 1997, the interest rate on the Notes shall
remain on a permanent basis thereafter at the increased level of
one-half of one percent per annum over the original interest rate
on the Notes, and such increase will apply to the Registered
Notes, if any, issued thereafter. Interest on this Note will
accrue for each Payment Date from and including the most recent
Payment Date on which interest has been paid to but excluding
such Payment Date or, if no interest has yet been paid, from
February 16, 1996. Interest will be computed on the basis of a
360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Note are payable in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts. All payments made by the Company with respect to this
Note shall be applied in priority set forth in Section 2.09(c) of
the Indenture.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by
manual signature, this Note shall not be entitled to any benefit
under the Indenture referred to on the reverse hereof, or be
valid or obligatory for any purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be signed, manually or in facsimile, by its Authorized
Officer.
USAIR, INC.
By: ____________________________
Name:
Title:
[remainder of page left blank intentionally]
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date:________________________
WILMINGTON TRUST COMPANY, not
in its Individual capacity but
solely as Indenture Trustee
By: __________________________
Authorized Signatory
A-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of the Notes of a duly authorized issue of
Notes of the Company, designated as its Class A 6.76% Notes
(herein called the "Notes"), all issued under an Indenture dated
as of February 15, 1996 (such indenture, as supplemented or
amended, is herein called the "Indenture"), between the Company
and Wilmington Trust Company, as indenture trustee (the
"Indenture Trustee", which term includes any successor indenture
trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of
the Company, the Indenture Trustee and the Noteholders of the
Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the
Collateral Agreement.
The entire unpaid principal amount of the Notes may become
Accelerated on the date on which a Collateral Access Event shall
have occurred and be continuing and the Indenture Trustee or the
Noteholders holding the Notes representing not less than a
majority of the Outstanding Amount of the Notes have Accelerated
the Notes.
Any interest or principal payable on this Note in accordance
with Sections 2.09(a) and (b) of the Indenture on the applicable
Payment Date shall be made by check mailed to the Person in whose
name this Note (or one or more predecessor Notes) is registered
on the Note Register as of the close of business on each Record
Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Depositary (initially,
such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on
the Note Register as of the applicable Record Date without
requiring that this Note be submitted for notation of payment.
Any reduction in the principal amount of this Note (or any one or
more predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Noteholders of this
Note and of any Note issued upon the registration of transfer
hereof or in
A-5
<PAGE>
exchange hereof or in lieu hereof, whether or not noted hereon.
If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Company,
will notify the Person in whose name this Note is registered as
of the Record Date preceding such Payment Date by notice mailed
within five days of such Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of
this Note at the Indenture Trustee's Corporate Trust Office or at
the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
By acceptance of its Note, each Noteholder agrees that in
the event such Noteholder shall receive any payment or
distribution (whether in cash, securities or other property) on
or in respect of any obligation which it is not entitled to
receive hereunder or under the Collateral Agreement, it shall
hold any amount so received in trust for the benefit of any
Person having a higher priority of distribution pursuant to
Section 2.5, 3.2 or 3.3 of the Collateral Agreement and shall
promptly remit such payment or distribution to the Collateral
Agent for application as provided in the Collateral Agreement.
Each Note shall be mandatorily redeemed pursuant to Section
3.01(a) of the Indenture, in whole or ratably in part, at the
Redemption Price, together with accrued interest thereon until
the Redemption Date. At any other time, the Company may redeem
the Notes in whole or in part at the Redemption Price for such
Notes together with accrued interest thereon until the Redemption
Date, plus the Make Whole Premium for such Notes.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be
registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by
the Company pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the
Noteholder hereof or his attorney duly authorized in writing,
with such signature guaranteed, and such other documents as the
Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate
principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
A-6
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, covenants and agrees that (i) by accepting the
benefits of the Indenture that such Noteholder will not at any
time institute against the Company, or join in any institution
against the Company of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in
connection with any obligations relating to the Notes, the
Indenture or the Basic Documents and (ii) such Noteholder will
agree to treat the Notes as indebtedness of the Company. Once
such a proceeding has been instituted, the Indenture Trustee may
file appropriate proofs of claim.
Prior to the due presentment for registration of transfer of
this Note, the Company, the Indenture Trustee and any agent of
the Company or the Indenture Trustee may treat the Person in
whose name this Note (as of the day of determination or as of
such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Company, the Indenture
Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Noteholders under the Indenture at any time by the Company with
the consent of the Noteholders holding a majority of the
Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Noteholders of
Notes representing specified percentages of the Outstanding
Amount of the Notes, on behalf of the Noteholders of all the
Notes, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the
Noteholder of this Note (or any one or more predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all
future Noteholders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made
upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Noteholders of the Notes issued
thereunder.
A-7
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, agrees that it shall have no recourse against the
Indenture Trustee in its individual capacity for the payment of
any principal, interest or other amounts due with respect to this
Note and that all such recourse shall be against the Company
pursuant to the terms of the Indenture.
The term "Company" as used in this Note includes any
successor to the Company under the Indenture.
The Company is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of
the Indenture Trustee and the Noteholders of Notes under the
Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain
limitations therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder and thereunder shall be
determined in accordance with such laws.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Note at the times,
place, and rate, and in the coin or currency herein prescribed.
A-8
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
____________________________________
_______________________________________________________________
_______________________________________________________________
Please print or typewrite name and address including zip code of
assignee
_______________________________________________________________
the within Note and all rights thereunder, hereby irrevocably
constituting and appointing
attorney to transfer said Note on the books of the Company with
full power of substitution in the premises.
A-9
<PAGE>
EXHIBIT B
REGISTERED
$___________________***
No. ______________
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN "INSTITUTIONAL
ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT,
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS NOTE OR THE LAST DATE ON WHICH THIS
NOTE WAS HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR,
INC., RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO USAIR, INC., OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
APPLICABLE INDENTURE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE APPLICABLE
INDENTURE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE VALUE OF NOTES AT THE TIME OF TRANSFER
OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTANCE
TO USAIR, INC. THAT SUCH TRANSFER IS IN COMPLIANCE THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS
________________________________
*** This amount is subject to decrease or increase from time to
time pursuant to the Indenture governing this Note to give effect
to transfers, redemptions or exchanges up to the aggregate
principal amount set forth on the face hereof.
B-1
<PAGE>
NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THE NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS HELD BY
USAIR, INC. OR AN AFFILIATE OF USAIR, INC., THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE APPLICABLE INDENTURE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
APPLICABLE INDENTURE TRUSTEE AND USAIR, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
APPLICABLE INDENTURE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
[Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the issuer or its agent for registration
of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC) - ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]****
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AND
REDEEMABLE AS SET FORTH HEREIN AND IN THE INDENTURE.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
________________________
**** Insert for each Global Note.
B-2
<PAGE>
USAIR ENHANCED EQUIPMENT NOTES
CLASS A 6.76% NOTES
USAir, Inc., a corporation trust organized and existing
under the laws of the State of Delaware (herein referred to as
the "Company"), for value received, hereby promises to pay to
__________________,, or registered assigns, the principal sum of
__________________ DOLLARS on _________________ (the "Maturity
Date"); provided that, subject to Section 2.09(a) of the
Indenture, the Company promises to pay on each Payment Date prior
to the Maturity Date an amount equal to the amount set forth in
Exhibit C to the Indenture (as such Exhibit C may be revised in
accordance with Section 2.10 of the Indenture) opposite such
Payment Date for the Class A Notes multiplied by a fraction (i)
the numerator of which shall be equal to the outstanding
principal amount of this Note and (ii) the denominator of which
shall be equal to the outstanding principal amount of the Class A
Notes, in each case, immediately before such Payment Date. This
Note will bear interest at the rate of 6.76% per annum until the
principal hereof is paid in full. The Company will pay,
interest on the unpaid principal of this Note until the principal
of this Note is paid or made available for payment, on each
Payment Date, commencing on April 15, 1996. In the event that,
for any reason, either (i) the Exchange Offer is not consummated
or (ii) a Registration Statement is not declared effective (each,
a "Registration Event"), in either case, on or prior to August
16, 1996, the interest rate on the Notes shall be increased by
one-half of one percent per annum beginning October 15, 1996.
Following the occurrence of a Registration Event, commencing on
the next interest payment date thereafter relating to the Notes,
(or, in the event of the occurrence of a Registration Event
following August 16, 1996, on April 15, 1997) the interest rate
on the Notes will be reduced to the original interest rate;
provided, however, that if a Registration Event has not occurred
on or prior to February 16, 1997, the interest rate on the Notes
shall remain on a permanent basis thereafter at the increased
level of one-half of one percent per annum over the original
interest rate on the Notes, and such increase will apply to the
Registered Notes, if any, issued thereafter. Interest on this
Note will accrue for each Payment Date from and including the
most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid,
from February 16, 1996. Interest will be computed on the basis
of a 360 day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on
the reverse hereof.
B-3
<PAGE>
The principal of and interest on this Note are payable in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts. All payments made by the Company with respect to this
Note shall be applied in priority set forth in Section 2.09(c) of
the Indenture.
[Beneficial interests in this Note will be exchangeable for
beneficial interests in the Permanent Offshore Global Note in the
same aggregate principal amount on or after [________________]
upon certification that such beneficial interests in this Note
are owned by either non-U.S. persons or U.S. persons who
purchased such interests pursuant to an exemption from, or in
transactions not subject to, the registration requirements of the
Securities Act.]****
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by
manual signature, this Note shall not be entitled to any benefit
under the Indenture referred to on the reverse hereof, or be
valid or obligatory for any purpose.
______________________________
***** Insert only for a Temporary Offshore Global Note.
B-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be signed, manually or in facsimile, by its Authorized
Officer.
USAIR, INC.
By: _____________________________
Name:
Title:
B-5
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date:
WILMINGTON TRUST COMPANY, not in
its individual capacity solely as
Indenture Trustee
By:___________________________
Authorized Signatory
B-6
<PAGE>
[REVERSE OF NOTE]
This Note is one of the Notes of a duly authorized issue of
Notes of the Company, designated as its Class A 6.76% Notes
(herein called the "Notes"), all issued under an Indenture dated
as of February 15, 1996 (such indenture, as supplemented or
amended, is herein called the "Indenture"), between the Company
and Wilmington Trust Company, as indenture trustee (the
"Indenture Trustee", which term includes any successor indenture
trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of
the Company, the Indenture Trustee and the Noteholders of the
Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the
Collateral Agreement.
The entire unpaid principal amount of the Notes may become
Accelerated on the date on which a Collateral Access Event shall
have occurred and be continuing and the Indenture Trustee or the
Noteholders holding the Notes representing not less than a
majority of the Outstanding Amount of the Notes have Accelerated
the Notes.
Any interest or principal, if any, payable on this Note in
accordance with Section 2.09(a) of the Indenture on the
applicable Payment Date shall be made by check mailed to the
Person in whose name this Note (or one or more predecessor Notes)
is registered on the Note Register as of the close of business on
each Record Date, except that with respect to Notes registered on
the Record Date in the name of the nominee of the Depositary
(initially, such nominee to be Cede & Co.), payments will be made
by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the
Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of
payment. Any reduction in the principal amount of this Note (or
any one or more predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Noteholders
of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds
B-7
<PAGE>
are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Indenture Trustee, in the
name of and on behalf of the Company, will notify the Person in
whose name this Note is registered as of the Record Date
preceding such Payment Date by notice mailed within five days of
such Payment Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the
Indenture Trustee's Corporate Trust Office or at the office of
the Indenture Trustee's agent appointed for such purposes located
in The City of New York.
By acceptance of its Note, each Noteholder agrees that in
the event such Noteholder shall receive any payment or
distribution (whether in cash, securities or other property) on
or in respect of any obligation which it is not entitled to
receive hereunder or under the Collateral Agreement, it shall
hold any amount so received in trust for the benefit of any
Person having a higher priority of distribution pursuant to
Section 2.5, 3.2 or 3.3 of the Collateral Agreement and shall
promptly remit such payment or distribution to the Collateral
Agent for application as provided in the Collateral Agreement.
Each Note shall be mandatorily redeemed pursuant to Section
3.01(a) of the Indenture, in whole or ratably in part, at the
Redemption Price, together with accrued interest thereon until
the Redemption Date. At any other time, the Company may redeem
the Notes in whole or in part at the Redemption Price for such
Notes together with accrued interest thereon until the Redemption
Date, plus the Make Whole Premium for such Notes.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be
registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by
the Company pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the
Noteholder hereof or his attorney duly authorized in writing,
with such signature guaranteed, and such other documents as the
Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate
principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
B-8
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, covenants and agrees that (i) by accepting the
benefits of the Indenture that such Noteholder will not at any
time institute against the Company, or join in any institution
against the Company of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in
connection with any obligations relating to the Notes, the
Indenture or the Basic Documents and (ii) such Noteholder will
agree to treat the Notes as indebtedness of the Company. Once
such a proceeding has been instituted, the Indenture Trustee may
file appropriate proofs of claim.
Prior to the due presentment for registration of transfer of
this Note, the Company, the Indenture Trustee and any agent of
the Company or the Indenture Trustee may treat the Person in
whose name this Note (as of the day of determination or as of
such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Company, the Indenture
Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Noteholders under the Indenture at any time by the Company with
the consent of the Noteholders holding a majority of the
Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Noteholders of
Notes representing specified percentages of the Outstanding
Amount of the Notes, on behalf of the Noteholders of all the
Notes, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the
Noteholder of this Note (or any one or more predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all
future Noteholders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made
upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Noteholders of the Notes issued
thereunder.
B-9
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, agrees that it shall have no recourse against the
Indenture Trustee in its individual capacity for the payment of
any principal, interest or other amounts due with respect to this
Note and that all such recourse shall be against the Company
pursuant to the terms of the Indenture.
The term "Company" as used in this Note includes any
successor to the Company under the Indenture.
The Company is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of
the Indenture Trustee and the Noteholders of Notes under the
Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain
limitations therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder and thereunder shall be
determined in accordance with such laws.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Note at the times,
place, and rate, and in the coin or currency herein prescribed.
B-10
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
________________________________________________________________
________________________________________________________________
Please print or typewrite name and address including zip code of
assignee
________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________________________
attorney to transfer said Note on the books of the Company with
full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES
EXCEPT PERMANENT OFFSHORE GLOBAL NOTES AND OFFSHORE
PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior
to the date which is three years after the later of the original
issuance of this Note or the last date on which this Note was
held by the Company or any affiliate of the Company the
undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
-----------
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
--
B-11
<PAGE>
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Indenture Trustee
or other Note Registrar shall not be obligated to register this
Note in the name of any Person other than the Noteholder hereof
unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.06 of the
Indenture shall have been satisfied.
Date: _____________________
___________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of
the within-mentioned instrument in
every particular, without
alteration or any change
whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with
respect to which it exercises sole investment discretion and that
it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933,
as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:______________________ _______________________________
NOTICE: To be executed by an
executive officer
B-12
<PAGE>
EXHIBIT C
Principal Payment Dates
and Amounts
Class A Notes
-------------
Payment Date Expected Principal Payment
------------ --------------------------
15 Apr-1996 $0
15 Oct-1996 3,697,000
15 Apr-1997 1,691,500
15 Oct-1997 1,691,500
15 Apr-1998 1,522,350
15 Oct-1998 1,522,350
15 Apr-1999 1,379,890
15 Oct-1999 1,379,890
15 Apr-2000 1,011,840
15 Oct-2000 1,011,840
15 Apr-2001 834,663
15 Oct-2001 1,660,300
15 Apr-2002 861,775
15 Oct-2002 2,353,758
15 Apr-2003 1,341,449
15 Oct-2003 1,660,300
15 Apr-2004 5,650,400
15 Oct-2004 3,281,400
15 Apr-2005 6,430,280
15 Oct-2005 7,115,916
15 Apr-2006 7,950,004
15 Oct-2006 7,052,800
15 Apr-2007 9,052,800
15 Oct-2007 6,650,400
15 Apr-2008 9,506,400
15 Oct-2008 63,648,000
-------------
Total 142,400,000
=============
C-1
<PAGE>
EXHIBIT D
Form of Certificate for Unlegended Notes
----------------------------------------
___________, _______
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class A 6.76% Notes (the "Notes")
---------------------------------
Dear Sirs:
This letter relates to U.S. $___________________ principal
amount of Notes represented by a Note (the "Legended Note") which
bears a legend outlining restrictions upon transfer of such
Legended Note. Pursuant to Section 2.01 of the Indenture (the
"Indenture") dated as of February 15, 1996 relating to the Notes,
we hereby certify that we are (or we will hold such securities on
behalf of) a person outside the United States to whom the Notes
could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to exchange the legended
certificate for an unlegended certificate representing an
identical principal amount of Notes, all in the manner provided
for in the Indenture.
You and USAir, Inc. are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.
Very truly yours,
[Name of Noteholder]
By:_____________________________
Authorized Signature
D-1
<PAGE>
EXHIBIT E
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
- -----------------------------------------
_____________, ______
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class A 6.76% Notes (the "Notes")
---------------------------------
Dear Sirs:
In connection with our proposed purchase of $_____________
aggregate principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions
set forth in the Indenture dated as of February 15, 1996
relating to the Notes (the "Indenture") and the undersigned
agrees to be bound by, and not to resell, pledge or
otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that
the Notes may not be offered or sold except as permitted in
the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Note within
three years after the later of the original issuance of such
Note or the last date on which the Note is owned by USAir,
Inc. (the "Company") or an affiliate of the Company, we will
do so only (A) to the Company or any subsidiary thereof, (B)
in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to
an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes to you a signed
letter
E-1
<PAGE>
containing certain representations and agreements relating
to the restrictions on transfer of the Notes (a form of
which letter can be obtained from you) and, if such transfer
is in respect of Notes having an aggregate value at the time
of transfer of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in
compliance with the Securities Act, (D) outside the United
States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act,
or (F) pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising
such purchaser that resales of the Notes are restricted as
stated herein.
3. We understand that, on any proposed resale of any
Notes, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as
you, and the Company may reasonably require to confirm that
the proposed sale complies with the foregoing restrictions.
We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act) and have such knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment
in the Notes and we and any accounts for which we are acting
are each able to bear the economic risks of our or their
investment.
5. We are acquiring the Notes purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby.
Very truly yours,
[Name of Transferee]
By:
Authorized Signature
E-2
<PAGE>
EXHIBIT F
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
___________, ____
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class A 6.76% Notes (the "Notes")
---------------------------------
Dear Sirs:
In connection with our proposed sale of
$_________________ aggregate principal amount of the Notes, we
confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as
amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in
the United States;
(2) at the time the buy order was originated, the
transferee was outside the United States or we and any
person acting on our behalf reasonably believed that the
transferee was outside the United States;
(3) no directed selling efforts have been made by us
in the United States in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the U.S. Securities
Act of 1933.
F-1
<PAGE>
You and the USAir, Inc. (the "Company") are entitled to rely
upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
Authorized Signature
F-2
<PAGE>
EXHIBIT G
Form of
Opinion of Counsel for
Issuance of Registered Notes
----------------------------
1. The Registered Notes have been duly authorized and, when
executed, authenticated and delivered to the Noteholders in
exchange for the Notes and assuming due authentication by the
Indenture Trustee, will be (x) valid and binding obligations of
the Company enforceable against the Company in accordance with
their terms, except to the extent that enforceability thereof may
be limited by (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights
generally and (B) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law) and (y) entitled to the benefits of the Indenture subject to
the terms thereof.
2. No consent, approval, authorization, license, order of, or
registration with, or the giving of notice to, any government,
governmental instrumentality, or court, domestic or foreign, or
other regulatory body or authority is required to be obtained by
the Company for performance by the Company of its obligations
under the Registered Notes, except such as have been obtained by
the date hereof and such as may be required by the securities or
blue sky laws of the various states in connection with the offer
and exchange of Notes for Registered Notes.
3. The issuance and delivery of the Registered Notes in
exchanged for the Notes and the performance by the Company of its
obligations under the Registered Notes will not contravene (i)
any provision of applicable law, (ii) the charter or by-laws of
the Company or (iii) to the knowledge of such counsel, any
judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its properties.
4. Such counsel has reviewed evidence that the Registration
Statement relating to the Registered Notes has been declared
effective under the Securities Act of 1933, as amended and the
Indenture qualified under the Trust Indenture Act of 1939, as
amended.
The opinions set forth above are subject to the effect of,
and such counsel expresses no opinion as to the application of,
any applicable fraudulent conveyance, fraudulent transfer or
fraudulent obligation law.
Exhibit 5.5
- -----------------------------------------------------------------
USAIR ENHANCED EQUIPMENT NOTES
Class B Notes
-------------------------------
INDENTURE
Dated as of February 15, 1996
-------------------------------
WILMINGTON TRUST COMPANY
Indenture Trustee
- -----------------------------------------------------------------
<PAGE>
Reconciliation and tie between the Indenture, dated as February
15, 1996, relating to the USAir Enhanced Equipment Notes (Class
B) and the Trust Indenture Act of 1939. This reconciliation
section does not constitute part of the Trust Indenture.
Trust Indenture Act Indenture
of 1939 Section Section
- -------------------- -----------
310 (a) (1) 7.12
(a) (2) 7.12
312 (a) 8.02
(c) 11.15
313 (a) 7.07
314 (a) 4.04
(b) 4.04
(c) (1) 11.01
(c) (2) 11.01
(d) (1) Not Applicable
(d) (2) Not Applicable
(d) (3) Not Applicable
(e) 11.02
15 (b) 7.06
(e) 6.12
316 (a) (last sentence) 1.01
(a) (1) (A) 6.10
(a) (1) (B) 6.11
(b) 6.06
(c) 11.04(c)
317 (a) (1) 6.03(i)
(a) (2) 6.11
(b) 4.03
318 (a) 11.16
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.... 1
SECTION 1.01. Definitions........................... 1
SECTION 1.02. Rules of Construction................. 1
ARTICLE II. THE NOTES.................................... 2
SECTION 2.01. Notes; Form and Dating................ 2
SECTION 2.02. Restrictive Legends................... 3
SECTION 2.03. Execution, Authentication and
Delivery............................. 5
SECTION 2.04. Transfer and Exchange................. 6
SECTION 2.06. Special Transfer Provisions........... 8
SECTION 2.07. Mutilated, Destroyed, Lost
or Stolen Notes...................... 12
SECTION 2.08. Persons Deemed Owner.................. 13
SECTION 2.09. Payment of Principal and Interest..... 13
SECTION 2.10. Revision of Expected
Principal Amounts and Payment Dates.. 14
SECTION 2.11. Liquidity Facility Distribution....... 14
SECTION 2.12. Registrar and Paying Agent............ 15
SECTION 2.13. Temporary Notes....................... 15
SECTION 2.14. Cancellation.......................... 16
SECTION 2.15. CUSIP Numbers......................... 16
SECTION 2.16. Purchase Upon Acceleration............ 16
ARTICLE III. REDEMPTION.................................. 18
SECTION 3.01. Redemptions........................... 18
SECTION 3.02. Notice of Redemption.................. 18
SECTION 3.03. Effect of Notice of Redemption........ 19
SECTION 3.04. Payment of Redemption Price........... 19
ARTICLE IV. COVENANTS.................................... 20
SECTION 4.01. Payment of Principal and Interest..... 20
SECTION 4.02. Maintenance of Office or Agency....... 20
SECTION 4.03. Money for Payments to Be Held
in Trust............................. 20
SECTION 4.04. Reports by the Company................ 21
<PAGE>
ARTICLE V. SATISFACTION AND DISCHARGE..................... 23
SECTION 5.01. Satisfaction and Discharge
of Indenture.......................... 23
SECTION 5.02. Application of Trust Mone.y............ 24
SECTION 5.03. Repayment of Moneys Held by
Paying Agent.......................... 24
ARTICLE VI. REMEDIES...................................... 24
SECTION 6.01. Collateral Access Events............... 24
SECTION 6.02. Acceleration of Maturity; Rescission
and Annulment......................... 27
SECTION 6.03. Collection of Indebtedness and Suits
for Enforcement by Indenture Trustee.. 28
SECTION 6.04. Remedies; Priorities................... 30
SECTION 6.05. Limitation of Suits.................... 30
SECTION 6.06. Unconditional Rights of Noteholders to
Receive Principal and Interest........ 31
SECTION 6.07. Restoration of Rights and Remedies..... 31
SECTION 6.08. Rights and Remedies Cumulative......... 31
SECTION 6.09. Delay or Omission Not a Waiver......... 32
SECTION 6.10. Control by Noteholders................. 32
SECTION 6.11. Waiver of Existing Defaults............ 32
SECTION 6.12. Undertaking for Costs.................. 33
SECTION 6.13. Waiver of Stay or Extension Laws....... 33
SECTION 6.14. Action on Notes........................ 33
ARTICLE VII. THE INDENTURE TRUSTEE........................ 34
SECTION 7.01. Duties of Indenture Trustee............ 34
SECTION 7.02. Directions to Collateral Agent......... 35
SECTION 7.03. Rights of Indenture Trustee............ 35
SECTION 7.04. Individual Rights of
Indenture Trustee..................... 36
SECTION 7.05. Indenture Trustee's Disclaimer......... 36
SECTION 7.06. Notice of Collateral Access Events..... 37
SECTION 7.07. Reports by Indenture Trustee
to Holders............................ 37
SECTION 7.08. Compensation and Indemnity............. 37
SECTION 7.09. Replacement of Indenture Trustee....... 38
SECTION 7.10. Successor Indenture Trustee
by Merger............................. 39
SECTION 7.11. Appointment of Co-Trustee or
Separate Trustee...................... 39
SECTION 7.12. Trustee Eligibility.................... 40
SECTION 7.13. Information to Collateral Agent........ 41
<PAGE>
ARTICLE VIII. NOTEHOLDERS' LISTS AND REPORTS.............. 41
SECTION 8.01. Company to Furnish Indenture Trustee
Names and Addresses of Noteholders.... 41
SECTION 8.02. Preservation of Information; Communi-
cations to Noteholders................ 41
ARTICLE IX. SUPPLEMENTAL INDENTURES AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS................ 42
SECTION 9.01. Amendments; Waivers, etc. of Documents;
Direction to Collateral Agent........ 42
SECTION 9.02. Trustees Protected.................... 43
SECTION 9.03. [Reserved]............................ 43
SECTION 9.04. No Noteholder Consent Necessary for
Indenture Supplement, etc............ 43
SECTION 9.05. Payment for Consent................... 45
SECTION 9.06. Effect of Supplemental Indenture...... 45
SECTION 9.07. Notation on Notes in Respect of
Supplemental Indentures.............. 45
SECTION 9.08. Notice to Rating Agencies............. 45
ARTICLE X. COLLATERAL AGREEMENT........................... 45
SECTION 10.01. Collateral Agreement.................. 45
SECTION 10.02. Release upon Termination of the
Company's Obligations................ 46
SECTION 10.03. Notice of Successor Collateral
Agent................................ 46
ARTICLE XI. MISCELLANEOUS................................. 46
SECTION 11.01. Compliance Certificates and
Opinions, etc........................ 46
SECTION 11.02. Statements Required in Certificate
or Opinion........................... 47
SECTION 11.03. Form of Documents Delivered to
Indenture Trustee.................... 47
SECTION 11.04. Acts of Noteholders................... 48
SECTION 11.05. Notices, etc., to Indenture Trustee,
Company and Rating Agencies.......... 49
SECTION 11.06. Notices to Noteholders; Waiver........ 49
SECTION 11.07. Effect of Headings and Table of
Contents............................. 50
SECTION 11.08. Successors and Assigns................ 50
SECTION 11.09. Separability.......................... 50
SECTION 11.10. Benefits of Indenture................. 50
<PAGE>
SECTION 11.11. GOVERNING LAW......................... 51
SECTION 11.12. Counterparts.......................... 51
SECTION 11.13. Recording of Indenture................ 51
SECTION 11.14. Disclosure of Names and Addresses
of Holders .......................... 51
SECTION 11.15. Trust Indenture Act Controls.......... 51
SECTION 11.16. Exchange Offer....................... 51
APPENDICES AND EXHIBITS
Appendix A Definitions
Exhibit A Form of Registered Note
Exhibit B Form of Note
Exhibit C Principal Payment Dates and Amounts
Exhibit D Form of Certificate for Unlegended Notes
Exhibit E Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors
Exhibit F Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S
Exhibit G Form of Opinion of Counsel for Issuance of Registered
Notes
<PAGE>
This INDENTURE dated as of February 15, 1996, between USAIR,
INC., a Delaware corporation (the "Company"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, solely as trustee
and not in its individual capacity except as expressly provided
herein (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Noteholders of
the Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. For all purposes of this
Indenture, capitalized terms used herein shall have the meanings
set forth in Appendix A attached hereto and shall be subject to
the rules of usage set forth at the beginning thereof. Unless
otherwise specified, Section and Article references herein are
Sections or Articles, as the case may be, of this Indenture.
SECTION 1.02. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) all other terms used herein which are defined
in the Trust Indenture Act, either directly or by
reference therein, have the meanings assigned to them
therein; except that the "obligor" within the meaning
of the Trust Indenture Act shall be the Company for all
purposes of this Indenture;
(iii) an accounting term not otherwise defined has
the meaning assigned to it in accordance with generally
accepted accounting principles as in effect from time
to time;
(iv) "or" is not exclusive;
(v) "including" means "including without
limitation"; and
(vi) words in the singular include the plural and
words in the plural include the singular.
<PAGE>
ARTICLE II
THE NOTES
SECTION 2.01. Notes; Form and Dating. (a) The Notes and
the Indenture Trustee's certificate of authentication in respect
thereof shall be substantially in the form annexed hereto as
Exhibit B; provided that, any Class B Registered Note, if and
when issued, and the Indenture Trustee's certificate of
authentication in respect thereof shall be substantially in the
form of Exhibit A. The Notes shall be issued in an aggregate
principal amount equal to $54,800,000 and shall bear interest at
the Stated Interest Rate. The principal of each Note shall be
due and payable in full on the Maturity Date, provided that,
subject to Section 2.10, the principal of the Notes is expected
to be paid prior to such date, subject to Section 2.09(a), in
installments, on such Payment Dates and in such amounts as set
forth in Exhibit C hereto.
(b) The Notes shall be in registered form and may have
notations, legends or endorsements required by law to which the
Company is subject or by usage. The Company shall approve the
form of the Notes and any notation, legend or endorsement on the
Notes. Each Note shall be dated the date of its authentication.
(c) The terms and provisions contained in the respective
forms of the Notes annexed hereto as Exhibits A (in the case of
Class B Registered Notes) and B (in the case of Notes other than
Class B Registered Notes) shall constitute, and are hereby
expressly made, a part of this Indenture. Each of the Company
and the Indenture Trustee, by its execution and delivery of this
Indenture, expressly agrees to the terms and provisions of the
Notes applicable to it and to be bound thereby.
(d) The Notes offered and sold in reliance on Rule 144A
shall be issued initially in the form of a single permanent
global Note in registered form, substantially in the form set
forth in Exhibit B (the "U.S. Global Note"), deposited with the
Indenture Trustee, as custodian for the Depositary, duly executed
by the Company and authenticated by the Indenture Trustee as
hereinafter provided. The aggregate principal amount of the U.S.
Global Note may from time to time be increased or decreased by
adjustments made on the records of the Indenture Trustee, as
custodian for the Depositary or its nominee, as hereinafter
provided.
<PAGE>
(e) The Notes offered and sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of
a single temporary global Note in registered form substantially
in the form set forth in Exhibit B (the "Temporary Offshore
Global Note") deposited with the Indenture Trustee, as custodian
for the Depositary, duly executed by the Company and
authenticated by the Indenture Trustee as hereinafter provided.
At any time following March 27, 1996 (the "Offshore Notes
Exchange Date"), upon receipt by the Indenture Trustee and the
Company of a certificate substantially in the form of Exhibit D
hereto, a single permanent global Note in registered form
substantially in the form set forth in Exhibit B (the "Permanent
Offshore Global Note"; and together with the Temporary Offshore
Global Note, the "Offshore Global Notes") duly executed by the
Company and authenticated by the Indenture Trustee as hereinafter
provided shall be deposited with the Indenture Trustee, as
custodian for the Depositary, and the Note Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of any Temporary Offshore Global Note in an
amount equal to the principal amount of the beneficial interest
in such Temporary Offshore Global Note transferred.
(f) The Notes offered and sold in reliance on Regulation D
under the Securities Act shall be issued in the form of permanent
certificated Notes in registered form in substantially the form
set forth in Exhibit B (the "U.S. Physical Notes"). Notes issued
pursuant to Section 2.07 in exchange for interests in any
Offshore Global Note shall be in the form of permanent
certificated Notes in registered form substantially in the form
set forth in Exhibit B (the "Offshore Physical Notes"). The
Offshore Physical Notes, U.S. Physical Notes and the Registered
Physical Notes are sometimes collectively herein referred to as
the "Physical Notes".
(g) Class B Registered Notes shall be issued initially in
the form of a single temporary or permanent global Note in
registered form substantially in the form set forth in Exhibit A
(with "Registered Global Note"), deposited with the Indenture
Trustee, as custodian for the Depository, duly executed by the
Company and authenticated by the Indenture Trustee as hereinafter
provided. Class B Registered Notes issued pursuant to
Section 2.07 in exchange for any Registered Global Note shall be
in the form of permanent certificated Class B Registered Notes in
registered form substantially in the form set forth in Exhibit A
(the "Registered Physical Note").
<PAGE>
(h) The definitive Notes shall be in registered form and
shall be typed, printed, lithographed or engraved or produced by
any combination of these methods or may be produced in any other
manner, all as determined by the officers executing such Notes,
as evidenced by their execution of such Notes.
SECTION 2.02. Restrictive Legends. (a) Each Global Note
(except any Registered Global Note) and each U.S. Physical Note
shall bear the following legend on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN "INSTITUTIONAL
ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT,
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS NOTE OR THE LAST DATE ON WHICH THIS
NOTE WAS HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR,
INC., RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO USAIR, INC., OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
APPLICABLE INDENTURE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE APPLICABLE
INDENTURE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE VALUE OF NOTES AT THE TIME OF TRANSFER
OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTANCE
TO USAIR, INC. THAT SUCH TRANSFER IS IN COMPLIANCE THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
<PAGE>
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS NOTE WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS
HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR, INC., THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE APPLICABLE INDENTURE TRUSTEE.
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE APPLICABLE INDENTURE TRUSTEE AND USAIR, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
APPLICABLE INDENTURE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Global Note (except any Registered Global Note)
shall also bear the following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO
USAIR, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION
2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Delivery. (a)
The Notes shall be executed on behalf of the Company by any of
its Responsible Officers. The signature of any such Responsible
Officer on the Notes may be manual or facsimile.
(b) Notes bearing the manual or facsimile signature of
individuals who were at any time Responsible Officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
(c) The Indenture Trustee shall upon Company Order
authenticate and deliver Notes in the aggregate principal amount
of $54,800,000. The aggregate principal amount of the Notes
outstanding at any time may not exceed such amount, except as
provided in Section 2.07. The Indenture Trustee shall upon
Company Order authenticate and deliver Registered Notes of equal
outstanding principal amount. The Indenture Trustee shall be
entitled to receive any Officer's Certificate and any Opinion of
Counsel of the Company that it may reasonably request in
connection with the authentication of such Registered Notes,
including, without limitation, in the case of the original
issuance of Registered Notes, an Opinion of Counsel dated the
date thereof substantially to the effect set forth in Exhibit G
hereto. The Notes shall be issuable as registered Notes in the
minimum denomination of $100,000 and in integral multiples of
$1,000 in excess thereof.
(d) No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there
appears on such Note a certificate of authentication
substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall
be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
<PAGE>
SECTION 2.04. Transfer and Exchange. The Notes are
issuable only in registered form. A Noteholder may transfer a
Note by written application to the Note Registrar stating the
name of the proposed transferee and otherwise complying with the
terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a
Noteholder only upon, final acceptance and registration of the
transfer by the Note Registrar in the Note Register. Prior to
the registration of any transfer by a Noteholder as provided
herein, the Company, the Indenture Trustee, and any agent of the
Company shall treat the person in whose name the Note is
registered as the owner thereof for all purposes whether or not
the Note shall be overdue, and neither the Company, the Indenture
Trustee, nor any such agent shall be affected by notice to the
contrary. Furthermore, the Depositary shall, by acceptance of a
Global Note, agree that transfers of beneficial interests in such
Global Note may be effected only through a book-entry system
maintained by the Depositary (or its agent), and that ownership
of a beneficial interest in the Note shall be required to be
reflected in a book entry. When Notes are presented to the Note
Registrar or a co-Note Registrar with a request to register the
transfer or to exchange them for an equal principal amount of
Notes of other authorized denominations (including an exchange of
Notes for Registered Notes), the Note Registrar shall register
the transfer or make the exchange as requested if its
requirements for such transactions are met; provided that no
exchanges of Notes for Registered Notes shall occur until a
Registration Statement shall have been declared effective by the
Commission and that any Notes that are exchanged for Registered
Notes shall be cancelled by the Indenture Trustee. To permit
registrations of transfers and exchanges in accordance with the
terms, conditions and restrictions hereof, the Company shall
execute and the Indenture Trustee shall authenticate Notes at the
Note Registrar's request. No service charge shall be made for
any registration of transfer or exchange or redemption of the
Notes, but the Company or the Indenture 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 other similar governmental charge
payable upon exchanges pursuant to Section 2.13 or 9.07).
SECTION 2.05. Book Entry Provisions for Global Notes. (a)
Each Global Note shall be issued in registered form and initially
shall (i) be registered in the name of the Depositary for such
Global Notes or the nominee of such Depositary, (ii) be delivered
to the Indenture Trustee as custodian for such Depositary and,
(iii) except with respect to the Registered Global Note, bear
legends as set forth in Section 2.02.
<PAGE>
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Note, as the case may be, held on their behalf by
the Depositary, or the Indenture Trustee as its custodian, or
under or any Global Note, as the case may be, and the Depositary
may be treated by the Company, the Indenture Trustee and any
agent of the Company or the Indenture Trustee as the absolute
owner of such Global Note, as the case may be, for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Indenture Trustee or any agent of the
Company or the Indenture Trustee, from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of any Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to the
Depositary, its successors or their respective nominees.
Beneficial interests in any Global Note may be transferred in
accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 2.06. In addition,
Physical Notes shall be delivered to all beneficial owners in
exchange for their beneficial interests in such Global Note, as
the case may be, if (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary for such
Global Note, as the case may be, and a successor depositary is
not appointed by the Company within 90 days of such notice or
(ii) a Collateral Access Event has occurred and is continuing and
the Noteholders holding at least a majority of the aggregate
outstanding principal amount of the Notes have caused the
Depositary to make such a request of the Note Registrar.
(c) Any beneficial interest in one of the Global Notes that
is transferred to a person who takes delivery in the form of an
interest in the other Global Note will, upon transfer, cease to
be an interest in such Global Note and become an interest in the
other Global Note and, accordingly, will thereafter be subject to
all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for
as long as it remains such an interest.
<PAGE>
(d) In connection with any transfer of a beneficial
interest in the U.S. Global Note to a transferee receiving U.S.
Physical Notes pursuant to paragraph (b) of this Section, the
Note Registrar shall reflect on its books and records the date
and a decrease in the principal amount of such U.S. Global Note
in an amount equal to the principal amount of the beneficial
interest in such U.S. Global Note to be transferred, and the
Company shall execute, and the Indenture Trustee shall
authenticate and deliver, one or more U.S. Physical Notes of like
tenor and amount.
(e) In connection with the transfer of the entire U.S.
Global Note, Offshore Global Note or Registered Global Note to
beneficial owners pursuant to paragraph (b) of this Section, such
U.S. Global Note, Offshore Global Note or Registered Global Note,
as the case may be, shall be deemed to be surrendered to the
Indenture Trustee for cancellation, and the Company shall
execute, and the Indenture Trustee shall authenticate and
deliver, to each beneficial owner identified by the Depositary in
exchange for its beneficial interest in such U.S. Global Note,
Offshore Global Note or Registered Global Note, as the case may
be, an equal aggregate principal amount of U.S. Physical Notes,
Offshore Physical Notes or Registered Physical Notes, as the case
may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b) or (d)
of this Section shall, except as otherwise provided by paragraph
(f) of Section 2.06, bear the legend regarding transfer
restrictions applicable to a U.S. Physical Note set forth in
Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an
interest in an Offshore Global Note pursuant to paragraph (b) of
this Section shall, except as otherwise provided by paragraph (f)
of Section 2.06, bear the legends regarding transfer restrictions
set forth in Section 2.02(a).
(h) The registered holder of any Offshore Global Note may
grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent
Members, to take any action which a Noteholder is entitled to
take under this Indenture or the Notes.
SECTION 2.06 Special Transfer Provisions. (a) Transfers
to Non-QIB Institutional Accredited Investors. The following
provisions shall apply with respect to the registration of any
proposed transfer of a Note (other than a Class B Registered
Note) to any Institutional Accredited Investor which is not a QIB
(excluding transfers to or by Non-U.S. Persons):
<PAGE>
(i) The Note Registrar shall register the transfer of
any Note, whether or not such Note bears the Private
Placement Legend, if (x) the requested transfer is at least
three years after the later of the original issue date of
the Notes and the last date on which such Note was held by
the Company or any affiliate of the Company or (y) the
proposed transferee has delivered to the Note Registrar a
certificate substantially in the form of Exhibit E hereto
and the aggregate principal amount of the Notes being
transferred is at least $100,000.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon
receipt by the Note Registrar of (x) the documents, if any,
required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and a decrease in the principal amount
of such U.S. Global Note in an amount equal to the principal
amount of the beneficial interest in such U.S. Global Note
to be transferred, and the Company shall execute, and the
Indenture Trustee shall authenticate and deliver, one or
more U.S. Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Note (other than a Class B Registered Note) to a QIB
(excluding transfers to or by Non-U.S. Persons):
(i) If the Note to be transferred consists of U.S.
Physical Notes or an interest in any Temporary Offshore
Global Note, except if exchanged for a Class B Registered
Note in the Exchange Offer, the Note Registrar shall
register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the
Company and the Note Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to
a transferee who has signed the certification provided for
on the form of Note stating, or has otherwise advised the
Company and the Note Registrar in writing, that it is
purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A.
<PAGE>
(ii) If the proposed transferee is an Agent Member,
and the Note to be transferred consists of U.S. Physical
Notes or an interest in the Temporary Offshore Global Note,
upon receipt by the Note Registrar of the documents referred
to in clause (i) and instructions given in accordance with
the Depositary's and the Note Registrar's procedures, the
Note Registrar shall reflect on its books and records the
date and an increase in the principal amount of the U.S.
Global Note in an amount equal to the principal amount of
such U.S. Physical Notes or the interest in such Temporary
Offshore Global Note, as the case may be, to be transferred,
and the Indenture Trustee shall cancel such Physical Notes
or decrease the amount of such Temporary Offshore Global
Note so transferred.
(c) Transfers of Interests in the Temporary Offshore
Global Note. The following provisions shall apply with respect
to registration of any proposed transfer of interests in the
Temporary Offshore Global Note:
(i) The Note Registrar shall register the transfer of
any such Note (x) if the proposed transferee is a Non-U.S.
Person and the proposed transferor has delivered to the Note
Registrar a certificate substantially in the form of Exhibit
F hereto or (y) if the proposed transferee is a QIB and the
proposed transferor has checked the box provided for on the
form of such Note stating, or has otherwise advised the
Company and such Note Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided
for on the form of Note stating, or has otherwise advised
the Company and the Note Registrar in writing, that it is
purchasing such Note for its own account or an account with
respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member,
upon receipt by the Note Registrar of the documents referred
to in clause (i)(y) above and instructions given in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and
<PAGE>
an increase in the principal amount of the U.S. Global Note
in an amount equal to the principal amount of the Temporary
Offshore Global Note to be transferred, and the Indenture
Trustee shall decrease the amount of the Temporary Offshore
Global Note.
(d) Transfers of Interests in the Permanent Offshore
Global Note, Offshore Physical Notes and Registered Class B Note.
With respect to any transfer of interests in any Permanent
Offshore Global Note, Offshore Physical Notes or Class B
Registered Note, the Note Registrar shall register such transfer
without requiring any additional certification.
(e) Transfers to Non-U.S. Persons at any Time. The
following provisions shall apply with respect to any transfer of
a Note (other than a Class B Registered Note) to a Non-U.S.
Person:
(i) Prior to March 27, 1996, the Note Registrar shall
register any proposed transfer of a Note to a Non-U.S.
Person upon receipt of a certificate substantially in the
form of Exhibit F hereto from the proposed transferor.
(ii) On and after March 27, 1996, the Note Registrar
shall register any proposed transfer to any Non-U.S. Person
if such Note to be transferred is a U.S. Physical Note or an
interest in the U.S. Global Note, upon receipt of a
certificate substantially in the form of Exhibit F from the
proposed transferor.
(iii) (a) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon
receipt by the Note Registrar of (x) the documents, if any,
required by paragraph (ii) and (y) instructions in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and a decrease in the principal amount
of such U.S. Global Note in an amount equal to the principal
amount of the beneficial interest in such U.S. Global Note
to be transferred, and (b) if the proposed transferee is an
Agent Member, upon receipt by the Note Registrar of
instructions given in accordance with the Depositary's and
the Note Registrar's procedures, the Note Registrar shall
reflect on its books and records the date and an increase in
the principal amount of the Offshore Global Note in an
amount equal to the principal amount of the U.S. Physical
Note or the U.S. Global Note, as the case may be, to be
transferred, and the Indenture Trustee shall cancel the
Physical Note, if any, so transferred or decrease the amount
of such U.S. Global Note.
<PAGE>
(f) Private Placement Legend. Upon the transfer, exchange
or replacement of Notes not bearing the Private Placement Legend,
the Note Registrar shall deliver Notes that do not bear the
Private Placement Legend. Upon the transfer, exchange or
replacement of Notes bearing the Private Placement Legend, the
Note Registrar shall deliver only Notes that bear the Private
Placement Legend unless either (i) the circumstances contemplated
by paragraph (a)(i)(x) or (e)(ii) of this Section 2.06 exist or
(ii) there is delivered to the Note Registrar an opinion of
counsel reasonably satisfactory to the Company and the Note
Registrar to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Note bearing the
Private Placement Legend, each Noteholder of such a Note
acknowledges the restrictions on transfer of such Note set forth
in this Indenture and in the Private Placement Legend and agrees
that it will transfer such Note only as provided in this
Indenture. The Note Registrar shall not register a transfer of
any Note unless such transfer complies with the restrictions on
transfer of such Note set forth in this Indenture. In connection
with any transfer of Notes (other than Class B Registered Notes),
each Noteholder agrees by its acceptance of the Notes to furnish
the Note Registrar or the Company such certifications, legal
opinions or other information as either of them may reasonably
require to confirm that such transfer is being made pursuant to
an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that
the Note Registrar shall not be required to determine (but may
rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
The Note Registrar shall retain copies of all letters,
notices and other written communications received pursuant to
Section 2.05 or this Section 2.06. The Company shall have the
right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the
giving of reasonable written notice to the Note Registrar.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Notes.
If (i) any mutilated Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its
satisfaction of the destruction, loss or theft of any Note, and
(ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Company and the
Indenture Trustee harmless, then, in the absence of notice to the
Company, the Note Registrar or the Indenture Trustee that such
Note has been acquired
<PAGE>
by a bona fide purchaser, and provided that the requirements of
Section 8-405 of the Uniform Commercial Code are met, the Company
shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note;
provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become or within seven
days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Company
may pay such destroyed, lost or stolen Note when so due or
payable or upon the Redemption Date without surrender thereof.
If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in
lieu of which such replacement Note was issued presents for
payment such original Note, the Company and the Indenture Trustee
shall be entitled to recover such replacement Note (or such
payment) from the Person to whom it was delivered or any Person
taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person,
except a bona fide purchaser, and shall be entitled to recover
upon the security or indemnity provided therefor to the extent of
any loss, damage, cost or expense incurred by the Company or the
Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this
Section, the Company may require the payment by the Noteholder of
such Note of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note
shall constitute an original additional contractual obligation of
the Company, whether or not the mutilated, destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes.
<PAGE>
SECTION 2.08. Persons Deemed Owner. Prior to due
presentment for registration of transfer of any Note, the
Company, the Indenture Trustee and any agent of the Company or
the Indenture Trustee may treat the Person in whose name any Note
is registered (as of the day of determination) as the owner of
such Note for the purpose of receiving payments of principal of
and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the
Company, the Indenture Trustee nor any agent of the Company or
the Indenture Trustee shall be affected by notice to the
contrary.
SECTION 2.09. Payment of Principal and Interest. (a) The
Company shall make principal payments in respect of the Notes on
each Payment Date as set forth on Exhibit C. The Company shall
unconditionally pay in full any outstanding principal of the
Notes (including the Note Principal Carryover Amount), and
accrued but unpaid interest thereon (including the Note Interest
Carryover Amount), on the Maturity Date.
(b) The Notes shall accrue interest at the Stated Interest
Rate on the principal amount thereof remaining unpaid from time
to time from and including the date of issuance to be excluding
the date of payment. Interest will be calculated on the basis of
a 360-day year of twelve 30-day months and shall be paid on each
Payment Date to the Person in whose name such Note (or one or
more predecessor Notes) is registered on the Record Date, by wire
transfer in immediately available funds to the account designated
by such person, with respect to Notes registered on the Record
Date in the name of the nominee of the Depositary (initially,
such nominee to be Cede & Co.), payment will be made by wire
transfer in immediately available funds to the account designated
by such nominee. The funds represented by any such checks
returned undelivered shall be held in accordance with Section
4.03. The final installment of principal of each Note will be
payable only upon presentation and surrender of such Note and
shall specify the place where such Note may be presented and
surrendered for payment of such installment.
(c) If a principal installment of the Notes expected to be
paid on any Payment Date (and the Note Principal Carryover Amount
for such Payment Date) is not paid in full on such Payment Date,
such unpaid principal amount shall be payable (together with
interest thereon) on or prior to the immediately following
Payment Date. If interest accrued on the Notes during the period
commencing on the immediately preceding Payment Date and ending
on any Payment Date (and the Note Interest Carryover Amount for
such Payment Date) is not paid in full on such Payment Date, such
unpaid amount (but without any interest on such amount) shall be
payable on or prior to the immediately following Payment Date.
<PAGE>
(d) Payments made by the Company pursuant to Section
2.09(a) and (b) shall be applied in the following order of
priority: (i) to pay the Note Interest Carryover Amount on the
Notes, (ii) to pay accrued and unpaid interest (other than the
Note Interest Carryover Amount) on the Notes, (iii) to pay the
Note Principal Carryover Amount of the Notes and (iv) to pay any
other principal amounts owing on the Notes. All payments on the
Notes shall be made pro rata to the Noteholders entitled thereto
based upon the outstanding principal amount of the Notes held by
such Noteholder.
(e) If any sum payable under the Notes or under this
Indenture falls due on a day which is not a Business Day, then
such sum shall be payable on the next succeeding Business Day
without additional interest as a result of such extension.
(f) The principal, interest and premium, if any, in respect
of each Note will be payable by the Company in U.S. dollars in
immediately available funds at the principal corporate trust
administration office of the Collateral Agent.
SECTION 2.10. Revision of Expected Principal Amounts and
Payment Dates. In the event that the Notes are redeemed in part
pursuant to Section 3.01, the amounts of principal expected to be
paid on any Payment Date for the Notes subsequent to the date of
such redemption will be revised as follows: the amount of
principal expected to be paid on each such subsequent Payment
Date for the Notes shall be equal to the difference of (x) the
amount of principal due on such Payment Date prior to such
revision minus (y) the amount equal to the product of (I) the
amount of principal due on such Payment Date prior to such
revision and (II) a fraction, the numerator of which is the
amount of principal paid on the Notes in connection with such
redemption, and the denominator of which is the aggregate
principal amount of such Notes prior to such redemption.
Exhibit C hereto will be revised as contemplated above and,
as so revised, will be binding on the parties hereto and the
Noteholders and be controlling for all purposes of this Indenture
and the Notes. The Company shall cause the Indenture Trustee to
prepare a new schedule of expected principal payments and the
Payment Dates therefor for the Notes within 10 Business Days
after the partial redemption of the Notes and deliver a copy of
such schedule to each Noteholder pursuant to Section 11.05. If
the Notes, the Class A Notes and the Class C Notes have been
redeemed at the option of the Company prior to any revision of
the expected principal payment schedule described above, such
schedule for the Class A Notes and the Class C Notes will be
revised as if such redemption had not occurred. If any of the
Notes, the Class A Notes or the Class C Notes have been redeemed
in part at the option of the Company, each succeeding principal
payment of such Class will be ratably reduced.
<PAGE>
SECTION 2.11. Liquidity Facility Distribution. Each
payment received by the Indenture Trustee pursuant to Section
3.6(a) or (f) of the Collateral Agreement shall be promptly
applied by the Indenture Trustee to accrued interest due and
payable on the Notes at the Stated Interest Rate and if the
amount received shall be insufficient to pay all such amounts due
and payable in full, such amount received shall be distributed
pro rata among the Notes, without priority of any Note over any
other, based upon the amount of such accrued interest due and
payable on each Note. The Indenture Trustee and each Noteholder
acknowledge and agree that they shall have no right or interest
in any payment received by the Class B Indenture Trustee or the
Class C Indenture Trustee pursuant to Section 3.6(a) or (f) of
the Collateral Agreement.
SECTION 2.12. Registrar and Paying Agent. The Company
shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange (the "Note
Registrar"), an office or agency where Notes may be presented for
payment (the "Paying Agent") and an office or agency where
notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served, which shall be, except in
case of the original Indenture Trustee, in the Borough of
Manhattan, The City of New York. The Company shall cause the
Note Registrar to keep a register of the Notes and of their
transfer and exchange (the "Note Register"). The Company may
have one or more co-Note Registrars and one or more additional
Paying Agents.
The Company shall enter into an appropriate agency agreement
with any agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to
such agent. The Company shall give prompt written notice to the
Indenture Trustee of the name and address of any such agent and
any change in the address of such agent. If the Company fails to
maintain a Note Registrar, Paying Agent and/or agent for service
of notices and demands, the Indenture Trustee shall act as such
Note Registrar, Paying Agent and/or agent for service of notices
and demands for so long as such failure shall continue. The
Company may remove any agent upon written notice to such agent
and the Indenture Trustee; provided that no such removal shall
become effective until (i) the acceptance of an appointment by a
successor agent to such agent as evidenced by an appropriate
agency agreement entered into by the Company and such successor
agent and delivered to the Indenture Trustee or (ii) notification
to the Indenture Trustee that the Indenture Trustee shall serve
as such agent until the appointment of a successor agent in
accordance with clause (i) of this proviso. The Company or any
<PAGE>
Affiliate of the Company may act as Paying Agent, Note Registrar
or co-Note Registrar, and/or agent for service of notice and
demands; provided, however, that neither the Company nor any
Affiliate of the Company shall act as Paying Agent in connection
with the defeasance of the Notes or the discharge of this
Indenture under Article V.
The Company initially appoints the Indenture Trustee as Note
Registrar, Paying Agent, authenticating agent and agent for
service of notice and demands. If, at any time, the Indenture
Trustee is not the Note Registrar, the Note Registrar shall make
available to the Indenture Trustee on or before each Payment Date
and at such other times as the Indenture Trustee may reasonably
request, the names and addresses of the Noteholders as they
appear in the Note Register.
SECTION 2.13. Temporary Notes. Until definitive Notes are
ready for delivery, the Company may prepare and the Indenture
Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may
have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the
temporary Notes, as evidenced by their execution of such
temporary Notes. If temporary Notes are issued, the Company will
cause definitive Notes to be prepared without unreasonable delay.
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 of the Company designated
for such purpose pursuant to Section 4.02, without charge to the
Noteholder. Upon surrender for cancellation of any one or more
temporary Notes the Company shall execute and the Indenture
Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall be
entitled to the same benefits under this Indenture as definitive
Notes.
SECTION 2.14. Cancellation. The Company at any time may
deliver to the Indenture Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever, and may
deliver to the Indenture Trustee for cancellation any Notes
previously authenticated hereunder which the Company has not
issued and sold. The Note Registrar and the Paying Agent shall
forward to the Indenture Trustee any Notes surrendered to them
for transfer, exchange or payment. The Indenture Trustee shall
cancel all Notes surrendered for transfer, exchange, payment or
cancellation and shall dispose of them in accordance with its
<PAGE>
normal procedure or the written instructions of the Company;
provided, however, the Indenture Trustee shall not be required to
destroy such Notes. The Company may not issue new Notes to
replace Notes it has paid in full or delivered to the Indenture
Trustee for cancellation.
SECTION 2.15. CUSIP Numbers. The Company in issuing the
Notes may use "CUSIP" and "CINS" numbers (if then generally in
use), and the Indenture Trustee shall use CUSIP numbers or CINS
numbers, as the case may be, in notices of redemption or exchange
as a convenience to Noteholders; provided that any such notice
may state that no representation is made as to the correctness of
such numbers either as printed on such Notes or as contained in
any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on such
Notes.
SECTION 2.16. Purchase Upon Acceleration. By acceptance
of its Note, each Noteholder agrees that at any time after any
Acceleration of the Notes, the Class A Notes or the Class C Notes
which has not been rescinded or withdrawn,
(i) each Class C Noteholder shall have the right to
purchase all, but not less than all, of the Class A Notes
and the Notes upon fifteen days written notice to the
Indenture Trustee, the Class A Indenture Trustee and each
other Class C Noteholder, provided that (A) if prior to the
end of such fifteen day period any other Class C Noteholder
notifies such purchasing Class C Noteholder that such other
Class C Noteholder wants to participate in such purchase,
then such other Class C Noteholder may join with the
purchasing Class C Noteholder to purchase all, but not less
than all, of the Class A Notes and B Notes pro rata based on
the outstanding principal amount of the Class C Notes held
by each such Class C Noteholder and (B) if prior to the end
of such fifteen day period any other Class C Noteholder
fails to notify the purchasing Class C Noteholder of such
other Class C Noteholder's desire to participate in such a
purchase, then such other Class C Noteholder shall lose its
right to purchase the Class A Notes and the B Notes pursuant
to this Section 2.16.
The purchase price with respect to the Notes shall be equal
to the aggregate unpaid principal amount of all Notes then
Outstanding, together with accrued and unpaid interest thereon to
the date of payment without any Make Whole Premium and all other
sums then due and payable to the Noteholders under this Indenture
and the other Basic Documents or on or in respect of its Notes;
provided, however, that no such purchase of Notes shall be
effective unless the purchaser shall certify to the Indenture
Trustee that contemporaneously with such purchase, such purchaser
is purchasing, pursuant to the terms of each Applicable
Indenture, the Outstanding Notes, Class A Notes and Class C Notes
which are senior to the securities held by such purchaser. Each
payment of the purchase price of the Notes referred to in the
first sentence hereof shall be made to an account or accounts
designated by the Indenture Trustee and each such purchase shall
be subject to the terms of this Section 2.16. Each Noteholder
agrees by its acceptance of its Note that it will, subject to
Section 2.04 hereof, upon payment from such Class C
Noteholder(s), as the case may be, of the purchase price set
forth in the first sentence of this paragraph, forthwith sell,
assign, transfer and convey to the purchaser thereof (without
recourse, representation or warranty of any kind except for its
own acts), all of the right, title and interest of such
Noteholder in, the Indenture, the other Basic Documents and all
Notes held by such Noteholder (excluding all right, title and
interest under any of the foregoing to the extent such right,
title or interest is with respect to an obligation not then due
and payable as respects any action or inaction or state of
affairs occurring prior to such sale) and the purchaser shall
assume all of such Noteholder's obligations under this Indenture
and the other Basic Documents. The Notes will be deemed to be
purchased on the date payment of the purchase price is made
notwithstanding the failure of the Noteholders to deliver any
<PAGE>
Notes (whether in the form of Physical Notes or beneficial
interests in Global Notes) and, upon such a purchase (i) the only
rights of the Noteholders will be to deliver the Notes to the
purchaser and receive the purchase price for such Notes and (ii)
if the purchaser shall so request, such Noteholder will comply
with all the provisions of Section 2.04 hereof to enable new
Notes to be issued to the purchaser in such denominations as it
shall request. All charges and expenses in connection with the
issuance of any such new Notes shall be borne by the purchaser
thereof.
Each Noteholder shall be entitled to the benefits of Section
2.16 and 9.01(b) of the Class A Indenture.
SECTION 2.17. Other Provisions Regarding Payment. By
acceptance of its Note, each Noteholder agrees that in the event
such Noteholder shall receive any payment or distribution
(whether in cash, securities or other property) on or in respect
of any obligation which it is not entitled to receive hereunder
or under the Collateral Agreement, it shall hold any amount so
received in trust for the benefit of any Person having a higher
priority of distribution pursuant to Section 2.5, 3.2 or 3.3 of
the Collateral Agreement and shall promptly remit such payment or
distribution to the Collateral Agent for application as provided
in the Collateral Agreement.
ARTICLE III
REDEMPTION
SECTION 3.01. Redemptions. (a) The Notes shall be
mandatorily redeemed in whole or ratably in part at the
Redemption Price, together with accrued interest thereon to the
Redemption Date, but without any Make Whole Premium, upon the
occurrence of an Event of Loss with respect to an Aircraft, not
later than 165 days after the occurrence of such Event of Loss,
if no Collateral Access Event has occurred and is continuing, and
the Company elects not to exercise its rights under Section 4.5
of the Collateral Agreement to provide a Replacement Aircraft.
The principal amount of each Note to be redeemed pursuant to this
Section 3.01(a) will be equal to the Pro Rata Amount multiplied
by a fraction (i) the numerator of which will be equal to the
aggregate outstanding principal amount of such Note and (ii) the
denominator of which will be equal to the sum of the aggregate
outstanding principal amount of all of the Notes, the Class A
Notes and the Class C Notes.
<PAGE>
(b) So long as no Event of Loss has occurred with respect
to any Aircraft as to which the Company has not, as of the
applicable Redemption Date, complied with Section 4.5(a) of the
Collateral Agreement, the Company may redeem the Notes in whole
or in part at the Redemption Price for such Notes together with
accrued interest thereon until the Redemption Date, plus the Make
.Whole Premium (if any) for such Notes.
(c) All amounts paid in connection with any redemption of
Notes (whether pursuant to this Section 3.01(a) or Section
3.01(b)) shall be applied to each Note pro rata in accordance
with the then outstanding principal amount thereof.
SECTION 3.02. Notice of Redemption. (a) If the Notes are
to be redeemed pursuant to Section 3.01(b), the Company shall
notify the Collateral Agent and the Indenture Trustee in writing
of the Redemption Date in an Officer's Certificate at least 30
days before the Redemption Date (unless a shorter period shall be
satisfactory to the Indenture Trustee).
(b) The Indenture Trustee shall mail a notice of redemption
(whether pursuant to Section 3.01(a) or 3.01(b)) by first class
mail to each Noteholder at least 15 days before the Redemption
Date promptly after the Indenture Trustee shall have received the
Written Notice from the Collateral Agent delivered pursuant to
Section 2.5(a)(i) or 2.5(b) of the Collateral Agreement.
The notice shall state:
(i) the Redemption Date (which, in the case of a
redemption pursuant to Section 3.01(a), shall be determined
pursuant to Section 2.5(a)(i) of the Collateral Agreement
and, in the case of a redemption pursuant to Section
3.01(b), shall be specified in the notice to the Indenture
Trustee given under subsection (a) above and the Written
Notice to the Collateral Agent given pursuant to Section
2.5(b) of the Collateral Agreement) and the Record Date
therefor;
(ii) the Redemption Price for each $1,000 initial
principal amount of Notes;
(iii) the reason for the redemption; and
<PAGE>
(iv) that, unless the Company defaults in making the
redemption payment, interest on the portion of the principal
amount of each Note to be redeemed will cease to accrue on
and after the Redemption Date and the only remaining right
of the Noteholders with respect to such portion is to
receive payment of the Redemption Price plus accrued
interest to the Redemption Date and, in the case of a
redemption pursuant to Section 3.01(b), the Make Whole
Premium.
SECTION 3.04. Effect of Notice of Redemption. Once notice
of redemption is mailed, the portion of the principal amount of
each Note called for redemption will become due and payable on
the Redemption Date and at the Redemption Price, plus accrued
interest to the Redemption Date and, in the case of a redemption
pursuant to Section 3.01(b), the Make Whole Premium.
Notice of redemption shall be deemed to be given when
mailed, whether or not the Noteholder receives the notice. In
any event, failure to give such notice, or any defect therein,
shall not affect the validity of the proceedings for the
redemption of Notes held by Noteholders to whom such notice was
properly given.
SECTION 3.04. Payment of Redemption Price. The Redemption
Price together with accrued interest thereon and the Make Whole
Premium (if any) shall be distributed by the Collateral Agent to
the Indenture Trustee on the Redemption Date pursuant to Section
2.5(a)(ii) or (iii) or Section 2.5(b) of the Collateral
Agreement, as the case may be. Any amounts received by the
Indenture Trustee shall be applied in the following order of
priority: (i) to pay interest accrued to the Redemption Date on
the portion of the principal amount of each Note to be redeemed,
(ii) to pay the Redemption Price and (iii) to pay the Make Whole
Premium (if any).
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Principal and Interest. The
Company will duly and punctually pay the principal of and
interest or premium, if any, on the Notes in accordance with the
terms of the Notes and this Indenture. Amounts properly withheld
under the Code by any Person from a payment to any Noteholder of
interest, premium (if any) and/or principal shall be considered
as having been paid by the Company to such Noteholder for all
<PAGE>
purposes of this Indenture. The unpaid principal of each Note,
together with interest accrued thereon, shall be due and payable
in full on the Maturity Date.
SECTION 4.02. Maintenance of Office or Agency. The
Company will maintain, except in the case of Wilmington Trust
Company, in the Borough of Manhattan, The City of New York, an
office or agency where Notes may be surrendered for registration
of transfer or exchange, and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be
served. The Company hereby initially appoints Wilmington Trust
Company to serve as its agent for the foregoing purposes. The
Company will give prompt written notice to the Indenture Trustee
of the location, and of any change in the location, of any such
office or agency. If at any time the Company shall fail to
maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust
Office, and the Company hereby appoints the Indenture Trustee as
its agent to receive all such surrenders, notices and demands.
SECTION 4.03. Money for Payments to Be Held in Trust. The
Company will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an
instrument in which such Paying Agent shall agree with the
Indenture Trustee (and if the Indenture Trustee acts as Paying
Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of the
principal of and Make Whole Premium, if any, and interest
and all other amounts due with respect to the Notes in trust
for the benefit of the Persons entitled thereto and the
Indenture Trustee until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and pay
such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default
by the Company in the making of any payment required to be
made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee,
forthwith pay to the Indenture Trustee all sums so held in
trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it
in trust for the payment of Notes if at any time it ceases
to meet the standards required to be met by a Paying Agent
at the time of its appointment; and
<PAGE>
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on
any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting
requirements in connection therewith.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, by Company Order direct any Paying Agent to pay to the
Indenture Trustee all sums held in trust by such Paying Agent,
such sums to be held by the Indenture Trustee upon the same
trusts as those upon which the sums were held by such Paying
Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Subject to applicable laws with respect to escheat of funds,
any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note
and remaining unclaimed for two years after such amount has
become due and payable shall be discharged from such trust, and
the Indenture Trustee or such Paying Agent, as the case may be,
shall give prompt notice of such occurrence to the Company and
shall release such money to the Company on Company Request; and
the Noteholder of such Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof
(but only to the extent of the amounts so paid to the Company),
and all liability of the Indenture Trustee or such Paying Agent
with respect to such trust money shall thereupon cease; provided,
however, that the Indenture Trustee or such Paying Agent, before
being required to make any such repayment, may at the expense of
the Company 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, notice
that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company. The Indenture
Trustee may also adopt and employ, at the expense of the Company,
any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment
to Noteholders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in
moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the
last address of record for each such Noteholder).
<PAGE>
SECTION 4.04. Reports by the Company. The Company shall:
(a) file with the Indenture Trustee, within 30 days after
the Company is required to file the same with the SEC, copies of
the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as
the SEC may from time to time by rules and regulations prescribe)
which the Company is required to file with the SEC pursuant to
section 13 or section 15(d) of the Exchange Act; or, if the
Company is not required to file information, documents or reports
pursuant to either of such sections, then to file with the
Indenture Trustee and the SEC, in accordance with rules and
regulations prescribed by the SEC, such of the supplementary and
periodic information, documents and reports which may be required
pursuant to Section 13 of the Exchange Act, as amended, in
respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and
regulations;
(b) file with the Indenture Trustee, within 60 days after
the end of each of the first three fiscal quarters in each fiscal
year of the Company, unaudited consolidated balance sheets of the
Company and its subsidiaries (if any) as of the end of such
quarter and related consolidated statements of income,
shareholder's equity and cash flows of the Company and its
subsidiaries (if any) for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter,
provided that so long as the Company is subject to the reporting
provisions of the Exchange Act, a copy of the Company's quarterly
report on Form 10-Q will satisfy this requirement;
(c) file with the Indenture Trustee and the SEC, in
accordance with the rules and regulations prescribed by the SEC,
such additional information, documents and reports with respect
to compliance by the Company with the conditions and covenants
provided for in this Agreement, as may be required by such rules
and regulations, including, in the case of annual reports, if
required by such rules and regulations, certificates or opinions
of independent public accountants, conforming to the requirements
of Section 11.02;
(d) transmit to all Noteholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act,
such summaries of any information, documents and reports required
to be filed by the Company pursuant to subsections (a) and (b) of
this Section 4.04 as may be required by rules and regulations
prescribed by the SEC;
<PAGE>
(e) furnish to the Indenture Trustee, not less often than
annually, a brief certificate from its principal executive
officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's compliance
with all conditions and covenants under this Indenture (it being
understood that for purposes of this paragraph (d), such
compliance shall be determined without regard to any period of
grace or requirement of notice provided under this Indenture);
and
(f) furnish to the Indenture Trustee:
(1) promptly after the execution and delivery of each
Collateral Agreement Supplement, an Opinion of Counsel
either stating that in the opinion of such counsel such
Collateral Agreement Supplement has been properly recorded
and filed so as to make effective the Lien intended to be
created thereby, and reciting the details of such action, or
stating that in the opinion of such counsel no such action
is necessary to make such Lien effective; and
(2) at least annually after the execution and delivery
of this Indenture, an Opinion of Counsel either stating that
in the opinion of such counsel such action with respect to
the recording, filing, re-recording, and refiling of the
Collateral Agreement, each the Collateral Agreement
Supplement entered into hereunder and any other instrument,
and all other action has been taken as is necessary to
maintain the Lien of this Indenture, and reciting the
details of such action, or stating that in the opinion of
such counsel no such action is necessary to maintain such
Lien.
The Indenture Trustee shall promptly remit to the
Noteholders and the Liquidity Providers a copy of any report,
document or other information delivered to the Indenture Trustee
by the Company pursuant to this Section 4.04.
<PAGE>
ARTICLE V.
SATISFACTION AND DISCHARGE
SECTION 5.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect
to the Notes except as to (i) rights of registration of transfer
and exchange, (ii) substitution of mutilated, destroyed, lost or
stolen Notes, (iii) rights of Noteholders to receive payments of
principal thereof and interest and Make Whole Premium (if any)
thereon, (iv) Section 4.03, (v) the rights and immunities of the
Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 7.08), (vi) the obligations of
the Indenture Trustee under Section 5.02 and (vii) the rights of
Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of
them, and the Indenture Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the
Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or
stolen and that have been replaced or paid as provided in
Section 2.07 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 4.03)
have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes not theretofore delivered to the
Indenture Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable in full at the
Final Scheduled Payment Date within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Indenture
Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of
the Company, and the Company, in the case of (i), (ii)
or (iii) above, has irrevocably deposited or caused to
be irrevocably deposited with the Indenture Trustee
cash or direct obligations of or obligations guaranteed
<PAGE>
by the United States of America (which will mature
prior to the date such amounts are payable), in trust
for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for
cancellation as of such day of discharge or when due on
the Final Scheduled Payment Date or Redemption Date (if
Notes shall have been called for redemption in whole
pursuant to Article III), as the case may be;
(B) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(C) the Company has delivered to the Indenture Trustee
an Officers' Certificate, an Opinion of Counsel and a certificate
from a firm of certified public accountants, and each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied
with.
SECTION 5.02. Application of Trust Money. All moneys
deposited with the Indenture Trustee pursuant to Section 5.01
hereof 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, as the
Indenture Trustee may determine, to the Noteholders of the
particular Notes for the payment or redemption of which such
moneys have been deposited with the Indenture Trustee, of all
sums due and to become due thereon for principal and interest;
but such moneys need not be segregated from other funds except to
the extent required herein or in the Collateral Agreement or
required by law.
SECTION 5.03. Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture
with respect to the Notes, all moneys then held by any Paying
Agent other than the Indenture Trustee under the provisions of
this Indenture with respect to such Notes shall, upon demand of
the Company, be paid to the Indenture Trustee to be held and
applied according to Section 4.03 and thereupon such Paying Agent
shall be released from all further liability with respect to such
moneys.
<PAGE>
ARTICLE VI.
