Exhibit 10.1

   

                                                                 Aviation
Services International, LLC                                   (IAI LOGO)
[d25134d2513400.gif]

FULL SERVICE AIRCRAFT SERVICES AGREEMENT

between

KITTY HAWK AIRCARGO, INC.

and

AVIATION SERVICES INTERNATIONAL, LLC

PROPRIETARY INFORMATION NOTICE

The information contained in this document is Aviation Services International,
LLC (“ASI”) Proprietary Information and is disclosed in confidence. It is the
property of ASI and shall not be used, disclosed to others or reproduced without
the express written consent of ASI. If consent is given for reproduction in
whole or in part, this notice and the notice set forth on each page of this
document shall appear in any such reproduction. U.S. export control laws may
also control the information contained in this document. Unauthorized export or
re-export is prohibited.

Confidential treatment has been requested by Kitty Hawk, Inc. for certain
portions of this document. Confidential portions have been filed separately with
the Securities and Exchange Commission. Omitted portions are indicated in this
agreement with “*****”.

 

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FULL SERVICE AIRCRAFT SERVICES AGREEMENT

THIS FULL SERVICE AIRCRAFT SERVICES AGREEMENT (sometimes, this “Agreement” and,
sometimes, these “General Terms”) is made as of March 7, 2005 (“Effective
Date”), by and between Kitty Hawk Aircargo Inc., a Delaware corporation, having
its principal place of business at 1515 West 20th Street, Dallas/Fort Worth
International Airport, Texas 75261, U.S.A. (“Customer”) and Aviation Services
International, LLC, a Delaware limited liability company, having its principal
place of business at Ben Gurion International Airport, Israel (“Supplier”),
either or both of which may be referred to as a “Party” or the “Parties”,
respectively.

RECITALS

WHEREAS, Supplier maintains and operates a comprehensive program for the
servicing, repair, maintenance, and functional testing of airframes, aircraft
components, aircraft engines, engine modules, assemblies, subassemblies,
controls and accessories, auxiliary power units and parts for each thereof (the
“T3 Program”);

WHEREAS, Supplier and Customer desire to enter into this Agreement to provide
the general terms that will be applicable to the repair and overhaul by Supplier
of aircraft components, aircraft engines, landing gear and auxiliary power units
that Customer elects to have repaired and/or overhauled under this Agreement;

WHEREAS, Customer is in the process of leasing from GE Capital Aviation
Services, Inc. (“GECAS”) seven (7) B737-300 passenger aircraft, but only after
each shall have undergone conversion from passenger configuration to special
freighter configuration so as to become a 737-300 SF Aircraft;

WHEREAS, in furtherance of the foregoing, Customer now requires repair or
servicing of the landing gears (“Landing Gears”) of its fleet of seven (7)
737-300 SF aircraft (each, a “737-300 SF Aircraft” and, together, the “737-300
SF Aircraft”);

WHEREAS, in furtherance of the foregoing, Customer now also requires the repair,
overhaul or servicing of the CFM 56-3B1/3B2 engines (each a “3B1 Engine” or a
“3B2 Engine,” respectively, and, together, the “3B1 Engines” or the “3B2
Engines,” respectively) on its fleet of 737-300 SF Aircraft;

WHEREAS, in furtherance of the foregoing, Customer now also requires repair,
overhaul or servicing of the components on its fleet of seven (7) 737-300 SF
Aircraft, excluding the components described on Annex 6 to Schedule No. 3 hereto
(the “Components”).

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NOW, THEREFORE, and in consideration of the mutual promises and covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

INTRODUCTION

(1)   Customer’s Fleet of Aircraft

  (A)      This Agreement shall cover only the seven (7) 737-300 SF Aircraft of
Customer’s fleet of Aircraft, as and when they are converted to special
freighter configuration.     (B)      Customer may add to, or delete from, its
current fleet, any Aircraft referred to in paragraph (A) above or any other type
of aircraft, except that the addition to, or deletion from, Customer’s fleet of
737-300 SF Aircraft, insofar as such actions impact on any T3 Program hereunder
shall be handled in accordance with the provisions of the applicable Schedule to
these General Terms to be annexed hereto, it being understood and agreed that,
with respect to (i) the T3 Program Aircraft Services, any such addition to, or
deletion from, Customer’s current fleet of covered Aircraft, shall be handled in
accordance with the provisions of Schedule No. 1 to these General Terms, which
is annexed hereto; (ii) the T3 Program Engine Services, any such addition to, or
deletion from, Customer’s current fleet of covered Aircraft shall be handled in
accordance with the provisions of Schedule No. 2 to these General Terms, which
is annexed hereto; and (iii) the T3 Program Component Services, any such
addition to, or deletion from, Customer’s current fleet of covered Aircraft
shall be handled in accordance with the provisions of Schedule No. 3 to these
General Terms, which is annexed hereto.

(2)   Customer’s Other Airframes

Customer may add to this Agreement by signing, together with Supplier, a
Schedule, to be numbered consecutively with all previous Schedules attached
hereto, and annexed hereto, thereby becoming a part of this Agreement, the
airframes of any or all of its aircraft, other than its seven (7) 737-300 SF
Aircraft.

(3)   Customer’s Other Engines

Customer may add to this Agreement by signing, together with Supplier, a
Schedule, to be numbered consecutively with all previous Schedules attached
hereto, and annexed hereto, thereby becoming a part of this Agreement, one or
more of its aircraft engines, other than the 3B1 Engines and the 3B2 Engines.

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(4)   Customer’s Other APUs

Customer may add to this Agreement by signing, together with Supplier, a
Schedule, to be numbered consecutively with all previous Schedules attached
hereto, and annexed hereto, thereby becoming a part of this Agreement, one or
more of its auxiliary power units, other than the APUs.

(5) Subcontractors

Supplier intends to subcontract all of the work it is required to perform under
all of the Schedules annexed to these General Terms by subcontracting (i) all T3
Program Aircraft Services and related Services to Empire Aero Center, Inc. of
Rome, N,Y., an indirect wholly-owned subsidiary of Israel Aircraft Industries
Ltd., and (ii) all T3 Program Engine Services and T3 Program Components Services
and all related Services to Israel Aircraft Industries Ltd. (“IAI”).

  (6)   Schedules to these General Terms

Each of the signed and numbered Schedules to these General Terms shall provide
the particular terms and conditions pursuant to which Supplier shall agree to
provide Services on items of Equipment, which terms and conditions may include
the deletion or alteration of some of these General Terms. Each of such signed
and numbered Schedules shall be incorporated into, and made an integral part of,
this Agreement. In the event of a conflict between the provisions of these
General Terms and the provisions of a signed and numbered Schedule, the terms of
such Schedule shall control.

  (7)   Definitions

Capitalized terms used in these General Terms and not specifically defined in
these General Terms shall have the meanings given to them in Appendix A to this
Agreement.

ARTICLE I     T3 PROGRAM

  (1)   SCOPE OF WORK

  (A)   Commencing on the Effective Date of the first Schedule, and provided
Customer is not in default of the provisions of Articles X and XIII with respect
to, and as modified, if modified, by, any Schedule, Supplier shall provide
maintenance Services in accordance with the provisions of the Schedules hereto.
Schedule No. 2, dated March 7, 2005, relating to the repair, overhaul or
servicing of the 3B1 Engines and 3B2 Engines on its 737-300 SF Aircraft is
annexed hereto. Schedule No. 3, dated March 7,, 2005, relating to the repair,
overhaul and servicing of the Landing Gears and Components, is also annexed
hereto.

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  (B)   Shop Visits. The Services described in the Schedules shall be performed
in accordance with applicable Aviation Authority requirements, the Customer
maintenance program, manufacturers’ guidelines and standard Supplier practices
for like Equipment. Customer’s Equipment requiring maintenance which (1) cannot
be performed on-wing, (2) are removed on or after the Effective Date of the
first Schedule, and (3) meet any of the following criteria shall be eligible for
maintenance on a T3 Rate basis under the T3 Program, if a shop visit (“Shop
Visit”) is necessary:

  (1)   To correct a known defect or performance deterioration which means an
item of Equipment is no longer Serviceable and cannot be corrected on-wing after
Customer has applied all published on-wing support procedures.     (2)   To
comply with a Supplier written recommendation requiring Shop Visits of Equipment
at scheduled intervals.     (3)   To replace a life limited item of Equipment
for life expiration (unless such item is installed on an Aircraft at the last
shop visit prior to the Effective Date of the first Schedule and did not conform
to the minimum build requirement in the applicable Repair Specification).

  (C)   Workscope and Repair Specification. Upon input of an item of Equipment
for repair, Supplier shall prepare a Workscope and a Repair Specification which
specify inspections, upgrades, improvements, and repairs required to return such
Equipment to a Serviceable Condition. Such Workscope may include reliability and
performance enhancements and Approved Aviation Authority approved repairs.
Supplier shall repair Customer’s Equipment in accordance with a Repair
Specification and Approved Aviation Authority regulations. Supplier may amend a
Repair Specification during the term hereof to improve reliability, enhance
Equipment operating characteristics, incorporate designated engineering
representative approved repairs or repairs not contained in OEM manuals, subject
to Customer’s written concurrence, which concurrence shall not be unreasonably
withheld, conditioned or delayed. Any changes or amendments requested by
Customer or made by any regulatory agency to a Repair Specification shall be
mutually agreed upon by the parties hereto and may be subject to an adjustment
in the pricing described in the applicable Schedule. In the event Customer
requests a change in a specific Workscope, Supplier shall perform such
additional work and invoice that work as Supplemental Work.     (D)   With
respect to each Schedule annexed hereto, Supplier shall assign a Program Manager
who will be the point of contact for Customer with respect to all of the
Services specified in such Schedule and who shall support this Agreement as set
forth in clauses (a) through (h) below.

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  (a)   Define the work to be accomplished for each Shop Visit, consistent with
the applicable Repair Specification.     (b)   Monitor dates, flight hours and
cycles to determine when Services are required on life limited items of
Equipment.     (c)   Assist Customer with Supplemental Work requirements to be
performed.     (d)   Maintain the necessary liaison between Supplier and
Customer.     (e)   Provide Customer’s authorized personnel with reasonable
access to Customer’s Equipment and related maintenance records, when any such
Equipment is in Supplier’s possession.     (f)   Schedule preventive or
corrective maintenance action.     (g)   In respect of Schedule No. 2 hereto
applicable to Customer’s 3B1 Engines and 3B2 Engines, develop with Customer, on
a monthly basis, a removal schedule (“RS”) for Customer’s 3B1 and 3B2 Engines
forecast for Delivery to Supplier for Repair under Schedule No. 2. An RS shall
identify by serial number the 3B1 and 3B2 Engines to be Delivered during the
following six (6) month period and the anticipated reason for removal of each.  
  (h)   Ensure that all routine correspondence from Supplier to Customer
relative to the administration of this Agreement, except for formal notices
issued under Article XVI of this Agreement, shall be directed to the attention
of the appropriate person at the Customer Facilities as designated by Customer.

  (E)   BER Proceedings         Supplier shall advise Customer if its estimate
of the cost to repair or overhaul an item of Equipment is such that such item of
Equipment is in a BER condition. If Customer nevertheless desires that a BER
item of Equipment be repaired or overhauled, Customer shall pay for all Services
to so repair such item of Equipment on a Supplemental Work basis. With respect
to each Schedule, the parties agree to provide a statement to the effect that
they are adopting these BER Proceedings or a description of the BER Proceedings
that are to be otherwise applicable to such Schedule.

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  (2)   T3 PROGRAM SERVICES

The T3 Program Services applicable to items of Equipment shall be described in
each Schedule that is signed by both parties, given a number and attached
hereto. The T3 Program Services applicable to (i) the 3B1 and 3B2 Engines are
described in Schedule No. 2 hereto; and (ii) the Landing Gear and Components are
described in Schedule No. 3 attached hereto.

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  (3)   CUSTOMER’S RESPONSIBILITY UNDER THE T3 PROGRAM

  (A)   During the term of this Agreement, Customer shall:

  (1)   Provide to Supplier’s authorized personnel reasonable access to
Customer’s Equipment when such Equipment is in Customer’s possession, and to all
operating and maintenance records related to Equipment which are maintained by
Customer.

  (2)   Advise Supplier that an item or items of Equipment needs to be picked up
for service at least three (3) days prior to its scheduled pick-up.

  (3)   Designate in writing one (1) or more of its employees to represent
Customer during the term of this Agreement.     (4)   Prepare each item of
Equipment to be repaired or overhauled under a Schedule for shipment by properly
packing such item of Equipment, together with a repair report and all
appropriate documentation, and notifying Supplier that such item of Equipment is
ready for pick-up.     (5)   Maintain Equipment in accordance with
Manufacturers’ recommendations.

  (6)   Execute, simultaneously with the signing of a Schedule, a Warranty
Assignment Letter, in the form attached hereto as Appendix C, stating that the
benefits of all OEM or third party warranties, guarantees or maintenance related
product discounts related to the T3 Program applicable to Customer’s Equipment,
covered by and during the term of such Schedule, are assigned to Supplier.
Notwithstanding the foregoing, Supplier will accept a purchase agreement for the
time and material repair of any such Equipment from any such third party or
Customer. A list of such Equipment under pre-existing warranties shall be
provided to Supplier by Customer upon the execution of such Schedule.     (7)  
No later than the time of Delivery of an item of Equipment for a Shop Visit,
provide to Supplier all information and records necessary for Supplier to:
(1) establish the nature and extent of the Services required to be performed on
such item of Equipment; and (2) to perform such Services. Such information and
records include, but are not limited to:

  (a)   The cause of Equipment removal or reason for a Shop Visit;     (b)  
Applicable Equipment log books detailing work performed at the most recent Shop
Visit, any reported defects or incidents during operation since such most recent
last Shop Visit, with a

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      description of action taken, and significant operational characteristics
experienced during last flight prior to Shop Visit;     (c)   SB and AD
status/requirements;     (d)   Total Equipment operating time since new (“TSN”)
for each item of Equipment that is a hard time or life limited item;     (e)  
Record of change of parts during operating period prior to such Shop Visit
(including, without limitation, all life limited items of Equipment removed and
replaced by Customer), and the reason(s) for change;     (f)   Back to birth
history certificate indicating history from zero TSN/CSN on all LLPs;     (g)  
Customer inventory of Equipment “as shipped”;     (h)   Historical log and
reliability data (for parts and accessories);

Customer’s failure to furnish necessary information and records shall result in
a delay in induction of the affected Equipment for Service, and may necessitate
premature LLP replacement, at Customer’s expense. However, prior to replacing
such an LLP, Supplier shall first advise Customer that certain records are
missing and allow Customer five (5) working days to acknowledge and forward such
records to Supplier.