REMEDIES
SECTION 6.01. Collateral Access Events. "Collateral Access
Event", wherever used herein, means any one of the following
events (whatever the reason for such Collateral Access Event and
whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body) and any such Collateral Access Event
referred to in clause (i) below to the extent relating to the
failure of the Company to pay (A) the outstanding principal
amount of Notes on the Maturity Date or (B) any interest due on
any Note on a Payment Date (unless the Collateral Agent shall
have made an Interest Advance under Section 3.6(a) of the
Collateral Agreement and distributed such funds to the Applicable
Indenture Trustee pursuant to Section 3.6(b) of the Collateral
Agreement) shall constitute an "Event of Default":
(i) The Company shall fail to make any payment when
due of principal or premium, if any, or interest on, any
Note, and such failure shall continue unremedied for a
period of 15 days;
(ii) The Company shall fail to procure and maintain
property or liability insurance with respect to the
Collateral complying with the provisions of Section 4.6 of
the Collateral Agreement or such insurance shall be canceled
or lapse; provided that such lapse or cancellation shall not
constitute a Collateral Access Event until the earlier of
(i) 30 days after receipt by the Collateral Agent of written
notice of such lapse or cancellation or (ii) the date that
such lapse or cancellation is effective as to the Collateral
Agent;
(iii) The Company shall operate an Aircraft after
having received notice that the insurance required by
Section 4.6 of the Collateral Agreement lapsed or has been
canceled;
(iv) The Company shall fail to observe or perform any
of its covenants or obligations in the Collateral Agreement,
and such failure shall continue for a period of 30 days
after delivery of notice of such failure from the Indenture
Trustee to the Company or from the Noteholders of at least
25% of the Outstanding Amount of the Notes, unless such
failure is curable and the Company shall, after the delivery
of such notice, then be diligently proceeding to correct
such failure and shall in fact correct such failure within
180 days after delivery of such notice;
<PAGE>
(v) Any representation or warranty made by the
Company or in any of the Basic Documents or in any document
or certificate furnished to the Indenture Trustee or any
Noteholder in connection herewith or therewith or pursuant
hereto or thereto, shall prove to have been incorrect in any
material respect when made and shall remain material at the
time in question and shall not be remedied within 30 days
after notice thereof has been given to the Company by the
Indenture Trustee or from the Noteholders of at least 25% of
the Outstanding Amount of the Notes;
(vi) The Company shall consent to the appointment of
or taking possession by a receiver, assignee, custodian,
sequestrator, trustee or liquidator (or other similar
official) of itself or of a substantial part of its property
or the Company shall admit in writing its inability to pay
its debts generally as they come due (as provided in 11
U.S.C. Section 303(h)(1)), or shall make a general assignment for
the benefit of its creditors, or the Company shall file a
voluntary petition in bankruptcy or a voluntary petition or
answer seeking liquidation, reorganization or other relief
with respect to itself or its debts under the Federal
bankruptcy laws, as now or hereafter constituted or any
other applicable Federal or state bankruptcy, insolvency or
other similar law, or shall consent to the entry or order
for relief in an involuntary case under any such law or the
Company shall file an answer admitting the material
allegations of a petition filed against it in any such
proceeding, or shall otherwise seek relief under the
provisions of any now existing or future Federal or state
bankruptcy, insolvency or other similar law providing for
the reorganization or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors;
(vii) An order, judgment or decree shall be entered in
any proceedings by any court of competent jurisdiction
appointing, without the consent of the Company, a receiver,
trustee or liquidator of the Company or of any substantial
part of its property, or any substantial part of the
property of the Company shall be sequestered, and any such
order, judgment, decree, appointment or sequestration shall
remain in force undismissed, unstayed or unvacated for a
period of 90 days after the date of entry thereof;
(viii) petition against the Company in a proceeding
under the Federal bankruptcy laws or other insolvency laws,
as now or hereafter in effect, shall be filed and shall not
be withdrawn or dismissed within 90 days thereafter, or,
<PAGE>
under the provisions of any law providing for reorganization
or winding up of corporations which may apply to the
Company, any court of competent jurisdiction shall assume
jurisdiction, custody or control of the Company of any
substantial part of its property and such jurisdiction,
custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of 90 days;
(ix) the Class B Liquidity Facility shall cease to be
in full force and effect and the amount to be drawn thereon
has not been reduced to zero or the funds, if any, on
deposit in the Class B Cash Collateral Account shall have
become subject to any writ, judgment, warrant of attachment,
execution or similar process which shall not have been
stayed, vacated, discharged or dismissed within 30 days from
the entry thereof;
(x) a Collateral Access Event under any other
Indenture shall have occurred and be continuing.
provided that, notwithstanding anything to the contrary in this
Indenture, any failure of the Company to perform or observe any
covenant, condition or agreement therein shall not constitute a
Collateral Access Event under clause (vi) above if such failure
is caused solely by reason of an event referred to in the
definition of "Event of Loss" so long as the Company, is
continuing to comply with the applicable terms of Section 4.5 of
the Collateral Agreement.
SECTION 6.02. Acceleration of Maturity; Rescission and
Annulment. If a Collateral Access Event occurs as a result of
clauses (vi), (vii) or (viii) of Section 6.01, then the unpaid
principal of all Notes, together with interest accrued but unpaid
thereon and all other amounts due to the Noteholders, will be
Accelerated. In addition, if the Class A Notes or the Class C
Notes become Accelerated, then the unpaid principal amount of all
the Notes, together with interest accrued but unpaid thereon and
all other amounts due in respect thereof, will be Accelerated.
If any other Collateral Access Event should occur and be
continuing, the Indenture Trustee or holders of a majority in
Outstanding Amount of the Notes may Accelerate the principal of
the Notes. Such Acceleration may be rescinded by the holders of
a majority in principal amount of the Notes then outstanding as
set forth below.
<PAGE>
At any time after such declaration of acceleration of
maturity has been made and before a judgment or decree for
payment of the money due has been obtained by the Indenture
Trustee as hereinafter in this Article VI provided, the
Noteholders of Notes representing a majority of the Outstanding
Amount of the Notes, by written notice to the Company and the
Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Company has paid or caused to be paid to the
Indenture Trustee a sum sufficient to pay
(A) all payments of principal of and interest on
all Notes and all other amounts that would then be due
and payable hereunder or upon such Notes if the
Collateral Access Event giving rise to such
Acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel; and
(ii) all Collateral Access Events, other than the
nonpayment of the principal of the Notes that has become due
solely by such Acceleration, have been cured or waived as
provided in Section 6.11.
No such rescission shall affect any subsequent default
or impair any right consequent thereto.
SECTION 6.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee. (a) The Company shall be
liable to the Indenture Trustee for all reasonable legal fees and
other reasonable costs and expenses incurred by the Indenture
Trustee in connection with any Collateral Access Event on the
exercise of remedies hereunder with respect thereto.
(b) In the event the Indenture Trustee is the
Controlling Party, in case the Company shall fail forthwith to
pay such amounts upon such demand, the Indenture Trustee, in its
own name and as trustee of an express trust, may institute a
Proceeding for the collection of the sums so due and unpaid, and
may prosecute such Proceeding to judgment or final decree, and
may enforce the same against the Company or other obligor upon
such Notes and collect in the manner provided by law out of the
property of the Company or other obligor upon such Notes,
wherever situated, the moneys adjudged or decreed to be payable.
<PAGE>
(c) If a Collateral Access Event occurs and is
continuing, the Indenture Trustee may, as more particularly
provided in Section 6.04, in its discretion, proceed to protect
and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most
effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy or legal or equitable right
vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the
Company or any other obligor upon the Notes or any Person having
or claiming an ownership interest in the Collateral, Proceedings
under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or other similar law, or
in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official
shall have been appointed for or taken possession of the Company
or its property or such other obligor or Person, or in case of
any other comparable judicial Proceedings relative to the Company
or other obligor upon the Notes, or to the creditors or property
of the Company or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be
due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section,
shall be entitled and empowered, by intervention in such
Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect
of the Notes and to file such other papers or documents as
may be necessary or advisable in order to have the claims of
the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Noteholders in any
election of a trustee, a standby trustee or Person
performing similar functions in any such Proceedings;
<PAGE>
(iii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute all amounts received with respect to the claims
of the Noteholders and of the Indenture Trustee on their
behalf; and
(iv) 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 Indenture Trustee or the Noteholders
allowed in any judicial proceedings relative to the Company,
its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar
official in any such Proceeding is hereby authorized by each
Noteholder to make payments to the Indenture Trustee, and, in the
event that the Indenture Trustee shall consent to the making of
payments directly to such Noteholders, to pay to the Indenture
Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture
Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to
authorize the Indenture Trustee to authorize or consent to or
vote for or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Noteholder or to
authorize the Indenture Trustee to vote in respect of the claim
of any Noteholder in any such proceeding except, as aforesaid, to
vote for the election of a trustee in bankruptcy or similar
Person.
(f) All rights of action and of asserting claims under
this Indenture, or under any of the Notes, may be enforced by the
Indenture Trustee without the possession of any of the Notes or
the production thereof in any trial or other Proceedings relative
thereto, and any such action or Proceedings instituted by the
Indenture Trustee shall be brought in its own name as trustee of
an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the
Indenture Trustee, each predecessor Indenture Trustee and their
respective agents and attorneys, shall be for the ratable benefit
of the Noteholders.
(g) In any Proceedings brought by the Indenture
Trustee (and also any Proceedings involving the interpretation of
any provision of this Indenture to which the Indenture Trustee
<PAGE>
shall be a party), the Indenture Trustee shall be held to
represent all the Noteholders, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
(h) The Indenture Trustee may file such proofs of
claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
and of the Noteholders allowed in any judicial proceedings
relating to the Company, its creditors, or its property.
(i) Notwithstanding any other provision hereof, if any
payment of principal of the Notes shall not be made when and as
the same shall become due and payable, or if any payment of
interest on the Notes shall not be made when the same shall
become due and payable and such failure shall continue for the
period prescribed in Section 6.01(a), the Indenture Trustee shall
be entitled to recover judgment, in its own name and as trustee
of an express trust upon the Notes for the whole amount of such
principal or interest, as the case may be, remaining unpaid.
SECTION 6.04. Remedies; Priorities. (a) If the Notes shall
have been Accelerated, the Indenture Trustee shall act as the
Controlling Party under the Collateral Agreement unless all
amounts owing to the Noteholders have been paid in full, subject
to the rights of the Liquidity Providers to become the
Controlling Party under certain circumstances set forth in the
Collateral Agreement.
(b) If the Indenture Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money
or property in accordance with Section 2.09(d).
The Indenture Trustee may fix a record date and payment
date for any payment to Noteholders pursuant to this Section. At
least 15 days before such record date, the Company shall mail to
each Noteholder and the Indenture Trustee a notice that states
the record date, the payment date and the amount to be paid.
SECTION 6.05. Limitation of Suits. No Noteholder shall
have any right to institute any Proceeding, judicial or
otherwise, with respect to this Indenture, the Collateral
Agreement or any Notes, or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(i) such Noteholder has previously given written
notice to the Indenture Trustee of a continuing Collateral
Access Event;
<PAGE>
(ii) the Noteholders of not less than 25% of the
Outstanding Amount of the Notes have made written request to
the Indenture Trustee to institute such Proceeding in
respect of such Collateral Access Event in its own name as
Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to
the Indenture Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in complying
with such request;
(iv) the Indenture Trustee for 60 days after its
receipt of such notice, request and offer of indemnity has
failed to institute such Proceedings; and
(v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such
60-day period by the Noteholders of a majority of the
Outstanding Amount of the Notes;
it being understood and intended that no one or more Noteholders
shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture or the Collateral
Agreement to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or
preference over any other Noteholders or to enforce any right
under this Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of
Noteholders, each representing less than a majority of the
Outstanding Amount of the Notes, the Indenture Trustee in its
sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture,
and shall have no liability to any person for such action or
inaction.
SECTION 6.06. Unconditional Rights of Noteholders to
Receive Principal and Interest. Notwithstanding any other
provisions in this Indenture, the right of any Noteholder to
receive payment of the principal of and interest, if any, on the
Note held by it on or after the respective due dates thereof
expressed in such Notes or in this Indenture (or, in the case of
redemption, on or after the Redemption Date) and to institute
suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the
consent of such Noteholder.
<PAGE>
SECTION 6.07. Restoration of Rights and Remedies. If the
Indenture Trustee or any Noteholder has instituted any Proceeding
to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason or
has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Company, the
Indenture Trustee and the Noteholders shall, subject to any
determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee and the
Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 6.08. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Indenture Trustee
or to the Noteholders 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 6.09. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee or any Noteholder to exercise
any right or remedy accruing upon any Potential Collateral Access
Event or Collateral Access Event shall impair any such right or
remedy or constitute a waiver of any such Potential Collateral
Access Event or Collateral Access Event or an acquiescence
therein. Every right and remedy given by this Article VI or by
law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee or by the Noteholders, as the
case may be.
SECTION 6.10. Control by Noteholders. The Noteholders
holding a majority of the Outstanding Amount of the Notes may
direct the time, method and place of conducting any Proceeding
for any remedy available to the Indenture Trustee or exercising
any trust or power conferred on the Indenture Trustee hereunder
with respect to the Notes. However, the Indenture Trustee may
refuse to follow any direction that conflicts with law or this
Indenture that is unduly prejudicial to the rights of the
Noteholders so affected or that would subject the Indenture
Trustee to personal liability.
<PAGE>
SECTION 6.11. Waiver of Existing Defaults. The Noteholders
of not less than a majority Outstanding Amount of the Notes, by
notice to the Indenture Trustee, may waive on behalf of the
Noteholders any existing Potential Collateral Access Event or
Collateral Access Event and its consequences except (i) a
Potential Collateral Access Event or Collateral Access Event in
the payment of the principal of or Make Whole Premium, if any, or
interest on any Notes or (ii) in respect of a covenant or
provision in this Agreement which pursuant to Section 9.01 cannot
be amended or modified without the consent of each Noteholder
affected thereby.
Upon any such waiver, such Potential Collateral Access Event
shall cease to exist and be deemed to have been cured and not to
have occurred, and any Collateral Access arising therefrom shall
be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Potential Collateral Access Event or
Collateral Access Event or impair any right consequent thereto.
The Indenture Trustee may file such proofs of claim and
other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee and of the
Holders allowed in any judicial proceedings relating to any
obligor on the Certificates, its creditors, or its property.
SECTION 6.12. Undertaking for Costs. All parties to this
Indenture agree, and each Noteholder by such Noteholder's
acceptance of its Notes shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in
any suit against the Indenture Trustee for any action taken or
omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable
costs, including reasonable attorneys' fees and expenses, against
any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to
(a) any suit instituted by the Indenture Trustee, (b) any suit
instituted by any Noteholder, or group of Noteholders, in each
case holding in the aggregate more than 10% of the Outstanding
Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such
Note and in this Indenture (or, in the case of redemption, on or
after the Redemption Date).
<PAGE>
SECTION 6.13. Waiver of Stay or Extension Laws. The
Company for itself and all who may claim under it waives, to the
extent that it lawfully may, all right to have the property in
the Collateral marshalled upon any foreclosure thereof, and
agrees that any court having jurisdiction to foreclose the
Collateral Agreement may order the sale of the Collateral as an
entirety.
If any law referred to in this Section 6.13 and now in
force, of which the Company or its successors might take
advantage despite this Section 6.13, shall hereafter be repealed
or cease to be in force, such law shall not thereafter be deemed
to constitute any part of the contract herein contained or to
preclude the application of this Section 6.13.
SECTION 6.14. Action on Notes. The Indenture Trustee's
right to seek and recover judgment on the Notes or under this
Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this
Indenture. Neither any rights or remedies of the Indenture
Trustee nor the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Company or by
the levy of any execution under such judgment upon any portion of
the Collateral or upon any of the assets of the Company. Any
money or property collected by the Indenture Trustee shall be
applied in accordance with Section 2.09(d).
ARTICLE VII.
THE INDENTURE TRUSTEE
SECTION 7.01. Duties of Indenture Trustee. (a) If a
Collateral Access Event has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in
it by this Indenture and the Collateral Agreement 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 such person's own affairs.
(b) Except during the continuance of a Collateral Access
Event:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in
this Indenture and no implied covenants or obligations shall
be read into this Indenture against the Indenture Trustee;
and
<PAGE>
(ii) in the absence of bad faith on its part, the
Indenture 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
Indenture Trustee and conforming to the requirements of this
Indenture; however, in the case of any such certificates or
opinions which by any provision hereof are specifically
required to be furnished to the Indenture Trustee, the
Indenture Trustee shall examine the certificates and
opinions to determine whether or not they conform on their
face to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from
liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible
Officer unless it is proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Indenture 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 6.10 or otherwise from Noteholders under the
Indenture.
(d) Every provision of this Indenture that in any way
relates to the Indenture Trustee is subject to paragraphs (a),
(b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest
on any money received by it except as the Indenture Trustee may
agree in writing with the Company.
(f) Money held in trust by the Indenture Trustee need not
be segregated from other funds except to the extent required by
law or the terms of this Indenture or the Collateral Agreement.
(g) No provision of this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if
it shall have reasonable grounds to believe that repayments of
such funds or adequate indemnity satisfactory to it against such
loss, liability or expense is not reasonably assured to it.
<PAGE>
(h) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Indenture Trustee shall be subject to the provisions of this
Section 7.01.
SECTION 7.02. Directions to Collateral Agent. The
Indenture Trustee may, and upon the request of a Majority in
Interest of the Noteholders shall, take such actions (including
the giving of direction or notice) as are permitted or required
to be taken by the Indenture Trustee under the Collateral
Agreement including, but not limited to, the following:
(i) sending notice of a Collateral Access Event
(which, if required by the Collateral Agreement, shall
specify the applicable section of the Indenture under which
any such event arises);
(ii) sending a Notice of Acceleration pursuant to
Section 4.2(a) of the Collateral Agreement;
(iii) when the Indenture Trustee is the Controlling
Party pursuant to the terms of the Collateral Agreement
directing the Collateral Agent in the exercise of remedies
under the Collateral Agreement; and
(iv) removing the Collateral Agent pursuant to Section
9.2 of the Collateral Agreement;
provided, however, that without the consent of each Noteholder,
the Indenture Trustee will not take any action which, pursuant to
Section 9.01 hereof, expressly requires the consent of each
Noteholder affected thereby.
SECTION 7.03. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper
person. The Indenture Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of
Counsel. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
<PAGE>
(c) The Indenture Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a custodian or
nominee, and the Indenture Trustee shall not be responsible for
any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(d) The Indenture Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Noteholders,
unless such Noteholders shall have offered to the Indenture
Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(e) The Indenture 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; provided,
however, that the Indenture Trustee's conduct does not constitute
wilful misconduct, negligence or bad faith.
(f) The Indenture Trustee may consult with counsel of
its selection, and the advice or opinion of counsel with respect
to legal matters relating to this Indenture and the Notes shall
be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(g) The Indenture Trustee shall not be responsible for
ascertaining whether any transfer pursuant to Sections 2.04, 2.05
or 2.06 complies with securities or blue sky laws, including,
without limitation, the Securities Act of 1933, as amended;
provided, however, that to the extent the Indenture Trustee is to
receive a certificate with respect to a transfer pursuant to
Sections 2.04, 2.05 or 2.06, the form of which is attached
hereto, the Indenture Trustee shall be responsible for ensuring
that such certificate meets the requirements for such as set
forth in this Indenture.
SECTION 7.04. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may
become the owner or pledgee of the Notes and may otherwise deal
with the Company or its affiliates with the same rights it would
have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with
like rights. However, the Indenture Trustee must comply with
Section 7.12.
<PAGE>
SECTION 7.05. Indenture Trustee's Disclaimer. The
Indenture Trustee shall not be (i) responsible for and makes no
representation as to the validity or adequacy of the Collateral,
this Indenture or the Notes, (ii) accountable for the Company's
use of the proceeds from the Notes and (iii) responsible for any
statement of the Company in the Indenture or in any document
issued in connection with the sale of the Notes or in the Notes
other than the Indenture Trustee's certificate of authentication.
SECTION 7.06. Notice of Collateral Access Events. If a
Collateral Access Event occurs and is continuing and if it is
actually known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall (i) promptly send written notice
thereof to the Company and (ii) within 90 days after it occurs,
mail to each Noteholder, the Collateral Agent and each Liquidity
Provider, in the manner and to the extent provided in Section
11.06, notice of all such Collateral Access Events which are not
cured. Except in the case of a default in the payment of the
principal of, Make Whole Premium, if any, or interest on, the
Notes, the Indenture Trustee shall be protected in withholding
the notice required under clause (ii) above (except from a
Liquidity Provider) if and so long as the executive committee or
trust committee of directors of the Indenture Trustee and/or
Responsible Officers thereof in good faith determines that
withholding such notice is in the interest of the Noteholders.
In addition, if on any day when the Indenture Trustee is required
to make any payment on or in respect of the Notes of the
character described in Section 6.01(i) and on such day does not
or is unable to make the full amount of such payment, the
Indenture Trustee shall on the next following Business Day give
notice thereof to the Company.
SECTION 7.07. Reports by Indenture Trustee to Holders.
Within 60 days after May 15 of each year commencing with the year
1996, so long as any Notes are Outstanding under this Agreement,
the Indenture Trustee shall transmit to the Holders as provided
in Section 313(c) of the Trust Indenture Act a brief report dated
as of such May 15 if required by Section 313(a) of the Trust
Indenture Act.
SECTION 7.08. Compensation and Indemnity. The Company
shall pay to the Indenture Trustee from time to time such
compensation for its services as shall be separately agreed to by
the Company and the Indenture Trustee. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in
<PAGE>
addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents,
counsel, accountants and experts. The Company shall indemnify
the Indenture Trustee in its trust and individual capacities
against any and all loss, damage, claim, tax (excluding any taxes
imposed on the compensation received by the Indenture Trustee for
its services hereunder), liability or expense (including the fees
and expenses of counsel) of any kind and nature whatsoever
incurred by it in connection with the acceptance and
administration of this trust and the performance of its duties
hereunder. The Indenture Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Indenture Trustee may have
separate counsel and the Company shall pay the fees and expenses
of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own wilful
misconduct, negligence or bad faith.
The Company's payment obligations to the Indenture Trustee
pursuant to this Section shall survive the discharge of this
Indenture. When the Indenture Trustee incurs expenses after the
occurrence of a Collateral Access Event specified in Section
6.01(vi), (vii) or (viii), the expenses are intended to
constitute expenses of administration under Title 11 of the
United States Code or any other applicable Federal or state
bankruptcy, insolvency or similar law.
SECTION 7.09. Replacement of Indenture Trustee. No
resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee shall become
effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 7.09. The Indenture
Trustee may resign at any time by giving at least 30 days prior
written notice to the Company, the Collateral Agent and each
Liquidity Provider. The Noteholders of a majority in Outstanding
Amount of the Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor
Indenture Trustee. The Company shall remove the Indenture
Trustee if:
(i) the Indenture Trustee is adjudged a bankrupt or
insolvent;
(ii) a receiver or other public officer takes charge
of the Indenture Trustee or its property; or
<PAGE>
(iii) the Indenture Trustee otherwise becomes incapable
of acting.
If the Indenture Trustee resigns or is removed or if a
vacancy exists in the office of Indenture Trustee for any reason
(the Indenture Trustee in such event being referred to herein as
the retiring Indenture Trustee), the Company shall promptly
appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee
and to the Company. Thereupon the resignation or removal of the
retiring Indenture Trustee shall become effective, and the
successor Indenture Trustee shall have all the rights, powers and
duties of the Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession
to the Noteholders, the Collateral Agent and each Liquidity
Provider. The retiring Indenture Trustee shall promptly transfer
all property held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within
60 days after the retiring Indenture Trustee resigns or is
removed, the retiring Indenture Trustee, the Company or the
Noteholders of a majority in Outstanding Amount of the Notes may
petition any court of competent jurisdiction for the appointment
of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section, the Company's obligations under Section
7.08 shall continue for the benefit of the retiring Indenture
Trustee.
SECTION 7.10. Successor Indenture Trustee by Merger. If
the Indenture Trustee consolidates with, merges or converts into,
or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation
or banking association without any further act shall be the
successor Indenture Trustee. The Indenture Trustee shall provide
the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall
succeed to the trusts created by this Indenture any of the Notes
shall have been authenticated but not delivered, any such
successor to the Indenture Trustee may adopt the certificate of
<PAGE>
authentication of any predecessor trustee, and deliver such Notes
so authenticated; and in case at that time any of the Notes shall
not have been authenticated, any successor to the Indenture
Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor to the
Indenture Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Notes or in this
Indenture provided that the certificate of the Indenture Trustee
shall have.
SECTION 7.11. Appointment of Co-Trustee or Separate
Trustee. (a) Notwithstanding any other provisions of this
Indenture, at any time, for the purpose of meeting any legal
requirement of any jurisdiction in which any part of the
Collateral may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments
to appoint one or more Persons reasonably acceptable to the
Company to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the
Collateral, and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders, such title to
the Collateral, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations,
rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall
be required to meet the terms of eligibility as a successor
trustee under Section 7.12 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be
required under Section 7.09 hereof.
(b) Every separate trustee and co-trustee shall, to
the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Indenture Trustee shall be
conferred or imposed upon and exercised or performed by the
Indenture Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture
Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or
any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Indenture
Trustee;
<PAGE>
(ii) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee
hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of
the then separate trustees and co-trustees, as effectively as if
given to each of them. Every instrument appointing any separate
trustee or co-trustee shall refer to this Agreement and the
conditions of this Article VII. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument
of appointment, either jointly with the Indenture Trustee or
separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting
the liability of, or affording protection to, the Indenture
Trustee. Every such instrument shall be filed with the Indenture
Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact
with full power and authority, to the extent not prohibited by
law, to do any lawful act under or in respect of this Indenture
on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Indenture Trustee,
to the extent permitted by law, without the appointment of a new
or successor trustee.
SECTION 7.12. Trustee Eligibility. This Indenture shall at
all times have an Indenture Trustee which shall be eligible to
act as Trustee under Section 310(a) of the Trust Indenture Act
and (i) shall have a combined capital and surplus of at least
$75,000,000 or (ii) shall have a combined capital and surplus in
excess of $5,000,000 and its obligations, whether now in
existence or hereafter incurred, are fully and unconditionally
guaranteed by a corporation organized and doing business under
the laws of the United States, any State or Territory thereof or
of the District of Columbia and having a combined capital and
surplus of at least $75,000,000. If such corporation publishes
reports of conditions at least annually, pursuant to law or to
the requirements of Federal, State, Territorial, or District of
Columbia supervising or examining authority, then for the
<PAGE>
purposes of this Section 7.12, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of conditions
so published. In case at any time the Indenture Trustee shall
cease to be eligible in accordance with the provisions of this
Section 7.12, the Indenture Trustee shall resign immediately in
the manner and with the effect specified in Section 7.09.
SECTION 7.13. Information to Collateral Agent. The
Indenture Trustee shall promptly, and in no event later than the
dates and times specified in Section 3.1 of the Collateral
Agreement, deliver to the Collateral Agent the information
required pursuant to such Section 3.1 in connection with the
payment of any amounts provided for therein.
ARTICLE VIII.
NOTEHOLDERS' LISTS AND REPORTS
SECTION 8.01. Company to Furnish Indenture Trustee Names
and Addresses of Noteholders. The Company will furnish or cause
to be furnished to the Indenture Trustee (a) not more than five
days after each Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and
addresses of the Noteholders as of such Record Date and (b) at
such other times as the Indenture Trustee may request in writing,
within 30 days after receipt by the Company of any such request,
a list of similar form and content as of a date not more than 10
days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no
such list shall be required to be furnished.
SECTION 8.02. Preservation of Information; Communications
to Noteholders. (a) The Indenture 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 the Noteholders,
which list shall be available to the Company for inspection. If
the Indenture Trustee is not the Registrar, the Registrar shall
furnish (and the Company shall cause the Registrar to furnish) to
the Indenture Trustee semi-annually on or before each Payment
Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as
the Indenture Trustee may reasonably require, containing all the
information in the possession or control of the Registrar as to
the names and addresses of the Noteholders.
<PAGE>
SECTION 8.03. Any Noteholder (who has owned a Note for at
least six months) may, by written request to the Indenture
Trustee, obtain access to the list of all Noteholders from the
Indenture Trustee for the purpose of communicating with such
Noteholders with respect to their rights under the Indenture or
the Notes. The Indenture Trustee may elect not to afford the
requesting Noteholder access to such list if it agrees to mail
the desired communication or proxy, on behalf and at the expense
of the requesting Noteholder, to all Noteholders of record.
ARTICLE IX.
SUPPLEMENTAL INDENTURES AND AMENDMENTS TO
THIS INDENTURE AND OTHER DOCUMENTS
SECTION 9.01. Amendments; Waivers, etc. of Documents;
Direction to Collateral Agent. (a) At any time and from time to
time, (i) the Company (but only with the written consent of each
Liquidity Provider, if required by the terms of the applicable
Liquidity Agreement) and the Indenture Trustee (but only with the
written consent of a Majority in Interest of the Noteholders) may
execute a supplement hereto for the purpose of adding provisions
to, or changing or eliminating provisions of, this Indenture
(including any appendix or schedule hereto) and (ii) the
Indenture Trustee (but only with the written consent of a
Majority in Interest of the Noteholders) may consent to or
execute a written amendment of or supplement to, or waiver or
consent under, the Collateral Agreement, the Class A Indenture or
the Class C Indenture; provided, however, that, without the
consent of each Noteholder and, if required by the terms of the
Liquidity Agreement, the Liquidity Provider, no such amendment,
supplement, waiver or consent shall
(A) modify any of the provisions of Section 6.11, this
Section 9.01 or the definitions of the terms "Majority in
Interest", "Outstanding," or "Outstanding Amount" contained
herein or in any other Basic Document,
(B) reduce the amount or extend the time of payment of
any amount owing or payable under any Note (including,
without limitation, any principal of any Note expected to be
paid on any Payment Date) or increase or reduce the Make
Whole Premium or interest payable on any Note or otherwise
affect the terms of payment of any Note,
(C) modify, amend or supplement the provisions of
Section 2.5, 3.2, 3.3, 3.6 or 10.1 of the Collateral
Agreement or
<PAGE>
(D) make any Note payable in money other than Dollars.
This Section 9.01 shall not apply to any indenture or indentures
supplemental hereto to the extent permitted by, and complying
with the terms of Section 7.11 or 9.04. Notwithstanding the
foregoing, without the consent of each Noteholder, no such
amendment, supplement, waiver or modification of the terms of any
agreement or document shall expressly permit the creation of any
Lien on the Collateral or any part thereof ranking prior to or on
a parity with the Lien of the Collateral Agreement, or deprive
any Noteholder of the benefit of the Lien of the Collateral
Agreement on the Collateral, except as provided in Sections 6.1
and 6.2 of the Collateral Agreement or in connection with the
exercise of remedies under Article V of the Collateral Agreement.
It shall not be necessary for the consent of the
Noteholders under this Section 9.01 to approve the particular
form of any proposed supplement or amendment to this Indenture,
the Collateral Agreement or any Basic Document, but it shall be
sufficient if such consent shall approve the substance thereof.
(b) The Indenture Trustee agrees that, without the
consent of each affected Class C Noteholder, the provisions of
Section 2.16 and this Section 9.01(b) may not be amended,
supplemented or modified in a manner that would adversely affect
the rights of such Class C Noteholders.
SECTION 9.02. Trustees Protected. If, in the opinion of
the institution acting as the Indenture Trustee hereunder, any
document required to be executed pursuant to the terms of Section
9.01 hereof adversely affects any right, duty, immunity or
indemnity with respect to it under this Indenture, the Collateral
Agreement or the other Basic Documents, the Indenture Trustee in
its discretion may decline to execute such document. In
executing, or accepting the additional trusts created by any
supplemental indenture permitted by this Article IX or the
modification thereby of the trusts created by this Indenture, the
Indenture Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized
or permitted by this Indenture.
SECTION 9.03. [Reserved]
<PAGE>
SECTION 9.04. No Noteholder Consent Necessary for Indenture
Supplement, etc. The Company and the Indenture Trustee may enter
into an indenture or indentures supplemental hereto and
agreements supplemental to the Collateral Agreement or the
Indenture Trustee may consent to an amendment or supplement to or
waiver or consent under, the Class A Indenture or the Class C
Indenture for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge
any property or assets to the Collateral Agent as security
for the Secured Obligations;
(b) to evidence the succession of another Person to
the Company, or successive successions, and the assumption
by the successor Person of the covenants, agreements and
obligations of the Company, and in the Collateral Agreement,
the Notes and the other Basic Documents;
(c) to add to the covenants of the Company such
further covenants, restrictions, conditions or provisions as
the Company and the Indenture Trustee shall consider to be
for the protection of the Noteholders, and to make the
occurrence, or the occurrence and continuance, of a default
in any such additional covenants, restrictions, conditions
or provisions a Collateral Access Event permitting the
enforcement of all or any of the several remedies provided
herein or in the Collateral Agreement; provided, however,
that in respect of any such additional covenant,
restriction, condition or provision such supplemental
indenture or agreement may provide for a particular period
of grace after default (which period may be shorter or
longer than that allowed in the case of the other defaults)
or may provide for an immediate enforcement upon such a
Collateral Access Event or may limit the remedies available
to the Indenture Trustee or the Collateral Agent upon such a
Collateral Access Event or may limit the right of the
Noteholders to waive such a Collateral Access Event;
(d) to surrender any rights or power conferred herein
or in the Collateral Agreement upon the Company;
(e) to cure any ambiguity or to correct or supplement
any provision contained herein or in the Collateral
Agreement, the Class B Indenture, the Class C Indenture or
which may be defective or inconsistent with any other
provision contained herein or therein;
<PAGE>
(f) to correct or amplify the description of any
property at any time subject to the Lien of the Collateral
Agreement or better to assure, convey and confirm unto the
Collateral Agent any property subject or required to be
subject to the Lien of the Collateral Agreement; and
(g) to amend or supplement any provision contained
herein, in the Collateral Agreement, the Class A Indenture,
the Class C Indenture or in any supplemental indenture or
agreement if such amendment or supplement shall not
materially adversely affect the Noteholders or shall confer
benefits upon the Noteholders.
The Indenture Trustee is hereby authorized to join in the
execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be contained
therein and to accept the conveyance, transfer, assignment,
mortgage or pledge of any property thereunder or under the
Collateral Agreement, but the Indenture Trustee shall not be
obligated to enter into any such supplemental indenture which
adversely affects the Indenture Trustee's own rights, duties or
immunities under this Indenture or otherwise, whether in its
trust or individual capacity.
Any supplemental indenture or supplemental agreement under
this Section 9.04 may be executed without the consent of the
Noteholders, notwithstanding any of the provisions of Section
9.01.
Promptly after the execution by the Company and the
Indenture Trustee of any supplemental indenture or supplemental
agreement pursuant to this Section 9.04, the Indenture Trustee
shall mail a notice thereof by first-class mail to each Liquidity
Provider at its address as provided herein and to the Noteholders
at their addresses as they shall appear on the Note Register of
the Note Registrar, setting forth in general terms the substance
of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such
supplemental indenture.
SECTION 9.05. Payment for Consent. Neither the Company nor
any of its Affiliates shall, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or
otherwise, to any Noteholder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of
this Indenture, the Collateral Agreement or the Notes unless such
consideration is offered to be paid to all Noteholders that so
consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or
agreement.
<PAGE>
SECTION 9.06. Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the
provisions hereof, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective
rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Indenture Trustee, the Company, and
the Noteholders shall therefore be determined, exercised and
enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.07. Notation on Notes in Respect of Supplemental
Indentures. Notes authenticated and delivered after the
execution of any supplemental indenture pursuant to the
provisions of this Article may bear a notation in form approved
by the Indenture Trustee as to any matter provided for by such
supplemental indenture. If the Company or the Indenture Trustee
shall so determine, new Notes so modified as to conform, in the
opinion of the Company and the Indenture Trustee, to any
modification of this Indenture contained in any such supplemental
indenture may be prepared by the Company, authenticated by the
Indenture Trustee and delivered in exchange for the Outstanding
Notes.
SECTION 9.08. Notice to Rating Agencies. No less than one
Business Day prior to its execution of each amendment, consent,
modification, supplement or waiver contemplated by Article IX
hereof, the Company shall send a copy thereof to each Rating
Agency.
ARTICLE X
COLLATERAL AGREEMENT
SECTION 10.01. Collateral Agreement. (a) In order to
secure the due and punctual payment of the Secured Obligations,
the Company, the Indenture Trustee, the Class A Indenture
Trustee, the Class C Indenture, the Liquidity Providers and the
Collateral Agent have entered into the Collateral Agreement to
create the Liens created therein and for related matters. The
Company and the Indenture Trustee, hereby agree that the
Collateral Agent holds the Collateral in trust for the benefit of
the Noteholders, the Indenture Trustee and the other Secured
Parties pursuant to the terms of the Collateral Agreement.
(b) Each Noteholder, by accepting a Note, agrees to
all of the terms and provisions of the Collateral Agreement as
the same may be amended from time to time pursuant to the
provisions thereof and of this Indenture.
<PAGE>
(c) As more fully set forth in the Collateral
Agreement, the Noteholders, and the Indenture Trustee on behalf
of such Noteholders, have rights in and to the Collateral which
are as provided therein subordinate to the rights of the
Liquidity Providers in and to the Collateral and prior to the
rights of (i) the holders of the Class A Notes and the Class A
Indenture Trustee on behalf of such holders and (ii) the holders
of the Class C Notes and the Class C Indenture Trustee on behalf
of such holders, in and to the Collateral.
(d) As amongst the Noteholders, the Collateral as now
or hereafter constituted shall be held for the equal and ratable
benefit of the Noteholders without preference, priority or
distinction of any thereof over any other by reason of difference
in time of issuance, sale or otherwise, as security for the
Notes.
SECTION 10.02. Release upon Termination of the Company's
Obligations. In the event that this Indenture shall be satisfied
and discharged in accordance with Section 5.01, the Indenture
Trustee shall deliver to the Collateral Agent a notice stating
that the Indenture Trustee, on behalf of the Noteholders,
disclaims and gives up any and all rights it has in or to the
Collateral and any rights it has under the Collateral Agreement
and, upon and after the receipt by the Collateral Agent of such
notice, the Collateral Agent shall not be deemed to hold the
Collateral on behalf of the Indenture Trustee for the benefit of
the Noteholders.
SECTION 10.03. Notice of Successor Collateral Agent. In
the case of any appointment of a successor to the Collateral
Agent pursuant to the Collateral Agreement or any merger,
conversion, consolidation or sale of all or substantially all of
the corporate trust business of the Collateral Agent pursuant to
the Collateral Agreement, the Indenture Trustee shall give prompt
written notice thereof to each Noteholder.
<PAGE>
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions, etc.
Upon any application or request by the Company to the Indenture
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Indenture Trustee (i) an
Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed
action have been complied with and (ii) an Opinion of Counsel
stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with except that, in the
case of any such application or request as to which the
furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion
need be furnished.
SECTION 11.02. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that the person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person,
he or she has made such examination or investigation as is
necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion
of such person, such condition or covenant has been complied
with.
SECTION 11.03. Form of Documents Delivered to Indenture
Trustee. In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
<PAGE>
Any certificate or opinion of an Responsible Officer of the
Company may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion
is based are erroneous. Any such certificate of an Responsible
Officer or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company,
stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
Whenever in this Indenture, in connection with any
application or certificate or report to the Indenture Trustee, it
is provided that the Company shall deliver any document as a
condition of the granting of such application, or as evidence of
the Company's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or
report (as the case may be), of the facts and opinions stated in
such document shall in such case be conditions precedent to the
right of the Company to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall
not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or
opinion contained in any such document as provided in Article
VII.
SECTION 11.04. Acts of Noteholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such
Noteholders in person or by agents duly appointed in writing; and
except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby
expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
<PAGE>
Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 7.01) conclusive in favor of the
Indenture Trustee and the Company, if made in the manner provided
in this Section.
(b) The fact and date of the execution by any person
of any such instrument or writing may be proved in any manner
that the Indenture Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes
held by any Person, and date of holding the same, shall be proved
by the Note Register. If the Company shall solicit from the
Noteholders any request, demand, authorization, direction,
notice, consent, waiver or other Act, the Company may, at its
option, in or pursuant to a board resolution, fix in advance a
record date for the determination of Noteholders entitled to give
such request, demand, authorization, direction, notice, consent,
waiver or other Act, but the Company shall have no obligation to
do so. Notwithstanding Section 316(c) of the Trust Indenture
Act, such record date shall be the record date specified in or
pursuant to such board resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of
Noteholders generally in connection therewith and not later than
the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such
record date, but only the Noteholders of record at the close of
business on such record date shall be deemed to be Noteholders
for the purposes of determining whether Noteholders of the
requisite proportion of Outstanding Notes have authorized or
agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Notes shall be computed as of such record
date; provided that, no such authorization, agreement or consent
by the Noteholders on such record date shall be deemed effective
unless it shall become effective pursuant to the provisions of
this Indenture not later than eleven months after the record
date.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Noteholder of any
Notes shall bind the Noteholder of every Note issued upon the
registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Note.
<PAGE>
SECTION 11.05. Notices, etc., to Indenture Trustee, Company
and Rating Agencies. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders or other
documents provided or permitted by this Indenture to be made
upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the
Company shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with the
Indenture Trustee and received at its Corporate Trust
Office, or
(b) The Company by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder
if in writing and mailed, first-class, postage prepaid, to
the Company addressed to: USAir, Inc., Crystal Park Four,
2345 Crystal Drive, Arlington, VA 22227 Attention:
Treasurer, or at any other address previously furnished in
writing to the Indenture Trustee by the Company.
Notices required to be given to the Rating Agencies by the
Company or the Indenture Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested
to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., Airline Analyst, 99 Church Street, New
York, New York 10007 and (ii) in the case of S&P at the following
address: Standard & Poor's Rating Group, 26 Broadway (20th
Floor), New York, New York 10004, Attention: Corporate
Finance/Transportation Ratings Group; or as to each of the
foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 11.06. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such
notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class,
postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such
notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in
the manner herein provided shall conclusively be presumed to have
been duly given.
<PAGE>
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive
such notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by
Noteholders shall be filed with the Indenture Trustee but such
filing shall not be a condition precedent to the validity of any
action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it
shall be impractical to mail notice of any event to Noteholders
when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be
deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other
rights or obligations created hereunder, and shall not under any
circumstance constitute a Collateral Access Event.
SECTION 11.07. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction
hereof.
SECTION 11.08. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Company shall
bind its successors and assigns, whether so expressed or not.
All agreements of the Indenture Trustee in this Indenture
shall bind its successors, co-trustees and agents of the
Indenture Trustee.
SECTION 11.09. Separability. 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 11.10. Benefits of Indenture. Nothing in this
Indenture or in the Notes, express or implied, shall give to any
Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any
part of the Collateral, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
<PAGE>
SECTION 11.11. GOVERNING LAW. THIS INDENTURE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 11.12. Counterparts. This Indenture may be
executed in any number of counterparts, each of which so executed
shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.13. Recording of Indenture. If this Indenture
is subject to recording in any appropriate public recording
offices, such recording is to be effected by the Company and at
its expense accompanied by an Opinion of Counsel to the effect
that such recording is necessary either for the protection of the
Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the Indenture
Trustee under this Indenture.
SECTION 11.14. Disclosure of Names and Addresses of
Holders. Every Noteholder, by receiving and holding a Note,
agrees with the Company and the Indenture Trustee that neither
the Company or the Indenture Trustee nor any agent of any of them
shall be deemed to be in violation of any existing law, or of any
law hereafter enacted which does not specifically refer to
Section 312 of the Trust Indenture Act, by reason of the
disclosure of any such information as to the names and addresses
of the Noteholders in accordance with Section 312 of the Trust
Indenture Act, regardless of the source from which such
information was derived, and that the Indenture Trustee shall not
be held accountable by reason of mailing any material pursuant to
a request made under Section 312 of the Trust Indenture Act.
SECTION 11.15. Trust Indenture Act Controls. After the
effectiveness of the Registration Statement, this Indenture shall
be governed by the provisions of the Trust Indenture Act of 1939,
as amended.
SECTION 11.16. Exchange Offer. The provisions of Sections
4.04(c), (d), (e) and (f), 7.07, 11.14, 11.15 and 11.16 shall not
have any force or effect until such time as any Notes have been
exchanged for Class B Registered Notes pursuant to the Exchange
Offer.
* * *
<PAGE>
IN WITNESS WHEREOF, the Company and the Indenture
Trustee have caused this Indenture to be duly executed by their
respective officers, thereunto duly authorized, all as of the day
and year first above written.
USAIR, INC.
By: /s/Thomas A. Fink
---------------------------------
Name: Thomas A. Fink
Title: Treasurer
WILMINGTON TRUST COMPANY, not in
its individual capacity except as
expressly provided herein but
solely as Indenture Trustee
By: /s/W. Chris Sponenberg
--------------------------------
Name: W. Chris Sponenberg
Title: Financial Services Officer
<PAGE>
APPENDIX A
----------
(a) For all purposes of the Basic Documents the following
terms shall have the following meanings (such definitions to be
equally applicable to both the singular and plural forms of the
terms defined unless otherwise set forth herein). Any agreement
referred to below shall mean such agreement as amended, restated,
supplemented, waived or modified from time to time as permitted
by the terms thereof and of any other Basic Document. A
reference to a Person below includes its permitted successors and
assigns.
(b) As used in this Appendix A and in any certificate or
other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Appendix A or in any such
certificate or other document, and accounting terms partly
defined in this Appendix or in any such certificate or other
document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting
terms in this Appendix A or in any such certificate or other
document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions
contained in this Appendix A or in any such certificate or other
document shall control.
(c) The words "hereof", "herein", "hereunder" and words of
similar import when used in any Basic Document shall refer to
such Basic Document in which the word appears, as a whole and not
to any particular provision of such Basic Document; Section and
Exhibit references contained in this Appendix A are references to
Sections and Exhibits in the document in which the reference
appears unless otherwise specified; and the term "including"
shall mean "including without limitation".
"Acceleration" means, with respect to the amounts payable in
respect of any Class of Notes, the declaration of such amounts to
be immediately due and payable. "Accelerate" and "Accelerated"
have meanings correlative to the foregoing.
"Acceleration Advance" with respect to any Liquidity
Facility has the meaning assigned to such term in the applicable
Liquidity Agreement.
<PAGE>
"Act" has the meaning specified in Section 11.04(a) of the
Indentures.
"Advance" with respect to any Liquidity Facility has the
meaning assigned to such term in the applicable Liquidity
Agreement.
"Aeronautical Authority" means as of any time of
determination, the FAA or other governmental airworthiness
authority having jurisdiction over the Aircraft or the Airframe
and Engines or engines attached thereto under the laws of the
country in which the Airframe is then registered.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under
common control with such Person. For the purposes of this
definition, "control" (including "controlled by" and "under
common control with") means the power, directly or indirectly, to
direct or cause the direction of the management and policies of
such Person whether through the ownership of voting securities or
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent's Lien" has the meaning given to such term in
Section 6.4 of the Collateral Agreement.
"Agent Members" means members of or participants in the
Depository.
"Aircraft" means an Airframe together with the two Engines
whether or not either of such Engines may at the time be
installed on such Airframe or installed on any other airframe or
any other aircraft.
"Airframe" means (A) any Boeing Model 757-2B7 aircraft
(excluding the Engines and any other engines which may from time
to time be installed thereon, but including any and all Parts
which may from time to time be incorporated or installed in, or
attached to such aircraft, and including any and all Parts
removed therefrom so long as the removed Parts remain subject to
the Lien of the Indenture under the terms of Section 4.4 of the
Collateral Agreement) identified by U.S. registration number and
manufacturer's serial number in the Collateral Agreement
Supplement executed and delivered on the Closing Date, so long as
a Replacement Airframe shall not have been substituted therefor
pursuant to Section 4.5 of the Collateral Agreement, and (B) a
Replacement Airframe, so long as another Replacement Airframe
shall not have been substituted therefor pursuant to Section 4.5
of the Collateral Agreement.
<PAGE>
"Appendix" means this Appendix A.
"Applicable Indenture" means, (i) with respect to the Class
A Notes, the Class A Noteholders or the Class A Indenture
Trustee, the Class A Indenture, (ii) with respect to the Class B
Notes, the Class B Noteholders or the Class B Indenture Trustee,
the Class B Indenture and (iii) with respect to the Class C
Notes, the Class C Noteholders or the Class C Indenture Trustee,
the Class C Indenture.
"Applicable Law" means all applicable laws, treaties,
judgments, decrees, injunctions, writs and orders of any court,
governmental agency or authority and rules, regulations, orders,
directives, licenses and permits of any governmental body,
instrumentality, agency or authority.
"Appraisal" means a fair market value appraisal (which may
be a "desktop" appraisal) on the basis of an arm's-length
transaction between an informed and willing purchaser under no
compulsion to buy and an informed and willing seller under no
compulsion to sell and both having knowledge of all relevant
facts performed by any Appraiser or any other nationally
recognized appraiser selected by the Company and reasonably
acceptable to the Collateral Agent.
"Appraised Value" means at any time with respect to any
Aircraft, the appraised value thereof as set forth in the most
recent Appraisal, provided that initially, the Appraised Value of
any Aircraft means the lower of the average or the median of the
three appraisals provided by the Appraisers for such Aircraft.
"Appraisers" means Air Claims Limited, Aircraft Information
Services, Inc. and BK Associates, Inc.
"Available Liquidity Commitment" with respect to any
Liquidity Facility, has the meaning given to such term in the
Liquidity Agreement relating to such Liquidity Facility.
"Average Life Date" means, with respect to any Note, the
date which follows such date of determination by a period equal
to the Remaining Average Life of such Note.
"Aviation Act" means Subtitle VII of Title 49 of the United
States Code or any subsequent legislation that amends,
supplements or supersedes the Aviation Act.
"Basic Documents" means each of the Liquidity Agreements,
the Collateral Agreement, the Indentures and the Notes, together
with exhibits and schedules included with any of the foregoing.
<PAGE>
"Bills of Sale" means the FAA Bills of Sale and the Warranty
Bills of Sale.
"Boeing Purchase Agreement" means the agreement between the
Company and the Manufacturer relating to the purchase by the
Company of the Aircraft, as originally executed and as thereafter
modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the
Aircraft.
"Book Entry Notes" means, when used in any Indenture, a
beneficial interest in the Notes issued thereunder, ownership and
transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05 of such Indenture.
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks in any of New York or the
jurisdictions in which any of the Collateral Agent, Indenture
Trustee or the Company have their chief executive offices are
authorized or required by law, executive order or governmental
decree to be closed.
"Cash Collateral Account" means, at any time, (i) when used
in the Class A Liquidity Agreement, the Class A Cash Collateral
Account, (ii) when used in the Class B Liquidity Agreement, the
Class B Cash Collateral Account, (iii) when used in the Class C
Liquidity Agreement, the Class C Cash Collateral Account, (iv)
when used in all other Basic Documents, the Class A Cash
Collateral Account, the Class B Cash Collateral Account or the
Class C Cash Collateral Account, as applicable, and (v) when used
in the plural, the Class A Cash Collateral Account, the Class B
Cash Collateral Account and the Class C Cash Collateral Account,
collectively.
"Certificated Air Carrier" means the United States "air
carrier" within the meaning of the Act, operating pursuant to an
operating certificate issued under Chapter 447 of the Act.
"Class" means each of the Class A Notes, the Class B Notes
and the Class C Notes.
"Class A Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class A
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
<PAGE>
"Class A Committed Facility" means the lending commitment of
the Class A Liquidity Provider evidenced by the Class A Liquidity
Agreement.
"Class A Indenture" means the Class A Trust Indenture dated
as of February 15, 1996 between the Company and the Class A
Indenture Trustee.
"Class A Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class A Indenture, but solely as Indenture Trustee under the
Class A Indenture, together with any successor Indenture Trustee
under the terms of the Class A Indenture.
"Class A Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class A Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class A Liquidity Facility, the
reimbursement agreement related to such Replacement Liquidity
Facility.
"Class A Liquidity Facility" means, initially, the Class A
Committed Facility and, from and after the expiration or earlier
replacement of the Class A Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class A Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class A Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class A Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class A Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
"Class A Noteholder" means, at any time, any holder of one
or more Class A Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class A Notes" means (i) prior to the exchange of any Class
A Notes for Class A Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class A Indenture Trustee under the Class A Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class A Indenture and (ii) after the
exchange of any Class A Notes for Class A Registered Notes
pursuant to the Exchange Offer, the Class A Registered Notes and
any Class A Notes not exchanged pursuant to the Exchange Offer.
<PAGE>
"Class A Registered Notes" means any Notes issued by the
Company and authenticated by the Class A Indenture Trustee under
the Class A Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefore or replacement thereof
pursuant to the terms of the Class A Indenture.
"Class B Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class B
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
"Class B Committed Facility" means the lending commitment of
the Class B Liquidity Provider evidenced by the Class B Liquidity
Agreement.
"Class B Indenture" means the Class B Trust Indenture dated
as of February 15, 1996 between the Company and the Class B
Indenture Trustee.
"Class B Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class B Indenture, but solely as Indenture Trustee under the
Class B Indenture, together with any successor Indenture Trustee
under the terms of the Class B Indenture.
"Class B Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class B Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class B Liquidity Facility, the
agreement related to such Replacement Liquidity Facility.
"Class B Liquidity Facility" means, initially, the Class B
Committed Facility and, from and after the expiration or earlier
replacement of the Class B Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class B Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class B Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class B Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class B Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
<PAGE>
"Class B Noteholder" means, at any time, any holder of one
or more Class B Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class B Notes" means (i) prior to the exchange of any Class
B Notes for Class B Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class B Indenture Trustee under the Class B Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class B Indenture and (ii) after the
exchange of any Class B Notes for Class B Registered Notes
pursuant to the Exchange Offer, the Class B Registered Notes and
any Class B Note not exchanged pursuant to the Exchange Offer.
"Class B Registered Notes" means any Notes issued by the
Company and authenticated by the Class B Indenture Trustee under
the Class B Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefor or replacement thereof pursuant
to the terms of the Class B Indenture.
"Class C Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent and maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class C
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
"Class C Committed Facility" means the lending commitment of
the Class C Liquidity Provider evidenced by the Class C Liquidity
Agreement.
"Class C Indenture" means the Class C Trust Indenture dated
as of February 15, 1996 between the Company and the Class C
Indenture Trustee.
"Class C Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class C Indenture, but solely as Indenture Trustee under the
Class C Indenture, together with any successor Indenture Trustee
under the terms of the Class C Indenture.
"Class C Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class C Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class C Liquidity Facility, the
agreement related to such Replacement Liquidity Facility."
<PAGE>
"Class C Liquidity Facility" means, initially, the Class C
Committed Facility and, from and after the expiration or earlier
replacement of the Class C Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class C Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class C Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class C Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class C Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
"Class C Noteholder" means, at any time, any holder of one
or more Class C Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class C Notes" means (i) prior to the exchange of any Class
C Notes for Class C Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class C Indenture Trustee under the Class C Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class C Indenture and (ii) after the
exchange of any Class C Notes for Class C Registered Notes
pursuant to the Exchange Offer, the Class C Registered Notes and
any Class C Notes not exchanged pursuant to the Exchange Offer.
"Class C Registered Notes" means any Notes issued by the
Company and authenticated by the Class C Indenture Trustee under
the Class C Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefor or replacement thereof pursuant
to the terms of the Class C Indenture.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to
time a Clearing Agency effects book-entry transfers and pledges
of securities deposited with the Clearing Agency.
"Closing Date" means February 16, 1996.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated
thereunder.
<PAGE>
"Collateral" has the meaning assigned to such term in the
granting clause of the Collateral Agreement.
"Collateral Access Event" means (i) for purposes of the
Class A Indenture, any Collateral Access Event under Section 6.01
of the Class A Indenture, (ii) for purposes of the Class B
Indenture, any Collateral Access Event under Section 6.01 of the
Class B Indenture and (iii) for purposes of the Class C
Indenture, any Collateral Access Event under Section 6.01 of the
Class C Indenture.
"Collateral Agent" means Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity
except as expressly set forth in the Collateral Agreement, but
solely as Collateral Agent under the Collateral Agreement.
"Collateral Agreement" means the Collateral Agency Agreement
dated as of February 15, 1996 among the Company, the Collateral
Agent, each Liquidity Provider and each Indenture Trustee.
"Commission" means the Securities and Exchange Commission.
"Committed Facility" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Committed Facility,
(ii) when used in the Class B Liquidity Agreement, the Class B
Committed Facility, (iii) when used in the Class C Liquidity
Agreement, the Class C Committed Facility, (iv) when used in all
other Basic Documents, the Class A Committed Facility, the Class
B Committed Facility or the Class C Committed Facility, as
applicable, and (v) when used in the plural, the Class A
Committed Facility, the Class B Committed Facility and the Class
C Committed Facility, collectively.
"Commitment" with respect to any Liquidity Facility has the
meaning assigned to such term in the applicable Liquidity
Agreement.
"Company" means USAir, Inc., a Delaware corporation, and,
subject to the provisions hereof, its permitted successors and
assigns.
"Company Order" and "Company Request" mean a written order
or request signed in the name of the Company by any one of its
Responsible Officers and delivered to the Applicable Indenture
Trustee.
"Controlling Party" means the Person entitled to act as such
pursuant to the terms of Section 2.7 of the Collateral Agreement.
<PAGE>
"Corporate Trust Office" of any Indenture Trustee means the
principal office of such Person located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration or such other office at which such
Person's corporate trust business shall be administered and which
such person shall have specified by notice in writing to the
Collateral Agent, the Liquidity Provider and the Noteholders of
the related Class.
"Depository" means the Depository Trust Company, a New York
corporation.
"Depository Agreement" means the Agreement among the
Company, the Indenture Trustees, and the Depositary Trust Company
dated February 16, 1996.
"Designated Representatives" means the Trustee
Representatives and the LP Representatives identified under
Section 2.6 of the Collateral Agreement.
"Dollars" means United States dollars.
"Downgrade Advance" (i) when used in any Liquidity Facility
has the meaning assigned to such term in the applicable Liquidity
Agreement and (ii) when used in any other Basic Document has the
meaning assigned to such term in Section 3.6(c) of the Collateral
Agreement.
"Downgraded Facility" has the meaning assigned to such term
in Section 3.6(c) of the Collateral Agreement.
"Drawn Down Facility" has the meaning assigned to such term
in Section 5.6(b) of the Collateral Agreement.
"Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust
account with the corporate trust department of a depository
institution organized under the laws of the United States of
America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited
in such account, so long as any of the securities of such
depository institution has a long-term, unsecured debt rating
from each Rating Agency of at least A-3 or its equivalent.
<PAGE>
"Eligible Institution" means (a) the corporate trust
department of the Collateral Agent or any Indenture Trustee or
(b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank),
which has a long-term unsecured debt rating of at least A-3 or
its equivalent.
"Eligible Investments" means (i) direct obligations of the
United States of America or agencies thereof where such
obligations are guaranteed by the United States government, and
having a final maturity of one year or less from date of purchase
thereof; (ii) certificates of deposit issued by, bankers'
acceptances of, or time deposits with, any bank, trust company or
national banking association incorporated or doing business under
the laws of the United States of America or one of the states
thereof having combined capital and surplus and retained earnings
as of its last report of condition of at least $100,000,000 and
having a short term debt rating of B or better by Keefe, Bruyette
& Woods, Inc. and having a final maturity of one year or less
from date of purchase thereof; (iii) commercial paper of any
holding company of a bank, trust company or national banking
association described in (ii) and commercial paper of any
corporation or finance company incorporated or doing business
under the laws of the United States of America or any state
thereof having a rating assigned to such commercial paper of A-1
or better by S&P or P1 by Moody's (or, if neither such
organization shall rate such commercial paper at any time, a
rating equal to the highest ratings assigned by any nationally
recognized rating organization in the United States of America)
and having a final maturity of 270 days or less from the date of
purchase thereof; (iv) U.S. dollar-denominated certificates of
deposit issued by the European subsidiaries of any bank, trust
company or national banking association described in (ii) and
having a final maturity of 90 days or less from the date of
purchase thereof; or (v) repurchase agreements with any financial
institution having combined capital and surplus and retained
earnings as of its last report of condition of at least
$100,000,000 when subject to an executed master repurchase
agreement and which are fully collateralized by obligations
described in clause (i) above where delivery must be taken, and
having a final maturity of 90 days or less from the date of
purchase thereof; provided that, except for investments described
in clauses (i) and (v) above, no more than the greater of
$10,000,000 or 50% of the principal amount may be invested as
"Eligible Investments" in any one corporation, bank holding
company, bank, trust company or national banking association at
any given time. If none of the above investments are available,
the entire amount to be invested may be used to purchase Federal
Funds overnight from an entity described in (ii) above.
<PAGE>
"Engine" means with respect to any Airframe: (A) one of the
two Rolls-Royce RB211-535E4 aircraft engines identified by
manufacturer's serial number in the Collateral Agreement
Supplement executed and delivered on the Closing Date, so long as
a Replacement Engine shall not have been substituted therefor
pursuant to Section 4.4 or 4.5 of the Collateral Agreement and
(B) a Replacement Engine, so long as another Replacement Engine
shall not have been substituted therefor pursuant to Section 4.4
or 4.5 of the Collateral Agreement, whether or not such Engine or
Replacement Engine, as the case may be, is from time to time
installed on such Airframe or installed on another airframe, and
including, in each case all Parts incorporated or installed in or
attached thereto and any and all Parts removed therefrom so long
as such Parts remain subject to the Lien of the Collateral
Agreement under the terms of Section 4.4 thereof. The term
"Engines" means, as of any date of determination, the two engines
each of which is an Engine on that date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" means (i) for purposes of the Class A
Indenture, any Event of Default as defined in Section 6.01 of the
Class A Indenture, (ii) for purposes of the Class B Indenture,
any Event of Default as defined in Section 6.01 of the Class B
Indenture and (iii) for purposes of the Class C Indenture, any
Event of Default as defined in Section 6.01 of the Class C
Indenture.
"Event of Loss" with respect to any Aircraft, Airframe or
Engine means any of the following events:
a) with respect to such property, payment of an insurance
settlement with respect to such property on the basis of an
actual or constructive total loss;
b) with respect to such property, destruction or damage
beyond repair (provided, that if it is not clear whether damage
constitutes damage beyond repair, an Event of Loss will be deemed
to occur when it is determined by the Company that such damage is
beyond repair);
c) with respect to such property, theft or disappearance
for a period in excess of 120 days, unless the location of such
property is known and the Company is diligently pursuing the
recovery of such property;
<PAGE>
d) with respect to such property, condemnation or taking of
title to such property by the United States government or any
foreign government or instrumentality or agency thereof;
e) with respect to an Airframe only, the requisition or
taking of use of such Airframe by a foreign government or
instrumentality or agency thereof for a continuous period of more
than six consecutive months;
f) with respect to an Engine only, the requisition or
taking of use thereof by any government or instrumentality or
agency thereof, or any divestiture of title or ownership deemed
to be an Event of Loss with respect to an Engine under Section
4.2(b)(iii) or 4.2(b)(vi) of the Collateral Agreement; or
g) with respect to any of such property, as a result of any
rule, regulation, order or other action by the Aeronautical
Authority, the use of such property for the transportation of
passengers shall have been prohibited for a period of 12
consecutive months (or such shorter period if it is determined by
the Company that such property can not be restored to normal use
during such twelve month period), unless the Company prior to
expiration of such period shall be diligently carrying forward
all necessary steps to permit the normal use of such property, or
in any event, if such use shall have been prohibited for a period
of more than 24 consecutive months;
provided that, in the case of an event referred to in clauses
(c), (d), (e) or (f) above with respect to an Airframe, if such
property shall be returned to the Company in usable condition
prior to the applicable date for replacement, then such event
shall, at the option of the Company, not constitute an Event of
Loss.
An Event of Loss with respect to an Aircraft shall be deemed
to have occurred if an Event of Loss has occurred with respect to
the Airframe which is a part thereof.
"Exchange Offer" means the offer the Company is required to
make pursuant to the Registration Rights Agreement to exchange
Class A Notes for Class A Registered Notes, the Class B Notes for
the Class B Registered Notes and Class C Notes for Class C
Registered Notes, as applicable.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
"Expenses" means any and all liabilities, obligations,
losses, damages, settlements, claims, actions, suits, penalties,
costs and expenses (including reasonable legal fees and
expenses), of whatsoever kind and nature.
"FAA" means the United States Federal Aviation
Administration.
"FAA Bill of Sale" with respect to an Aircraft, means the
bill of sale on AC Form 8050-2 executed by the Manufacturer in
favor of the Company and dated the date of delivery of such
Aircraft from the Manufacturer to the Company.
"Federal Aviation Administration" or "FAA" means the United
States Federal Aviation Administration or any successor thereto
administering the functions of the Federal Aviation
Administration under the Federal Aviation Act.
"Final Scheduled Payment Date" means for each Class of
Notes, the last scheduled Payment Date for such Class specified
in Exhibit C to the Applicable Indenture.
"Global Notes" means, when used in any Indenture, the
Offshore Global Notes, the U.S. Global Notes and the Registered
Notes issued thereunder, collectively.
"Indenture" means (i) when used in the Class A Indenture,
the Class A Indenture, (ii) when used in the Class B Indenture,
the Class B Indenture, (iii) when used in the Class C Indenture,
the Class C Indenture, (iv) when used in all other Basic
Documents, the Class A Indenture, the Class B Indenture or the
Class C Indenture, as applicable, and (v) when used in the
plural, the Class A Indenture, the Class B Indenture and the
Class C Indenture, collectively.
"Indenture Trustee" means, at any time, (i) when used in the
Class A Indenture, the Class A Indenture Trustee, (ii) when used
in the Class B Indenture, the Class B Indenture Trustee, (iii)
when used in the Class C Indenture, the Class C Indenture
Trustee, (iv) when used in all other Basic Documents, the Class A
Indenture Trustee, the Class B Indenture Trustee or the Class C
Indenture Trustee, as applicable, and (v) when used in the
plural, the Class A Indenture Trustee, the Class B Indenture
Trustee and the Class C Indenture Trustee, collectively.
<PAGE>
"Independent", when used with respect to an engineer,
Appraiser or other expert, means an engineer, Appraiser or other
expert who (i) is in fact independent, (ii) does not have any
direct financial interest or any material indirect financial
interest in the Company or any Affiliate of the Company, and
(iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions.
"Initial Aggregate Appraisal Value" means the aggregate of
each Initial Appraised Value.
"Initial Appraised Value" means for each Aircraft the value
set forth opposite such Aircraft as follows:
<TABLE>
<CAPTION>
Aircraft Initial Appraised Value
-------- -----------------------
<S> <C>
N625VJ $47,710,000
N626AU 47,920,000
N627AU 48,330,000
N628AU 48,330,000
N629AU 48,740,000
N630AU 48,750,000
N631AU 49,170,000
N632AU 49,380,000
N633AU 49,790,000
</TABLE>
"Insurance Amount" means, at any time of determination, the
sum of (i) the Pro Rata Amount plus (ii) the amount of interest
to accrue on the Pro Rata Amount as of the next scheduled Payment
Date.
"Institutional Accredited Investor" means an institutional
investor that is an "accredited investor" within the meaning set
forth in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Interest Advance" if used in any Liquidity Facility has the
meaning assigned to such term in such Liquidity Facility and if
used in any other Basic Document has the meaning assigned to such
term in Section 3.6(a) of the Collateral Agreement.
<PAGE>
"Investment Banker" means an independent investment banking
institution of national standing appointed by the Company.
"Investment Earnings" means investment earnings on funds on
deposit in the Cash Collateral Account net of losses and
investment expenses of the Collateral Agent in making such
investments.
"Lien" means any mortgage, pledge, lien, charge,
encumbrance, lease, exercise of rights, security interest or
claim.
"Liquidity Agreement" means, (i) when used in the singular,
the Class A Liquidity Agreement, the Class B Liquidity Agreement
or the Class C Liquidity Agreement, as applicable, and (ii) when
used in the plural, the Class A Liquidity Agreement, the Class B
Liquidity Agreement and the Class C Liquidity Agreement,
collectively.
"Liquidity Facility" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Liquidity Facility,
(ii) when used in the Class B Liquidity Agreement, the Class B
Liquidity Facility, (iii) when used in the Class C Liquidity
Agreement, the Class C Liquidity Facility, (iv) when used in the
other Basic Documents, the Class A Liquidity Facility, the Class
B Liquidity Facility or the Class C Liquidity Facility, as
applicable, and (v) when used in the plural, the Class A
Liquidity Facility, the Class B Liquidity Facility and the Class
C Liquidity Facility, collectively.
"Liquidity Facility Notice of Termination" with respect to
any Liquidity Facility has the meaning assigned to such term in
such Liquidity Facility.
"Liquidity Facility Termination Date" with respect to any
Liquidity Facility has the meaning assigned to such term in such
Liquidity Facility.
"Liquidity Fee" with respect to any Liquidity Facility has
the meaning assigned to such term in Section 2.03 of the
Liquidity Agreement relating to such Liquidity Facility.
"Liquidity Obligations" has the meaning given to such term
in the applicable Liquidity Agreement.
<PAGE>
"Liquidity Provider" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Liquidity Provider,
(ii) when used in the Class B Liquidity Agreement, the Class B
Liquidity Provider, (iii) when used in the Class C Liquidity
Agreement, the Class C Liquidity Provider, (iv) when used in all
other Basic Documents, the Class A Liquidity Provider, the Class
B Liquidity Provider or the Class C Liquidity Provider, as
applicable, and (v) when used in the plural, the Class A
Liquidity Provider, the Class B Liquidity Provider and the Class
C Liquidity Provider, collectively.
"Liquidity Provider Information" with respect to any
Liquidity Agreement has the meaning assigned to such term in
Section 7.05(a) of such Liquidity Agreement.
"LP Incumbency Certificate" has the meaning assigned to such
term in Section 2.6(b) of the Collateral Agreement.
"LP Representatives" has the meaning assigned to such term
in Section 2.6(d) of the Collateral Agreement.
"Majority in Interest" means, as of any date of the
determination thereof, (i) with respect to the Class A
Noteholders, the holders of more than 50% in aggregate unpaid
principal amount of all Class A Notes Outstanding as of such
date, (ii) with respect to the Class B Noteholders, the holders
of more than 50% in aggregate unpaid principal amount of all
Class B Notes Outstanding as of such date and (iii) with respect
to the Class C Noteholders, the holders of more than 50% in
aggregate unpaid principal amount of all Class C Notes
Outstanding as of such date. For purposes of the foregoing, with
respect to the Notes issued and authenticated under each
Indenture, the proviso contained in the definition of
"Outstanding" shall apply.
"Make Whole Premium" means, with respect to the redemption
of any Note, the amount which the Investment Banker determines as
of the third Business Day prior to the applicable Redemption Date
to be the amount by which (i) the aggregate unpaid principal
amount of, plus all accrued but unpaid interest on, such Note is
exceeded by (ii) the sum of the present values of all the
remaining scheduled payments of principal and interest from the
applicable Redemption Date to the Final Scheduled Payment Date of
such Note, computed by discounting such payments on a semi-annual
basis on each Payment Date at a rate equal to the Treasury Rate,
based on a 360 day year of twelve 30-day months; provided that,
with respect to the Class A Notes, Class B Notes and Class C
Notes, the Make Whole Premium will equal zero on and after the
Original Average Life Date.
<PAGE>
"Manufacturer" means The Boeing Company, a Delaware
corporation and its successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
the Manufacturer relating to certain rights under the Purchase
Agreement assigned to the Collateral Agent as security under the
Granting Clauses of this Indenture.
"Maturity Date" means, (i) with respect to the Class A
Notes, October 15, 2009; (ii) with respect to the Class B Notes,
October 15, 2009; and (iii) with respect to the Class C Notes,
October 15, 2009.
"Minimum Sale Price" means, with respect to any Aircraft at
any time, the lesser of (i) 75% of the Appraised Value of such
Aircraft based upon the most recent Appraisal and (ii) the
product of (a) the Secured Obligations and (b) the quotient of
(A) the Initial Appraised Value for such Aircraft and (B) the
Initial Aggregate Appraised Value (excluding any Aircraft no
longer subject to the Lien of the Collateral Agreement).
"Moody's" means Moody's Investors Service, Inc.
"Non-Controlling Parties" means the Class B Indenture
Trustee, the Class C Indenture Trustee, the Class A Liquidity
Provider, the Class B Liquidity Provider and the Class C
Liquidity Provider at such times as any of such Persons shall not
be the Controlling Party in accordance with Section 2.7(b) of the
Collateral Agreement.
"Non-Excluded Taxes" with respect to any Liquidity Agreement
shall have the meaning set forth in Section 3.03 of such
Liquidity Agreement.
"Non-Extension Advance" (i) when used in any Liquidity
Facility has the meaning assigned to such term in the applicable
Liquidity Agreement and (ii) when used in any other Basic
Document has the meaning assigned to such term in 3.6(d) of the
Collateral Agreement.
"Non-U.S. Person" means a Person who is not a "U.S. Person"
as defined in Regulation S.
<PAGE>
"Note Interest Carryover Amount" for the Notes of any Class
means, with respect to any Payment Date (the "Current Payment
Date"), the sum of (i) any unpaid interest accrued on such Notes
during the semi-annual period ending on the immediately preceding
Payment Date (the "Past Payment Date"), plus (ii) the unpaid Note
Interest Carryover Amount as of the Past Payment Date, in each of
clause (i) and (ii), after giving effect to the payments on the
Past Payment Date in accordance with Article II or III of the
Collateral Agreement.
"Note Principal Carryover Amount" for the Notes of any Class
means, with respect to any Payment Date, the sum of (i) any
unpaid principal on such Notes expected to be paid on the
immediately preceding Payment Date and (ii) the unpaid Note
Principal Carryover Amount as of such preceding Payment Date, in
each of clause (i) and (ii), after giving effect to the payments
on such preceding Payment Date in accordance with Article II or
III of the Collateral Agreement.
"Note Register" with respect to any Indenture has the
meaning assigned to such term in Section 2.12 of such Indenture.
"Note Registrar" with respect to each Class of Notes issued
and authenticated under the Applicable Indenture, means the
registrar maintained and appointed for such Class pursuant to
Section 2.12 of such Applicable Indenture.
"Note Termination Date" means the Class A Note Termination
Date, the Class B Note Termination Date or the Class C Note
Termination Date, as applicable.
"Noteholder" means, at any time, (i) for purposes of the
Class A Indenture, any holder of one or more Class A Notes issued
and authenticated under the Class A Indenture, (ii) for purposes
of the Class B Indenture, any holder of one or more Class B Notes
issued and authenticated under the Class B Indenture, (iii) for
purposes of the Class C Indenture, any holder of one or more
Class C Notes issued and authenticated under the Class C
Indenture and (iv) for purposes of any other Basic Document, any
holder of one or more of the Class A Notes, the Class B Notes or
the Class C Notes. Reference to a holder of a given Class of
Note shall mean such Person in such capacity and not in its
capacity as the holder of any other Class of Note.