ARTICLE II     SUPPLEMENTAL WORK

(1)   SUPPLEMENTAL WORK SERVICES       Supplemental Work shall include, but not
be limited to:

  (A)   If Customer selects Supplier to perform the work to meet the return
conditions of any lease of Customer from a third party, then, unless
specifically specified otherwise in a Schedule, Customer shall pay Supplier for
any Service required to meet such lease return conditions on a Supplemental Work
basis. It being understood that Supplier assumes financial responsibility for
Engine, Component and Landing Gear lease Return Conditions for the Aircraft
leases between GECAS and Customer.     (B)   Should Supplier technical
representatives be required to perform services at a Customer location other
than the Customer Facilities, Customer shall make all

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      arrangements and shall bear the cost of travel and lodging arising from
such performance. Supplier A&P mechanics provided for performance of Services at
all locations other than a designated Repair Station shall be on a Supplemental
Work basis.

(2)   SUPPLEMENTAL WORK PRICING.       Supplemental Work shall be charged at the
prices set forth in each Schedule.

ARTICLE III     DELIVERY, REDELIVERY AND GOVERNMENTAL AUTHORIZATION

  (A)   Delivery. Supplier shall pick up at Customer’s facilities at Fort Wayne,
Indiana, Outstations designated by Customer or at Dallas/Fort Worth
International Airport, Texas (the “Customer Fort Wayne Facilities” and the
“Customer Dallas Facilities,” respectively, and together, the “Customer
Facilities” and collectively the “Customer Premises” and “Customer Facilities”),
as noticed by Customer, all Equipment to be Serviced. Such Equipment, to the
extent it is only a part of an Aircraft, shall be shipped as defined in each
Schedule. However, Supplier shall have the option to perform Repairs with a
field team at other locations.     (B)   Redelivery. After completion of
Services, Supplier shall Redeliver the applicable Equipment to Customer at one
of the Customer Facilities, as designated in writing by Customer not less than
twenty-one (21) days prior to such Redelivery.     (C)   Governmental
Authorization.

Supplier shall be the importer and/or exporter of record and shall be
responsible for timely obtaining any import license, export license, exchange
permit, or other required governmental authorization relating to the Equipment.
At Supplier’s request and expense, Customer shall assist Supplier in its
application for any required U.S. export licenses. Supplier shall not be liable
if any authorization is not renewed or is delayed, denied, revoked, or
restricted, and Customer shall not thereby be relieved of its obligation to pay
for Services performed by Supplier. All items of Equipment Redelivered hereunder
shall at all times be subject to the U.S. Export Administration Regulations
and/or International Traffic in Arms Regulations of the U.S.A. and any
amendments thereto. Customer agrees not to dispose of U.S. origin items provided
by Supplier other than in and to the country of ultimate destination specified
in Customer’s purchase order and/or approved government license or
authorization, except as such laws and regulations may permit.

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     ARTICLE IV      MECHANIC’S LIEN/SECURITY INTEREST

Omitted Intentionally.

     ARTICLE V      NO ASSIGNMENT

The attempted assignment of all or any portion of this Agreement or a Schedule
or any purchase order or any right or obligation hereunder or thereunder, by
either party, without the prior written consent of the other party, shall be
null and void; except that Customer’s consent shall not be required for the
substitution of an affiliated company of, or subcontractor from, Supplier in
place of Supplier as the contracting party and/or the recipient of payments
pertaining to all or any portion of this Agreement or any purchase order in
connection with this Agreement. In the event of any such substitution, Customer
shall be so advised in writing.

     ARTICLE VI      EXCLUSIVE AGREEMENT

This Agreement, insofar as it, pursuant to a Schedule hereto, relates to the
maintenance, repair or overhaul of Customer’s Equipment, shall be exclusive, and
Customer shall not enter into any other arrangement with a third party for such
services with respect to Customer’s Equipment during the term of this Agreement.
Accordingly, as of the signing of a Schedule hereto, such Schedule shall be
exclusive, and Customer shall not enter into any other arrangement with a third
party for the services described therein with respect to Customer’s Equipment
covered thereby during the term of such Schedule.

     ARTICLE VII      TERM AND TERMINATION

(A)   If Customer desires to extend the term of any Schedule to this Agreement
beyond the initial term noted therein, Customer shall give Supplier written
notice of its desire to extend at least one hundred eighty (180) days prior to
the expiration date of such initial term. Within thirty (30) days of receipt of
such notice, Supplier shall, at its option, submit a proposal to Customer which
shall specify the extended term and any amendment to pricing and other terms and
conditions. Customer and Supplier shall endeavour to renew such Schedule a
minimum of ninety (90) days prior to the expiration date of such initial term.
Any further extension shall be subject to the same process.   (B)   Failure to
Pay/Insolvency. Supplier may, at its option, immediately cancel all or any
portion of this Agreement and/or any Schedule, if Customer: (a) fails to make
any of the required payments when due, unless cured within ten (10) calendar
days of its payment due date; (b) generally makes an agreement with creditors
due to its inability to make timely payments of its debts; (c) enters

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    into bankruptcy or liquidation whether compulsory or voluntary that is not
discharged within sixty (60) calendar days; (d) becomes insolvent (i.e.
liabilities greater than assets) ; or (e) becomes subject to the appointment of
a receiver or custodian of the whole or a material part of its assets. If any
such cancellation shall occur, Customer shall not be relieved of its payment
obligation for Services rendered hereunder and/or any Schedule.   (C)   Material
Provisions. Without limiting the above provisions and excluding any other
remedies provided elsewhere in this Agreement or any Schedule, either party may
cancel this Agreement and all Schedules upon ninety (90) calendar days written
notice to the other for failure to comply with any material provision of this
Agreement or any Schedule, unless the failure shall have been cured or the party
in breach shall have substantially effected all acts required to cure the
failure prior to the expiration of such ninety (90) calendar days.   (D)   Work
in Process. Upon the expiration or cancellation of this Agreement or any
Schedule, Supplier shall complete all work in process in a diligent manner under
the terms of this Agreement and such Schedules provided that Customer has
deposited sufficient monies with Supplier to pay the estimated charges for all
such work, in accordance with the prices set forth in such Schedule.   (E)  
Redelivery of Customer Equipment. In the event this Agreement and all Schedules
are terminated, Supplier shall, upon receipt of Customer’s written request, and
provided Customer is then not in default of any provision of this Agreement and
all Schedules (and the Appendices), promptly deliver all Customer’s Equipment,
parts and related documentation to Customer.

     ARTICLE VIII      PARTS REPLACEMENT PROCEDURES

(A)   Missing or Damaged Parts. Supplier shall notify Customer of any (A) parts,
components or line replaceable units missing (i.e., incomplete inventory of
specific items of Equipment) from Equipment when received at a Repair Station
and (B) parts found to have been damaged during transportation of an item of
Equipment to Supplier. Supplier shall replace such missing or damaged items at
Customer’s expense unless Customer notifies Supplier in writing within two
(2) business days of receiving Supplier’s notice that Customer wishes to furnish
such missing or damaged items within a period of time specified by Supplier.  
(B)   Parts Replacement. Supplier shall determine which parts are required to
accomplish the Services and shall provide all parts and materials required to
accomplish such Services.   (C)   Rotable Parts. Supplier may issue compatible
parts from Supplier’s Rotable Parts inventory to replace Customer’s parts
requiring repair. Customer agrees

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    to accept compatible Rotable Parts that are updated to the then-current
Service Bulletin baseline used by the majority of Supplier’s Customers.
Repairable parts removed from an Aircraft and replaced by Supplier’s Rotable
Parts inventory will be repaired by Supplier or a third party, at Supplier ‘s
option.   (D)   Life Limited Parts. LLPs received by Supplier without the
necessary records, as required by the above, shall be replaced by Supplier at
Customer’s expense.   (E)   Title to Parts. Supplier furnished parts and
material incorporated into Customer’s items of Equipment shall be deemed to have
been sold to Customer and title to such Supplier furnished parts and material
shall pass to Customer upon incorporation into any such item of Equipment. Risk
of loss or damage to such parts and material shall pass to Customer upon
Redelivery of the applicable item(s) of Equipment. Title to any parts removed
from an item of Equipment, which are replaced by other parts, shall pass to
Supplier upon incorporation into a Customer item of Equipment of the replacement
part.   (F)   Scrapped Parts. Supplier shall, at its sole expense and without
any further adjustment to Customer, dispose of all Scrapped Parts.

     ARTICLE IX      REPAIR STATIONS AND SUBCONTRACTED SERVICES

(A)   Supplier Repair Stations. Supplier may have any of the Services within the
scope of this Agreement performed at any facility of Supplier or any Supplier
affiliated repair station or a repair station (only if it is a FAA/EASA approved
repair station) of any of its subcontractors. In such event, Customer’s
obligations hereunder, including, without limitation, transportation expense,
shall be no greater than if such Services were performed at the designated
Repair Station for the item of Equipment to be repaired or maintained. .   (B)  
Subcontracted Services. Supplier, in its absolute discretion, may subcontract
any portion of the Services to be performed on Customer’s Equipment to suitably
qualified FAA or EASA 145 certified and competent subcontractors, but only if
each such subcontractor is on Customer’s approved vendor list. Any other
proposed subcontractor from Supplier shall require Customer’s consent, which
consent shall not be unreasonably withheld, conditioned or delayed. Any
subcontracted Services shall be performed in accordance with the requirements of
the Workscope and the applicable Approved Aviation Authority directives.
Subcontracting of any Services hereunder shall not relieve Supplier of its
performance obligations set forth in this Agreement.

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     ARTICLE X      INVOICES AND PAYMENT

(A)   Services Not charged at a T3 Rate

  (1)   Services Payments. With respect to all Services that are not charged at
a T3 Rate, except as otherwise provided in a Schedule, Customer shall pay within
thirty (30) calendar days after receipt of an invoice therefor.     (2)  
Supplemental Work Payments. Supplier shall issue an invoice for Services
performed on a Supplemental Work basis as soon as practicable following
Redelivery of an item of Equipment. Such invoice shall reflect the total charges
owed by Customer to complete the Supplemental Work.     (3)   Payment Terms.
Except as otherwise provided in a Schedule, Customer shall pay each such invoice
within thirty (30) calendar days of receipt. If any payment date falls on a day
that is not a business day, the payment that is otherwise due shall instead be
due the next business day.

(B)   Services Charged at a T3 Rate

  (1)   T3 Payments. Except as otherwise provided in a Schedule, Customer shall
remit to Supplier, no later than the fifth (5) day of each month, a schedule of
the actual AFHs and cycles for each Aircraft for the preceding month (as
provided in paragraph (2) below). Supplier shall then submit an invoice to
Customer for the performance of T3 Program services for such preceding month.
Customer shall pay such invoice within ten (10) days of receipt of such invoice.
In the event Customer fails to pay the full amount of a monthly T3 Rate payment
on or before the such tenth ,day, then all Services performed on Equipment from
such tenth day to, and including, the day Customer shall have paid in full all
outstanding T3 Rate payments (herein, the “Short Fall Period” and “Customer’s
Make-Whole Payment,” respectively), shall be performed by Supplier, and paid for
by Customer, on a Supplemental Work basis (i.e., time and materials); provided,
further, that, at such time that Customer intends to make Customer’s Make-Whole
Payment, Customer may credit against such Payment (and such Payment shall be
deemed to have been made to the extent of such credit) the aggregate of the
payments it made during the Shortfall Period in respect of Services performed
during the Shortfall Period; and provided, further, that, in the event the Short
Fall Period continues for another twenty-one (21) days, Supplier, in its sole
and absolute discretion, may suspend the performance of the Services under the
applicable Schedule and declare Customer to be in default of such Schedule, all
other Schedules that have been signed by the Parties and the General Terms

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      Agreement. Supplier shall then have the right to enforce all of its legal
and equitable rights in respect of such declared default.         During the
first and last years of this Agreement as Aircraft are delivered or redelivered
as the case may be, Customer shall pay Supplier for Components the rate
applicable to the 961-1,400 annual AFH’s Payment Per Flight Hour and for
Engines, the applicable rate in Schedule 2 of this Agreement. However, since
during the first and last years of this Agreement, not all Aircraft will be in
service for an entire calendar year, the Reconciliation shall be done by taking
the actual AFH’s per Aircraft since entry into service and annualizing the
average Aircraft fleet AFH’s as if the Aircraft had been in service for the
entire calendar year.         When Aircraft are delivered to Customer from
Lessor during the first year of this Agreement, there will be a lag (one month)
between the time of delivery and when each of the Aircraft is placed into
revenue service. During this lag time, Customer shall pay Supplier in accordance
with the preceding paragraph, however, the lag time shall not be included in
determining the Reconciliation.     (2)   Actual Flight Hours per Aircraft. For
each Aircraft covered by a Schedule whose payment for services pursuant to this
Agreement is determined by Flight Hours, Customer, no later than the fifth
business day of each calendar month, including in respect of the last calendar
month during the term of such Schedule, shall report to Supplier via facsimile
(or other form of electronic communication) the actual flight hours flown by
such Aircraft during the preceding calendar month (“AFH”). Customer shall pay
Supplier, in accordance with this Agreement, the actual AFH’s flown for the
preceding month multiplied by (i) for Components, the rate applicable to
961-1,400 annual AFH’s Payment Per Flight Hour, and (ii) for Engines, the rate
applicable to flight hours/cycles 1.5/1 in Schedule 2 of this Agreement. If the
flight hours/cycle (flown per year) does not match the table rates in Schedule 2
para. 5.12, deviations and pricing will be calculated on a linear basis.    
(3)   Reconciliation. No later than the fifteenth business day after the end of
each calendar year of performance under each Schedule, Supplier shall compare:

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  i)   the actual total AFH reported during such previous calendar year for all
Aircraft with 960, the guaranteed minimum Flight Hours per Aircraft per year on
a fleet average basis (the “Guaranteed AFH”). If the Guaranteed AFH times the
number of aircraft operated during the preceding calendar year exceeds the total
Flight Hours invoiced during such period, Supplier shall invoice Customer and
Customer shall pay Supplier an amount equal to the difference between the
Guaranteed AFH times the number of aircraft operated during the preceding
calendar year times the applicable escalated Flight Hour Rate in effect for such
period and the total amount invoiced during such period. Payment shall be made
within thirty (30) days after receipt of an invoice therefore. If the Guaranteed
AFH times the number of aircraft operated during the preceding calendar year is
less than the total AFH invoiced during such period, Supplier (In regards to
Components Services only) shall credit Customer with an amount equal to the
difference between the product of the total actual Flight Hours flown by the
Customer’s fleet during such period times the applicable escalated Flight Hour
Rate in effect for such period and the total amount invoiced during such period.
Such credit shall be made against the following month’s charges.     ii)   The
actual average Flight Hours per cycle reported during such calendar year for all
Aircraft with the Flight Hours per cycle listed in Schedule 2 Para. 5.12.1 of
this agreement. If the actual average Flight Hours per cycle reported during
such calendar year for all Aircraft differs from the Flight Hours per cycle
listed in Schedule 2 Para. 5.12.1 of this agreement, Supplier (In regards to
Engine Services only) shall debit or credit Customer accordingly taking in
consideration the conditions stipulated in Schedule 2 Para. 4 of this agreement

(C)   Payments by GECAS. Upon the first Shop Visit of an item of Equipment under
a Schedule, GECAS shall pay to Supplier (by wire transfer of immediately
available funds to the bank account specified in Paragraph G below) a sum equal
to the product of the applicable Flight Hour Rate times the number of Flight
Hours of the Equipment, from (and including) such item of Equipment’s last Shop
Visit before the first day of the Term of such Schedule to (and including) the
day preceding the first day of the Term of such Schedule.   (D)   Late Payment.
In the event Customer fails to make payment within the specified time, then
Supplier may charge a late payment fee at an annual rate equal to the
then-current one (1) year London Inter Bank Offered Rate (“LIBOR”) for U.S.
Dollar deposits, as published in the Wall Street Journal, plus five percent
(5%), compounded daily on any unpaid balance commencing on the next calendar day
after the payment due date until such time as the

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    payment plus the late payment fee are received by Supplier. Payments and
advance payments made pursuant to this Article X or any Schedule by Customer
shall be applied to the oldest outstanding amounts owing to Supplier in order of
succession. Supplier’s obligation to provide any item of Equipment hereunder or
under any Schedule shall be suspended during any period Customer fails to make
payment within the specified time.   (E)   Customer shall not at any time
withhold or deduct from any payment any sum by reason of any dispute as to the
contents of any invoice delivered by or on behalf of Supplier or any default,
breach or non-performance by Supplier of its obligations under this Agreement.  
(F)   In the event that Customer fails to make any payment on the due date
thereof, then Supplier shall be entitled, without prejudice to any other rights
or remedies available to it at any time in law or equity, suspend, withhold or
reduce any or all further T3 Program Services until all and any outstanding sums
plus interest thereon pursuant to paragraph (C) above have been paid in full. In
the case of any such suspension by Supplier, Supplier shall (in addition to and
without prejudice to any other remedy or relief available to it) be entitled to
be paid any sum owing to it prior to such suspension.   (G)   Payment
Instruction. All payments under this Agreement shall be made in Dollars,
immediately available for use, without any right of set-off or deduction, via
wire transfer by Customer to the bank account and address designated below:

     

  Bank Leumi U.S.A.

  564 Fifth Avenue

  New York, N.Y. 10036

  ABA# 026002794

  Swift Address: LUMIUS3N

  For: Aviation Services International LLC

  Account Number: 22005390-18

     ARTICLE XI     LIMITATION OF LIABILITY

(A)   Total Liability. The total liability of Supplier for any and all claims,
whether in contract, warranty, tort (including negligence, but excluding willful
misconduct or gross negligence), product liability, patent infringement, or
otherwise for any damages arising out of, connected with, or resulting from the
performance or non-performance of any Service or Services provided under any
Schedule or from the manufacture, sale, Redelivery, resale, repair, overhaul,
replacement or use of any item of Equipment or any item or part thereof, shall
not exceed the price allocable to the Service or Services which gives rise to
the claim.

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(B)   Damages. In no event, whether as a result of breach of contract, warranty,
tort (including negligence), product liability, patent infringement, or
otherwise, shall Supplier be liable for any special, consequential, incidental,
resultant, indirect, punitive or exemplary damages (including, without
limitation, loss of use, loss of profit or loss of revenue in connection with
any item of Equipment).   (C)   Definition. For the purpose of this Article XI,
the term “Supplier “ is deemed to include Supplier and its affiliated companies,
the subcontractors and suppliers of any Services furnished hereunder, and the
directors, officers, employees, servants, and representatives of each.

     ARTICLE XII      INDEMNIFICATION

(A)   Customer and its insurers hereby waive all rights of recourse against, and
Customer agrees to indemnify, defend and hold harmless, Supplier, including its
contractors, subcontractors, employees, agents and anyone acting on their behalf
(hereinafter in this Article XII referred to, collectively, as the “Indemnitees”
and, individually, as an “Indemnitee”) from and against any and all liabilities,
claims, damages, losses, and judgments (whether in contract, tort, negligence of
any kind, including strict liability, or otherwise), which may be suffered by,
accrued against, be charged to, or recoverable from the Indemnitees or any
Indemnitee by reason of loss of, or damage to, or loss of use of, any property
of Customer and/or any third party, and/or by reason of any bodily injury and/or
death to passengers, crew, and/or third parties arising out of or in any way
connected with the Services and Supplemental Work, if any, and/or the operation
and/or maintenance of any item of Equipment, unless such loss, damage, bodily
injury or death is due to the gross negligence or willful misconduct of
Supplier.   (B)   Supplier and its insurers agree to waive all rights of
recourse against Customer, its contractors, subcontractors, employees and agents
by reason of any such loss, damage, injury or death and Supplier shall be solely
responsible for, loss or damage to its own equipment and/or to death and injury
of its employees unless such loss, damage, bodily injury or death is due to the
gross negligence or willful misconduct of Customer.   (C)   Definition. For the
purpose of this Article XII, the terms “Indemnitees” and “Customer” are deemed
to include, respectively, Supplier, Customer and each of their affiliated
companies, the subcontractors and suppliers of any Services furnished hereunder,
and their respective directors, officers, employees, and representatives.

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     ARTICLE XIII      INSURANCE

(A)   Without derogating from Customer’s obligations under Article XII above
(“Indemnification”) and in furtherance thereof, Customer shall, at Customer’s
expense, with respect to each, or an agreed-upon group of, Schedules, procure
and maintain in effect, as provided in Section (B) below, a satisfactory policy
or policies of insurance, with insurers reasonably satisfactory to Supplier,
providing coverage as follows:

  (1)   Hull all risks (including risks of war/confiscation/hijacking) coverage
(with acceptable deductibles and standard limitations and not subject to AVN 29)
for the item(s) of Equipment covered by such Schedule(s), with an agreed insured
value for each such item of Equipment. The applicable policy shall, to the
extent applicable, insure such item(s) of Equipment while an Aircraft is on the
ground, taxiing or in the air. Supplier (and each identified subcontractor)
shall be listed on such policy as an additional named insured and loss payee, as
its interests may appear.     (2)   Third party aircraft legal liability, bodily
injury and property coverage (with standard limitations and not subject to AVN
53), including liability towards the air crew, technical staff, and Aircraft
passengers, with a combined single limit of not less than U.S. $500,000,000.
Supplier (and each identified subcontractor) shall appear on the policy as an
additional named insured, together with Customer in connection with the
possession, use, operation or maintenance of such item(s) of Equipment.

(B)   The policies referred to in Article XIII (A) above shall, inter alia,
expressly provide:

  (1)   That the interests of Supplier thereunder shall not be affected by any
breach by Customer of any of the provisions of such policies, by means of a
breach of warranty clause.     (2)   For severability of interests, by means of
a cross liability clause.     (3)   That the coverage thereunder shall be
primary and any similar coverage which Supplier might carry shall be excess
coverage and non-contributory thereto.     (4)   For the waiver by the insurers
of all of their rights of subrogation against Supplier.     (5)   That Supplier
shall be given thirty (30) days prior written notice by the insurers (except
with respect to war and allied perils, for which the

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      prior notice shall be seven (7) days) in the event that either the
insurers or Customer desire to cancel or change such policies of insurance in a
manner which materially restricts the coverage thereof.     (6)   Customer
covenants that the insurance coverage provided herein shall remain in force with
respect to each item of Equipment for so long as Customer owns and/or operates
such item of Equipment.     (7)   Customer shall deliver to Supplier no later
than twenty (20) days from the date the applicable Schedule(s) is (are) signed,
a certificate of the insurers or other evidence satisfactory to Supplier that
the insurance coverage provided for in Article XIII (A) above is in effect.

     ARTICLE XIV      EXCUSABLE DELAY

(A)   Excusable Delays. Supplier shall be excused from, and shall not be liable
for, any delays in its performance or failure to perform under any Schedule, and
shall not be deemed to be in default under such Schedule for any delay in or
failure of performance hereunder or thereunder due to causes beyond its
reasonable control. Such causes shall be conclusively deemed to include, but not
be limited to, acts of God, acts (or failures to act) of Customer, acts (or
failures to act) of civil or military authority, government priorities, fires,
strikes, labor disputes, work stoppages, floods and other natural
catastrophe(s), epidemics, war (declared or undeclared), riot, delays in
transportation or inability to obtain on a timely basis necessary labor,
materials, or components, which have been timely ordered. In the event of any
such delay, the time of performance shall be extended for a period equal to the
time lost by reason of the delay.   (B)   Continuing Obligations. Article XIV
(A) shall not, however, relieve Supplier from using its best commercial efforts
to avoid or remove any such cause of delay and continue performance with
reasonable dispatch when such cause is removed. During the period of an
excusable delay, Supplier shall have the right to invoice Customer for Services
performed, and Customer shall pay all such invoices net thirty (30) calendar
days.   (C)   Extended Delay — Termination. If delay resulting from any of the
foregoing causes extends for more than six (6) months and the parties have not
agreed upon a revised basis for continuing the Services under the affected
Schedule(s), including any adjustment of prices, then either party, upon thirty
(30) calendar days written notice to the other, may terminate the performance of
Services with respect to the item(s) of Equipment for which Services were
delayed, whereupon Customer shall pay Supplier’s termination charges upon
receipt of Supplier’s invoice(s) therefor.

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ARTICLE XV     WARRANTY

  (A)   Workmanship Warranty — The Parties agree that with respect to Equipment
repaired and Redelivered, if Customer alleges a defect in workmanship within the
period(s) provided in a Schedule (the “Warranty Period(s)”), and Customer
provides written notice to Supplier of such defect within ten (10) days of its
discovery, Supplier shall pay direct costs for accessory, equipment or part
repairs resulting therefrom (this “Warranty”). The foregoing shall constitute
the sole remedy of Customer and the sole liability of Supplier for repair of
defective workmanship, relative to items of Equipment covered by this
Article XV. THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES, WHETHER WRITTEN, ORAL, EXPRESSED, IMPLIED OR STATUTORY (INCLUDING,
WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE OR ARISING FROM COURSE OF PERFORMANCE, COURSE OF DEALING OR
USAGE OF TRADE).     (B)   Supplier undertakes, with respect to each defect
demonstrated to Supplier’s reasonable satisfaction to be a defect covered by
this Warranty, either to repair such item of Equipment in which a defect
appears, or, at Supplier’s option, to replace such accessory, item of Equipment
or part with a similar item free from defects. All such repairs and replacements
shall be performed by Supplier at Supplier’s expense, at a Repair Station and
Customer shall Deliver to Supplier, at Customer’s Premises, the applicable
item(s) of Equipment. Supplier shall be responsible for the cost (including, but
not limited, to shipping and insurance expenses) of furnishing the applicable
item of Equipment to Supplier and of removal thereof from such Repair Station
following the completion by Supplier of the Warranty services. In addition,
Customer shall be responsible for the cost of removing a defective item of
Equipment from an Engine or Aircraft and for the reinstallation of the
repaired/replacement item of Equipment on such Engine or Aircraft.     (C)  
This Warranty shall not apply to an item of Equipment that was not manufactured
to Supplier’s detailed design, except that any defect in Supplier workmanship
incorporated in the installation of such item that invalidates any applicable
warranties from the manufacturers/suppliers thereof shall constitute a defect in
workmanship for the purpose of this Warranty. Supplier shall transfer to
Customer any applicable warranties provided by the manufacturers/suppliers for
accessories, equipment or parts incorporated by Supplier into items of Equipment
during the provision of Services.     (D)   Warranty Limitations. This Warranty
is not assignable without the prior written consent of Supplier and is
applicable only if, following Redelivery, the applicable item(s) of Equipment
(A) has been transported, stored, installed, operated, handled, maintained, and
repaired in accordance with all applicable

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      ADs and the then current recommendations of the applicable OEM as stated
in its manuals, SBs, or other written instructions, (B) has not been altered,
modified or repaired by anyone other than Supplier, and (C) has not been
subjected to foreign object damage, accident, misuse, abuse or neglect.
Supplier’s liability in connection with the Service of an item of Equipment is
expressly limited to workmanship, and any warranty for parts and material will
be the warranty, if any, of the manufacturer of such parts and material.    
(E)   Sole Remedy. The liability of Supplier connected with or resulting from
this Warranty shall not in any case exceed the cost of correcting a defect or
providing a replacement for a defective item of Equipment, whichever is lower,
as provided in Paragraph (B) above, and, upon the expiration of the applicable
Warranty Period(s), all such liability shall terminate. The foregoing shall
constitute the sole remedy of Customer and the sole liability of Supplier with
respect to warranty.

     ARTICLE XVI      NOTICES

  (A)   Acknowledgment. All notices required or permitted under this Agreement
or any Schedule shall be in writing and shall be delivered personally, via first
class mail, return receipt requested, by facsimile, by courier service, or
express mail, addressed as follows or such other address as either party may
designate in writing to the other party from time to time:

     
Aviation Services
  Kitty Hawk Aircrago, Inc.
International, LLC
  1515 West 20th Street
Ben Gurion International
  P.O.Box 612787
Airport,
  Dallas/Fort Worth International
70100 Israel
  Airport

  Texas 75261
Attn:    Tommy Guttman
  U.S.A.
Phone: 972-3-935-8778
  Attn:   Robbie Barron
Fax:     972-3-935-4577
  Phone: 972-456-2427

  Fax:     972-456-2350
 
   

    With a copy to:
 
   

    Steven Markhoff
 
   

    Phone: 972-456-2328

    Fax:     972-456-2309

Notices may not be sent by e-mail.

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  (B)   Effect of Notices. Notices shall be effective and shall be deemed to
have been given when received by the recipient (A) if sent by courier, express
mail, or delivered personally, upon delivery; (B) if sent by facsimile, upon
receipt; and (C) in the case of a letter sent prepaid first class mail, on the
fifth (5th) day after posting (or on actual receipt, if earlier).