<PAGE>
"Notes" means, at any time, (i) for purposes of the Class A
Indenture, the Class A Notes, (ii) for purposes of the Class B
Indenture, the Class B Notes, (iii) for purposes of the Class C
Indenture, the Class C Notes and (iv) for purposes of the other
Basic Documents and this Appendix A, the Class A Notes, the Class
B Notes and the Class C Notes, collectively, and in each case,
any such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Applicable Indenture.
"Notice of Acceleration" means (i) notice from the Class A
Indenture Trustee that the Class A Notes have become Accelerated
in accordance with the terms of the Class A Indenture, (ii)
notice from the Class B Indenture Trustee that the Class B Notes
have become Accelerated in accordance with the terms of the Class
B Indenture and (iii) notice from the Class C Indenture Trustee
that the Class C Notes have become Accelerated in accordance with
the terms of the Class C Indenture.
"Offering Memorandum" means any offering memorandum or other
document used in connection with the offering and sale of the
Notes (including, without limitation, the Offering Memorandum
dated February 9, 1996 relating to the Notes).
"Officer's Certificate" of any Person means a certification
signed by a Responsible Officer of such Person.
"Offshore Global Note" means, when used in any Indenture,
the Permanent Offshore Global Note and the Temporary Offshore
Global Note issued thereunder, collectively.
"Offshore Notes Exchange Date" means March 27, 1996.
"Offshore Physical Notes" means, when used in any Indenture,
the Notes issued pursuant to Section 2.07 of such Indenture in
exchange for interests in an Offshore Global Note.
"Opinion of Counsel" means, unless otherwise provided in a
Basic Document, a written opinion of legal counsel who may be
such counsel as may be designated by the Person on whose behalf
such opinion is being given whether or not such counsel is an
employee of such Person, and who shall be reasonably acceptable
to the recipient or recipients of such opinion.
"Optional Note Redemption" has the meaning assigned to such
term in Section 2.5(d) of the Collateral Agreement.
"Original Average Life Date" means (i) with respect to the
Class A Notes, February 20, 2006, (ii) with respect to the Class
B Notes, February 20, 2006 and (iii) with respect to the Class C
Notes, February 20, 2006.
<PAGE>
"Other Committed Facility" means, at any time, (i) when used
in the Class A Liquidity Agreement, the Class B Committed
Facility and the Class C Committed Facility, (ii) when used in
the Class B Liquidity Agreement, the Class A Committed Facility
and the Class C Committed Facility and (iii) when used in the
Class C Liquidity Agreement, the Class A Committed Facility and
the Class B Committed Facility.
"Other Liquidity Agreements" means, at any time, (i) when
used in the Class A Liquidity Agreement, the Class B Liquidity
Agreement and the Class C Liquidity Agreement, (ii) when used in
the Class B Liquidity Agreement, the Class A Liquidity Agreement
and the Class C Liquidity Agreement and (iii) when used in the
Class C Liquidity Agreement, the Class A Liquidity Agreement and
the Class B Liquidity Agreement.
"Other Liquidity Providers" means, at any time, (i) when
used in the Class A Liquidity Agreement, the Class B Liquidity
Provider and the Class C Liquidity Provider, (ii) when used in
the Class B Liquidity Agreement, the Class A Liquidity Provider
and the Class C Liquidity Provider and (iii) when used in the
Class C Liquidity Agreement, the Class A Liquidity Provider and
the Class B Liquidity Provider.
"Outstanding" means, with respect to the Notes issued and
authenticated under each Indenture, all Notes theretofore
authenticated and delivered under such Indenture except:
(i) Notes theretofore canceled by the Note Registrar
under such Indenture or delivered to the Indenture Trustee
or the Note Registrar, under such Indenture for
cancellation;
(ii) Notes in exchange for or in lieu of which other
Notes have been authenticated and delivered pursuant to such
Indenture, unless proof satisfactory to the applicable
Indenture Trustee is presented that such Notes or are held
by a bona fide purchaser; and
(iii) Notes or portions thereof the payment for
which money in the necessary amount has been theretofore
deposited with the applicable Indenture Trustee or any
Paying Agent in trust for the Noteholders (provided,
however, that if such Notes or are to be redeemed, notice of
such redemption has been duly given pursuant to the
applicable Indenture or provision therefor, satisfactory to
the Indenture Trustee);
<PAGE>
provided, however, that in determining whether the holders of the
requisite Outstanding Amount of the Notes have given any request,
demand, authorization, direction, notice, consent or waiver
hereunder or under any Basic Document, Notes owned by the Company
or any Affiliate of the Company shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the
applicable Indenture Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the applicable Indenture
Trustee knows to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
applicable Indenture Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Company or
any Affiliate of the Company.
"Outstanding Amount" means the aggregate principal amount of
all Notes Outstanding at the date of determination.
"Parts" means all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of
whatever nature other than complete Engines or engines, which are
from time to time incorporated or installed in or attached to the
Airframe or any Engine, exclusive of any items leased by the
Company from third parties and not required in the navigation of
the Aircraft.
"Paying Agent" with respect to the Class A Notes, the Class
B Notes and the Class C Notes issued and authenticated under the
Applicable Indenture, means the paying agent maintained and
appointed for such Notes pursuant to Section 2.12 of such
Applicable Indenture, who shall initially be the Applicable
Indenture Trustee with respect to such Class.
"Payment Dates" means April 15, 1996 and thereafter each
succeeding April 15 and October 15 of each year; provided,
however, if any such day shall not be a Business Day, the Payment
Date shall be the next succeeding Business Day.
"Permanent Offshore Global Note" means, when used in any
Indenture, the permanent offshore global note in registered form
substantially in the form of Exhibit B to such Indenture.
"Permitted Air Carrier" means (i) a Certificated Aircraft
Carrier or (ii) a foreign air carrier duly organized and
operating pursuant to a license issued under the laws of its home
country, which country is a party to the Convention on the
International Recognition of Rights in Aircraft (Geneva 1948) or
is listed on Exhibit B to the Collateral Agreement.
<PAGE>
"Permitted Liens" has the meaning given such term in Section
4.1 of the Collateral Agreement.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, trustee,
unincorporated organization or government or any agency or
political subdivision thereof.
"Physical Notes" means, when used in any Indenture, the
Offshore Physical Notes and the U.S. Physical Notes issued
thereunder, collectively.
"Post Petition Interest", with respect to any Secured
Obligation, means interest on such Secured Obligation accruing
after the commencement of any proceeding of the type referred to
in Section 6.01(vi), 6.01(vii) or 6.01(viii) of each Indenture.
"Potential Collateral Access Event" means (i) for purposes
of the Class A Indenture, any occurrence that is, or with notice
or the lapse of time or both would become, a Collateral Access
Event under the Class A Indenture, (ii) for purposes of the Class
B Indenture, any occurrence that is or with notice or lapse of
time or both would become, a Collateral Access Event under the
Class B Indenture and (iii) for purposes of the Class C
Indenture, any occurrence that is, or with notice or the lapse of
time or both would become, a Collateral Access Event under the
Class C Indenture.
"Private Placement Legend" means the restrictive legend set
forth at Section 2.02(a) of the Applicable Indenture.
"Pro Rata Amount" shall mean, at any time of determination
for any Aircraft, the product of (i) the aggregate outstanding
principal amount of the Notes and (ii) the quotient of (A) the
Initial Appraised Value for such Aircraft and (B) the Initial
Aggregate Appraised Value (excluding any Aircraft no longer
subject to the Lien of the Collateral Agreement).
"Proceeding" means any suit in equity, action at law or
other judicial or administrative proceeding.
"Purchase Agreement" means the agreement dated February 9,
1996, among the Purchasers and the Company.
"Purchasers" means Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc, Chase Securities, Inc. and Lehman Brothers
Inc.
<PAGE>
"QIB" and "Qualified Institutional Buyer" mean a qualified
institutional buyer as defined in Rule 144A under the Securities
Act.
"Rating Agencies" means, collectively, at any time, each
nationally recognized rating agency which shall have been
requested by the Company to rate the Notes and which shall then
be rating the Notes. The initial Rating Agencies will be Moody's
and S&P.
"Ratings Confirmation" means, with respect to any action
proposed to be taken, a written confirmation from each of the
Rating Agencies that such action would not result in (i) a
reduction of the rating for any Class of Notes below the then
current rating for such Class of Notes or (ii) a withdrawal or
suspension of the rating of any Class of Notes.
"Record Date" means, with respect to a Payment Date, the
close of business on the last day of the immediately preceding
calendar month. With respect to any Redemption Date, the Record
Date means the close of business on the day immediately preceding
such Redemption Date.
"Redemption Date" means the date specified by the Collateral
Agent pursuant to Section 2.5 of the Collateral Agreement or the
date specified pursuant to Section 3.02 of the Applicable
Indenture.
"Redemption Price" for any Note of any Class means (i) in
the case of a redemption of the Notes pursuant to Section 3.01(a)
of the Applicable Indenture, an amount equal to the unpaid
principal amount of such Note multiplied by a fraction (x) the
numerator of which will be equal to the principal amount of the
Notes of such Class to be redeemed and (y) the denominator of
which will be equal to the aggregate outstanding principal amount
of the Notes of such Class and (ii) in the case of a redemption
of the Notes pursuant to Section 3.01(b) of the Applicable
Indenture, the outstanding principal amount of such Note.
"Registered Note" means, when used in any Indenture, any
securities issued by the Company under the Indenture of equal
outstanding principal amount as and containing terms identical to
the Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Notes or, if no such
interest has been paid, from the Closing Date, (ii) the transfer
restrictions thereon shall be modified or eliminated, as
appropriate, and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Noteholders in exchange for such Notes pursuant to
the Exchange Offer.
<PAGE>
"Registered Physical Notes" means, when used in any
Indenture, the Notes issued pursuant to Section 2.07 of such
Indenture in exchange for interests in a Registered Global Note.
"Registration Event" has the meaning given to such term in
the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of February 15, 1996 by and between the
Company and the Purchasers as such agreement may be amended,
modified or supplemented from time to time.
"Registration Statement" means any registration statement of
the Company, together with all amendments and supplements
thereto, that covers any of the Registered Notes pursuant to the
provisions of the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act
and any successor regulation thereto.
"Remaining Weighted Average Life" means on a given date with
respect to any Note, the number of days which is equal to the
quotient obtained by dividing (a) the sum of each of the products
obtained by multiplying (i) the amount of each then remaining
scheduled payment of principal of such Note by (ii) the number of
days from and including such determination date to but excluding
the date on which such payment of principal is scheduled to be
made by (b) the then outstanding principal amount of such Note.
"Replacement Aircraft" means any Aircraft of which a
Replacement Airframe is part.
"Replacement Airframe" means a Boeing 757-200 series
aircraft (except Engines or engines from time to time installed
thereon), or a more advanced model, having a value and utility at
least equal to, and in as good operating condition and as
airworthy as, the Airframe it is replacing, assuming such
Airframe was in the condition required by the terms of this
Indenture, which shall have been made subject to the Lien of the
Collateral Agreement pursuant to Section 4.5 thereof.
"Replacement Closing Date" has the meaning given such term
in Section 4.5(c) of the Collateral Agreement.
<PAGE>
"Replacement Engine" means a Rolls-Royce or engine of the
same model engine (or engine of the same or another manufacturer
of a comparable or an improved model and suitable for
installation and use on the applicable Airframe) which has a
value and utility at least equal to the Engine which it is
replacing, assuming such Engine was of the value and utility
required by the terms of the Collateral Agreement and which shall
have been made subject to the Lien of the Collateral Agreement
pursuant to Section 4.4 or 4.5 thereof.
"Replacement Liquidity Facility" means, for any Liquidity
Facility, an irrevocable facility issued by a Replacement
Liquidity Provider in substantially the form of such Liquidity
Facility which is being replaced, including reinstatement
provisions, or in such other form (including a letter of credit
facility) as shall permit the Rating Agencies to confirm in
writing their respective then ratings of the Securities, in a
face amount equal to the Required Amount for such Liquidity
Facility.
"Replacement Liquidity Provider" means a Person having
unsecured short-term debt ratings issued by both Ratings Agencies
which are not lower than the Trigger Rating.
"Required Amount" with respect to each Liquidity Facility
means, for any day, the sum of the aggregate amount of interest
at the Stated Interest Rate for the Class of Notes covered
thereby that would be payable on such Class of Notes on each of
the three Payment Dates immediately following such day or, if
such day is a Payment Date, on such day and the succeeding two
Payment Dates, in each case calculated on the basis of the
principal of such Class of Notes Outstanding on such date and
without regard to expected future payments of principal on such
Class of Notes.
"Responsible Officer" means (i) with respect to the
Collateral Agent and each of the Indenture Trustees, any officer
in the corporate trust administration department of the
Collateral Agent or such Indenture Trustee or any other officer
customarily performing functions similar to those performed by
the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of his
knowledge of and familiarly with a particular subject, (ii) with
respect to the Company, the Chairman, the Vice Chairman, the
President, any Vice President, Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary and (iii) with respect to each
Liquidity Provider, the Treasurer, any Assistant Treasurer,
Secretary or Assistant Secretary.
<PAGE>
"Restricted Global Note" means, when used in any Indenture,
the restricted global note in registered form substantially in
the form of Exhibit B to such Indenture.
"Rule 144A" means Rule 144A under the Securities Act and any
successor rule thereto.
"Rule 904" means Rule 904 under the Securities Act and any
successor rule thereto.
"S&P" means Standard & Poor's Rating Group, a division of
McGraw-Hill Inc.
"Secured Obligations" has the meaning assigned to such term
in the granting clause of the Collateral Agreement.
"Secured Parties" means, collectively, the Collateral Agent,
the Indenture Trustees, the Noteholders and the Liquidity
Providers.
"Securities Act" means the United States Securities Act of
1933, as amended from time to time and any successor thereto.
"Stated Expiration Date" if used in any Liquidity Facility
has the meaning assigned to such term in such Liquidity Facility
and if used in any other Basic Document has the meaning assigned
to such term in Section 3.6(d) of the Collateral Agreement.
"Stated Interest Rate" means (i) with respect to the Class A
Notes, 6.76%, (ii) with respect to the Class B Notes, 7.50% and
(iii) with respect to the Class C Notes, 8.93% (in each case, the
"Original Rate"); provided that, in the event that a Registration
Event does not occur on or prior to August 16, 1996, each such
Original Rate shall be temporarily increased by 0.5%, such
increase to be effective as of October 15, 1996 until the next
Payment Date; provided that in the event a Registration Event has
not occurred on or prior to February 16, 1997, such increase
shall be permanent (including with respect to the Registered
Notes).
"Taxes" means any and all fees (including, without
limitation, license, documentation and registration fees), taxes
(including, without limitation, income, gross receipts, sales,
rental, use, turnover, value added, property (tangible and
intangible), excise and stamp taxes), licenses, levies, imposts,
duties, recording charges or fees, charges, assessments or
withholdings of any nature whatsoever, together with any
assessments, penalties, fines, additions to tax and interest
thereof (each, individually, a "Tax").
<PAGE>
"Temporary Offshore Global Note" means, when used in any
Indenture, the temporary global Note issued thereunder and
offered and sold in offshore transactions in reliance on
Regulation S pursuant to such Indenture.
"Transferee" shall have the meaning assigned to such term in
Section 7.08(b) of each Liquidity Agreement.
"Treasury Regulations" means regulations, including proposed
or temporary regulations, promulgated under the Code. References
herein to specific provisions of proposed or temporary
regulations shall include analogous provisions of final Treasury
Regulations or other successor Treasury Regulations.
"Treasury Rate" means, with respect to any Notes, a per
annum rate (expressed as a semi-annual equivalent and as a
decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield), determined to be the per
annum rate equal to the semi-annual yield to maturity for United
States Treasury securities maturing on the Average Life Date of
such Notes, as determined by interpolation between the most
recent weekly average yields to maturity for two series of United
States Treasury securities trading in public securities markets,
(A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Note and (B) the other maturing as
close as possible to, but later than, the Average Life Date of
such Note, in each case as published in the most recent H.15(519)
(or, if a weekly average yield to maturity for United States
Treasury securities maturing on the Average Life Date of such
Note is reported in the most recent H.15(519), as published in
H.15(519)). H.15(519) means the weekly statistical release
designated as such, or any successor publication, published by
the Board of Governors of the Federal Reserve System. The most
recent H.15(519) means the latest H.15(519) which is published
prior to the close of business on the third Business Day
preceding the scheduled Redemption Date.
"Trigger Rating" means in the case of any Liquidity
Provider, a short term unsecured debt rating of A-1 by S&P or P-1
by Moody's.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended (15 U.S.C. Sections 77aaa-77bbb), as in effect on the date
hereof (unless otherwise specifically provided herein).
"Trustee Incumbency Certificate" has the meaning assigned to
such term in Section 2.6(a) of the Collateral Agreement.
<PAGE>
"Trustee Representatives" has the meaning assigned to such
term in Section 2.6(a) of the Collateral Agreement.
"U.S. Global Note" means, when used in any Indenture, the
permanent global Note in registered form that will initially be
issued for the Notes sold in reliance on Rule 144A pursuant to
such Indenture.
"U.S. Government Obligations" means securities that are
direct obligations of the United States of America or agencies or
instrumentalities thereof for the payment of which the full faith
and credit of the United States of America is pledged which are
not callable or redeemable.
"U.S. Physical Notes" means, when used in any Indenture, the
Notes offered and sold in reliance on Regulation D under the
Securities Act issued in the form of permanent certificated notes
in registered form in substantially the form set forth in Exhibit
B of such Indenture.
"Warranty Bill of Sale" with respect to an Aircraft, means
the full warranty bill of sale executed by the Manufacturer in
favor of the Company and dated the date of delivery of such
Aircraft from the Manufacturer to the Company.
"WestLB" means Westdeutsche Landesbank Girozentrale, New
York Branch.
"Written Notice" from (i) each Indenture Trustee, or any
Liquidity Provider, means a written instrument executed by the
Designated Representative of such Person, and (ii) the Collateral
Agent means a written instrument executed by a Person designated
in the Certificate of Wilmington Trust Company delivered on the
Closing Date.
<PAGE>
EXHIBIT A
REGISTERED
$_________________*
No. ______________
CUSIP NO.
[Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the issuer or its agent for registration
of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC) - ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]**
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AND
REDEEMABLE AS SET FORTH HEREIN AND IN THE INDENTURE.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
USAIR ENHANCED EQUIPMENT NOTES
CLASS B 7.50% NOTES
USAir, Inc., a corporation organized and existing under the
laws of the State of Delaware (herein referred to as the
"Company"), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum of
____________________________ DOLLARS on _________________ (the
"Maturity Date"); provided that, subject to Section 2.09(a) of
the Indenture, the Company promises to pay on each Payment Date
prior to the Maturity Date an amount equal to the amount set
forth in Exhibit C to the Indenture (as such Exhibit C may be
revised in accordance with Section 2.10 of the Indenture)
opposite such Payment Date for the Class B Notes multiplied by a
fraction (i) the numerator of which shall be equal to the
outstanding principal amount of this Note and (ii) the
- -------------------------------
* This amount is subject to decrease or increase from time to
time pursuant to the Indenture governing this Note to give effect
to transfers, redemptions or exchanges up to the aggregate
principal amount set forth on the face hereof.
** Insert for each Global Note
A-1
<PAGE>
denominator of which shall be equal to the outstanding principal
amount of the Class B Notes, in each case, immediately before
such Payment Date. This Note will bear interest at the rate of
7.50% per annum until the principal hereof is paid in full. The
Company will pay, subject to Section 2.09(a) of the Indenture,
interest on the unpaid principal of this Note until the principal
of this Note is paid or made available for payment, on each
Payment Date, commencing on April 15, 1996. In the event that,
for any reason, either (i) the Exchange Offer is not consummated
or (ii) a Registration Statement is not declared effective (each,
a "Registration Event"), in either case, on or prior to August
16, 1996, the interest rate on the Notes shall be increased by
one-half of one percent per annum beginning October 15, 1996.
Following the occurrence of a Registration Event, commencing on
the next interest payment date thereafter relating to the Notes
(or, in the event of the occurrence of a Registration Event
following August 16, 1996, on April 15, 1997), the interest rate
on the Notes will be reduced to the original interest rate;
provided, however, that if a Registration Event has not occurred
on or prior to February 16, 1997, the interest rate on the Notes
shall remain on a permanent basis thereafter at the increased
level of one-half of one percent per annum over the original
interest rate on the Notes, and such increase will apply to the
Registered Notes, if any, issued thereafter. Interest on this
Note will accrue for each Payment Date from and including the
most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid,
from February 16, 1996. Interest will be computed on the basis
of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Note are payable in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts. All payments made by the Company with respect to this
Note shall be applied in priority set forth in Section 2.09(c) of
the Indenture.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by
manual signature, this Note shall not be entitled to any benefit
under the Indenture referred to on the reverse hereof, or be
valid or obligatory for any purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be signed, manually or in facsimile, by its Authorized
Officer.
USAIR, INC.
By: ____________________________
Name:
Title:
[remainder of page left blank intentionally]
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date:________________________
WILMINGTON TRUST COMPANY, not
in its Individual capacity but
solely as Indenture Trustee
By: __________________________
Authorized Signatory
A-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of the Notes of a duly authorized issue of
Notes of the Company, designated as its Class B 7.50% Notes
(herein called the "Notes"), all issued under an Indenture dated
as of February 15, 1996 (such indenture, as supplemented or
amended, is herein called the "Indenture"), between the Company
and Wilmington Trust Company, as indenture trustee (the
"Indenture Trustee", which term includes any successor indenture
trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of
the Company, the Indenture Trustee and the Noteholders of the
Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the
Collateral Agreement.
The entire unpaid principal amount of the Notes may become
Accelerated on the date on which a Collateral Access Event shall
have occurred and be continuing and the Indenture Trustee or the
Noteholders holding the Notes representing not less than a
majority of the Outstanding Amount of the Notes have Accelerated
the Notes.
Any interest or principal payable on this Note in accordance
with Sections 2.09(a) and (b) of the Indenture on the applicable
Payment Date shall be made by check mailed to the Person in whose
name this Note (or one or more predecessor Notes) is registered
on the Note Register as of the close of business on each Record
Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Depositary (initially,
such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on
the Note Register as of the applicable Record Date without
requiring that this Note be submitted for notation of payment.
Any reduction in the principal amount of this Note (or any one or
more predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Noteholders of this
Note and of any Note issued upon the registration of transfer
hereof or in
A-5
<PAGE>
exchange hereof or in lieu hereof, whether or not noted hereon.
If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Company,
will notify the Person in whose name this Note is registered as
of the Record Date preceding such Payment Date by notice mailed
within five days of such Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of
this Note at the Indenture Trustee's Corporate Trust Office or at
the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
By acceptance of its Note, each Noteholder agrees that in
the event such Noteholder shall receive any payment or
distribution (whether in cash, securities or other property) on
or in respect of any obligation which it is not entitled to
receive hereunder or under the Collateral Agreement, it shall
hold any amount so received in trust for the benefit of any
Person having a higher priority of distribution pursuant to
Section 2.5, 3.2 or 3.3 of the Collateral Agreement and shall
promptly remit such payment or distribution to the Collateral
Agent for application as provided in the Collateral Agreement.
Each Note shall be mandatorily redeemed pursuant to Section
3.01(a) of the Indenture, in whole or ratably in part, at the
Redemption Price, together with accrued interest thereon until
the Redemption Date. At any other time, the Company may redeem
the Notes in whole or in part at the Redemption Price for such
Notes together with accrued interest thereon until the Redemption
Date, plus the Make Whole Premium for such Notes.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be
registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by
the Company pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the
Noteholder hereof or his attorney duly authorized in writing,
with such signature guaranteed, and such other documents as the
Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate
principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
A-6
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, covenants and agrees that (i) by accepting the
benefits of the Indenture that such Noteholder will not at any
time institute against the Company, or join in any institution
against the Company of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in
connection with any obligations relating to the Notes, the
Indenture or the Basic Documents and (ii) such Noteholder will
agree to treat the Notes as indebtedness of the Company. Once
such a proceeding has been instituted, the Indenture Trustee may
file appropriate proofs of claim.
Prior to the due presentment for registration of transfer of
this Note, the Company, the Indenture Trustee and any agent of
the Company or the Indenture Trustee may treat the Person in
whose name this Note (as of the day of determination or as of
such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Company, the Indenture
Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Noteholders under the Indenture at any time by the Company with
the consent of the Noteholders holding a majority of the
Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Noteholders of
Notes representing specified percentages of the Outstanding
Amount of the Notes, on behalf of the Noteholders of all the
Notes, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the
Noteholder of this Note (or any one or more predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all
future Noteholders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made
upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Noteholders of the Notes issued
thereunder.
A-7
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, agrees that it shall have no recourse against the
Indenture Trustee in its individual capacity for the payment of
any principal, interest or other amounts due with respect to this
Note and that all such recourse shall be against the Company
pursuant to the terms of the Indenture.
The term "Company" as used in this Note includes any
successor to the Company under the Indenture.
The Company is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of
the Indenture Trustee and the Noteholders of Notes under the
Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain
limitations therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder and thereunder shall be
determined in accordance with such laws.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Note at the times,
place, and rate, and in the coin or currency herein prescribed.
A-8
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
____________________________________
_______________________________________________________________
_______________________________________________________________
Please print or typewrite name and address including zip code of
assignee
_______________________________________________________________
the within Note and all rights thereunder, hereby irrevocably
constituting and appointing
attorney to transfer said Note on the books of the Company with
full power of substitution in the premises.
A-9
<PAGE>
EXHIBIT B
REGISTERED
$___________________***
No. ______________
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN "INSTITUTIONAL
ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT,
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS NOTE OR THE LAST DATE ON WHICH THIS
NOTE WAS HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR,
INC., RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO USAIR, INC., OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
APPLICABLE INDENTURE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE APPLICABLE
INDENTURE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE VALUE OF NOTES AT THE TIME OF TRANSFER
OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTANCE
TO USAIR, INC. THAT SUCH TRANSFER IS IN COMPLIANCE THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS
________________________________
*** This amount is subject to decrease or increase from time to
time pursuant to the Indenture governing this Note to give effect
to transfers, redemptions or exchanges up to the aggregate
principal amount set forth on the face hereof.
B-1
<PAGE>
NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THE NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS HELD BY
USAIR, INC. OR AN AFFILIATE OF USAIR, INC., THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE APPLICABLE INDENTURE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
APPLICABLE INDENTURE TRUSTEE AND USAIR, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
APPLICABLE INDENTURE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
[Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the issuer or its agent for registration
of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC) - ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]****
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AND
REDEEMABLE AS SET FORTH HEREIN AND IN THE INDENTURE.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
________________________
**** Insert for each Global Note.
B-2
<PAGE>
USAIR ENHANCED EQUIPMENT NOTES
CLASS B 7.50% NOTES
USAir, Inc., a corporation trust organized and existing
under the laws of the State of Delaware (herein referred to as
the "Company"), for value received, hereby promises to pay to
__________________,, or registered assigns, the principal sum of
__________________ DOLLARS on _________________ (the "Maturity
Date"); provided that, subject to Section 2.09(a) of the
Indenture, the Company promises to pay on each Payment Date prior
to the Maturity Date an amount equal to the amount set forth in
Exhibit C to the Indenture (as such Exhibit C may be revised in
accordance with Section 2.10 of the Indenture) opposite such
Payment Date for the Class B Notes multiplied by a fraction (i)
the numerator of which shall be equal to the outstanding
principal amount of this Note and (ii) the denominator of which
shall be equal to the outstanding principal amount of the Class B
Notes, in each case, immediately before such Payment Date. This
Note will bear interest at the rate of 7.50% per annum until the
principal hereof is paid in full. The Company will pay,
interest on the unpaid principal of this Note until the principal
of this Note is paid or made available for payment, on each
Payment Date, commencing on April 15, 1996. In the event that,
for any reason, either (i) the Exchange Offer is not consummated
or (ii) a Registration Statement is not declared effective (each,
a "Registration Event"), in either case, on or prior to August
16, 1996, the interest rate on the Notes shall be increased by
one-half of one percent per annum beginning October 15, 1996.
Following the occurrence of a Registration Event, commencing on
the next interest payment date thereafter relating to the Notes,
(or, in the event of the occurrence of a Registration Event
following August 16, 1996, on April 15, 1997) the interest rate
on the Notes will be reduced to the original interest rate;
provided, however, that if a Registration Event has not occurred
on or prior to February 16, 1997, the interest rate on the Notes
shall remain on a permanent basis thereafter at the increased
level of one-half of one percent per annum over the original
interest rate on the Notes, and such increase will apply to the
Registered Notes, if any, issued thereafter. Interest on this
Note will accrue for each Payment Date from and including the
most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid,
from February 16, 1996. Interest will be computed on the basis
of a 360 day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on
the reverse hereof.
B-3
<PAGE>
The principal of and interest on this Note are payable in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts. All payments made by the Company with respect to this
Note shall be applied in priority set forth in Section 2.09(c) of
the Indenture.
[Beneficial interests in this Note will be exchangeable for
beneficial interests in the Permanent Offshore Global Note in the
same aggregate principal amount on or after [________________]
upon certification that such beneficial interests in this Note
are owned by either non-U.S. persons or U.S. persons who
purchased such interests pursuant to an exemption from, or in
transactions not subject to, the registration requirements of the
Securities Act.]****
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by
manual signature, this Note shall not be entitled to any benefit
under the Indenture referred to on the reverse hereof, or be
valid or obligatory for any purpose.
______________________________
***** Insert only for a Temporary Offshore Global Note.
B-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be signed, manually or in facsimile, by its Authorized
Officer.
USAIR, INC.
By: _____________________________
Name:
Title:
B-5
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date:
WILMINGTON TRUST COMPANY, not in
its individual capacity solely as
Indenture Trustee
By:___________________________
Authorized Signatory
B-6
<PAGE>
[REVERSE OF NOTE]
This Note is one of the Notes of a duly authorized issue of
Notes of the Company, designated as its Class B 7.50% Notes
(herein called the "Notes"), all issued under an Indenture dated
as of February 15, 1996 (such indenture, as supplemented or
amended, is herein called the "Indenture"), between the Company
and Wilmington Trust Company, as indenture trustee (the
"Indenture Trustee", which term includes any successor indenture
trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of
the Company, the Indenture Trustee and the Noteholders of the
Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the
Collateral Agreement.
The entire unpaid principal amount of the Notes may become
Accelerated on the date on which a Collateral Access Event shall
have occurred and be continuing and the Indenture Trustee or the
Noteholders holding the Notes representing not less than a
majority of the Outstanding Amount of the Notes have Accelerated
the Notes.
Any interest or principal, if any, payable on this Note in
accordance with Section 2.09(a) of the Indenture on the
applicable Payment Date shall be made by check mailed to the
Person in whose name this Note (or one or more predecessor Notes)
is registered on the Note Register as of the close of business on
each Record Date, except that with respect to Notes registered on
the Record Date in the name of the nominee of the Depositary
(initially, such nominee to be Cede & Co.), payments will be made
by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the
Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of
payment. Any reduction in the principal amount of this Note (or
any one or more predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Noteholders
of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds
B-7
<PAGE>
are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Indenture Trustee, in the
name of and on behalf of the Company, will notify the Person in
whose name this Note is registered as of the Record Date
preceding such Payment Date by notice mailed within five days of
such Payment Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the
Indenture Trustee's Corporate Trust Office or at the office of
the Indenture Trustee's agent appointed for such purposes located
in The City of New York.
By acceptance of its Note, each Noteholder agrees that in
the event such Noteholder shall receive any payment or
distribution (whether in cash, securities or other property) on
or in respect of any obligation which it is not entitled to
receive hereunder or under the Collateral Agreement, it shall
hold any amount so received in trust for the benefit of any
Person having a higher priority of distribution pursuant to
Section 2.5, 3.2 or 3.3 of the Collateral Agreement and shall
promptly remit such payment or distribution to the Collateral
Agent for application as provided in the Collateral Agreement.
Each Note shall be mandatorily redeemed pursuant to Section
3.01(a) of the Indenture, in whole or ratably in part, at the
Redemption Price, together with accrued interest thereon until
the Redemption Date. At any other time, the Company may redeem
the Notes in whole or in part at the Redemption Price for such
Notes together with accrued interest thereon until the Redemption
Date, plus the Make Whole Premium for such Notes.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be
registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by
the Company pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the
Noteholder hereof or his attorney duly authorized in writing,
with such signature guaranteed, and such other documents as the
Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate
principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
B-8
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, covenants and agrees that (i) by accepting the
benefits of the Indenture that such Noteholder will not at any
time institute against the Company, or join in any institution
against the Company of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in
connection with any obligations relating to the Notes, the
Indenture or the Basic Documents and (ii) such Noteholder will
agree to treat the Notes as indebtedness of the Company. Once
such a proceeding has been instituted, the Indenture Trustee may
file appropriate proofs of claim.
Prior to the due presentment for registration of transfer of
this Note, the Company, the Indenture Trustee and any agent of
the Company or the Indenture Trustee may treat the Person in
whose name this Note (as of the day of determination or as of
such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Company, the Indenture
Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Noteholders under the Indenture at any time by the Company with
the consent of the Noteholders holding a majority of the
Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Noteholders of
Notes representing specified percentages of the Outstanding
Amount of the Notes, on behalf of the Noteholders of all the
Notes, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the
Noteholder of this Note (or any one or more predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all
future Noteholders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made
upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Noteholders of the Notes issued
thereunder.
B-9
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, agrees that it shall have no recourse against the
Indenture Trustee in its individual capacity for the payment of
any principal, interest or other amounts due with respect to this
Note and that all such recourse shall be against the Company
pursuant to the terms of the Indenture.
The term "Company" as used in this Note includes any
successor to the Company under the Indenture.
The Company is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of
the Indenture Trustee and the Noteholders of Notes under the
Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain
limitations therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder and thereunder shall be
determined in accordance with such laws.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Note at the times,
place, and rate, and in the coin or currency herein prescribed.
B-10
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
________________________________________________________________
________________________________________________________________
Please print or typewrite name and address including zip code of
assignee
________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________________________
attorney to transfer said Note on the books of the Company with
full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES
EXCEPT PERMANENT OFFSHORE GLOBAL NOTES AND OFFSHORE
PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior
to the date which is three years after the later of the original
issuance of this Note or the last date on which this Note was
held by the Company or any affiliate of the Company the
undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
-----------
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
--
B-11
<PAGE>
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Indenture Trustee
or other Note Registrar shall not be obligated to register this
Note in the name of any Person other than the Noteholder hereof
unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.06 of the
Indenture shall have been satisfied.
Date: _____________________
___________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of
the within-mentioned instrument in
every particular, without
alteration or any change
whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with
respect to which it exercises sole investment discretion and that
it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933,
as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:______________________ _______________________________
NOTICE: To be executed by an
executive officer
B-12
<PAGE>
EXHIBIT C
Principal Payment Dates
and Amounts
Class B Notes
-------------
Payment Date Expected Principal Payment
------------ --------------------------
15 Apr-1996 $0
15 Oct-1996 1,422,722
15 Apr-1997 650,942
15 Oct-1997 650,942
15 Apr-1998 585,848
15 Oct-1998 585,848
15 Apr-1999 531,025
15 Oct-1999 531,025
15 Apr-2000 389,388
15 Oct-2000 389,388
15 Apr-2001 321,205
15 Oct-2001 638,936
15 Apr-2002 444,212
15 Oct-2002 331,638
15 Apr-2003 905,800
15 Oct-2003 516,228
15 Apr-2004 2,174,452
15 Oct-2004 1,262,786
15 Apr-2005 2,474,574
15 Oct-2005 2,738,428
15 Apr-2006 3,059,412
15 Oct-2006 3,483,802
15 Apr-2007 2,559,283
15 Oct-2007 3,658,362
15 Apr-2008 24,493,753
-------------
Total 54,800,000
=============
C-1
<PAGE>
EXHIBIT D
Form of Certificate for Unlegended Notes
----------------------------------------
___________, _______
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class B 7.50% Notes (the "Notes")
---------------------------------
Dear Sirs:
This letter relates to U.S. $___________________ principal
amount of Notes represented by a Note (the "Legended Note") which
bears a legend outlining restrictions upon transfer of such
Legended Note. Pursuant to Section 2.01 of the Indenture (the
"Indenture") dated as of February 15, 1996 relating to the Notes,
we hereby certify that we are (or we will hold such securities on
behalf of) a person outside the United States to whom the Notes
could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to exchange the legended
certificate for an unlegended certificate representing an
identical principal amount of Notes, all in the manner provided
for in the Indenture.
You and USAir, Inc. are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.
Very truly yours,
[Name of Noteholder]
By:_____________________________
Authorized Signature
D-1
<PAGE>
EXHIBIT E
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
- -----------------------------------------
_____________, ______
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class B 7.50% Notes (the "Notes")
---------------------------------
Dear Sirs:
In connection with our proposed purchase of $_____________
aggregate principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions
set forth in the Indenture dated as of February 15, 1996
relating to the Notes (the "Indenture") and the undersigned
agrees to be bound by, and not to resell, pledge or
otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that
the Notes may not be offered or sold except as permitted in
the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Note within
three years after the later of the original issuance of such
Note or the last date on which the Note is owned by USAir,
Inc. (the "Company") or an affiliate of the Company, we will
do so only (A) to the Company or any subsidiary thereof, (B)
in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to
an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes to you a signed
letter
E-1
<PAGE>
containing certain representations and agreements relating
to the restrictions on transfer of the Notes (a form of
which letter can be obtained from you) and, if such transfer
is in respect of Notes having an aggregate value at the time
of transfer of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in
compliance with the Securities Act, (D) outside the United
States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act,
or (F) pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising
such purchaser that resales of the Notes are restricted as
stated herein.
3. We understand that, on any proposed resale of any
Notes, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as
you, and the Company may reasonably require to confirm that
the proposed sale complies with the foregoing restrictions.
We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act) and have such knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment
in the Notes and we and any accounts for which we are acting
are each able to bear the economic risks of our or their
investment.
5. We are acquiring the Notes purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby.
Very truly yours,
[Name of Transferee]
By:
Authorized Signature
E-2
<PAGE>
EXHIBIT F
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
___________, ____
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class B 7.50% Notes (the "Notes")
---------------------------------
Dear Sirs:
In connection with our proposed sale of
$_________________ aggregate principal amount of the Notes, we
confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as
amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in
the United States;
(2) at the time the buy order was originated, the
transferee was outside the United States or we and any
person acting on our behalf reasonably believed that the
transferee was outside the United States;
(3) no directed selling efforts have been made by us
in the United States in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the U.S. Securities
Act of 1933.
F-1
<PAGE>
You and the USAir, Inc. (the "Company") are entitled to rely
upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
Authorized Signature
F-2
<PAGE>
EXHIBIT G
Form of
Opinion of Counsel for
Issuance of Registered Notes
----------------------------
1. The Registered Notes have been duly authorized and, when
executed, authenticated and delivered to the Noteholders in
exchange for the Notes and assuming due authentication by the
Indenture Trustee, will be (x) valid and binding obligations of
the Company enforceable against the Company in accordance with
their terms, except to the extent that enforceability thereof may
be limited by (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights
generally and (B) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law) and (y) entitled to the benefits of the Indenture subject to
the terms thereof.
2. No consent, approval, authorization, license, order of, or
registration with, or the giving of notice to, any government,
governmental instrumentality, or court, domestic or foreign, or
other regulatory body or authority is required to be obtained by
the Company for performance by the Company of its obligations
under the Registered Notes, except such as have been obtained by
the date hereof and such as may be required by the securities or
blue sky laws of the various states in connection with the offer
and exchange of Notes for Registered Notes.
3. The issuance and delivery of the Registered Notes in
exchanged for the Notes and the performance by the Company of its
obligations under the Registered Notes will not contravene (i)
any provision of applicable law, (ii) the charter or by-laws of
the Company or (iii) to the knowledge of such counsel, any
judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its properties.
4. Such counsel has reviewed evidence that the Registration
Statement relating to the Registered Notes has been declared
effective under the Securities Act of 1933, as amended and the
Indenture qualified under the Trust Indenture Act of 1939, as
amended.
The opinions set forth above are subject to the effect of,
and such counsel expresses no opinion as to the application of,
any applicable fraudulent conveyance, fraudulent transfer or
fraudulent obligation law.
Exhibit 5.6
- -----------------------------------------------------------------
USAIR ENHANCED EQUIPMENT NOTES
Class C Notes
-------------------------------
INDENTURE
Dated as of February 15, 1996
-------------------------------
WILMINGTON TRUST COMPANY
Indenture Trustee
- -----------------------------------------------------------------
<PAGE>
Reconciliation and tie between the Indenture, dated as February
15, 1996, relating to the USAir Enhanced Equipment Notes (Class
C) and the Trust Indenture Act of 1939. This reconciliation
section does not constitute part of the Trust Indenture.
Trust Indenture Act Indenture
of 1939 Section Section
- -------------------- -----------
310 (a) (1) 7.12
(a) (2) 7.12
312 (a) 8.02
(c) 11.15
313 (a) 7.07
314 (a) 4.04
(b) 4.04
(c) (1) 11.01
(c) (2) 11.01
(d) (1) Not Applicable
(d) (2) Not Applicable
(d) (3) Not Applicable
(e) 11.02
15 (b) 7.06
(e) 6.12
316 (a) (last sentence) 1.01
(a) (1) (A) 6.10
(a) (1) (B) 6.11
(b) 6.06
(c) 11.04(c)
317 (a) (1) 6.03(i)
(a) (2) 6.11
(b) 4.03
318 (a) 11.16
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS AND INCORPORATION BY REFERENCE.... 1
SECTION 1.01. Definitions........................... 1
SECTION 1.02. Rules of Construction................. 1
ARTICLE II. THE NOTES.................................... 2
SECTION 2.01. Notes; Form and Dating................ 2
SECTION 2.02. Restrictive Legends................... 3
SECTION 2.03. Execution, Authentication and
Delivery............................. 5
SECTION 2.04. Transfer and Exchange................. 6
SECTION 2.06. Special Transfer Provisions........... 8
SECTION 2.07. Mutilated, Destroyed, Lost
or Stolen Notes...................... 12
SECTION 2.08. Persons Deemed Owner.................. 13
SECTION 2.09. Payment of Principal and Interest..... 13
SECTION 2.10. Revision of Expected
Principal Amounts and Payment Dates.. 14
SECTION 2.11. Liquidity Facility Distribution....... 14
SECTION 2.12. Registrar and Paying Agent............ 15
SECTION 2.13. Temporary Notes....................... 15
SECTION 2.14. Cancellation.......................... 16
SECTION 2.15. CUSIP Numbers......................... 16
SECTION 2.16. Purchase Upon Acceleration............ 16
ARTICLE III. REDEMPTION.................................. 18
SECTION 3.01. Redemptions........................... 18
SECTION 3.02. Notice of Redemption.................. 18
SECTION 3.03. Effect of Notice of Redemption........ 19
SECTION 3.04. Payment of Redemption Price........... 19
ARTICLE IV. COVENANTS.................................... 20
SECTION 4.01. Payment of Principal and Interest..... 20
SECTION 4.02. Maintenance of Office or Agency....... 20
SECTION 4.03. Money for Payments to Be Held
in Trust............................. 20
SECTION 4.04. Reports by the Company................ 21
<PAGE>
ARTICLE V. SATISFACTION AND DISCHARGE..................... 23
SECTION 5.01. Satisfaction and Discharge
of Indenture.......................... 23
SECTION 5.02. Application of Trust Mone.y............ 24
SECTION 5.03. Repayment of Moneys Held by
Paying Agent.......................... 24
ARTICLE VI. REMEDIES...................................... 24
SECTION 6.01. Collateral Access Events............... 24
SECTION 6.02. Acceleration of Maturity; Rescission
and Annulment......................... 27
SECTION 6.03. Collection of Indebtedness and Suits
for Enforcement by Indenture Trustee.. 28
SECTION 6.04. Remedies; Priorities................... 30
SECTION 6.05. Limitation of Suits.................... 30
SECTION 6.06. Unconditional Rights of Noteholders to
Receive Principal and Interest........ 31
SECTION 6.07. Restoration of Rights and Remedies..... 31
SECTION 6.08. Rights and Remedies Cumulative......... 31
SECTION 6.09. Delay or Omission Not a Waiver......... 32
SECTION 6.10. Control by Noteholders................. 32
SECTION 6.11. Waiver of Existing Defaults............ 32
SECTION 6.12. Undertaking for Costs.................. 33
SECTION 6.13. Waiver of Stay or Extension Laws....... 33
SECTION 6.14. Action on Notes........................ 33
ARTICLE VII. THE INDENTURE TRUSTEE........................ 34
SECTION 7.01. Duties of Indenture Trustee............ 34
SECTION 7.02. Directions to Collateral Agent......... 35
SECTION 7.03. Rights of Indenture Trustee............ 35
SECTION 7.04. Individual Rights of
Indenture Trustee..................... 36
SECTION 7.05. Indenture Trustee's Disclaimer......... 36
SECTION 7.06. Notice of Collateral Access Events..... 37
SECTION 7.07. Reports by Indenture Trustee
to Holders............................ 37
SECTION 7.08. Compensation and Indemnity............. 37
SECTION 7.09. Replacement of Indenture Trustee....... 38
SECTION 7.10. Successor Indenture Trustee
by Merger............................. 39
SECTION 7.11. Appointment of Co-Trustee or
Separate Trustee...................... 39
SECTION 7.12. Trustee Eligibility.................... 40
SECTION 7.13. Information to Collateral Agent........ 41
<PAGE>
ARTICLE VIII. NOTEHOLDERS' LISTS AND REPORTS.............. 41
SECTION 8.01. Company to Furnish Indenture Trustee
Names and Addresses of Noteholders.... 41
SECTION 8.02. Preservation of Information; Communi-
cations to Noteholders................ 41
ARTICLE IX. SUPPLEMENTAL INDENTURES AND AMENDMENTS TO THIS
INDENTURE AND OTHER DOCUMENTS................ 42
SECTION 9.01. Amendments; Waivers, etc. of Documents;
Direction to Collateral Agent........ 42
SECTION 9.02. Trustees Protected.................... 43
SECTION 9.03. [Reserved]............................ 43
SECTION 9.04. No Noteholder Consent Necessary for
Indenture Supplement, etc............ 43
SECTION 9.05. Payment for Consent................... 45
SECTION 9.06. Effect of Supplemental Indenture...... 45
SECTION 9.07. Notation on Notes in Respect of
Supplemental Indentures.............. 45
SECTION 9.08. Notice to Rating Agencies............. 45
ARTICLE X. COLLATERAL AGREEMENT........................... 45
SECTION 10.01. Collateral Agreement.................. 45
SECTION 10.02. Release upon Termination of the
Company's Obligations................ 46
SECTION 10.03. Notice of Successor Collateral
Agent................................ 46
ARTICLE XI. MISCELLANEOUS................................. 46
SECTION 11.01. Compliance Certificates and
Opinions, etc........................ 46
SECTION 11.02. Statements Required in Certificate
or Opinion........................... 47
SECTION 11.03. Form of Documents Delivered to
Indenture Trustee.................... 47
SECTION 11.04. Acts of Noteholders................... 48
SECTION 11.05. Notices, etc., to Indenture Trustee,
Company and Rating Agencies.......... 49
SECTION 11.06. Notices to Noteholders; Waiver........ 49
SECTION 11.07. Effect of Headings and Table of
Contents............................. 50
SECTION 11.08. Successors and Assigns................ 50
SECTION 11.09. Separability.......................... 50
SECTION 11.10. Benefits of Indenture................. 50
<PAGE>
SECTION 11.11. GOVERNING LAW......................... 51
SECTION 11.12. Counterparts.......................... 51
SECTION 11.13. Recording of Indenture................ 51
SECTION 11.14. Disclosure of Names and Addresses
of Holders .......................... 51
SECTION 11.15. Trust Indenture Act Controls.......... 51
SECTION 11.16. Exchange Offer....................... 51
APPENDICES AND EXHIBITS
Appendix A Definitions
Exhibit A Form of Registered Note
Exhibit B Form of Note
Exhibit C Principal Payment Dates and Amounts
Exhibit D Form of Certificate for Unlegended Notes
Exhibit E Form of Certificate to Be Delivered in Connection
with Transfers to Non-QIB Accredited Investors
Exhibit F Form of Certificate to Be Delivered in Connection
with Transfers Pursuant to Regulation S
Exhibit G Form of Opinion of Counsel for Issuance of Registered
Notes
<PAGE>
This INDENTURE dated as of February 15, 1996, between USAIR,
INC., a Delaware corporation (the "Company"), and WILMINGTON
TRUST COMPANY, a Delaware banking corporation, solely as trustee
and not in its individual capacity except as expressly provided
herein (the "Indenture Trustee").
Each party agrees as follows for the benefit of the other
party and for the equal and ratable benefit of the Noteholders of
the Notes:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions. For all purposes of this
Indenture, capitalized terms used herein shall have the meanings
set forth in Appendix A attached hereto and shall be subject to
the rules of usage set forth at the beginning thereof. Unless
otherwise specified, Section and Article references herein are
Sections or Articles, as the case may be, of this Indenture.
SECTION 1.02. Rules of Construction. Unless the context
otherwise requires:
(i) a term has the meaning assigned to it;
(ii) all other terms used herein which are defined
in the Trust Indenture Act, either directly or by
reference therein, have the meanings assigned to them
therein; except that the "obligor" within the meaning
of the Trust Indenture Act shall be the Company for all
purposes of this Indenture;
(iii) an accounting term not otherwise defined has
the meaning assigned to it in accordance with generally
accepted accounting principles as in effect from time
to time;
(iv) "or" is not exclusive;
(v) "including" means "including without
limitation"; and
(vi) words in the singular include the plural and
words in the plural include the singular.
<PAGE>
ARTICLE II
THE NOTES
SECTION 2.01. Notes; Form and Dating. (a) The Notes and
the Indenture Trustee's certificate of authentication in respect
thereof shall be substantially in the form annexed hereto as
Exhibit B; provided that, any Class C Registered Note, if and
when issued, and the Indenture Trustee's certificate of
authentication in respect thereof shall be substantially in the
form of Exhibit A. The Notes shall be issued in an aggregate
principal amount equal to $65,800,000 and shall bear interest at
the Stated Interest Rate. The principal of each Note shall be
due and payable in full on the Maturity Date, provided that,
subject to Section 2.10, the principal of the Notes is expected
to be paid prior to such date, subject to Section 2.09(a), in
installments, on such Payment Dates and in such amounts as set
forth in Exhibit C hereto.
(b) The Notes shall be in registered form and may have
notations, legends or endorsements required by law to which the
Company is subject or by usage. The Company shall approve the
form of the Notes and any notation, legend or endorsement on the
Notes. Each Note shall be dated the date of its authentication.
(c) The terms and provisions contained in the respective
forms of the Notes annexed hereto as Exhibits A (in the case of
Class C Registered Notes) and B (in the case of Notes other than
Class C Registered Notes) shall constitute, and are hereby
expressly made, a part of this Indenture. Each of the Company
and the Indenture Trustee, by its execution and delivery of this
Indenture, expressly agrees to the terms and provisions of the
Notes applicable to it and to be bound thereby.
(d) The Notes offered and sold in reliance on Rule 144A
shall be issued initially in the form of a single permanent
global Note in registered form, substantially in the form set
forth in Exhibit B (the "U.S. Global Note"), deposited with the
Indenture Trustee, as custodian for the Depositary, duly executed
by the Company and authenticated by the Indenture Trustee as
hereinafter provided. The aggregate principal amount of the U.S.
Global Note may from time to time be increased or decreased by
adjustments made on the records of the Indenture Trustee, as
custodian for the Depositary or its nominee, as hereinafter
provided.
<PAGE>
(e) The Notes offered and sold in offshore transactions in
reliance on Regulation S shall be issued initially in the form of
a single temporary global Note in registered form substantially
in the form set forth in Exhibit B (the "Temporary Offshore
Global Note") deposited with the Indenture Trustee, as custodian
for the Depositary, duly executed by the Company and
authenticated by the Indenture Trustee as hereinafter provided.
At any time following March 27, 1996 (the "Offshore Notes
Exchange Date"), upon receipt by the Indenture Trustee and the
Company of a certificate substantially in the form of Exhibit D
hereto, a single permanent global Note in registered form
substantially in the form set forth in Exhibit B (the "Permanent
Offshore Global Note"; and together with the Temporary Offshore
Global Note, the "Offshore Global Notes") duly executed by the
Company and authenticated by the Indenture Trustee as hereinafter
provided shall be deposited with the Indenture Trustee, as
custodian for the Depositary, and the Note Registrar shall
reflect on its books and records the date and a decrease in the
principal amount of any Temporary Offshore Global Note in an
amount equal to the principal amount of the beneficial interest
in such Temporary Offshore Global Note transferred.
(f) The Notes offered and sold in reliance on Regulation D
under the Securities Act shall be issued in the form of permanent
certificated Notes in registered form in substantially the form
set forth in Exhibit B (the "U.S. Physical Notes"). Notes issued
pursuant to Section 2.07 in exchange for interests in any
Offshore Global Note shall be in the form of permanent
certificated Notes in registered form substantially in the form
set forth in Exhibit B (the "Offshore Physical Notes"). The
Offshore Physical Notes, U.S. Physical Notes and the Registered
Physical Notes are sometimes collectively herein referred to as
the "Physical Notes".
(g) Class C Registered Notes shall be issued initially in
the form of a single temporary or permanent global Note in
registered form substantially in the form set forth in Exhibit A
(with "Registered Global Note"), deposited with the Indenture
Trustee, as custodian for the Depository, duly executed by the
Company and authenticated by the Indenture Trustee as hereinafter
provided. Class C Registered Notes issued pursuant to
Section 2.07 in exchange for any Registered Global Note shall be
in the form of permanent certificated Class C Registered Notes in
registered form substantially in the form set forth in Exhibit A
(the "Registered Physical Note").
<PAGE>
(h) The definitive Notes shall be in registered form and
shall be typed, printed, lithographed or engraved or produced by
any combination of these methods or may be produced in any other
manner, all as determined by the officers executing such Notes,
as evidenced by their execution of such Notes.
SECTION 2.02. Restrictive Legends. (a) Each Global Note
(except any Registered Global Note) and each U.S. Physical Note
shall bear the following legend on the face thereof:
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN "INSTITUTIONAL
ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT,
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS NOTE OR THE LAST DATE ON WHICH THIS
NOTE WAS HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR,
INC., RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO USAIR, INC., OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
APPLICABLE INDENTURE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE APPLICABLE
INDENTURE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE VALUE OF NOTES AT THE TIME OF TRANSFER
OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTANCE
TO USAIR, INC. THAT SUCH TRANSFER IS IN COMPLIANCE THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
<PAGE>
THIS NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF
THIS NOTE WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THE NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS
HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR, INC., THE
HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE APPLICABLE INDENTURE TRUSTEE.
IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO THE APPLICABLE INDENTURE TRUSTEE AND USAIR, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
APPLICABLE INDENTURE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
(b) Each Global Note (except any Registered Global Note)
shall also bear the following legend on the face thereof:
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, TO
USAIR, INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY OR SUCH OTHER REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.
<PAGE>
TRANSFERS OF THIS GLOBAL NOTE SHALL BE LIMITED TO
TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF
CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS
GLOBAL NOTE SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN SECTION
2.08 OF THE INDENTURE.
SECTION 2.03. Execution, Authentication and Delivery. (a)
The Notes shall be executed on behalf of the Company by any of
its Responsible Officers. The signature of any such Responsible
Officer on the Notes may be manual or facsimile.
(b) Notes bearing the manual or facsimile signature of
individuals who were at any time Responsible Officers of the
Company shall bind the Company, notwithstanding that such
individuals or any of them have ceased to hold such offices prior
to the authentication and delivery of such Notes or did not hold
such offices at the date of such Notes.
(c) The Indenture Trustee shall upon Company Order
authenticate and deliver Notes in the aggregate principal amount
of $65,800,000. The aggregate principal amount of the Notes
outstanding at any time may not exceed such amount, except as
provided in Section 2.07. The Indenture Trustee shall upon
Company Order authenticate and deliver Registered Notes of equal
outstanding principal amount. The Indenture Trustee shall be
entitled to receive any Officer's Certificate and any Opinion of
Counsel of the Company that it may reasonably request in
connection with the authentication of such Registered Notes,
including, without limitation, in the case of the original
issuance of Registered Notes, an Opinion of Counsel dated the
date thereof substantially to the effect set forth in Exhibit G
hereto. The Notes shall be issuable as registered Notes in the
minimum denomination of $100,000 and in integral multiples of
$1,000 in excess thereof.
(d) No Note shall be entitled to any benefit under this
Indenture or be valid or obligatory for any purpose, unless there
appears on such Note a certificate of authentication
substantially in the form provided for herein executed by the
Indenture Trustee by the manual signature of one of its
authorized signatories, and such certificate upon any Note shall
be conclusive evidence, and the only evidence, that such Note has
been duly authenticated and delivered hereunder.
<PAGE>
SECTION 2.04. Transfer and Exchange. The Notes are
issuable only in registered form. A Noteholder may transfer a
Note by written application to the Note Registrar stating the
name of the proposed transferee and otherwise complying with the
terms of this Indenture. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a
Noteholder only upon, final acceptance and registration of the
transfer by the Note Registrar in the Note Register. Prior to
the registration of any transfer by a Noteholder as provided
herein, the Company, the Indenture Trustee, and any agent of the
Company shall treat the person in whose name the Note is
registered as the owner thereof for all purposes whether or not
the Note shall be overdue, and neither the Company, the Indenture
Trustee, nor any such agent shall be affected by notice to the
contrary. Furthermore, the Depositary shall, by acceptance of a
Global Note, agree that transfers of beneficial interests in such
Global Note may be effected only through a book-entry system
maintained by the Depositary (or its agent), and that ownership
of a beneficial interest in the Note shall be required to be
reflected in a book entry. When Notes are presented to the Note
Registrar or a co-Note Registrar with a request to register the
transfer or to exchange them for an equal principal amount of
Notes of other authorized denominations (including an exchange of
Notes for Registered Notes), the Note Registrar shall register
the transfer or make the exchange as requested if its
requirements for such transactions are met; provided that no
exchanges of Notes for Registered Notes shall occur until a
Registration Statement shall have been declared effective by the
Commission and that any Notes that are exchanged for Registered
Notes shall be cancelled by the Indenture Trustee. To permit
registrations of transfers and exchanges in accordance with the
terms, conditions and restrictions hereof, the Company shall
execute and the Indenture Trustee shall authenticate Notes at the
Note Registrar's request. No service charge shall be made for
any registration of transfer or exchange or redemption of the
Notes, but the Company or the Indenture 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 other similar governmental charge
payable upon exchanges pursuant to Section 2.13 or 9.07).
SECTION 2.05. Book Entry Provisions for Global Notes. (a)
Each Global Note shall be issued in registered form and initially
shall (i) be registered in the name of the Depositary for such
Global Notes or the nominee of such Depositary, (ii) be delivered
to the Indenture Trustee as custodian for such Depositary and,
(iii) except with respect to the Registered Global Note, bear
legends as set forth in Section 2.02.
<PAGE>
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Indenture with respect
to any Global Note, as the case may be, held on their behalf by
the Depositary, or the Indenture Trustee as its custodian, or
under or any Global Note, as the case may be, and the Depositary
may be treated by the Company, the Indenture Trustee and any
agent of the Company or the Indenture Trustee as the absolute
owner of such Global Note, as the case may be, for all purposes
whatsoever. Notwithstanding the foregoing, nothing herein shall
prevent the Company, the Indenture Trustee or any agent of the
Company or the Indenture Trustee, from giving effect to any
written certification, proxy or other authorization furnished by
the Depositary or impair, as between the Depositary and its Agent
Members, the operation of customary practices governing the
exercise of the rights of a holder of any Note.
(b) Transfers of any Global Note shall be limited to
transfers of such Global Note in whole, but not in part, to the
Depositary, its successors or their respective nominees.
Beneficial interests in any Global Note may be transferred in
accordance with the applicable rules and procedures of the
Depositary and the provisions of Section 2.06. In addition,
Physical Notes shall be delivered to all beneficial owners in
exchange for their beneficial interests in such Global Note, as
the case may be, if (i) the Depositary notifies the Company that
it is unwilling or unable to continue as Depositary for such
Global Note, as the case may be, and a successor depositary is
not appointed by the Company within 90 days of such notice or
(ii) a Collateral Access Event has occurred and is continuing and
the Noteholders holding at least a majority of the aggregate
outstanding principal amount of the Notes have caused the
Depositary to make such a request of the Note Registrar.
(c) Any beneficial interest in one of the Global Notes that
is transferred to a person who takes delivery in the form of an
interest in the other Global Note will, upon transfer, cease to
be an interest in such Global Note and become an interest in the
other Global Note and, accordingly, will thereafter be subject to
all transfer restrictions, if any, and other procedures
applicable to beneficial interests in such other Global Note for
as long as it remains such an interest.
<PAGE>
(d) In connection with any transfer of a beneficial
interest in the U.S. Global Note to a transferee receiving U.S.
Physical Notes pursuant to paragraph (b) of this Section, the
Note Registrar shall reflect on its books and records the date
and a decrease in the principal amount of such U.S. Global Note
in an amount equal to the principal amount of the beneficial
interest in such U.S. Global Note to be transferred, and the
Company shall execute, and the Indenture Trustee shall
authenticate and deliver, one or more U.S. Physical Notes of like
tenor and amount.
(e) In connection with the transfer of the entire U.S.
Global Note, Offshore Global Note or Registered Global Note to
beneficial owners pursuant to paragraph (b) of this Section, such
U.S. Global Note, Offshore Global Note or Registered Global Note,
as the case may be, shall be deemed to be surrendered to the
Indenture Trustee for cancellation, and the Company shall
execute, and the Indenture Trustee shall authenticate and
deliver, to each beneficial owner identified by the Depositary in
exchange for its beneficial interest in such U.S. Global Note,
Offshore Global Note or Registered Global Note, as the case may
be, an equal aggregate principal amount of U.S. Physical Notes,
Offshore Physical Notes or Registered Physical Notes, as the case
may be, of authorized denominations.
(f) Any U.S. Physical Note delivered in exchange for an
interest in the U.S. Global Note pursuant to paragraph (b) or (d)
of this Section shall, except as otherwise provided by paragraph
(f) of Section 2.06, bear the legend regarding transfer
restrictions applicable to a U.S. Physical Note set forth in
Section 2.02.
(g) Any Offshore Physical Note delivered in exchange for an
interest in an Offshore Global Note pursuant to paragraph (b) of
this Section shall, except as otherwise provided by paragraph (f)
of Section 2.06, bear the legends regarding transfer restrictions
set forth in Section 2.02(a).
(h) The registered holder of any Offshore Global Note may
grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent
Members, to take any action which a Noteholder is entitled to
take under this Indenture or the Notes.
SECTION 2.06 Special Transfer Provisions. (a) Transfers
to Non-QIB Institutional Accredited Investors. The following
provisions shall apply with respect to the registration of any
proposed transfer of a Note (other than a Class C Registered
Note) to any Institutional Accredited Investor which is not a QIB
(excluding transfers to or by Non-U.S. Persons):
<PAGE>
(i) The Note Registrar shall register the transfer of
any Note, whether or not such Note bears the Private
Placement Legend, if (x) the requested transfer is at least
three years after the later of the original issue date of
the Notes and the last date on which such Note was held by
the Company or any affiliate of the Company or (y) the
proposed transferee has delivered to the Note Registrar a
certificate substantially in the form of Exhibit E hereto
and the aggregate principal amount of the Notes being
transferred is at least $100,000.
(ii) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon
receipt by the Note Registrar of (x) the documents, if any,
required by paragraph (i) and (y) instructions given in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and a decrease in the principal amount
of such U.S. Global Note in an amount equal to the principal
amount of the beneficial interest in such U.S. Global Note
to be transferred, and the Company shall execute, and the
Indenture Trustee shall authenticate and deliver, one or
more U.S. Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer
of a Note (other than a Class C Registered Note) to a QIB
(excluding transfers to or by Non-U.S. Persons):
(i) If the Note to be transferred consists of U.S.
Physical Notes or an interest in any Temporary Offshore
Global Note, except if exchanged for a Class C Registered
Note in the Exchange Offer, the Note Registrar shall
register the transfer if such transfer is being made by a
proposed transferor who has checked the box provided for on
the form of Note stating, or has otherwise advised the
Company and the Note Registrar in writing, that the sale has
been made in compliance with the provisions of Rule 144A to
a transferee who has signed the certification provided for
on the form of Note stating, or has otherwise advised the
Company and the Note Registrar in writing, that it is
purchasing the Note for its own account or an account with
respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A.
<PAGE>
(ii) If the proposed transferee is an Agent Member,
and the Note to be transferred consists of U.S. Physical
Notes or an interest in the Temporary Offshore Global Note,
upon receipt by the Note Registrar of the documents referred
to in clause (i) and instructions given in accordance with
the Depositary's and the Note Registrar's procedures, the
Note Registrar shall reflect on its books and records the
date and an increase in the principal amount of the U.S.
Global Note in an amount equal to the principal amount of
such U.S. Physical Notes or the interest in such Temporary
Offshore Global Note, as the case may be, to be transferred,
and the Indenture Trustee shall cancel such Physical Notes
or decrease the amount of such Temporary Offshore Global
Note so transferred.
(c) Transfers of Interests in the Temporary Offshore
Global Note. The following provisions shall apply with respect
to registration of any proposed transfer of interests in the
Temporary Offshore Global Note:
(i) The Note Registrar shall register the transfer of
any such Note (x) if the proposed transferee is a Non-U.S.
Person and the proposed transferor has delivered to the Note
Registrar a certificate substantially in the form of Exhibit
F hereto or (y) if the proposed transferee is a QIB and the
proposed transferor has checked the box provided for on the
form of such Note stating, or has otherwise advised the
Company and such Note Registrar in writing, that the sale
has been made in compliance with the provisions of Rule 144A
to a transferee who has signed the certification provided
for on the form of Note stating, or has otherwise advised
the Company and the Note Registrar in writing, that it is
purchasing such Note for its own account or an account with
respect to which it exercises sole investment discretion and
that it and any such account is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim
the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member,
upon receipt by the Note Registrar of the documents referred
to in clause (i)(y) above and instructions given in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and
<PAGE>
an increase in the principal amount of the U.S. Global Note
in an amount equal to the principal amount of the Temporary
Offshore Global Note to be transferred, and the Indenture
Trustee shall decrease the amount of the Temporary Offshore
Global Note.
(d) Transfers of Interests in the Permanent Offshore
Global Note, Offshore Physical Notes and Registered Class C Note.
With respect to any transfer of interests in any Permanent
Offshore Global Note, Offshore Physical Notes or Class C
Registered Note, the Note Registrar shall register such transfer
without requiring any additional certification.
(e) Transfers to Non-U.S. Persons at any Time. The
following provisions shall apply with respect to any transfer of
a Note (other than a Class C Registered Note) to a Non-U.S.
Person:
(i) Prior to March 27, 1996, the Note Registrar shall
register any proposed transfer of a Note to a Non-U.S.
Person upon receipt of a certificate substantially in the
form of Exhibit F hereto from the proposed transferor.
(ii) On and after March 27, 1996, the Note Registrar
shall register any proposed transfer to any Non-U.S. Person
if such Note to be transferred is a U.S. Physical Note or an
interest in the U.S. Global Note, upon receipt of a
certificate substantially in the form of Exhibit F from the
proposed transferor.
(iii) (a) If the proposed transferor is an Agent Member
holding a beneficial interest in the U.S. Global Note, upon
receipt by the Note Registrar of (x) the documents, if any,
required by paragraph (ii) and (y) instructions in
accordance with the Depositary's and the Note Registrar's
procedures, the Note Registrar shall reflect on its books
and records the date and a decrease in the principal amount
of such U.S. Global Note in an amount equal to the principal
amount of the beneficial interest in such U.S. Global Note
to be transferred, and (b) if the proposed transferee is an
Agent Member, upon receipt by the Note Registrar of
instructions given in accordance with the Depositary's and
the Note Registrar's procedures, the Note Registrar shall
reflect on its books and records the date and an increase in
the principal amount of the Offshore Global Note in an
amount equal to the principal amount of the U.S. Physical
Note or the U.S. Global Note, as the case may be, to be
transferred, and the Indenture Trustee shall cancel the
Physical Note, if any, so transferred or decrease the amount
of such U.S. Global Note.
<PAGE>
(f) Private Placement Legend. Upon the transfer, exchange
or replacement of Notes not bearing the Private Placement Legend,
the Note Registrar shall deliver Notes that do not bear the
Private Placement Legend. Upon the transfer, exchange or
replacement of Notes bearing the Private Placement Legend, the
Note Registrar shall deliver only Notes that bear the Private
Placement Legend unless either (i) the circumstances contemplated
by paragraph (a)(i)(x) or (e)(ii) of this Section 2.06 exist or
(ii) there is delivered to the Note Registrar an opinion of
counsel reasonably satisfactory to the Company and the Note
Registrar to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain
compliance with the provisions of the Securities Act.
(g) General. By its acceptance of any Note bearing the
Private Placement Legend, each Noteholder of such a Note
acknowledges the restrictions on transfer of such Note set forth
in this Indenture and in the Private Placement Legend and agrees
that it will transfer such Note only as provided in this
Indenture. The Note Registrar shall not register a transfer of
any Note unless such transfer complies with the restrictions on
transfer of such Note set forth in this Indenture. In connection
with any transfer of Notes (other than Class C Registered Notes),
each Noteholder agrees by its acceptance of the Notes to furnish
the Note Registrar or the Company such certifications, legal
opinions or other information as either of them may reasonably
require to confirm that such transfer is being made pursuant to
an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act; provided that
the Note Registrar shall not be required to determine (but may
rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
The Note Registrar shall retain copies of all letters,
notices and other written communications received pursuant to
Section 2.05 or this Section 2.06. The Company shall have the
right to inspect and make copies of all such letters, notices or
other written communications at any reasonable time upon the
giving of reasonable written notice to the Note Registrar.
SECTION 2.07. Mutilated, Destroyed, Lost or Stolen Notes.
If (i) any mutilated Note is surrendered to the Indenture
Trustee, or the Indenture Trustee receives evidence to its
satisfaction of the destruction, loss or theft of any Note, and
(ii) there is delivered to the Indenture Trustee such security or
indemnity as may be required by it to hold the Company and the
Indenture Trustee harmless, then, in the absence of notice to the
Company, the Note Registrar or the Indenture Trustee that such
Note has been acquired
<PAGE>
by a bona fide purchaser, and provided that the requirements of
Section 8-405 of the Uniform Commercial Code are met, the Company
shall execute and upon its request the Indenture Trustee shall
authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen Note, a replacement Note;
provided, however, that if any such destroyed, lost or stolen
Note, but not a mutilated Note, shall have become or within seven
days shall be due and payable, or shall have been called for
redemption, instead of issuing a replacement Note, the Company
may pay such destroyed, lost or stolen Note when so due or
payable or upon the Redemption Date without surrender thereof.
If, after the delivery of such replacement Note or payment of a
destroyed, lost or stolen Note pursuant to the proviso to the
preceding sentence, a bona fide purchaser of the original Note in
lieu of which such replacement Note was issued presents for
payment such original Note, the Company and the Indenture Trustee
shall be entitled to recover such replacement Note (or such
payment) from the Person to whom it was delivered or any Person
taking such replacement Note from such Person to whom such
replacement Note was delivered or any assignee of such Person,
except a bona fide purchaser, and shall be entitled to recover
upon the security or indemnity provided therefor to the extent of
any loss, damage, cost or expense incurred by the Company or the
Indenture Trustee in connection therewith.
Upon the issuance of any replacement Note under this
Section, the Company may require the payment by the Noteholder of
such Note of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and
any other reasonable expenses (including the fees and expenses of
the Indenture Trustee) connected therewith.
Every replacement Note issued pursuant to this Section in
replacement of any mutilated, destroyed, lost or stolen Note
shall constitute an original additional contractual obligation of
the Company, whether or not the mutilated, destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall
be entitled to all the benefits of this Indenture equally and
proportionately with any and all other Notes duly issued
hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies
with respect to the replacement or payment of mutilated,
destroyed, lost or stolen Notes.
<PAGE>
SECTION 2.08. Persons Deemed Owner. Prior to due
presentment for registration of transfer of any Note, the
Company, the Indenture Trustee and any agent of the Company or
the Indenture Trustee may treat the Person in whose name any Note
is registered (as of the day of determination) as the owner of
such Note for the purpose of receiving payments of principal of
and interest, if any, on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and neither the
Company, the Indenture Trustee nor any agent of the Company or
the Indenture Trustee shall be affected by notice to the
contrary.
SECTION 2.09. Payment of Principal and Interest. (a) The
Company shall make principal payments in respect of the Notes on
each Payment Date as set forth on Exhibit C. The Company shall
unconditionally pay in full any outstanding principal of the
Notes (including the Note Principal Carryover Amount), and
accrued but unpaid interest thereon (including the Note Interest
Carryover Amount), on the Maturity Date.
(b) The Notes shall accrue interest at the Stated Interest
Rate on the principal amount thereof remaining unpaid from time
to time from and including the date of issuance to be excluding
the date of payment. Interest will be calculated on the basis of
a 360-day year of twelve 30-day months and shall be paid on each
Payment Date to the Person in whose name such Note (or one or
more predecessor Notes) is registered on the Record Date, by wire
transfer in immediately available funds to the account designated
by such person, with respect to Notes registered on the Record
Date in the name of the nominee of the Depositary (initially,
such nominee to be Cede & Co.), payment will be made by wire
transfer in immediately available funds to the account designated
by such nominee. The funds represented by any such checks
returned undelivered shall be held in accordance with Section
4.03. The final installment of principal of each Note will be
payable only upon presentation and surrender of such Note and
shall specify the place where such Note may be presented and
surrendered for payment of such installment.
(c) If a principal installment of the Notes expected to be
paid on any Payment Date (and the Note Principal Carryover Amount
for such Payment Date) is not paid in full on such Payment Date,
such unpaid principal amount shall be payable (together with
interest thereon) on or prior to the immediately following
Payment Date. If interest accrued on the Notes during the period
commencing on the immediately preceding Payment Date and ending
on any Payment Date (and the Note Interest Carryover Amount for
such Payment Date) is not paid in full on such Payment Date, such
unpaid amount (but without any interest on such amount) shall be
payable on or prior to the immediately following Payment Date.
<PAGE>
(d) Payments made by the Company pursuant to Section
2.09(a) and (b) shall be applied in the following order of
priority: (i) to pay the Note Interest Carryover Amount on the
Notes, (ii) to pay accrued and unpaid interest (other than the
Note Interest Carryover Amount) on the Notes, (iii) to pay the
Note Principal Carryover Amount of the Notes and (iv) to pay any
other principal amounts owing on the Notes. All payments on the
Notes shall be made pro rata to the Noteholders entitled thereto
based upon the outstanding principal amount of the Notes held by
such Noteholder.
(e) If any sum payable under the Notes or under this
Indenture falls due on a day which is not a Business Day, then
such sum shall be payable on the next succeeding Business Day
without additional interest as a result of such extension.
(f) The principal, interest and premium, if any, in respect
of each Note will be payable by the Company in U.S. dollars in
immediately available funds at the principal corporate trust
administration office of the Collateral Agent.
SECTION 2.10. Revision of Expected Principal Amounts and
Payment Dates. In the event that the Notes are redeemed in part
pursuant to Section 3.01, the amounts of principal expected to be
paid on any Payment Date for the Notes subsequent to the date of
such redemption will be revised as follows: the amount of
principal expected to be paid on each such subsequent Payment
Date for the Notes shall be equal to the difference of (x) the
amount of principal due on such Payment Date prior to such
revision minus (y) the amount equal to the product of (I) the
amount of principal due on such Payment Date prior to such
revision and (II) a fraction, the numerator of which is the
amount of principal paid on the Notes in connection with such
redemption, and the denominator of which is the aggregate
principal amount of such Notes prior to such redemption.
Exhibit C hereto will be revised as contemplated above and,
as so revised, will be binding on the parties hereto and the
Noteholders and be controlling for all purposes of this Indenture
and the Notes. The Company shall cause the Indenture Trustee to
prepare a new schedule of expected principal payments and the
Payment Dates therefor for the Notes within 10 Business Days
after the partial redemption of the Notes and deliver a copy of
such schedule to each Noteholder pursuant to Section 11.05. If
the Notes, the Class A Notes and the Class B Notes have been
redeemed at the option of the Company prior to any revision of
the expected principal payment schedule described above, such
schedule for the Class A Notes and the Class B Notes will be
revised as if such redemption had not occurred. If any of the
Notes, the Class A Notes or the Class B Notes have been redeemed
in part at the option of the Company, each succeeding principal
payment of such Class will be ratably reduced.
<PAGE>
SECTION 2.11. Liquidity Facility Distribution. Each
payment received by the Indenture Trustee pursuant to Section
3.6(a) or (f) of the Collateral Agreement shall be promptly
applied by the Indenture Trustee to accrued interest due and
payable on the Notes at the Stated Interest Rate and if the
amount received shall be insufficient to pay all such amounts due
and payable in full, such amount received shall be distributed
pro rata among the Notes, without priority of any Note over any
other, based upon the amount of such accrued interest due and
payable on each Note. The Indenture Trustee and each Noteholder
acknowledge and agree that they shall have no right or interest
in any payment received by the Class A Indenture Trustee or the
Class B Indenture Trustee pursuant to Section 3.6(a) or (f) of
the Collateral Agreement.
SECTION 2.12. Registrar and Paying Agent. The Company
shall maintain an office or agency where Notes may be presented
for registration of transfer or for exchange (the "Note
Registrar"), an office or agency where Notes may be presented for
payment (the "Paying Agent") and an office or agency where
notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served, which shall be, except in
case of the original Indenture Trustee, in the Borough of
Manhattan, The City of New York. The Company shall cause the
Note Registrar to keep a register of the Notes and of their
transfer and exchange (the "Note Register"). The Company may
have one or more co-Note Registrars and one or more additional
Paying Agents.
The Company shall enter into an appropriate agency agreement
with any agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to
such agent. The Company shall give prompt written notice to the
Indenture Trustee of the name and address of any such agent and
any change in the address of such agent. If the Company fails to
maintain a Note Registrar, Paying Agent and/or agent for service
of notices and demands, the Indenture Trustee shall act as such
Note Registrar, Paying Agent and/or agent for service of notices
and demands for so long as such failure shall continue. The
Company may remove any agent upon written notice to such agent
and the Indenture Trustee; provided that no such removal shall
become effective until (i) the acceptance of an appointment by a
successor agent to such agent as evidenced by an appropriate
agency agreement entered into by the Company and such successor
agent and delivered to the Indenture Trustee or (ii) notification
to the Indenture Trustee that the Indenture Trustee shall serve
as such agent until the appointment of a successor agent in
accordance with clause (i) of this proviso. The Company or any
<PAGE>
Affiliate of the Company may act as Paying Agent, Note Registrar
or co-Note Registrar, and/or agent for service of notice and
demands; provided, however, that neither the Company nor any
Affiliate of the Company shall act as Paying Agent in connection
with the defeasance of the Notes or the discharge of this
Indenture under Article V.
The Company initially appoints the Indenture Trustee as Note
Registrar, Paying Agent, authenticating agent and agent for
service of notice and demands. If, at any time, the Indenture
Trustee is not the Note Registrar, the Note Registrar shall make
available to the Indenture Trustee on or before each Payment Date
and at such other times as the Indenture Trustee may reasonably
request, the names and addresses of the Noteholders as they
appear in the Note Register.
SECTION 2.13. Temporary Notes. Until definitive Notes are
ready for delivery, the Company may prepare and the Indenture
Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may
have insertions, substitutions, omissions and other variations
determined to be appropriate by the Officers executing the
temporary Notes, as evidenced by their execution of such
temporary Notes. If temporary Notes are issued, the Company will
cause definitive Notes to be prepared without unreasonable delay.
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 of the Company designated
for such purpose pursuant to Section 4.02, without charge to the
Noteholder. Upon surrender for cancellation of any one or more
temporary Notes the Company shall execute and the Indenture
Trustee shall authenticate and deliver in exchange therefor a
like principal amount of definitive Notes of authorized
denominations. Until so exchanged, the temporary Notes shall be
entitled to the same benefits under this Indenture as definitive
Notes.
SECTION 2.14. Cancellation. The Company at any time may
deliver to the Indenture Trustee for cancellation any Notes
previously authenticated and delivered hereunder which the
Company may have acquired in any manner whatsoever, and may
deliver to the Indenture Trustee for cancellation any Notes
previously authenticated hereunder which the Company has not
issued and sold. The Note Registrar and the Paying Agent shall
forward to the Indenture Trustee any Notes surrendered to them
for transfer, exchange or payment. The Indenture Trustee shall
cancel all Notes surrendered for transfer, exchange, payment or
cancellation and shall dispose of them in accordance with its
<PAGE>
normal procedure or the written instructions of the Company;
provided, however, the Indenture Trustee shall not be required to
destroy such Notes. The Company may not issue new Notes to
replace Notes it has paid in full or delivered to the Indenture
Trustee for cancellation.
SECTION 2.15. CUSIP Numbers. The Company in issuing the
Notes may use "CUSIP" and "CINS" numbers (if then generally in
use), and the Indenture Trustee shall use CUSIP numbers or CINS
numbers, as the case may be, in notices of redemption or exchange
as a convenience to Noteholders; provided that any such notice
may state that no representation is made as to the correctness of
such numbers either as printed on such Notes or as contained in
any notice of redemption or exchange and that reliance may be
placed only on the other identification numbers printed on such
Notes.
SECTION 2.16. Purchase Upon Acceleration. Each Noteholder
shall be entitled to the benefitsof Sections 2.16 and 9.01(b) of
each of the Class A Indenture and the Class B Indenture.
SECTION 2.17. Other Provisions Regarding Payment. By
acceptance of its Note, each Noteholder agrees that in the event
such Noteholder shall receive any payment or distribution
(whether in cash, securities or other property) on or in respect
of any obligation which it is not entitled to receive hereunder
or under the Collateral Agreement, it shall hold any amount so
received in trust for the benefit of any Person having a higher
priority of distribution pursuant to Section 2.5, 3.2 or 3.3 of
the Collateral Agreement and shall promptly remit such payment or
distribution to the Collateral Agent for application as provided
in the Collateral Agreement.
ARTICLE II
REDEMPTION
SECTION 3.01. Redemptions. (a) The Notes shall be
mandatorily redeemed in whole or ratably in part at the
Redemption Price, together with accrued interest thereon to the
Redemption Date, but without any Make Whole Premium, upon the
occurrence of an Event of Loss with respect to an Aircraft, not
later than 165 days after the occurrence of such Event of Loss,
if no Collateral Access Event has occurred and is continuing, and
the Company elects not to exercise its rights under Section 4.5
of the Collateral Agreement to provide a Replacement Aircraft.
The principal amount of each Note to be redeemed pursuant to this
Section 3.01(a) will be equal to the Pro Rata Amount multiplied
by a fraction (i) the numerator of which will be equal to the
aggregate outstanding principal amount of such Note and (ii) the
denominator of which will be equal to the sum of the aggregate
outstanding principal amount of all of the Notes, the Class A
Notes and the Class B Notes.
<PAGE>
(b) So long as no Event of Loss has occurred with respect
to any Aircraft as to which the Company has not, as of the
applicable Redemption Date, complied with Section 4.5(a) of the
Collateral Agreement, the Company may redeem the Notes in whole
or in part at the Redemption Price for such Notes together with
accrued interest thereon until the Redemption Date, plus the Make
.Whole Premium (if any) for such Notes.
(c) All amounts paid in connection with any redemption of
Notes (whether pursuant to this Section 3.01(a) or Section
3.01(b)) shall be applied to each Note pro rata in accordance
with the then outstanding principal amount thereof.
SECTION 3.02. Notice of Redemption. (a) If the Notes are
to be redeemed pursuant to Section 3.01(b), the Company shall
notify the Collateral Agent and the Indenture Trustee in writing
of the Redemption Date in an Officer's Certificate at least 30
days before the Redemption Date (unless a shorter period shall be
satisfactory to the Indenture Trustee).
(b) The Indenture Trustee shall mail a notice of redemption
(whether pursuant to Section 3.01(a) or 3.01(b)) by first class
mail to each Noteholder at least 15 days before the Redemption
Date promptly after the Indenture Trustee shall have received the
Written Notice from the Collateral Agent delivered pursuant to
Section 2.5(a)(i) or 2.5(b) of the Collateral Agreement.
The notice shall state:
(i) the Redemption Date (which, in the case of a
redemption pursuant to Section 3.01(a), shall be determined
pursuant to Section 2.5(a)(i) of the Collateral Agreement
and, in the case of a redemption pursuant to Section
3.01(b), shall be specified in the notice to the Indenture
Trustee given under subsection (a) above and the Written
Notice to the Collateral Agent given pursuant to Section
2.5(b) of the Collateral Agreement) and the Record Date
therefor;
(ii) the Redemption Price for each $1,000 initial
principal amount of Notes;
(iii) the reason for the redemption; and
<PAGE>
(iv) that, unless the Company defaults in making the
redemption payment, interest on the portion of the principal
amount of each Note to be redeemed will cease to accrue on
and after the Redemption Date and the only remaining right
of the Noteholders with respect to such portion is to
receive payment of the Redemption Price plus accrued
interest to the Redemption Date and, in the case of a
redemption pursuant to Section 3.01(b), the Make Whole
Premium.
SECTION 3.04. Effect of Notice of Redemption. Once notice
of redemption is mailed, the portion of the principal amount of
each Note called for redemption will become due and payable on
the Redemption Date and at the Redemption Price, plus accrued
interest to the Redemption Date and, in the case of a redemption
pursuant to Section 3.01(b), the Make Whole Premium.
Notice of redemption shall be deemed to be given when
mailed, whether or not the Noteholder receives the notice. In
any event, failure to give such notice, or any defect therein,
shall not affect the validity of the proceedings for the
redemption of Notes held by Noteholders to whom such notice was
properly given.
SECTION 3.04. Payment of Redemption Price. The Redemption
Price together with accrued interest thereon and the Make Whole
Premium (if any) shall be distributed by the Collateral Agent to
the Indenture Trustee on the Redemption Date pursuant to Section
2.5(a)(ii) or (iii) or Section 2.5(b) of the Collateral
Agreement, as the case may be. Any amounts received by the
Indenture Trustee shall be applied in the following order of
priority: (i) to pay interest accrued to the Redemption Date on
the portion of the principal amount of each Note to be redeemed,
(ii) to pay the Redemption Price and (iii) to pay the Make Whole
Premium (if any).
ARTICLE IV
COVENANTS
SECTION 4.01. Payment of Principal and Interest. The
Company will duly and punctually pay the principal of and
interest or premium, if any, on the Notes in accordance with the
terms of the Notes and this Indenture. Amounts properly withheld
under the Code by any Person from a payment to any Noteholder of
interest, premium (if any) and/or principal shall be considered
as having been paid by the Company to such Noteholder for all
<PAGE>
purposes of this Indenture. The unpaid principal of each Note,
together with interest accrued thereon, shall be due and payable
in full on the Maturity Date.
SECTION 4.02. Maintenance of Office or Agency. The
Company will maintain, except in the case of Wilmington Trust
Company, in the Borough of Manhattan, The City of New York, an
office or agency where Notes may be surrendered for registration
of transfer or exchange, and where notices and demands to or upon
the Company in respect of the Notes and this Indenture may be
served. The Company hereby initially appoints Wilmington Trust
Company to serve as its agent for the foregoing purposes. The
Company will give prompt written notice to the Indenture Trustee
of the location, and of any change in the location, of any such
office or agency. If at any time the Company shall fail to
maintain any such office or agency or shall fail to furnish the
Indenture Trustee with the address thereof, such surrenders,
notices and demands may be made or served at the Corporate Trust
Office, and the Company hereby appoints the Indenture Trustee as
its agent to receive all such surrenders, notices and demands.
SECTION 4.03. Money for Payments to Be Held in Trust. The
Company will cause each Paying Agent other than the Indenture
Trustee to execute and deliver to the Indenture Trustee an
instrument in which such Paying Agent shall agree with the
Indenture Trustee (and if the Indenture Trustee acts as Paying
Agent, it hereby so agrees), subject to the provisions of this
Section, that such Paying Agent will:
(i) hold all sums held by it for the payment of the
principal of and Make Whole Premium, if any, and interest
and all other amounts due with respect to the Notes in trust
for the benefit of the Persons entitled thereto and the
Indenture Trustee until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and pay
such sums to such Persons as herein provided;
(ii) give the Indenture Trustee notice of any default
by the Company in the making of any payment required to be
made with respect to the Notes;
(iii) at any time during the continuance of any such
default, upon the written request of the Indenture Trustee,
forthwith pay to the Indenture Trustee all sums so held in
trust by such Paying Agent;
(iv) immediately resign as a Paying Agent and
forthwith pay to the Indenture Trustee all sums held by it
in trust for the payment of Notes if at any time it ceases
to meet the standards required to be met by a Paying Agent
at the time of its appointment; and
<PAGE>
(v) comply with all requirements of the Code with
respect to the withholding from any payments made by it on
any Notes of any applicable withholding taxes imposed
thereon and with respect to any applicable reporting
requirements in connection therewith.
The Company may at any time, for the purpose of obtaining
the satisfaction and discharge of this Indenture or for any other
purpose, by Company Order direct any Paying Agent to pay to the
Indenture Trustee all sums held in trust by such Paying Agent,
such sums to be held by the Indenture Trustee upon the same
trusts as those upon which the sums were held by such Paying
Agent; and upon such payment by any Paying Agent to the Indenture
Trustee, such Paying Agent shall be released from all further
liability with respect to such money.
Subject to applicable laws with respect to escheat of funds,
any money held by the Indenture Trustee or any Paying Agent in
trust for the payment of any amount due with respect to any Note
and remaining unclaimed for two years after such amount has
become due and payable shall be discharged from such trust, and
the Indenture Trustee or such Paying Agent, as the case may be,
shall give prompt notice of such occurrence to the Company and
shall release such money to the Company on Company Request; and
the Noteholder of such Note shall thereafter, as an unsecured
general creditor, look only to the Company for payment thereof
(but only to the extent of the amounts so paid to the Company),
and all liability of the Indenture Trustee or such Paying Agent
with respect to such trust money shall thereupon cease; provided,
however, that the Indenture Trustee or such Paying Agent, before
being required to make any such repayment, may at the expense of
the Company 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, notice
that such money remains unclaimed and that, after a date
specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money
then remaining will be repaid to the Company. The Indenture
Trustee may also adopt and employ, at the expense of the Company,
any other reasonable means of notification of such repayment
(including, but not limited to, mailing notice of such repayment
to Noteholders whose Notes have been called but have not been
surrendered for redemption or whose right to or interest in
moneys due and payable but not claimed is determinable from the
records of the Indenture Trustee or of any Paying Agent, at the
last address of record for each such Noteholder).
<PAGE>
SECTION 4.04. Reports by the Company. The Company shall:
(a) file with the Indenture Trustee, within 30 days after
the Company is required to file the same with the SEC, copies of
the annual reports and of the information, documents and other
reports (or copies of such portions of any of the foregoing as
the SEC may from time to time by rules and regulations prescribe)
which the Company is required to file with the SEC pursuant to
section 13 or section 15(d) of the Exchange Act; or, if the
Company is not required to file information, documents or reports
pursuant to either of such sections, then to file with the
Indenture Trustee and the SEC, in accordance with rules and
regulations prescribed by the SEC, such of the supplementary and
periodic information, documents and reports which may be required
pursuant to Section 13 of the Exchange Act, as amended, in
respect of a security listed and registered on a national
securities exchange as may be prescribed in such rules and
regulations;
(b) file with the Indenture Trustee, within 60 days after
the end of each of the first three fiscal quarters in each fiscal
year of the Company, unaudited consolidated balance sheets of the
Company and its subsidiaries (if any) as of the end of such
quarter and related consolidated statements of income,
shareholder's equity and cash flows of the Company and its
subsidiaries (if any) for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter,
provided that so long as the Company is subject to the reporting
provisions of the Exchange Act, a copy of the Company's quarterly
report on Form 10-Q will satisfy this requirement;
(c) file with the Indenture Trustee and the SEC, in
accordance with the rules and regulations prescribed by the SEC,
such additional information, documents and reports with respect
to compliance by the Company with the conditions and covenants
provided for in this Agreement, as may be required by such rules
and regulations, including, in the case of annual reports, if
required by such rules and regulations, certificates or opinions
of independent public accountants, conforming to the requirements
of Section 11.02;
(d) transmit to all Noteholders, in the manner and to the
extent provided in Section 313(c) of the Trust Indenture Act,
such summaries of any information, documents and reports required
to be filed by the Company pursuant to subsections (a) and (b) of
this Section 4.04 as may be required by rules and regulations
prescribed by the SEC;
<PAGE>
(e) furnish to the Indenture Trustee, not less often than
annually, a brief certificate from its principal executive
officer, principal financial officer or principal accounting
officer as to his or her knowledge of the Company's compliance
with all conditions and covenants under this Indenture (it being
understood that for purposes of this paragraph (d), such
compliance shall be determined without regard to any period of
grace or requirement of notice provided under this Indenture);
and
(f) furnish to the Indenture Trustee:
(1) promptly after the execution and delivery of each
Collateral Agreement Supplement, an Opinion of Counsel
either stating that in the opinion of such counsel such
Collateral Agreement Supplement has been properly recorded
and filed so as to make effective the Lien intended to be
created thereby, and reciting the details of such action, or
stating that in the opinion of such counsel no such action
is necessary to make such Lien effective; and
(2) at least annually after the execution and delivery
of this Indenture, an Opinion of Counsel either stating that
in the opinion of such counsel such action with respect to
the recording, filing, re-recording, and refiling of the
Collateral Agreement, each the Collateral Agreement
Supplement entered into hereunder and any other instrument,
and all other action has been taken as is necessary to
maintain the Lien of this Indenture, and reciting the
details of such action, or stating that in the opinion of
such counsel no such action is necessary to maintain such
Lien.
The Indenture Trustee shall promptly remit to the
Noteholders and the Liquidity Providers a copy of any report,
document or other information delivered to the Indenture Trustee
by the Company pursuant to this Section 4.04.
<PAGE>
ARTICLE V.
SATISFACTION AND DISCHARGE
SECTION 5.01. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect with respect
to the Notes except as to (i) rights of registration of transfer
and exchange, (ii) substitution of mutilated, destroyed, lost or
stolen Notes, (iii) rights of Noteholders to receive payments of
principal thereof and interest and Make Whole Premium (if any)
thereon, (iv) Section 4.03, (v) the rights and immunities of the
Indenture Trustee hereunder (including the rights of the
Indenture Trustee under Section 7.08), (vi) the obligations of
the Indenture Trustee under Section 5.02 and (vii) the rights of
Noteholders as beneficiaries hereof with respect to the property
so deposited with the Indenture Trustee payable to all or any of
them, and the Indenture Trustee, on demand of and at the expense
of the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture with respect to the
Notes, when
(A) either
(1) all Notes theretofore authenticated and delivered
(other than (i) Notes that have been destroyed, lost or
stolen and that have been replaced or paid as provided in
Section 2.07 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held
in trust by the Company and thereafter repaid to the Company
or discharged from such trust, as provided in Section 4.03)
have been delivered to the Indenture Trustee for
cancellation; or
(2) all Notes not theretofore delivered to the
Indenture Trustee for cancellation
(i) have become due and payable,
(ii) will become due and payable in full at the
Final Scheduled Payment Date within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Indenture
Trustee for the giving of notice of redemption by the
Indenture Trustee in the name, and at the expense, of
the Company, and the Company, in the case of (i), (ii)
or (iii) above, has irrevocably deposited or caused to
be irrevocably deposited with the Indenture Trustee
cash or direct obligations of or obligations guaranteed
<PAGE>
by the United States of America (which will mature
prior to the date such amounts are payable), in trust
for such purpose, in an amount sufficient to pay and
discharge the entire indebtedness on such Notes not
theretofore delivered to the Indenture Trustee for
cancellation as of such day of discharge or when due on
the Final Scheduled Payment Date or Redemption Date (if
Notes shall have been called for redemption in whole
pursuant to Article III), as the case may be;
(B) the Company has paid or caused to be paid all
other sums payable hereunder by the Company; and
(C) the Company has delivered to the Indenture Trustee
an Officers' Certificate, an Opinion of Counsel and a certificate
from a firm of certified public accountants, and each stating
that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Indenture have been complied
with.
SECTION 5.02. Application of Trust Money. All moneys
deposited with the Indenture Trustee pursuant to Section 5.01
hereof 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, as the
Indenture Trustee may determine, to the Noteholders of the
particular Notes for the payment or redemption of which such
moneys have been deposited with the Indenture Trustee, of all
sums due and to become due thereon for principal and interest;
but such moneys need not be segregated from other funds except to
the extent required herein or in the Collateral Agreement or
required by law.
SECTION 5.03. Repayment of Moneys Held by Paying Agent. In
connection with the satisfaction and discharge of this Indenture
with respect to the Notes, all moneys then held by any Paying
Agent other than the Indenture Trustee under the provisions of
this Indenture with respect to such Notes shall, upon demand of
the Company, be paid to the Indenture Trustee to be held and
applied according to Section 4.03 and thereupon such Paying Agent
shall be released from all further liability with respect to such
moneys.
<PAGE>
ARTICLE VI.
REMEDIES
SECTION 6.01. Collateral Access Events. "Collateral Access
Event", wherever used herein, means any one of the following
events (whatever the reason for such Collateral Access Event and
whether it shall be voluntary or involuntary or be effected by
operation of law or pursuant to any judgment, decree or order of
any court or any order, rule or regulation of any administrative
or governmental body) and any such Collateral Access Event
referred to in clause (i) below to the extent relating to the
failure of the Company to pay (A) the outstanding principal
amount of Notes on the Maturity Date or (B) any interest due on
any Note on a Payment Date (unless the Collateral Agent shall
have made an Interest Advance under Section 3.6(a) of the
Collateral Agreement and distributed such funds to the Applicable
Indenture Trustee pursuant to Section 3.6(b) of the Collateral
Agreement) shall constitute an "Event of Default":
(i) The Company shall fail to make any payment when
due of principal or premium, if any, or interest on, any
Note, and such failure shall continue unremedied for a
period of 15 days;
(ii) The Company shall fail to procure and maintain
property or liability insurance with respect to the
Collateral complying with the provisions of Section 4.6 of
the Collateral Agreement or such insurance shall be canceled
or lapse; provided that such lapse or cancellation shall not
constitute a Collateral Access Event until the earlier of
(i) 30 days after receipt by the Collateral Agent of written
notice of such lapse or cancellation or (ii) the date that
such lapse or cancellation is effective as to the Collateral
Agent;
(iii) The Company shall operate an Aircraft after
having received notice that the insurance required by
Section 4.6 of the Collateral Agreement lapsed or has been
canceled;
(iv) The Company shall fail to observe or perform any
of its covenants or obligations in the Collateral Agreement,
and such failure shall continue for a period of 30 days
after delivery of notice of such failure from the Indenture
Trustee to the Company or from the Noteholders of at least
25% of the Outstanding Amount of the Notes, unless such
failure is curable and the Company shall, after the delivery
of such notice, then be diligently proceeding to correct
such failure and shall in fact correct such failure within
180 days after delivery of such notice;
<PAGE>
(v) Any representation or warranty made by the
Company or in any of the Basic Documents or in any document
or certificate furnished to the Indenture Trustee or any
Noteholder in connection herewith or therewith or pursuant
hereto or thereto, shall prove to have been incorrect in any
material respect when made and shall remain material at the
time in question and shall not be remedied within 30 days
after notice thereof has been given to the Company by the
Indenture Trustee or from the Noteholders of at least 25% of
the Outstanding Amount of the Notes;
(vi) The Company shall consent to the appointment of
or taking possession by a receiver, assignee, custodian,
sequestrator, trustee or liquidator (or other similar
official) of itself or of a substantial part of its property
or the Company shall admit in writing its inability to pay
its debts generally as they come due (as provided in 11
U.S.C. Section 303(h)(1)), or shall make a general assignment for
the benefit of its creditors, or the Company shall file a
voluntary petition in bankruptcy or a voluntary petition or
answer seeking liquidation, reorganization or other relief
with respect to itself or its debts under the Federal
bankruptcy laws, as now or hereafter constituted or any
other applicable Federal or state bankruptcy, insolvency or
other similar law, or shall consent to the entry or order
for relief in an involuntary case under any such law or the
Company shall file an answer admitting the material
allegations of a petition filed against it in any such
proceeding, or shall otherwise seek relief under the
provisions of any now existing or future Federal or state
bankruptcy, insolvency or other similar law providing for
the reorganization or winding-up of corporations, or
providing for an agreement, composition, extension or
adjustment with its creditors;
(vii) An order, judgment or decree shall be entered in
any proceedings by any court of competent jurisdiction
appointing, without the consent of the Company, a receiver,
trustee or liquidator of the Company or of any substantial
part of its property, or any substantial part of the
property of the Company shall be sequestered, and any such
order, judgment, decree, appointment or sequestration shall
remain in force undismissed, unstayed or unvacated for a
period of 90 days after the date of entry thereof;
(viii) petition against the Company in a proceeding
under the Federal bankruptcy laws or other insolvency laws,
as now or hereafter in effect, shall be filed and shall not
be withdrawn or dismissed within 90 days thereafter, or,
<PAGE>
under the provisions of any law providing for reorganization
or winding up of corporations which may apply to the
Company, any court of competent jurisdiction shall assume
jurisdiction, custody or control of the Company of any
substantial part of its property and such jurisdiction,
custody or control shall remain in force unrelinquished,
unstayed or unterminated for a period of 90 days;
(ix) the Class C Liquidity Facility shall cease to be
in full force and effect and the amount to be drawn thereon
has not been reduced to zero or the funds, if any, on
deposit in the Class C Cash Collateral Account shall have
become subject to any writ, judgment, warrant of attachment,
execution or similar process which shall not have been
stayed, vacated, discharged or dismissed within 30 days from
the entry thereof;
(x) a Collateral Access Event under any other
Indenture shall have occurred and be continuing.
provided that, notwithstanding anything to the contrary in this
Indenture, any failure of the Company to perform or observe any
covenant, condition or agreement therein shall not constitute a
Collateral Access Event under clause (vi) above if such failure
is caused solely by reason of an event referred to in the
definition of "Event of Loss" so long as the Company, is
continuing to comply with the applicable terms of Section 4.5 of
the Collateral Agreement.
SECTION 6.02. Acceleration of Maturity; Rescission and
Annulment. If a Collateral Access Event occurs as a result of
clauses (vi), (vii) or (viii) of Section 6.01, then the unpaid
principal of all Notes, together with interest accrued but unpaid
thereon and all other amounts due to the Noteholders, will be
Accelerated. In addition, if the Class A Notes or the Class B
Notes become Accelerated, then the unpaid principal amount of all
the Notes, together with interest accrued but unpaid thereon and
all other amounts due in respect thereof, will be Accelerated.
If any other Collateral Access Event should occur and be
continuing, the Indenture Trustee or holders of a majority in
Outstanding Amount of the Notes may Accelerate the principal of
the Notes. Such Acceleration may be rescinded by the holders of
a majority in principal amount of the Notes then outstanding as
set forth below.
<PAGE>
At any time after such declaration of acceleration of
maturity has been made and before a judgment or decree for
payment of the money due has been obtained by the Indenture
Trustee as hereinafter in this Article VI provided, the
Noteholders of Notes representing a majority of the Outstanding
Amount of the Notes, by written notice to the Company and the
Indenture Trustee, may rescind and annul such declaration and its
consequences if:
(i) the Company has paid or caused to be paid to the
Indenture Trustee a sum sufficient to pay
(A) all payments of principal of and interest on
all Notes and all other amounts that would then be due
and payable hereunder or upon such Notes if the
Collateral Access Event giving rise to such
Acceleration had not occurred; and
(B) all sums paid or advanced by the Indenture
Trustee hereunder and the reasonable compensation,
expenses, disbursements and advances of the Indenture
Trustee and its agents and counsel; and
(ii) all Collateral Access Events, other than the
nonpayment of the principal of the Notes that has become due
solely by such Acceleration, have been cured or waived as
provided in Section 6.11.
No such rescission shall affect any subsequent default
or impair any right consequent thereto.
SECTION 6.03. Collection of Indebtedness and Suits for
Enforcement by Indenture Trustee. (a) The Company shall be
liable to the Indenture Trustee for all reasonable legal fees and
other reasonable costs and expenses incurred by the Indenture
Trustee in connection with any Collateral Access Event on the
exercise of remedies hereunder with respect thereto.
(b) In the event the Indenture Trustee is the
Controlling Party, in case the Company shall fail forthwith to
pay such amounts upon such demand, the Indenture Trustee, in its
own name and as trustee of an express trust, may institute a
Proceeding for the collection of the sums so due and unpaid, and
may prosecute such Proceeding to judgment or final decree, and
may enforce the same against the Company or other obligor upon
such Notes and collect in the manner provided by law out of the
property of the Company or other obligor upon such Notes,
wherever situated, the moneys adjudged or decreed to be payable.
<PAGE>
(c) If a Collateral Access Event occurs and is
continuing, the Indenture Trustee may, as more particularly
provided in Section 6.04, in its discretion, proceed to protect
and enforce its rights and the rights of the Noteholders, by such
appropriate Proceedings as the Indenture Trustee shall deem most
effective to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this
Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy or legal or equitable right
vested in the Indenture Trustee by this Indenture or by law.
(d) In case there shall be pending, relative to the
Company or any other obligor upon the Notes or any Person having
or claiming an ownership interest in the Collateral, Proceedings
under Title 11 of the United States Code or any other applicable
Federal or state bankruptcy, insolvency or other similar law, or
in case a receiver, assignee or trustee in bankruptcy or
reorganization, liquidator, sequestrator or similar official
shall have been appointed for or taken possession of the Company
or its property or such other obligor or Person, or in case of
any other comparable judicial Proceedings relative to the Company
or other obligor upon the Notes, or to the creditors or property
of the Company or such other obligor, the Indenture Trustee,
irrespective of whether the principal of any Notes shall then be
due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Indenture Trustee shall
have made any demand pursuant to the provisions of this Section,
shall be entitled and empowered, by intervention in such
Proceedings or otherwise:
(i) to file and prove a claim or claims for the whole
amount of principal and interest owing and unpaid in respect
of the Notes and to file such other papers or documents as
may be necessary or advisable in order to have the claims of
the Indenture Trustee (including any claim for reasonable
compensation to the Indenture Trustee and each predecessor
Indenture Trustee, and their respective agents, attorneys
and counsel, and for reimbursement of all expenses and
liabilities incurred, and all advances made, by the
Indenture Trustee and each predecessor Indenture Trustee,
except as a result of negligence or bad faith) and of the
Noteholders allowed in such Proceedings;
(ii) unless prohibited by applicable law and
regulations, to vote on behalf of the Noteholders in any
election of a trustee, a standby trustee or Person
performing similar functions in any such Proceedings;
<PAGE>
(iii) to collect and receive any moneys or other
property payable or deliverable on any such claims and to
distribute all amounts received with respect to the claims
of the Noteholders and of the Indenture Trustee on their
behalf; and
(iv) 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 Indenture Trustee or the Noteholders
allowed in any judicial proceedings relative to the Company,
its creditors and its property;
and any trustee, receiver, liquidator, custodian or other similar
official in any such Proceeding is hereby authorized by each
Noteholder to make payments to the Indenture Trustee, and, in the
event that the Indenture Trustee shall consent to the making of
payments directly to such Noteholders, to pay to the Indenture
Trustee such amounts as shall be sufficient to cover reasonable
compensation to the Indenture Trustee, each predecessor Indenture
Trustee and their respective agents, attorneys and counsel, and
all other expenses and liabilities incurred, and all advances
made, by the Indenture Trustee and each predecessor Indenture
Trustee except as a result of negligence or bad faith.
(e) Nothing herein contained shall be deemed to
authorize the Indenture Trustee to authorize or consent to or
vote for or accept or adopt on behalf of any Noteholder any plan
of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Noteholder or to
authorize the Indenture Trustee to vote in respect of the claim
of any Noteholder in any such proceeding except, as aforesaid, to
vote for the election of a trustee in bankruptcy or similar
Person.
(f) All rights of action and of asserting claims under
this Indenture, or under any of the Notes, may be enforced by the
Indenture Trustee without the possession of any of the Notes or
the production thereof in any trial or other Proceedings relative
thereto, and any such action or Proceedings instituted by the
Indenture Trustee shall be brought in its own name as trustee of
an express trust, and any recovery of judgment, subject to the
payment of the expenses, disbursements and compensation of the
Indenture Trustee, each predecessor Indenture Trustee and their
respective agents and attorneys, shall be for the ratable benefit
of the Noteholders.
(g) In any Proceedings brought by the Indenture
Trustee (and also any Proceedings involving the interpretation of
any provision of this Indenture to which the Indenture Trustee
<PAGE>
shall be a party), the Indenture Trustee shall be held to
represent all the Noteholders, and it shall not be necessary to
make any Noteholder a party to any such Proceedings.
(h) The Indenture Trustee may file such proofs of
claim and other papers or documents as may be necessary or
advisable in order to have the claims of the Indenture Trustee
and of the Noteholders allowed in any judicial proceedings
relating to the Company, its creditors, or its property.
(i) Notwithstanding any other provision hereof, if any
payment of principal of the Notes shall not be made when and as
the same shall become due and payable, or if any payment of
interest on the Notes shall not be made when the same shall
become due and payable and such failure shall continue for the
period prescribed in Section 6.01(a), the Indenture Trustee shall
be entitled to recover judgment, in its own name and as trustee
of an express trust upon the Notes for the whole amount of such
principal or interest, as the case may be, remaining unpaid.
SECTION 6.04. Remedies; Priorities. (a) If the Notes shall
have been Accelerated, the Indenture Trustee shall act as the
Controlling Party under the Collateral Agreement unless all
amounts owing to the Noteholders have been paid in full, subject
to the rights of the Liquidity Providers to become the
Controlling Party under certain circumstances set forth in the
Collateral Agreement.
(b) If the Indenture Trustee collects any money or
property pursuant to this Article VI, it shall pay out the money
or property in accordance with Section 2.09(d).
The Indenture Trustee may fix a record date and payment
date for any payment to Noteholders pursuant to this Section. At
least 15 days before such record date, the Company shall mail to
each Noteholder and the Indenture Trustee a notice that states
the record date, the payment date and the amount to be paid.
SECTION 6.05. Limitation of Suits. No Noteholder shall
have any right to institute any Proceeding, judicial or
otherwise, with respect to this Indenture, the Collateral
Agreement or any Notes, or for the appointment of a receiver or
trustee, or for any other remedy hereunder, unless:
(i) such Noteholder has previously given written
notice to the Indenture Trustee of a continuing Collateral
Access Event;
<PAGE>
(ii) the Noteholders of not less than 25% of the
Outstanding Amount of the Notes have made written request to
the Indenture Trustee to institute such Proceeding in
respect of such Collateral Access Event in its own name as
Indenture Trustee hereunder;
(iii) such Noteholder or Noteholders have offered to
the Indenture Trustee reasonable indemnity against the
costs, expenses and liabilities to be incurred in complying
with such request;
(iv) the Indenture Trustee for 60 days after its
receipt of such notice, request and offer of indemnity has
failed to institute such Proceedings; and
(v) no direction inconsistent with such written
request has been given to the Indenture Trustee during such
60-day period by the Noteholders of a majority of the
Outstanding Amount of the Notes;
it being understood and intended that no one or more Noteholders
shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture or the Collateral
Agreement to affect, disturb or prejudice the rights of any other
Noteholders or to obtain or to seek to obtain priority or
preference over any other Noteholders or to enforce any right
under this Indenture, except in the manner herein provided.
In the event the Indenture Trustee shall receive conflicting
or inconsistent requests and indemnity from two or more groups of
Noteholders, each representing less than a majority of the
Outstanding Amount of the Notes, the Indenture Trustee in its
sole discretion may determine what action, if any, shall be
taken, notwithstanding any other provisions of this Indenture,
and shall have no liability to any person for such action or
inaction.
SECTION 6.06. Unconditional Rights of Noteholders to
Receive Principal and Interest. Notwithstanding any other
provisions in this Indenture, the right of any Noteholder to
receive payment of the principal of and interest, if any, on the
Note held by it on or after the respective due dates thereof
expressed in such Notes or in this Indenture (or, in the case of
redemption, on or after the Redemption Date) and to institute
suit for the enforcement of any such payment on or after such
respective dates, shall not be impaired or affected without the
consent of such Noteholder.
<PAGE>
SECTION 6.07. Restoration of Rights and Remedies. If the
Indenture Trustee or any Noteholder has instituted any Proceeding
to enforce any right or remedy under this Indenture and such
Proceeding has been discontinued or abandoned for any reason or
has been determined adversely to the Indenture Trustee or to such
Noteholder, then and in every such case the Company, the
Indenture Trustee and the Noteholders shall, subject to any
determination in such Proceeding, be restored severally and
respectively to their former positions hereunder, and thereafter
all rights and remedies of the Indenture Trustee and the
Noteholders shall continue as though no such Proceeding had been
instituted.
SECTION 6.08. Rights and Remedies Cumulative. No right or
remedy herein conferred upon or reserved to the Indenture Trustee
or to the Noteholders 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 6.09. Delay or Omission Not a Waiver. No delay or
omission of the Indenture Trustee or any Noteholder to exercise
any right or remedy accruing upon any Potential Collateral Access
Event or Collateral Access Event shall impair any such right or
remedy or constitute a waiver of any such Potential Collateral
Access Event or Collateral Access Event or an acquiescence
therein. Every right and remedy given by this Article VI or by
law to the Indenture Trustee or to the Noteholders may be
exercised from time to time, and as often as may be deemed
expedient, by the Indenture Trustee or by the Noteholders, as the
case may be.
SECTION 6.10. Control by Noteholders. The Noteholders
holding a majority of the Outstanding Amount of the Notes may
direct the time, method and place of conducting any Proceeding
for any remedy available to the Indenture Trustee or exercising
any trust or power conferred on the Indenture Trustee hereunder
with respect to the Notes. However, the Indenture Trustee may
refuse to follow any direction that conflicts with law or this
Indenture that is unduly prejudicial to the rights of the
Noteholders so affected or that would subject the Indenture
Trustee to personal liability.
<PAGE>
SECTION 6.11. Waiver of Existing Defaults. The Noteholders
of not less than a majority Outstanding Amount of the Notes, by
notice to the Indenture Trustee, may waive on behalf of the
Noteholders any existing Potential Collateral Access Event or
Collateral Access Event and its consequences except (i) a
Potential Collateral Access Event or Collateral Access Event in
the payment of the principal of or Make Whole Premium, if any, or
interest on any Notes or (ii) in respect of a covenant or
provision in this Agreement which pursuant to Section 9.01 cannot
be amended or modified without the consent of each Noteholder
affected thereby.
Upon any such waiver, such Potential Collateral Access Event
shall cease to exist and be deemed to have been cured and not to
have occurred, and any Collateral Access arising therefrom shall
be deemed to have been cured and not to have occurred, for every
purpose of this Indenture; but no such waiver shall extend to any
subsequent or other Potential Collateral Access Event or
Collateral Access Event or impair any right consequent thereto.
The Indenture Trustee may file such proofs of claim and
other papers or documents as may be necessary or advisable in
order to have the claims of the Indenture Trustee and of the
Holders allowed in any judicial proceedings relating to any
obligor on the Certificates, its creditors, or its property.
SECTION 6.12. Undertaking for Costs. All parties to this
Indenture agree, and each Noteholder by such Noteholder's
acceptance of its Notes shall be deemed to have agreed, that any
court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Indenture, or in
any suit against the Indenture Trustee for any action taken or
omitted by it as Indenture Trustee, the filing by any party
litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable
costs, including reasonable attorneys' fees and expenses, against
any party litigant in such suit, having due regard to the merits
and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section shall not apply to
(a) any suit instituted by the Indenture Trustee, (b) any suit
instituted by any Noteholder, or group of Noteholders, in each
case holding in the aggregate more than 10% of the Outstanding
Amount of the Notes or (c) any suit instituted by any Noteholder
for the enforcement of the payment of principal of or interest on
any Note on or after the respective due dates expressed in such
Note and in this Indenture (or, in the case of redemption, on or
after the Redemption Date).
<PAGE>
SECTION 6.13. Waiver of Stay or Extension Laws. The
Company for itself and all who may claim under it waives, to the
extent that it lawfully may, all right to have the property in
the Collateral marshalled upon any foreclosure thereof, and
agrees that any court having jurisdiction to foreclose the
Collateral Agreement may order the sale of the Collateral as an
entirety.
If any law referred to in this Section 6.13 and now in
force, of which the Company or its successors might take
advantage despite this Section 6.13, shall hereafter be repealed
or cease to be in force, such law shall not thereafter be deemed
to constitute any part of the contract herein contained or to
preclude the application of this Section 6.13.
SECTION 6.14. Action on Notes. The Indenture Trustee's
right to seek and recover judgment on the Notes or under this
Indenture shall not be affected by the seeking, obtaining or
application of any other relief under or with respect to this
Indenture. Neither any rights or remedies of the Indenture
Trustee nor the Noteholders shall be impaired by the recovery of
any judgment by the Indenture Trustee against the Company or by
the levy of any execution under such judgment upon any portion of
the Collateral or upon any of the assets of the Company. Any
money or property collected by the Indenture Trustee shall be
applied in accordance with Section 2.09(d).
ARTICLE VII.
THE INDENTURE TRUSTEE
SECTION 7.01. Duties of Indenture Trustee. (a) If a
Collateral Access Event has occurred and is continuing, the
Indenture Trustee shall exercise the rights and powers vested in
it by this Indenture and the Collateral Agreement 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 such person's own affairs.
(b) Except during the continuance of a Collateral Access
Event:
(i) the Indenture Trustee undertakes to perform such
duties and only such duties as are specifically set forth in
this Indenture and no implied covenants or obligations shall
be read into this Indenture against the Indenture Trustee;
and
<PAGE>
(ii) in the absence of bad faith on its part, the
Indenture 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
Indenture Trustee and conforming to the requirements of this
Indenture; however, in the case of any such certificates or
opinions which by any provision hereof are specifically
required to be furnished to the Indenture Trustee, the
Indenture Trustee shall examine the certificates and
opinions to determine whether or not they conform on their
face to the requirements of this Indenture.
(c) The Indenture Trustee may not be relieved from
liability for its own negligent action, its own negligent failure
to act or its own wilful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section;
(ii) the Indenture Trustee shall not be liable for any
error of judgment made in good faith by a Responsible
Officer unless it is proved that the Indenture Trustee was
negligent in ascertaining the pertinent facts; and
(iii) the Indenture 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 6.10 or otherwise from Noteholders under the
Indenture.
(d) Every provision of this Indenture that in any way
relates to the Indenture Trustee is subject to paragraphs (a),
(b) and (c) of this Section.
(e) The Indenture Trustee shall not be liable for interest
on any money received by it except as the Indenture Trustee may
agree in writing with the Company.
(f) Money held in trust by the Indenture Trustee need not
be segregated from other funds except to the extent required by
law or the terms of this Indenture or the Collateral Agreement.
(g) No provision of this Indenture shall require the
Indenture Trustee to expend or risk its own funds or otherwise
incur financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if
it shall have reasonable grounds to believe that repayments of
such funds or adequate indemnity satisfactory to it against such
loss, liability or expense is not reasonably assured to it.
<PAGE>
(h) Every provision of this Indenture relating to the
conduct or affecting the liability of or affording protection to
the Indenture Trustee shall be subject to the provisions of this
Section 7.01.
SECTION 7.02. Directions to Collateral Agent. The
Indenture Trustee may, and upon the request of a Majority in
Interest of the Noteholders shall, take such actions (including
the giving of direction or notice) as are permitted or required
to be taken by the Indenture Trustee under the Collateral
Agreement including, but not limited to, the following:
(i) sending notice of a Collateral Access Event
(which, if required by the Collateral Agreement, shall
specify the applicable section of the Indenture under which
any such event arises);
(ii) sending a Notice of Acceleration pursuant to
Section 4.2(a) of the Collateral Agreement;
(iii) when the Indenture Trustee is the Controlling
Party pursuant to the terms of the Collateral Agreement
directing the Collateral Agent in the exercise of remedies
under the Collateral Agreement; and
(iv) removing the Collateral Agent pursuant to Section
9.2 of the Collateral Agreement;
provided, however, that without the consent of each Noteholder,
the Indenture Trustee will not take any action which, pursuant to
Section 9.01 hereof, expressly requires the consent of each
Noteholder affected thereby.
SECTION 7.03. Rights of Indenture Trustee. (a) The
Indenture Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper
person. The Indenture Trustee need not investigate any fact or
matter stated in the document.
(b) Before the Indenture Trustee acts or refrains from
acting, it may require an Officers' Certificate or an Opinion of
Counsel. The Indenture Trustee shall not be liable for any
action it takes or omits to take in good faith in reliance on the
Officers' Certificate or Opinion of Counsel.
<PAGE>
(c) The Indenture Trustee may execute any of the
trusts or powers hereunder or perform any duties hereunder either
directly or by or through agents or attorneys or a custodian or
nominee, and the Indenture Trustee shall not be responsible for
any misconduct or negligence on the part of, or for the
supervision of, any such agent, attorney, custodian or nominee
appointed with due care by it hereunder.
(d) The Indenture Trustee shall be under no obligation
to exercise any of the rights or powers vested in it by this
Indenture at the request or direction of any of the Noteholders,
unless such Noteholders shall have offered to the Indenture
Trustee reasonable security or indemnity against the costs,
expenses and liabilities that might be incurred by it in
compliance with such request or direction;
(e) The Indenture 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; provided,
however, that the Indenture Trustee's conduct does not constitute
wilful misconduct, negligence or bad faith.
(f) The Indenture Trustee may consult with counsel of
its selection, and the advice or opinion of counsel with respect
to legal matters relating to this Indenture and the Notes shall
be full and complete authorization and protection from liability
in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or
opinion of such counsel.
(g) The Indenture Trustee shall not be responsible for
ascertaining whether any transfer pursuant to Sections 2.04, 2.05
or 2.06 complies with securities or blue sky laws, including,
without limitation, the Securities Act of 1933, as amended;
provided, however, that to the extent the Indenture Trustee is to
receive a certificate with respect to a transfer pursuant to
Sections 2.04, 2.05 or 2.06, the form of which is attached
hereto, the Indenture Trustee shall be responsible for ensuring
that such certificate meets the requirements for such as set
forth in this Indenture.
SECTION 7.04. Individual Rights of Indenture Trustee. The
Indenture Trustee in its individual or any other capacity may
become the owner or pledgee of the Notes and may otherwise deal
with the Company or its affiliates with the same rights it would
have if it were not Indenture Trustee. Any Paying Agent, Note
Registrar, co-registrar or co-paying agent may do the same with
like rights. However, the Indenture Trustee must comply with
Section 7.12.
<PAGE>
SECTION 7.05. Indenture Trustee's Disclaimer. The
Indenture Trustee shall not be (i) responsible for and makes no
representation as to the validity or adequacy of the Collateral,
this Indenture or the Notes, (ii) accountable for the Company's
use of the proceeds from the Notes and (iii) responsible for any
statement of the Company in the Indenture or in any document
issued in connection with the sale of the Notes or in the Notes
other than the Indenture Trustee's certificate of authentication.
SECTION 7.06. Notice of Collateral Access Events. If a
Collateral Access Event occurs and is continuing and if it is
actually known to a Responsible Officer of the Indenture Trustee,
the Indenture Trustee shall (i) promptly send written notice
thereof to the Company and (ii) within 90 days after it occurs,
mail to each Noteholder, the Collateral Agent and each Liquidity
Provider, in the manner and to the extent provided in Section
11.06, notice of all such Collateral Access Events which are not
cured. Except in the case of a default in the payment of the
principal of, Make Whole Premium, if any, or interest on, the
Notes, the Indenture Trustee shall be protected in withholding
the notice required under clause (ii) above (except from a
Liquidity Provider) if and so long as the executive committee or
trust committee of directors of the Indenture Trustee and/or
Responsible Officers thereof in good faith determines that
withholding such notice is in the interest of the Noteholders.
In addition, if on any day when the Indenture Trustee is required
to make any payment on or in respect of the Notes of the
character described in Section 6.01(i) and on such day does not
or is unable to make the full amount of such payment, the
Indenture Trustee shall on the next following Business Day give
notice thereof to the Company.
SECTION 7.07. Reports by Indenture Trustee to Holders.
Within 60 days after May 15 of each year commencing with the year
1996, so long as any Notes are Outstanding under this Agreement,
the Indenture Trustee shall transmit to the Holders as provided
in Section 313(c) of the Trust Indenture Act a brief report dated
as of such May 15 if required by Section 313(a) of the Trust
Indenture Act.
SECTION 7.08. Compensation and Indemnity. The Company
shall pay to the Indenture Trustee from time to time such
compensation for its services as shall be separately agreed to by
the Company and the Indenture Trustee. The Indenture Trustee's
compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the
Indenture Trustee for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in
<PAGE>
addition to the compensation for its services. Such expenses
shall include the reasonable compensation and expenses,
disbursements and advances of the Indenture Trustee's agents,
counsel, accountants and experts. The Company shall indemnify
the Indenture Trustee in its trust and individual capacities
against any and all loss, damage, claim, tax (excluding any taxes
imposed on the compensation received by the Indenture Trustee for
its services hereunder), liability or expense (including the fees
and expenses of counsel) of any kind and nature whatsoever
incurred by it in connection with the acceptance and
administration of this trust and the performance of its duties
hereunder. The Indenture Trustee shall notify the Company
promptly of any claim for which it may seek indemnity. Failure
by the Indenture Trustee to so notify the Company shall not
relieve the Company of its obligations hereunder. The Company
shall defend the claim and the Indenture Trustee may have
separate counsel and the Company shall pay the fees and expenses
of such counsel. The Company need not reimburse any expense or
indemnify against any loss, liability or expense incurred by the
Indenture Trustee through the Indenture Trustee's own wilful
misconduct, negligence or bad faith.
The Company's payment obligations to the Indenture Trustee
pursuant to this Section shall survive the discharge of this
Indenture. When the Indenture Trustee incurs expenses after the
occurrence of a Collateral Access Event specified in Section
6.01(vi), (vii) or (viii), the expenses are intended to
constitute expenses of administration under Title 11 of the
United States Code or any other applicable Federal or state
bankruptcy, insolvency or similar law.
SECTION 7.09. Replacement of Indenture Trustee. No
resignation or removal of the Indenture Trustee and no
appointment of a successor Indenture Trustee shall become
effective until the acceptance of appointment by the successor
Indenture Trustee pursuant to this Section 7.09. The Indenture
Trustee may resign at any time by giving at least 30 days prior
written notice to the Company, the Collateral Agent and each
Liquidity Provider. The Noteholders of a majority in Outstanding
Amount of the Notes may remove the Indenture Trustee by so
notifying the Indenture Trustee and may appoint a successor
Indenture Trustee. The Company shall remove the Indenture
Trustee if:
(i) the Indenture Trustee is adjudged a bankrupt or
insolvent;
(ii) a receiver or other public officer takes charge
of the Indenture Trustee or its property; or
<PAGE>
(iii) the Indenture Trustee otherwise becomes incapable
of acting.
If the Indenture Trustee resigns or is removed or if a
vacancy exists in the office of Indenture Trustee for any reason
(the Indenture Trustee in such event being referred to herein as
the retiring Indenture Trustee), the Company shall promptly
appoint a successor Indenture Trustee.
A successor Indenture Trustee shall deliver a written
acceptance of its appointment to the retiring Indenture Trustee
and to the Company. Thereupon the resignation or removal of the
retiring Indenture Trustee shall become effective, and the
successor Indenture Trustee shall have all the rights, powers and
duties of the Indenture Trustee under this Indenture. The
successor Indenture Trustee shall mail a notice of its succession
to the Noteholders, the Collateral Agent and each Liquidity
Provider. The retiring Indenture Trustee shall promptly transfer
all property held by it as Indenture Trustee to the successor
Indenture Trustee.
If a successor Indenture Trustee does not take office within
60 days after the retiring Indenture Trustee resigns or is
removed, the retiring Indenture Trustee, the Company or the
Noteholders of a majority in Outstanding Amount of the Notes may
petition any court of competent jurisdiction for the appointment
of a successor Indenture Trustee.
Notwithstanding the replacement of the Indenture Trustee
pursuant to this Section, the Company's obligations under Section
7.08 shall continue for the benefit of the retiring Indenture
Trustee.
SECTION 7.10. Successor Indenture Trustee by Merger. If
the Indenture Trustee consolidates with, merges or converts into,
or transfers all or substantially all its corporate trust
business or assets to, another corporation or banking
association, the resulting, surviving or transferee corporation
or banking association without any further act shall be the
successor Indenture Trustee. The Indenture Trustee shall provide
the Rating Agencies prior written notice of any such transaction.
In case at the time such successor or successors by merger,
conversion or consolidation to the Indenture Trustee shall
succeed to the trusts created by this Indenture any of the Notes
shall have been authenticated but not delivered, any such
successor to the Indenture Trustee may adopt the certificate of
<PAGE>
authentication of any predecessor trustee, and deliver such Notes
so authenticated; and in case at that time any of the Notes shall
not have been authenticated, any successor to the Indenture
Trustee may authenticate such Notes either in the name of any
predecessor hereunder or in the name of the successor to the
Indenture Trustee; and in all such cases such certificates shall
have the full force which it is anywhere in the Notes or in this
Indenture provided that the certificate of the Indenture Trustee
shall have.
SECTION 7.11. Appointment of Co-Trustee or Separate
Trustee. (a) Notwithstanding any other provisions of this
Indenture, at any time, for the purpose of meeting any legal
requirement of any jurisdiction in which any part of the
Collateral may at the time be located, the Indenture Trustee
shall have the power and may execute and deliver all instruments
to appoint one or more Persons reasonably acceptable to the
Company to act as a co-trustee or co-trustees, or separate
trustee or separate trustees, of all or any part of the
Collateral, and to vest in such Person or Persons, in such
capacity and for the benefit of the Noteholders, such title to
the Collateral, or any part hereof, and, subject to the other
provisions of this Section, such powers, duties, obligations,
rights and trusts as the Indenture Trustee may consider necessary
or desirable. No co-trustee or separate trustee hereunder shall
be required to meet the terms of eligibility as a successor
trustee under Section 7.12 and no notice to Noteholders of the
appointment of any co-trustee or separate trustee shall be
required under Section 7.09 hereof.
(b) Every separate trustee and co-trustee shall, to
the extent permitted by law, be appointed and act subject to the
following provisions and conditions:
(i) all rights, powers, duties and obligations
conferred or imposed upon the Indenture Trustee shall be
conferred or imposed upon and exercised or performed by the
Indenture Trustee and such separate trustee or co-trustee
jointly (it being understood that such separate trustee or
co-trustee is not authorized to act separately without the
Indenture Trustee joining in such act), except to the extent
that under any law of any jurisdiction in which any
particular act or acts are to be performed the Indenture
Trustee shall be incompetent or unqualified to perform such
act or acts, in which event such rights, powers, duties and
obligations (including the holding of title to the Trust or
any portion thereof in any such jurisdiction) shall be
exercised and performed singly by such separate trustee or
co-trustee, but solely at the direction of the Indenture
Trustee;
<PAGE>
(ii) no trustee hereunder shall be personally liable
by reason of any act or omission of any other trustee
hereunder; and
(iii) the Indenture Trustee may at any time accept the
resignation of or remove any separate trustee or co-trustee.
(c) Any notice, request or other writing given to the
Indenture Trustee shall be deemed to have been given to each of
the then separate trustees and co-trustees, as effectively as if
given to each of them. Every instrument appointing any separate
trustee or co-trustee shall refer to this Agreement and the
conditions of this Article VII. Each separate trustee and
co-trustee, upon its acceptance of the trusts conferred, shall be
vested with the estates or property specified in its instrument
of appointment, either jointly with the Indenture Trustee or
separately, as may be provided therein, subject to all the
provisions of this Indenture, specifically including every
provision of this Indenture relating to the conduct of, affecting
the liability of, or affording protection to, the Indenture
Trustee. Every such instrument shall be filed with the Indenture
Trustee.
(d) Any separate trustee or co-trustee may at any time
constitute the Indenture Trustee, its agent or attorney-in-fact
with full power and authority, to the extent not prohibited by
law, to do any lawful act under or in respect of this Indenture
on its behalf and in its name. If any separate trustee or
co-trustee shall die, become incapable of acting, resign or be
removed, all of its estates, properties, rights, remedies and
trusts shall vest in and be exercised by the Indenture Trustee,
to the extent permitted by law, without the appointment of a new
or successor trustee.
SECTION 7.12. Trustee Eligibility. This Indenture shall at
all times have an Indenture Trustee which shall be eligible to
act as Trustee under Section 310(a) of the Trust Indenture Act
and (i) shall have a combined capital and surplus of at least
$75,000,000 or (ii) shall have a combined capital and surplus in
excess of $5,000,000 and its obligations, whether now in
existence or hereafter incurred, are fully and unconditionally
guaranteed by a corporation organized and doing business under
the laws of the United States, any State or Territory thereof or
of the District of Columbia and having a combined capital and
surplus of at least $75,000,000. If such corporation publishes
reports of conditions at least annually, pursuant to law or to
the requirements of Federal, State, Territorial, or District of
Columbia supervising or examining authority, then for the
<PAGE>
purposes of this Section 7.12, the combined capital and surplus
of such corporation shall be deemed to be its combined capital
and surplus as set forth in its most recent report of conditions
so published. In case at any time the Indenture Trustee shall
cease to be eligible in accordance with the provisions of this
Section 7.12, the Indenture Trustee shall resign immediately in
the manner and with the effect specified in Section 7.09.
SECTION 7.13. Information to Collateral Agent. The
Indenture Trustee shall promptly, and in no event later than the
dates and times specified in Section 3.1 of the Collateral
Agreement, deliver to the Collateral Agent the information
required pursuant to such Section 3.1 in connection with the
payment of any amounts provided for therein.
ARTICLE VIII.
NOTEHOLDERS' LISTS AND REPORTS
SECTION 8.01. Company to Furnish Indenture Trustee Names
and Addresses of Noteholders. The Company will furnish or cause
to be furnished to the Indenture Trustee (a) not more than five
days after each Record Date, a list, in such form as the
Indenture Trustee may reasonably require, of the names and
addresses of the Noteholders as of such Record Date and (b) at
such other times as the Indenture Trustee may request in writing,
within 30 days after receipt by the Company of any such request,
a list of similar form and content as of a date not more than 10
days prior to the time such list is furnished; provided, however,
that so long as the Indenture Trustee is the Note Registrar, no
such list shall be required to be furnished.
SECTION 8.02. Preservation of Information; Communications
to Noteholders. (a) The Indenture 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 the Noteholders,
which list shall be available to the Company for inspection. If
the Indenture Trustee is not the Registrar, the Registrar shall
furnish (and the Company shall cause the Registrar to furnish) to
the Indenture Trustee semi-annually on or before each Payment
Date, and at such other times as the Indenture Trustee may
request in writing, a list, in such form and as of such date as
the Indenture Trustee may reasonably require, containing all the
information in the possession or control of the Registrar as to
the names and addresses of the Noteholders.
<PAGE>
SECTION 8.03. Any Noteholder (who has owned a Note for at
least six months) may, by written request to the Indenture
Trustee, obtain access to the list of all Noteholders from the
Indenture Trustee for the purpose of communicating with such
Noteholders with respect to their rights under the Indenture or
the Notes. The Indenture Trustee may elect not to afford the
requesting Noteholder access to such list if it agrees to mail
the desired communication or proxy, on behalf and at the expense
of the requesting Noteholder, to all Noteholders of record.
ARTICLE IX.
SUPPLEMENTAL INDENTURES AND AMENDMENTS TO
THIS INDENTURE AND OTHER DOCUMENTS
SECTION 9.01. Amendments; Waivers, etc. of Documents;
Direction to Collateral Agent. At any time and from time to
time, (i) the Company (but only with the written consent of each
Liquidity Provider, if required by the terms of the applicable
Liquidity Agreement) and the Indenture Trustee (but only with the
written consent of a Majority in Interest of the Noteholders) may
execute a supplement hereto for the purpose of adding provisions
to, or changing or eliminating provisions of, this Indenture
(including any appendix or schedule hereto) and (ii) the
Indenture Trustee (but only with the written consent of a
Majority in Interest of the Noteholders) may consent to or
execute a written amendment of or supplement to, or waiver or
consent under, the Collateral Agreement, the Class A Indenture or
the Class B Indenture; provided, however, that, without the
consent of each Noteholder and, if required by the terms of the
Liquidity Agreement, the Liquidity Provider, no such amendment,
supplement, waiver or consent shall
(A) modify any of the provisions of Section 6.11, this
Section 9.01 or the definitions of the terms "Majority in
Interest", "Outstanding," or "Outstanding Amount" contained
herein or in any other Basic Document,
(B) reduce the amount or extend the time of payment of
any amount owing or payable under any Note (including,
without limitation, any principal of any Note expected to be
paid on any Payment Date) or increase or reduce the Make
Whole Premium or interest payable on any Note or otherwise
affect the terms of payment of any Note,
(C) modify, amend or supplement the provisions of
Section 2.5, 3.2, 3.3, 3.6 or 10.1 of the Collateral
Agreement or
<PAGE>
(D) make any Note payable in money other than Dollars.
This Section 9.01 shall not apply to any indenture or indentures
supplemental hereto to the extent permitted by, and complying
with the terms of Section 7.11 or 9.04. Notwithstanding the
foregoing, without the consent of each Noteholder, no such
amendment, supplement, waiver or modification of the terms of any
agreement or document shall expressly permit the creation of any
Lien on the Collateral or any part thereof ranking prior to or on
a parity with the Lien of the Collateral Agreement, or deprive
any Noteholder of the benefit of the Lien of the Collateral
Agreement on the Collateral, except as provided in Sections 6.1
and 6.2 of the Collateral Agreement or in connection with the
exercise of remedies under Article V of the Collateral Agreement.
It shall not be necessary for the consent of the
Noteholders under this Section 9.01 to approve the particular
form of any proposed supplement or amendment to this Indenture,
the Collateral Agreement or any Basic Document, but it shall be
sufficient if such consent shall approve the substance thereof.
SECTION 9.02. Trustees Protected. If, in the opinion of
the institution acting as the Indenture Trustee hereunder, any
document required to be executed pursuant to the terms of Section
9.01 hereof adversely affects any right, duty, immunity or
indemnity with respect to it under this Indenture, the Collateral
Agreement or the other Basic Documents, the Indenture Trustee in
its discretion may decline to execute such document. In
executing, or accepting the additional trusts created by any
supplemental indenture permitted by this Article IX or the
modification thereby of the trusts created by this Indenture, the
Indenture Trustee shall be entitled to receive, and shall be
fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized
or permitted by this Indenture.
SECTION 9.03. [Reserved]
<PAGE>
SECTION 9.04. No Noteholder Consent Necessary for Indenture
Supplement, etc. The Company and the Indenture Trustee may enter
into an indenture or indentures supplemental hereto and
agreements supplemental to the Collateral Agreement or the
Indenture Trustee may consent to an amendment or supplement to or
waiver or consent under, the Class A Indenture or the Class B
Indenture for one or more of the following purposes:
(a) to convey, transfer, assign, mortgage or pledge
any property or assets to the Collateral Agent as security
for the Secured Obligations;
(b) to evidence the succession of another Person to
the Company, or successive successions, and the assumption
by the successor Person of the covenants, agreements and
obligations of the Company, and in the Collateral Agreement,
the Notes and the other Basic Documents;
(c) to add to the covenants of the Company such
further covenants, restrictions, conditions or provisions as
the Company and the Indenture Trustee shall consider to be
for the protection of the Noteholders, and to make the
occurrence, or the occurrence and continuance, of a default
in any such additional covenants, restrictions, conditions
or provisions a Collateral Access Event permitting the
enforcement of all or any of the several remedies provided
herein or in the Collateral Agreement; provided, however,
that in respect of any such additional covenant,
restriction, condition or provision such supplemental
indenture or agreement may provide for a particular period
of grace after default (which period may be shorter or
longer than that allowed in the case of the other defaults)
or may provide for an immediate enforcement upon such a
Collateral Access Event or may limit the remedies available
to the Indenture Trustee or the Collateral Agent upon such a
Collateral Access Event or may limit the right of the
Noteholders to waive such a Collateral Access Event;
(d) to surrender any rights or power conferred herein
or in the Collateral Agreement upon the Company;
(e) to cure any ambiguity or to correct or supplement
any provision contained herein or in the Collateral
Agreement, the Class A Indenture, the Class B Indenture or
which may be defective or inconsistent with any other
provision contained herein or therein;
<PAGE>
(f) to correct or amplify the description of any
property at any time subject to the Lien of the Collateral
Agreement or better to assure, convey and confirm unto the
Collateral Agent any property subject or required to be
subject to the Lien of the Collateral Agreement; and
(g) to amend or supplement any provision contained
herein, in the Collateral Agreement, the Class A Indenture,
the Class B Indenture or in any supplemental indenture or
agreement if such amendment or supplement shall not
materially adversely affect the Noteholders or shall confer
benefits upon the Noteholders.
The Indenture Trustee is hereby authorized to join in the
execution of any such supplemental indenture, to make any further
appropriate agreements and stipulations which may be contained
therein and to accept the conveyance, transfer, assignment,
mortgage or pledge of any property thereunder or under the
Collateral Agreement, but the Indenture Trustee shall not be
obligated to enter into any such supplemental indenture which
adversely affects the Indenture Trustee's own rights, duties or
immunities under this Indenture or otherwise, whether in its
trust or individual capacity.
Any supplemental indenture or supplemental agreement under
this Section 9.04 may be executed without the consent of the
Noteholders, notwithstanding any of the provisions of Section
9.01.
Promptly after the execution by the Company and the
Indenture Trustee of any supplemental indenture or supplemental
agreement pursuant to this Section 9.04, the Indenture Trustee
shall mail a notice thereof by first-class mail to each Liquidity
Provider at its address as provided herein and to the Noteholders
at their addresses as they shall appear on the Note Register of
the Note Registrar, setting forth in general terms the substance
of such supplemental indenture. Any failure of the Indenture
Trustee to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such
supplemental indenture.
SECTION 9.05. Payment for Consent. Neither the Company nor
any of its Affiliates shall, directly or indirectly, pay or cause
to be paid any consideration, whether by way of interest, fee or
otherwise, to any Noteholder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of
this Indenture, the Collateral Agreement or the Notes unless such
consideration is offered to be paid to all Noteholders that so
consent, waive or agree to amend in the time frame set forth in
solicitation documents relating to such consent, waiver or
agreement.
<PAGE>
SECTION 9.06. Effect of Supplemental Indenture. Upon the
execution of any supplemental indenture pursuant to the
provisions hereof, this Indenture shall be and be deemed to be
modified and amended in accordance therewith and the respective
rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Indenture Trustee, the Company, and
the Noteholders shall therefore be determined, exercised and
enforced hereunder subject in all respects to such modifications
and amendments, and all the terms and conditions of any such
supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
SECTION 9.07. Notation on Notes in Respect of Supplemental
Indentures. Notes authenticated and delivered after the
execution of any supplemental indenture pursuant to the
provisions of this Article may bear a notation in form approved
by the Indenture Trustee as to any matter provided for by such
supplemental indenture. If the Company or the Indenture Trustee
shall so determine, new Notes so modified as to conform, in the
opinion of the Company and the Indenture Trustee, to any
modification of this Indenture contained in any such supplemental
indenture may be prepared by the Company, authenticated by the
Indenture Trustee and delivered in exchange for the Outstanding
Notes.
SECTION 9.08. Notice to Rating Agencies. No less than one
Business Day prior to its execution of each amendment, consent,
modification, supplement or waiver contemplated by Article IX
hereof, the Company shall send a copy thereof to each Rating
Agency.
ARTICLE X
COLLATERAL AGREEMENT
SECTION 10.01. Collateral Agreement. (a) In order to
secure the due and punctual payment of the Secured Obligations,
the Company, the Indenture Trustee, the Class A Indenture
Trustee, the Class B Indenture, the Liquidity Providers and the
Collateral Agent have entered into the Collateral Agreement to
create the Liens created therein and for related matters. The
Company and the Indenture Trustee, hereby agree that the
Collateral Agent holds the Collateral in trust for the benefit of
the Noteholders, the Indenture Trustee and the other Secured
Parties pursuant to the terms of the Collateral Agreement.
<PAGE>
(b) Each Noteholder, by accepting a Note, agrees to
all of the terms and provisions of the Collateral Agreement as
the same may be amended from time to time pursuant to the
provisions thereof and of this Indenture.
(c) As more fully set forth in the Collateral
Agreement, the Noteholders, and the Indenture Trustee on behalf
of such Noteholders, have rights in and to the Collateral which
are as provided therein subordinate to the rights of the
Liquidity Providers in and to the Collateral and prior to the
rights of (i) the holders of the Class A Notes and the Class A
Indenture Trustee on behalf of such holders and (ii) the holders
of the Class B Notes and the Class B Indenture Trustee on behalf
of such holders, in and to the Collateral.
(d) As amongst the Noteholders, the Collateral as now
or hereafter constituted shall be held for the equal and ratable
benefit of the Noteholders without preference, priority or
distinction of any thereof over any other by reason of difference
in time of issuance, sale or otherwise, as security for the
Notes.
SECTION 10.02. Release upon Termination of the Company's
Obligations. In the event that this Indenture shall be satisfied
and discharged in accordance with Section 5.01, the Indenture
Trustee shall deliver to the Collateral Agent a notice stating
that the Indenture Trustee, on behalf of the Noteholders,
disclaims and gives up any and all rights it has in or to the
Collateral and any rights it has under the Collateral Agreement
and, upon and after the receipt by the Collateral Agent of such
notice, the Collateral Agent shall not be deemed to hold the
Collateral on behalf of the Indenture Trustee for the benefit of
the Noteholders.
SECTION 10.03. Notice of Successor Collateral Agent. In
the case of any appointment of a successor to the Collateral
Agent pursuant to the Collateral Agreement or any merger,
conversion, consolidation or sale of all or substantially all of
the corporate trust business of the Collateral Agent pursuant to
the Collateral Agreement, the Indenture Trustee shall give prompt
written notice thereof to each Noteholder.
<PAGE>
ARTICLE XI.
MISCELLANEOUS
SECTION 11.01. Compliance Certificates and Opinions, etc.
Upon any application or request by the Company to the Indenture
Trustee to take any action under any provision of this Indenture,
the Company shall furnish to the Indenture Trustee (i) an
Officers' Certificate stating that all conditions precedent, if
any, provided for in this Indenture relating to the proposed
action have been complied with and (ii) an Opinion of Counsel
stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with except that, in the
case of any such application or request as to which the
furnishing of such documents is specifically required by any
provision of this Indenture, no additional certificate or opinion
need be furnished.
SECTION 11.02. Statements Required in Certificate or
Opinion. Each certificate or opinion with respect to compliance
with a condition or covenant provided for in this Indenture shall
include:
(1) a statement that the person making such
certificate or opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of
the examination or investigation upon which the statements
or opinions contained in such certificate or opinion are
based;
(3) a statement that, in the opinion of such person,
he or she has made such examination or investigation as is
necessary to enable him or her to express an informed
opinion as to whether or not such covenant or condition has
been complied with; and
(4) a statement as to whether or not, in the opinion
of such person, such condition or covenant has been complied
with.
SECTION 11.03. Form of Documents Delivered to Indenture
Trustee. In any case where several matters are required to be
certified by, or covered by an opinion of, any specified Person,
it is not necessary that all such matters be certified by, or
covered by the opinion of, only one such Person, or that they be
so certified or covered by only one document, but one such Person
may certify or give an opinion with respect to some matters and
one or more other such Persons as to other matters, and any such
Person may certify or give an opinion as to such matters in one
or several documents.