     ARTICLE XVII      TAXES AND OTHER CHARGES

  (A)   Taxes, Duties or Charges. In addition to the prices for the Services,
Customer shall pay to Supplier, upon demand, any taxes (including, without
limitation, sales, use, ad valorem, excise, turnover or value added taxes),
duties, fees, charges, imposts, tariffs, or assessments of any nature (but
excluding income taxes of Supplier) (“Taxes”), assessed or levied in connection
with Supplier’s performance under this Agreement and all Schedules.     (B)  
Right To Protest/Refund. If claim is made against Supplier for any such Taxes,
Supplier shall immediately notify Customer and, if requested by Customer,
Supplier shall not pay except under protest, and if payment shall have been
made, Supplier shall use all reasonable efforts to obtain a refund thereof. If
all or any part of any Taxes are refunded, Supplier shall repay to Customer such
part thereof as Customer shall have paid. Customer shall pay to Supplier, upon
demand, all expenses (including penalties, interest and attorneys’ fees)
incurred by Supplier in protesting payment and in endeavoring to obtain any such
refund.     (C)   Withholding. All payments by Customer to Supplier under this
Agreement shall be free of all withholdings of any nature whatsoever except to
the extent otherwise required by law, and, if any such withholding is so
required, Customer shall pay an additional amount such that, after the deduction
of all amounts required to be withheld, the net amount received by Supplier
shall equal the amount that Supplier would have received had such withholding
not been required.

     ARTICLE XVIII      DISPUTE RESOLUTION, ARBITRATION

  (A)   Resolution by Senior Management. If a dispute arises relating to this
Agreement or a Schedule and related damages, if any (a “Dispute”), either party
shall give written notice to the other party requesting that senior management
attempt to resolve such Dispute. Within fifteen (15) days after receipt of such
notice, the receiving party shall submit a written response. The notice and the
response shall include a statement of the applicable party’s position and a
summary of reasons supporting that position. The parties shall cause senior
management to meet within forty-five (45) calendar days after delivery of such
notice, at a mutually acceptable time and place, and thereafter

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      as often as they reasonably deem necessary, and to use commercially
reasonable efforts to resolve such Dispute.     (B)   Arbitration. If the
parties’ senior management do not resolve a Dispute by means of the process
described above within one hundred twenty (120) calendar days after delivery of
the disputing party’s notice, then either party may request that such Dispute be
settled and finally determined by binding arbitration, in front of an arbitrator
selected by the American Arbitration Association (“AAA”) in New York, New York,
or any other location the parties may agree upon.     (C)   Arbitration
Procedure. A single arbitrator chosen by the AAA shall conduct the arbitration.
The arbitrator may hold pre-hearing conferences or adopt other procedures. This
Agreement shall be interpreted and applied in accordance with the substantive
laws of the State of New York, without giving effect to its conflict of law
provisions, rules or procedures (except to the extent that the validity,
perfection, or creation of any lien or security interest hereunder and the
exercise of rights or remedies with respect of such lien or security interest
for a particular item of Equipment are governed by the laws of a jurisdiction
other than New York). The arbitration shall be conducted in, and all submissions
to the arbitrator shall be written in, the English language. Reasonable
examination of opposing witnesses in oral hearing shall be permitted. Each party
shall bear its own cost of presenting or defending its position in an
arbitration. The award of the arbitrator shall be final, binding and
non-appealable and judgment may be entered thereon in any court having
jurisdiction thereof.     (D)   Exclusivity, Confidentiality. Each of the
parties intends that the dispute resolution process set forth in this
Article XVIII shall be the parties’ exclusive remedy for any Dispute. All
statements made in connection with the dispute resolution process set forth in
this Article XVIII shall not be disclosed to any third party except as required
by law or subpoena.     (E)   Exception. Either party may at any time, without
inconsistency with this Article XVIII, seek from a court of competent
jurisdiction any equitable, interim, or provisional relief to avoid irreparable
harm or injury.

     ARTICLE XIX      NONDISCLOSURE OF PROPRIETARY DATA

  (A)   Unless otherwise specifically agreed upon in a written proprietary
information agreement, any knowledge or information which Customer has disclosed
or may hereafter disclose to Supplier incident to the Service of Equipment shall
not be deemed to be confidential or proprietary information and, accordingly,
shall be acquired free from any restriction on use or disclosure.

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  (B)   Non-Disclosure. The existence of this Agreement and its general purpose
or any Schedule may be stated to others by either of the parties without
approval from the other, except that, the terms of this Agreement or any
Schedule and any knowledge or information which Supplier may disclose to
Customer with respect to pricing, design, manufacture, sale, use, repair,
overhaul or Service of Equipment, shall be deemed to be proprietary information,
and shall be held in confidence by Customer. Such information shall not be
reproduced, used or disclosed to others by Customer without Supplier’s prior
written consent, except to the extent required by government agencies and courts
for official purposes. Disclosure to any such government agency or court shall
be made only (i) upon thirty (30) calendar days advance written notice to
Supplier of such disclosure, so as to provide Supplier the ability to obtain an
appropriate protective order, and (ii) with a suitable restrictive legend
limiting further disclosure.     (C)   Exceptions. The preceding Article XIX
(B) shall not apply to information which (i) is or becomes part of the general
public knowledge or literature otherwise than as a result of breach of
Customer’s obligations hereunder, or (ii) was, as shown by written records,
known to Customer prior to receipt from Supplier, or (iii) is disclosed without
restriction to Customer by a third party having the right to do so.     (D)  
Nothing contained in this Agreement shall convey to either party the right to
use the trademarks or other intellectual property of the other, or convey or
grant to Customer any license under any patent owned or controlled by Supplier.

     ARTICLE XX      SAVINGS CLAUSE

If any portion of this Agreement or any Schedule shall be determined to be a
violation of or contrary to any controlling law, rule or regulation or a
judgment issued by a court of competent jurisdiction, then such portion shall be
unenforceable and deleted from this Agreement or such Schedule, as applicable.
However, the balance of this Agreement or such Schedule shall remain in full
force and effect.

     ARTICLE XXI      BENEFICIARIES

Except as herein or in any Schedule expressly provided to the contrary, the
provisions of this Agreement and all Schedules are for the benefit of the
parties hereto and not for the benefit of any third party.

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     ARTICLE XXII      CONTROLLING LANGUAGE

The English language shall be used in the interpretation and performance of this
Agreement and all Schedules. All correspondence and documentation arising out of
or connected with this Agreement and/or any Schedule and any related purchase
order(s), including, but not limited to, Equipment logs, shall be in the English
language.

     ARTICLE XXIIII      NON-WAIVER OF RIGHTS AND REMEDIES

Any failure or delay in the exercise of rights or remedies hereunder shall not
operate to waive or impair such rights or remedies. Any waiver given shall not
be construed to require future or further waivers.

     ARTICLE XXIV      TITLES/SUBTITLES

The titles and subtitles given to the sections of this Agreement or any Schedule
are, and will be, for convenience only and shall not in any manner be deemed to
limit or restrict the context of the article or section to which they relate.
The words “herein”, “hereof”, “hereunder”, “herewith”, and similar terms are not
to be deemed restrictive and refer to the entire Agreement, including all
Appendices, or Schedules, as applicable.

     ARTICLE XXV      CURRENCY JUDGMENT

This is an international transaction in which the specification of Dollars is of
the essence. Except as may otherwise be provided in a Schedule, no payments
required to be made under this Agreement shall be discharged by payments in any
currency other than Dollars, whether pursuant to a judgment, arbitration award,
or otherwise.

     ARTICLE XXVI      NO AGENCY FEES

Customer represents and warrants that no officer, employee, representative, or
agent of Customer has been or will be paid a fee or otherwise has received or
will receive any personal compensation or consideration by or from Supplier in
connection with the obtaining, arranging or negotiation of this Agreement or
other documents entered into or executed in connection herewith.

     ARTICLE XXVII      E-COMMERCE

Customer and Supplier agree that all requirements of this Agreement and all
Schedules may be fulfilled through the use of E-commerce, E-billing, web
billing, electronic or digital signatures, e-mail messages, world wide web sites
or websites, electronic contracts or amendments, and electronic data exchange
(collectively, “E-commerce”). This provision is specifically intended to enable
each party to use E-commerce technology to increase efficiency in fulfilling its
responsibilities under this

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Agreement and all Schedules. Except for notices provided pursuant Article XVI
above, Customer and Supplier agree that use of E-commerce in whatever manner
shall be recognized as performance for the specific contract requirement and
shall not be dismissed, ignored or used to prevent or hinder performance in any
way. However, the parties agree that using E-commerce shall not subject either
party to jurisdiction in any location which, but for the use of E-commerce, no
jurisdiction would exist.

     ARTICLE XXVIII      ON-SITE REPRESENTATIVES

Subject to the following conditions, Supplier agrees to permit Designated
Representatives, from time to time during the term of any Schedule, to enter
onto its premises at a Repair Station for the purpose of observing the Services.
Supplier shall furnish such Designated Representatives the use of a work space,
including the use of a local telephone line and parking accommodations. Costs
incurred by such Designated Representatives, including, without limitation, long
distance telephone charges, fax, or computer charges, shall be the
responsibility of Customer, and if charged to Supplier in the first instance,
shall be billed to Customer for reimbursement.

     ARTICLE XXIX      NO AGENCY

Nothing in this Agreement shall be interpreted or construed to create a
partnership, agency, or joint venture between Supplier and Customer.

     ARTICLE XXX      ENTIRE AGREEMENT

This Agreement, together with all Appendices and Schedules, contains and
constitutes the entire understanding and agreement between the parties hereto
respecting the subject matter hereof, and supersedes and cancels all previous
negotiations, agreements, commitments, and writings in connection herewith or,
in the case of each Schedule, such Schedule. This Agreement and any Schedule may
not be released, discharged, abandoned, supplemented, changed, or modified in
any manner, orally or otherwise, except by a writing of concurrent or subsequent
date signed and delivered by a duly authorized officer or representative of each
of the parties hereto making specific reference to this Agreement or such
Schedule, as applicable, and the provisions hereof or thereof, being released,
discharged, abandoned, supplemented, changed, or modified.

     ARTICLE XXXI      COUNTERPARTS

This Agreement and each Schedule may be executed in one or more counterparts,
all of which counterparts shall be treated as the same binding agreement, which
shall be effective as of the date set forth on the first page hereof, in the
case of these General Terms, and as of the date specified in a Schedule, in the
case of such Schedule, upon execution and delivery by each party hereto to the
other party of one or more such counterparts.

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ARTICLE XXXII      GOVERNING LAW AND JURISDICTION

  (A)   Governing Law         This Agreement shall be governed by, and shall be
construed in accordance with, the laws of the State of New York.     (B)  
Jurisdiction

  (1)   The Parties hereto agree that the United States Federal courts in New
York shall have jurisdiction to settle any disputes which may arise in
connection with the legal relationships established by this Agreement
(including, without limitation, claims for set-off or counterclaim) or otherwise
arising in connection with this Agreement.     (2)   Each of the Parties hereto
waives any objection to the jurisdiction of the U.S. Federal Courts in New York
on the grounds of venue or forum non conveniens or any similar grounds.

IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their duly authorized officer or representatives who represent to each other and
both parties that each is employed in the capacity indicated below and has the
unequivocal authority to execute and deliver this Agreement, which shall be
effective as of the date first above written.

         
AVIATION SERVICES
    KITTY HAWK
INTERNATIONAL, LLC
    AIRCRAGO, INC.
            (Supplier)
                  (Customer)
 
       
By:
    By: /s/ Steven Markhoff
 
       
Printed Name:
    Printed Name:

    Steven Markhoff
Title:
    Title:

    Vice President Strategic Planning,

    General Counsel and Secretary
Date:
    Date: March 7, 2005

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For the purposes of Article X (C) only.

GE CAPITAL AVIATION SERVICES, INC.

         
By:
       

 

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Print Name:
       

 

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Title:
       

 

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Date:
       

 

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APPENDIX A

GLOSSARY

Definitions. Capitalized terms used in the recitals and elsewhere in this
Agreement but not otherwise defined in this Agreement shall have the following
meanings:

“Agreement” shall mean this Full Service Aircraft Services Agreement and all
Schedules, as it may be amended or supplemented from time to time.

“Aircraft” shall mean, each bare Aircraft assembly, identified by serial number
in Annex A to a Schedule including those basic Aircraft controls and accessories
listed in such Schedule and those parts as described in the Aircraft
manufacturer’s specification manuals. Annex A to a Schedule, may be amended in
writing by both parties to reflect any Aircraft added to or deleted from this
Agreement.

“Airworthiness Directive” or “AD” shall mean a document issued by the Approved
Aviation Authority having jurisdiction over the Aircraft prescribing inspections
and the conditions and limitations, if any, under which the Aircraft may
continue to operate.

“Approved Aviation Authority” shall mean, as applicable, the Federal Aviation
Administration of the United States (“FAA”), or, at the request of Customer (and
agreed in writing by Supplier), the European Aviation safety Agency (“EASA”) or
such other equivalent foreign aviation authority having jurisdiction over the
performance of Services provided hereunder.

“Beyond Economic Repair” (“BER”) shall mean an Equipment shop visit for which
the cost to restore an item of Equipment to the requirements of its Repair
Specification, when calculated on a Supplemental Work basis as set forth in this
Agreement, exceeds seventy percent (70%) of the replacement cost for a
comparable replacement item of Equipment.

“CLP” shall mean a manufacturer’s current catalog, or manufacturer’s current
list, price pertaining to a new part or new item of Equipment. The term
“current” as used in this definition means as of the time of the applicable
Service.

“Customer Facilities/Premises” shall mean the facilities of customer at (i) Fort
Wayne, Indiana U.S.A. (the “Fort Wayne Hub”) and (ii) Dallas/Fort Worth
International Airport, Texas, 75261, U.S.A (the “Dallas Maintenance Base”) and
such Customer out-stations that Customer shall specify in a letter to Supplier
pursuant to the provisions of Schedule No. 3.

“Delivered Duty Paid” (“DDP”) to a Repair Station pursuant to the International
Chamber of Commerce “Incoterms” (2000 Edition), whereby Customer shall fulfill
the obligations

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of seller and Supplier of buyer. “Deliver” shall mean the act by which Customer
accomplishes Delivery.

“Delivery” shall mean, in respect of any item of Equipment, the occurrence of
the arrival thereof at a Repair Facility, together with all applicable records
and required data.

“Dollars” shall mean the legal tender of the United States of America.