<PAGE>
Any certificate or opinion of an Responsible Officer of the
Company may be based, insofar as it relates to legal matters,
upon a certificate or opinion of, or representations by, counsel,
unless such officer knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion
is based are erroneous. Any such certificate of an Responsible
Officer or Opinion of Counsel may be based, insofar as it relates
to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company,
stating that the information with respect to such factual matters
is in the possession of the Company, unless such counsel knows,
or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such
matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements,
opinions or other instruments under this Indenture, they may, but
need not, be consolidated and form one instrument.
Whenever in this Indenture, in connection with any
application or certificate or report to the Indenture Trustee, it
is provided that the Company shall deliver any document as a
condition of the granting of such application, or as evidence of
the Company's compliance with any term hereof, it is intended
that the truth and accuracy, at the time of the granting of such
application or at the effective date of such certificate or
report (as the case may be), of the facts and opinions stated in
such document shall in such case be conditions precedent to the
right of the Company to have such application granted or to the
sufficiency of such certificate or report. The foregoing shall
not, however, be construed to affect the Indenture Trustee's
right to rely upon the truth and accuracy of any statement or
opinion contained in any such document as provided in Article
VII.
SECTION 11.04. Acts of Noteholders. (a) Any request,
demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be given or taken by
Noteholders may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such
Noteholders in person or by agents duly appointed in writing; and
except as herein otherwise expressly provided such action shall
become effective when such instrument or instruments are
delivered to the Indenture Trustee, and, where it is hereby
expressly required, to the Company. Such instrument or
instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the
<PAGE>
Noteholders signing such instrument or instruments. Proof of
execution of any such instrument or of a writing appointing any
such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 7.01) conclusive in favor of the
Indenture Trustee and the Company, if made in the manner provided
in this Section.
(b) The fact and date of the execution by any person
of any such instrument or writing may be proved in any manner
that the Indenture Trustee deems sufficient.
(c) The principal amount and serial numbers of Notes
held by any Person, and date of holding the same, shall be proved
by the Note Register. If the Company shall solicit from the
Noteholders any request, demand, authorization, direction,
notice, consent, waiver or other Act, the Company may, at its
option, in or pursuant to a board resolution, fix in advance a
record date for the determination of Noteholders entitled to give
such request, demand, authorization, direction, notice, consent,
waiver or other Act, but the Company shall have no obligation to
do so. Notwithstanding Section 316(c) of the Trust Indenture
Act, such record date shall be the record date specified in or
pursuant to such board resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of
Noteholders generally in connection therewith and not later than
the date such solicitation is completed. If such a record date
is fixed, such request, demand, authorization, direction, notice,
consent, waiver or other Act may be given before or after such
record date, but only the Noteholders of record at the close of
business on such record date shall be deemed to be Noteholders
for the purposes of determining whether Noteholders of the
requisite proportion of Outstanding Notes have authorized or
agreed or consented to such request, demand, authorization,
direction, notice, consent, waiver or other Act, and for that
purpose the Outstanding Notes shall be computed as of such record
date; provided that, no such authorization, agreement or consent
by the Noteholders on such record date shall be deemed effective
unless it shall become effective pursuant to the provisions of
this Indenture not later than eleven months after the record
date.
(d) Any request, demand, authorization, direction,
notice, consent, waiver or other action by the Noteholder of any
Notes shall bind the Noteholder of every Note issued upon the
registration thereof or in exchange therefor or in lieu thereof,
in respect of anything done, omitted or suffered to be done by
the Indenture Trustee or the Company in reliance thereon, whether
or not notation of such action is made upon such Note.
<PAGE>
SECTION 11.05. Notices, etc., to Indenture Trustee, Company
and Rating Agencies. Any request, demand, authorization,
direction, notice, consent, waiver or Act of Noteholders or other
documents provided or permitted by this Indenture to be made
upon, given or furnished to or filed with:
(a) The Indenture Trustee by any Noteholder or by the
Company shall be sufficient for every purpose hereunder if
made, given, furnished or filed in writing to or with the
Indenture Trustee and received at its Corporate Trust
Office, or
(b) The Company by the Indenture Trustee or by any
Noteholder shall be sufficient for every purpose hereunder
if in writing and mailed, first-class, postage prepaid, to
the Company addressed to: USAir, Inc., Crystal Park Four,
2345 Crystal Drive, Arlington, VA 22227 Attention:
Treasurer, or at any other address previously furnished in
writing to the Indenture Trustee by the Company.
Notices required to be given to the Rating Agencies by the
Company or the Indenture Trustee shall be in writing, personally
delivered or mailed by certified mail, return receipt requested
to (i) in the case of Moody's, at the following address: Moody's
Investors Service, Inc., Airline Analyst, 99 Church Street, New
York, New York 10007 and (ii) in the case of S&P at the following
address: Standard & Poor's Rating Group, 26 Broadway (20th
Floor), New York, New York 10004, Attention: Corporate
Finance/Transportation Ratings Group; or as to each of the
foregoing, at such other address as shall be designated by
written notice to the other parties.
SECTION 11.06. Notices to Noteholders; Waiver. Where this
Indenture provides for notice to Noteholders of any event, such
notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class,
postage prepaid to each Noteholder affected by such event, at his
address as it appears on the Note Register, not later than the
latest date, and not earlier than the earliest date, prescribed
for the giving of such notice. In any case where notice to
Noteholders is given by mail, neither the failure to mail such
notice nor any defect in any notice so mailed to any particular
Noteholder shall affect the sufficiency of such notice with
respect to other Noteholders, and any notice that is mailed in
the manner herein provided shall conclusively be presumed to have
been duly given.
<PAGE>
Where this Indenture provides for notice in any manner, such
notice may be waived in writing by any Person entitled to receive
such notice, either before or after the event, and such waiver
shall be the equivalent of such notice. Waivers of notice by
Noteholders shall be filed with the Indenture Trustee but such
filing shall not be a condition precedent to the validity of any
action taken in reliance upon such a waiver.
In case, by reason of the suspension of regular mail service
as a result of a strike, work stoppage or similar activity, it
shall be impractical to mail notice of any event to Noteholders
when such notice is required to be given pursuant to any
provision of this Indenture, then any manner of giving such
notice as shall be satisfactory to the Indenture Trustee shall be
deemed to be a sufficient giving of such notice.
Where this Indenture provides for notice to the Rating
Agencies, failure to give such notice shall not affect any other
rights or obligations created hereunder, and shall not under any
circumstance constitute a Collateral Access Event.
SECTION 11.07. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction
hereof.
SECTION 11.08. Successors and Assigns. All covenants and
agreements in this Indenture and the Notes by the Company shall
bind its successors and assigns, whether so expressed or not.
All agreements of the Indenture Trustee in this Indenture
shall bind its successors, co-trustees and agents of the
Indenture Trustee.
SECTION 11.09. Separability. 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 11.10. Benefits of Indenture. Nothing in this
Indenture or in the Notes, express or implied, shall give to any
Person, other than the parties hereto and their successors
hereunder, and the Noteholders, and any other party secured
hereunder, and any other Person with an ownership interest in any
part of the Collateral, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
<PAGE>
SECTION 11.11. GOVERNING LAW. THIS INDENTURE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
SECTION 11.12. Counterparts. This Indenture may be
executed in any number of counterparts, each of which so executed
shall be deemed to be an original, but all such counterparts
shall together constitute but one and the same instrument.
SECTION 11.13. Recording of Indenture. If this Indenture
is subject to recording in any appropriate public recording
offices, such recording is to be effected by the Company and at
its expense accompanied by an Opinion of Counsel to the effect
that such recording is necessary either for the protection of the
Noteholders or any other Person secured hereunder or for the
enforcement of any right or remedy granted to the Indenture
Trustee under this Indenture.
SECTION 11.14. Disclosure of Names and Addresses of
Holders. Every Noteholder, by receiving and holding a Note,
agrees with the Company and the Indenture Trustee that neither
the Company or the Indenture Trustee nor any agent of any of them
shall be deemed to be in violation of any existing law, or of any
law hereafter enacted which does not specifically refer to
Section 312 of the Trust Indenture Act, by reason of the
disclosure of any such information as to the names and addresses
of the Noteholders in accordance with Section 312 of the Trust
Indenture Act, regardless of the source from which such
information was derived, and that the Indenture Trustee shall not
be held accountable by reason of mailing any material pursuant to
a request made under Section 312 of the Trust Indenture Act.
SECTION 11.15. Trust Indenture Act Controls. After the
effectiveness of the Registration Statement, this Indenture shall
be governed by the provisions of the Trust Indenture Act of 1939,
as amended.
SECTION 11.16. Exchange Offer. The provisions of Sections
4.04(c), (d), (e) and (f), 7.07, 11.14, 11.15 and 11.16 shall not
have any force or effect until such time as any Notes have been
exchanged for Class C Registered Notes pursuant to the Exchange
Offer.
* * *
<PAGE>
IN WITNESS WHEREOF, the Company and the Indenture
Trustee have caused this Indenture to be duly executed by their
respective officers, thereunto duly authorized, all as of the day
and year first above written.
USAIR, INC.
By: /s/Thomas A. Fink
---------------------------------
Name: Thomas A. Fink
Title: Treasurer
WILMINGTON TRUST COMPANY, not in
its individual capacity except as
expressly provided herein but
solely as Indenture Trustee
By: /s/W. Chris Sponenberg
--------------------------------
Name: W. Chris Sponenberg
Title: Financial Services Officer
<PAGE>
APPENDIX A
----------
(a) For all purposes of the Basic Documents the following
terms shall have the following meanings (such definitions to be
equally applicable to both the singular and plural forms of the
terms defined unless otherwise set forth herein). Any agreement
referred to below shall mean such agreement as amended, restated,
supplemented, waived or modified from time to time as permitted
by the terms thereof and of any other Basic Document. A
reference to a Person below includes its permitted successors and
assigns.
(b) As used in this Appendix A and in any certificate or
other document made or delivered pursuant hereto or thereto,
accounting terms not defined in this Appendix A or in any such
certificate or other document, and accounting terms partly
defined in this Appendix or in any such certificate or other
document to the extent not defined, shall have the respective
meanings given to them under generally accepted accounting
principles. To the extent that the definitions of accounting
terms in this Appendix A or in any such certificate or other
document are inconsistent with the meanings of such terms under
generally accepted accounting principles, the definitions
contained in this Appendix A or in any such certificate or other
document shall control.
(c) The words "hereof", "herein", "hereunder" and words of
similar import when used in any Basic Document shall refer to
such Basic Document in which the word appears, as a whole and not
to any particular provision of such Basic Document; Section and
Exhibit references contained in this Appendix A are references to
Sections and Exhibits in the document in which the reference
appears unless otherwise specified; and the term "including"
shall mean "including without limitation".
"Acceleration" means, with respect to the amounts payable in
respect of any Class of Notes, the declaration of such amounts to
be immediately due and payable. "Accelerate" and "Accelerated"
have meanings correlative to the foregoing.
"Acceleration Advance" with respect to any Liquidity
Facility has the meaning assigned to such term in the applicable
Liquidity Agreement.
<PAGE>
"Act" has the meaning specified in Section 11.04(a) of the
Indentures.
"Advance" with respect to any Liquidity Facility has the
meaning assigned to such term in the applicable Liquidity
Agreement.
"Aeronautical Authority" means as of any time of
determination, the FAA or other governmental airworthiness
authority having jurisdiction over the Aircraft or the Airframe
and Engines or engines attached thereto under the laws of the
country in which the Airframe is then registered.
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under
common control with such Person. For the purposes of this
definition, "control" (including "controlled by" and "under
common control with") means the power, directly or indirectly, to
direct or cause the direction of the management and policies of
such Person whether through the ownership of voting securities or
by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent's Lien" has the meaning given to such term in
Section 6.4 of the Collateral Agreement.
"Agent Members" means members of or participants in the
Depository.
"Aircraft" means an Airframe together with the two Engines
whether or not either of such Engines may at the time be
installed on such Airframe or installed on any other airframe or
any other aircraft.
"Airframe" means (A) any Boeing Model 757-2B7 aircraft
(excluding the Engines and any other engines which may from time
to time be installed thereon, but including any and all Parts
which may from time to time be incorporated or installed in, or
attached to such aircraft, and including any and all Parts
removed therefrom so long as the removed Parts remain subject to
the Lien of the Indenture under the terms of Section 4.4 of the
Collateral Agreement) identified by U.S. registration number and
manufacturer's serial number in the Collateral Agreement
Supplement executed and delivered on the Closing Date, so long as
a Replacement Airframe shall not have been substituted therefor
pursuant to Section 4.5 of the Collateral Agreement, and (B) a
Replacement Airframe, so long as another Replacement Airframe
shall not have been substituted therefor pursuant to Section 4.5
of the Collateral Agreement.
<PAGE>
"Appendix" means this Appendix A.
"Applicable Indenture" means, (i) with respect to the Class
A Notes, the Class A Noteholders or the Class A Indenture
Trustee, the Class A Indenture, (ii) with respect to the Class B
Notes, the Class B Noteholders or the Class B Indenture Trustee,
the Class B Indenture and (iii) with respect to the Class C
Notes, the Class C Noteholders or the Class C Indenture Trustee,
the Class C Indenture.
"Applicable Law" means all applicable laws, treaties,
judgments, decrees, injunctions, writs and orders of any court,
governmental agency or authority and rules, regulations, orders,
directives, licenses and permits of any governmental body,
instrumentality, agency or authority.
"Appraisal" means a fair market value appraisal (which may
be a "desktop" appraisal) on the basis of an arm's-length
transaction between an informed and willing purchaser under no
compulsion to buy and an informed and willing seller under no
compulsion to sell and both having knowledge of all relevant
facts performed by any Appraiser or any other nationally
recognized appraiser selected by the Company and reasonably
acceptable to the Collateral Agent.
"Appraised Value" means at any time with respect to any
Aircraft, the appraised value thereof as set forth in the most
recent Appraisal, provided that initially, the Appraised Value of
any Aircraft means the lower of the average or the median of the
three appraisals provided by the Appraisers for such Aircraft.
"Appraisers" means Air Claims Limited, Aircraft Information
Services, Inc. and BK Associates, Inc.
"Available Liquidity Commitment" with respect to any
Liquidity Facility, has the meaning given to such term in the
Liquidity Agreement relating to such Liquidity Facility.
"Average Life Date" means, with respect to any Note, the
date which follows such date of determination by a period equal
to the Remaining Average Life of such Note.
"Aviation Act" means Subtitle VII of Title 49 of the United
States Code or any subsequent legislation that amends,
supplements or supersedes the Aviation Act.
"Basic Documents" means each of the Liquidity Agreements,
the Collateral Agreement, the Indentures and the Notes, together
with exhibits and schedules included with any of the foregoing.
<PAGE>
"Bills of Sale" means the FAA Bills of Sale and the Warranty
Bills of Sale.
"Boeing Purchase Agreement" means the agreement between the
Company and the Manufacturer relating to the purchase by the
Company of the Aircraft, as originally executed and as thereafter
modified, amended or supplemented in accordance with the terms
thereof, but only insofar as the foregoing relates to the
Aircraft.
"Book Entry Notes" means, when used in any Indenture, a
beneficial interest in the Notes issued thereunder, ownership and
transfers of which shall be made through book entries by a
Clearing Agency as described in Section 2.05 of such Indenture.
"Business Day" means any day other than a Saturday or Sunday
or a day on which commercial banks in any of New York or the
jurisdictions in which any of the Collateral Agent, Indenture
Trustee or the Company have their chief executive offices are
authorized or required by law, executive order or governmental
decree to be closed.
"Cash Collateral Account" means, at any time, (i) when used
in the Class A Liquidity Agreement, the Class A Cash Collateral
Account, (ii) when used in the Class B Liquidity Agreement, the
Class B Cash Collateral Account, (iii) when used in the Class C
Liquidity Agreement, the Class C Cash Collateral Account, (iv)
when used in all other Basic Documents, the Class A Cash
Collateral Account, the Class B Cash Collateral Account or the
Class C Cash Collateral Account, as applicable, and (v) when used
in the plural, the Class A Cash Collateral Account, the Class B
Cash Collateral Account and the Class C Cash Collateral Account,
collectively.
"Certificated Air Carrier" means the United States "air
carrier" within the meaning of the Act, operating pursuant to an
operating certificate issued under Chapter 447 of the Act.
"Class" means each of the Class A Notes, the Class B Notes
and the Class C Notes.
"Class A Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class A
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
<PAGE>
"Class A Committed Facility" means the lending commitment of
the Class A Liquidity Provider evidenced by the Class A Liquidity
Agreement.
"Class A Indenture" means the Class A Trust Indenture dated
as of February 15, 1996 between the Company and the Class A
Indenture Trustee.
"Class A Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class A Indenture, but solely as Indenture Trustee under the
Class A Indenture, together with any successor Indenture Trustee
under the terms of the Class A Indenture.
"Class A Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class A Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class A Liquidity Facility, the
reimbursement agreement related to such Replacement Liquidity
Facility.
"Class A Liquidity Facility" means, initially, the Class A
Committed Facility and, from and after the expiration or earlier
replacement of the Class A Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class A Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class A Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class A Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class A Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
"Class A Noteholder" means, at any time, any holder of one
or more Class A Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class A Notes" means (i) prior to the exchange of any Class
A Notes for Class A Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class A Indenture Trustee under the Class A Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class A Indenture and (ii) after the
exchange of any Class A Notes for Class A Registered Notes
pursuant to the Exchange Offer, the Class A Registered Notes and
any Class A Notes not exchanged pursuant to the Exchange Offer.
<PAGE>
"Class A Registered Notes" means any Notes issued by the
Company and authenticated by the Class A Indenture Trustee under
the Class A Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefore or replacement thereof
pursuant to the terms of the Class A Indenture.
"Class B Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class B
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
"Class B Committed Facility" means the lending commitment of
the Class B Liquidity Provider evidenced by the Class B Liquidity
Agreement.
"Class B Indenture" means the Class B Trust Indenture dated
as of February 15, 1996 between the Company and the Class B
Indenture Trustee.
"Class B Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class B Indenture, but solely as Indenture Trustee under the
Class B Indenture, together with any successor Indenture Trustee
under the terms of the Class B Indenture.
"Class B Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class B Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class B Liquidity Facility, the
agreement related to such Replacement Liquidity Facility.
"Class B Liquidity Facility" means, initially, the Class B
Committed Facility and, from and after the expiration or earlier
replacement of the Class B Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class B Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class B Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class B Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class B Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
<PAGE>
"Class B Noteholder" means, at any time, any holder of one
or more Class B Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class B Notes" means (i) prior to the exchange of any Class
B Notes for Class B Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class B Indenture Trustee under the Class B Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class B Indenture and (ii) after the
exchange of any Class B Notes for Class B Registered Notes
pursuant to the Exchange Offer, the Class B Registered Notes and
any Class B Note not exchanged pursuant to the Exchange Offer.
"Class B Registered Notes" means any Notes issued by the
Company and authenticated by the Class B Indenture Trustee under
the Class B Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefor or replacement thereof pursuant
to the terms of the Class B Indenture.
"Class C Cash Collateral Account" means an Eligible Deposit
Account in the name of the Collateral Agent and maintained at an
Eligible Institution, which shall be the Collateral Agent if it
shall so qualify, into which all amounts drawn under the Class C
Liquidity Facility pursuant to Section 3.6(c), 3.6(d) or 3.6(i)
of the Collateral Agreement shall be deposited.
"Class C Committed Facility" means the lending commitment of
the Class C Liquidity Provider evidenced by the Class C Liquidity
Agreement.
"Class C Indenture" means the Class C Trust Indenture dated
as of February 15, 1996 between the Company and the Class C
Indenture Trustee.
"Class C Indenture Trustee" means Wilmington Trust Company,
not in its individual capacity except as expressly set forth in
the Class C Indenture, but solely as Indenture Trustee under the
Class C Indenture, together with any successor Indenture Trustee
under the terms of the Class C Indenture.
"Class C Liquidity Agreement" means, initially, the
Liquidity Agreement dated as of February 15, 1996 between the
Class C Liquidity Provider, the Company and the Collateral Agent,
and thereafter, upon the issuance of a Replacement Liquidity
Facility in substitution for the Class C Liquidity Facility, the
agreement related to such Replacement Liquidity Facility."
<PAGE>
"Class C Liquidity Facility" means, initially, the Class C
Committed Facility and, from and after the expiration or earlier
replacement of the Class C Committed Facility, the then effective
Replacement Liquidity Facility, if any.
"Class C Liquidity Provider" means, initially, WestLB and,
upon any replacement of the Class C Liquidity Facility issued by
WestLB, the Replacement Liquidity Provider which has issued a
Replacement Liquidity Facility to replace the Class C Liquidity
Facility pursuant to Section 3.6(e) of the Collateral Agreement.
"Class C Note Termination Date" has the meaning assigned to
such term in Section 2.7(b) of the Collateral Agreement.
"Class C Noteholder" means, at any time, any holder of one
or more Class C Notes, subject to the second sentence of the
definition of "Noteholder" in this Appendix.
"Class C Notes" means (i) prior to the exchange of any Class
C Notes for Class C Registered Notes pursuant to the Exchange
Offer, the Notes issued by the Company and authenticated by the
Class C Indenture Trustee under the Class C Indenture and any
such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Class C Indenture and (ii) after the
exchange of any Class C Notes for Class C Registered Notes
pursuant to the Exchange Offer, the Class C Registered Notes and
any Class C Notes not exchanged pursuant to the Exchange Offer.
"Class C Registered Notes" means any Notes issued by the
Company and authenticated by the Class C Indenture Trustee under
the Class C Indenture pursuant to the Exchange Offer and any such
Notes issued in exchange therefor or replacement thereof pursuant
to the terms of the Class C Indenture.
"Clearing Agency" means an organization registered as a
"clearing agency" pursuant to Section 17A of the Exchange Act.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to
time a Clearing Agency effects book-entry transfers and pledges
of securities deposited with the Clearing Agency.
"Closing Date" means February 16, 1996.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, and Treasury Regulations promulgated
thereunder.
<PAGE>
"Collateral" has the meaning assigned to such term in the
granting clause of the Collateral Agreement.
"Collateral Access Event" means (i) for purposes of the
Class A Indenture, any Collateral Access Event under Section 6.01
of the Class A Indenture, (ii) for purposes of the Class B
Indenture, any Collateral Access Event under Section 6.01 of the
Class B Indenture and (iii) for purposes of the Class C
Indenture, any Collateral Access Event under Section 6.01 of the
Class C Indenture.
"Collateral Agent" means Wilmington Trust Company, a
Delaware banking corporation, not in its individual capacity
except as expressly set forth in the Collateral Agreement, but
solely as Collateral Agent under the Collateral Agreement.
"Collateral Agreement" means the Collateral Agency Agreement
dated as of February 15, 1996 among the Company, the Collateral
Agent, each Liquidity Provider and each Indenture Trustee.
"Commission" means the Securities and Exchange Commission.
"Committed Facility" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Committed Facility,
(ii) when used in the Class B Liquidity Agreement, the Class B
Committed Facility, (iii) when used in the Class C Liquidity
Agreement, the Class C Committed Facility, (iv) when used in all
other Basic Documents, the Class A Committed Facility, the Class
B Committed Facility or the Class C Committed Facility, as
applicable, and (v) when used in the plural, the Class A
Committed Facility, the Class B Committed Facility and the Class
C Committed Facility, collectively.
"Commitment" with respect to any Liquidity Facility has the
meaning assigned to such term in the applicable Liquidity
Agreement.
"Company" means USAir, Inc., a Delaware corporation, and,
subject to the provisions hereof, its permitted successors and
assigns.
"Company Order" and "Company Request" mean a written order
or request signed in the name of the Company by any one of its
Responsible Officers and delivered to the Applicable Indenture
Trustee.
"Controlling Party" means the Person entitled to act as such
pursuant to the terms of Section 2.7 of the Collateral Agreement.
<PAGE>
"Corporate Trust Office" of any Indenture Trustee means the
principal office of such Person located at Rodney Square North,
1100 North Market Street, Wilmington, Delaware 19890-0001, Attn:
Corporate Trust Administration or such other office at which such
Person's corporate trust business shall be administered and which
such person shall have specified by notice in writing to the
Collateral Agent, the Liquidity Provider and the Noteholders of
the related Class.
"Depository" means the Depository Trust Company, a New York
corporation.
"Depository Agreement" means the Agreement among the
Company, the Indenture Trustees, and the Depositary Trust Company
dated February 16, 1996.
"Designated Representatives" means the Trustee
Representatives and the LP Representatives identified under
Section 2.6 of the Collateral Agreement.
"Dollars" means United States dollars.
"Downgrade Advance" (i) when used in any Liquidity Facility
has the meaning assigned to such term in the applicable Liquidity
Agreement and (ii) when used in any other Basic Document has the
meaning assigned to such term in Section 3.6(c) of the Collateral
Agreement.
"Downgraded Facility" has the meaning assigned to such term
in Section 3.6(c) of the Collateral Agreement.
"Drawn Down Facility" has the meaning assigned to such term
in Section 5.6(b) of the Collateral Agreement.
"Eligible Deposit Account" means either (a) a segregated
account with an Eligible Institution or (b) a segregated trust
account with the corporate trust department of a depository
institution organized under the laws of the United States of
America or any one of the states thereof or the District of
Columbia (or any domestic branch of a foreign bank), having
corporate trust powers and acting as trustee for funds deposited
in such account, so long as any of the securities of such
depository institution has a long-term, unsecured debt rating
from each Rating Agency of at least A-3 or its equivalent.
<PAGE>
"Eligible Institution" means (a) the corporate trust
department of the Collateral Agent or any Indenture Trustee or
(b) a depository institution organized under the laws of the
United States of America or any one of the states thereof or the
District of Columbia (or any domestic branch of a foreign bank),
which has a long-term unsecured debt rating of at least A-3 or
its equivalent.
"Eligible Investments" means (i) direct obligations of the
United States of America or agencies thereof where such
obligations are guaranteed by the United States government, and
having a final maturity of one year or less from date of purchase
thereof; (ii) certificates of deposit issued by, bankers'
acceptances of, or time deposits with, any bank, trust company or
national banking association incorporated or doing business under
the laws of the United States of America or one of the states
thereof having combined capital and surplus and retained earnings
as of its last report of condition of at least $100,000,000 and
having a short term debt rating of B or better by Keefe, Bruyette
& Woods, Inc. and having a final maturity of one year or less
from date of purchase thereof; (iii) commercial paper of any
holding company of a bank, trust company or national banking
association described in (ii) and commercial paper of any
corporation or finance company incorporated or doing business
under the laws of the United States of America or any state
thereof having a rating assigned to such commercial paper of A-1
or better by S&P or P1 by Moody's (or, if neither such
organization shall rate such commercial paper at any time, a
rating equal to the highest ratings assigned by any nationally
recognized rating organization in the United States of America)
and having a final maturity of 270 days or less from the date of
purchase thereof; (iv) U.S. dollar-denominated certificates of
deposit issued by the European subsidiaries of any bank, trust
company or national banking association described in (ii) and
having a final maturity of 90 days or less from the date of
purchase thereof; or (v) repurchase agreements with any financial
institution having combined capital and surplus and retained
earnings as of its last report of condition of at least
$100,000,000 when subject to an executed master repurchase
agreement and which are fully collateralized by obligations
described in clause (i) above where delivery must be taken, and
having a final maturity of 90 days or less from the date of
purchase thereof; provided that, except for investments described
in clauses (i) and (v) above, no more than the greater of
$10,000,000 or 50% of the principal amount may be invested as
"Eligible Investments" in any one corporation, bank holding
company, bank, trust company or national banking association at
any given time. If none of the above investments are available,
the entire amount to be invested may be used to purchase Federal
Funds overnight from an entity described in (ii) above.
<PAGE>
"Engine" means with respect to any Airframe: (A) one of the
two Rolls-Royce RB211-535E4 aircraft engines identified by
manufacturer's serial number in the Collateral Agreement
Supplement executed and delivered on the Closing Date, so long as
a Replacement Engine shall not have been substituted therefor
pursuant to Section 4.4 or 4.5 of the Collateral Agreement and
(B) a Replacement Engine, so long as another Replacement Engine
shall not have been substituted therefor pursuant to Section 4.4
or 4.5 of the Collateral Agreement, whether or not such Engine or
Replacement Engine, as the case may be, is from time to time
installed on such Airframe or installed on another airframe, and
including, in each case all Parts incorporated or installed in or
attached thereto and any and all Parts removed therefrom so long
as such Parts remain subject to the Lien of the Collateral
Agreement under the terms of Section 4.4 thereof. The term
"Engines" means, as of any date of determination, the two engines
each of which is an Engine on that date.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Event of Default" means (i) for purposes of the Class A
Indenture, any Event of Default as defined in Section 6.01 of the
Class A Indenture, (ii) for purposes of the Class B Indenture,
any Event of Default as defined in Section 6.01 of the Class B
Indenture and (iii) for purposes of the Class C Indenture, any
Event of Default as defined in Section 6.01 of the Class C
Indenture.
"Event of Loss" with respect to any Aircraft, Airframe or
Engine means any of the following events:
a) with respect to such property, payment of an insurance
settlement with respect to such property on the basis of an
actual or constructive total loss;
b) with respect to such property, destruction or damage
beyond repair (provided, that if it is not clear whether damage
constitutes damage beyond repair, an Event of Loss will be deemed
to occur when it is determined by the Company that such damage is
beyond repair);
c) with respect to such property, theft or disappearance
for a period in excess of 120 days, unless the location of such
property is known and the Company is diligently pursuing the
recovery of such property;
<PAGE>
d) with respect to such property, condemnation or taking of
title to such property by the United States government or any
foreign government or instrumentality or agency thereof;
e) with respect to an Airframe only, the requisition or
taking of use of such Airframe by a foreign government or
instrumentality or agency thereof for a continuous period of more
than six consecutive months;
f) with respect to an Engine only, the requisition or
taking of use thereof by any government or instrumentality or
agency thereof, or any divestiture of title or ownership deemed
to be an Event of Loss with respect to an Engine under Section
4.2(b)(iii) or 4.2(b)(vi) of the Collateral Agreement; or
g) with respect to any of such property, as a result of any
rule, regulation, order or other action by the Aeronautical
Authority, the use of such property for the transportation of
passengers shall have been prohibited for a period of 12
consecutive months (or such shorter period if it is determined by
the Company that such property can not be restored to normal use
during such twelve month period), unless the Company prior to
expiration of such period shall be diligently carrying forward
all necessary steps to permit the normal use of such property, or
in any event, if such use shall have been prohibited for a period
of more than 24 consecutive months;
provided that, in the case of an event referred to in clauses
(c), (d), (e) or (f) above with respect to an Airframe, if such
property shall be returned to the Company in usable condition
prior to the applicable date for replacement, then such event
shall, at the option of the Company, not constitute an Event of
Loss.
An Event of Loss with respect to an Aircraft shall be deemed
to have occurred if an Event of Loss has occurred with respect to
the Airframe which is a part thereof.
"Exchange Offer" means the offer the Company is required to
make pursuant to the Registration Rights Agreement to exchange
Class A Notes for Class A Registered Notes, the Class B Notes for
the Class B Registered Notes and Class C Notes for Class C
Registered Notes, as applicable.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
<PAGE>
"Expenses" means any and all liabilities, obligations,
losses, damages, settlements, claims, actions, suits, penalties,
costs and expenses (including reasonable legal fees and
expenses), of whatsoever kind and nature.
"FAA" means the United States Federal Aviation
Administration.
"FAA Bill of Sale" with respect to an Aircraft, means the
bill of sale on AC Form 8050-2 executed by the Manufacturer in
favor of the Company and dated the date of delivery of such
Aircraft from the Manufacturer to the Company.
"Federal Aviation Administration" or "FAA" means the United
States Federal Aviation Administration or any successor thereto
administering the functions of the Federal Aviation
Administration under the Federal Aviation Act.
"Final Scheduled Payment Date" means for each Class of
Notes, the last scheduled Payment Date for such Class specified
in Exhibit C to the Applicable Indenture.
"Global Notes" means, when used in any Indenture, the
Offshore Global Notes, the U.S. Global Notes and the Registered
Notes issued thereunder, collectively.
"Indenture" means (i) when used in the Class A Indenture,
the Class A Indenture, (ii) when used in the Class B Indenture,
the Class B Indenture, (iii) when used in the Class C Indenture,
the Class C Indenture, (iv) when used in all other Basic
Documents, the Class A Indenture, the Class B Indenture or the
Class C Indenture, as applicable, and (v) when used in the
plural, the Class A Indenture, the Class B Indenture and the
Class C Indenture, collectively.
"Indenture Trustee" means, at any time, (i) when used in the
Class A Indenture, the Class A Indenture Trustee, (ii) when used
in the Class B Indenture, the Class B Indenture Trustee, (iii)
when used in the Class C Indenture, the Class C Indenture
Trustee, (iv) when used in all other Basic Documents, the Class A
Indenture Trustee, the Class B Indenture Trustee or the Class C
Indenture Trustee, as applicable, and (v) when used in the
plural, the Class A Indenture Trustee, the Class B Indenture
Trustee and the Class C Indenture Trustee, collectively.
<PAGE>
"Independent", when used with respect to an engineer,
Appraiser or other expert, means an engineer, Appraiser or other
expert who (i) is in fact independent, (ii) does not have any
direct financial interest or any material indirect financial
interest in the Company or any Affiliate of the Company, and
(iii) is not connected with the Company or any Affiliate of the
Company as an officer, employee, promoter, underwriter, trustee,
partner, director or Person performing similar functions.
"Initial Aggregate Appraisal Value" means the aggregate of
each Initial Appraised Value.
"Initial Appraised Value" means for each Aircraft the value
set forth opposite such Aircraft as follows:
<TABLE>
<CAPTION>
Aircraft Initial Appraised Value
-------- -----------------------
<S> <C>
N625VJ $47,710,000
N626AU 47,920,000
N627AU 48,330,000
N628AU 48,330,000
N629AU 48,740,000
N630AU 48,750,000
N631AU 49,170,000
N632AU 49,380,000
N633AU 49,790,000
</TABLE>
"Insurance Amount" means, at any time of determination, the
sum of (i) the Pro Rata Amount plus (ii) the amount of interest
to accrue on the Pro Rata Amount as of the next scheduled Payment
Date.
"Institutional Accredited Investor" means an institutional
investor that is an "accredited investor" within the meaning set
forth in Rule 501(a)(1), (2), (3) or (7) under the Securities
Act.
"Interest Advance" if used in any Liquidity Facility has the
meaning assigned to such term in such Liquidity Facility and if
used in any other Basic Document has the meaning assigned to such
term in Section 3.6(a) of the Collateral Agreement.
<PAGE>
"Investment Banker" means an independent investment banking
institution of national standing appointed by the Company.
"Investment Earnings" means investment earnings on funds on
deposit in the Cash Collateral Account net of losses and
investment expenses of the Collateral Agent in making such
investments.
"Lien" means any mortgage, pledge, lien, charge,
encumbrance, lease, exercise of rights, security interest or
claim.
"Liquidity Agreement" means, (i) when used in the singular,
the Class A Liquidity Agreement, the Class B Liquidity Agreement
or the Class C Liquidity Agreement, as applicable, and (ii) when
used in the plural, the Class A Liquidity Agreement, the Class B
Liquidity Agreement and the Class C Liquidity Agreement,
collectively.
"Liquidity Facility" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Liquidity Facility,
(ii) when used in the Class B Liquidity Agreement, the Class B
Liquidity Facility, (iii) when used in the Class C Liquidity
Agreement, the Class C Liquidity Facility, (iv) when used in the
other Basic Documents, the Class A Liquidity Facility, the Class
B Liquidity Facility or the Class C Liquidity Facility, as
applicable, and (v) when used in the plural, the Class A
Liquidity Facility, the Class B Liquidity Facility and the Class
C Liquidity Facility, collectively.
"Liquidity Facility Notice of Termination" with respect to
any Liquidity Facility has the meaning assigned to such term in
such Liquidity Facility.
"Liquidity Facility Termination Date" with respect to any
Liquidity Facility has the meaning assigned to such term in such
Liquidity Facility.
"Liquidity Fee" with respect to any Liquidity Facility has
the meaning assigned to such term in Section 2.03 of the
Liquidity Agreement relating to such Liquidity Facility.
"Liquidity Obligations" has the meaning given to such term
in the applicable Liquidity Agreement.
<PAGE>
"Liquidity Provider" means, at any time, (i) when used in
the Class A Liquidity Agreement, the Class A Liquidity Provider,
(ii) when used in the Class B Liquidity Agreement, the Class B
Liquidity Provider, (iii) when used in the Class C Liquidity
Agreement, the Class C Liquidity Provider, (iv) when used in all
other Basic Documents, the Class A Liquidity Provider, the Class
B Liquidity Provider or the Class C Liquidity Provider, as
applicable, and (v) when used in the plural, the Class A
Liquidity Provider, the Class B Liquidity Provider and the Class
C Liquidity Provider, collectively.
"Liquidity Provider Information" with respect to any
Liquidity Agreement has the meaning assigned to such term in
Section 7.05(a) of such Liquidity Agreement.
"LP Incumbency Certificate" has the meaning assigned to such
term in Section 2.6(b) of the Collateral Agreement.
"LP Representatives" has the meaning assigned to such term
in Section 2.6(d) of the Collateral Agreement.
"Majority in Interest" means, as of any date of the
determination thereof, (i) with respect to the Class A
Noteholders, the holders of more than 50% in aggregate unpaid
principal amount of all Class A Notes Outstanding as of such
date, (ii) with respect to the Class B Noteholders, the holders
of more than 50% in aggregate unpaid principal amount of all
Class B Notes Outstanding as of such date and (iii) with respect
to the Class C Noteholders, the holders of more than 50% in
aggregate unpaid principal amount of all Class C Notes
Outstanding as of such date. For purposes of the foregoing, with
respect to the Notes issued and authenticated under each
Indenture, the proviso contained in the definition of
"Outstanding" shall apply.
"Make Whole Premium" means, with respect to the redemption
of any Note, the amount which the Investment Banker determines as
of the third Business Day prior to the applicable Redemption Date
to be the amount by which (i) the aggregate unpaid principal
amount of, plus all accrued but unpaid interest on, such Note is
exceeded by (ii) the sum of the present values of all the
remaining scheduled payments of principal and interest from the
applicable Redemption Date to the Final Scheduled Payment Date of
such Note, computed by discounting such payments on a semi-annual
basis on each Payment Date at a rate equal to the Treasury Rate,
based on a 360 day year of twelve 30-day months; provided that,
with respect to the Class A Notes, Class B Notes and Class C
Notes, the Make Whole Premium will equal zero on and after the
Original Average Life Date.
<PAGE>
"Manufacturer" means The Boeing Company, a Delaware
corporation and its successors and assigns.
"Manufacturer's Consent" means the Consent and Agreement of
the Manufacturer relating to certain rights under the Purchase
Agreement assigned to the Collateral Agent as security under the
Granting Clauses of this Indenture.
"Maturity Date" means, (i) with respect to the Class A
Notes, October 15, 2009; (ii) with respect to the Class B Notes,
October 15, 2009; and (iii) with respect to the Class C Notes,
October 15, 2009.
"Minimum Sale Price" means, with respect to any Aircraft at
any time, the lesser of (i) 75% of the Appraised Value of such
Aircraft based upon the most recent Appraisal and (ii) the
product of (a) the Secured Obligations and (b) the quotient of
(A) the Initial Appraised Value for such Aircraft and (B) the
Initial Aggregate Appraised Value (excluding any Aircraft no
longer subject to the Lien of the Collateral Agreement).
"Moody's" means Moody's Investors Service, Inc.
"Non-Controlling Parties" means the Class B Indenture
Trustee, the Class C Indenture Trustee, the Class A Liquidity
Provider, the Class B Liquidity Provider and the Class C
Liquidity Provider at such times as any of such Persons shall not
be the Controlling Party in accordance with Section 2.7(b) of the
Collateral Agreement.
"Non-Excluded Taxes" with respect to any Liquidity Agreement
shall have the meaning set forth in Section 3.03 of such
Liquidity Agreement.
"Non-Extension Advance" (i) when used in any Liquidity
Facility has the meaning assigned to such term in the applicable
Liquidity Agreement and (ii) when used in any other Basic
Document has the meaning assigned to such term in 3.6(d) of the
Collateral Agreement.
"Non-U.S. Person" means a Person who is not a "U.S. Person"
as defined in Regulation S.
<PAGE>
"Note Interest Carryover Amount" for the Notes of any Class
means, with respect to any Payment Date (the "Current Payment
Date"), the sum of (i) any unpaid interest accrued on such Notes
during the semi-annual period ending on the immediately preceding
Payment Date (the "Past Payment Date"), plus (ii) the unpaid Note
Interest Carryover Amount as of the Past Payment Date, in each of
clause (i) and (ii), after giving effect to the payments on the
Past Payment Date in accordance with Article II or III of the
Collateral Agreement.
"Note Principal Carryover Amount" for the Notes of any Class
means, with respect to any Payment Date, the sum of (i) any
unpaid principal on such Notes expected to be paid on the
immediately preceding Payment Date and (ii) the unpaid Note
Principal Carryover Amount as of such preceding Payment Date, in
each of clause (i) and (ii), after giving effect to the payments
on such preceding Payment Date in accordance with Article II or
III of the Collateral Agreement.
"Note Register" with respect to any Indenture has the
meaning assigned to such term in Section 2.12 of such Indenture.
"Note Registrar" with respect to each Class of Notes issued
and authenticated under the Applicable Indenture, means the
registrar maintained and appointed for such Class pursuant to
Section 2.12 of such Applicable Indenture.
"Note Termination Date" means the Class A Note Termination
Date, the Class B Note Termination Date or the Class C Note
Termination Date, as applicable.
"Noteholder" means, at any time, (i) for purposes of the
Class A Indenture, any holder of one or more Class A Notes issued
and authenticated under the Class A Indenture, (ii) for purposes
of the Class B Indenture, any holder of one or more Class B Notes
issued and authenticated under the Class B Indenture, (iii) for
purposes of the Class C Indenture, any holder of one or more
Class C Notes issued and authenticated under the Class C
Indenture and (iv) for purposes of any other Basic Document, any
holder of one or more of the Class A Notes, the Class B Notes or
the Class C Notes. Reference to a holder of a given Class of
Note shall mean such Person in such capacity and not in its
capacity as the holder of any other Class of Note.
<PAGE>
"Notes" means, at any time, (i) for purposes of the Class A
Indenture, the Class A Notes, (ii) for purposes of the Class B
Indenture, the Class B Notes, (iii) for purposes of the Class C
Indenture, the Class C Notes and (iv) for purposes of the other
Basic Documents and this Appendix A, the Class A Notes, the Class
B Notes and the Class C Notes, collectively, and in each case,
any such Notes issued in exchange therefor or replacement thereof
pursuant to the terms of the Applicable Indenture.
"Notice of Acceleration" means (i) notice from the Class A
Indenture Trustee that the Class A Notes have become Accelerated
in accordance with the terms of the Class A Indenture, (ii)
notice from the Class B Indenture Trustee that the Class B Notes
have become Accelerated in accordance with the terms of the Class
B Indenture and (iii) notice from the Class C Indenture Trustee
that the Class C Notes have become Accelerated in accordance with
the terms of the Class C Indenture.
"Offering Memorandum" means any offering memorandum or other
document used in connection with the offering and sale of the
Notes (including, without limitation, the Offering Memorandum
dated February 9, 1996 relating to the Notes).
"Officer's Certificate" of any Person means a certification
signed by a Responsible Officer of such Person.
"Offshore Global Note" means, when used in any Indenture,
the Permanent Offshore Global Note and the Temporary Offshore
Global Note issued thereunder, collectively.
"Offshore Notes Exchange Date" means March 27, 1996.
"Offshore Physical Notes" means, when used in any Indenture,
the Notes issued pursuant to Section 2.07 of such Indenture in
exchange for interests in an Offshore Global Note.
"Opinion of Counsel" means, unless otherwise provided in a
Basic Document, a written opinion of legal counsel who may be
such counsel as may be designated by the Person on whose behalf
such opinion is being given whether or not such counsel is an
employee of such Person, and who shall be reasonably acceptable
to the recipient or recipients of such opinion.
"Optional Note Redemption" has the meaning assigned to such
term in Section 2.5(d) of the Collateral Agreement.
"Original Average Life Date" means (i) with respect to the
Class A Notes, February 20, 2006, (ii) with respect to the Class
B Notes, February 20, 2006 and (iii) with respect to the Class C
Notes, February 20, 2006.
<PAGE>
"Other Committed Facility" means, at any time, (i) when used
in the Class A Liquidity Agreement, the Class B Committed
Facility and the Class C Committed Facility, (ii) when used in
the Class B Liquidity Agreement, the Class A Committed Facility
and the Class C Committed Facility and (iii) when used in the
Class C Liquidity Agreement, the Class A Committed Facility and
the Class B Committed Facility.
"Other Liquidity Agreements" means, at any time, (i) when
used in the Class A Liquidity Agreement, the Class B Liquidity
Agreement and the Class C Liquidity Agreement, (ii) when used in
the Class B Liquidity Agreement, the Class A Liquidity Agreement
and the Class C Liquidity Agreement and (iii) when used in the
Class C Liquidity Agreement, the Class A Liquidity Agreement and
the Class B Liquidity Agreement.
"Other Liquidity Providers" means, at any time, (i) when
used in the Class A Liquidity Agreement, the Class B Liquidity
Provider and the Class C Liquidity Provider, (ii) when used in
the Class B Liquidity Agreement, the Class A Liquidity Provider
and the Class C Liquidity Provider and (iii) when used in the
Class C Liquidity Agreement, the Class A Liquidity Provider and
the Class B Liquidity Provider.
"Outstanding" means, with respect to the Notes issued and
authenticated under each Indenture, all Notes theretofore
authenticated and delivered under such Indenture except:
(i) Notes theretofore canceled by the Note Registrar
under such Indenture or delivered to the Indenture Trustee
or the Note Registrar, under such Indenture for
cancellation;
(ii) Notes in exchange for or in lieu of which other
Notes have been authenticated and delivered pursuant to such
Indenture, unless proof satisfactory to the applicable
Indenture Trustee is presented that such Notes or are held
by a bona fide purchaser; and
(iii) Notes or portions thereof the payment for
which money in the necessary amount has been theretofore
deposited with the applicable Indenture Trustee or any
Paying Agent in trust for the Noteholders (provided,
however, that if such Notes or are to be redeemed, notice of
such redemption has been duly given pursuant to the
applicable Indenture or provision therefor, satisfactory to
the Indenture Trustee);
<PAGE>
provided, however, that in determining whether the holders of the
requisite Outstanding Amount of the Notes have given any request,
demand, authorization, direction, notice, consent or waiver
hereunder or under any Basic Document, Notes owned by the Company
or any Affiliate of the Company shall be disregarded and deemed
not to be Outstanding, except that, in determining whether the
applicable Indenture Trustee shall be protected in relying upon
any such request, demand, authorization, direction, notice,
consent or waiver, only Notes that the applicable Indenture
Trustee knows to be so owned shall be so disregarded. Notes so
owned that have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the
applicable Indenture Trustee the pledgee's right so to act with
respect to such Notes and that the pledgee is not the Company or
any Affiliate of the Company.
"Outstanding Amount" means the aggregate principal amount of
all Notes Outstanding at the date of determination.
"Parts" means all appliances, parts, instruments,
appurtenances, accessories, furnishings and other equipment of
whatever nature other than complete Engines or engines, which are
from time to time incorporated or installed in or attached to the
Airframe or any Engine, exclusive of any items leased by the
Company from third parties and not required in the navigation of
the Aircraft.
"Paying Agent" with respect to the Class A Notes, the Class
B Notes and the Class C Notes issued and authenticated under the
Applicable Indenture, means the paying agent maintained and
appointed for such Notes pursuant to Section 2.12 of such
Applicable Indenture, who shall initially be the Applicable
Indenture Trustee with respect to such Class.
"Payment Dates" means April 15, 1996 and thereafter each
succeeding April 15 and October 15 of each year; provided,
however, if any such day shall not be a Business Day, the Payment
Date shall be the next succeeding Business Day.
"Permanent Offshore Global Note" means, when used in any
Indenture, the permanent offshore global note in registered form
substantially in the form of Exhibit B to such Indenture.
"Permitted Air Carrier" means (i) a Certificated Aircraft
Carrier or (ii) a foreign air carrier duly organized and
operating pursuant to a license issued under the laws of its home
country, which country is a party to the Convention on the
International Recognition of Rights in Aircraft (Geneva 1948) or
is listed on Exhibit B to the Collateral Agreement.
<PAGE>
"Permitted Liens" has the meaning given such term in Section
4.1 of the Collateral Agreement.
"Person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, trustee,
unincorporated organization or government or any agency or
political subdivision thereof.
"Physical Notes" means, when used in any Indenture, the
Offshore Physical Notes and the U.S. Physical Notes issued
thereunder, collectively.
"Post Petition Interest", with respect to any Secured
Obligation, means interest on such Secured Obligation accruing
after the commencement of any proceeding of the type referred to
in Section 6.01(vi), 6.01(vii) or 6.01(viii) of each Indenture.
"Potential Collateral Access Event" means (i) for purposes
of the Class A Indenture, any occurrence that is, or with notice
or the lapse of time or both would become, a Collateral Access
Event under the Class A Indenture, (ii) for purposes of the Class
B Indenture, any occurrence that is or with notice or lapse of
time or both would become, a Collateral Access Event under the
Class B Indenture and (iii) for purposes of the Class C
Indenture, any occurrence that is, or with notice or the lapse of
time or both would become, a Collateral Access Event under the
Class C Indenture.
"Private Placement Legend" means the restrictive legend set
forth at Section 2.02(a) of the Applicable Indenture.
"Pro Rata Amount" shall mean, at any time of determination
for any Aircraft, the product of (i) the aggregate outstanding
principal amount of the Notes and (ii) the quotient of (A) the
Initial Appraised Value for such Aircraft and (B) the Initial
Aggregate Appraised Value (excluding any Aircraft no longer
subject to the Lien of the Collateral Agreement).
"Proceeding" means any suit in equity, action at law or
other judicial or administrative proceeding.
"Purchase Agreement" means the agreement dated February 9,
1996, among the Purchasers and the Company.
"Purchasers" means Morgan Stanley & Co. Incorporated,
Salomon Brothers Inc, Chase Securities, Inc. and Lehman Brothers
Inc.
<PAGE>
"QIB" and "Qualified Institutional Buyer" mean a qualified
institutional buyer as defined in Rule 144A under the Securities
Act.
"Rating Agencies" means, collectively, at any time, each
nationally recognized rating agency which shall have been
requested by the Company to rate the Notes and which shall then
be rating the Notes. The initial Rating Agencies will be Moody's
and S&P.
"Ratings Confirmation" means, with respect to any action
proposed to be taken, a written confirmation from each of the
Rating Agencies that such action would not result in (i) a
reduction of the rating for any Class of Notes below the then
current rating for such Class of Notes or (ii) a withdrawal or
suspension of the rating of any Class of Notes.
"Record Date" means, with respect to a Payment Date, the
close of business on the last day of the immediately preceding
calendar month. With respect to any Redemption Date, the Record
Date means the close of business on the day immediately preceding
such Redemption Date.
"Redemption Date" means the date specified by the Collateral
Agent pursuant to Section 2.5 of the Collateral Agreement or the
date specified pursuant to Section 3.02 of the Applicable
Indenture.
"Redemption Price" for any Note of any Class means (i) in
the case of a redemption of the Notes pursuant to Section 3.01(a)
of the Applicable Indenture, an amount equal to the unpaid
principal amount of such Note multiplied by a fraction (x) the
numerator of which will be equal to the principal amount of the
Notes of such Class to be redeemed and (y) the denominator of
which will be equal to the aggregate outstanding principal amount
of the Notes of such Class and (ii) in the case of a redemption
of the Notes pursuant to Section 3.01(b) of the Applicable
Indenture, the outstanding principal amount of such Note.
"Registered Note" means, when used in any Indenture, any
securities issued by the Company under the Indenture of equal
outstanding principal amount as and containing terms identical to
the Notes (except that (i) interest thereon shall accrue from the
last date on which interest was paid on the Notes or, if no such
interest has been paid, from the Closing Date, (ii) the transfer
restrictions thereon shall be modified or eliminated, as
appropriate, and (iii) certain provisions relating to an increase
in the stated rate of interest thereon shall be eliminated), to
be offered to Noteholders in exchange for such Notes pursuant to
the Exchange Offer.
<PAGE>
"Registered Physical Notes" means, when used in any
Indenture, the Notes issued pursuant to Section 2.07 of such
Indenture in exchange for interests in a Registered Global Note.
"Registration Event" has the meaning given to such term in
the Registration Rights Agreement.
"Registration Rights Agreement" means the Registration
Rights Agreement dated as of February 15, 1996 by and between the
Company and the Purchasers as such agreement may be amended,
modified or supplemented from time to time.
"Registration Statement" means any registration statement of
the Company, together with all amendments and supplements
thereto, that covers any of the Registered Notes pursuant to the
provisions of the Registration Rights Agreement.
"Regulation S" means Regulation S under the Securities Act
and any successor regulation thereto.
"Remaining Weighted Average Life" means on a given date with
respect to any Note, the number of days which is equal to the
quotient obtained by dividing (a) the sum of each of the products
obtained by multiplying (i) the amount of each then remaining
scheduled payment of principal of such Note by (ii) the number of
days from and including such determination date to but excluding
the date on which such payment of principal is scheduled to be
made by (b) the then outstanding principal amount of such Note.
"Replacement Aircraft" means any Aircraft of which a
Replacement Airframe is part.
"Replacement Airframe" means a Boeing 757-200 series
aircraft (except Engines or engines from time to time installed
thereon), or a more advanced model, having a value and utility at
least equal to, and in as good operating condition and as
airworthy as, the Airframe it is replacing, assuming such
Airframe was in the condition required by the terms of this
Indenture, which shall have been made subject to the Lien of the
Collateral Agreement pursuant to Section 4.5 thereof.
"Replacement Closing Date" has the meaning given such term
in Section 4.5(c) of the Collateral Agreement.
<PAGE>
"Replacement Engine" means a Rolls-Royce or engine of the
same model engine (or engine of the same or another manufacturer
of a comparable or an improved model and suitable for
installation and use on the applicable Airframe) which has a
value and utility at least equal to the Engine which it is
replacing, assuming such Engine was of the value and utility
required by the terms of the Collateral Agreement and which shall
have been made subject to the Lien of the Collateral Agreement
pursuant to Section 4.4 or 4.5 thereof.
"Replacement Liquidity Facility" means, for any Liquidity
Facility, an irrevocable facility issued by a Replacement
Liquidity Provider in substantially the form of such Liquidity
Facility which is being replaced, including reinstatement
provisions, or in such other form (including a letter of credit
facility) as shall permit the Rating Agencies to confirm in
writing their respective then ratings of the Securities, in a
face amount equal to the Required Amount for such Liquidity
Facility.
"Replacement Liquidity Provider" means a Person having
unsecured short-term debt ratings issued by both Ratings Agencies
which are not lower than the Trigger Rating.
"Required Amount" with respect to each Liquidity Facility
means, for any day, the sum of the aggregate amount of interest
at the Stated Interest Rate for the Class of Notes covered
thereby that would be payable on such Class of Notes on each of
the three Payment Dates immediately following such day or, if
such day is a Payment Date, on such day and the succeeding two
Payment Dates, in each case calculated on the basis of the
principal of such Class of Notes Outstanding on such date and
without regard to expected future payments of principal on such
Class of Notes.
"Responsible Officer" means (i) with respect to the
Collateral Agent and each of the Indenture Trustees, any officer
in the corporate trust administration department of the
Collateral Agent or such Indenture Trustee or any other officer
customarily performing functions similar to those performed by
the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of his
knowledge of and familiarly with a particular subject, (ii) with
respect to the Company, the Chairman, the Vice Chairman, the
President, any Vice President, Treasurer, Assistant Treasurer,
Secretary or Assistant Secretary and (iii) with respect to each
Liquidity Provider, the Treasurer, any Assistant Treasurer,
Secretary or Assistant Secretary.
<PAGE>
"Restricted Global Note" means, when used in any Indenture,
the restricted global note in registered form substantially in
the form of Exhibit B to such Indenture.
"Rule 144A" means Rule 144A under the Securities Act and any
successor rule thereto.
"Rule 904" means Rule 904 under the Securities Act and any
successor rule thereto.
"S&P" means Standard & Poor's Rating Group, a division of
McGraw-Hill Inc.
"Secured Obligations" has the meaning assigned to such term
in the granting clause of the Collateral Agreement.
"Secured Parties" means, collectively, the Collateral Agent,
the Indenture Trustees, the Noteholders and the Liquidity
Providers.
"Securities Act" means the United States Securities Act of
1933, as amended from time to time and any successor thereto.
"Stated Expiration Date" if used in any Liquidity Facility
has the meaning assigned to such term in such Liquidity Facility
and if used in any other Basic Document has the meaning assigned
to such term in Section 3.6(d) of the Collateral Agreement.
"Stated Interest Rate" means (i) with respect to the Class A
Notes, 6.76%, (ii) with respect to the Class B Notes, 7.50% and
(iii) with respect to the Class C Notes, 8.93% (in each case, the
"Original Rate"); provided that, in the event that a Registration
Event does not occur on or prior to August 16, 1996, each such
Original Rate shall be temporarily increased by 0.5%, such
increase to be effective as of October 15, 1996 until the next
Payment Date; provided that in the event a Registration Event has
not occurred on or prior to February 16, 1997, such increase
shall be permanent (including with respect to the Registered
Notes).
"Taxes" means any and all fees (including, without
limitation, license, documentation and registration fees), taxes
(including, without limitation, income, gross receipts, sales,
rental, use, turnover, value added, property (tangible and
intangible), excise and stamp taxes), licenses, levies, imposts,
duties, recording charges or fees, charges, assessments or
withholdings of any nature whatsoever, together with any
assessments, penalties, fines, additions to tax and interest
thereof (each, individually, a "Tax").
<PAGE>
"Temporary Offshore Global Note" means, when used in any
Indenture, the temporary global Note issued thereunder and
offered and sold in offshore transactions in reliance on
Regulation S pursuant to such Indenture.
"Transferee" shall have the meaning assigned to such term in
Section 7.08(b) of each Liquidity Agreement.
"Treasury Regulations" means regulations, including proposed
or temporary regulations, promulgated under the Code. References
herein to specific provisions of proposed or temporary
regulations shall include analogous provisions of final Treasury
Regulations or other successor Treasury Regulations.
"Treasury Rate" means, with respect to any Notes, a per
annum rate (expressed as a semi-annual equivalent and as a
decimal and, in the case of United States Treasury bills,
converted to a bond equivalent yield), determined to be the per
annum rate equal to the semi-annual yield to maturity for United
States Treasury securities maturing on the Average Life Date of
such Notes, as determined by interpolation between the most
recent weekly average yields to maturity for two series of United
States Treasury securities trading in public securities markets,
(A) one maturing as close as possible to, but earlier than, the
Average Life Date of such Note and (B) the other maturing as
close as possible to, but later than, the Average Life Date of
such Note, in each case as published in the most recent H.15(519)
(or, if a weekly average yield to maturity for United States
Treasury securities maturing on the Average Life Date of such
Note is reported in the most recent H.15(519), as published in
H.15(519)). H.15(519) means the weekly statistical release
designated as such, or any successor publication, published by
the Board of Governors of the Federal Reserve System. The most
recent H.15(519) means the latest H.15(519) which is published
prior to the close of business on the third Business Day
preceding the scheduled Redemption Date.
"Trigger Rating" means in the case of any Liquidity
Provider, a short term unsecured debt rating of A-1 by S&P or P-1
by Moody's.
"Trust Indenture Act" means the Trust Indenture Act of 1939,
as amended (15 U.S.C. Sections 77aaa-77bbb), as in effect on the date
hereof (unless otherwise specifically provided herein).
"Trustee Incumbency Certificate" has the meaning assigned to
such term in Section 2.6(a) of the Collateral Agreement.
<PAGE>
"Trustee Representatives" has the meaning assigned to such
term in Section 2.6(a) of the Collateral Agreement.
"U.S. Global Note" means, when used in any Indenture, the
permanent global Note in registered form that will initially be
issued for the Notes sold in reliance on Rule 144A pursuant to
such Indenture.
"U.S. Government Obligations" means securities that are
direct obligations of the United States of America or agencies or
instrumentalities thereof for the payment of which the full faith
and credit of the United States of America is pledged which are
not callable or redeemable.
"U.S. Physical Notes" means, when used in any Indenture, the
Notes offered and sold in reliance on Regulation D under the
Securities Act issued in the form of permanent certificated notes
in registered form in substantially the form set forth in Exhibit
B of such Indenture.
"Warranty Bill of Sale" with respect to an Aircraft, means
the full warranty bill of sale executed by the Manufacturer in
favor of the Company and dated the date of delivery of such
Aircraft from the Manufacturer to the Company.
"WestLB" means Westdeutsche Landesbank Girozentrale, New
York Branch.
"Written Notice" from (i) each Indenture Trustee, or any
Liquidity Provider, means a written instrument executed by the
Designated Representative of such Person, and (ii) the Collateral
Agent means a written instrument executed by a Person designated
in the Certificate of Wilmington Trust Company delivered on the
Closing Date.
<PAGE>
EXHIBIT
A
REGISTERED
$_________________*
No. ______________
CUSIP
NO.
[Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the issuer or its agent for registration
of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC) - ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]**
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AND
REDEEMABLE AS SET FORTH HEREIN AND IN THE INDENTURE.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
USAIR ENHANCED EQUIPMENT NOTES
CLASS C 8.93% NOTES
USAir, Inc., a corporation organized and existing under the
laws of the State of Delaware (herein referred to as the
"Company"), for value received, hereby promises to pay to
____________________, or registered assigns, the principal sum of
____________________________ DOLLARS on _________________ (the
"Maturity Date"); provided that, subject to Section 2.09(a) of
the Indenture, the Company promises to pay on each Payment Date
prior to the Maturity Date an amount equal to the amount set
forth in Exhibit C to the Indenture (as such Exhibit C may be
revised in accordance with Section 2.10 of the Indenture)
opposite such Payment Date for the Class C Notes multiplied by a
fraction (i) the numerator of which shall be equal to the
outstanding principal amount of this Note and (ii) the
- -------------------------------
* This amount is subject to decrease or increase from time to
time pursuant to the Indenture governing this Note to give effect
to transfers, redemptions or exchanges up to the aggregate
principal amount set forth on the face hereof.
** Insert for each Global Note
A-1
<PAGE>
denominator of which shall be equal to the outstanding principal
amount of the Class C Notes, in each case, immediately before
such Payment Date. This Note will bear interest at the rate of
8.93% per annum until the principal hereof is paid in full. The
Company will pay, subject to Section 2.09(a) of the Indenture,
interest on the unpaid principal of this Note until the principal
of this Note is paid or made available for payment, on each
Payment Date, commencing on April 15, 1996. In the event that,
for any reason, either (i) the Exchange Offer is not consummated
or (ii) a Registration Statement is not declared effective (each,
a "Registration Event"), in either case, on or prior to August
16, 1996, the interest rate on the Notes shall be increased by
one-half of one percent per annum beginning October 15, 1996.
Following the occurrence of a Registration Event, commencing on
the next interest payment date thereafter relating to the Notes
(or, in the event of the occurrence of a Registration Event
following August 16, 1996, on April 15, 1997), the interest rate
on the Notes will be reduced to the original interest rate;
provided, however, that if a Registration Event has not occurred
on or prior to February 16, 1997, the interest rate on the Notes
shall remain on a permanent basis thereafter at the increased
level of one-half of one percent per annum over the original
interest rate on the Notes, and such increase will apply to the
Registered Notes, if any, issued thereafter. Interest on this
Note will accrue for each Payment Date from and including the
most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid,
from February 16, 1996. Interest will be computed on the basis
of a 360-day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on
the reverse hereof.
The principal of and interest on this Note are payable in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts. All payments made by the Company with respect to this
Note shall be applied in priority set forth in Section 2.09(c) of
the Indenture.
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by
manual signature, this Note shall not be entitled to any benefit
under the Indenture referred to on the reverse hereof, or be
valid or obligatory for any purpose.
A-2
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be signed, manually or in facsimile, by its Authorized
Officer.
USAIR, INC.
By: ____________________________
Name:
Title:
[remainder of page left blank intentionally]
A-3
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date:________________________
WILMINGTON TRUST COMPANY, not
in its Individual capacity but
solely as Indenture Trustee
By: __________________________
Authorized Signatory
A-4
<PAGE>
[REVERSE OF NOTE]
This Note is one of the Notes of a duly authorized issue of
Notes of the Company, designated as its Class C 8.93% Notes
(herein called the "Notes"), all issued under an Indenture dated
as of February 15, 1996 (such indenture, as supplemented or
amended, is herein called the "Indenture"), between the Company
and Wilmington Trust Company, as indenture trustee (the
"Indenture Trustee", which term includes any successor indenture
trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of
the Company, the Indenture Trustee and the Noteholders of the
Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the
Collateral Agreement.
The entire unpaid principal amount of the Notes may become
Accelerated on the date on which a Collateral Access Event shall
have occurred and be continuing and the Indenture Trustee or the
Noteholders holding the Notes representing not less than a
majority of the Outstanding Amount of the Notes have Accelerated
the Notes.
Any interest or principal payable on this Note in accordance
with Sections 2.09(a) and (b) of the Indenture on the applicable
Payment Date shall be made by check mailed to the Person in whose
name this Note (or one or more predecessor Notes) is registered
on the Note Register as of the close of business on each Record
Date, except that with respect to Notes registered on the Record
Date in the name of the nominee of the Depositary (initially,
such nominee to be Cede & Co.), payments will be made by wire
transfer in immediately available funds to the account designated
by such nominee. Such checks shall be mailed to the Person
entitled thereto at the address of such Person as it appears on
the Note Register as of the applicable Record Date without
requiring that this Note be submitted for notation of payment.
Any reduction in the principal amount of this Note (or any one or
more predecessor Notes) effected by any payments made on any
Payment Date shall be binding upon all future Noteholders of this
Note and of any Note issued upon the registration of transfer
hereof or in
A-5
<PAGE>
exchange hereof or in lieu hereof, whether or not noted hereon.
If funds are expected to be available, as provided in the
Indenture, for payment in full of the then remaining unpaid
principal amount of this Note on a Payment Date, then the
Indenture Trustee, in the name of and on behalf of the Company,
will notify the Person in whose name this Note is registered as
of the Record Date preceding such Payment Date by notice mailed
within five days of such Payment Date and the amount then due and
payable shall be payable only upon presentation and surrender of
this Note at the Indenture Trustee's Corporate Trust Office or at
the office of the Indenture Trustee's agent appointed for such
purposes located in The City of New York.
By acceptance of its Note, each Noteholder agrees that in
the event such Noteholder shall receive any payment or
distribution (whether in cash, securities or other property) on
or in respect of any obligation which it is not entitled to
receive hereunder or under the Collateral Agreement, it shall
hold any amount so received in trust for the benefit of any
Person having a higher priority of distribution pursuant to
Section 2.5, 3.2 or 3.3 of the Collateral Agreement and shall
promptly remit such payment or distribution to the Collateral
Agent for application as provided in the Collateral Agreement.
Each Note shall be mandatorily redeemed pursuant to Section
3.01(a) of the Indenture, in whole or ratably in part, at the
Redemption Price, together with accrued interest thereon until
the Redemption Date. At any other time, the Company may redeem
the Notes in whole or in part at the Redemption Price for such
Notes together with accrued interest thereon until the Redemption
Date, plus the Make Whole Premium for such Notes.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be
registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by
the Company pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the
Noteholder hereof or his attorney duly authorized in writing,
with such signature guaranteed, and such other documents as the
Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate
principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
A-6
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, covenants and agrees that (i) by accepting the
benefits of the Indenture that such Noteholder will not at any
time institute against the Company, or join in any institution
against the Company of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in
connection with any obligations relating to the Notes, the
Indenture or the Basic Documents and (ii) such Noteholder will
agree to treat the Notes as indebtedness of the Company. Once
such a proceeding has been instituted, the Indenture Trustee may
file appropriate proofs of claim.
Prior to the due presentment for registration of transfer of
this Note, the Company, the Indenture Trustee and any agent of
the Company or the Indenture Trustee may treat the Person in
whose name this Note (as of the day of determination or as of
such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Company, the Indenture
Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Noteholders under the Indenture at any time by the Company with
the consent of the Noteholders holding a majority of the
Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Noteholders of
Notes representing specified percentages of the Outstanding
Amount of the Notes, on behalf of the Noteholders of all the
Notes, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the
Noteholder of this Note (or any one or more predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all
future Noteholders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made
upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Noteholders of the Notes issued
thereunder.
A-7
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, agrees that it shall have no recourse against the
Indenture Trustee in its individual capacity for the payment of
any principal, interest or other amounts due with respect to this
Note and that all such recourse shall be against the Company
pursuant to the terms of the Indenture.
The term "Company" as used in this Note includes any
successor to the Company under the Indenture.
The Company is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of
the Indenture Trustee and the Noteholders of Notes under the
Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain
limitations therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder and thereunder shall be
determined in accordance with such laws.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Note at the times,
place, and rate, and in the coin or currency herein prescribed.
A-8
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder
hereby sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
____________________________________
_______________________________________________________________
_______________________________________________________________
Please print or typewrite name and address including zip code of
assignee
_______________________________________________________________
the within Note and all rights thereunder, hereby irrevocably
constituting and appointing
attorney to transfer said Note on the books of the Company with
full power of substitution in the premises.
A-9
<PAGE>
EXHIBIT B
REGISTERED
$___________________***
No. ______________
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS, EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT), (B) IT IS AN "INSTITUTIONAL
ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) or (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT
IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN
OFFSHORE TRANSACTION, (2) AGREES THAT IT WILL NOT,
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL
ISSUANCE OF THIS NOTE OR THE LAST DATE ON WHICH THIS
NOTE WAS HELD BY USAIR, INC. OR AN AFFILIATE OF USAIR,
INC., RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A)
TO USAIR, INC., OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C)
INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
APPLICABLE INDENTURE TRUSTEE A SIGNED LETTER CONTAINING
CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF
WHICH LETTER CAN BE OBTAINED FROM THE APPLICABLE
INDENTURE TRUSTEE) AND IF SUCH TRANSFER IS IN RESPECT
OF AN AGGREGATE VALUE OF NOTES AT THE TIME OF TRANSFER
OF LESS THAN $100,000, AN OPINION OF COUNSEL ACCEPTANCE
TO USAIR, INC. THAT SUCH TRANSFER IS IN COMPLIANCE THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN
OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER
THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, AND
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS
________________________________
*** This amount is subject to decrease or increase from time to
time pursuant to the Indenture governing this Note to give effect
to transfers, redemptions or exchanges up to the aggregate
principal amount set forth on the face hereof.
B-1
<PAGE>
NOTE IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS NOTE
WITHIN THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
OF THE NOTE OR THE LAST DATE ON WHICH THIS NOTE WAS HELD BY
USAIR, INC. OR AN AFFILIATE OF USAIR, INC., THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF
RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE APPLICABLE INDENTURE TRUSTEE. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE
APPLICABLE INDENTURE TRUSTEE AND USAIR, INC. SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS
EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN
A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION", "UNITED STATES" AND "U.S. PERSON" HAVE THE
MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES
ACT. THE INDENTURE CONTAINS A PROVISION REQUIRING THE
APPLICABLE INDENTURE TRUSTEE TO REFUSE TO REGISTER ANY
TRANSFER OF THIS NOTE IN VIOLATION OF THE FOREGOING
RESTRICTIONS.
SEE REVERSE FOR CERTAIN DEFINITIONS
CUSIP NO.
[Unless this Note is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the issuer or its agent for registration
of transfer, exchange or payment, and any Note issued is
registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by
an authorized representative of DTC) - ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has
an interest herein.]****
THE PRINCIPAL OF THIS NOTE IS PAYABLE IN INSTALLMENTS AND
REDEEMABLE AS SET FORTH HEREIN AND IN THE INDENTURE.
ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY
TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.
________________________
**** Insert for each Global Note.
B-2
<PAGE>
USAIR ENHANCED EQUIPMENT NOTES
CLASS C 8.93% NOTES
USAir, Inc., a corporation trust organized and existing
under the laws of the State of Delaware (herein referred to as
the "Company"), for value received, hereby promises to pay to
__________________,, or registered assigns, the principal sum of
__________________ DOLLARS on _________________ (the "Maturity
Date"); provided that, subject to Section 2.09(a) of the
Indenture, the Company promises to pay on each Payment Date prior
to the Maturity Date an amount equal to the amount set forth in
Exhibit C to the Indenture (as such Exhibit C may be revised in
accordance with Section 2.10 of the Indenture) opposite such
Payment Date for the Class C Notes multiplied by a fraction (i)
the numerator of which shall be equal to the outstanding
principal amount of this Note and (ii) the denominator of which
shall be equal to the outstanding principal amount of the Class C
Notes, in each case, immediately before such Payment Date. This
Note will bear interest at the rate of 8.93% per annum until the
principal hereof is paid in full. The Company will pay,
interest on the unpaid principal of this Note until the principal
of this Note is paid or made available for payment, on each
Payment Date, commencing on April 15, 1996. In the event that,
for any reason, either (i) the Exchange Offer is not consummated
or (ii) a Registration Statement is not declared effective (each,
a "Registration Event"), in either case, on or prior to August
16, 1996, the interest rate on the Notes shall be increased by
one-half of one percent per annum beginning October 15, 1996.
Following the occurrence of a Registration Event, commencing on
the next interest payment date thereafter relating to the Notes,
(or, in the event of the occurrence of a Registration Event
following August 16, 1996, on April 15, 1997) the interest rate
on the Notes will be reduced to the original interest rate;
provided, however, that if a Registration Event has not occurred
on or prior to February 16, 1997, the interest rate on the Notes
shall remain on a permanent basis thereafter at the increased
level of one-half of one percent per annum over the original
interest rate on the Notes, and such increase will apply to the
Registered Notes, if any, issued thereafter. Interest on this
Note will accrue for each Payment Date from and including the
most recent Payment Date on which interest has been paid to but
excluding such Payment Date or, if no interest has yet been paid,
from February 16, 1996. Interest will be computed on the basis
of a 360 day year of twelve 30-day months. Such principal of and
interest on this Note shall be paid in the manner specified on
the reverse hereof.
B-3
<PAGE>
The principal of and interest on this Note are payable in
such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private
debts. All payments made by the Company with respect to this
Note shall be applied in priority set forth in Section 2.09(c) of
the Indenture.
[Beneficial interests in this Note will be exchangeable for
beneficial interests in the Permanent Offshore Global Note in the
same aggregate principal amount on or after [________________]
upon certification that such beneficial interests in this Note
are owned by either non-U.S. persons or U.S. persons who
purchased such interests pursuant to an exemption from, or in
transactions not subject to, the registration requirements of the
Securities Act.]****
Reference is made to the further provisions of this Note set
forth on the reverse hereof, which shall have the same effect as
though fully set forth on the face of this Note.
Unless the certificate of authentication hereon has been
executed by the Indenture Trustee whose name appears below by
manual signature, this Note shall not be entitled to any benefit
under the Indenture referred to on the reverse hereof, or be
valid or obligatory for any purpose.
______________________________
***** Insert only for a Temporary Offshore Global Note.
B-4
<PAGE>
IN WITNESS WHEREOF, the Company has caused this instrument
to be signed, manually or in facsimile, by its Authorized
Officer.
USAIR, INC.
By: _____________________________
Name:
Title:
B-5
<PAGE>
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Notes designated above and referred to in
the within-mentioned Indenture.
Date:
WILMINGTON TRUST COMPANY, not in
its individual capacity solely as
Indenture Trustee
By:___________________________
Authorized Signatory
B-6
<PAGE>
[REVERSE OF NOTE]
This Note is one of the Notes of a duly authorized issue of
Notes of the Company, designated as its Class C 8.93% Notes
(herein called the "Notes"), all issued under an Indenture dated
as of February 15, 1996 (such indenture, as supplemented or
amended, is herein called the "Indenture"), between the Company
and Wilmington Trust Company, as indenture trustee (the
"Indenture Trustee", which term includes any successor indenture
trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a
statement of the respective rights and obligations thereunder of
the Company, the Indenture Trustee and the Noteholders of the
Notes. The Notes are subject to all terms of the Indenture. All
terms used in this Note that are defined in the Indenture, as
supplemented or amended, shall have the meanings assigned to them
in or pursuant to the Indenture, as so supplemented or amended.
The Notes are and will be equally and ratably secured by the
collateral pledged as security therefor as provided in the
Collateral Agreement.
The entire unpaid principal amount of the Notes may become
Accelerated on the date on which a Collateral Access Event shall
have occurred and be continuing and the Indenture Trustee or the
Noteholders holding the Notes representing not less than a
majority of the Outstanding Amount of the Notes have Accelerated
the Notes.
Any interest or principal, if any, payable on this Note in
accordance with Section 2.09(a) of the Indenture on the
applicable Payment Date shall be made by check mailed to the
Person in whose name this Note (or one or more predecessor Notes)
is registered on the Note Register as of the close of business on
each Record Date, except that with respect to Notes registered on
the Record Date in the name of the nominee of the Depositary
(initially, such nominee to be Cede & Co.), payments will be made
by wire transfer in immediately available funds to the account
designated by such nominee. Such checks shall be mailed to the
Person entitled thereto at the address of such Person as it
appears on the Note Register as of the applicable Record Date
without requiring that this Note be submitted for notation of
payment. Any reduction in the principal amount of this Note (or
any one or more predecessor Notes) effected by any payments made
on any Payment Date shall be binding upon all future Noteholders
of this Note and of any Note issued upon the registration of
transfer hereof or in exchange hereof or in lieu hereof, whether
or not noted hereon. If funds
B-7
<PAGE>
are expected to be available, as provided in the Indenture, for
payment in full of the then remaining unpaid principal amount of
this Note on a Payment Date, then the Indenture Trustee, in the
name of and on behalf of the Company, will notify the Person in
whose name this Note is registered as of the Record Date
preceding such Payment Date by notice mailed within five days of
such Payment Date and the amount then due and payable shall be
payable only upon presentation and surrender of this Note at the
Indenture Trustee's Corporate Trust Office or at the office of
the Indenture Trustee's agent appointed for such purposes located
in The City of New York.
By acceptance of its Note, each Noteholder agrees that in
the event such Noteholder shall receive any payment or
distribution (whether in cash, securities or other property) on
or in respect of any obligation which it is not entitled to
receive hereunder or under the Collateral Agreement, it shall
hold any amount so received in trust for the benefit of any
Person having a higher priority of distribution pursuant to
Section 2.5, 3.2 or 3.3 of the Collateral Agreement and shall
promptly remit such payment or distribution to the Collateral
Agent for application as provided in the Collateral Agreement.
Each Note shall be mandatorily redeemed pursuant to Section
3.01(a) of the Indenture, in whole or ratably in part, at the
Redemption Price, together with accrued interest thereon until
the Redemption Date. At any other time, the Company may redeem
the Notes in whole or in part at the Redemption Price for such
Notes together with accrued interest thereon until the Redemption
Date, plus the Make Whole Premium for such Notes.
As provided in the Indenture and subject to certain
limitations set forth therein, the transfer of this Note may be
registered on the Note Register upon surrender of this Note for
registration of transfer at the office or agency designated by
the Company pursuant to the Indenture, duly endorsed by, or
accompanied by a written instrument of transfer in form
satisfactory to the Indenture Trustee duly executed by, the
Noteholder hereof or his attorney duly authorized in writing,
with such signature guaranteed, and such other documents as the
Indenture Trustee may require, and thereupon one or more new
Notes of authorized denominations and in the same aggregate
principal amount will be issued to the designated transferee or
transferees. No service charge will be charged for any
registration of transfer or exchange of this Note, but the
transferor may be required to pay a sum sufficient to cover any
tax or other governmental charge that may be imposed in
connection with any such registration of transfer or exchange.
B-8
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, covenants and agrees that (i) by accepting the
benefits of the Indenture that such Noteholder will not at any
time institute against the Company, or join in any institution
against the Company of, any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceedings under any
United States Federal or state bankruptcy or similar law in
connection with any obligations relating to the Notes, the
Indenture or the Basic Documents and (ii) such Noteholder will
agree to treat the Notes as indebtedness of the Company. Once
such a proceeding has been instituted, the Indenture Trustee may
file appropriate proofs of claim.
Prior to the due presentment for registration of transfer of
this Note, the Company, the Indenture Trustee and any agent of
the Company or the Indenture Trustee may treat the Person in
whose name this Note (as of the day of determination or as of
such other date as may be specified in the Indenture) is
registered as the owner hereof for all purposes, whether or not
this Note be overdue, and neither the Company, the Indenture
Trustee nor any such agent shall be affected by notice to the
contrary.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the
rights and obligations of the Company and the rights of the
Noteholders under the Indenture at any time by the Company with
the consent of the Noteholders holding a majority of the
Outstanding Amount of all Notes at the time Outstanding. The
Indenture also contains provisions permitting the Noteholders of
Notes representing specified percentages of the Outstanding
Amount of the Notes, on behalf of the Noteholders of all the
Notes, to waive compliance by the Company with certain provisions
of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the
Noteholder of this Note (or any one or more predecessor Notes)
shall be conclusive and binding upon such Noteholder and upon all
future Noteholders of this Note and of any Note issued upon the
registration of transfer hereof or in exchange hereof or in lieu
hereof whether or not notation of such consent or waiver is made
upon this Note. The Indenture also permits the Indenture Trustee
to amend or waive certain terms and conditions set forth in the
Indenture without the consent of Noteholders of the Notes issued
thereunder.
B-9
<PAGE>
Each Noteholder or holder of a beneficial interest in a
Note, by acceptance of a Note or such beneficial interest,
respectively, agrees that it shall have no recourse against the
Indenture Trustee in its individual capacity for the payment of
any principal, interest or other amounts due with respect to this
Note and that all such recourse shall be against the Company
pursuant to the terms of the Indenture.
The term "Company" as used in this Note includes any
successor to the Company under the Indenture.
The Company is permitted by the Indenture, under certain
circumstances, to merge or consolidate, subject to the rights of
the Indenture Trustee and the Noteholders of Notes under the
Indenture.
The Notes are issuable only in registered form in
denominations as provided in the Indenture, subject to certain
limitations therein set forth.
This Note and the Indenture shall be construed in accordance
with the laws of the State of New York, without reference to its
conflict of law provisions, and the obligations, rights and
remedies of the parties hereunder and thereunder shall be
determined in accordance with such laws.
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional,
to pay the principal of and interest on this Note at the times,
place, and rate, and in the coin or currency herein prescribed.
B-10
<PAGE>
[FORM OF TRANSFER NOTICE]
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
- ----------------------------------
________________________________________________________________
________________________________________________________________
Please print or typewrite name and address including zip code of
assignee
________________________________________________________________
the within Note and all rights thereunder, hereby irrevocably
constituting and appointing
________________________________________________________________
attorney to transfer said Note on the books of the Company with
full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL NOTES
EXCEPT PERMANENT OFFSHORE GLOBAL NOTES AND OFFSHORE
PHYSICAL NOTES]
In connection with any transfer of this Note occurring prior
to the date which is three years after the later of the original
issuance of this Note or the last date on which this Note was
held by the Company or any affiliate of the Company the
undersigned confirms that without utilizing any general
solicitation or general advertising that:
[Check One]
-----------
[ ] (a) this Note is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
--
B-11
<PAGE>
[ ] (b) this Note is being transferred other than in accordance
with (a) above and documents are being furnished which comply
with the conditions of transfer set forth in this Note and the
Indenture.
If none of the foregoing boxes is checked, the Indenture Trustee
or other Note Registrar shall not be obligated to register this
Note in the name of any Person other than the Noteholder hereof
unless and until the conditions to any such transfer of
registration set forth herein and in Section 2.06 of the
Indenture shall have been satisfied.
Date: _____________________
___________________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of
the within-mentioned instrument in
every particular, without
alteration or any change
whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is
purchasing this Note for its own account or an account with
respect to which it exercises sole investment discretion and that
it and any such account is a "qualified institutional buyer"
within the meaning of Rule 144A under the Securities Act of 1933,
as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as the undersigned has
requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:______________________ _______________________________
NOTICE: To be executed by an
executive officer
B-12
<PAGE>
EXHIBIT C
Principal Payment Dates
and Amounts
Class C Notes
-------------
Payment Date Expected Principal Payment
------------ --------------------------
15 Apr-1996 $0
15 Oct-1996 1,708,305
15 Apr-1997 781,606
15 Oct-1997 781,606
15 Apr-1998 703,445
15 Oct-1998 703,445
15 Apr-1999 637,618
15 Oct-1999 637,618
15 Apr-2000 467,550
15 Oct-2000 467,550
15 Apr-2001 385,680
15 Oct-2001 767,189
15 Apr-2002 533,379
15 Oct-2002 398,208
15 Apr-2003 1,087,621
15 Oct-2003 619,851
15 Apr-2004 2,610,929
15 Oct-2004 1,516,265
15 Apr-2005 2,971,295
15 Oct-2005 3,288,113
15 Apr-2006 3,673,527
15 Oct-2006 4,183,106
15 Apr-2007 3,073,008
15 Oct-2007 4,392,704
15 Apr-2008 29,410,382
-------------
Total 65,800,000
=============
C-1
<PAGE>
EXHIBIT D
Form of Certificate for Unlegended Notes
----------------------------------------
___________, _______
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class C 8.93% Notes (the "Notes")
---------------------------------
Dear Sirs:
This letter relates to U.S. $___________________ principal
amount of Notes represented by a Note (the "Legended Note") which
bears a legend outlining restrictions upon transfer of such
Legended Note. Pursuant to Section 2.01 of the Indenture (the
"Indenture") dated as of February 15, 1996 relating to the Notes,
we hereby certify that we are (or we will hold such securities on
behalf of) a person outside the United States to whom the Notes
could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended.
Accordingly, you are hereby requested to exchange the legended
certificate for an unlegended certificate representing an
identical principal amount of Notes, all in the manner provided
for in the Indenture.
You and USAir, Inc. are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters
covered hereby. Terms used in this certificate have the meanings
set forth in Regulation S.
Very truly yours,
[Name of Noteholder]
By:_____________________________
Authorized Signature
D-1
<PAGE>
EXHIBIT E
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
- -----------------------------------------
_____________, ______
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class A 6.76% Notes (the "Notes")
---------------------------------
Dear Sirs:
In connection with our proposed purchase of $_____________
aggregate principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the
Securities is subject to certain restrictions and conditions
set forth in the Indenture dated as of February 15, 1996
relating to the Notes (the "Indenture") and the undersigned
agrees to be bound by, and not to resell, pledge or
otherwise transfer the Notes except in compliance with, such
restrictions and conditions and the Securities Act of 1933,
as amended (the "Securities Act").
2. We understand that the offer and sale of the Notes
have not been registered under the Securities Act, and that
the Notes may not be offered or sold except as permitted in
the following sentence. We agree, on our own behalf and on
behalf of any accounts for which we are acting as
hereinafter stated, that if we should sell any Note within
three years after the later of the original issuance of such
Note or the last date on which the Note is owned by USAir,
Inc. (the "Company") or an affiliate of the Company, we will
do so only (A) to the Company or any subsidiary thereof, (B)
in accordance with Rule 144A under the Securities Act to a
"qualified institutional buyer" (as defined therein), (C) to
an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes to you a signed
letter
E-1
<PAGE>
containing certain representations and agreements relating
to the restrictions on transfer of the Notes (a form of
which letter can be obtained from you) and, if such transfer
is in respect of Notes having an aggregate value at the time
of transfer of less than $100,000, an opinion of counsel
acceptable to the Company that such transfer is in
compliance with the Securities Act, (D) outside the United
States in accordance with Rule 904 of Regulation S under the
Securities Act, (E) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act,
or (F) pursuant to an effective registration statement under
the Securities Act, and we further agree to provide to any
person purchasing any of the Notes from us a notice advising
such purchaser that resales of the Notes are restricted as
stated herein.
3. We understand that, on any proposed resale of any
Notes, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as
you, and the Company may reasonably require to confirm that
the proposed sale complies with the foregoing restrictions.
We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D
under the Securities Act) and have such knowledge and
experience in financial and business matters as to be
capable of evaluating the merits and risks of our investment
in the Notes and we and any accounts for which we are acting
are each able to bear the economic risks of our or their
investment.
5. We are acquiring the Notes purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a
copy hereof to any interested party in any administrative or
legal proceedings or official inquiry with respect to the matters
covered hereby.
Very truly yours,
[Name of Transferee]
By:
Authorized Signature
E-2
<PAGE>
EXHIBIT F
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
___________, ____
Wilmington Trust Company
Rodney Square North
1110 North Market Street
Wilmington, DE 19890
Attention: Corporate Trust Administration
Re: USAir Enhanced Equipment Notes
Class C 8.93% Notes (the "Notes")
---------------------------------
Dear Sirs:
In connection with our proposed sale of
$_________________ aggregate principal amount of the Notes, we
confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as
amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in
the United States;
(2) at the time the buy order was originated, the
transferee was outside the United States or we and any
person acting on our behalf reasonably believed that the
transferee was outside the United States;
(3) no directed selling efforts have been made by us
in the United States in contravention of the requirements of
Rule 903(b) or Rule 904(b) of Regulation S, as applicable;
and
(4) the transaction is not part of a plan or scheme to
evade the registration requirements of the U.S. Securities
Act of 1933.
F-1
<PAGE>
You and the USAir, Inc. (the "Company") are entitled to rely
upon this letter and are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any
administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this
certificate have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
Authorized Signature
F-2
<PAGE>
EXHIBIT G
Form of
Opinion of Counsel for
Issuance of Registered Notes
----------------------------
1. The Registered Notes have been duly authorized and, when
executed, authenticated and delivered to the Noteholders in
exchange for the Notes and assuming due authentication by the
Indenture Trustee, will be (x) valid and binding obligations of
the Company enforceable against the Company in accordance with
their terms, except to the extent that enforceability thereof may
be limited by (A) bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights
generally and (B) general principles of equity (regardless of
whether enforcement is considered in a proceeding in equity or at
law) and (y) entitled to the benefits of the Indenture subject to
the terms thereof.
2. No consent, approval, authorization, license, order of, or
registration with, or the giving of notice to, any government,
governmental instrumentality, or court, domestic or foreign, or
other regulatory body or authority is required to be obtained by
the Company for performance by the Company of its obligations
under the Registered Notes, except such as have been obtained by
the date hereof and such as may be required by the securities or
blue sky laws of the various states in connection with the offer
and exchange of Notes for Registered Notes.
3. The issuance and delivery of the Registered Notes in
exchanged for the Notes and the performance by the Company of its
obligations under the Registered Notes will not contravene (i)
any provision of applicable law, (ii) the charter or by-laws of
the Company or (iii) to the knowledge of such counsel, any
judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having
jurisdiction over the Company or any of its properties.
4. Such counsel has reviewed evidence that the Registration
Statement relating to the Registered Notes has been declared
effective under the Securities Act of 1933, as amended and the
Indenture qualified under the Trust Indenture Act of 1939, as
amended.
The opinions set forth above are subject to the effect of,
and such counsel expresses no opinion as to the application of,
any applicable fraudulent conveyance, fraudulent transfer or
fraudulent obligation law.
Exhibit 5.7
<PAGE>
=================================================================
CLASS A LIQUIDITY AGREEMENT
Dated as of February 15, 1996
between
USAIR, INC.,
as Company,
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH,
as Liquidity Provider
and
WILMINGTON TRUST COMPANY,
as Collateral Agent
=================================================================
Relating to
$142,400,000 6.76% Class A Enhanced Equipment Notes
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS
Section 1.01. Certain Defined Terms........................ 1
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01. The Advances................................. 5
Section 2.02. Making the Advances.......................... 6
Section 2.03. Fees......................................... 8
Section 2.04. Reduction or Termination of the Commitment... 8
Section 2.05. Repayment of Advances; Compensation.......... 9
Section 2.06. Application of Provider Advances............. 9
Section 2.07. Book Entries................................. 9
Section 2.08. Renewal of the Commitment and Extension
of the Termination Date;
Non-extension Advance.................... 10
ARTICLE III.
OBLIGATIONS OF THE COMPANY
Section 3.01. Increased Costs.............................. 10
Section 3.02. Capital Adequacy............................. 11
Section 3.03. Payments Free of Deductions.................. 12
Section 3.04. Payments..................................... 12
Section 3.05. Computations................................. 13
Section 3.06. Payment on Non-Business Days................. 13
Section 3.07. Interest..................................... 13
Section 3.08. Security..................................... 14
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to Effectiveness........ 14
Section 4.02. Conditions Precedent to Borrowing............ 16
<PAGE>
ARTICLE V.
COVENANTS
Section 5.01. Affirmative Covenants of the Company......... 16
Section 5.02. Negative Covenants of the Company............ 17
Section 5.03. Covenants of the Liquidity Provider.......... 17
Section 5.04. Covenant of the Collateral Agent............. 17
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc.............................. 18
Section 6.02. Notices, Etc................................. 18
Section 6.03. No Waiver.................................... 19
Section 6.04. Further Assurances........................... 19
Section 6.05. Indemnification.............................. 19
Section 6.06. Liability of the Liquidity Provider.......... 20
Section 6.07. Costs, Expenses and Taxes.................... 21
Section 6.08. Binding Effect; Participations............... 22
Section 6.09. Severability................................. 23
Section 6.10. GOVERNING LAW................................ 23
Section 6.11. Execution in Counterparts.................... 23
Section 6.12. Entirety..................................... 23
Section 6.13. Headings..................................... 23
Section 6.14. LIQUIDITY PROVIDER'S OBLIGATION
TO MAKE ADVANCES......................... 23
Section 6.15. Exculpation of Collateral Agent.............. 23
EXHIBIT A Expected Reductions in Commitment
ANNEX I Interest Advance Notice of Borrowing
ANNEX II Downgrade Advance Notice of Borrowing
ANNEX III Non-extension Advance Notice of Borrowing
<PAGE>
CLASS A LIQUIDITY AGREEMENT
This CLASS A LIQUIDITY AGREEMENT, dated as of February 15,
1996 between USAIR, INC., a Delaware corporation (the "Company"),
WESTDEUTSCHE LANDESBANK GIROZENTRALE, a universal bank organized
under the laws of Germany, acting through its New York Branch
(the "Liquidity Provider"), and WILMINGTON TRUST COMPANY, a
Delaware banking corporation ("Wilmington Trust"), as Collateral
Agent (the "Collateral Agent").
W I T N E S S E T H :
WHEREAS, pursuant to the Class A Indenture (such term and
all other capitalized terms used in these recitals having the
meanings set forth or referred to in Section 1.01 hereof), the
Company is issuing the Class A Notes;
WHEREAS, the Company, in order to support the timely payment
of a portion of the interest on the Class A Notes in accordance
with their terms, has requested the Liquidity Provider to enter
into this Agreement, providing for the Collateral Agent to
request that advances be made hereunder; and
WHEREAS, concurrently herewith the Company, the Liquidity
Provider, the Collateral Agent and each Indenture Trustee have
entered into the Collateral Agency Agreement pursuant to which,
among other things, the Company has granted a security interest
in the Collateral to the Collateral Agent to secure the Secured
Obligations of the Company, including, without limitation, the
Liquidity Obligations hereunder.
NOW, THEREFORE, in consideration of the premises, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this
Agreement and unless otherwise expressly indicated, or unless the
context clearly requires otherwise, all capitalized terms used
herein and not defined in this Section 1.01 shall have the
respective meanings set forth in Appendix A to the Collateral
Agency Agreement dated as of February 15, 1996 among the Company,
<PAGE>
Wilmington Trust as Class A Indenture Trustee, Class B Indenture
Trustee and Class C Indenture Trustee, the Liquidity Provider as
Class A Liquidity Provider, Class B Liquidity Provider and
Class C Liquidity Provider and Wilmington Trust as Collateral
Agent. For purposes of this Agreement, the following terms shall
have the meanings indicated:
"Acceleration Advance" means an advance made pursuant to
Section 2.02(e).
"Advance" means an Interest Advance, a Provider Advance or
an Acceleration Advance.
"Applicable Margin" means two percent per annum.
"Available Liquidity Commitment" means, from time to time,
the Commitment minus the amount of all Advances outstanding at
the time.
"Borrowing" means the making of Advances.
"Business Day" means (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and
any day which shall be in New York, New York or Wilmington,
Delaware a legal holiday or a day on which banking institutions
are authorized or required by law or other government action to
be closed and (ii) with respect to all notices and determinations
in connection with, and payments of principal of and interest on,
LIBOR Advances, any day which is a Business Day described in
clause (i) above and which is also a day for trading by and
between banks in the London interbank Eurodollar market.
"Commitment" means as of any date of determination, the
Required Amount in respect of the Class A Notes on such date.
The amount of the Commitment, assuming that all expected
principal payments are made and no redemptions of the Class A
Notes occur, is set forth in Exhibit A.
"Cost of Funds" means a rate of interest equal to the cost
to the Liquidity Provider, as reasonably determined by it, of
funding itself during the relevant period of a Cost of Funds
Advance.
"Cost of Funds Advance" means any advance made pursuant to
this Agreement as to which there is interest payable computed
with reference to the Cost of Funds.
"Downgrade Advance" means an advance made pursuant to
Section 2.02(c).
<PAGE>
"Effective Date" has the meaning specified in Section 4.01.
"Interest Advance" means, as the case may be, (i) an advance
made pursuant to Section 2.02(b) or (ii), with effect from the
date of such application, that portion of a Provider Advance
applied by the Collateral Agent from the Cash Collateral Account
in accordance with the Collateral Agency Agreement to the payment
of interest on the Class A Notes.
"Interest Period" means:
(i) in the case of a LIBOR Advance, a period of one,
two, three or six months, as the case may be, as more
particularly specified in this Agreement, provided that if any
Interest Period relating to a LIBOR Advance begins on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month. If
any Interest Period would otherwise expire on a day which is not
a Business Day, such Interest Period shall expire on the
succeeding Business Day, provided that if such Interest Period
relates to a LIBOR Advance, and if such succeeding Business Day
would occur in the succeeding calendar month, such Interest
Period shall expire on the preceding Business Day. Each Interest
Period shall commence on the date of the relevant Advance or the
last day of the preceding Interest Period. No Interest Period
for a LIBOR Advance shall extend beyond the next Payment Date,
and unless otherwise agreed by the Liquidity Provider no Advance
will be a LIBOR Advance if such advance is made or renewed less
than one month prior to a Payment Date; and
(ii) in the case of a Cost of Funds Advance, such period
as may be agreed between the Borrower and the Liquidity Provider,
provided that if no such agreement is made, such Interest Period
shall be successive periods of one day.
"Lending Office" means the lending office of the Liquidity
Provider, presently located at 1211 Avenue of the Americas, New
York, New York, or such other lending office as the Liquidity
Provider from time to time shall notify the Company (with a copy
to the Collateral Agent) as its lending office hereunder.
"LIBOR" means, for any Interest Period, an interest rate per
annum equal to the rate per annum obtained by dividing (i) (A)
the rate per annum at which deposits in U.S. dollars for a period
equal to such Interest Period are offered in the London interbank
<PAGE>
market as set forth on Telerate page 3750 at 11:00 A.M. (London
time) two Business Days before the first day of such Interest
Period, or if such page on such service ceases to display such
information, such other page as may replace it on that service
for the purpose of displaying such information (the "Telerate
Rate"), or (B) if the Telerate Rate is unavailable for any
reason, the rate of interest at which deposits in U.S. dollars
for a similar period are offered in the London interbank market
as quoted on Reuters Screen page "LIBOR" at 11:00 A.M. (London
time) two Business Days before the first day of such Interest
Period, or if such page on such screen ceases to display such
information, such other page as may replace it on that screen for
the purpose of displaying such information, by (ii) a percentage
equal to 100% minus the Eurodollar Reserve Percentage (as defined
below) for such period, rounded upward to the nearest multiple of
1/16 of 1% per annum if such rate is not such a multiple. If at
least two such offered rates appear on the Telerate page 3750 or
the Reuters Screen page "LIBOR", as applicable, LIBOR shall be
the arithmetic mean of such offered rates. The "Eurodollar
Reserve Percentage" for any period means the reserve percentage
applicable during such period under regulations issued from time
to time by the Board of Governors of the Federal Reserve System
(or, if more than one such percentage shall be so applicable, the
daily average of such percentages for those days in such period
during which any such percentage shall be so applicable) for
determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve
requirement) for the Liquidity Provider in respect of liabilities
or assets consisting of or including Eurocurrency liabilities (as
that term is defined in Regulation D of the Board of Governors of
the Federal Reserve System as in effect from time to time) having
a term equal to such Interest Period.
"LIBOR Advance" means any advance made pursuant to this
Agreement as to which there is interest payable computed with
reference to LIBOR, except, unless otherwise agreed by the
Company and the Liquidity Provider, any Downgrade or
Non-Extension Advance.
"Liquidity Obligations" means all obligations of the Company
to the Liquidity Provider under this Agreement, including,
without limitation, obligations to pay fees, to repay advances,
to pay interest and to pay indemnities, compensation costs and
expenses.
"Non-extension Advance" means an advance made pursuant to
Section 2.02(d) hereof.
<PAGE>
"Notice of Borrowing" has the meaning specified in Section
2.02(f).
"Other Liquidity Agreements" means the Class B Liquidity
Agreement and the Class C Liquidity Agreement, each among the
parties hereto and dated as of the date hereof.
"Provider Advance" means a Downgrade Advance or a
Non-extension Advance.
"Termination Date" means February 14, 1997 or such later
date to which the termination of the Commitment may be extended
pursuant to the terms hereof.
"Unused Commitment" means at any time of determination an
amount equal to (i) the Commitment at such time less (ii) the
aggregate amount of all Advances outstanding at such time.
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01. The Advances. The Liquidity Provider agrees,
on the terms and conditions hereinafter set forth, to make
Advances from time to time on any Business Day during the period
from the Effective Date until 5:00 p.m. New York time on the
Termination Date in an aggregate amount not to exceed at any time
outstanding the Commitment. Within the limits of the Commitment,
the amount of Advances made and reimbursed hereunder will be
available for future Advances.
Section 2.02. Making the Advances. (a) The Company hereby
irrevocably appoints the Collateral Agent as its attorney-in-fact
with full authority in the place and stead of the Company and in
the name of the Company or otherwise, from time to time in the
Collateral Agent's discretion, to complete and deliver from time
to time one or more Notices of Borrowing (as defined herein) and
direct payment of the proceeds of any Borrowing hereunder and to
take action in its discretion in furtherance thereof.
(b) Interest Advances shall be (i) made in one or more
Borrowings by delivery to the Liquidity Provider of one or more
written and completed Notices of Borrowing in substantially the
form of Annex I, signed by a person purporting to be an
authorized signatory of the Collateral Agent or (ii) deemed made
upon the withdrawal of funds from the Cash Collateral Account as
provided in the second sentence of Section 2.06 in an amount not
<PAGE>
exceeding the lesser of (x) the semi-annual installment of
interest on the Class A Notes which has become due and is unpaid
and (y) the Unused Commitment at the time of such Advance. Each
Interest Advance shall bear interest at the Cost of Funds plus
the Applicable Margin and shall be for successive Interest
Periods of one day; provided that the Company may, on not less
than three Business Days' prior notice, request that such Advance
be for an Interest Period of one, two or three months and that
such Advance be a LIBOR Advance, in which case such Advance shall
be for the requested Interest Period and shall bear interest at
LIBOR plus the Applicable Margin.
(c) A Downgrade Advance shall be made in a single Borrowing
by delivery to the Liquidity Provider of a written and completed
Notice of Borrowing in substantially the form of Annex II, signed
by a person purporting to be an authorized signatory of the
Collateral Agent, in an amount equal to the Unused Commitment at
such time and shall be used to fund the Cash Collateral Account
in accordance with Section 3.6(c) of the Collateral Agency
Agreement. Prior to the Acceleration of the Class A Notes, each
Downgrade Advance, to the extent not applied as an Interest
Advance in accordance with Section 2.06, shall bear interest at a
rate equal to the greater of (i) a per annum rate equal to the
weighted daily average of one-month LIBOR during the period such
Advance (or portion thereof) is on deposit in the Cash Collateral
Account and (ii) the Investment Earnings on the portion of such
Advance not so applied as an Interest Advance (such Investment
Earnings to be made available to the Liquidity Provider from time
to time in accordance with the third sentence of Section 3.6(f)
of the Collateral Agency Agreement), such rate of interest to be
notified to the Company by the Liquidity Provider in accordance
with Section 3.07(d).
(d) A Non-extension Advance shall be made in a single
Borrowing by delivery to the Liquidity Provider of a written and
completed Notice of Borrowing in substantially the form of
Annex III, signed by a person purporting to be an authorized
signatory of the Collateral Agent, in an amount equal to the
Unused Commitment at such time and shall be used to fund the Cash
Collateral Account in accordance with Section 3.6(d) of the
Collateral Agency Agreement. Prior to the Acceleration of the
Class A Notes, each Non-Extension Advance, to the extent not
applied as an Interest Advance in accordance with Section 2.06,
shall bear interest at a rate equal to the greater of (i) a per
annum rate equal to the weighted daily average of one-month LIBOR
during the period such Advance (or portion thereof) is on deposit
in the Cash Collateral Account and (ii) the Investment Earnings
<PAGE>
on the portion of such Advance not so applied as an Interest
Advance (such Investment Earnings to be made available to the
Liquidity Provider from time to time in accordance with the third
sentence of Section 3.6(f) of the Collateral Agency Agreement),
such rate of interest to be notified to the Company by the
Liquidity Provider in accordance with Section 3.07(d).
(e) An Acceleration Advance shall be made by the Liquidity
Provider, without the necessity for delivery of a Notice of
Borrowing, concurrently with the Acceleration of the Class A
Notes and shall be funded by the Liquidity Provider by wire
transfer of immediately available funds to the Collateral Agent
for deposit in the Cash Collateral Account. The Acceleration
Advance shall be in the amount of the Unused Commitment, and,
unless otherwise agreed by the Liquidity Provider and the
Company, shall bear interest at the Cost of Funds Rate plus the
Applicable Margin and shall be for successive Interest Periods of
one day.
(f) Except as provided in Section 2.02(e), each Borrowing
shall be made on notice given by the Collateral Agent to the
Liquidity Provider not later than 10:30 a.m. (New York City time)
(i) on the third Business Day prior to the proposed Borrowing, if
such Borrowing is a LIBOR Advance, or (ii) on the Business Day of
such Borrowing, if such Borrowing is a Cost of Funds Advance.
Each such notice of a Borrowing (a "Notice of Borrowing") shall
be in writing in substantially the form required by the
applicable provision of this Section 2.02. Upon satisfaction of
the conditions precedent set forth in Section 4.02 with respect
to a requested Borrowing, the Liquidity Provider shall, before
11:00 a.m. (New York City time), if a LIBOR Advance, or 2:00 p.m.
(New York City time), if a Cost of Funds Advance, on the date of
such Borrowing, make available by wire transfer of immediately
available funds the amount of such Borrowing to the Collateral
Agent at its office in Wilmington, Delaware (for credit to
account number 36022-0) or to such other account as is specified
in the relevant Notice of Borrowing. Each Notice of Borrowing
shall be irrevocable and binding on the Company.
(g) Upon the making of any Advance requested pursuant to a
Notice of Borrowing in accordance with the Collateral Agent's
payment instructions, the Liquidity Provider shall be fully
discharged of its obligation hereunder with respect to such
Notice of Borrowing, and the Liquidity Provider shall not
thereafter be obligated to make any further Advances hereunder in
respect of such Notice of Borrowing, to the Collateral Agent or
to any other person (including the Company, the holder of any
Class A Note or the Class A Indenture Trustee) who may have made,
or who makes, to the Collateral Agent, the Class A Indenture
Trustee or the Company a demand for payment with respect to any
<PAGE>
Class A Note. By paying to the Collateral Agent proceeds of
Advances requested by the Collateral Agent in accordance with the
provisions of this Agreement, the Liquidity Provider makes no
representation as to, and assumes no responsibility for, the
correctness or sufficiency for any purpose of the amount of the
Advances so made and requested.
Section 2.03. Fees. In consideration of the Commitment
provided hereby, the Company agrees to pay:
(i) on the Effective Date directly to the Liquidity
Provider a one-time fee of .40 of 1% of the Commitment; provided,
however, that if the Commitment is increased as of October 15,
1996 as described in the definition of such term in Section 1.01,
the Company shall pay on such date directly to the Liquidity
Provider an amount in adjustment of the one-time fee equal to .40
of 1% of $1,068,000; and
(ii) thereafter to the Collateral Agent for distribution to
the Liquidity Provider a fee (the "Liquidity Fee"), payable in
arrears on each Payment Date subsequent to the Effective Date and
prior to the Termination Date and on the Termination Date,
computed on a daily basis at the rate of .50 of 1% per annum on
the Unused Commitment from time to time.
Section 2.04. Reduction or Termination of the Commitment.
(a) The Commitment is subject to reduction as follows:
(i) unless the Collateral Agent shall have notified the
Liquidity Provider otherwise in a Written Notice promptly after
any such date, on each date on which a payment of principal is
expected to be made in respect of the Class A Notes on a date set
forth on Exhibit A under the heading "Payment Dates", the amount
of the Commitment shall automatically be reduced, as of such
Payment Date, to the amount set opposite such date on Exhibit A;
and
(ii) upon any payment of principal of the Class A Notes
under the Class A Indenture other than due to an expected payment
referred to in the preceding subparagraph (i), the Collateral
Agent shall promptly notify the Liquidity Provider, and the
Collateral Agent and the Liquidity Provider shall promptly agree
on a revised Exhibit A setting forth the relevant Commitment.
(b) Upon the making of any Provider Advance or the
occurrence of the Termination Date, the Commitment shall
automatically terminate, and no further Borrowing hereunder may
be requested.
<PAGE>
Section 2.05. Repayment of Advances; Compensation. (a)
Each Advance hereunder shall be due and payable by the Company
when made notwithstanding that any such Advance may be for an
Interest Period of more than one day and that repayment thereof
prior to the expiration of such Interest Period may require
payments by the Company pursuant to Section 2.05(b); provided,
however, that until the Acceleration of the Class A Notes, no
Provider Advance shall be due and payable by the Company until,
and then only to the extent of, the application of the funds in
the Cash Collateral Account as Interest Advances. Upon
Acceleration of the Class A Notes, all Provider Advances, whether
or not so applied as Interest Advances, shall become immediately
due and payable by the Company and shall thereupon bear interest
as applicable to Acceleration Advances pursuant to
Section 2.02(e).
(b) The Company shall compensate the Liquidity Provider,
upon its written request (which request shall set forth the basis
for requesting such compensation and shall, absent manifest
error, be final and conclusive and binding on all the parties
hereto), for all reasonable losses, expenses and liabilities, but
not with respect to the Applicable Margin (including, without
limitation, any loss, expense or liability incurred by reason of
the liquidation or reemployment of deposits or other funds
required by the Liquidity Provider to fund its LIBOR Advances)
which such Liquidity Provider may sustain if (i) for any reason a
Borrowing of, or conversion from or into, a LIBOR Advance does
not occur on a date specified therefor, or (ii) any repayment or
prepayment (including any prepayment made by application of funds
in accordance with the Collateral Agency Agreement) or conversion
of any LIBOR Advance occurs on a date which is not the last day
of an Interest Period.
Section 2.06. Application of Provider Advances. Amounts
paid in respect of a Provider Advance shall be deposited in the
Cash Collateral Account, invested and withdrawn from the Cash
Collateral Account as set forth in Sections 2.2 and 3.6(f) of the
Collateral Agency Agreement. Amounts withdrawn from the Cash
Collateral Account for the purpose of paying interest on the
Class A Notes in accordance with Section 3.6(f)(i) of the
Collateral Agency Agreement shall thereupon be deemed, as of the
date of such withdrawal, Interest Advances for all purposes of
this Agreement.
<PAGE>
Section 2.07. Book Entries. The Liquidity Provider shall
maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Company resulting
from Advances made from time to time and the amounts of principal
and interest payable hereunder and paid from time to time in
respect thereof; provided, however, that the failure by the
Liquidity Provider to maintain such account or accounts shall not
affect the obligations of the Company in respect of Advances. In
any legal action or proceeding in respect of this Agreement, the
entries made in such account or accounts shall, in the absence of
manifest error or the failure by the Liquidity Provider to
maintain such account or accounts, be prima facie evidence of the
existence and amounts of the obligations of the Company therein
recorded.
Section 2.08. Renewal of the Commitment and Extension of
the Termination Date; Non-extension Advance. The Termination
Date may be extended for periods of 364 days after the
then-effective Termination Date (unless this Agreement is earlier
terminated in accordance with its terms) upon (i) request by the
Collateral Agent by Written Notice, at least 60 days prior to the
then-effective Termination Date, which notice the Collateral
Agent hereby agrees to give no later than 60 days prior to each
Termination Date until the Class A Notes are paid in full or the
Commitment terminates, and (ii) the Liquidity Provider's
agreement to so extend the Termination Date as advised by Written
Notice to the Collateral Agent that the Termination Date shall be
so extended. If the Liquidity Provider fails to so extend the
Termination Date on or before the 30th day preceding the
Termination Date, the Collateral Agent shall demand a
Non-extension Advance in accordance with Section 3.6(d)(i) of the
Collateral Agency Agreement, following the making of which
Non-extension Advance the Commitment shall terminate.
ARTICLE III.
OBLIGATIONS OF THE COMPANY
Section 3.01. Increased Costs. If the Liquidity Provider
shall determine that any change after the Effective Date in any
law or regulation or in the interpretation thereof by any court
or administrative or governmental authority charged with the
administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement
against or assets held by, or deposits in or for the account of,
or loans made by, the Liquidity Provider, or (ii) impose on the
Liquidity Provider any other condition regarding this Agreement
and (b) the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to the Liquidity
<PAGE>
Provider of issuing or maintaining its Commitment, or funding or
maintaining Interest Advances (which increase in cost shall be
determined by the Liquidity Provider's reasonable allocation of
the aggregate of such cost increases resulting from such event),
then, upon demand by the Liquidity Provider, the Company shall
pay, or cause to be paid, to the Liquidity Provider, from time to
time as specified by the Liquidity Provider additional amounts
which shall be sufficient to compensate the Liquidity Provider
for such increased cost; provided, however, that before making
any such demand, the Liquidity Provider agrees to use reasonable
efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Lending Office
if the making of such a designation would avoid the need for, or
reduce the amount of, such increased cost and would not, in the
reasonable judgment of the Liquidity Provider, be otherwise
disadvantageous to the Liquidity Provider. A certificate as to
such increased cost incurred by the Liquidity Provider as a
result of any event mentioned in clause (i) or (ii) above,
prepared in reasonable detail and in accordance with this Section
3.01, submitted by the Liquidity Provider to the Company, shall
be prima facie evidence of the amount thereof. The Liquidity
Provider agrees to give the Company notice of any event referred
to in this Section 3.01 which may have the effect of causing the
Liquidity Provider to incur an increased cost referred to in this
Section 3.01 promptly after an appropriate officer of the
Liquidity Provider becomes aware of such event; provided,
however, that if the Liquidity Provider fails to give such notice
30 days after it obtains or reasonably should have obtained
knowledge with respect to such an event, the Liquidity Provider
shall, with respect to amounts payable pursuant to this Section
3.01 resulting from such event, be entitled to payment under this
Section for amounts incurred only from and after the date 30 days
prior to the date that such Liquidity Provider does give such
notice.
Section 3.02. Capital Adequacy. If the Liquidity Provider
shall determine that the adoption after the Effective Date of any
applicable law, rule or regulation regarding capital adequacy, or
any change therein, or any change after the Effective Date in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Liquidity Provider with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency (excluding
requirements of the Federal Deposit Insurance Corporation and
excluding implementation at the Federal level of the Basle Accord
(to the extent contemplated by current interpretation (as of the
<PAGE>
date hereof) of regulations in respect of the Final Risk-Based
Capital Guidelines of the Board of Governors of the Federal
Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225,
Appendix A) and the Final Risk-Based Capital Guidelines of the
Office of the Comptroller of the Currency (12 CFR Part 3,
Appendix A))), has the effect of reducing the rate of return on
the Liquidity Provider's capital as a consequence of its
commitment hereunder, its issuance or maintenance of its
Commitment, its funding Interest Advances or maintaining
outstanding Interest Advances to a level below that which the
Liquidity Provider could have achieved but for such adoption,
change or compliance (taking into consideration the Liquidity
Provider's policies with respect to capital adequacy) by an
amount deemed by the Liquidity Provider to be material, then,
upon demand by the Liquidity Provider, the Company shall pay to
the Liquidity Provider, from time to time as specified by the
Liquidity Provider amounts which shall be sufficient to
compensate the Liquidity Provider for such reduction in respect
of its commitment hereunder, its issuance or maintenance of its
Commitment, its funding Interest Advances or maintaining
outstanding Interest Advances; provided, however, that before
making any such demand, the Liquidity Provider agrees to use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Lending
Office if the making of such a designation would avoid the need
for, or reduce the amount of, such increased cost and would not,
in the reasonable judgment of the Liquidity Provider be otherwise
disadvantageous to the Liquidity Provider. A certificate as to
such additional amount describing the event which has the effect
of reducing the rate of return on the Liquidity Provider's
capital, prepared in reasonable detail and in accordance with
this Section 3.02, submitted by the Liquidity Provider to the
Company, shall be prima facie evidence of the amount thereof.
The Liquidity Provider agrees to give the Company notice of any
event referred to in this Section 3.02 which may have the effect
of reducing the rate of return on the Liquidity Provider's
capital promptly after an appropriate officer of the Liquidity
Provider becomes aware of such event; provided, however, that if
the Liquidity Provider fails to give such notice 30 days after it
obtains or reasonably should have obtained knowledge with respect
to such an event, the Liquidity Provider shall, with respect to
amounts payable pursuant to this Section 3.02 resulting from such
event, be entitled to payment under this Section for amounts
incurred only from and after the date 30 days prior to the date
that such Liquidity Provider does give such notice. For the
purposes of this Section 3.02, "Basle Accord" shall mean the
proposals for a risk-based capital framework described by the
Basle Committee on Banking Regulations and Supervisory Practices
<PAGE>
in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as modified
and supplemented and in effect from time to time.
Section 3.03. Payments Free of Deductions. All payments
made by the Company under this Agreement shall be made free and
clear of, and without reduction for or on account of, any present
or future stamp or other taxes, levies, imposts, duties, charges,
fees, deductions, withholdings, restrictions or conditions of any
nature whatsoever now or hereafter imposed, levied, collected,
withheld or assessed by the United States (or by any political
subdivision or taxing authority thereof or therein) excluding
income, franchise, capital, business or withholding taxes (gross
or net) now or hereafter imposed on such payments or the
Liquidity Provider (such non-excluded taxes being referred to
herein, collectively, as "Non-excluded Taxes" and, individually,
as a "Non-excluded Tax"). If any Non-excluded Taxes are required
to be withheld from any amounts payable to the Liquidity Provider
under this Agreement, the amounts so payable to the Liquidity
Provider shall be increased to the extent necessary to yield to
the Liquidity Provider (after payment of all Non-excluded Taxes)
interest or any other such amounts payable under this Agreement
at the rates or in the amounts specified in this Agreement.
Whenever any Non-excluded Tax is payable by the Company, as
promptly as possible thereafter the Company shall send the
Liquidity Provider an original official receipt, if available,
showing payment thereof. The Liquidity Provider agrees to use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its
Lending Office if the making of such a change would avoid the
need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable
judgment of the Liquidity Provider, be otherwise disadvantageous
to the Liquidity Provider. From time to time upon the reasonable
request of the Company, the Liquidity Provider agrees to provide
to the Company two original Internal Revenue Service Forms 1001
or 4224, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that the
Liquidity Provider is exempt from or entitled to a reduced rate
of United States withholding tax on payments pursuant to this
Agreement.
Section 3.04. Payments. The Company shall make or cause to
be made each payment under this Agreement to the Collateral Agent
for payment to the Liquidity Provider not later than 2:00 P.M.
(New York City time) on the day when due, in lawful money of the
United States of America, by wire transfer of immediately
<PAGE>
available funds to the account of Westdeutsche Landesbank
Girozentrale, New York Branch, at The Chase Manhattan Bank, One
Chase Manhattan Plaza, New York, New York (Account No.
920-1-060663, reference USAir). The Company shall make or cause
to be made all payments hereunder from an office or payment
facility within the United States of America. The Company
hereby authorizes the Liquidity Provider, and the Liquidity
Provider hereby agrees, if and to the extent payment is not made
when due hereunder, to apply any moneys received from the
Collateral Agent pursuant to the Collateral Agency Agreement
against any amount then owing hereunder, whether for principal,
interest, fees, commissions, expenses or otherwise.
Section 3.05. Computations. All computations of interest
hereunder at LIBOR shall be made on the basis of a year of 360
days, and all other computations of interest and fees hereunder
shall be made on the basis of a year of 365 days, in each case
for the actual number of days elapsed (including the first day
but excluding the last day).
Section 3.06. Payment on Non-Business Days. Whenever any
payment to be made hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next
Business Day (and if so made, shall be deemed to have been made
when due), and such extension of time shall in such case be
included in the computation of the payment of interest due
hereunder.
Section 3.07. Interest; Application of Payments. (a)
Except as provided in Section 2.02(c) and (d), the Company shall
pay interest on the unpaid principal amount of each Advance at
the rate provided herein. Interest on any LIBOR Advance not paid
at the end of the relevant Interest Period shall be capitalized
and added to the principal amount thereof in succeeding periods.
(b) All payments received by the Liquidity Provider
hereunder shall be applied first to all amounts due hereunder not
described in second, third and fourth below, second to accrued
interest on all Advances, whether or not any Interest Period has
ended, third, to compensation in accordance with Section 2.05(b)
and fourth, to reduction of the principal of all Advances then
due and payable by the Company, in each case ratably.
(c) In each case interest shall be payable in arrears on
the date of each payment of any amount due hereunder, on each
Payment Date and on the Termination Date (in each case excluding
the date of payment); provided, however, if at any time the
otherwise applicable interest rate as set forth in this Section
<PAGE>
3.07 shall exceed the maximum rate permitted by applicable law,
then any subsequent reduction in such interest rate will not
reduce the rate of interest payable pursuant to this Section 3.07
below the maximum rate permitted by applicable law until the
total amount of interest accrued equals the amount of interest
that would have accrued if such otherwise applicable interest
rate as set forth in this Section 3.07 had at all times been in
effect.
(d) The rate and amount of interest payable in accordance
with the last sentence of each of Sections 2.02(c) and 2.02(d)
shall be calculated by the Liquidity Provider and notified to the
Company and the Collateral Agent in a Written Notice delivered to
the Company in a timely manner.
Section 3.08. Security. Under and pursuant to the
Collateral Agency Agreement, the Company has pledged and granted
to the Collateral Agent to secure the prompt payment of the
Secured Obligations, including the Liquidity Obligations, for the
security and benefit of the Liquidity Provider, the Other
Liquidity Providers, the Noteholders and the Indenture Trustees,
a first priority lien on, pledge of and security interest in the
Collateral.
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to Effectiveness. This
Agreement shall become effective on and as of the first date (the
"Effective Date") on which the following conditions precedent
have been satisfied:
(a) the Liquidity Provider shall have received on or
before February 16, 1996 each of the following, each dated
such date (except for those documents delivered pursuant to
paragraphs (v) and (vii) of this Section 4.01(a)), and each
in form and substance satisfactory to the Liquidity
Provider:
(i) This Agreement duly executed on behalf of the
Company and the Collateral Agent.
(ii) The Collateral Agency Agreement duly executed
on behalf of each of the parties thereto.
<PAGE>
(iii) Counterparts (or certified copies
thereof) of each of the Basic Documents (other than
this Agreement and the Collateral Agency Agreement)
which, when taken together, bear the signatures of all
of the respective parties thereto and which are in full
force and effect in accordance with their respective
terms.
(iv) A copy of the Offering Memorandum and a
specimen copy of the Class A Notes.
(v) Evidence that, on the Effective Date, the
Class A Notes, the Class B Notes and the Class C Notes
will receive long-term credit ratings from Moody's of
not lower than A2, Baa1 and Ba2, respectively, and from
S&P of not lower than A+, A- and BBB-, respectively.
(vi) An executed or certified copy of each
document, instrument, certificate and opinion delivered
pursuant to the Class A Indenture, the Collateral
Agency Agreement and the other Basic Documents
(together with, in the case of each such opinion, other
than the opinion of counsel for the Purchasers, a
letter from the counsel rendering such opinion to the
effect that the Liquidity Provider is entitled to rely
on such opinion as if it were addressed to the
Liquidity Provider).
(vii) Evidence that there shall have been made
and shall be in full force and effect, all filings,
recordings and/or registrations, and there shall have
been given or taken any notice or other similar action
as may be reasonably necessary or, to the extent
reasonably requested by the Liquidity Provider,
reasonably advisable, in order to establish, perfect,
protect and preserve the right, title and interest,
remedies, powers, privileges, liens and security
interests of, or for the benefit of, the Liquidity
Provider created by the Basic Documents.
(viii) Such other documents, instruments,
opinions and approvals (and, if requested by the
Liquidity Provider, certified duplicates or executed
copies thereof) as the Liquidity Provider shall have
reasonably requested.
<PAGE>
(b) The following statements shall be true and shall
be deemed to have been represented by the Company as being
true on and as of the Effective Date:
(i) The representations and warranties of the
Company contained in the Purchase Agreement are true
and correct on and as of the Effective Date as though
made on and as of such Date; and
(ii) No event has occurred and is continuing, or
would result from the entering into of this Agreement
or the making of any Advance, which constitutes a
Collateral Access Event.
(c) The Liquidity Provider shall have received payment
in full of all fees and other sums required to be paid to or
for the account of the Liquidity Provider on or prior to the
Effective Date.
(d) All conditions precedent to the issuance of the
Notes under the Indentures shall have been or shall
concurrently be satisfied, all conditions precedent to the
effectiveness of the Other Liquidity Facilities shall have
been or shall concurrently be satisfied, all conditions
precedent to the purchase of the Notes by the Purchasers
under the Purchase Agreement shall have been or shall
concurrently be satisfied (unless any of such conditions
precedent under the Purchase Agreement shall have been
waived by the Purchasers) and the Company shall have
received or shall concurrently receive the proceeds of the
sale of such Notes.
(e) The perfection and priority of the lien granted
under the Collateral Agency Agreement shall be satisfactory
in all respects to the Liquidity Provider.
Section 4.02. Conditions Precedent to Borrowing. The
obligation of the Liquidity Provider to make an Advance on the
occasion of each Borrowing shall be subject to the conditions
precedent that the Effective Date shall have occurred, on the
date of such Borrowing the Collateral Agent, to the extent
required by the terms of this Agreement, shall have delivered a
Notice of Borrowing and the Liquidity Provider shall find that
the Notice of Borrowing conforms to the terms and conditions of
this Agreement and has been completed as may be required by the
relevant form of the Notice of Borrowing for the type of Advances
requested.
<PAGE>
ARTICLE V.
COVENANTS
Section 5.01. Affirmative Covenants of the Company. So
long as any Advance shall remain unpaid or the Liquidity Provider
shall have any Commitment hereunder or the Company shall have any
obligation to pay any amount to the Liquidity Provider hereunder,
the Company will, unless the Liquidity Provider shall otherwise
consent in writing:
(a) Performance of This and Other Agreements. Punctually
pay or cause to be paid all amounts payable under this Agreement
and the other Basic Documents and observe and perform in all
material respects the conditions, covenants and requirements of
this Agreement and the other Basic Documents.
(b) Reporting Requirements. Furnish, or cause to be
furnished, to the Liquidity Provider, with reasonable promptness
copies of all information furnished to the Class A Indenture
Trustee or the Class A Noteholders pursuant to Section 4.04 of
the Class A Indenture as originally executed and such other
information and data with respect to the Collateral and the
transactions completed by the Basic Documents as from time to
time may be reasonably requested by the Liquidity Provider.
(c) Certain Notices. Furnish to the Liquidity Provider and
the Collateral Agent (i) promptly after August 16, 1996, Written
Notice as to whether or not a Registration Event has occurred,
and (ii) if a Registration Event did not occur on or prior to
August 16, 1996, Written Notice promptly after February 16, 1997
as to whether or not a Registration Event occurred on or prior to
February 16, 1997.
Section 5.02. Negative Covenants of the Company. So long
as any Advance shall remain unpaid or the Liquidity Provider
shall have any Commitment hereunder or the Company shall have any
obligation to pay any amount to the Liquidity Provider hereunder,
the Company will not, without the written consent of the
Liquidity Provider:
(a) Amendments. Modify, amend or supplement, or give any
consent to any modification, amendment or supplement or make any
waiver with respect to, any provision of the Indentures in a
manner described in Section 9.01(a)(A), (B), (C) or (D) thereof.
<PAGE>
(b) Collateral Agent. Appoint or permit or suffer to be
appointed any successor Collateral Agent without the prior
written approval of the Liquidity Provider (which approval shall
not be unreasonably withheld).
Section 5.03. Covenants of the Liquidity Provider. So long
as it shall have any Commitment hereunder, the Liquidity Provider
will:
(a) Change in Ratings. Immediately give Written Notice to
the Company and the Collateral Agent of any change in the ratings
given to any of the Liquidity Provider's outstanding debt or
other securities (including (without limitation) any change in
the ratings of its short-term, unsecured debt) by S&P or Moody's.
(b) Notice of Liquidity Obligations. From time to time
upon request of the Collateral Agent, inform the Collateral
Agent, by delivery of a Written Notice, of the outstanding amount
of Liquidity Obligations as of the date of such Notice.
Section 5.04. Covenant of the Collateral Agent. So long as
the Liquidity Provider shall have any Commitment hereunder, the
Collateral Agent will deliver to the Liquidity Provider each of
the notices that this Agreement contemplates will be or may be
delivered by the Collateral Agent (including, without limitation,
each of the notices referred to (i) in the definition of
"Commitment" in Section 1.01 and (ii) in Section 2.04(a))
promptly upon the occurrence of the relevant event referred to
herein or in any such notice.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc. No amendment or waiver of
any provision of this Agreement, or consent to any departure by
the Company therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Liquidity Provider and
the Collateral Agent, and, in the case of an amendment, the
Company and the Collateral Agent in accordance with Section 10.1
of the Collateral Agency Agreement, and then such waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given.
<PAGE>
Section 6.02. Notices, Etc. Except as otherwise expressly
provided herein, all notices and other communications provided
for hereunder shall be in writing (including fax) and mailed or
delivered or sent by fax:
if to the
Company, at: USAir, Inc.
Crystal Park Four
2345 Crystal Drive
Arlington, VA 22227
Attention of Treasurer
Telephone: (703) 418-7000
Fax: (703) 418-5936
if to the
Liquidity Provider, at: Westdeutsche Landesbank
Girozentrale,
New York Branch
1211 Avenue of the Americas
New York, NY 10036
Attention of Asset Based
Finance
Telephone: (212) 852-6111
Fax: (212) 921-5947
if to the
Collateral Agent, at: Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention of Corporate Trust
Administration
Telephone: (302) 651-8726
Fax: (302) 651-8882
or, as to each of the foregoing, at such other address as shall
be designated by such Person in a Written Notice to the others.
All such notices and communications shall be effective (i) if
given by fax, when transmitted to the fax number specified as
aforesaid, (ii) if given by mail, when deposited in the mails
addressed as aforesaid, and (iii) if given by other means, when
delivered at the address specified as aforesaid, except that
Written Notices to the Liquidity Provider pursuant to the
provisions of Articles II and III hereof shall not be effective
until received by the Liquidity Provider.
<PAGE>
Section 6.03. No Waiver. No failure on the part of the
Liquidity Provider to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver thereof.
Section 6.04. Further Assurances. The Company agrees to do
such further acts and things and to execute and deliver to the
Liquidity Provider such additional assignments, agreements,
powers and instruments as the Liquidity Provider may reasonably
require or deem advisable to carry into effect the purposes of
this Agreement and the other Basic Documents or to better assure
and confirm unto the Liquidity Provider its rights, powers and
remedies hereunder and under the other Basic Documents.
Section 6.05. Indemnification. The Company hereby agrees
to pay, assume liability for and indemnify, protect, defend, save
and keep harmless the Liquidity Provider from and against any and
all Expenses from time to time be imposed, incurred by or
asserted against the Liquidity Provider (whether or not such is
also indemnified or insured against by any other person) as a
result of (A) the manufacture, purchase, acceptance or rejection
of any Airframe or Engine; (B) any Aircraft (or any portion
thereof) or any Engine installed on an airframe or any engine
installed on an Airframe, whether or not arising out the
ownership, delivery, nondelivery, storage, lease, sublease,
possession, use, non-use, operation, maintenance, modification,
alteration, condition, replacement, repair, substitution, sale,
return or other disposition, registration, reregistration or
airworthiness of an Aircraft including, without limitation,
latent or other defects (whether or not discoverable), strict
tort liability and any claim for patent, trademark or copyright
infringement; or (C) the failure by the Company to perform or
observe any covenant, condition or agreement contained herein or
in any of the Basic Documents, or the falsity of any
representation or warranty of the Company contained herein or in
any other Basic Document; provided that, the foregoing indemnity
shall not extend to any Expense to the extent attributable to (1)
the failure by the Liquidity Provider to perform or observe any
agreement, covenant or condition in this Collateral Agency
Agreement or any other Basic Document; (2) the bad faith, wilful
misconduct or negligence of the Liquidity Provider; (3) the
breach of any contractual obligation by, or the falsity or
inaccuracy or breach of any representation or warranty of, the
Liquidity Provider; (4) other than during the continuation of any
Collateral Access Event, the authorization or giving or
withholding of any future amendments, supplements, waivers or
consents with respect to this Agreement unless such amendments,
supplements, waivers or consents (a) are requested by the Company
<PAGE>
or (b) are required pursuant to the terms of this Agreement
(unless such requirements results from the actions of the
Liquidity Provider); (5) except to the extent attributable to
acts or events occurring prior thereto, acts or events which
occur after the payment by the Company of all amounts payable by
the Company pursuant hereto and pursuant to the Indentures; (6) a
disposition by the Liquidity Provider of its interest in the
Basic Documents other than during the continuance of a Collateral
Access Event; or (7) any and all Taxes. After the Liquidity
Provider receives notice of any claim or commencement of any
action, suit or proceeding against it or otherwise becomes aware
of any matter for which indemnification will be sought hereunder,
if such party elects to make a claim hereunder, it shall notify
the Company in writing within 10 days after receiving such notice
or becoming so aware and the Company shall, at its election, be
entitled to assume control of the defense of any such proceeding.
If the Company so elects to assume control, it shall not be
liable for any additional fees and expenses of counsel for the
Liquidity Provider, except to the extent such counsel is retained
with the prior consent of the Company unless, in the reasonable
judgment of the Liquidity Provider, there exists a conflict of
interest between the Company and the Liquidity Provider which
requires the retention by the Liquidity Provider of separate
counsel. In no event shall the Company settle any action or
proceeding against the Liquidity Provider without the prior
written consent of the Liquidity Provider. Failure to timely
give such notice shall not waive any right to indemnification,
except only to the extent of any damage or loss suffered by the
Company by reason of delay in receiving such notice. Nothing in
this Section 6.05 is intended to limit the obligations of the
Company contained in Articles II and III.
Section 6.06. Liability of the Liquidity Provider. (a)
The Company assumes all risks of the acts or omissions of the
Collateral Agent and any beneficiary or transferee of the rights
of the Collateral Agent hereunder. Neither the Liquidity
Provider nor any of its officers or directors shall be liable or
responsible for: (i) the use which may be made of the Advances
or any acts or omissions of the Collateral Agent in connection
therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (iii) making of Advances by the Liquidity
Provider against delivery of a Notice of Borrowing and other
documents which do not comply with the terms hereof; or (iv) any
other circumstances whatsoever in making or failing to make any
Advances hereunder; provided, however, that the Company shall
have a claim against the Liquidity Provider, and the Liquidity
Provider shall be liable to the Company, to the extent of any
<PAGE>
damages suffered by the Company which were the result of the
Liquidity Provider's failure to make lawful payment hereunder
after the delivery to it by the Collateral Agent of a Notice of
Borrowing strictly complying with the terms and conditions
hereof.
(b) The Liquidity Provider shall not be liable or
responsible in any respect for (i) any error, omission,
interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with
this Agreement or any Notice of Borrowing delivered hereunder, or
(ii) any action, inaction or omission which may be taken by it in
good faith, absent willful misconduct or gross negligence (in
which event the extent of the Liquidity Provider's potential
liability to the Company shall be limited as set forth in the
immediately preceding paragraph), in connection with this
Agreement or any Notice of Borrowing. The Company further agrees
that any action taken or omitted by the Liquidity Provider under
or in connection with this Agreement or any Notice of Borrowing
or the related Advances or documents, if done in good faith
without willful misconduct or gross negligence, shall be
effective against the Company as to the rights, duties and
obligations of the Liquidity Provider and shall not place the
Liquidity Provider under any liability to the Company.
Section 6.07. Costs, Expenses and Taxes. The Company
agrees to pay (A) on the Effective Date and on such later date or
dates on which the Liquidity Provider shall make demand, all
reasonable out-of-pocket costs and expenses in connection with
the preparation, negotiation, execution, delivery, filing and
recording of this Agreement, any other Basic Document and any
other documents (including, without limitation, the Offering
Memorandum) which may be delivered in connection with this
Agreement, including, without limitation, the reasonable fees and
expenses of outside counsel for the Liquidity Provider and (B) on
demand, all reasonable costs and expenses (including reasonable
counsel fees and actual disbursements) in connection with (i) any
Interest or Acceleration Advance (other than normal overhead
charges) and the enforcement of this Agreement, (ii) any
modification or amendment of, or supplement to, this Agreement,
any other Basic Document or such other documents which may be
delivered in connection herewith or therewith (whether or not the
same shall become effective), other than any such modification,
amendment or supplement sought by the Liquidity Provider, or
(iii) any action or proceeding relating to any order, injunction
or other process or decree restraining or seeking to restrain the
Liquidity Provider from paying any amount hereunder. In
addition, the Company shall pay any and all recording, stamp and
<PAGE>
other similar taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing and recording
of this Agreement, any other Basic Document and such other
documents, and agrees to save the Liquidity Provider harmless
from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes
or fees. (For the avoidance of doubt, the Company and the
Liquidity Provider agree that the Company shall not be required
to pay any costs or expenses of the Liquidity Provider in
connection with any extension of this Agreement contemplated in
Section 2.08.)
Section 6.08. Binding Effect; Participations. (a) This
Agreement shall be binding upon and inure to the benefit of the
Company, the Collateral Agent and the Liquidity Provider and
their respective successors and assigns, except that neither the
Liquidity Provider (except as otherwise provided in this
Section 6.08) nor the Company shall have the right to assign its
rights hereunder or any interest herein without the prior written
consent of the other party, subject to the requirement of Section
6.08(b). The Liquidity Provider may grant participations herein
or in any of its rights or security hereunder and under the other
Basic Documents, including, without limitation, any instruments
securing the Company's obligations hereunder, to such Persons as
the Liquidity Provider may in its sole discretion select, subject
to the requirements of Section 6.08(b). No such participation by
the Liquidity Provider, however, will relieve the Liquidity
Provider of its obligations hereunder. In connection with any
participation or any proposed participation, the Liquidity
Provider may disclose to the participant or the proposed
participant any information that the Company is required to
deliver or to disclose to the Liquidity Provider pursuant to this
Agreement. Notwithstanding the foregoing, the Company's
obligations hereunder and under the other Basic Documents shall
not increase as a result of the grant of any participations by
the Liquidity Provider in any of its interests or obligations
under this Agreement, in any Advances or the other Basic
Documents to any participant.
(b) If, pursuant to subsection (a) above, the Liquidity
Provider sells any participation or transfers any interest in
this Agreement to any bank or other entity (each a "Transferee"),
then, concurrently with the effectiveness of such transfer, the
Transferee shall (i) represent to the Liquidity Provider (for the
benefit of the Liquidity Provider and the Company) either (A)
that it is incorporated under the laws of the United States or a
state thereof or (B) that under applicable law and treaties, no
taxes will be required to be withheld by the Company or the
<PAGE>
Provider with respect to any payments to be made to such
Transferee in respect of this Agreement, (ii) furnish to the
Liquidity Provider and the Company either (x) a statement that it
is incorporated under the laws of the United States or a state
thereof or (y) if it is not so incorporated, two copies of a
properly completed United States Internal Revenue Service Form
4224 or Form 1001, as appropriate, or other applicable form,
certificate or document prescribed by the Internal Revenue
Service certifying, in each case, such Transferee's entitlement
to a complete exemption from United States federal withholding
tax in respect to any and all payments to be made hereunder, and
(iii) agree (for the benefit of the Liquidity Provider and the
Company) to provide the Liquidity Provider and the Company a new
Form 4224 or Form 1001, as appropriate, (A) on or before the date
that any such form expires or becomes obsolete or (B) after the
occurrence of any event requiring a change in the most recent
form previously delivered by it and prior to the immediately
following due date of any payment by the Company hereunder,
certifying in the case of a Form 1001 or Form 4224 that such
Transferee is entitled to a complete exemption from United States
federal withholding tax on payments under this Agreement. Unless
the Company has received forms or other documents reasonably
satisfactory to it indicating that payments hereunder are not
subject to United States federal withholding tax, the Company
will withhold taxes as required by law from such payments at the
applicable statutory rate.
Section 6.09. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
Section 6.10. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
Section 6.11. Execution in Counterparts. This Agreement
may be executed in any number of counterparts and by different
parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together,
shall constitute but one and the same Agreement.
<PAGE>
Section 6.12. Entirety. This Agreement and the other Basic
Documents to which the Liquidity Provider is a party constitute
the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior understandings and
agreements of such parties.
Section 6.13. Headings. Section headings in this Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 6.14. LIQUIDITY PROVIDER'S OBLIGATION TO MAKE
ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER,
AND THE COLLATERAL AGENT'S RIGHTS TO DELIVER NOTICES OF BORROWING
REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE
UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT,
NOTWITHSTANDING THE BANKRUPTCY OR INSOLVENCY OF THE COMPANY.
Section 6.15. Exculpation of Collateral Agent. Wilmington
Trust Company is executing this Agreement not in its individual
capacity but solely as Collateral Agent and, as such, shall incur
no personal liability in connection herewith or the transactions
contemplated hereby, other than for its own wilful misconduct or
gross negligence.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first set forth
above.
USAIR, INC.
By: /s/Thomas A. Fink
_____________________________
Name: Thomas A. Fink
Title: Treasurer
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: _______________________________
Name:
Title:
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH, as Liquidity Provider
By: /s/Brigitte Thieme
_____________________________
Name: Brigitte Thieme
Title: Managing Director
By: /s/Cordula Kraska-Hoernemann
_____________________________
Name: Cordula Kraska-Hoernemann
Title: Vice President
WILMINGTON TRUST COMPANY
as Collateral Agent
By: ____________________________________
Name:
Title:
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH, as Liquidity Provider
By: _______________________________
Name:
Title:
By: _______________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: /s/W. Chris Sponenberg
_____________________________
Name: W. Chris Sponenberg
Title: Financial Services Officer
<PAGE>
EXHIBIT A to
Liquidity Agreement
Class A Notes
- -------------
Expected Required Required
Outstanding Commitment Amount Commitment Amount
Principal At Stated Interest At Stated Interest
Payment Date Balance Rate of 6.76% Rate of 7.26%
- ------------ ------------- ------------------ ------------------
16-Feb-1996 142,400,000 14,439,360 15,507,360
15-Apr-1996 142,400,000 14,439,360 15,507,360
15-Oct-1996 138,703,000 14,064,484 15,104,757
15-Apr-1997 137,011,500 13,892,966 14,920,552
15-Oct-1997 135,320,000 13,721,448 14,736,348
15-Apr-1998 133,797,650 13,567,082 14,570,564
15-Oct-1998 132,275,300 13,412,715 14,404,780
15-Apr-1999 130,895,410 13,272,795 14,254,510
15-Oct-1999 129,515,520 13,132,874 14,104,240
15-Apr-2000 128,503,680 13,030,273 13,994,051
15-Oct-2000 127,491,840 12,927,673 13,883,861
15-Apr-2001 126,657,177 12,843,038 13,792,967
15-Oct-2001 124,996,877 12,674,683 13,612,160
15 Apr-2002 123,842,573 12,557,637 13,486,456
15-Oct-2002 122,980,798 12,470,253 13,392,609
15-Apr-2003 120,627,040 12,231,582 13,136,285
15-Oct-2003 119,285,600 12,095,560 12,990,202
15-Apr-2004 113,635,200 11,522,609 12,374,873
15-Oct-2004 110,353,800 11,189,875 12,017,529
15-Apr-2005 103,923,520 10,537,845 11,317,271
15-Oct-2005 96,807,604 9,816,291 10,542,348
15 Apr-2006 88,857,600 9,010,161 9,676,593
15-Oct-2006 79,804,800 8,092,207 8,690,743
15-Apr-2007 73,154,400 7,417,856 7,966,514
15-Oct-2007 63,648,000 6,453,907 6,931,267
15-Apr-2008 0 0 0
<PAGE>
Annex I to
Liquidity Agreement
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
collateral agent (the "Collateral Agent"), HEREBY CERTIFIES to
Westdeutsche Landesbank Girozentrale, New York Branch (the "Liquidity
Provider"), with reference to Class A Liquidity Agreement dated as of
February 15, 1996 among the Liquidity Provider, USAir, Inc. and the
Collateral Agent (the "Liquidity Agreement"; the terms defined therein
and not otherwise defined herein being used herein as therein
defined), that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of Borrowing
for the making of an Interest Advance by the Liquidity Provider to be
used for the payment of interest on the Class A Notes which was
payable on the Payment Date that occurred five calendar days prior to
the date of this Notice of Borrowing in accordance with the terms and
provisions of the Class A Indenture and the Class A Notes pursuant to
Section 3.6(a) of the Collateral Agency Agreement.
(3) The amount of the Interest Advance requested hereby (i) is
$______, to be applied in respect of the payment of interest which was
due and payable on the Class A Notes on such Payment Date, (ii) does
not include any amount with respect to the payment of principal of, or
premium on, the Class A Notes, the Class B Notes or the Class C Notes,
or interest on the Class B Notes or the Class C Notes, (iii) was
computed in accordance with the provisions of the Class A Notes, the
Class A Indenture and the Collateral Agency Agreement (a copy of which
computation is attached hereto as Schedule I), (iv) does not exceed
the Unused Commitment on the date hereof, and (v) has not been and is
not the subject of a prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Collateral Agent of the
amount requested hereby, (a) the Collateral Agent will apply the same
in accordance with the terms of the Collateral Agency Agreement, (b)
no portion of such amount shall be applied by the Collateral Agent for
any other purpose and (c) no portion of such amount until so applied
shall be commingled with other funds held by the Collateral Agent.
The Collateral Agent hereby acknowledges that, pursuant to the
Liquidity Agreement, the making of the Interest Advance requested by
this Notice of Borrowing shall automatically reduce the Unused
Commitment by an amount equal to the amount of the Interest Advance
made pursuant hereto as set forth in clause (i) of paragraph (3) of
this Certificate and such reduction shall automatically result in
corresponding reductions in the amounts available to be borrowed by a
subsequent Downgrade Advance or Non-extension Advance.