“Equipment” shall mean each and all of Customer’s Landing Gear, Engines, Covered
Components, Other Components or APUs, Engine LRUs, APU LRUs, or any part or
accessory thereof, Delivered by Customer to Supplier for Service under any
Schedule.

“Foreign Object Damage” or “FOD” shall mean damage to any portion of an item of
Equipment caused by impact or ingestion of an outside object which is beyond the
operator’s control such as birds, stones, hail, or natural tarmac debris.

“GECAS” shall mean GE Capital Aviation Services, Inc., and its affiliates and
assigns, a Delaware corporation, and lessor of the Aircraft to Customer.

“Life Limited Part” or “LLP” shall mean a part with an approved limitation on
use in cumulative hours or cycles, established by an OEM or the Approved
Aviation Authority.

“Line Replaceable Unit” or “LRU” shall mean one or more major accessories of the
external portion of an Engine or APU which can be changed on wing.

“Original Equipment Manufacturer” or “OEM” shall mean the original manufacturer
of any item of Equipment.

“Redelivery” shall mean the occurrence of the return of an item of Equipment for
Customer’s acceptance Ex Works, Supplier’s Repair Station, pursuant to the
International Chamber of Commerce “Incoterms” (2000 Edition), whereby Customer
shall fulfill the obligations of buyer and Supplier of seller. “Redeliver” shall
mean the act by which Supplier accomplishes Redelivery.

“Removal Schedule (“RS”)” shall mean the schedule for Engine removal from an
Aircraft for maintenance as jointly developed by Supplier and Customer.

“Repair Station” shall mean one or more of the repair facilities owned by
Supplier or its affiliates or any direct or indirect subcontractor from
Supplier, now or in the future, which are certified by the Approved Aviation
Authority to perform the applicable Service hereunder. A list of repair
facilities owned by Supplier or its affiliates, as of the Effective Date of
these General Terms, is set forth in Appendix B hereto.

“Repair Specification” shall mean a Customer repair specification, which shall
identify the minimum baseline to which a Customer item of Equipment shall be
inspected, repaired, modified, reassembled and tested hereunder and under any
applicable Schedule. Each Repair Specification shall meet or exceed the
recommendations of the

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applicable OEM’s operational specifications and applicable Equipment maintenance
or overhaul manuals, and Customer’s maintenance plan as agreed to by Customer
and Supplier and approved by the Approved Aviation Authority.

“Repairable” shall mean capable of being made Serviceable.

“Return Conditions” shall mean the lease return conditions for the Aircraft as
between Customer and GECAS and provided to Supplier and attached to Schedule 2
as Annex 1A.

“Rotable Part” shall mean a new or used Serviceable part drawn from a common
pool of parts used to support multiple customers, which replaces a like part
requiring repair for which the actual repair time impedes the specified Turn
Time.

“Scrapped Parts” shall mean those parts determined by Supplier to be
unserviceable and beyond economic repair for reliability, performance or
economic reasons.

“Service” or “Services” shall mean, with respect to any item of Equipment, all
or any part of those services requested by Customer which Supplier agrees to
perform under a Schedule, as more particularly described in the Workscope and
Repair Specification for such item of Equipment, including, without limitation,
the furnishing of parts and materials, labor, facilities, tooling, painting,
plating, and testing devices required in the performance of repair and
maintenance in connection with such item of Equipment. “Serviced” shall be
construed accordingly.

“Service Bulletin” or “SB” shall mean the document issued by an OEM to notify
Customer of modifications, substitution of parts, special inspections, special
checks, amendment of existing life limits or establishment of first time life
limits.

“Serviceable” shall mean an item of Equipment that meets all OEM and Approved
Aviation Authority specified standards for airworthiness, and has no known
defects which would render it unfit for service in accordance with its Workscope
and Repair Specification.

“Serviceable Condition” shall mean, with respect to an item of Equipment, a
repaired, calibrated, or inspected item in an airworthy condition which can be
used for the same purpose as a newly manufactured item.

“Straight Time” shall mean the first eight (8) hours charged Monday through
Friday (Sunday through Thursday, in the case of IAI) (except local holidays
observed by a Repair Station), provided that a minimum of eight (8) hours break
has occurred since the last time charged.

“Supplemental Work” shall mean any Service provided under a Schedule which is
not specifically covered under the T3 Program. All Supplemental Work shall be at
Customer’s expense, in accordance with the pricing set forth in the applicable
Schedule.

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“Shop Visit(s)” shall mean a Repair Station visit (scheduled or unscheduled)
during which off-wing repair and maintenance is performed on Equipment.

“T3 Program” shall mean the program consisting of the repair, maintenance, and
management of the Equipment provided to Customer by Supplier, pursuant to the
terms hereof, provided such Equipment is covered by a Schedule.

“T3 Rate” shall mean the price(s) per flight hour provided in a Schedule as the
consideration for the provision of the Services contained in such Schedule.

“Turn Time” shall mean the number of calendar days between Delivery and
Redelivery of Equipment, exclusive of public holidays observed by the applicable
Repair Station.

“Workscope” shall mean the document written and approved by Supplier’s
Engineering staff describing the prescribed repair or approach to repair of
identified Equipment to meet the requirements of the Repair Specification for
such Equipment.

[Balance of this page intentionally left blank.]

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APPENDIX B
REPAIR STATIONS

                                                  Repair Station     Location  
  Certification Authority     Certification Number                              
                     
Aircraft, Engine and
    Ben Gurion     FAA     MK1Y325K    
Components Services –
    International     EASA     CAA.00417    
Israel Aircraft
    Airport, Israel     CAA Israel     CAA 01    
Industries Ltd.
          CAA UK     DIA/6376/61    
 
          IDGCA     1107/94/-AI(2)/2-95    
 
          CAAC     F.2401    
 
          RSA     PT3    
 
          DNA     1-B-130    
 
          DDA     055    
 
          RCAA     B1-12/1991    
 
          ECAA     AS/02/94    
 
          KDCA     K/A1/288    
 
          UDCA     UG/CAA/028    
 
          ZDCA     Z/IAO/056    
 
          NDCA     FCAA/SS/AD60/7-94                            
 
                                             
Aircraft Services – Empire Auto Center Inc.
    Rome, New York     FAA     VN4R602M                          

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APPENDIX C
Form of
WARRANTY ASSIGNMENT LETTER
(Customer Letterhead)

(Date)

(Name and Address of Original Equipment Manufacturer)

Attn:

Re: Assignment of Third Party Warranty

Dear (Sir/Madam):

(Kitty Hawk Aircrago, Inc.) (“KHI”) and the (Original Equipment Manufacturer)
entered into Agreement Number                     , dated                     ,
200___ (the “Equipment Purchase Agreement”), wherein KHI agreed to purchase a
specified number of items of Equipment (Original Equipment Manufacture) agreed
to provide certain warranties and guarantees with regard to such items of
Equipment to (KHI).

KHI and Aviation Services International, LLC (“ASI”) have now entered into a
separate Full Service Aircraft Services Agreement, dated                     
2004, as supplemented by Schedule No.                     , (as so supplemented,
the “Maintenance Agreement”) for the maintenance, repair and overhaul of the
aforementioned items of Equipment. The Maintenance Agreement specifies that KHI
shall, during the term of the Maintenance Agreement, assign to ASI the benefit
of all (Original Equipment Manufacturer) warranties and guarantees applicable to
the items of Equipment covered by the Maintenance Agreement.

This Letter is intended to serve as official notification to (Original Equipment
Manufacturer) of KHI’s intent to so assign the applicable warranties and
guarantees under the Equipment Purchase Agreement to ASI.

(Original Equipment Manufacturer), please indicate your concurrence with such
assignment by signing in the space provided below and returning a copy of this
letter to the undersigned.

(Signature Block)

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EXHIBIT 1

[Form of Schedule]

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Schedule No.:

SCHEDULE
to

Full Service Aircraft Services Agreement,
dated March 7, 2005, between
Aviation Services International, LLC
and
Kitty Hawk Aircargo, Inc.

This Schedule is issued pursuant to the Full Service Aircraft Services
Agreement, dated March 7, 2005 (the “General Terms Agreement”), between Kitty
Hawk Aircrago, Inc.. and Aviation Services International, LLC (any term used
herein and not defined herein shall have the meaning given to it in the General
Terms Agreement).

  (1)   T3 Program Services included under this Schedule     (2)   Additional
Provisions

[Include modifications and deletions, if any, from the General Terms Agreement
for the purposes of this Schedule only.]

(3)   Part of General Terms Agreement

This Schedule, when countersigned by the parties hereto, dated and numbered,
shall be incorporated into, and form an integral part of, the General Terms
Agreement. By their execution and delivery of this Schedule, the parties hereby
reaffirm all of the terms and conditions of the General Terms Agreement, except,
as to this Schedule only, to the extent modified or deleted under Section 2
above.

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All annexes to this Schedule are hereby incorporated herein and made a part
hereof as if such annexes were set forth in this Schedule at length.

             

          AVIATION SERVICES INTERNATIONAL, LLC
(Supplier)

      By:    

      Print Name:    

      Title:    

          KITTY HAWK AIRCARGO, INC.
(Customer)

      By:    

      Print Name:    

      Title:    
Dated:
           

  March 7, 2005        

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Schedule No.: 2

SCHEDULE
to
Full Service Aircraft Services Agreement,
dated March 7, 2005, between
Aviation Services International, LLC
and
Kitty Hawk Aircargo, Inc.

This Schedule is issued pursuant to the Master Aircraft Service Agreement, dated
March 7, 2005 (the “General Terms Agreement”), between Aviation Services
International, LLC. (“Supplier”) and Kitty Hawk Aircargo, Inc. (“Customer”) (any
term used herein and not defined herein shall have the meaning given to it in
the General Terms Agreement).

(1)   Coverage       This Schedule applies to the T3 Program Engine Services on
Customers seven (7) 737-300 SF Aircraft, a list of which, including a list of
the Engines subject to this Schedule, is set out in Annex 1.   (2)   Definitions
      Unless the context otherwise requires, for the purposes of this Schedule,
the following terms shall have the following meanings:       “Abuse” means, any
Engine operations which do not comply with the Manufacturer’s operating
instructions and limitations. Engines should also be operated within CFMI’s
recommended operating procedures for performance retention and to avoid
premature engine removal; e.g., de-rated thrust take-off using only the level
required for the prevailing conditions, implementation of a water wash program,
application of warm-up and cool-down periods. Lack of implementation of these
‘best operating’ procedures and resultant excessive EGTM deterioration will
constitute ‘abuse’ within the framework of this Schedule.       “Bench Stock”
means those expendable or consumable items routinely replaced during the
inspection, repair or maintenance of Equipment, whether or not such items have
been damaged, and other items that are customarily replaced at each inspection
or maintenance period.       “Cycle” means one (1) take off and subsequent
landing to a full stop of an Aircraft, including touch and go to a full stop.  
    “CSLSV” means the number of Cycles an Engine has completed since its last
Shop visit.

 

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    “CSN” means the number of Cycles an Engine has completed since manufacture.
      “Delivery” shall mean, in respect of any item of Equipment, the pickup of
such item of Equipment by Supplier or a representative of Supplier at the
applicable Supplier Facility.       “Deliver” shall mean the act by which
Customer accomplishes Delivery.       “Dollars” shall mean the lawful currency
of the United States of America.       “Designated Repair Station” shall mean
the facilities of Israel Aircraft Industries, Ltd, Bedek Aviation Group, Engines
Division, Ben Gurion International Airport, Israel.       “Engine” shall mean, a
CFM56-3 B1 or 3B2 bare (i.e., without QEC) Engine, plus its essential controls
and accessories as described in the engine manufacturer’s specification manuals,
and the parts incorporated therein.       “Engine LRU” shall mean those line
replaceable units in respect of a bare Engine.       “Engine Refurbishment”
shall mean all scheduled and un-scheduled off-wing Engine repair accomplished
for each module/Engine in accordance with minimum workscope, performance
workscope, or full workscope levels, as defined in the Workscope Planning Guide.
      “Equipment” shall mean an individual or collective reference, as
appropriate, to Customer’s Engines, Engine modules, Engine assemblies and
sub-assemblies, Engine mounted controls and accessories, and the parts
incorporated therein.       “Exchange Part” shall mean any Part or component
provided from Supplier’s (or its subcontractor’s) inventory, whenever possible,
to replace any un-Serviceable Part or component in order to expedite
Repair/Overhaul of an Engine. An Exchange Part shall be of the same
configuration/build standard as the replaced Part or component.       “Flight
Hour” shall mean each hour or part thereof elapsing from the moment at which the
wheels of an Aircraft leave the ground on the take-off of such Aircraft until
the wheels of such Aircraft touch the ground on the landing of such Aircraft
following such take off and recorded in such Aircraft’s log book.       “Foreign
Object Damage” or “FOD” shall mean, any damage to an Engine caused by impact or
ingestion of a foreign object, which does not allow the further airworthy
operation of such Engine and this requires its removal from an Aircraft
according to the CFMI Engine Shop Manual.

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    “Full Core Performance Restoration” shall mean the Services performed during
an MCAP Shop Visit of an Engine, in which, at a minimum, the major modules,
which shall include, without limitation, the compressor, combustor and
high-pressure turbine of an Engine are exposed and subsequently refurbished,
consistent with such Engine’s Performance Workscope.       “GECAS” shall mean GE
Commercial Aviation Services LLC, and its affiliates and successors, lessor of
the Aircraft to Customer.       “Hot Section Restoration” shall mean Engine
Refurbishment at its Performance Workscope Level as per the CFM 56-3 Workscope
Planning Guide, dated June, 2000, and as amended, to be performed to the high
pressure turbine of an Engine sub-module, as required.       “IOD” shall mean
damage to an Engine caused by impact or ingestion of an internal object, which
does not allow the further airworthy operation of such Engine and this requires
its removal from an Aircraft according to the CFMI Engine Shop Manual.      
“Man-hour” shall mean the allocation of one (1) man to any specified task,
including the supervision/inspection of that task, for an elapsed time of one
(1) hour or pro-rata part thereof.       “Manufacturer” shall mean the original
equipment manufacturer of a Part or a component on an Engine.       “Part” shall
mean one piece, or two or more pieces joined together, which are not normally
subject to disassembly without destruction of designed use.       “Preliminary
Workscope” shall mean the document submitted to Supplier by Customer which
(A) identifies the Equipment by type and serial number, (B) describes the
Services requested to be performed on such Equipment, and (C) includes detailed
information on the Equipment removal cause, current LLP status and current LLP
rebuild specification, Airworthiness Directive status, and any other technical
data required to process such Equipment.       “QEC” shall mean a kit consisting
of air ducts, major components, fuel and air hoses, electrical wiring and Engine
mounts necessary for adapting an Engine to the appropriate Aircraft.      
“Redelivery” shall mean the occurrence of the return of an item of Equipment by
Supplier or a representative of Supplier to the designated (by Customer)
Facility. “Redeliver” shall mean the act by which Supplier accomplishes
Redelivery.       “Repair” shall mean the restoration of an Engine or any of its
Parts and/or components to a Serviceable Condition.