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this Notice of Borrowing as of the _______ day of ______,
______ .
WILMINGTON TRUST COMPANY,
as Collateral Agent
By _____________________________
[Name and Title]
<PAGE>
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with Interest Advance
Notice of Borrowing]
<PAGE>
Annex II to
Liquidity Agreement
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
collateral agent (the "Collateral Agent"), HEREBY CERTIFIES to
Westdeutsche Landesbank Girozentrale, New York Branch (the "Liquidity
Provider"), with reference to Class A Liquidity Agreement dated as of
February 15, 1996 among the Liquidity Provider, USAir, Inc. and the
Collateral Agent (the "Liquidity Agreement"; the terms defined therein
and not otherwise defined herein being used herein as therein
defined), that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of Borrowing
for the making of a Downgrade Advance by the Liquidity Provider to be
used for the funding of the Cash Collateral Account in accordance with
Section 3.6(c) of the Collateral Agency Agreement by reason of the
short-term unsecured debt rating of the Liquidity Provider being rated
by any Rating Agency at or lower than the Trigger Rating, which
Advance is requested to be made on ________________, ______.
(3) The amount of the Downgrade Advance requested hereby (i) is
$___________, to be applied in respect of the funding of the Cash
Collateral Account in accordance with Sections 3.6(c) and 3.6(f) of
the Collateral Agency Agreement and does not exceed the Unused
Commitment on the date hereof, (ii) does not include any amount with
respect to the payment of the principal of, or premium on, the Class A
Notes, or principal of, or interest or premium on, the Class B Notes
or the Class C Notes, (iii) was computed in accordance with the
provisions of the Class A Notes, the Class A Indenture and the
Collateral Agency Agreement (a copy of which computation is attached
hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing under the Liquidity
Agreement.
(4) Upon receipt by or on behalf of the Collateral Agent of the
amount requested hereby, (a) the Collateral Agent will deposit such
amount in the Cash Collateral Account and apply the same in accordance
with the terms of Section 3.6(c) of the Collateral Agency Agreement,
(b) no portion of such amount shall be applied by the Collateral Agent
for any other purpose and (c) no portion of such amount until so
applied shall be commingled with other funds held by the Collateral
Agent.
The Collateral Agent hereby acknowledges that, pursuant to the
Liquidity Agreement, (A) the making of the Downgrade Advance requested
by this Notice of Borrowing shall terminate the Commitment, and (B)
<PAGE>
following the making by the Liquidity Provider of the Downgrade
Advance requested by this Notice of Borrowing, the Collateral Agent
shall not be entitled to request any further Advances under the
Liquidity Agreement.
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this as of Notice of Borrowing the ____ day of
_______________, ____.
WILMINGTON TRUST COMPANY,
as Collateral Agent
By
_____________________________
[Name and Title]
<PAGE>
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with Downgrade Advance
Notice of Borrowing]
<PAGE>
Annex III to
Liquidity Agreement
NON-EXTENSION ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
collateral agent (the "Collateral Agent"), HEREBY CERTIFIES to
Westdeutsche Landesbank Girozentrale, New York Branch (the "Liquidity
Provider"), with reference to Class A Liquidity Agreement dated as of
February 15, 1996 among the Liquidity Provider, USAir, Inc. and the
Collateral Agent (the "Liquidity Agreement"; the terms defined therein
and not otherwise defined herein being used herein as therein
defined), that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of Borrowing
for the making of a Non-extension Advance by the Liquidity Provider to
be used for the funding of the Cash Collateral Account in accordance
with Section 3.6(d) of the Collateral Agency Agreement by reason of
the failure to deliver to the Collateral Agent a Replacement Liquidity
Facility in accordance with said Section 3.6(d), which Advance is
requested to be made on _________________, ______.
(3) The amount of the Non-extension Advance requested hereby (i)
is $___________, to be applied in respect of the funding of the Cash
Collateral Account in accordance with Sections 3.6(d) and 3.6(f) of
the Collateral Agency Agreement and does not exceed the Unused
Commitment on the date hereof, (ii) does not include any amount with
respect to the payment of principal of, or premium on, the Class A
Notes, or principal of or interest or premium on, the Class B Notes or
the Class C Notes, (iii) was computed in accordance with the
provisions of the Class A Notes, the Class A Indenture and the
Collateral Agency Agreement (a copy of which computation is attached
hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Collateral Agent of the
amount requested hereby, (a) the Collateral Agent will deposit such
amount in the Cash Collateral Account and apply the same in accordance
with the terms of Section 3.6(d) of the Collateral Agency Agreement,
(b) no portion of such amount shall be applied by the Collateral Agent
for any other purpose and (c) no portion of such amount until so
applied shall be commingled with other funds held by the Collateral
Agent.
The Collateral Agent hereby acknowledges that, pursuant to the
Liquidity Agreement, (A) the making of the Non-extension Advance
requested by this Notice of Borrowing shall terminate the Commitment,
and (B) following the making by the Liquidity Provider of the
Non-extension Advance requested by this Notice of Borrowing, the
<PAGE>
Collateral Agent shall not be entitled to request any further Advances
under the Liquidity Agreement.
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this Notice of Borrowing as of the ___ day of ___________,
____.
WILMINGTON TRUST COMPANY,
as Collateral Agent
By
___________________________
[Name and Title]
<PAGE>
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with Non-extension
Advance Notice of Borrowing]
Exhibit 5.8
<PAGE>
=================================================================
CLASS B LIQUIDITY AGREEMENT
Dated as of February 15, 1996
between
USAIR, INC.,
as Company,
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH,
as Liquidity Provider
and
WILMINGTON TRUST COMPANY,
as Collateral Agent
=================================================================
Relating to
$54,800,000 7.50% Class B Enhanced Equipment Notes
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS
Section 1.01. Certain Defined Terms........................ 1
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01. The Advances................................. 5
Section 2.02. Making the Advances.......................... 6
Section 2.03. Fees......................................... 8
Section 2.04. Reduction or Termination of the Commitment... 8
Section 2.05. Repayment of Advances; Compensation.......... 9
Section 2.06. Application of Provider Advances............. 9
Section 2.07. Book Entries................................. 9
Section 2.08. Renewal of the Commitment and Extension
of the Termination Date;
Non-extension Advance.................... 10
ARTICLE III.
OBLIGATIONS OF THE COMPANY
Section 3.01. Increased Costs.............................. 10
Section 3.02. Capital Adequacy............................. 11
Section 3.03. Payments Free of Deductions.................. 12
Section 3.04. Payments..................................... 12
Section 3.05. Computations................................. 13
Section 3.06. Payment on Non-Business Days................. 13
Section 3.07. Interest; Application of Payments............ 13
Section 3.08. Security..................................... 14
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to Effectiveness........ 14
Section 4.02. Conditions Precedent to Borrowing............ 16
<PAGE>
ARTICLE V.
COVENANTS
Section 5.01. Affirmative Covenants of the Company......... 16
Section 5.02. Negative Covenants of the Company............ 17
Section 5.03. Covenants of the Liquidity Provider.......... 17
Section 5.04. Covenant of the Collateral Agent............. 17
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc.............................. 18
Section 6.02. Notices, Etc................................. 18
Section 6.03. No Waiver.................................... 19
Section 6.04. Further Assurances........................... 19
Section 6.05. Indemnification.............................. 19
Section 6.06. Liability of the Liquidity Provider.......... 20
Section 6.07. Costs, Expenses and Taxes.................... 21
Section 6.08. Binding Effect; Participations............... 22
Section 6.09. Severability................................. 23
Section 6.10. GOVERNING LAW................................ 23
Section 6.11. Execution in Counterparts.................... 23
Section 6.12. Entirety..................................... 23
Section 6.13. Headings..................................... 23
Section 6.14. LIQUIDITY PROVIDER'S OBLIGATION
TO MAKE ADVANCES......................... 23
Section 6.15. Exculpation of Collateral Agent.............. 23
EXHIBIT A Expected Reductions in Commitment
ANNEX I Interest Advance Notice of Borrowing
ANNEX II Downgrade Advance Notice of Borrowing
ANNEX III Non-extension Advance Notice of Borrowing
<PAGE>
CLASS B LIQUIDITY AGREEMENT
This CLASS B LIQUIDITY AGREEMENT, dated as of February 15,
1996 between USAIR, INC., a Delaware corporation (the "Company"),
WESTDEUTSCHE LANDESBANK GIROZENTRALE, a universal bank organized
under the laws of Germany, acting through its New York Branch
(the "Liquidity Provider"), and WILMINGTON TRUST COMPANY, a
Delaware banking corporation ("Wilmington Trust"), as Collateral
Agent (the "Collateral Agent").
W I T N E S S E T H :
WHEREAS, pursuant to the Class B Indenture (such term and
all other capitalized terms used in these recitals having the
meanings set forth or referred to in Section 1.01 hereof), the
Company is issuing the Class B Notes;
WHEREAS, the Company, in order to support the timely payment
of a portion of the interest on the Class B Notes in accordance
with their terms, has requested the Liquidity Provider to enter
into this Agreement, providing for the Collateral Agent to
request that advances be made hereunder; and
WHEREAS, concurrently herewith the Company, the Liquidity
Provider, the Collateral Agent and each Indenture Trustee have
entered into the Collateral Agency Agreement pursuant to which,
among other things, the Company has granted a security interest
in the Collateral to the Collateral Agent to secure the Secured
Obligations of the Company, including, without limitation, the
Liquidity Obligations hereunder.
NOW, THEREFORE, in consideration of the premises, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this
Agreement and unless otherwise expressly indicated, or unless the
context clearly requires otherwise, all capitalized terms used
herein and not defined in this Section 1.01 shall have the
respective meanings set forth in Appendix A to the Collateral
Agency Agreement dated as of February 15, 1996 among the Company,
<PAGE>
Wilmington Trust as Class A Indenture Trustee, Class B Indenture
Trustee and Class C Indenture Trustee, the Liquidity Provider as
Class A Liquidity Provider, Class B Liquidity Provider and
Class C Liquidity Provider and Wilmington Trust as Collateral
Agent. For purposes of this Agreement, the following terms shall
have the meanings indicated:
"Acceleration Advance" means an advance made pursuant to
Section 2.02(e).
"Advance" means an Interest Advance, a Provider Advance or
an Acceleration Advance.
"Applicable Margin" means two percent per annum.
"Available Liquidity Commitment" means, from time to time,
the Commitment minus the amount of all Advances outstanding at
the time.
"Borrowing" means the making of Advances.
"Business Day" means (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and
any day which shall be in New York, New York or Wilmington,
Delaware a legal holiday or a day on which banking institutions
are authorized or required by law or other government action to
be closed and (ii) with respect to all notices and determinations
in connection with, and payments of principal of and interest on,
LIBOR Advances, any day which is a Business Day described in
clause (i) above and which is also a day for trading by and
between banks in the London interbank Eurodollar market.
"Commitment" means as of any date of determination, the
Required Amount in respect of the Class B Notes on such date.
The amount of the Commitment, assuming that all expected
principal payments are made and no redemptions of the Class B
Notes occur, is set forth on Exhibit A.
"Cost of Funds" means a rate of interest equal to the cost
to the Liquidity Provider, as reasonably determined by it, of
funding itself during the relevant period of a Cost of Funds
Advance.
"Cost of Funds Advance" means any advance made pursuant to
this Agreement as to which there is interest payable computed
with reference to the Cost of Funds.
"Downgrade Advance" means an advance made pursuant to
Section 2.02(c).
<PAGE>
"Effective Date" has the meaning specified in Section 4.01.
"Interest Advance" means, as the case may be, (i) an advance
made pursuant to Section 2.02(b) or (ii), with effect from the
date of such application, that portion of a Provider Advance
applied by the Collateral Agent from the Cash Collateral Account
in accordance with the Collateral Agency Agreement to the payment
of interest on the Class B Notes.
"Interest Period" means:
(i) in the case of a LIBOR Advance, a period of one,
two, three or six months, as the case may be, as more
particularly specified in this Agreement, provided that if any
Interest Period relating to a LIBOR Advance begins on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month. If
any Interest Period would otherwise expire on a day which is not
a Business Day, such Interest Period shall expire on the
succeeding Business Day, provided that if such Interest Period
relates to a LIBOR Advance, and if such succeeding Business Day
would occur in the succeeding calendar month, such Interest
Period shall expire on the preceding Business Day. Each Interest
Period shall commence on the date of the relevant Advance or the
last day of the preceding Interest Period. No Interest Period
for a LIBOR Advance shall extend beyond the next Payment Date,
and unless otherwise agreed by the Liquidity Provider no Advance
will be a LIBOR Advance if such advance is made or renewed less
than one month prior to a Payment Date; and
(ii) in the case of a Cost of Funds Advance, such period
as may be agreed between the Borrower and the Liquidity Provider,
provided that if no such agreement is made, such Interest Period
shall be successive periods of one day.
"Lending Office" means the lending office of the Liquidity
Provider, presently located at 1211 Avenue of the Americas, New
York, New York, or such other lending office as the Liquidity
Provider from time to time shall notify the Company (with a copy
to the Collateral Agent) as its lending office hereunder.
"LIBOR" means, for any Interest Period, an interest rate per
annum equal to the rate per annum obtained by dividing (i) (A)
the rate per annum at which deposits in U.S. dollars for a period
equal to such Interest Period are offered in the London interbank
<PAGE>
market as set forth on Telerate page 3750 at 11:00 A.M. (London
time) two Business Days before the first day of such Interest
Period, or if such page on such service ceases to display such
information, such other page as may replace it on that service
for the purpose of displaying such information (the "Telerate
Rate"), or (B) if the Telerate Rate is unavailable for any
reason, the rate of interest at which deposits in U.S. dollars
for a similar period are offered in the London interbank market
as quoted on Reuters Screen page "LIBOR" at 11:00 A.M. (London
time) two Business Days before the first day of such Interest
Period, or if such page on such screen ceases to display such
information, such other page as may replace it on that screen for
the purpose of displaying such information, by (ii) a percentage
equal to 100% minus the Eurodollar Reserve Percentage (as defined
below) for such period, rounded upward to the nearest multiple of
1/16 of 1% per annum if such rate is not such a multiple. If at
least two such offered rates appear on the Telerate page 3750 or
the Reuters Screen page "LIBOR", as applicable, LIBOR shall be
the arithmetic mean of such offered rates. The "Eurodollar
Reserve Percentage" for any period means the reserve percentage
applicable during such period under regulations issued from time
to time by the Board of Governors of the Federal Reserve System
(or, if more than one such percentage shall be so applicable, the
daily average of such percentages for those days in such period
during which any such percentage shall be so applicable) for
determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve
requirement) for the Liquidity Provider in respect of liabilities
or assets consisting of or including Eurocurrency liabilities (as
that term is defined in Regulation D of the Board of Governors of
the Federal Reserve System as in effect from time to time) having
a term equal to such Interest Period.
"LIBOR Advance" means any advance made pursuant to this
Agreement as to which there is interest payable computed with
reference to LIBOR, except, unless otherwise agreed by the
Company and the Liquidity Provider, any Downgrade or
Non-Extension Advance.
"Liquidity Obligations" means all obligations of the Company
to the Liquidity Provider under this Agreement, including,
without limitation, obligations to pay fees, to repay advances,
to pay interest and to pay indemnities, compensation costs and
expenses.
"Non-extension Advance" means an advance made pursuant to
Section 2.02(d) hereof.
<PAGE>
"Notice of Borrowing" has the meaning specified in Section
2.02(f).
"Other Liquidity Agreements" means the Class B Liquidity
Agreement and the Class C Liquidity Agreement, each among the
parties hereto and dated as of the date hereof.
"Provider Advance" means a Downgrade Advance or a
Non-extension Advance.
"Termination Date" means February 14, 1997 or such later
date to which the termination of the Commitment may be extended
pursuant to the terms hereof.
"Unused Commitment" means at any time of determination an
amount equal to (i) the Commitment at such time less (ii) the
aggregate amount of all Advances outstanding at such time.
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01. The Advances. The Liquidity Provider agrees,
on the terms and conditions hereinafter set forth, to make
Advances from time to time on any Business Day during the period
from the Effective Date until 5:00 p.m. New York time on the
Termination Date in an aggregate amount not to exceed at any time
outstanding the Commitment. Within the limits of the Commitment,
the amount of Advances made and reimbursed hereunder will be
available for future Advances.
Section 2.02. Making the Advances. (a) The Company hereby
irrevocably appoints the Collateral Agent as its attorney-in-fact
with full authority in the place and stead of the Company and in
the name of the Company or otherwise, from time to time in the
Collateral Agent's discretion, to complete and deliver from time
to time one or more Notices of Borrowing (as defined herein) and
direct payment of the proceeds of any Borrowing hereunder and to
take action in its discretion in furtherance thereof.
(b) Interest Advances shall be (i) made in one or more
Borrowings by delivery to the Liquidity Provider of one or more
written and completed Notices of Borrowing in substantially the
form of Annex I, signed by a person purporting to be an
authorized signatory of the Collateral Agent or (ii) deemed made
upon the withdrawal of funds from the Cash Collateral Account as
provided in the second sentence of Section 2.06 in an amount not
<PAGE>
exceeding the lesser of (x) the semi-annual installment of
interest on the Class B Notes which has become due and is unpaid
and (y) the Unused Commitment at the time of such Advance. Each
Interest Advance shall bear interest at the Cost of Funds plus
the Applicable Margin and shall be for successive Interest
Periods of one day; provided that the Company may, on not less
than three Business Days' prior notice, request that such Advance
be for an Interest Period of one, two or three months and that
such Advance be a LIBOR Advance, in which case such Advance shall
be for the requested Interest Period and shall bear interest at
LIBOR plus the Applicable Margin.
(c) A Downgrade Advance shall be made in a single Borrowing
by delivery to the Liquidity Provider of a written and completed
Notice of Borrowing in substantially the form of Annex II, signed
by a person purporting to be an authorized signatory of the
Collateral Agent, in an amount equal to the Unused Commitment at
such time and shall be used to fund the Cash Collateral Account
in accordance with Section 3.6(c) of the Collateral Agency
Agreement. Prior to the Acceleration of the Class B Notes, each
Downgrade Advance, to the extent not applied as an Interest
Advance in accordance with Section 2.06, shall bear interest at a
rate equal to the greater of (i) a per annum rate equal to the
weighted daily average of one-month LIBOR during the period such
Advance (or portion thereof) is on deposit in the Cash Collateral
Account and (ii) the Investment Earnings on the portion of such
Advance not so applied as an Interest Advance (such Investment
Earnings to be made available to the Liquidity Provider from time
to time in accordance with the third sentence of Section 3.6(f)
of the Collateral Agency Agreement), such rate of interest to be
notified to the Company by the Liquidity Provider in accordance
with Section 3.07(d).
(d) A Non-extension Advance shall be made in a single
Borrowing by delivery to the Liquidity Provider of a written and
completed Notice of Borrowing in substantially the form of
Annex III, signed by a person purporting to be an authorized
signatory of the Collateral Agent, in an amount equal to the
Unused Commitment at such time and shall be used to fund the Cash
Collateral Account in accordance with Section 3.6(d) of the
Collateral Agency Agreement. Prior to the Acceleration of the
Class B Notes, each Non-Extension Advance, to the extent not
applied as an Interest Advance in accordance with Section 2.06,
shall bear interest at a rate equal to the greater of (i) a per
annum rate equal to the weighted daily average of one-month LIBOR
during the period such Advance (or portion thereof) is on deposit
in the Cash Collateral Account and (ii) the Investment Earnings
<PAGE>
on the portion of such Advance not so applied as an Interest
Advance (such Investment Earnings to be made available to the
Liquidity Provider from time to time in accordance with the third
sentence of Section 3.6(f) of the Collateral Agency Agreement),
such rate of interest to be notified to the Company by the
Liquidity Provider in accordance with Section 3.07(d).
(e) An Acceleration Advance shall be made by the Liquidity
Provider, without the necessity for delivery of a Notice of
Borrowing, concurrently with the Acceleration of the Class B
Notes and shall be funded by the Liquidity Provider by wire
transfer of immediately available funds to the Collateral Agent
for deposit in the Cash Collateral Account. The Acceleration
Advance shall be in the amount of the Unused Commitment, and,
unless otherwise agreed by the Liquidity Provider and the
Company, shall bear interest at the Cost of Funds Rate plus the
Applicable Margin and shall be for successive Interest Periods of
one day.
(f) Except as provided in Section 2.02(e), each Borrowing
shall be made on notice given by the Collateral Agent to the
Liquidity Provider not later than 10:30 a.m. (New York City time)
(i) on the third Business Day prior to the proposed Borrowing, if
such Borrowing is a LIBOR Advance, or (ii) on the Business Day of
such Borrowing, if such Borrowing is a Cost of Funds Advance.
Each such notice of a Borrowing (a "Notice of Borrowing") shall
be in writing in substantially the form required by the
applicable provision of this Section 2.02. Upon satisfaction of
the conditions precedent set forth in Section 4.02 with respect
to a requested Borrowing, the Liquidity Provider shall, before
11:00 a.m. (New York City time), if a LIBOR Advance, or 2:00 p.m.
(New York City time), if a Cost of Funds Advance, on the date of
such Borrowing, make available by wire transfer of immediately
available funds the amount of such Borrowing to the Collateral
Agent at its office in Wilmington, Delaware (for credit to
account number 36023-0) or to such other account as is specified
in the relevant Notice of Borrowing. Each Notice of Borrowing
shall be irrevocable and binding on the Company.
(g) Upon the making of any Advance requested pursuant to a
Notice of Borrowing in accordance with the Collateral Agent's
payment instructions, the Liquidity Provider shall be fully
discharged of its obligation hereunder with respect to such
Notice of Borrowing, and the Liquidity Provider shall not
thereafter be obligated to make any further Advances hereunder in
respect of such Notice of Borrowing, to the Collateral Agent or
to any other person (including the Company, the holder of any
Class B Note or the Class B Indenture Trustee) who may have made,
or who makes, to the Collateral Agent, the Class B Indenture
Trustee or the Company a demand for payment with respect to any
<PAGE>
Class B Note. By paying to the Collateral Agent proceeds of
Advances requested by the Collateral Agent in accordance with the
provisions of this Agreement, the Liquidity Provider makes no
representation as to, and assumes no responsibility for, the
correctness or sufficiency for any purpose of the amount of the
Advances so made and requested.
Section 2.03. Fees. In consideration of the Commitment
provided hereby, the Company agrees to pay:
(i) on the Effective Date directly to the Liquidity
Provider a one-time fee of .40 of 1% of the Commitment; provided,
however, that if the Commitment is increased as of October 15,
1996 as described in the definition of such term in Section 1.01,
the Company shall pay on such date directly to the Liquidity
Provider an amount in adjustment of the one-time fee equal to .40
of 1% of $411,000; and
(ii) thereafter to the Collateral Agent for distribution to
the Liquidity Provider a fee (the "Liquidity Fee"), payable in
arrears on each Payment Date subsequent to the Effective Date and
prior to the Termination Date and on the Termination Date,
computed on a daily basis at the rate of .50 of 1% per annum on
the Unused Commitment from time to time.
Section 2.04. Reduction or Termination of the Commitment.
(a) The Commitment is subject to reduction as follows:
(i) unless the Collateral Agent shall have notified the
Liquidity Provider otherwise in a Written Notice promptly after
any such date, on each date on which a payment of principal is
expected to be made in respect of the Class B Notes on a date set
forth on Exhibit A under the heading "Payment Dates", the amount
of the Commitment shall automatically be reduced, as of such
Payment Date, to the amount set opposite such date on Exhibit A;
and
(ii) upon any payment of principal of the Class B Notes
under the Class B Indenture other than due to an expected payment
referred to in the preceding subparagraph (i), the Collateral
Agent shall promptly notify the Liquidity Provider, and the
Collateral Agent and the Liquidity Provider shall promptly agree
on a revised Exhibit A setting forth the relevant Commitment.
(b) Upon the making of any Provider Advance or the
occurrence of the Termination Date, the Commitment shall
automatically terminate, and no further Borrowing hereunder may
be requested.
<PAGE>
Section 2.05. Repayment of Advances; Compensation. (a)
Each Advance hereunder shall be due and payable by the Company
when made notwithstanding that any such Advance may be for an
Interest Period of more than one day and that repayment thereof
prior to the expiration of such Interest Period may require
payments by the Company pursuant to Section 2.05(b); provided,
however, that until the Acceleration of the Class B Notes, no
Provider Advance shall be due and payable by the Company until,
and then only to the extent of, the application of the funds in
the Cash Collateral Account as Interest Advances. Upon
Acceleration of the Class B Notes, all Provider Advances, whether
or not so applied as Interest Advances, shall become immediately
due and payable by the Company and shall thereupon bear interest
as applicable to Acceleration Advances pursuant to
Section 2.02(e).
(b) The Company shall compensate the Liquidity Provider,
upon its written request (which request shall set forth the basis
for requesting such compensation and shall, absent manifest
error, be final and conclusive and binding on all the parties
hereto), for all reasonable losses, expenses and liabilities, but
not with respect to the Applicable Margin (including, without
limitation, any loss, expense or liability incurred by reason of
the liquidation or reemployment of deposits or other funds
required by the Liquidity Provider to fund its LIBOR Advances)
which such Liquidity Provider may sustain if (i) for any reason a
Borrowing of, or conversion from or into, a LIBOR Advance does
not occur on a date specified therefor, or (ii) any repayment or
prepayment (including any prepayment made by application of funds
in accordance with the Collateral Agency Agreement) or conversion
of any LIBOR Advance occurs on a date which is not the last day
of an Interest Period.
Section 2.06. Application of Provider Advances. Amounts
paid in respect of a Provider Advance shall be deposited in the
Cash Collateral Account, invested and withdrawn from the Cash
Collateral Account as set forth in Sections 2.2 and 3.6(f) of the
Collateral Agency Agreement. Amounts withdrawn from the Cash
Collateral Account for the purpose of paying interest on the
Class B Notes in accordance with Section 3.6(f)(i) of the
Collateral Agency Agreement shall thereupon be deemed, as of the
date of such withdrawal, Interest Advances for all purposes of
this Agreement.
<PAGE>
Section 2.07. Book Entries. The Liquidity Provider shall
maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Company resulting
from Advances made from time to time and the amounts of principal
and interest payable hereunder and paid from time to time in
respect thereof; provided, however, that the failure by the
Liquidity Provider to maintain such account or accounts shall not
affect the obligations of the Company in respect of Advances. In
any legal action or proceeding in respect of this Agreement, the
entries made in such account or accounts shall, in the absence of
manifest error or the failure by the Liquidity Provider to
maintain such account or accounts, be prima facie evidence of the
existence and amounts of the obligations of the Company therein
recorded.
Section 2.08. Renewal of the Commitment and Extension of
the Termination Date; Non-extension Advance. The Termination
Date may be extended for periods of 364 days after the
then-effective Termination Date (unless this Agreement is earlier
terminated in accordance with its terms) upon (i) request by the
Collateral Agent by Written Notice, at least 60 days prior to the
then-effective Termination Date, which notice the Collateral
Agent hereby agrees to give no later than 60 days prior to each
Termination Date until the Class B Notes are paid in full or the
Commitment terminates, and (ii) the Liquidity Provider's
agreement to so extend the Termination Date as advised by Written
Notice to the Collateral Agent that the Termination Date shall be
so extended. If the Liquidity Provider fails to so extend the
Termination Date on or before the 30th day preceding the
Termination Date, the Collateral Agent shall demand a
Non-extension Advance in accordance with Section 3.6(d)(i) of the
Collateral Agency Agreement, following the making of which
Non-extension Advance the Commitment shall terminate.
ARTICLE III.
OBLIGATIONS OF THE COMPANY
Section 3.01. Increased Costs. If the Liquidity Provider
shall determine that any change after the Effective Date in any
law or regulation or in the interpretation thereof by any court
or administrative or governmental authority charged with the
administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement
against or assets held by, or deposits in or for the account of,
or loans made by, the Liquidity Provider, or (ii) impose on the
Liquidity Provider any other condition regarding this Agreement
and (b) the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to the Liquidity
<PAGE>
Provider of issuing or maintaining its Commitment, or funding or
maintaining Interest Advances (which increase in cost shall be
determined by the Liquidity Provider's reasonable allocation of
the aggregate of such cost increases resulting from such event),
then, upon demand by the Liquidity Provider, the Company shall
pay, or cause to be paid, to the Liquidity Provider, from time to
time as specified by the Liquidity Provider additional amounts
which shall be sufficient to compensate the Liquidity Provider
for such increased cost; provided, however, that before making
any such demand, the Liquidity Provider agrees to use reasonable
efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Lending Office
if the making of such a designation would avoid the need for, or
reduce the amount of, such increased cost and would not, in the
reasonable judgment of the Liquidity Provider, be otherwise
disadvantageous to the Liquidity Provider. A certificate as to
such increased cost incurred by the Liquidity Provider as a
result of any event mentioned in clause (i) or (ii) above,
prepared in reasonable detail and in accordance with this Section
3.01, submitted by the Liquidity Provider to the Company, shall
be prima facie evidence of the amount thereof. The Liquidity
Provider agrees to give the Company notice of any event referred
to in this Section 3.01 which may have the effect of causing the
Liquidity Provider to incur an increased cost referred to in this
Section 3.01 promptly after an appropriate officer of the
Liquidity Provider becomes aware of such event; provided,
however, that if the Liquidity Provider fails to give such notice
30 days after it obtains or reasonably should have obtained
knowledge with respect to such an event, the Liquidity Provider
shall, with respect to amounts payable pursuant to this Section
3.01 resulting from such event, be entitled to payment under this
Section for amounts incurred only from and after the date 30 days
prior to the date that such Liquidity Provider does give such
notice.
Section 3.02. Capital Adequacy. If the Liquidity Provider
shall determine that the adoption after the Effective Date of any
applicable law, rule or regulation regarding capital adequacy, or
any change therein, or any change after the Effective Date in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Liquidity Provider with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency (excluding
requirements of the Federal Deposit Insurance Corporation and
excluding implementation at the Federal level of the Basle Accord
(to the extent contemplated by current interpretation (as of the
<PAGE>
date hereof) of regulations in respect of the Final Risk-Based
Capital Guidelines of the Board of Governors of the Federal
Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225,
Appendix A) and the Final Risk-Based Capital Guidelines of the
Office of the Comptroller of the Currency (12 CFR Part 3,
Appendix A))), has the effect of reducing the rate of return on
the Liquidity Provider's capital as a consequence of its
commitment hereunder, its issuance or maintenance of its
Commitment, its funding Interest Advances or maintaining
outstanding Interest Advances to a level below that which the
Liquidity Provider could have achieved but for such adoption,
change or compliance (taking into consideration the Liquidity
Provider's policies with respect to capital adequacy) by an
amount deemed by the Liquidity Provider to be material, then,
upon demand by the Liquidity Provider, the Company shall pay to
the Liquidity Provider, from time to time as specified by the
Liquidity Provider amounts which shall be sufficient to
compensate the Liquidity Provider for such reduction in respect
of its commitment hereunder, its issuance or maintenance of its
Commitment, its funding Interest Advances or maintaining
outstanding Interest Advances; provided, however, that before
making any such demand, the Liquidity Provider agrees to use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Lending
Office if the making of such a designation would avoid the need
for, or reduce the amount of, such increased cost and would not,
in the reasonable judgment of the Liquidity Provider be otherwise
disadvantageous to the Liquidity Provider. A certificate as to
such additional amount describing the event which has the effect
of reducing the rate of return on the Liquidity Provider's
capital, prepared in reasonable detail and in accordance with
this Section 3.02, submitted by the Liquidity Provider to the
Company, shall be prima facie evidence of the amount thereof.
The Liquidity Provider agrees to give the Company notice of any
event referred to in this Section 3.02 which may have the effect
of reducing the rate of return on the Liquidity Provider's
capital promptly after an appropriate officer of the Liquidity
Provider becomes aware of such event; provided, however, that if
the Liquidity Provider fails to give such notice 30 days after it
obtains or reasonably should have obtained knowledge with respect
to such an event, the Liquidity Provider shall, with respect to
amounts payable pursuant to this Section 3.02 resulting from such
event, be entitled to payment under this Section for amounts
incurred only from and after the date 30 days prior to the date
that such Liquidity Provider does give such notice. For the
purposes of this Section 3.02, "Basle Accord" shall mean the
proposals for a risk-based capital framework described by the
Basle Committee on Banking Regulations and Supervisory Practices
<PAGE>
in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as modified
and supplemented and in effect from time to time.
Section 3.03. Payments Free of Deductions. All payments
made by the Company under this Agreement shall be made free and
clear of, and without reduction for or on account of, any present
or future stamp or other taxes, levies, imposts, duties, charges,
fees, deductions, withholdings, restrictions or conditions of any
nature whatsoever now or hereafter imposed, levied, collected,
withheld or assessed by the United States (or by any political
subdivision or taxing authority thereof or therein) excluding
income, franchise, capital, business or withholding taxes (gross
or net) now or hereafter imposed on such payments or the
Liquidity Provider (such non-excluded taxes being referred to
herein, collectively, as "Non-excluded Taxes" and, individually,
as a "Non-excluded Tax"). If any Non-excluded Taxes are required
to be withheld from any amounts payable to the Liquidity Provider
under this Agreement, the amounts so payable to the Liquidity
Provider shall be increased to the extent necessary to yield to
the Liquidity Provider (after payment of all Non-excluded Taxes)
interest or any other such amounts payable under this Agreement
at the rates or in the amounts specified in this Agreement.
Whenever any Non-excluded Tax is payable by the Company, as
promptly as possible thereafter the Company shall send the
Liquidity Provider an original official receipt, if available,
showing payment thereof. The Liquidity Provider agrees to use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its
Lending Office if the making of such a change would avoid the
need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable
judgment of the Liquidity Provider, be otherwise disadvantageous
to the Liquidity Provider. From time to time upon the reasonable
request of the Company, the Liquidity Provider agrees to provide
to the Company two original Internal Revenue Service Forms 1001
or 4224, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that the
Liquidity Provider is exempt from or entitled to a reduced rate
of United States withholding tax on payments pursuant to this
Agreement.
Section 3.04. Payments. The Company shall make or cause to
be made each payment under this Agreement to the Collateral Agent
for payment to the Liquidity Provider not later than 2:00 P.M.
(New York City time) on the day when due, in lawful money of the
United States of America, by wire transfer of immediately
<PAGE>
available funds to the account of Westdeutsche Landesbank
Girozentrale, New York Branch, at The Chase Manhattan Bank, One
Chase Manhattan Plaza, New York, New York (Account No.
920-1-060663, reference USAir). The Company shall make or cause
to be made all payments hereunder from an office or payment
facility within the United States of America. The Company
hereby authorizes the Liquidity Provider, and the Liquidity
Provider hereby agrees, if and to the extent payment is not made
when due hereunder, to apply any moneys received from the
Collateral Agent pursuant to the Collateral Agency Agreement
against any amount then owing hereunder, whether for principal,
interest, fees, commissions, expenses or otherwise.
Section 3.05. Computations. All computations of interest
hereunder at LIBOR shall be made on the basis of a year of 360
days, and all other computations of interest and fees hereunder
shall be made on the basis of a year of 365 days, in each case
for the actual number of days elapsed (including the first day
but excluding the last day).
Section 3.06. Payment on Non-Business Days. Whenever any
payment to be made hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next
Business Day (and if so made, shall be deemed to have been made
when due), and such extension of time shall in such case be
included in the computation of the payment of interest due
hereunder.
Section 3.07. Interest; Application of Payments. (a)
Except as provided in Section 2.02(c) and (d), the Company shall
pay interest on the unpaid principal amount of each Advance at
the rate provided herein. Interest on any LIBOR Advance not paid
at the end of the relevant Interest Period shall be capitalized
and added to the principal amount thereof in succeeding periods.
(b) All payments received by the Liquidity Provider
hereunder shall be applied first to all amounts due hereunder not
described in second, third and fourth below, second to accrued
interest on all Advances, whether or not any Interest Period has
ended, third, to compensation in accordance with Section 2.05(b)
and fourth, to reduction of the principal of all Advances then
due and payable by the Company, in each case ratably.
(c) In each case interest shall be payable in arrears on
the date of each payment of any amount due hereunder, on each
Payment Date and on the Termination Date (in each case excluding
the date of payment); provided, however, if at any time the
otherwise applicable interest rate as set forth in this Section
<PAGE>
3.07 shall exceed the maximum rate permitted by applicable law,
then any subsequent reduction in such interest rate will not
reduce the rate of interest payable pursuant to this Section 3.07
below the maximum rate permitted by applicable law until the
total amount of interest accrued equals the amount of interest
that would have accrued if such otherwise applicable interest
rate as set forth in this Section 3.07 had at all times been in
effect.
(d) The rate and amount of interest payable in accordance
with the last sentence of each of Sections 2.02(c) and 2.02(d)
shall be calculated by the Liquidity Provider and notified to the
Company and the Collateral Agent in a Written Notice delivered to
the Company in a timely manner.
Section 3.08. Security. Under and pursuant to the
Collateral Agency Agreement, the Company has pledged and granted
to the Collateral Agent to secure the prompt payment of the
Secured Obligations, including the Liquidity Obligations, for the
security and benefit of the Liquidity Provider, the Other
Liquidity Providers, the Noteholders and the Indenture Trustees,
a first priority lien on, pledge of and security interest in the
Collateral.
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to Effectiveness. This
Agreement shall become effective on and as of the first date (the
"Effective Date") on which the following conditions precedent
have been satisfied:
(a) the Liquidity Provider shall have received on or
before February 16, 1996 each of the following, each
dated such date (except for those documents delivered
pursuant to paragraphs (v) and (vii) of this Section
4.01(a)), and each in form and substance satisfactory
to the Liquidity Provider:
(i) This Agreement duly executed on behalf of the
Company and the Collateral Agent.
(ii) The Collateral Agency Agreement duly executed
on behalf of each of the parties thereto.
<PAGE>
(iii) Counterparts (or certified copies
thereof) of each of the Basic Documents (other than
this Agreement and the Collateral Agency Agreement)
which, when taken together, bear the signatures of all
of the respective parties thereto and which are in full
force and effect in accordance with their respective
terms.
(iv) A copy of the Offering Memorandum and a
specimen copy of the Class B Notes.
(v) Evidence that, on the Effective Date, the
Class B Notes, the Class B Notes and the Class C Notes
will receive long-term credit ratings from Moody's of
not lower than A2, Baa1 and Ba2, respectively, and from
S&P of not lower than A+, A- and BBB-, respectively.
(vi) An executed or certified copy of each
document, instrument, certificate and opinion delivered
pursuant to the Class B Indenture, the Collateral
Agency Agreement and the other Basic Documents
(together with, in the case of each such opinion, other
than the opinion of counsel for the Purchasers, a
letter from the counsel rendering such opinion to the
effect that the Liquidity Provider is entitled to rely
on such opinion as if it were addressed to the
Liquidity Provider).
(vii) Evidence that there shall have been made
and shall be in full force and effect, all filings,
recordings and/or registrations, and there shall have
been been given or taken any notice or other similar
action as may be reasonably necessary or, to the extent
reasonably requested by the Liquidity Provider,
reasonably advisable, in order to establish, perfect,
protect and preserve the right, title and interest,
remedies, powers, privileges, liens and security
interests of, or for the benefit of, the Liquidity
Provider created by the Basic Documents.
(viii) Such other documents, instruments,
opinions and approvals (and, if requested by the
Liquidity Provider, certified duplicates or executed
copies thereof) as the Liquidity Provider shall have
reasonably requested.
<PAGE>
(b) The following statements shall be true and shall
be deemed to have been represented by the Company as being
true on and as of the Effective Date:
(i) The representations and warranties of the
Company contained in the Purchase Agreement are true
and correct on and as of the Effective Date as though
made on and as of such Date; and
(ii) No event has occurred and is continuing, or
would result from the entering into of this Agreement
or the making of any Advance, which constitutes a
Collateral Access Event.
(c) The Liquidity Provider shall have received payment
in full of all fees and other sums required to be paid to or
for the account of the Liquidity Provider on or prior to the
Effective Date.
(d) All conditions precedent to the issuance of the
Notes under the Indentures shall have been or shall
concurrently be satisfied, all conditions precedent to the
effectiveness of the Other Liquidity Facilities shall have
been or shall concurrently be satisfied, all conditions
precedent to the purchase of the Notes by the Purchasers
under the Purchase Agreement shall have been or shall
concurrently be satisfied (unless any of such conditions
precedent under the Purchase Agreement shall have been
waived by the Purchasers) and the Company shall have
received or shall concurrently receive the proceeds of the
sale of such Notes.
(e) The perfection and priority of the lien
granted under the Collateral Agency Agreement shall be
satisfactory in all respects to the Liquidity Provider.
Section 4.02. Conditions Precedent to Borrowing. The
obligation of the Liquidity Provider to make an Advance on
the occasion of each Borrowing shall be subject to the
conditions precedent that the Effective Date shall have
occurred, on the date of such Borrowing the Collateral
Agent, to the extent required by the terms of this
Agreement, shall have delivered a Notice of Borrowing and
the Liquidity Provider shall find that the Notice of
Borrowing conforms to the terms and conditions of this
Agreement and has been completed as may be required by the
relevant form of the Notice of Borrowing for the type of
Advances requested.
<PAGE>
ARTICLE V.
COVENANTS
Section 5.01. Affirmative Covenants of the Company. So
long as any Advance shall remain unpaid or the Liquidity Provider
shall have any Commitment hereunder or the Company shall have any
obligation to pay any amount to the Liquidity Provider hereunder,
the Company will, unless the Liquidity Provider shall otherwise
consent in writing:
(a) Performance of This and Other Agreements. Punctually
pay or cause to be paid all amounts payable under this Agreement
and the other Basic Documents and observe and perform in all
material respects the conditions, covenants and requirements of
this Agreement and the other Basic Documents.
(b) Reporting Requirements. Furnish, or cause to be
furnished, to the Liquidity Provider, with reasonable promptness
copies of all information furnished to the Class B Indenture
Trustee or the Class B Noteholders pursuant to Section 4.04 of
the Class B Indenture as originally executed and such other
information and data with respect to the Collateral and the
transactions completed by the Basic Documents as from time to
time may be reasonably requested by the Liquidity Provider.
(c) Certain Notices. Furnish to the Liquidity Provider and
the Collateral Agent (i) promptly after August 16, 1996, Written
Notice as to whether or not a Registration Event has occurred,
and (ii) if a Registration Event did not occur on or prior to
August 16, 1996, Written Notice promptly after February 16, 1997
as to whether or not a Registration Event occurred on or prior to
February 16, 1997.
Section 5.02. Negative Covenants of the Company. So long
as any Advance shall remain unpaid or the Liquidity Provider
shall have any Commitment hereunder or the Company shall have any
obligation to pay any amount to the Liquidity Provider hereunder,
the Company will not, without the written consent of the
Liquidity Provider:
(a) Amendments. Modify, amend or supplement, or give any
consent to any modification, amendment or supplement or make any
waiver with respect to, any provision of the Indentures in a
manner described in Section 9.01(a)(A), (B), (C) or (D) thereof.
<PAGE>
(b) Collateral Agent. Appoint or permit or suffer to be
appointed any successor Collateral Agent without the prior
written approval of the Liquidity Provider (which approval shall
not be unreasonably withheld).
Section 5.03. Covenants of the Liquidity Provider. So long
as it shall have any Commitment hereunder, the Liquidity Provider
will:
(a) Change in Ratings. Immediately give Written Notice to
the Company and the Collateral Agent of any change in the ratings
given to any of the Liquidity Provider's outstanding debt or
other securities (including (without limitation) any change in
the ratings of its short-term, unsecured debt) by S&P or Moody's.
(b) Notice of Liquidity Obligations. From time to time
upon request of the Collateral Agent, inform the Collateral
Agent, by delivery of a Written Notice, of the outstanding amount
of Liquidity Obligations as of the date of such Notice.
Section 5.04. Covenant of the Collateral Agent. So long as
the Liquidity Provider shall have any Commitment hereunder, the
Collateral Agent will deliver to the Liquidity Provider each of
the notices that this Agreement contemplates will be or may be
delivered by the Collateral Agent (including, without limitation,
each of the notices referred to (i) in the definition of
"Commitment" in Section 1.01 and (ii) in Section 2.04(a))
promptly upon the occurrence of the relevant event referred to
herein or in any such notice.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc. No amendment or waiver of
any provision of this Agreement, or consent to any departure by
the Company therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Liquidity Provider and
the Collateral Agent, and, in the case of an amendment, the
Company and the Collateral Agent in accordance with Section 10.1
of the Collateral Agency Agreement, and then such waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given.
<PAGE>
Section 6.02. Notices, Etc. Except as otherwise expressly
provided herein, all notices and other communications provided
for hereunder shall be in writing (including fax) and mailed or
delivered or sent by fax:
if to the
Company, at: USAir, Inc.
Crystal Park Four
2345 Crystal Drive
Arlington, VA 22227
Attention of Treasurer
Telephone: (703) 418-7000
Fax: (703) 418-5936
if to the
Liquidity Provider, at: Westdeutsche Landesbank
Girozentrale,
New York Branch
1211 Avenue of the Americas
New York, NY 10036
Attention of Asset Based
Finance
Telephone: (212) 852-6111
Fax: (212) 921-5947
if to the
Collateral Agent, at: Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention of Corporate Trust
Administration
Telephone: (302) 651-8726
Fax: (302) 651-8882
or, as to each of the foregoing, at such other address as shall
be designated by such Person in a Written Notice to the others.
All such notices and communications shall be effective (i) if
given by fax, when transmitted to the fax number specified as
aforesaid, (ii) if given by mail, when deposited in the mails
addressed as aforesaid, and (iii) if given by other means, when
delivered at the address specified as aforesaid, except that
Written Notices to the Liquidity Provider pursuant to the
provisions of Articles II and III hereof shall not be effective
until received by the Liquidity Provider.
<PAGE>
Section 6.03. No Waiver. No failure on the part of the
Liquidity Provider to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver thereof.
Section 6.04. Further Assurances. The Company agrees to do
such further acts and things and to execute and deliver to the
Liquidity Provider such additional assignments, agreements,
powers and instruments as the Liquidity Provider may reasonably
require or deem advisable to carry into effect the purposes of
this Agreement and the other Basic Documents or to better assure
and confirm unto the Liquidity Provider its rights, powers and
remedies hereunder and under the other Basic Documents.
Section 6.05. Indemnification. The Company hereby agrees
to pay, assume liability for and indemnify, protect, defend, save
and keep harmless the Liquidity Provider from and against any and
all Expenses from time to time be imposed, incurred by or
asserted against the Liquidity Provider (whether or not such is
also indemnified or insured against by any other person) as a
result of (A) the manufacture, purchase, acceptance or rejection
of any Airframe or Engine; (B) any Aircraft (or any portion
thereof) or any Engine installed on an airframe or any engine
installed on an Airframe, whether or not arising out the
ownership, delivery, nondelivery, storage, lease, sublease,
possession, use, non-use, operation, maintenance, modification,
alteration, condition, replacement, repair, substitution, sale,
return or other disposition, registration, reregistration or
airworthiness of an Aircraft including, without limitation,
latent or other defects (whether or not discoverable), strict
tort liability and any claim for patent, trademark or copyright
infringement; or (C) the failure by the Company to perform or
observe any covenant, condition or agreement contained herein or
in any of the Basic Documents, or the falsity of any
representation or warranty of the Company contained herein or in
any other Basic Document; provided that, the foregoing indemnity
shall not extend to any Expense to the extent attributable to (1)
the failure by the Liquidity Provider to perform or observe any
agreement, covenant or condition in this Collateral Agency
Agreement or any other Basic Document; (2) the bad faith, wilful
misconduct or negligence of the Liquidity Provider; (3) the
breach of any contractual obligation by, or the falsity or
inaccuracy or breach of any representation or warranty of, the
Liquidity Provider; (4) other than during the continuation of any
Collateral Access Event, the authorization or giving or
withholding of any future amendments, supplements, waivers or
consents with respect to this Agreement unless such amendments,
supplements, waivers or consents (a) are requested by the Company
<PAGE>
or (b) are required pursuant to the terms of this Agreement
(unless such requirements results from the actions of the
Liquidity Provider); (5) except to the extent attributable to
acts or events occurring prior thereto, acts or events which
occur after the payment by the Company of all amounts payable by
the Company pursuant hereto and pursuant to the Indentures; (6) a
disposition by the Liquidity Provider of its interest in the
Basic Documents other than during the continuance of a Collateral
Access Event; or (7) any and all Taxes. After the Liquidity
Provider receives notice of any claim or commencement of any
action, suit or proceeding against it or otherwise becomes aware
of any matter for which indemnification will be sought hereunder,
if such party elects to make a claim hereunder, it shall notify
the Company in writing within 10 days after receiving such notice
or becoming so aware and the Company shall, at its election, be
entitled to assume control of the defense of any such proceeding.
If the Company so elects to assume control, it shall not be
liable for any additional fees and expenses of counsel for the
Liquidity Provider, except to the extent such counsel is retained
with the prior consent of the Company unless, in the reasonable
judgment of the Liquidity Provider, there exists a conflict of
interest between the Company and the Liquidity Provider which
requires the retention by the Liquidity Provider of separate
counsel. In no event shall the Company settle any action or
proceeding against the Liquidity Provider without the prior
written consent of the Liquidity Provider. Failure to timely
give such notice shall not waive any right to indemnification,
except only to the extent of any damage or loss suffered by the
Company by reason of delay in receiving such notice. Nothing in
this Section 6.05 is intended to limit the obligations of the
Company contained in Articles II and III.
Section 6.06. Liability of the Liquidity Provider. (a)
The Company assumes all risks of the acts or omissions of the
Collateral Agent and any beneficiary or transferee of the rights
of the Collateral Agent hereunder. Neither the Liquidity
Provider nor any of its officers or directors shall be liable or
responsible for: (i) the use which may be made of the Advances
or any acts or omissions of the Collateral Agent in connection
therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (iii) making of Advances by the Liquidity
Provider against delivery of a Notice of Borrowing and other
documents which do not comply with the terms hereof; or (iv) any
other circumstances whatsoever in making or failing to make any
Advances hereunder; provided, however, that the Company shall
have a claim against the Liquidity Provider, and the Liquidity
Provider shall be liable to the Company, to the extent of any
<PAGE>
damages suffered by the Company which were the result of the
Liquidity Provider's failure to make lawful payment hereunder
after the delivery to it by the Collateral Agent of a Notice of
Borrowing strictly complying with the terms and conditions
hereof.
(b) The Liquidity Provider shall not be liable or
responsible in any respect for (i) any error, omission,
interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with
this Agreement or any Notice of Borrowing delivered hereunder, or
(ii) any action, inaction or omission which may be taken by it in
good faith, absent willful misconduct or gross negligence (in
which event the extent of the Liquidity Provider's potential
liability to the Company shall be limited as set forth in the
immediately preceding paragraph), in connection with this
Agreement or any Notice of Borrowing. The Company further agrees
that any action taken or omitted by the Liquidity Provider under
or in connection with this Agreement or any Notice of Borrowing
or the related Advances or documents, if done in good faith
without willful misconduct or gross negligence, shall be
effective against the Company as to the rights, duties and
obligations of the Liquidity Provider and shall not place the
Liquidity Provider under any liability to the Company.
Section 6.07. Costs, Expenses and Taxes. The Company
agrees to pay (A) on the Effective Date and on such later date or
dates on which the Liquidity Provider shall make demand, all
reasonable out-of-pocket costs and expenses in connection with
the preparation, negotiation, execution, delivery, filing and
recording of this Agreement, any other Basic Document and any
other documents (including, without limitation, the Offering
Memorandum) which may be delivered in connection with this
Agreement, including, without limitation, the reasonable fees and
expenses of outside counsel for the Liquidity Provider and (B) on
demand, all reasonable costs and expenses (including reasonable
counsel fees and actual disbursements) in connection with (i) any
Interest or Acceleration Advance (other than normal overhead
charges) and the enforcement of this Agreement, (ii) any
modification or amendment of, or supplement to, this Agreement,
any other Basic Document or such other documents which may be
delivered in connection herewith or therewith (whether or not the
same shall become effective), other than any such modification,
amendment or supplement sought by the Liquidity Provider, or
(iii) any action or proceeding relating to any order, injunction
or other process or decree restraining or seeking to restrain the
Liquidity Provider from paying any amount hereunder. In
addition, the Company shall pay any and all recording, stamp and
<PAGE>
other similar taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing and recording
of this Agreement, any other Basic Document and such other
documents, and agrees to save the Liquidity Provider harmless
from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes
or fees. (For the avoidance of doubt, the Company and the
Liquidity Provider agree that the Company shall not be required
to pay any costs or expenses of the Liquidity Provider in
connection with any extension of this Agreement contemplated in
Section 2.08.)
Section 6.08. Binding Effect; Participations. (a) This
Agreement shall be binding upon and inure to the benefit of the
Company, the Collateral Agent and the Liquidity Provider and
their respective successors and assigns, except that neither the
Liquidity Provider (except as otherwise provided in this
Section 6.08) nor the Company shall have the right to assign its
rights hereunder or any interest herein without the prior written
consent of the other party, subject to the requirement of Section
6.08(b). The Liquidity Provider may grant participations herein
or in any of its rights or security hereunder and under the other
Basic Documents, including, without limitation, any instruments
securing the Company's obligations hereunder, to such Persons as
the Liquidity Provider may in its sole discretion select, subject
to the requirements of Section 6.08(b). No such participation by
the Liquidity Provider, however, will relieve the Liquidity
Provider of its obligations hereunder. In connection with any
participation or any proposed participation, the Liquidity
Provider may disclose to the participant or the proposed
participant any information that the Company is required to
deliver or to disclose to the Liquidity Provider pursuant to this
Agreement. Notwithstanding the foregoing, the Company's
obligations hereunder and under the other Basic Documents shall
not increase as a result of the grant of any participations by
the Liquidity Provider in any of its interests or obligations
under this Agreement, in any Advances or the other Basic
Documents to any participant.
(b) If, pursuant to subsection (a) above, the Liquidity
Provider sells any participation or transfers any interest in
this Agreement to any bank or other entity (each a "Transferee"),
then, concurrently with the effectiveness of such transfer, the
Transferee shall (i) represent to the Liquidity Provider (for the
benefit of the Liquidity Provider and the Company) either (A)
that it is incorporated under the laws of the United States or a
state thereof or (B) that under applicable law and treaties, no
taxes will be required to be withheld by the Company or the
<PAGE>
Provider with respect to any payments to be made to such
Transferee in respect of this Agreement, (ii) furnish to the
Liquidity Provider and the Company either (x) a statement that it
is incorporated under the laws of the United States or a state
thereof or (y) if it is not so incorporated, two copies of a
properly completed United States Internal Revenue Service Form
4224 or Form 1001, as appropriate, or other applicable form,
certificate or document prescribed by the Internal Revenue
Service certifying, in each case, such Transferee's entitlement
to a complete exemption from United States federal withholding
tax in respect to any and all payments to be made hereunder, and
(iii) agree (for the benefit of the Liquidity Provider and the
Company) to provide the Liquidity Provider and the Company a new
Form 4224 or Form 1001, as appropriate, (A) on or before the date
that any such form expires or becomes obsolete or (B) after the
occurrence of any event requiring a change in the most recent
form previously delivered by it and prior to the immediately
following due date of any payment by the Company hereunder,
certifying in the case of a Form 1001 or Form 4224 that such
Transferee is entitled to a complete exemption from United States
federal withholding tax on payments under this Agreement. Unless
the Company has received forms or other documents reasonably
satisfactory to it indicating that payments hereunder are not
subject to United States federal withholding tax, the Company
will withhold taxes as required by law from such payments at the
applicable statutory rate.
Section 6.09. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
Section 6.10. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
Section 6.11. Execution in Counterparts. This Agreement
may be executed in any number of counterparts and by different
parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together,
shall constitute but one and the same Agreement.
<PAGE>
Section 6.12. Entirety. This Agreement and the other Basic
Documents to which the Liquidity Provider is a party constitute
the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior understandings and
agreements of such parties.
Section 6.13. Headings. Section headings in this Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 6.14. LIQUIDITY PROVIDER'S OBLIGATION TO MAKE
ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER,
AND THE COLLATERAL AGENT'S RIGHTS TO DELIVER NOTICES OF BORROWING
REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE
UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT,
NOTWITHSTANDING THE BANKRUPTCY OR INSOLVENCY OF THE COMPANY.
Section 6.15. Exculpation of Collateral Agent. Wilmington
Trust Company is executing this Agreement not in its individual
capacity but solely as Collateral Agent and, as such, shall incur
no personal liability in connection herewith or the transactions
contemplated hereby, other than for its own wilful misconduct or
gross negligence.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first set forth
above.
USAIR, INC.
By: /s/Thomas A. Fink
_____________________________
Name: Thomas A. Fink
Title: Treasurer
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: ______________________________
Name:
Title:
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH, as Liquidity Provider
By: /s/Brigitte Thieme
_____________________________
Name: Brigitte Thieme
Title: Managing Director
By: /s/Cordula Kraska-Hoernemann
_____________________________
Name: Cordula Kraska-Hoernemann
Title: Vice President
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: ______________________________
Name:
Title
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE
NEW YORK BRANCH, as Liquidity Provider
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: /s/W. Chris Sponenberg
_____________________________
Name: W. Chris Sponenberg
Title: Financial Services Officer
<PAGE>
EXHIBIT A to
Liquidity Agreement
Class B Notes
- -------------
Expected Required Required
Outstanding Commitment Amount Commitment Amount
Principal At Stated Interest At Stated Interest
Payment Date Balance Rate of 6.76% Rate of 7.26%
- ------------ ------------ ------------------ -------------------
16-Feb-1996 54,800,000 6,165,000 6,576,000
15-Apr-1996 54,800,000 6,165,000 6,576,000
15-Oct-1996 53,377,278 6,004,944 6,405,273
15-Apr-1997 52,726,336 5,931,713 6,327,160
15-Oct-1997 52,075,393 5,858,482 6,249,047
15-Apr-1998 51,489,545 5,792,574 6,178,745
15-Oct-1998 50,903,697 5,726,666 6,108,444
15-Apr-1999 50,372,672 5,666,926 6,044,721
15-Oct-1999 49,841,647 5,607,185 5,980,998
15-Apr-2000 49,452,259 5,563,379 5,934,271
15-Oct-2000 49,062,871 5,519,573 5,887,545
15-Apr-2001 48,741,666 5,483,437 5,849,000
15-Oct-2001 48,102,731 5,411,557 5,772,328
15 Apr-2002 47,658,518 5,361,583 5,719,022
15-Oct-2002 47,326,880 5,324,274 5,679,226
15-Apr-2003 46,421,080 5,222,372 5,570,530
15-Oct-2003 45,904,852 5,164,296 5,508,582
15-Apr-2004 43,730,400 4,919,670 5,247,648
15-Oct-2004 42,467,614 4,777,607 5,096,114
15-Apr-2005 39,993,040 4,499,217 4,799,165
15-Oct-2005 37,254,612 4,191,144 4,470,553
15 Apr-2006 34,195,200 3,846,960 4,103,424
15-Oct-2006 30,711,398 3,455,032 3,685,368
15-Apr-2007 28,152,115 3,167,113 3,378,254
15-Oct-2007 24,493,753 2,755,547 2,939,250
15-Apr-2008 0 0 0
<PAGE>
Annex I to
Liquidity Agreement
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the
undersigned collateral agent (the "Collateral Agent"), HEREBY
CERTIFIES to Westdeutsche Landesbank Girozentrale, New York
Branch (the "Liquidity Provider"), with reference to Class B
Liquidity Agreement dated as of February 15, 1996 among the
Liquidity Provider, USAir, Inc. and the Collateral Agent (the
"Liquidity Agreement"; the terms defined therein and not
otherwise defined herein being used herein as therein defined),
that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of
Borrowing for the making of an Interest Advance by the Liquidity
Provider to be used for the payment of interest on the Class B
Notes which was payable on the Payment Date that occurred five
calendar days prior to the date of this Notice of Borrowing in
accordance with the terms and provisions of the Class B Indenture
and the Class B Notes pursuant to Section 3.6(a) of the
Collateral Agency Agreement.
(3) The amount of the Interest Advance requested hereby (i)
is $______, to be applied in respect of the payment of interest
which was due and payable on the Class B Notes on such Payment
Date, (ii) does not include any amount with respect to the
payment of principal of, or premium on, the Class A Notes, the
Class B Notes or the Class C Notes, or interest on the Class B
Notes or the Class C Notes, (iii) was computed in accordance with
the provisions of the Class B Notes, the Class B Indenture and
the Collateral Agency Agreement (a copy of which computation is
attached hereto as Schedule I), (iv) does not exceed the Unused
Commitment on the date hereof, and (v) has not been and is not
the subject of a prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Collateral Agent of
the amount requested hereby, (a) the Collateral Agent will apply
the same in accordance with the terms of the Collateral Agency
Agreement, (b) no portion of such amount shall be applied by the
Collateral Agent for any other purpose and (c) no portion of such
amount until so applied shall be commingled with other funds held
by the Collateral Agent.
The Collateral Agent hereby acknowledges that, pursuant to
the Liquidity Agreement, the making of the Interest Advance
requested by this Notice of Borrowing shall automatically reduce
the Unused Commitment by an amount equal to the amount of the
Interest Advance made pursuant hereto as set forth in clause (i)
of paragraph (3) of this Certificate and such reduction shall
automatically result in corresponding reductions in the amounts
<PAGE>
available to be borrowed by a subsequent Downgrade Advance or
Non-extension Advance.
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this Notice of Borrowing as of the _______ day of
______, ______ .
WILMINGTON TRUST COMPANY,
as Collateral Agent
By _____________________________
[Name and Title]
<PAGE>
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with Interest
Advance Notice of Borrowing]
<PAGE>
Annex II to
Liquidity Agreement
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the
undersigned collateral agent (the "Collateral Agent"), HEREBY
CERTIFIES to Westdeutsche Landesbank Girozentrale, New York
Branch (the "Liquidity Provider"), with reference to Class B
Liquidity Agreement dated as of February 15, 1996 among the
Liquidity Provider, USAir, Inc. and the Collateral Agent (the
"Liquidity Agreement"; the terms defined therein and not
otherwise defined herein being used herein as therein defined),
that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of
Borrowing for the making of a Downgrade Advance by the Liquidity
Provider to be used for the funding of the Cash Collateral
Account in accordance with Section 3.6(c) of the Collateral
Agency Agreement by reason of the short-term unsecured debt
rating of the Liquidity Provider being rated by any Rating Agency
at or lower than the Trigger Rating, which Advance is requested
to be made on ________________, ______.
(3) The amount of the Downgrade Advance requested hereby
(i) is $___________, to be applied in respect of the funding of
the Cash Collateral Account in accordance with Sections 3.6(c)
and 3.6(f) of the Collateral Agency Agreement and does not exceed
the Unused Commitment on the date hereof, (ii) does not include
any amount with respect to the payment of the principal of, or
premium on, the Class B Notes, or principal of, or interest or
premium on, the Class B Notes or the Class C Notes, (iii) was
computed in accordance with the provisions of the Class B Notes,
the Class B Indenture and the Collateral Agency Agreement (a copy
of which computation is attached hereto as Schedule I), and (iv)
has not been and is not the subject of a prior or contemporaneous
Notice of Borrowing under the Liquidity Agreement.
(4) Upon receipt by or on behalf of the Collateral Agent of
the amount requested hereby, (a) the Collateral Agent will
deposit such amount in the Cash Collateral Account and apply the
same in accordance with the terms of Section 3.6(c) of the
Collateral Agency Agreement, (b) no portion of such amount shall
be applied by the Collateral Agent for any other purpose and (c)
no portion of such amount until so applied shall be commingled
with other funds held by the Collateral Agent.
The Collateral Agent hereby acknowledges that, pursuant to
the Liquidity Agreement, (A) the making of the Downgrade Advance
requested by this Notice of Borrowing shall terminate the
Commitment, and (B)
<PAGE>
following the making by the Liquidity Provider of the Downgrade
Advance requested by this Notice of Borrowing, the Collateral
Agent shall not be entitled to request any further Advances under
the Liquidity Agreement.
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this as of Notice of Borrowing the ____ day of
_______________, ____.
WILMINGTON TRUST COMPANY,
as Collateral Agent
By
_____________________________
[Name and Title]
<PAGE>
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with Downgrade
Advance Notice of Borrowing]
<PAGE>
Annex III to
Liquidity Agreement
NON-EXTENSION ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the
undersigned collateral agent (the "Collateral Agent"), HEREBY
CERTIFIES to Westdeutsche Landesbank Girozentrale, New York
Branch (the "Liquidity Provider"), with reference to Class B
Liquidity Agreement dated as of February 15, 1996 among the
Liquidity Provider, USAir, Inc. and the Collateral Agent (the
"Liquidity Agreement"; the terms defined therein and not
otherwise defined herein being used herein as therein defined),
that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of
Borrowing for the making of a Non-extension Advance by the
Liquidity Provider to be used for the funding of the Cash
Collateral Account in accordance with Section 3.6(d) of the
Collateral Agency Agreement by reason of the failure to deliver
to the Collateral Agent a Replacement Liquidity Facility in
accordance with said Section 3.6(d), which Advance is requested
to be made on _________________, ______.
(3) The amount of the Non-extension Advance requested
hereby (i) is $___________, to be applied in respect of the
funding of the Cash Collateral Account in accordance with
Sections 3.6(d) and 3.6(f) of the Collateral Agency Agreement and
does not exceed the Unused Commitment on the date hereof, (ii)
does not include any amount with respect to the payment of
principal of, or premium on, the Class B Notes, or principal of
or interest or premium on, the Class B Notes or the Class C
Notes, (iii) was computed in accordance with the provisions of
the Class B Notes, the Class B Indenture and the Collateral
Agency Agreement (a copy of which computation is attached hereto
as Schedule I), and (iv) has not been and is not the subject of a
prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Collateral Agent of
the amount requested hereby, (a) the Collateral Agent will
deposit such amount in the Cash Collateral Account and apply the
same in accordance with the terms of Section 3.6(d) of the
Collateral Agency Agreement, (b) no portion of such amount shall
be applied by the Collateral Agent for any other purpose and (c)
no portion of such amount until so applied shall be commingled
with other funds held by the Collateral Agent.
The Collateral Agent hereby acknowledges that, pursuant to
the Liquidity Agreement, (A) the making of the Non-extension
Advance requested by this Notice of Borrowing shall terminate the
Commitment, and (B) following the making by the Liquidity
<PAGE>
Provider of the Non-extension Advance requested by this Notice of
Borrowing, the Collateral Agent shall not be entitled to request
any further Advances under the Liquidity Agreement.
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this Notice of Borrowing as of the ___ day of
____________, ______.
WILMINGTON TRUST COMPANY,
as Collateral Agent
By
___________________________
[Name and Title]
<PAGE>
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with
Non-extension Advance Notice of Borrowing]
Exhibit 5.9
<PAGE>
=================================================================
CLASS C LIQUIDITY AGREEMENT
Dated as of February 15, 1996
between
USAIR, INC.,
as Company,
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH,
as Liquidity Provider
and
WILMINGTON TRUST COMPANY,
as Collateral Agent
=================================================================
Relating to
$65,800,000 8.93% Class C Enhanced Equipment Notes
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I.
DEFINITIONS
Section 1.01. Certain Defined Terms........................ 1
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01. The Advances................................. 5
Section 2.02. Making the Advances.......................... 6
Section 2.03. Fees......................................... 8
Section 2.04. Reduction or Termination of the Commitment... 8
Section 2.05. Repayment of Advances; Compensation.......... 9
Section 2.06. Application of Provider Advances............. 9
Section 2.07. Book Entries................................. 9
Section 2.08. Renewal of the Commitment and Extension
of the Termination Date;
Non-extension Advance.................... 10
ARTICLE III.
OBLIGATIONS OF THE COMPANY
Section 3.01. Increased Costs.............................. 10
Section 3.02. Capital Adequacy............................. 11
Section 3.03. Payments Free of Deductions.................. 12
Section 3.04. Payments..................................... 12
Section 3.05. Computations................................. 13
Section 3.06. Payment on Non-Business Days................. 13
Section 3.07. Interest..................................... 13
Section 3.08. Security..................................... 14
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to Effectiveness........ 14
Section 4.02. Conditions Precedent to Borrowing............ 16
<PAGE>
ARTICLE V.
COVENANTS
Section 5.01. Affirmative Covenants of the Company......... 16
Section 5.02. Negative Covenants of the Company............ 17
Section 5.03. Covenants of the Liquidity Provider.......... 17
Section 5.04. Covenant of the Collateral Agent............. 17
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc.............................. 18
Section 6.02. Notices, Etc................................. 18
Section 6.03. No Waiver.................................... 19
Section 6.04. Further Assurances........................... 19
Section 6.05. Indemnification.............................. 19
Section 6.06. Liability of the Liquidity Provider.......... 20
Section 6.07. Costs, Expenses and Taxes.................... 21
Section 6.08. Binding Effect; Participations............... 22
Section 6.09. Severability................................. 23
Section 6.10. GOVERNING LAW................................ 23
Section 6.11. Execution in Counterparts.................... 23
Section 6.12. Entirety..................................... 23
Section 6.13. Headings..................................... 23
Section 6.14. LIQUIDITY PROVIDER'S OBLIGATION
TO MAKE ADVANCES......................... 23
Section 6.15. Exculpation of Collateral Agent.............. 23
EXHIBIT A Expected Reductions in Commitment
ANNEX I Interest Advance Notice of Borrowing
ANNEX II Downgrade Advance Notice of Borrowing
ANNEX III Non-extension Advance Notice of Borrowing
<PAGE>
CLASS C LIQUIDITY AGREEMENT
This CLASS C LIQUIDITY AGREEMENT, dated as of February 15,
1996 between USAIR, INC., a Delaware corporation (the "Company"),
WESTDEUTSCHE LANDESBANK GIROZENTRALE, a universal bank organized
under the laws of Germany, acting through its New York Branch
(the "Liquidity Provider"), and WILMINGTON TRUST COMPANY, a
Delaware banking corporation ("Wilmington Trust"), as Collateral
Agent (the "Collateral Agent").
W I T N E S S E T H :
WHEREAS, pursuant to the Class C Indenture (such term and
all other capitalized terms used in these recitals having the
meanings set forth or referred to in Section 1.01 hereof), the
Company is issuing the Class C Notes;
WHEREAS, the Company, in order to support the timely payment
of a portion of the interest on the Class C Notes in accordance
with their terms, has requested the Liquidity Provider to enter
into this Agreement, providing for the Collateral Agent to
request that advances be made hereunder; and
WHEREAS, concurrently herewith the Company, the Liquidity
Provider, the Collateral Agent and each Indenture Trustee have
entered into the Collateral Agency Agreement pursuant to which,
among other things, the Company has granted a security interest
in the Collateral to the Collateral Agent to secure the Secured
Obligations of the Company, including, without limitation, the
Liquidity Obligations hereunder.
NOW, THEREFORE, in consideration of the premises, the
parties hereto agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. Certain Defined Terms. As used in this
Agreement and unless otherwise expressly indicated, or unless the
context clearly requires otherwise, all capitalized terms used
herein and not defined in this Section 1.01 shall have the
respective meanings set forth in Appendix A to the Collateral
Agency Agreement dated as of February 15, 1996 among the Company,
<PAGE>
Wilmington Trust as Class A Indenture Trustee, Class B Indenture
Trustee and Class C Indenture Trustee, the Liquidity Provider as
Class A Liquidity Provider, Class B Liquidity Provider and
Class C Liquidity Provider and Wilmington Trust as Collateral
Agent. For purposes of this Agreement, the following terms shall
have the meanings indicated:
"Acceleration Advance" means an advance made pursuant to
Section 2.02(e).
"Advance" means an Interest Advance, a Provider Advance or
an Acceleration Advance.
"Applicable Margin" means two percent per annum.
"Available Liquidity Commitment" means, from time to time,
the Commitment minus the amount of all Advances outstanding at
the time.
"Borrowing" means the making of Advances.
"Business Day" means (i) for all purposes other than as
covered by clause (ii) below, any day except Saturday, Sunday and
any day which shall be in New York, New York or Wilmington,
Delaware a legal holiday or a day on which banking institutions
are authorized or required by law or other government action to
be closed and (ii) with respect to all notices and determinations
in connection with, and payments of principal of and interest on,
LIBOR Advances, any day which is a Business Day described in
clause (i) above and which is also a day for trading by and
between banks in the London interbank Eurodollar market.
"Commitment" means as of the date of determination, the
Required Amount in respect of the Class C Notes on such date.
The amount of the Commitment, assuming that all expected
principal payments are made and no redemptions of the Class C
Notes occur, is set forth in Exhibit A.
"Cost of Funds" means a rate of interest equal to the cost
to the Liquidity Provider, as reasonably determined by it, of
funding itself during the relevant period of a Cost of Funds
Advance.
"Cost of Funds Advance" means any advance made pursuant to
this Agreement as to which there is interest payable computed
with reference to the Cost of Funds.
"Downgrade Advance" means an advance made pursuant to
Section 2.02(c).
<PAGE>
"Effective Date" has the meaning specified in Section 4.01.
"Interest Advance" means, as the case may be, (i) an advance
made pursuant to Section 2.02(b) or (ii), with effect from the
date of such application, that portion of a Provider Advance
applied by the Collateral Agent from the Cash Collateral Account
in accordance with the Collateral Agency Agreement to the payment
of interest on the Class C Notes.
"Interest Period" means:
(i) in the case of a LIBOR Advance, a period of one,
two, three or six months, as the case may be, as more
particularly specified in this Agreement, provided that if any
Interest Period relating to a LIBOR Advance begins on a day for
which there is no numerically corresponding day in the calendar
month at the end of such Interest Period, such Interest Period
shall end on the last Business Day of such calendar month. If
any Interest Period would otherwise expire on a day which is not
a Business Day, such Interest Period shall expire on the
succeeding Business Day, provided that if such Interest Period
relates to a LIBOR Advance, and if such succeeding Business Day
would occur in the succeeding calendar month, such Interest
Period shall expire on the preceding Business Day. Each Interest
Period shall commence on the date of the relevant Advance or the
last day of the preceding Interest Period. No Interest Period
for a LIBOR Advance shall extend beyond the next Payment Date,
and unless otherwise agreed by the Liquidity Provider no Advance
will be a LIBOR Advance if such advance is made or renewed less
than one month prior to a Payment Date; and
(ii) in the case of a Cost of Funds Advance, such period
as may be agreed between the Borrower and the Liquidity Provider,
provided that if no such agreement is made, such Interest Period
shall be successive periods of one day.
"Lending Office" means the lending office of the Liquidity
Provider, presently located at 1211 Avenue of the Americas, New
York, New York, or such other lending office as the Liquidity
Provider from time to time shall notify the Company (with a copy
to the Collateral Agent) as its lending office hereunder.
"LIBOR" means, for any Interest Period, an interest rate per
annum equal to the rate per annum obtained by dividing (i) (A)
the rate per annum at which deposits in U.S. dollars for a period
equal to such Interest Period are offered in the London interbank
<PAGE>
market as set forth on Telerate page 3750 at 11:00 A.M. (London
time) two Business Days before the first day of such Interest
Period, or if such page on such service ceases to display such
information, such other page as may replace it on that service
for the purpose of displaying such information (the "Telerate
Rate"), or (B) if the Telerate Rate is unavailable for any
reason, the rate of interest at which deposits in U.S. dollars
for a similar period are offered in the London interbank market
as quoted on Reuters Screen page "LIBOR" at 11:00 A.M. (London
time) two Business Days before the first day of such Interest
Period, or if such page on such screen ceases to display such
information, such other page as may replace it on that screen for
the purpose of displaying such information, by (ii) a percentage
equal to 100% minus the Eurodollar Reserve Percentage (as defined
below) for such period, rounded upward to the nearest multiple of
1/16 of 1% per annum if such rate is not such a multiple. If at
least two such offered rates appear on the Telerate page 3750 or
the Reuters Screen page "LIBOR", as applicable, LIBOR shall be
the arithmetic mean of such offered rates. The "Eurodollar
Reserve Percentage" for any period means the reserve percentage
applicable during such period under regulations issued from time
to time by the Board of Governors of the Federal Reserve System
(or, if more than one such percentage shall be so applicable, the
daily average of such percentages for those days in such period
during which any such percentage shall be so applicable) for
determining the maximum reserve requirement (including, but not
limited to, any emergency, supplemental or other marginal reserve
requirement) for the Liquidity Provider in respect of liabilities
or assets consisting of or including Eurocurrency liabilities (as
that term is defined in Regulation D of the Board of Governors of
the Federal Reserve System as in effect from time to time) having
a term equal to such Interest Period.
"LIBOR Advance" means any advance made pursuant to this
Agreement as to which there is interest payable computed with
reference to LIBOR, except, unless otherwise agreed by the
Company and the Liquidity Provider, any Downgrade or
Non-Extension Advance.
"Liquidity Obligations" means all obligations of the Company
to the Liquidity Provider under this Agreement, including,
without limitation, obligations to pay fees, to repay advances,
to pay interest and to pay indemnities, compensation costs and
expenses.
"Non-extension Advance" means an advance made pursuant to
Section 2.02(d) hereof.
<PAGE>
"Notice of Borrowing" has the meaning specified in Section
2.02(f).
"Other Liquidity Agreements" means the Class B Liquidity
Agreement and the Class C Liquidity Agreement, each among the
parties hereto and dated as of the date hereof.
"Provider Advance" means a Downgrade Advance or a
Non-extension Advance.
"Termination Date" means February 14, 1997 or such later
date to which the termination of the Commitment may be extended
pursuant to the terms hereof.
"Unused Commitment" means at any time of determination an
amount equal to (i) the Commitment at such time less (ii) the
aggregate amount of all Advances outstanding at such time.
ARTICLE II.
AMOUNT AND TERMS OF THE COMMITMENT
Section 2.01. The Advances. The Liquidity Provider agrees,
on the terms and conditions hereinafter set forth, to make
Advances from time to time on any Business Day during the period
from the Effective Date until 5:00 p.m. New York time on the
Termination Date in an aggregate amount not to exceed at any time
outstanding the Commitment. Within the limits of the Commitment,
the amount of Advances made and reimbursed hereunder will be
available for future Advances.
Section 2.02. Making the Advances. (a) The Company hereby
irrevocably appoints the Collateral Agent as its attorney-in-fact
with full authority in the place and stead of the Company and in
the name of the Company or otherwise, from time to time in the
Collateral Agent's discretion, to complete and deliver from time
to time one or more Notices of Borrowing (as defined herein) and
direct payment of the proceeds of any Borrowing hereunder and to
take action in its discretion in furtherance thereof.
(b) Interest Advances shall be (i) made in one or more
Borrowings by delivery to the Liquidity Provider of one or more
written and completed Notices of Borrowing in substantially the
form of Annex I, signed by a person purporting to be an
authorized signatory of the Collateral Agent or (ii) deemed made
upon the withdrawal of funds from the Cash Collateral Account as
provided in the second sentence of Section 2.06 in an amount not
<PAGE>
exceeding the lesser of (x) the semi-annual installment of
interest on the Class C Notes which has become due and is unpaid
and (y) the Unused Commitment at the time of such Advance. Each
Interest Advance shall bear interest at the Cost of Funds plus
the Applicable Margin and shall be for successive Interest
Periods of one day; provided that the Company may, on not less
than three Business Days' prior notice, request that such Advance
be for an Interest Period of one, two or three months and that
such Advance be a LIBOR Advance, in which case such Advance shall
be for the requested Interest Period and shall bear interest at
LIBOR plus the Applicable Margin.
(c) A Downgrade Advance shall be made in a single Borrowing
by delivery to the Liquidity Provider of a written and completed
Notice of Borrowing in substantially the form of Annex II, signed
by a person purporting to be an authorized signatory of the
Collateral Agent, in an amount equal to the Unused Commitment at
such time and shall be used to fund the Cash Collateral Account
in accordance with Section 3.6(c) of the Collateral Agency
Agreement. Prior to the Acceleration of the Class C Notes, each
Downgrade Advance, to the extent not applied as an Interest
Advance in accordance with Section 2.06, shall bear interest at a
rate equal to the greater of (i) a per annum rate equal to the
weighted daily average of one-month LIBOR during the period such
Advance (or portion thereof) is on deposit in the Cash Collateral
Account and (ii) the Investment Earnings on the portion of such
Advance not so applied as an Interest Advance (such Investment
Earnings to be made available to the Liquidity Provider from time
to time in accordance with the third sentence of Section 3.6(f)
of the Collateral Agency Agreement), such rate of interest to be
notified to the Company by the Liquidity Provider in accordance
with Section 3.07(d).
(d) A Non-extension Advance shall be made in a single
Borrowing by delivery to the Liquidity Provider of a written and
completed Notice of Borrowing in substantially the form of
Annex III, signed by a person purporting to be an authorized
signatory of the Collateral Agent, in an amount equal to the
Unused Commitment at such time and shall be used to fund the Cash
Collateral Account in accordance with Section 3.6(d) of the
Collateral Agency Agreement. Prior to the Acceleration of the
Class C Notes, each Non-Extension Advance, to the extent not
applied as an Interest Advance in accordance with Section 2.06,
shall bear interest at a rate equal to the greater of (i) a per
annum rate equal to the weighted daily average of one-month LIBOR
during the period such Advance (or portion thereof) is on deposit
in the Cash Collateral Account and (ii) the Investment Earnings
<PAGE>
on the portion of such Advance not so applied as an Interest
Advance (such Investment Earnings to be made available to the
Liquidity Provider from time to time in accordance with the third
sentence of Section 3.6(f) of the Collateral Agency Agreement),
such rate of interest to be notified to the Company by the
Liquidity Provider in accordance with Section 3.07(d).
(e) An Acceleration Advance shall be made by the Liquidity
Provider, without the necessity for delivery of a Notice of
Borrowing, concurrently with the Acceleration of the Class C
Notes and shall be funded by the Liquidity Provider by wire
transfer of immediately available funds to the Collateral Agent
for deposit in the Cash Collateral Account. The Acceleration
Advance shall be in the amount of the Unused Commitment, and,
unless otherwise agreed by the Liquidity Provider and the
Company, shall bear interest at the Cost of Funds Rate plus the
Applicable Margin and shall be for successive Interest Periods of
one day.
(f) Except as provided in Section 2.02(e), each Borrowing
shall be made on notice given by the Collateral Agent to the
Liquidity Provider not later than 10:30 a.m. (New York City time)
(i) on the third Business Day prior to the proposed Borrowing, if
such Borrowing is a LIBOR Advance, or (ii) on the Business Day of
such Borrowing, if such Borrowing is a Cost of Funds Advance.
Each such notice of a Borrowing (a "Notice of Borrowing") shall
be in writing in substantially the form required by the
applicable provision of this Section 2.02. Upon satisfaction of
the conditions precedent set forth in Section 4.02 with respect
to a requested Borrowing, the Liquidity Provider shall, before
11:00 a.m. (New York City time), if a LIBOR Advance, or 2:00 p.m.
(New York City time), if a Cost of Funds Advance, on the date of
such Borrowing, make available by wire transfer of immediately
available funds the amount of such Borrowing to the Collateral
Agent at its office in Wilmington, Delaware (for credit to
account number 36022-0) or to such other account as is specified
in the relevant Notice of Borrowing. Each Notice of Borrowing
shall be irrevocable and binding on the Company.
(g) Upon the making of any Advance requested pursuant to a
Notice of Borrowing in accordance with the Collateral Agent's
payment instructions, the Liquidity Provider shall be fully
discharged of its obligation hereunder with respect to such
Notice of Borrowing, and the Liquidity Provider shall not
thereafter be obligated to make any further Advances hereunder in
respect of such Notice of Borrowing, to the Collateral Agent or
to any other person (including the Company, the holder of any
Class C Note or the Class C Indenture Trustee) who may have made,
or who makes, to the Collateral Agent, the Class C Indenture
Trustee or the Company a demand for payment with respect to any
<PAGE>
Class C Note. By paying to the Collateral Agent proceeds of
Advances requested by the Collateral Agent in accordance with the
provisions of this Agreement, the Liquidity Provider makes no
representation as to, and assumes no responsibility for, the
correctness or sufficiency for any purpose of the amount of the
Advances so made and requested.
Section 2.03. Fees. In consideration of the Commitment
provided hereby, the Company agrees to pay:
(i) on the Effective Date directly to the Liquidity
Provider a one-time fee of .40 of 1% of the Commitment; provided,
however, that if the Commitment is increased as of October 15,
1996 as described in the definition of such term in Section 1.01,
the Company shall pay on such date directly to the Liquidity
Provider an amount in adjustment of the one-time fee equal to .40
of 1% of $493,500; and
(ii) thereafter to the Collateral Agent for distribution to
the Liquidity Provider a fee (the "Liquidity Fee"), payable in
arrears on each Payment Date subsequent to the Effective Date and
prior to the Termination Date and on the Termination Date,
computed on a daily basis at the rate of .50 of 1% per annum on
the Unused Commitment from time to time.
Section 2.04. Reduction or Termination of the Commitment.
(a) The Commitment is subject to reduction as follows:
(i) unless the Collateral Agent shall have notified the
Liquidity Provider otherwise in a Written Notice promptly after
any such date, on each date on which a payment of principal is
expected to be made in respect of the Class C Notes on a date set
forth on Exhibit A under the heading "Payment Dates", the amount
of the Commitment shall automatically be reduced, as of such
Payment Date, to the amount set opposite such date on Exhibit A;
and
(ii) upon any payment of principal of the Class C Notes
under the Class C Indenture other than due to an expected payment
referred to in the preceding subparagraph (i), the Collateral
Agent shall promptly notify the Liquidity Provider, and the
Collateral Agent and the Liquidity Provider shall promptly agree
on a revised Exhibit A setting forth the relevant Commitment.
(b) Upon the making of any Provider Advance or the
occurrence of the Termination Date, the Commitment shall
automatically terminate, and no further Borrowing hereunder may
be requested.
<PAGE>
Section 2.05. Repayment of Advances; Compensation. (a)
Each Advance hereunder shall be due and payable by the Company
when made notwithstanding that any such Advance may be for an
Interest Period of more than one day and that repayment thereof
prior to the expiration of such Interest Period may require
payments by the Company pursuant to Section 2.05(b); provided,
however, that until the Acceleration of the Class C Notes, no
Provider Advance shall be due and payable by the Company until,
and then only to the extent of, the application of the funds in
the Cash Collateral Account as Interest Advances. Upon
Acceleration of the Class C Notes, all Provider Advances, whether
or not so applied as Interest Advances, shall become immediately
due and payable by the Company and shall thereupon bear interest
as applicable to Acceleration Advances pursuant to
Section 2.02(e).
(b) The Company shall compensate the Liquidity Provider,
upon its written request (which request shall set forth the basis
for requesting such compensation and shall, absent manifest
error, be final and conclusive and binding on all the parties
hereto), for all reasonable losses, expenses and liabilities, but
not with respect to the Applicable Margin (including, without
limitation, any loss, expense or liability incurred by reason of
the liquidation or reemployment of deposits or other funds
required by the Liquidity Provider to fund its LIBOR Advances)
which such Liquidity Provider may sustain if (i) for any reason a
Borrowing of, or conversion from or into, a LIBOR Advance does
not occur on a date specified therefor, or (ii) any repayment or
prepayment (including any prepayment made by application of funds
in accordance with the Collateral Agency Agreement) or conversion
of any LIBOR Advance occurs on a date which is not the last day
of an Interest Period.
Section 2.06. Application of Provider Advances. Amounts
paid in respect of a Provider Advance shall be deposited in the
Cash Collateral Account, invested and withdrawn from the Cash
Collateral Account as set forth in Sections 2.2 and 3.6(f) of the
Collateral Agency Agreement. Amounts withdrawn from the Cash
Collateral Account for the purpose of paying interest on the
Class C Notes in accordance with Section 3.6(f)(i) of the
Collateral Agency Agreement shall thereupon be deemed, as of the
date of such withdrawal, Interest Advances for all purposes of
this Agreement.
<PAGE>
Section 2.07. Book Entries. The Liquidity Provider shall
maintain in accordance with its usual practice an account or
accounts evidencing the indebtedness of the Company resulting
from Advances made from time to time and the amounts of principal
and interest payable hereunder and paid from time to time in
respect thereof; provided, however, that the failure by the
Liquidity Provider to maintain such account or accounts shall not
affect the obligations of the Company in respect of Advances. In
any legal action or proceeding in respect of this Agreement, the
entries made in such account or accounts shall, in the absence of
manifest error or the failure by the Liquidity Provider to
maintain such account or accounts, be prima facie evidence of the
existence and amounts of the obligations of the Company therein
recorded.
Section 2.08. Renewal of the Commitment and Extension of
the Termination Date; Non-extension Advance. The Termination
Date may be extended for periods of 364 days after the
then-effective Termination Date (unless this Agreement is earlier
terminated in accordance with its terms) upon (i) request by the
Collateral Agent by Written Notice, at least 60 days prior to the
then-effective Termination Date, which notice the Collateral
Agent hereby agrees to give no later than 60 days prior to each
Termination Date until the Class C Notes are paid in full or the
Commitment terminates, and (ii) the Liquidity Provider's
agreement to so extend the Termination Date as advised by Written
Notice to the Collateral Agent that the Termination Date shall be
so extended. If the Liquidity Provider fails to so extend the
Termination Date on or before the 30th day preceding the
Termination Date, the Collateral Agent shall demand a
Non-extension Advance in accordance with Section 3.6(d)(i) of the
Collateral Agency Agreement, following the making of which
Non-extension Advance the Commitment shall terminate.
ARTICLE III.
OBLIGATIONS OF THE COMPANY
Section 3.01. Increased Costs. If the Liquidity Provider
shall determine that any change after the Effective Date in any
law or regulation or in the interpretation thereof by any court
or administrative or governmental authority charged with the
administration thereof shall either (i) impose, modify or deem
applicable any reserve, special deposit or similar requirement
against or assets held by, or deposits in or for the account of,
or loans made by, the Liquidity Provider, or (ii) impose on the
Liquidity Provider any other condition regarding this Agreement
and (b) the result of any event referred to in the preceding
clause (i) or (ii) shall be to increase the cost to the Liquidity
<PAGE>
Provider of issuing or maintaining its Commitment, or funding or
maintaining Interest Advances (which increase in cost shall be
determined by the Liquidity Provider's reasonable allocation of
the aggregate of such cost increases resulting from such event),
then, upon demand by the Liquidity Provider, the Company shall
pay, or cause to be paid, to the Liquidity Provider, from time to
time as specified by the Liquidity Provider additional amounts
which shall be sufficient to compensate the Liquidity Provider
for such increased cost; provided, however, that before making
any such demand, the Liquidity Provider agrees to use reasonable
efforts (consistent with its internal policy and legal and
regulatory restrictions) to designate a different Lending Office
if the making of such a designation would avoid the need for, or
reduce the amount of, such increased cost and would not, in the
reasonable judgment of the Liquidity Provider, be otherwise
disadvantageous to the Liquidity Provider. A certificate as to
such increased cost incurred by the Liquidity Provider as a
result of any event mentioned in clause (i) or (ii) above,
prepared in reasonable detail and in accordance with this Section
3.01, submitted by the Liquidity Provider to the Company, shall
be prima facie evidence of the amount thereof. The Liquidity
Provider agrees to give the Company notice of any event referred
to in this Section 3.01 which may have the effect of causing the
Liquidity Provider to incur an increased cost referred to in this
Section 3.01 promptly after an appropriate officer of the
Liquidity Provider becomes aware of such event; provided,
however, that if the Liquidity Provider fails to give such notice
30 days after it obtains or reasonably should have obtained
knowledge with respect to such an event, the Liquidity Provider
shall, with respect to amounts payable pursuant to this Section
3.01 resulting from such event, be entitled to payment under this
Section for amounts incurred only from and after the date 30 days
prior to the date that such Liquidity Provider does give such
notice.
Section 3.02. Capital Adequacy. If the Liquidity Provider
shall determine that the adoption after the Effective Date of any
applicable law, rule or regulation regarding capital adequacy, or
any change therein, or any change after the Effective Date in the
interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the
Liquidity Provider with any request or directive regarding
capital adequacy (whether or not having the force of law) of any
such authority, central bank or comparable agency (excluding
requirements of the Federal Deposit Insurance Corporation and
excluding implementation at the Federal level of the Basle Accord
(to the extent contemplated by current interpretation (as of the
<PAGE>
date hereof) of regulations in respect of the Final Risk-Based
Capital Guidelines of the Board of Governors of the Federal
Reserve System (12 CFR Part 208, Appendix A; 12 CFR Part 225,
Appendix A) and the Final Risk-Based Capital Guidelines of the
Office of the Comptroller of the Currency (12 CFR Part 3,
Appendix A))), has the effect of reducing the rate of return on
the Liquidity Provider's capital as a consequence of its
commitment hereunder, its issuance or maintenance of its
Commitment, its funding Interest Advances or maintaining
outstanding Interest Advances to a level below that which the
Liquidity Provider could have achieved but for such adoption,
change or compliance (taking into consideration the Liquidity
Provider's policies with respect to capital adequacy) by an
amount deemed by the Liquidity Provider to be material, then,
upon demand by the Liquidity Provider, the Company shall pay to
the Liquidity Provider, from time to time as specified by the
Liquidity Provider amounts which shall be sufficient to
compensate the Liquidity Provider for such reduction in respect
of its commitment hereunder, its issuance or maintenance of its
Commitment, its funding Interest Advances or maintaining
outstanding Interest Advances; provided, however, that before
making any such demand, the Liquidity Provider agrees to use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to designate a different Lending
Office if the making of such a designation would avoid the need
for, or reduce the amount of, such increased cost and would not,
in the reasonable judgment of the Liquidity Provider be otherwise
disadvantageous to the Liquidity Provider. A certificate as to
such additional amount describing the event which has the effect
of reducing the rate of return on the Liquidity Provider's
capital, prepared in reasonable detail and in accordance with
this Section 3.02, submitted by the Liquidity Provider to the
Company, shall be prima facie evidence of the amount thereof.
The Liquidity Provider agrees to give the Company notice of any
event referred to in this Section 3.02 which may have the effect
of reducing the rate of return on the Liquidity Provider's
capital promptly after an appropriate officer of the Liquidity
Provider becomes aware of such event; provided, however, that if
the Liquidity Provider fails to give such notice 30 days after it
obtains or reasonably should have obtained knowledge with respect
to such an event, the Liquidity Provider shall, with respect to
amounts payable pursuant to this Section 3.02 resulting from such
event, be entitled to payment under this Section for amounts
incurred only from and after the date 30 days prior to the date
that such Liquidity Provider does give such notice. For the
purposes of this Section 3.02, "Basle Accord" shall mean the
proposals for a risk-based capital framework described by the
Basle Committee on Banking Regulations and Supervisory Practices
<PAGE>
in its paper entitled "International Convergence of Capital
Measurement and Capital Standards" dated July 1988, as modified
and supplemented and in effect from time to time.
Section 3.03. Payments Free of Deductions. All payments
made by the Company under this Agreement shall be made free and
clear of, and without reduction for or on account of, any present
or future stamp or other taxes, levies, imposts, duties, charges,
fees, deductions, withholdings, restrictions or conditions of any
nature whatsoever now or hereafter imposed, levied, collected,
withheld or assessed by the United States (or by any political
subdivision or taxing authority thereof or therein) excluding
income, franchise, capital, business or withholding taxes (gross
or net) now or hereafter imposed on such payments or the
Liquidity Provider (such non-excluded taxes being referred to
herein, collectively, as "Non-excluded Taxes" and, individually,
as a "Non-excluded Tax"). If any Non-excluded Taxes are required
to be withheld from any amounts payable to the Liquidity Provider
under this Agreement, the amounts so payable to the Liquidity
Provider shall be increased to the extent necessary to yield to
the Liquidity Provider (after payment of all Non-excluded Taxes)
interest or any other such amounts payable under this Agreement
at the rates or in the amounts specified in this Agreement.
Whenever any Non-excluded Tax is payable by the Company, as
promptly as possible thereafter the Company shall send the
Liquidity Provider an original official receipt, if available,
showing payment thereof. The Liquidity Provider agrees to use
reasonable efforts (consistent with its internal policy and legal
and regulatory restrictions) to change the jurisdiction of its
Lending Office if the making of such a change would avoid the
need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable
judgment of the Liquidity Provider, be otherwise disadvantageous
to the Liquidity Provider. From time to time upon the reasonable
request of the Company, the Liquidity Provider agrees to provide
to the Company two original Internal Revenue Service Forms 1001
or 4224, as appropriate, or any successor or other form
prescribed by the Internal Revenue Service, certifying that the
Liquidity Provider is exempt from or entitled to a reduced rate
of United States withholding tax on payments pursuant to this
Agreement.
Section 3.04. Payments. The Company shall make or cause to
be made each payment under this Agreement to the Collateral Agent
for payment to the Liquidity Provider not later than 2:00 P.M.
(New York City time) on the day when due, in lawful money of the
United States of America, by wire transfer of immediately
<PAGE>
available funds to the account of Westdeutsche Landesbank
Girozentrale, New York Branch, at The Chase Manhattan Bank, One
Chase Manhattan Plaza, New York, New York (Account No.
920-1-060663, reference USAir). The Company shall make or cause
to be made all payments hereunder from an office or payment
facility within the United States of America. The Company
hereby authorizes the Liquidity Provider, and the Liquidity
Provider hereby agrees, if and to the extent payment is not made
when due hereunder, to apply any moneys received from the
Collateral Agent pursuant to the Collateral Agency Agreement
against any amount then owing hereunder, whether for principal,
interest, fees, commissions, expenses or otherwise.
Section 3.05. Computations. All computations of interest
hereunder at LIBOR shall be made on the basis of a year of 360
days, and all other computations of interest and fees hereunder
shall be made on the basis of a year of 365 days, in each case
for the actual number of days elapsed (including the first day
but excluding the last day).
Section 3.06. Payment on Non-Business Days. Whenever any
payment to be made hereunder shall be stated to be due on a day
other than a Business Day, such payment shall be made on the next
Business Day (and if so made, shall be deemed to have been made
when due), and such extension of time shall in such case be
included in the computation of the payment of interest due
hereunder.
Section 3.07. Interest; Application of Payments. (a)
Except as provided in Section 2.02(c) and (d), the Company shall
pay interest on the unpaid principal amount of each Advance at
the rate provided herein. Interest on any LIBOR Advance not paid
at the end of the relevant Interest Period shall be capitalized
and added to the principal amount thereof in succeeding periods.
(b) All payments received by the Liquidity Provider
hereunder shall be applied first to all amounts due hereunder not
described in second, third and fourth below, second to accrued
interest on all Advances, whether or not any Interest Period has
ended, third, to compensation in accordance with Section 2.05(b)
and fourth, to reduction of the principal of all Advances then
due and payable by the Company, in each case ratably.
(c) In each case interest shall be payable in arrears on
the date of each payment of any amount due hereunder, on each
Payment Date and on the Termination Date (in each case excluding
the date of payment); provided, however, if at any time the
otherwise applicable interest rate as set forth in this Section
<PAGE>
3.07 shall exceed the maximum rate permitted by applicable law,
then any subsequent reduction in such interest rate will not
reduce the rate of interest payable pursuant to this Section 3.07
below the maximum rate permitted by applicable law until the
total amount of interest accrued equals the amount of interest
that would have accrued if such otherwise applicable interest
rate as set forth in this Section 3.07 had at all times been in
effect.
(d) The rate and amount of interest payable in accordance
with the last sentence of each of Sections 2.02(c) and 2.02(d)
shall be calculated by the Liquidity Provider and notified to the
Company and the Collateral Agent in a Written Notice delivered to
the Company in a timely manner.
Section 3.08. Security. Under and pursuant to the
Collateral Agency Agreement, the Company has pledged and granted
to the Collateral Agent to secure the prompt payment of the
Secured Obligations, including the Liquidity Obligations, for the
security and benefit of the Liquidity Provider, the Other
Liquidity Providers, the Noteholders and the Indenture Trustees,
a first priority lien on, pledge of and security interest in the
Collateral.
ARTICLE IV.
CONDITIONS PRECEDENT
Section 4.01. Conditions Precedent to Effectiveness. This
Agreement shall become effective on and as of the first date (the
"Effective Date") on which the following conditions precedent
have been satisfied:
(a) the Liquidity Provider shall have received on or
before February 16, 1996 each of the following, each dated
such date (except for those documents delivered pursuant to
paragraphs (v) and (vii) of this Section 4.01(a)), and each
in form and substance satisfactory to the Liquidity
Provider:
(i) This Agreement duly executed on behalf of the
Company and the Collateral Agent.
(ii) The Collateral Agency Agreement duly executed
on behalf of each of the parties thereto.
<PAGE>
(iii) Counterparts (or certified copies
thereof) of each of the Basic Documents (other than
this Agreement and the Collateral Agency Agreement)
which, when taken together, bear the signatures of all
of the respective parties thereto and which are in full
force and effect in accordance with their respective
terms.
(iv) A copy of the Offering Memorandum and a
specimen copy of the Class C Notes.
(v) Evidence that, on the Effective Date, the
Class A Notes, the Class B Notes and the Class C Notes
will receive long-term credit ratings from Moody's of
not lower than A2, Baa1 and Ba2, respectively, and from
S&P of not lower than A+, A- and BBB-, respectively.
(vi) An executed or certified copy of each
document, instrument, certificate and opinion delivered
pursuant to the Class C Indenture, the Collateral
Agency Agreement and the other Basic Documents
(together with, in the case of each such opinion, other
than the opinion of counsel for the Purchasers, a
letter from the counsel rendering such opinion to the
effect that the Liquidity Provider is entitled to rely
on such opinion as if it were addressed to the
Liquidity Provider).
(vii) Evidence that there shall have been made
and shall be in full force and effect, all filings,
recordings and/or registrations, and there shall have
been given or taken any notice or other similar action
as may be reasonably necessary or, to the extent
reasonably requested by the Liquidity Provider,
reasonably advisable, in order to establish, perfect,
protect and preserve the right, title and interest,
remedies, powers, privileges, liens and security
interests of, or for the benefit of, the Liquidity
Provider created by the Basic Documents.
(viii) Such other documents, instruments,
opinions and approvals (and, if requested by the
Liquidity Provider, certified duplicates or executed
copies thereof) as the Liquidity Provider shall have
reasonably requested.
<PAGE>
(b) The following statements shall be true and shall
be deemed to have been represented by the Company as being
true on and as of the Effective Date:
(i) The representations and warranties of the
Company contained in the Purchase Agreement are true
and correct on and as of the Effective Date as though
made on and as of such Date; and
(ii) No event has occurred and is continuing, or
would result from the entering into of this Agreement
or the making of any Advance, which constitutes a
Collateral Access Event.
(c) The Liquidity Provider shall have received payment
in full of all fees and other sums required to be paid to or
for the account of the Liquidity Provider on or prior to the
Effective Date.
(d) All conditions precedent to the issuance of the
Notes under the Indentures shall have been or shall
concurrently be satisfied, all conditions precedent to the
effectiveness of the Other Liquidity Facilities shall have
been or shall concurrently be satisfied, all conditions
precedent to the purchase of the Notes by the Purchasers
under the Purchase Agreement shall have been or shall
concurrently be satisfied (unless any of such conditions
precedent under the Purchase Agreement shall have been
waived by the Purchasers) and the Company shall have
received or shall concurrently receive the proceeds of the
sale of such Notes.
(e) The perfection and priority of the lien granted
under the Collateral Agency Agreement shall be satisfactory
in all respects to the Liquidity Provider.
Section 4.02. Conditions Precedent to Borrowing. The
obligation of the Liquidity Provider to make an Advance on the
occasion of each Borrowing shall be subject to the conditions
precedent that the Effective Date shall have occurred, on the
date of such Borrowing the Collateral Agent, to the extent
required by the terms of this Agreement, shall have delivered a
Notice of Borrowing and the Liquidity Provider shall find that
the Notice of Borrowing conforms to the terms and conditions of
this Agreement and has been completed as may be required by the
relevant form of the Notice of Borrowing for the type of Advances
requested.
<PAGE>
ARTICLE V.
COVENANTS
Section 5.01. Affirmative Covenants of the Company. So
long as any Advance shall remain unpaid or the Liquidity Provider
shall have any Commitment hereunder or the Company shall have any
obligation to pay any amount to the Liquidity Provider hereunder,
the Company will, unless the Liquidity Provider shall otherwise
consent in writing:
(a) Performance of This and Other Agreements. Punctually
pay or cause to be paid all amounts payable under this Agreement
and the other Basic Documents and observe and perform in all
material respects the conditions, covenants and requirements of
this Agreement and the other Basic Documents.
(b) Reporting Requirements. Furnish, or cause to be
furnished, to the Liquidity Provider, with reasonable promptness
copies of all information furnished to the Class C Indenture
Trustee or the Class C Noteholders pursuant to Section 4.04 of
the Class C Indenture as originally executed and such other
information and data with respect to the Collateral and the
transactions completed by the Basic Documents as from time to
time may be reasonably requested by the Liquidity Provider.
(c) Certain Notices. Furnish to the Liquidity Provider and
the Collateral Agent (i) promptly after August 16, 1996, Written
Notice as to whether or not a Registration Event has occurred,
and (ii) if a Registration Event did not occur on or prior to
August 16, 1996, Written Notice promptly after February 16, 1997
as to whether or not a Registration Event occurred on or prior to
February 16, 1997.
Section 5.02. Negative Covenants of the Company. So long
as any Advance shall remain unpaid or the Liquidity Provider
shall have any Commitment hereunder or the Company shall have any
obligation to pay any amount to the Liquidity Provider hereunder,
the Company will not, without the written consent of the
Liquidity Provider:
(a) Amendments. Modify, amend or supplement, or give any
consent to any modification, amendment or supplement or make any
waiver with respect to, any provision of the Indentures in a
manner described in Section 9.01(a)(A), (B), (C) or (D) thereof.
<PAGE>
(b) Collateral Agent. Appoint or permit or suffer to be
appointed any successor Collateral Agent without the prior
written approval of the Liquidity Provider (which approval shall
not be unreasonably withheld).
Section 5.03. Covenants of the Liquidity Provider. So long
as it shall have any Commitment hereunder, the Liquidity Provider
will:
(a) Change in Ratings. Immediately give Written Notice to
the Company and the Collateral Agent of any change in the ratings
given to any of the Liquidity Provider's outstanding debt or
other securities (including (without limitation) any change in
the ratings of its short-term, unsecured debt) by S&P or Moody's.
(b) Notice of Liquidity Obligations. From time to time
upon request of the Collateral Agent, inform the Collateral
Agent, by delivery of a Written Notice, of the outstanding amount
of Liquidity Obligations as of the date of such Notice.
Section 5.04. Covenant of the Collateral Agent. So long as
the Liquidity Provider shall have any Commitment hereunder, the
Collateral Agent will deliver to the Liquidity Provider each of
the notices that this Agreement contemplates will be or may be
delivered by the Collateral Agent (including, without limitation,
each of the notices referred to (i) in the definition of
"Commitment" in Section 1.01 and (ii) in Section 2.04(a))
promptly upon the occurrence of the relevant event referred to
herein or in any such notice.
ARTICLE VI.
MISCELLANEOUS
Section 6.01. Amendments, Etc. No amendment or waiver of
any provision of this Agreement, or consent to any departure by
the Company therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Liquidity Provider and
the Collateral Agent, and, in the case of an amendment, the
Company and the Collateral Agent in accordance with Section 10.1
of the Collateral Agency Agreement, and then such waiver or
consent shall be effective only in the specific instance and for
the specific purpose for which given.
<PAGE>
Section 6.02. Notices, Etc. Except as otherwise expressly
provided herein, all notices and other communications provided
for hereunder shall be in writing (including fax) and mailed or
delivered or sent by fax:
if to the
Company, at: USAir, Inc.
Crystal Park Four
2345 Crystal Drive
Arlington, VA 22227
Attention of Treasurer
Telephone: (703) 418-7000
Fax: (703) 418-5936
if to the
Liquidity Provider, at: Westdeutsche Landesbank
Girozentrale,
New York Branch
1211 Avenue of the Americas
New York, NY 10036
Attention of Asset Based
Finance
Telephone: (212) 852-6111
Fax: (212) 921-5947
if to the
Collateral Agent, at: Wilmington Trust Company
Rodney Square North
1100 North Market Street
Wilmington, DE 19890-0001
Attention of Corporate Trust
Administration
Telephone: (302) 651-8726
Fax: (302) 651-8882
or, as to each of the foregoing, at such other address as shall
be designated by such Person in a Written Notice to the others.
All such notices and communications shall be effective (i) if
given by fax, when transmitted to the fax number specified as
aforesaid, (ii) if given by mail, when deposited in the mails
addressed as aforesaid, and (iii) if given by other means, when
delivered at the address specified as aforesaid, except that
Written Notices to the Liquidity Provider pursuant to the
provisions of Articles II and III hereof shall not be effective
until received by the Liquidity Provider.
<PAGE>
Section 6.03. No Waiver. No failure on the part of the
Liquidity Provider to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver thereof.
Section 6.04. Further Assurances. The Company agrees to do
such further acts and things and to execute and deliver to the
Liquidity Provider such additional assignments, agreements,
powers and instruments as the Liquidity Provider may reasonably
require or deem advisable to carry into effect the purposes of
this Agreement and the other Basic Documents or to better assure
and confirm unto the Liquidity Provider its rights, powers and
remedies hereunder and under the other Basic Documents.
Section 6.05. Indemnification. The Company hereby agrees
to pay, assume liability for and indemnify, protect, defend, save
and keep harmless the Liquidity Provider from and against any and
all Expenses from time to time be imposed, incurred by or
asserted against the Liquidity Provider (whether or not such is
also indemnified or insured against by any other person) as a
result of (A) the manufacture, purchase, acceptance or rejection
of any Airframe or Engine; (B) any Aircraft (or any portion
thereof) or any Engine installed on an airframe or any engine
installed on an Airframe, whether or not arising out the
ownership, delivery, nondelivery, storage, lease, sublease,
possession, use, non-use, operation, maintenance, modification,
alteration, condition, replacement, repair, substitution, sale,
return or other disposition, registration, reregistration or
airworthiness of an Aircraft including, without limitation,
latent or other defects (whether or not discoverable), strict
tort liability and any claim for patent, trademark or copyright
infringement; or (C) the failure by the Company to perform or
observe any covenant, condition or agreement contained herein or
in any of the Basic Documents, or the falsity of any
representation or warranty of the Company contained herein or in
any other Basic Document; provided that, the foregoing indemnity
shall not extend to any Expense to the extent attributable to (1)
the failure by the Liquidity Provider to perform or observe any
agreement, covenant or condition in this Collateral Agency
Agreement or any other Basic Document; (2) the bad faith, wilful
misconduct or negligence of the Liquidity Provider; (3) the
breach of any contractual obligation by, or the falsity or
inaccuracy or breach of any representation or warranty of, the
Liquidity Provider; (4) other than during the continuation of any
Collateral Access Event, the authorization or giving or
withholding of any future amendments, supplements, waivers or
consents with respect to this Agreement unless such amendments,
supplements, waivers or consents (a) are requested by the Company
<PAGE>
or (b) are required pursuant to the terms of this Agreement
(unless such requirements results from the actions of the
Liquidity Provider); (5) except to the extent attributable to
acts or events occurring prior thereto, acts or events which
occur after the payment by the Company of all amounts payable by
the Company pursuant hereto and pursuant to the Indentures; (6) a
disposition by the Liquidity Provider of its interest in the
Basic Documents other than during the continuance of a Collateral
Access Event; or (7) any and all Taxes. After the Liquidity
Provider receives notice of any claim or commencement of any
action, suit or proceeding against it or otherwise becomes aware
of any matter for which indemnification will be sought hereunder,
if such party elects to make a claim hereunder, it shall notify
the Company in writing within 10 days after receiving such notice
or becoming so aware and the Company shall, at its election, be
entitled to assume control of the defense of any such proceeding.
If the Company so elects to assume control, it shall not be
liable for any additional fees and expenses of counsel for the
Liquidity Provider, except to the extent such counsel is retained
with the prior consent of the Company unless, in the reasonable
judgment of the Liquidity Provider, there exists a conflict of
interest between the Company and the Liquidity Provider which
requires the retention by the Liquidity Provider of separate
counsel. In no event shall the Company settle any action or
proceeding against the Liquidity Provider without the prior
written consent of the Liquidity Provider. Failure to timely
give such notice shall not waive any right to indemnification,
except only to the extent of any damage or loss suffered by the
Company by reason of delay in receiving such notice. Nothing in
this Section 6.05 is intended to limit the obligations of the
Company contained in Articles II and III.
Section 6.06. Liability of the Liquidity Provider. (a)
The Company assumes all risks of the acts or omissions of the
Collateral Agent and any beneficiary or transferee of the rights
of the Collateral Agent hereunder. Neither the Liquidity
Provider nor any of its officers or directors shall be liable or
responsible for: (i) the use which may be made of the Advances
or any acts or omissions of the Collateral Agent in connection
therewith; (ii) the validity, sufficiency or genuineness of
documents, or of any endorsement thereon, even if such documents
should prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (iii) making of Advances by the Liquidity
Provider against delivery of a Notice of Borrowing and other
documents which do not comply with the terms hereof; or (iv) any
other circumstances whatsoever in making or failing to make any
Advances hereunder; provided, however, that the Company shall
have a claim against the Liquidity Provider, and the Liquidity
Provider shall be liable to the Company, to the extent of any
<PAGE>
damages suffered by the Company which were the result of the
Liquidity Provider's failure to make lawful payment hereunder
after the delivery to it by the Collateral Agent of a Notice of
Borrowing strictly complying with the terms and conditions
hereof.
(b) The Liquidity Provider shall not be liable or
responsible in any respect for (i) any error, omission,
interruption or delay in transmission, dispatch or delivery of
any message or advice, however transmitted, in connection with
this Agreement or any Notice of Borrowing delivered hereunder, or
(ii) any action, inaction or omission which may be taken by it in
good faith, absent willful misconduct or gross negligence (in
which event the extent of the Liquidity Provider's potential
liability to the Company shall be limited as set forth in the
immediately preceding paragraph), in connection with this
Agreement or any Notice of Borrowing. The Company further agrees
that any action taken or omitted by the Liquidity Provider under
or in connection with this Agreement or any Notice of Borrowing
or the related Advances or documents, if done in good faith
without willful misconduct or gross negligence, shall be
effective against the Company as to the rights, duties and
obligations of the Liquidity Provider and shall not place the
Liquidity Provider under any liability to the Company.
Section 6.07. Costs, Expenses and Taxes. The Company
agrees to pay (A) on the Effective Date and on such later date or
dates on which the Liquidity Provider shall make demand, all
reasonable out-of-pocket costs and expenses in connection with
the preparation, negotiation, execution, delivery, filing and
recording of this Agreement, any other Basic Document and any
other documents (including, without limitation, the Offering
Memorandum) which may be delivered in connection with this
Agreement, including, without limitation, the reasonable fees and
expenses of outside counsel for the Liquidity Provider and (B) on
demand, all reasonable costs and expenses (including reasonable
counsel fees and actual disbursements) in connection with (i) any
Interest or Acceleration Advance (other than normal overhead
charges) and the enforcement of this Agreement, (ii) any
modification or amendment of, or supplement to, this Agreement,
any other Basic Document or such other documents which may be
delivered in connection herewith or therewith (whether or not the
same shall become effective), other than any such modification,
amendment or supplement sought by the Liquidity Provider, or
(iii) any action or proceeding relating to any order, injunction
or other process or decree restraining or seeking to restrain the
Liquidity Provider from paying any amount hereunder. In
addition, the Company shall pay any and all recording, stamp and
<PAGE>
other similar taxes and fees payable or determined to be payable
in connection with the execution, delivery, filing and recording
of this Agreement, any other Basic Document and such other
documents, and agrees to save the Liquidity Provider harmless
from and against any and all liabilities with respect to or
resulting from any delay in paying or omission to pay such taxes
or fees. (For the avoidance of doubt, the Company and the
Liquidity Provider agree that the Company shall not be required
to pay any costs or expenses of the Liquidity Provider in
connection with any extension of this Agreement contemplated in
Section 2.08.)
Section 6.08. Binding Effect; Participations. (a) This
Agreement shall be binding upon and inure to the benefit of the
Company, the Collateral Agent and the Liquidity Provider and
their respective successors and assigns, except that neither the
Liquidity Provider (except as otherwise provided in this
Section 6.08) nor the Company shall have the right to assign its
rights hereunder or any interest herein without the prior written
consent of the other party, subject to the requirement of Section
6.08(b). The Liquidity Provider may grant participations herein
or in any of its rights or security hereunder and under the other
Basic Documents, including, without limitation, any instruments
securing the Company's obligations hereunder, to such Persons as
the Liquidity Provider may in its sole discretion select, subject
to the requirements of Section 6.08(b). No such participation by
the Liquidity Provider, however, will relieve the Liquidity
Provider of its obligations hereunder. In connection with any
participation or any proposed participation, the Liquidity
Provider may disclose to the participant or the proposed
participant any information that the Company is required to
deliver or to disclose to the Liquidity Provider pursuant to this
Agreement. Notwithstanding the foregoing, the Company's
obligations hereunder and under the other Basic Documents shall
not increase as a result of the grant of any participations by
the Liquidity Provider in any of its interests or obligations
under this Agreement, in any Advances or the other Basic
Documents to any participant.
(b) If, pursuant to subsection (a) above, the Liquidity
Provider sells any participation or transfers any interest in
this Agreement to any bank or other entity (each a "Transferee"),
then, concurrently with the effectiveness of such transfer, the
Transferee shall (i) represent to the Liquidity Provider (for the
benefit of the Liquidity Provider and the Company) either (A)
that it is incorporated under the laws of the United States or a
state thereof or (B) that under applicable law and treaties, no
taxes will be required to be withheld by the Company or the
<PAGE>
Provider with respect to any payments to be made to such
Transferee in respect of this Agreement, (ii) furnish to the
Liquidity Provider and the Company either (x) a statement that it
is incorporated under the laws of the United States or a state
thereof or (y) if it is not so incorporated, two copies of a
properly completed United States Internal Revenue Service Form
4224 or Form 1001, as appropriate, or other applicable form,
certificate or document prescribed by the Internal Revenue
Service certifying, in each case, such Transferee's entitlement
to a complete exemption from United States federal withholding
tax in respect to any and all payments to be made hereunder, and
(iii) agree (for the benefit of the Liquidity Provider and the
Company) to provide the Liquidity Provider and the Company a new
Form 4224 or Form 1001, as appropriate, (A) on or before the date
that any such form expires or becomes obsolete or (B) after the
occurrence of any event requiring a change in the most recent
form previously delivered by it and prior to the immediately
following due date of any payment by the Company hereunder,
certifying in the case of a Form 1001 or Form 4224 that such
Transferee is entitled to a complete exemption from United States
federal withholding tax on payments under this Agreement. Unless
the Company has received forms or other documents reasonably
satisfactory to it indicating that payments hereunder are not
subject to United States federal withholding tax, the Company
will withhold taxes as required by law from such payments at the
applicable statutory rate.
Section 6.09. Severability. Any provision of this
Agreement which is prohibited, unenforceable or not authorized in
any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition, unenforceability or
non-authorization without invalidating the remaining provisions
hereof or affecting the validity, enforceability or legality of
such provision in any other jurisdiction.
Section 6.10. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE
STATE OF NEW YORK.
Section 6.11. Execution in Counterparts. This Agreement
may be executed in any number of counterparts and by different
parties hereto on separate counterparts, each of which
counterparts, when so executed and delivered, shall be deemed to
be an original and all of which counterparts, taken together,
shall constitute but one and the same Agreement.
<PAGE>
Section 6.12. Entirety. This Agreement and the other Basic
Documents to which the Liquidity Provider is a party constitute
the entire agreement of the parties hereto with respect to the
subject matter hereof and supersede all prior understandings and
agreements of such parties.
Section 6.13. Headings. Section headings in this Agreement
are included herein for convenience of reference only and shall
not constitute a part of this Agreement for any other purpose.
Section 6.14. LIQUIDITY PROVIDER'S OBLIGATION TO MAKE
ADVANCES. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT, THE
OBLIGATIONS OF THE LIQUIDITY PROVIDER TO MAKE ADVANCES HEREUNDER,
AND THE COLLATERAL AGENT'S RIGHTS TO DELIVER NOTICES OF BORROWING
REQUESTING THE MAKING OF ADVANCES HEREUNDER, SHALL BE
UNCONDITIONAL AND IRREVOCABLE, AND SHALL BE PAID OR PERFORMED
STRICTLY IN ACCORDANCE WITH THE TERMS OF THIS AGREEMENT,
NOTWITHSTANDING THE BANKRUPTCY OR INSOLVENCY OF THE COMPANY.
Section 6.15. Exculpation of Collateral Agent. Wilmington
Trust Company is executing this Agreement not in its individual
capacity but solely as Collateral Agent and, as such, shall incur
no personal liability in connection herewith or the transactions
contemplated hereby, other than for its own wilful misconduct or
gross negligence.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered by their respective
officers thereunto duly authorized as of the date first set forth
above.
USAIR, INC.
By: /s/Thomas A. Fink
_____________________________
Name: Thomas A. Fink
Title: Treasurer
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: ______________________________
Name:
Title:
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH, as Liquidity Provider
By: /s/Brigitte Thieme
_____________________________
Name: Brigitte Thieme
Title: Managing Director
By: /s/Cordula Kraska-Hoernemann
_____________________________
Name: Cordula Kraska-Hoernemann
Title: Vice President
WILMINGTON TRUST COMPANY
as Collateral Agent
By: ______________________________
Name:
Title:
<PAGE>
WESTDEUTSCHE LANDESBANK GIROZENTRALE,
NEW YORK BRANCH, as Liquidity Provider
By: ______________________________
Name:
Title:
By: ______________________________
Name:
Title:
WILMINGTON TRUST COMPANY,
as Collateral Agent
By: /s/W. Chris Sponenberg
_____________________________
Name: W. Chris Sponenberg
Title: Financial Services Officer
<PAGE>
EXHIBIT A to
Liquidity Agreement
Class C Notes
- -------------
Expected Required Required
Outstanding Commitment Amount Commitment Amount
Principal At Stated Interest At Stated Interest
Payment Date Balance Rate of 6.76% Rate of 7.26%
- ------------ ------------- ------------------ ------------------
16-Feb-1996 65,800,000 8,813,910 9,307,410
15-Apr-1996 65,800,000 8,813,910 9,307,410
15-Oct-1996 64,091,695 8,585,083 9,065,770
15-Apr-1997 63,310,089 8,480,386 8,995,212
15-Oct-1997 62,528,483 8,375,690 8,844,654
15-Apr-1998 61,825,038 8,281,464 8,745,152
15-Oct-1998 61,121,592 8,187,237 8,645,649
15-Apr-1999 60,483,975 8,101,828 8,555,458
15-Oct-1999 59,846,357 8,016,420 8,465,267
15-Apr-2000 59,378,807 7,953,791 8,399,132
15-Oct-2000 58,911,258 7,891,163 8,332,997
15-Apr-2001 58,525,578 7,839,501 8,278,443
15-Oct-2001 57,758,388 7,736,736 8,169,924
15 Apr-2002 57,225,009 7,665,290 8,094,478
15-Oct-2002 56,826,801 7,611,950 8,038,151
15-Apr-2003 55,739,180 7,466,263 7,884,307
15-Oct-2003 55,119,329 7,383,234 7,796,629
15-Apr-2004 52,508,400 7,033,500 7,427,313
15-Oct-2004 50,992,135 6,830,396 7,212,838
15-Apr-2005 48,020,840 6,432,392 6,792,548
15-Oct-2005 44,732,727 5,991,949 6,327,444
15 Apr-2006 41,059,200 5,499,880 5,807,824
15-Oct-2006 36,876,094 4,939,553 5,216,124
15-Apr-2007 33,803,087 4,527,923 4,781,447
15-Oct-2007 29,410,382 3,939,521 4,160,099
15-Apr-2008 0 0 0
<PAGE>
Annex I to
Liquidity Agreement
INTEREST ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
collateral agent (the "Collateral Agent"), HEREBY CERTIFIES to
Westdeutsche Landesbank Girozentrale, New York Branch (the "Liquidity
Provider"), with reference to Class C Liquidity Agreement dated as of
February 15, 1996 among the Liquidity Provider, USAir, Inc. and the
Collateral Agent (the "Liquidity Agreement"; the terms defined therein
and not otherwise defined herein being used herein as therein
defined), that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of Borrowing
for the making of an Interest Advance by the Liquidity Provider to be
used for the payment of interest on the Class C Notes which was
payable on the Payment Date that occurred five calendar days prior to
the date of this Notice of Borrowing in accordance with the terms and
provisions of the Class C Indenture and the Class C Notes pursuant to
Section 3.6(a) of the Collateral Agency Agreement.
(3) The amount of the Interest Advance requested hereby (i) is
$______, to be applied in respect of the payment of interest which was
due and payable on the Class C Notes on such Payment Date, (ii) does
not include any amount with respect to the payment of principal of, or
premium on, the Class C Notes, the Class B Notes or the Class C Notes,
or interest on the Class B Notes or the Class C Notes, (iii) was
computed in accordance with the provisions of the Class C Notes, the
Class C Indenture and the Collateral Agency Agreement (a copy of which
computation is attached hereto as Schedule I), (iv) does not exceed
the Unused Commitment on the date hereof, and (v) has not been and is
not the subject of a prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Collateral Agent of the
amount requested hereby, (a) the Collateral Agent will apply the same
in accordance with the terms of the Collateral Agency Agreement, (b)
no portion of such amount shall be applied by the Collateral Agent for
any other purpose and (c) no portion of such amount until so applied
shall be commingled with other funds held by the Collateral Agent.
The Collateral Agent hereby acknowledges that, pursuant to the
Liquidity Agreement, the making of the Interest Advance requested by
this Notice of Borrowing shall automatically reduce the Unused
Commitment by an amount equal to the amount of the Interest Advance
made pursuant hereto as set forth in clause (i) of paragraph (3) of
this Certificate and such reduction shall automatically result in
corresponding reductions in the amounts available to be borrowed by a
subsequent Downgrade Advance or Non-extension Advance.
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this Notice of Borrowing as of the _______ day of ______,
______ .
WILMINGTON TRUST COMPANY,
as Collateral Agent
By _____________________________
[Name and Title]
<PAGE>
SCHEDULE I TO INTEREST ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with Interest Advance
Notice of Borrowing]
<PAGE>
Annex II to
Liquidity Agreement
DOWNGRADE ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
collateral agent (the "Collateral Agent"), HEREBY CERTIFIES to
Westdeutsche Landesbank Girozentrale, New York Branch (the "Liquidity
Provider"), with reference to Class C Liquidity Agreement dated as of
February 15, 1996 among the Liquidity Provider, USAir, Inc. and the
Collateral Agent (the "Liquidity Agreement"; the terms defined therein
and not otherwise defined herein being used herein as therein
defined), that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of Borrowing
for the making of a Downgrade Advance by the Liquidity Provider to be
used for the funding of the Cash Collateral Account in accordance with
Section 3.6(c) of the Collateral Agency Agreement by reason of the
short-term unsecured debt rating of the Liquidity Provider being rated
by any Rating Agency at or lower than the Trigger Rating, which
Advance is requested to be made on ________________, ______.
(3) The amount of the Downgrade Advance requested hereby (i) is
$___________, to be applied in respect of the funding of the Cash
Collateral Account in accordance with Sections 3.6(c) and 3.6(f) of
the Collateral Agency Agreement and does not exceed the Unused
Commitment on the date hereof, (ii) does not include any amount with
respect to the payment of the principal of, or premium on, the Class C
Notes, or principal of, or interest or premium on, the Class B Notes
or the Class C Notes, (iii) was computed in accordance with the
provisions of the Class C Notes, the Class C Indenture and the
Collateral Agency Agreement (a copy of which computation is attached
hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing under the Liquidity
Agreement.
(4) Upon receipt by or on behalf of the Collateral Agent of the
amount requested hereby, (a) the Collateral Agent will deposit such
amount in the Cash Collateral Account and apply the same in accordance
with the terms of Section 3.6(c) of the Collateral Agency Agreement,
(b) no portion of such amount shall be applied by the Collateral Agent
for any other purpose and (c) no portion of such amount until so
applied shall be commingled with other funds held by the Collateral
Agent.
The Collateral Agent hereby acknowledges that, pursuant to the
Liquidity Agreement, (A) the making of the Downgrade Advance requested
by this Notice of Borrowing shall terminate the Commitment, and (B)
<PAGE>
following the making by the Liquidity Provider of the Downgrade
Advance requested by this Notice of Borrowing, the Collateral Agent
shall not be entitled to request any further Advances under the
Liquidity Agreement.
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this as of Notice of Borrowing the ____ day of
_______________, ____.
WILMINGTON TRUST COMPANY,
as Collateral Agent
By
_____________________________
[Name and Title]
<PAGE>
SCHEDULE I TO DOWNGRADE ADVANCE NOTICE OF BORROWING
[Insert Copy of computations in accordance with Downgrade Advance
Notice of Borrowing]
<PAGE>
Annex III to
Liquidity Agreement
NON-EXTENSION ADVANCE NOTICE OF BORROWING
The undersigned, a duly authorized signatory of the undersigned
collateral agent (the "Collateral Agent"), HEREBY CERTIFIES to
Westdeutsche Landesbank Girozentrale, New York Branch (the "Liquidity
Provider"), with reference to Class C Liquidity Agreement dated as of
February 15, 1996 among the Liquidity Provider, USAir, Inc. and the
Collateral Agent (the "Liquidity Agreement"; the terms defined therein
and not otherwise defined herein being used herein as therein
defined), that:
(1) The Collateral Agent is the Collateral Agent under the
Collateral Agency Agreement.
(2) The Collateral Agent is delivering this Notice of Borrowing
for the making of a Non-extension Advance by the Liquidity Provider to
be used for the funding of the Cash Collateral Account in accordance
with Section 3.6(d) of the Collateral Agency Agreement by reason of
the failure to deliver to the Collateral Agent a Replacement Liquidity
Facility in accordance with said Section 3.6(d), which Advance is
requested to be made on _________________, ______.
(3) The amount of the Non-extension Advance requested hereby (i)
is $___________, to be applied in respect of the funding of the Cash
Collateral Account in accordance with Sections 3.6(d) and 3.6(f) of
the Collateral Agency Agreement and does not exceed the Unused
Commitment on the date hereof, (ii) does not include any amount with
respect to the payment of principal of, or premium on, the Class C
Notes, or principal of or interest or premium on, the Class B Notes or
the Class C Notes, (iii) was computed in accordance with the
provisions of the Class C Notes, the Class C Indenture and the
Collateral Agency Agreement (a copy of which computation is attached
hereto as Schedule I), and (iv) has not been and is not the subject of
a prior or contemporaneous Notice of Borrowing.
(4) Upon receipt by or on behalf of the Collateral Agent of the
amount requested hereby, (a) the Collateral Agent will deposit such
amount in the Cash Collateral Account and apply the same in accordance
with the terms of Section 3.6(d) of the Collateral Agency Agreement,
(b) no portion of such amount shall be applied by the Collateral Agent
for any other purpose and (c) no portion of such amount until so
applied shall be commingled with other funds held by the Collateral
Agent.
The Collateral Agent hereby acknowledges that, pursuant to the
Liquidity Agreement, (A) the making of the Non-extension Advance
requested by this Notice of Borrowing shall terminate the Commitment,
and (B) following the making by the Liquidity Provider of the
Non-extension Advance requested by this Notice of Borrowing, the
Collateral Agent shall not be entitled to request any further Advances
under the Liquidity Agreement.
<PAGE>
IN WITNESS WHEREOF, the Collateral Agent has executed and
delivered this Notice of Borrowing as of the ___ day of __________,
_____.
WILMINGTON TRUST COMPANY,
as Collateral Agent
By
___________________________
[Name and Title]
<PAGE>
SCHEDULE I TO NON-EXTENSION ADVANCE NOTICE OF BORROWING
[Insert Copy of Computations in accordance with Non-extension Advance
Notice of Borrowing]
Exhibit 5.10
[Opinion of Lawrence M. Nagin to be
filed by Amendment]
Exhibit 5.11
[subject to completion]
, 1996
USAir, Inc.
Crystal Park Four
2345 Crystal Drive
Arlington, Virginia 22227
Dear Sirs:
We have acted as special tax counsel to USAir, Inc., (the
"Company") in connection with the preparation and filing with the
Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Act"), of a Registration
Statement on Form S-4 (Registration No. 33-_____), (the
Registration Statement"), relating to New Class A, Class B and
Class C Enhanced Equipment Notes (the "Notes"), to be issued in
exchange for Old Class A, Class B and Class C Enhanced Equipment
Notes, respectively, pursuant to three separate indentures, each
dated as of February 15, 1996, entered into between the Company and
Wilmington Trust Company, as indenture trustee under each
indenture.
Based upon the facts as set forth in the Registration
Statement (which we have assumed to be accurate without examination
of the Notes or the related indentures), we are of the opinion that
the discussion in the Prospectus constituting part of the
Registration Statement entitled "Certain United States Federal
Income Tax Consequences," insofar as it relates to statements of
law or legal conclusions, is correct in all material respects.
We hereby consent to the filing of this opinion as an Exhibit
to the Registration Statement. In giving such consent, we do not
thereby concede that we are within the category of persons whose
consent is required under Section 7 of the Act or the Rules and
Regulations of the commission thereunder.
Very truly yours,
Ginsburg, Feldman and Bress Chartered
Exhibit 5.13
FULBRIGHT & JAWORSKI
L.L.P.
February 16, 1996
To each of the Parties Named
on the Attached Schedule:
Re: USAir Enhanced Equipment Notes
------------------------------
Gentlemen:
We have acted as special New York counsel for USAir, Inc. (the
"Company") in connection with the transactions contemplated by the
Collateral Agency Agreement (the "Collateral Agreement") dated as
of February 15, 1996 among the Company; Wilmington Trust Company,
as Class A Indenture Trustee; Wilmington Trust Company, as Class B
Indenture Trustee; Wilmington Trust Company, as Class C Indenture
Trustee; Westdeutsche Landesbank Girozentrale, New York Branch, as
Class A Liquidity Provider; Westdeutsche Landesbank Girozentrale,
New York Branch, as Class B Liquidity Provider; Westdeutsche
Landesbank Girozentrale, New York Branch, as Class C Liquidity
Provider; and Wilmington Trust Company, as Collateral Agent.
Capitalized terms used herein and not otherwise defined herein
shall have the meanings set forth in Appendix A to the Collateral
Agreement.
In connection herewith, we have examined the originals or
copies of the Collateral Agreement, the Class A Indenture, the
Class B Indenture, the Class C Indenture, the Class A Liquidity
Agreement, the Class B Liquidity Agreement, the Class C Liquidity
Agreement and the Notes issued under each Indenture (collectively,
the "Agreements"). We have also examined the Registration Rights
Agreement. In addition, we have examined copies, certified or
otherwise identified to our satisfaction of such corporate records
of the Company and such other documents, certificates and other
statements of government officials and corporate officers and other
representatives of the Company as we have considered necessary or
appropriate for purposes of this opinion. As to certain facts
material to the opinions expressed herein, we have relied without
independent verification upon the representations and warranties
contained in or made pursuant to the Agreements.
<PAGE>
Based upon the foregoing, and upon an examination of such
questions of law as we have considered necessary or appropriate,
and subject to the assumptions, exceptions, qualifications and
limitations set forth below, we advise you that, in our opinion:
1. The execution and delivery by the Company of each of the
Agreements, the consummation by the Company of the transactions
contemplated thereby and the compliance by the Company with the
terms and provisions thereof do not contravene any federal law or
regulation of the United States of America or any law or regulation
of the State of New York applicable to the Company.
2. Except for (i) the filings referred to in paragraph 4
below and (ii) filings or other actions that may be required under
the securities or Blue Sky laws of the various states, as to which
we express no opinion, the execution and delivery by the Company of
the Agreements, the consummation by the Company of the transactions
contemplated thereby, the issuance of the Notes as contemplated by
the Indentures and the operation by the Company of the Aircraft
under U.S. registration, does not require the authorization,
consent or approval of, or the giving of notice to, or the
registration, recording or filing of any document with, or the
taking of any other action with respect to, the Department of
Transportation, the Federal Aviation Administration or any
authority or agency of the federal government of the United States
of America or the State of New York or any local authority or
agency within the State of New York.
3. Each of the Agreements and the Registration Rights
Agreement constitutes the legal, valid and binding obligation of
the Company, enforceable against the Company in accordance with its
terms, and each of the Notes is entitled the benefits of the
applicable Indenture.
4. The Collateral Agreement the Collateral Agreement
Supplement No. 1 are in due form for filing in accordance with the
Aviation Act. The Collateral Agreement, as supplemented by the
Collateral Agreement Supplement No. 1, validly creates for the
benefit of the Collateral Agent the security interest in the
Collateral which the Granting Clauses of the Collateral Agreement
purports to create. Except for the filings with the FAA referred
to in the opinion dated today and addressed to you of Crowe &
Dunlvey, P.C., and the filing of Uniform Commercial Code financing
statements in the Commonwealth of Virginia, which filings we assume
have been duly effected and are adequate for their intended purpose
(and subject to the timely filing in the future of continuation
statement with respect to such financing statements, no further
<PAGE>
recording or filing in the United States of America of the
Collateral Agreement or any other documents, nor of any financing
statements with respect thereto, nor any other action, is necessary
or advisable in order to perfect and maintain perfected in the
United States of America the Lien of the Collateral Agreement in
the Aircraft as against the Company and any third parties.
5. Assuming the due authorization, execution and delivery of
the Collateral Agreement and the Indentures (the "Trustee
Documents") by Wilmington Trust Company, the Trustee Documents,
constitute the legal, valid and binding obligations of the
Collateral Agent and the Indenture Trustees as the case may be,
enforceable against the Collateral Agent and the Indenture Trustees
in accordance with their respective terms.
6. In a proceeding under Chapter 11 of the U.S. Bankruptcy
Code involving the Company as debtor, the Collateral Agent, on
behalf of the Noteholders and the Liquidity Providers, would be
entitled to the benefits of 11 U.S.C. Section 1110 with respect to
the security interest granted by the Collateral Agreement in the
Aircraft. However, we express no opinion as to the protection
afforded by Section 1110 of the Bankruptcy Code to the Collateral
Agent with respect to a security interest in a Replacement Airframe
or Replacement Engine.
7. The Notes, the Collateral Agreement and each Indenture
conform in all material respects to the description of such
documents contained in the Offering Memorandum.
8. The statements set forth under "Description of the Notes -
Events of Default" in the Offering Memorandum, insofar as such
statements purport to summarize the provisions of 11 U.S.C. Section
1110, provide a fair summary of such provisions.
The foregoing opinions are subject to the following
assumptions, exceptions, qualifications and limitations:
A. The foregoing opinions are expressly limited to matters
under and governed by the internal laws of the State of New York,
and applicable federal laws of the United States of America, except
that we express no opinion as to federal securities law or the
securities laws of any state including the State of New York. Our
opinion in paragraph 1 above as to the contravention of certain
laws, rules and regulations is based upon a review of those laws
and regulations that, in our experience, are normally applicable to
transactions of the type contemplated by the Agreements.
<PAGE>
B. The foregoing opinions in paragraphs 3 and 5 regarding the
enforceability of the Agreements and the Registration Rights
Agreement are subject to the following:
(i) The enforceability of the Agreements and the
Registration Rights Agreement may be limited or
affected by (a) bankruptcy, insolvency,
reorganization, moratorium, liquidation,
rearrangement, probate, conservatorship, fraudulent
transfer, fraudulent conveyance and other similar
laws (including court decisions) now or hereafter
in effect and affecting the rights and remedies of
creditor generally or providing for the relief of
debtors, (b) the refusal of a particular court to
grant (1) equitable remedies, including, without
limiting the generality of the foregoing, specific
performance and injunctive relief or (2) a
particular remedy sought by the Collateral Agent
under any of the Agreements as opposed to another
remedy provided for therein or another remedy
available at law or in equity, but which does not
in our opinion make such remedies with respect to
the Agreements inadequate for the practical
realization of the benefit intended to be provided
thereby and (c) general principles of equity
(regardless of whether such remedies are sought in
a proceeding in equity or at law).
(ii) In rendering the foregoing opinions, we express no
opinion as to the availability of certain equitable
remedies, including specific performance, and
further, we express no opinions as to the
enforceability of provisions of any of the
Agreements and Registration Rights Agreement (a)
restricting access to legal (procedural and/or
substantive) or equitable remedies, (b) purporting
to waive the right to receive notice or any benefit
bestowed by law, to the extent such right or
benefit can not be waived, (c) relating to
indemnities to the extent prohibited by public
policy (or otherwise limited by federal or state
securities laws which may be applicable to the
enforceability of Section 5 of the Registration
Rights Agreement) or which might require
indemnification for losses or expenses caused by
gross negligence, willful misconduct, fraud or
illegality of an indemnified party, or (d)
<PAGE>
providing for the exercise of rights and remedies
with respect to the Collateral other than in a
commercially reasonable manner or as otherwise
provided in the Uniform Commercial Code or other
applicable law.
(iii) We note that the enforceability of specific
provisions of the Agreements and the Registration
Rights Agreement may be subject to standards of
reasonableness, care and diligence and "good faith"
limitations and obligations such as those provided
in Sections 1-102(3) and 1-203 of the Uniform
Commercial Code and similar applicable principles
of common law and judicial decisions.
(iv) We express no opinion with respect to compliance
with the anti-fraud provisions of the applicable
federal or state securities laws, rules or
regulations.
C. With respect to the opinion given in paragraph 4 above as
to the creation of as security interest in the Collateral, we
express no opinions as to the creation of any security interest in
any Collateral other than (I) that portion of the Collateral
consisting of the Aircraft, (II) that portion of the Collateral
(except for the Aircraft) which is not excluded by Section 9-104 of
the Uniform Commercial Code (the "UCC") and (III) if possession or
control and dominion or both by the Collateral Agent is required or
necessary, such portion of the Collateral as has been deposited
with the Collateral Agent pursuant to the Collateral Agreement, or
which possession or control and dominion, or both, has otherwise
effectively occurred.
D. We express no opinion as to the priority of any security
interest purported to be created by any of the Agreements.
E. We have made no examination of, and express no opinion as
to, (a) the title of any person to any of the Collateral or (b) the
value of any security granted to the Collateral Agent.
F. We have assumed (a) the due authorization, execution and
delivery by, and, expect with respect to the Company, the
enforceability against, each of the parties thereto of the
Agreements, and the Registration Rights Agreement and that each of
such parties (including the Company) has the full power, authority
and legal right to execute, deliver and perform such documents and
(b) the due authentication of each Note by the applicable Indenture
Trustee.
<PAGE>
G. We have assumed the genuineness of all signatures, the
authenticity of all documents submitted to us as originals and the
conformity to the originals of all documents submitted to us as
copies, which facts we have not verified independently.
H. We have assumed that the Agreements and the transactions
contemplated thereby are not within the prohibitions of Section 406
of the Employee Retirements Income Security Act of 1974.
I. With respect to the opinion given in paragraph 5, our
opinion is subject to limitations of Delaware law applicable to,
and of New York law governing the banking and trust powers of,
Wilmington Trust Company, the Collateral Agent or the Indenture
Trustees, as to which we express no opinion.
J. Except to the extent expressly set forth in paragraphs 7
and 8 above, we have not checked the accuracy or completeness of,
or otherwise verified, and are not passing upon, and assume no
responsibility for, the accuracy or completeness of the information
contained in or incorporated by reference in the Offering
Memorandum.
In giving the foregoing opinion, we have relied upon the
opinion delivered to you today of Crowe & Dunlevy, with respect to
the matter set forth therein relating to the Act and regulations
thereunder and the opinion of Richards, Layton & Finger delivered
to you today with respect to paragraph 5 hereof as to matters of
Delaware law. Our opinion is subject to all applicable
qualifications and exceptions set forth in such opinions.
The opinions expressed herein are solely for the benefit of,
and may only be relied upon by, the named addressee in connection
with the Agreements, and the transactions provided for thereby.
This opinion may not be furnished or relied upon by, any other
person with the prior written consent of this Firm. The opinions
expressed herein are as of the date hereof and we make no
undertaking to amend or supplement such opinions as facts an
circumstances come t our attention or changes in the law occur
which could affect such opinions.
FULBRIGHT & JAWORSKI L.L.P.
By: /s/William C. Clarke
-----------------------
William C. Clarke
<PAGE>
SCHEDULE
--------
Morgan Stanley & Co. Incorporated
Chase Securities, Inc.
Salomon Brothers Inc.
Lehman Brothers, Inc.
Wilmington Trust Company, as Collateral Agent, Class A Indenture
Trustee, Class B Indenture Trustee and Class C Indenture Trustee
Westdeutsche Landesbank Girozentrale, New York Branch
EXHIBIT 21
SUBSIDIARY OF USAIR, INC.
-------------------------
USAM Corp.
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
USAir, Inc.:
We consent to the use of our report included herein in the
registration statement.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Washington, D.C.
May 22, 1996
Exhibit 23.2
Letterhead of
FULBRIGHT & JAWORSKI
L.L.P.
April 23, 1996
Steve A. Rossum
USAir, Inc.
Crystal Park Four
2345 Crystal Drive
Arlington, VA 22227
Re: USAir 1996 Enhanced Equipment Notes
Dear Steve:
Reference is made to the opinion letter (the "Opinion") of
Fulbright & Jaworski L.L.P. (the "Firm"), dated as of February
16, 1996, delivered in connection with the issuance by USAir of
Enhanced Equipment Notes in the aggregate principal amount of
$263,000,000 (the "Securities"). The Firm hereby consents to
USAir's inclusion of the Opinion in the Registration Statement
filed with the Securities and Exchange Commission in connection
with the exchange offer relating to the Securities.
FULBRIGHT & JAWORSKI L.L.P.
By: /s/William C. Clarke
________________________________
William C. Clarke
Exhibit 24.1
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, ROBERT J. AYLING,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Robert J. Ayling (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, ROBERT W. BOGLE,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Robert W. Bogle (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, EDWIN I. COLODNY,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Edwin I. Colodny (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, MATHIAS J. DEVITO,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Mathias J. DeVito (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, GEORGE J. W. GOODMAN,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/George J. W. Goodman (L.S.)
------------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, JOHN W. HARRIS,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/John W. Harris (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, EDWARD A. HORRIGAN,
JR., Director of USAir, Inc. ("USAir"), do hereby constitute and
appoint STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN
W. HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Edward A. Horrigan, Jr. (L.S.)
---------------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, ROBERT LEBUHN,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Robert LeBuhn (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, ROGER P. MAYNARD,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Roger P. Maynard (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, JOHN G. MEDLIN, JR.,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/John G. Medlin, Jr. (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, Hanne M. Merriman,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Hanne M. Merriman (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, RAYMOND W. SMITH,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Raymond W. Smith (L.S.)
-----------------------------
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, THAT I, DEREK M. STEVENS,
Director of USAir, Inc. ("USAir"), do hereby constitute and appoint
STEPHEN M. WOLF, RAKESH GANGWAL, LAWRENCE M. NAGIN and JOHN W.
HARPER, and each of them (with full power to each of them to act
alone), attorney and agent for me and in my name and on my behalf
to sign a Registration Statement on Form S-4 or other appropriate
Forms and any amendments or supplements thereto of USAir which
shall be filed with the Securities and Exchange Commission under
the Securities Act of 1933, as amended, with respect to an Exchange
Offer for $263,000,000 in aggregate principal amount of Class A,
Class B and Class C Enhanced Equipment Notes, of USAir.
I hereby give and grant to said attorneys and agents, and each
of them acting alone, full power and authority to generally do and
perform all acts and things necessary to be done in the premises as
fully and effectually in all respects as I could do if personally
present; and I hereby ratify and confirm all that said attorneys
and agents, and each of them, shall do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand and seal this
27th day of March, 1996.
/s/Derek M. Stevens (L.S.)
------------------------------
<PAGE>
Exhibit 99.1
LETTER OF TRANSMITTAL
---------------------
[to be filed by Amendment]