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    “Return Conditions” shall mean the engine lease return conditions for the
Aircraft specified in the aircraft leases between GECAS and Customer, a copy of
which is annexed hereto as Annex 1A.       “Sage Data” shall mean Engine
condition monitoring data collected from Engine operation.       “Turn Time” or
“Turn Around Time” or “TAT” shall mean the number of calendar days between
Delivery and Redelivery of Customer’s Equipment, exclusive of public holidays
observed by the Designated Repair Station.       “T3 Program Engine Services”
shall mean all those services described in this Schedule as such.       “TSLSV”
shall mean the time, expressed in hours of operation, and Engine has completed
since its last shop visit.       “TSN” shall mean the time, expressed in hours
of operation, an Engine has completed since manufacturer.       “Workscope”
shall mean a document written and approved by Supplier’s engineering staff
describing the prescribed repair or approach to repair of identified Equipment
to meet the requirements of a Repair Specification for such Equipment. A
Workscope shall be developed by Supplier, based upon the Preliminary Workscope
and the actual condition of the Equipment, and shall be submitted by Supplier to
Customer for Customer’s approval, such approval not to be unreasonably withheld,
conditioned or delayed. A Workscope shall, at such time of Customer’s approval,
supersede the Preliminary Workscope and shall be utilized by Supplier in the
performance of the Services on the referenced Equipment.       “Workscope
Planning Guide” shall mean CFMI’s Workscope Planning Guide in its latest
revision as of the Commencement Date and as updated from time to time.   (3)  
Interpretation

  3.1   Any expression in the singular shall, where the context requires,
include the plural and vice versa.     3.2   In this Schedule all references to
“Sections”, “Sub-sections”, “Paragraphs”, “Sub-paragraphs”, “Appendices”
“Annexes” and “Exhibits” are to Sections, sub-sections, paragraphs,
sub-paragraphs, appendices, annexes and exhibits to this Schedule, unless
expressly stated otherwise.     3.3   Section headings are inserted for
convenience of reference only and shall be ignored in the construction of this
Schedule.

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  3.4   Any technical expressions used in this Schedule and not defined herein
shall, unless the context otherwise requires, have the meanings specified in the
latest edition from time to time of the World Airlines Technical Operations
Glossary (WATOG) published by the International Airline Transport Association.
Where a definition does not appear in WATOG, then reference shall be made to the
World Airlines Suppliers Guide (WASG), provided that WATOG shall take precedence
in the case of any conflict of definitions.

(4)   Objective       This Schedule details the scope of the T3 Program Engine
Services to be supplied by Supplier to the fourteen (14) Engines on Customer’s
737-300 SF Aircraft.       Supplier shall perform the T3 Program Engine Services
at the Site or at another FAA approved base maintenance facility approved in
writing between the Parties from time to time. For the avoidance of doubt, the
performance of T3 Program Engine Services at any such other FAA approved
maintenance facilities shall not diminish Supplier’s obligations to Customer in
respect thereof, as provided in this Schedule.       Note: The provision of the
T3 Program Engine Services on the terms, and subject to the conditions,
contained in this Schedule is based on the assumption that the Engines will be
operated (i) in the case of the 3B1 Engines, at 20,000 pounds of thrust; and
(ii) in the case of the 3B2 Engines, at 22,000 pounds of thrust with a de-rate
average of 10% or if operated as 3B1s, shall comply with (i) above, provided
that all 3B2 Engines operating at such thrust which have a turbine control timer
installed, must have it operational. (It is understood that 3B1 cannot be
de-rated below 18,500 pounds of thrust).   5.   T3 Program Engine Services  
5.1   Entry conditions for Customer’s 3B1 and 3B2 Engines:

  •   Minimum build-up requirement for each Engine entering the T3 Program shall
be 3,000 remaining cycles at 20,000 and 22,000 pounds of thrust for the 3B1 and
3B2 Engines, respectively. Adjustment in price may be made if an Engine enters
the Program with less than the minimum build-up requirement from its last shop
visit.     •   Each Engine must undergo a video borescope prior to entry into
the T3 Program and pass with no restrictions or impediments in accordance with
Manufacturer recommendations (no “on-wing watch on” items), to be performed by
Supplier at its cost.     •   Each Engine must have sufficient EGT margin
(“EGTM”) for the remaining Cycles upon entry into the T3 Program, as follows:

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                                Remaining Cycles     Minimum EGT margin        
  per Engine     on-wing at     Engine Type     nameplate     sea-level    
3B1 operated at 20K lbs. thrust
      3000       25 deg. C.    
3B2 operated at 20K lbs. thrust
      3000       25 deg. C.    
3B2 operated at 22K lbs. thrust
      3000       13 deg. C.    

      In respect of each Engine entering the T3 Program, for each additional
1,000 Cycles remaining, such Engine should have a sufficient EGTM to remain
on-wing in accordance with standard rates of deterioration as published by CFMI.
        The EGTM for each Engine’s entry into the T3 Program shall be measured
by either (1) SAGE Data on take-off or (2) Maximum Power Assurance (MPA) on-wing
in accordance with the Manufacturer’s manual. If an Engine does not comply with
the above entry conditions, then an adjustment in price may be made.     •  
Customer shall provide all relevant Engine documentation for each Engine prior
to entry into the T3 Program, including records of all LLPs, TSLSV/CSLSV,
TSN/CSN, SAGE Data, last shop visit records, list of SBs/ADs incorporated, and
configuration data issued by CFMI, to the extent Customer has these in its
possession or which are readily obtainable by Customer without unreasonable
effort.     •   Engines which have not undergone a shop visit prior to the
Commencement Date of this Agreement or which have had their last shop visit
performed by IAI or by a comparable shop facility approved by, and which is
acceptable to IAI (such approval and acceptance not to be unreasonably withheld
by Supplier), shall be admitted to the T3 Program, subject to final evaluation
by Supplier prior to receipt of an Engine. Notwithstanding the foregoing, if the
most recent shop visit shall have been performed and monitored under the
supervision of GECAS, this provision shall not apply.     •   Engines that have
undergone repairs at a third party and which are accepted into the T3 Program
are subject to the right of Supplier to conduct a detailed evaluation. Such
evaluation may include TSLSV/CSLSV, nature and extent of maintenance services
performed at most recent shop visit, Engine hardware configuration and number of
repairs performed, reputation of previous shop, inspection of Engine, Engine
borescope, and full review of all technical records and data concerning the
Engine.

5.2   Supplier shall provide comprehensive off-wing maintenance coverage for
Customer’s 3B1 and 3B2 Engines pursuant to this Schedule for both scheduled and
unscheduled engine removals, in accordance with FAA regulations, applicable
Manufacturer specifications, the Manufacturer’s Engine Service Manual and IAI’s
engineering procedures and recommendations, FAA-authorized repairs (no FAA PMA
Parts). Workscope Planning Guide (latest revision), in effect on the Signature
Date, or future versions that will appear from time to time, as detailed below
(together, the “Work Standard”). At all times, Supplier shall provide the latest
version. Should the latest version impose considerable financial burdens on
Supplier, both Parties will meet to find an equitable solution to such financial
burden. For the avoidance of

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    doubt, Supplier shall not use FAA-PMA parts or perform FAA-DER repairs
unless authorized in advance by Customer.   5.2A    Supplier shall assume all
responsibility including financial responsibility for the Return Conditions for
the Engines that Customer is required to meet in accordance with the aircraft
leases. This shall include, but not be limited to: scheduling shop visits to
meet minimum time and cycles remaining since overhaul and minimum LLP life at
re-delivery to lessor, responsibility for meeting minimum EGTM upon return to
lessor and responsibility for correcting boroscope findings not occasioned by
FOD or negligent operation by Customer, all in accordance with the lease Return
Conditions for the Engines.   5.3   Shop Visits

  5.3.1   Each Engine will undergo Core Performance Restoration Shop Visits
and/or Hot Section Restorations as required and recommended by IAI engineering
and in consultation with Customer (the Workscope for Full Core Performance
Restoration is attached hereto as Annex 2).     5.3.2   Shop Visits to correct
known defects or performance deterioration beyond service limits, which cannot
be corrected on wing.     5.3.3   Shop Visits for scheduled maintenance as
recommended by IAI or due to LLP replacement and agreed to by Customer.    
5.3.4   Shop Visits that cannot be accomplished on-wing, after all reasonable
troubleshooting actions have been carried out by Customer or Supplier.    
5.3.5   During Shop Visits Customer will give consideration to the following
return conditions and will build the engines as appropriate with sufficient LLP
life and EGT margin remaining as expected to meet these terms.         IAI will
consult with GECAS on all workscopes.     5.3.6   Return conditions at end of
Term shall be not less than 3,000 remaining Cycles and not less than 3000 Engine
Flight Hours on-wing to the next Engine Refurbishment and are subject to max MPA
runs and sufficient EGTM to remain on-wing for the remaining Cycles as per table
in Sub-paragraph 5.1 above.

5.4   The T3 Program Engine Services shall include:

  •   Off-wing comprehensive Engine maintenance for both scheduled and
unscheduled Engine maintenance, including material, labor, LLPs, bare Engine
component repair, shop test, as necessary, to return an Engine to a Serviceable
Condition, which shall include the following:

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  1.   Incoming Inspection,     2.   Disassembly (as required).     3.  
Cleaning.     4.   Non-Destructive Testing (N.D.T.).     5.   Inspection and
repair or replacement of Removed Engine Parts, Subassemblies, Modules.     6.  
Re-Assembly of Modules.     7.   Balancing of rotating Modules and High Speed
Grinder.     8.   Re-Assembly of Engine.     9.   Test cell run of Engine.    
10.   Post-test inspection.     11.   Preservation for twelve months.     12.  
Preparation of Engine for airfreight shipment on Customer furnished equipment,
consisting of Engine stand with cradle, together with preparation of empty stand
for the Engine to be removed, except that Supplier shall provide, as needed
(i) an extra cradle for transportation and (ii) one (1) sling kit. Such Engine
will be Redelivered with full QEC (without nose cowl), unless such Engine was
Delivered without a full QEC, in which case, it shall be Redelivered without a
full QEC.

      with guaranteed Customer fleet-wide average EGTM levels (after Shop
Visits), such average to be determined after six (6) Engines have undergone Shop
Visits for a Full Core Performance Restoration Workscope in accordance with the
Workscope Planning Guide, as follows:

  •   3B1: 65 degrees C at hot-day takeoff at sea level.     •   3B2: 35 degrees
C at hot-day takeoff at sea level.

  •   LLP replacement Shop Visits. All LLPs to be installed by Supplier shall
have full back to birth traceability, reasonably acceptable to Supplier prior to
installation, in addition, Supplier is expressly forbidden to replace any
Customer owned LLPs which have lower life remaining or value regardless of
having minimum built life requirements. All LLPs removed from an Engine

8

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      shall become Supplier property and may be installed on other Engines in
the T3 Program.     •   Perform line station repairs to avoid Shop Visits, at
Supplier’s option only (such option to be exercised with due care) and in
consultation with Customer.     •   Engine testing, including fuel and oil.    
•   Program Management, including Engine Condition Monitoring (ECM) and SAGE
Engineering Support, including Cycles and Flight Hours control based upon
information received on a monthly basis from Customer.     •   Repair incidental
minor damage, FOD/IOD, up to $20,000 per Shop Visit discovered during a Shop
Visit. For reasons of clarity, the term FOD/IOD will not include LLPs and normal
wear, tear and erosion.     •   Incorporation of Category 1-3 SBs, higher
category SBs at Supplier option only and to extend time on-wing (e.g.,
reliability improving modifications), all Alert SBs and ADs (known at time of
proposal) which occur at a Shop Visit up to a maximum of $20,000 per Engine per
Shop Visit (not including optional coverage; i.e., categories 4-9 per CFMI
recommendations and new ADs).     •   Roundtrip transportation to/from the
applicable Customer Facility.

5.5   Spare Engine Program

  •   Spare Engines Availability for scheduled Shop Visits: Not less than
twenty-four (24) hours prior to removal of an Engine for a scheduled Shop Visit,
Supplier will provide a spare Engine (a “Spare Engine”) with the same
configuration as the removed Engine for Customer’s use during such scheduled
Shop Visit, subject to the Parties mutually agreed to schedule of planned Engine
removals during the term.     •   For unscheduled removals of an Engine,
Supplier will use its best efforts to provide a Spare Engine to Customer within
forty-eight (48) hours of notification by Customer. If Supplier cannot procure
such Spare Engine, Customer shall procure such Spare Engine on the best
commercial terms available to it at that time.     •   Article 5.12.2 of this
Schedule shall apply to payment for supply of spare engines for both scheduled
and unscheduled engine removals.     •   While Customer has custody of a Spare
Engine, Customer shall (i) operate such Spare Engine in accordance with the
operating parameters and, in all events, within the Flight Hours to Cycles
ratio, that it was operating the Engine being replaced by such Spare Engine,
(ii) bear full risk of damage to, or loss of, such Spare Engine and extend the
coverage of the insurance policies it is maintaining pursuant to Article XIII of
the General Terms Agreement to cover such Spare Engine; and (iii) generally deal
with such

9

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      Spare Engine with the same standard of care with which it deals with its
own engines.     •   Upon the Redelivery of the Engine that had been replaced
and, in all events, no more than forty-eight (48) hours thereafter, Customer
shall return the Spare Engine to Supplier at the Site.     •   In the event
Customer fails to return a Spare Engine in accordance with the provisions of the
redelivery provisions the immediately preceding sub-paragraph, then, commencing
with the first day after such Redelivery by Supplier, and until Customer
actually redelivers such Spare Engine to Supplier at the Site, Customer shall
pay to Supplier the sum of US$ 1,500 per day (pro rata for partial days).

5.6   Supplemental Work

  •   Supplemental work shall consist of all other services not specifically
included in the T3 Program Engine Services, and agreed through a cost estimate
approved by Customer before a service is performed.     •   SB and AD Coverage
for Optional SBs (categories 4-9 per CFMI recommendations and excluding
modifications for the sole benefit of Supplier) and new ADs to be charged
case-by-case on Supplemental Work basis, excluding future ADs and SBs with the
same intent as an earlier version, where only the incremental cost will be on a
Supplemental Work basis.     •   QEC repair and/or replacement (which is covered
under Schedule No. 3).     •   Services performed at the request of Customer.  
  •   Services exclusively required as a result of:

  •   an accident; and/or     •   a Shop Visit required as a result of FOD
(other than incidental FOD, as to Engines only, up to $20,000, discovered during
a Shop Visit).     •   A Shop Visit required due to a Manufacturer design defect
or manufactured part, excluding normal wear, tear and erosion. Supplier will
assist Customer in applying for /administering each Manufacturer’s warranties.  
  •   Customer requested SBs that are not initiated by Supplier.     •   An Act
of God.

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  •   Improper or negligent installation, operation or maintenance of Customer’s
Equipment not in conformance with Manufacturer manuals.

  •   Experimental tests applied to equipment.     •   Use of Parts, components
or modules non-compliant with or not authorized by the FAA.     •   Engine
non-conformance with the required Manufacturer’s configuration.     •   Engine
accessories test, repair and overhaul, the fixed labor charges for which are set
out in Annex 3.     •   Cost of the repair above 65% of its replacement cost of
an Engine damaged Beyond Economic Repair (“BER”). For the purposes of this
Agreement, an Engine shall be considered to be BER when the cost of restoration
or repair of such Engine exceeds sixty-five percent (65%) of the replacement
cost for a comparable replacement engine, unless market conditions are such that
a replacement engine is less expensive than the cost of a repair. In such case,
Customer may opt to buy a replacement engine.

5.7   Program Management       Supplier shall appoint a Program Manager, who in
addition to the duties described in Article 3(1)(D) of the General Terms
Agreement, shall provide:

  w   A Supplier developed Repair Specification to be shared with Customer and
consistent with OEM specifications.     w   Consistent implementation of a
Repair Specification throughout the term of this Schedule.     w  
Interpretation, analysis, support and recommendations regarding Sage Data.    
w   Customer focal point for scheduling Shop Visits.     w   Engine
Record-keeping and documentation.     w   An option to Customer to place a
designated repair representative at Supplier’s Designated Repair Station to
monitor repair processes under this Schedule, at its own cost and expense.
Supplier shall provide such representative with office facilities, including
access to telephone, fax and internet, with copy services nearby.

5.8   Supplier Repair Procedures. The following procedures shall govern the
performance of Services on Equipment.

  5.8.1   Preliminary Workscope. Upon completion of a strip down and parts
inspection, Supplier shall submit to Customer an initial findings report for
review and a list of major parts requiring replacement or rework, a Preliminary
Workscope and cost estimate approval form for Customer’s authorization of such
work.

11

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  5.8.2   Records Furnished by Customer. Customer shall, at least seven (7) days
prior to the time of Delivery of Equipment (or with the Equipment, in the case
of an unscheduled Shop Visit) for a Shop Visit, provide Supplier all information
and records necessary for Supplier to establish the nature and extent of the
Services required to be performed on the Equipment and to perform such Services.
Such information and records shall include, but are not limited to:

  A.   The cause of Equipment removal (reason for such Shop Visit);     B.  
Applicable Engine log books detailing work performed at the most recent Shop
Visit, any reported defects or incidents during operation since such most recent
Shop Visit, with a description of the action taken, and significant operational
characteristics experienced during the last flight prior to such Shop Visit;    
C.   SB and AD status/requirements;     D.   TSN for each Engine;     E.   TSLSV
for each Engine, module, component and accessory;     F.   CSN for each Engine;
    G.   CSLSV for each Engine, module, component and accessory;     H.   Record
of change of Parts during operating period prior to such Shop Visit and reason
for removal;     I.   TSN, CSN, TSLSV, CSLSV time since overhaul (“TSO”) and
cycles since overhaul (“CSO”) on all LLPs;     J.   Back to birth history
certificate indicating history from zero TSN/CSN on all LLPs;     K.   Customer
inventory of Equipment “as shipped”, including (when applicable) a description
of the external Engine configuration;     L.   Engine oil used (for Engines);  
  M.   Historical log (for parts and accessories);     N.   Module log cards (if
applicable);     O.   CFMI EDS Report of Last Shop Visit, if available (whether
or not such shop visit was under this Schedule); and     P.   Engine on-wing
performance trend data generated utilizing trend monitoring programs such as
ADEPT or SAGE (if available).

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      Customer’s failure to furnish necessary information and records shall
result in a delay in induction of the Equipment for repair, delay in Turn Time,
and may necessitate premature LLP replacement.     5.8.3   Receiving Inspection.
Following Delivery of an item of Equipment for a Shop Visit, Supplier shall
accomplish a standard receiving inspection and shall provide a copy of the
results of such receiving inspection to Customer. Customer shall be notified of
any components, parts and line replaceable units found to be missing or damaged
in transit, as more fully described in the Master Agreement.     5.8.4  
Disassembly, Inspection, Workscope. Upon receipt of Equipment, Supplier shall
disassemble, clean, and inspect the Equipment. Upon completion of its
inspection, Supplier shall recommend a Workscope to meet the requirements of the
applicable Repair Specification.     5.8.5   Work in Progress Reports. Supplier
shall provide Customer with a weekly work in progress report, describing the
progress of the Repair work from initial receipt until Redelivery.     5.8.6.  
Repair and Reassembly. Supplier shall Repair and reassemble each item of
Equipment in accordance with the requirements of its Workscope. Supplier may, in
its discretion, incorporate Designated Engineering Representative (“DER”)
repairs for Equipment. Supplier shall determine the Parts required to repair
Equipment, and may, to the extent Customer does not furnish such Parts, elect to
use new Parts, overhauled Parts, FAA PMA Parts and/or Parts in Serviceable
condition from Supplier’s Rotable Parts Inventory to replace Customer’s
repairable Parts (such Parts covered under Schedule 3). For the avoidance of
doubt, Supplier shall not use FAA-PMA parts or perform FAA-DER repairs unless
authorized in advance by Customer.     5.8.7   Test. Supplier shall test an item
of Equipment in accordance with its Workscope.     5.8.8   Records Review —
Certification. Supplier shall accomplish a review of Equipment records to
ascertain that Equipment has been repaired in accordance with its Workscope.
Serviceable Equipment shall be tagged with the appropriate Serviceable tag
recognized by the FAA.     5.8.9   Preparation for Redelivery. Supplier shall
prepare and package Equipment in Customer supplied shipping stands or containers
for Redelivery in accordance with Supplier’s standard commercial practice,
unless otherwise agreed between the

13

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      parties. For Engines, Supplier shall preserve the fuel and lubrication
systems prior to Redelivery in accordance with the applicable Manufacturer
manual requirements. Supplier shall comply with the reasonable written
instructions of Customer as to markings to be placed on invoices, bills of
lading, packing lists, correspondence and shipping containers.     5.8.10  
Redelivery. Equipment shall be Redelivered in accordance with CFM56
Transportation Reference Guide, March 1, 1999, and as amended.     5.8.11  
Supplier Documentation.         At Redelivery of an item of Equipment, Supplier
shall provide Customer with a records package in connection with Services
performed on such item of Equipment, and shall retain a copy of such records.
Such records shall include:

  A.   Major Repair/Alteration Certification FAA No. 337, including AD
compliance;     B.   FAA Form 8130—3 for accessories and Engines;     C.   Cycle
limited parts log (full traceability for LLPs);     D.   Serviceable tag for
Serviceable Equipment;     E.   Shop Preliminary Finding Report;     F.  
Scrapped Parts List;     G.   Major Parts and Accessory Change Records;     H.  
List of SBs/ADs incorporated and status;     I.   Test cell report; and     J.  
Original records and related documentation furnished by Customer.

      Supplier shall provide the following records to Customer within fifteen
(15) calendar days after Redelivery of an item of Equipment and shall retain a
copy of such records:

  A.   Shop Visit final report;     B.   Off/On log; and     C.   Service
Bulletin status report.

5.9   Miscellaneous Customer Responsibilities.

  5.9.1   Designated Representative. Customer shall designate in writing one
(1) or more of its full time employees as a representative to Supplier (each a
“Designated Representative”) during the term of this Schedule. Such Designated
Representative shall act as the liaison between Supplier and Customer and shall
have the authority to represent Customer in all matters relating to the Services
requested hereunder, including, without limitation,

14

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      approving or authorizing Changes to Workscopes, making final decisions as
to the correction or other disposition of non-routine items, and authorizing the
performance of repairs on an overtime basis and Supplemental Work.     5.9.2  
Timely Authorization. Customer’s Designated Representative shall provide
approvals and authorizations in connection with the Services provided under this
Schedule in a timely manner, but in no event greater than two (2) business days
following receipt of a request from Supplier for an approval or authorization.  
  5.9.3   Shipping Stands and Shipping Containers. Customer shall provide all
necessary and appropriate shipping stands (except (i) in the case of a Spare
Engine, which is provided with an engine stand, and (ii) that Customer may
request that Supplier provide an engine stand, in which event, if so supplied by
Supplier, Customer shall pay the round trip transportation costs (inclusive of
insurance costs) for such engine stand), shipping containers, mounting adapters,
inlet plugs and covers, as may be required by Supplier in order to package
Equipment for transport.     5.9.4   Delivery of Engines. Engines shall be
delivered with full QEC to enable a full test to be completed.     5.9.5  
Supply of LLPs. GECAS shall supply all LLPs to the Designated Repair Facility at
least seven (7) days before the applicable Engine is Delivered, which LLPs shall
have a remaining life, at the time of such supply by GECAS, such that, assuming
normal use of the applicable Engine that Customer is required to return such
Engine to GECAS, the LLPs on such Engine will able to meet the Return Condition.
    5.9.6   Regulations and Revisions. Customer shall identify any special FAA
or other regulatory agency rules, directives or regulations, including any
revisions thereto, affecting a Repair Specification, or any Services to be
provided hereunder.     5.9.7   Forecast. At no expense to Supplier, Customer
shall make available to Supplier, a forecast of operational and maintenance
program schedules, fleet operational status, Engine/aircraft flying hours and
cycles, scheduled Engine or Engine module removals, and such other relevant
information as to enable both parties to manage resources to accomplish the
forecasted workload. Such forecast shall be made available by Customer to
Supplier quarterly (no later than fifteen (15) days prior to the end of the
previous quarter) on a rolling annual basis, unless otherwise agreed in writing.
The parties shall mutually agree as to the format and content of such forecast.

15

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  5.9.8   Input Notice. Customer shall advise Supplier of its intention to
Deliver Equipment prior to dispatch of such Equipment and shall make every
reasonable effort to provide incoming transportation information in writing to
Supplier at least seven (7) calendar days prior to Delivery of Customer’s
Equipment to the Designated Repair Station. Customer shall not Deliver to
Supplier piece parts or components separate from the Equipment without the
written consent of Supplier. Supplier shall not be obligated to induct more than
one Engine of each type per calendar day.

5.10   Turn Around Time

  5.10.1   Turn-Time. Turn-Time will be (i) sixty-five (65) days for Full Core
Performance Restoration only; and (ii) seventy (70) days for Full Core
Performance Restoration and LPT or fair and booster disassembly to piece parts,
from readiness for pick-up of an Engine at the applicable Customer Facility, to
Redelivery back to such Customer Facility.     5.10.2   Interruption of Service.
If Services on an item of Equipment are interrupted due to (A) circumstances
described as an Excusable Delay in the General Terms Agreement, (B) Customer’s
failure to timely provide Supplier with information, records, approvals,
authorizations or parts to enable Supplier to proceed with the timely processing
of such item of Equipment, or (C) such item of Equipment having been delivered
to Supplier with either transit-caused damage or missing parts, and Customer or
Supplier cannot immediately supply replacement parts for such missing or damaged
parts, then the estimated Turn Time for such item of Equipment shall be extended
by the period of such delay.     5.10.3   In the event the Turn Time for an
Engine (a “Delayed Engine”) is greater than as provided in 5.10.1 above,
adjusted under 5.10.2 above, then Supplier shall pay to Customer, the actual
direct costs of Customer for actual daily leasing fees including all
transportation and insurance costs for a Spare Engine leased by Customer from a
third party or Supplier’s affiliate, Israel Aircraft Industries Ltd. in
accordance with this Agreement to replace the Delayed Engine until Redelivery of
such Delayed Engine shall have occurred. . Supplier acknowledges that, given the
business sector in which Customer operates, Turn Time is an essential element of
this Schedule.

5.11   Subcontracted Services

      Supplier has subcontracted to IAI the performance of the Services on
Customer’s Engines. IAI may further subcontract

16

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      any portion of the Services to be performed on Customer’s Equipment. Any
such further subcontracted Services shall be performed in accordance with the
requirements of the applicable Workscope and the applicable FAA directives and
may only be further subcontracted to a subcontractor with a valid FAA repair
license which is approved by IAI in accordance with FAA requirements; and all
such subcontracted Services shall include the provision of an 8130 tag.
Subcontracting of any Services hereunder shall not relieve Supplier of its
performance obligations set forth in this Schedule.

5.12   Pricing

  5.12.1   In respect of the T3 Program Engine Services set out in Sub-paragraph
5.4 above, Customer shall pay to Supplier the applicable Flight Hour Rate per
Engine per month set out in the following table:

                  Thrust (1)   Flight Hours/Cycle     Flight Hour Rate  
20,000 lbs.
    1.5/1     $ *****  
20,000 lbs
    2/1     $ *****  
22,000 lbs.
    1.5/1     $ *****  
22,000 lbs.
    2/1     $ *****  

--------------------------------------------------------------------------------

(1)   For both Engine types.   (2)   For 3B2s operated as if they were 3B1s with
derates to 20,000 and further derated as required in this Agreement for 3B1s,
Supplier will prorate the Flight Hour Rate to the 20,000 pound Thrust rates
above.

  5.12.2   For Spare Engines in respect of both scheduled and unscheduled Shop
Visits, Customer (y) shall continue to pay in respect of the Spare Engine, the
Flight Hour Rates, and the Flight Cycle Rates and the Flight Cycle Rates for
LLPs at the rate that it was paying to GECAS in respect of the Engine that is
undergoing the Shop Visit; and (z) shall pay a daily rate for the use of such
Spare Engine (the “Spare Engine Daily Rate”) that is comparable with then market
daily rate conditions.         If Supplier cannot procure a Spare Engine for a
scheduled or unscheduled Shop Visit, Customer shall do so and Customer (y) shall
pay directly to the leasing company/lessor in respect of the Spare Engine, the
Flight Hour Rates, and the Flight Cycle Rates for LLPs due under the lease with
the leasing company/lessor ; and (z) shall pay directly to the leasing
company/lessor the Spare Engine Daily Rate due under the lease with the leasing
company/lessor. Supplier shall reimburse Customer for the difference between the
actual cycle

Confidential treatment has been requested by Kitty Hawk, Inc. for certain
portions of this document. Confidential portions have been filed separately with
the Securities and Exchange Commission. Omitted portions are indicated in this
agreement with “*****”.

17

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      and hour usage costs of the Spare Engine paid by Customer, and the cost of
the cycle and hour usage costs that Customer was paying in respect of the Engine
undergoing the Shop Visit.

  5.12.3   In respect of the Supplemental Work set out in Sub-paragraph 5.6
above, Customer shall pay to Supplier the following charges:

  (a)   Supplier’s labor rate for all Supplemental Work by Supplier’s
subcontractor, IAI, shall be $***** per Man Hour.     (b)   In respect of
materials:

  (i)   new Parts (excluding LLPs) shall be charged at the applicable
Manufacturer’s Catalogue List Price (“CLP”), plus an 8% handling charge (“H/C”)
not to exceed (“NTC”) $ 3,000 per item and $ 4,000 per line item.     (ii)  
overhauled condition (“OHC”) Parts shall be charged at 70% of CLP, plus an 8%
H/C NTE $ 2,500 per item and $ 3,000 per line item.     (iii)   new LLPs shall
be charged at the applicable Manufacturer’s then current CLP, plus an 8% H/C NTE
$ 5,000 per LLP.     (iv)   LLPs in OHC shall be charged pro rata (the
applicable Manufacturer’s then current CLP, prorated for remaining cycles), plus
an 8% HC NTE $ 4,000 per LLP.     (v)   Exchange Parts provided shall be charged
for cost of repair, plus a 4% (of applicable Manufacturer’s then current CLP)
H/C NTE $ 2,500 per item and $ 3,500 per line item.     (vi)   sub-contracting
services for ESM (Engine Shop Manual) repairs

Confidential treatment has been requested by Kitty Hawk, Inc. for certain
portions of this document. Confidential portions have been filed separately with
the Securities and Exchange Commission. Omitted portions are indicated in this
agreement with “*****”.

18

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      shall be charged at invoice cost, plus an 8% H/C NTE $ 2,500.

  5.12.4   Assumptions

  (a)   The prices contained in Sub-paragraph 5.12 are based on the assumptions
that:

  (i)   a guaranteed annual minimum of 960 Flight Hours per Engine.     (ii)   a
Flight Hour to Cycle ratio of 1.5/1 or 2/1.     (iii)   Engines will be operated
at (i) in the case of 3B1 Engines, 20,000 lbs. of thrust and (ii) in the case of
3B2 Engines, 22,000 lbs. of thrust or operated as if they were 3B1 Engines; and
in respect of all Engines operated at 20,000 lbs. of thrust, Customer will not
change operation to a higher thrust category.     (iv)   Line maintenance (labor
and materials) will be performed by Customer.     (v)   Customer’s “Major
Operating Region” is the United States.     (vi)   Engines will be operated in
accordance with CMFI recommendations for improved time on-wing, including
(i) water wash program and (ii) cool down and warm up procedures.     (vii)  
Customer is the user of all of the Engines, which it is leasing from GECAS.    
(viii)   The Term of this Schedule continues for a full ten (10) years or the
actual lease term of the aircraft, whichever is longer.

  (b)   Supplier reserves the right to revise all charges payable under this
Schedule in the event any of

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      the foregoing assumptions change during the Term.

5.13   Terms of Payment

  (a)   In respect of the first Shop Visit under this Schedule of each Engine,
GECAS, and not Customer, shall pay to Supplier, at the time of Delivery of such
Engine to Supplier, an amount, in respect of such Engine, equal to (y) the
Flight Hour charges as of the date of Delivery to Supplier for such first
scheduled Shop Visit, multiplied by (z) the actual Flight Hours of such Engine
from its most recent Full Core Performance Restoration (or, if it shall not then
have undergone a Full Core Performance Restoration, from its manufacture) up to
the Commencement Date of this Schedule.     (b)   Payments of the Flight Hour
Charges in respect of all Shop Visits after the Commencement Date, shall be made
in accordance with the provisions of Article X(B) of the General Terms
Agreement. The Guaranteed AFH provided in Article X(B)(3) of the General Terms
Agreement shall be a fleet average of 960 Engine Flight Hours per Aircraft.    
(c)   Escalation         All prices in this Schedule (i) are stated in 2004 US
Dollars; and (ii) shall be adjusted annually on January 1, commencing with
January 1, 2005, based on a change in the basket of elements calculated:

  §   as to 70% of each such price (allocable to materials): annual price change
of CFM56 Spare Parts Catalogue, capped at 3.5% per year.     §   as to 30% of
each such price (allocable to labor): annual change in Labor Index (NAICS
336412) from the US Department of Labor, Bureau of Labor Statistics, of the
average for the months of July, August and September of the previous year;
capped at 3.5% per year.

6.   Parts Replacement Policy       In addition to, and as a supplement to, the
provisions of Article 7 of the General Terms Agreement, Customer shall permit
purchase of PMA parts by Supplier in non-rotating or gas-path areas following
review by Customer’s program manager and Supplier engineering. Customer shall
permit DER repairs subject to review by Customer program manager and Supplier
engineering. Customer understands that, if it changes its policy regarding
purchase of PMA parts or performing DER repairs, the Flight Hour Charges,

20

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    Additional Flight Hour Charges and Flight Cycle Charges may be adjusted
accordingly. For the avoidance of doubt, Supplier shall not use FAA-PMA parts or
perform FAA-DER repairs unless authorized in advance by Customer.   7.  
Guarantees and Warranties:       Customer shall assign to Supplier all
Manufacturer warranties that are assignable for the period of this Schedule.  
7.1   Warranty

  (1)   The warranty provisions of the General Terms Agreement shall be
applicable hereto, except that they shall only be applicable in respect of the
last Redelivery of an Engine prior to expiration of the Term.     (2)   For the
purposes of this Schedule, the Warranty Periods shall be:

             
(a)
  in respect of all Parts of Engines (other than accessories)   -   Eighteen
(18) months or two thousand five hundred (2,500) Flight Hours, in each case,
after the applicable Engine’s last Shop Visit, whichever occurs first.  
(b)
  In respect of accessories   -   Six (6) months or 1,500 Flight Hours, in each
case, after the applicable Engine’s last Shop Visit, whichever occurs first.

8.   Term of Schedule       This Schedule shall commence upon acceptance of the
first Aircraft by Customer from GECAS (the “Commencement Date”) and, unless
sooner terminated pursuant to this Schedule or the Master Agreement, shall
remain in effect for an initial period of ten (10) years or the actual term of
the Aircraft leases with GECAS, whichever is longer. (the “Term”).   9.  
Additional Provisions

  (A)   The provisions of Article 1(E)[“BER Procedures"] of the General Terms
Agreement are modified by the provisions of Sub-paragraph 5.6 of this Schedule

10.   Part of General Terms Agreement       This Schedule, when countersigned by
the parties hereto, dated and numbered, shall be incorporated into, and form an
integral part of, the General Terms Agreement. By their execution and delivery
of this Schedule, the parties hereby reaffirm all of the terms and conditions of
the General Terms

21

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    Agreement, except, as to this Schedule only, to the extent modified or
deleted under Section 9 above.       All annexes to this Schedule are hereby
incorporated herein and made a part hereof as if such annexes were set forth in
this Schedule at length.

                  AVIATION SERVICES INTERNATIONAL, INC.         (Supplier)
   

  By:        

           
 
           

  Print Name:        

           
 
           

  Title:        

           
 
                KITTY HAWK AIRCARGO, INC.         (Customer)
   
 
           

  By:        

           
 
           

  Print Name:        

           
 
           

  Title:        

           
 
            For the purposes of Section 5.9.5 and 5.12.2 only.     GE CAPITAL
AVIATION SERVICES, INC.
 
           

  By:        

           
 
           

  Print Name:        

           
 
           

  Title:        

           

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ANNEX 1

[List of Engines and Aircraft
Subject to this Schedule]

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                                Aircraft Serial number     Engine Serial Number
and Type    
1
      24022       CFM56-3B2 ESN 723103
CFM56-3B2 ESN 723347    
2
      23708       CFM56-3B2 ESN 722115
CFM56-3B2 ESN 722298    
3
      24462       CFM56-3B2 ESN 722374
CFM56-3B2 ESN 722408    
4
      24020       CFM56-3B1 ESN 858641
CFM56-3B1 ESN858928    
5
      23538       CFM56-3B1 ESN 722364
CFM56-3B1 ESN 720664    
6
      24902       CFM56-3B2 ESN 724778
CFM56-3B2 ESN 724802    
7
      24916       CFM56-3B2 ESN 727111
CFM56-3B2 ESN 726128    

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*   please insert correct engine type (3C1, 3B2, 3B1)

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ANNEX 2

[Description of Services For Full Core Performance Restoration]

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1.   Fan and Booster Major Modules       Disassemble into Sub-Modules (or piece
parts if required), Inspect (repair any damage found) and Reassemble the
following Sub-Modules:

  •   Fan and Booster Module     •   No.1 and No. 2 Bearing Support Module    
•   IGB and No. 3 Bearing Support Modules     •   Fan Frame Module.

2.   Accessory Drive Modules

      Disassemble (for cause) from Engine, Inspect and Reassemble the following
Modules: AGB Module, TGB Module.

3.   Core Modules – Performance Workscope

      Disassemble to piece parts, Inspect (repair any damage found), Reassemble
and Rework dimensions to meet required clearances of the following modules:

  •   HPC Rotor Module.     •   HPC Forward/Rear Stator Module.     •  
Combustion Casing Module.     •   HPT Nozzle Module.     •   HPT Rotor Module.  
  •   HPT Shroud and Stage 1 LPT Nozzle Module.

4.   Low Pressure Turbine Modules

      Disassemble into Sub-Modules (or into piece parts if required), inspect
(repair any damage found) and reassemble the following Sub-Modules:

  •   LPT Shaft Module     •   LPT Rotor and Stator.     •   Turbine Frame
Module.     •   No. 4 and 5 Bearing Inspection

5.   Engine Mounts (Front, AFT)

      Inspect and repair as necessary.

6.   Turbine Exhaust Sleeve & Plug

      Inspect and repair as necessary.

7.   QEC parts

      Visual Inspection.

8.   Engine Accessories

      Inspect and Repair / Overhaul as required.

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    General Notes

      Supplier is authorized to use FAA/DER Repairs (substantiated by FAA
8110-3).         A replacement Part must be a Manufacturer approved Part and
must not have been installed on an aircraft registered on a military aircraft
register. In all cases the replacement Part must be in good operating condition,
must not have been involved in any accident or incident, have as much useful
life available until the next expected maintenance procedure, be of the same or
a more advanced make and model and of the same interchangeable modification
status as the Part it is replacing or is otherwise of an equivalent value and
utility as the Part it is replacing.         At Customer’s option, LLPs may be
supplied by Customer (at its own cost and expense) in accordance with minimum
build-up requirements under this Schedule. Otherwise, Customer shall pay the
Flight Cycle Rate for LLP usage under this Schedule.         Supplier will agree
with Customer regarding WorkScope for Engines based on the recommendations
contained in the Workscope Planning Guide.

Permanent Replacement.

      If an Engine suffers an Event of Loss, then Customer shall permanently
replace such Engine under and in accordance with the Leases, whereupon such
replacement Engine shall be covered by this Schedule and such replaced Engine
shall be removed from the coverage of this Schedule, any remaining funds
accumulated under this Schedule or the Leases for Engine maintenance services
with respect to the replaced Engine shall be carried over to, and then be
applicable to, the replacement Engine, which shall be operated by Customer under
the Leases.

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Annex 3

[Schedule of Fixed Labor Prices for
Accessory Supplemental Work]

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Only for Supplemental Work

CFM56-3 ACCESSORY REPAIR FIXED CHARGES (USD) FOR LABOR ONLY

                                              A.T.A           COMPLETE    
REPAIR &     BENCH     ITEM/DESCRIPTION     NO.     TYPICAL P/N     OVERHAUL    
TEST     TEST    
Main Engine Control
    73-21-13     8063-214     *****     *****     *****    
Main Fuel Pump
    73-11-11     708600-2     *****     *****     *****    
Lube Unit
    79-21-12     335-261-004-0     *****     *****     *****    
Fuel Nozzle (including ultrasonic cleaning per nozzle each)
    73-11-42     6840023M /E     *****     N/A     *****    
Fuel Manifold (each)
    72-41-04     9375M90G X     *****     *****     *****    
Variable Stator Valve Actuator (each)
    75-32-11     1211175-7 /010     *****     *****     *****    
VSV & VBV Feedback cable (each)
    75-32-21     9339M12P0X     *****     N/A     *****    
T5. SENSOR
    77-31-17     301-779-602-0     —     —     *****    
T12 Sensor
    73-21-42     301-771-601     —     —     *****    
T2 Sensor (FIT)
    73-21-71     8901-278     *****     *****     *****    
CIT Sensor
    73-21-22     8901-274     *****     *****     *****    
Oil/Fuel Heat Exchanger
    79-21-22     301-776-401     *****     —     *****    
VBV Stop Mechanism
    75-31-21     301-772-601     *****     *****     *****    
Master Ball Screw Actuator
    75-31-51     121666-7     *****     *****     *****    
Ball Screw Actuator (each)
    75-31-61     121664-3 /5     *****     *****     *****    
Oil Scavenge Filter
    79-21-31     335-260-701-0     *****     —     *****    
HPT Clearance Control Valve
    75-21-11     7061M31G0X     *****     *****     *****    
Ignition Exciter Box (each)
    74-11-12     9238M66P07     —     —     *****    
Ignition Lead (each)
    74-21-12     9339M26P X     —     —     *****    
Ignitor Plug (each)
    74-21-37     1374M13P0X     —     —     *****    
Thermocouple Probe+ Harness (each)
    77-21-24     SET     —     —     *****    
Inlet Gear Box no.3 bering.
    72-61-00     9995M18G06     *****     *****     *****    
Accessory Gear Box
    72-63-00     335-300-110-0     *****     *****     *****    
Transfer Gear Box
    72-62-00     335-300-010-0     *****     *****     *****    
N1 Speed Sensor
    77-11-13     320-094-001-0     *****     *****     *****    
Core Speed Sensor ( N2 )
    77-11-21     R-9974M83P01
S-9974M82P03     —     *****     *****    
Oil Tank
    79-11-13     335-261-203-0     *****     *****     *****    
Servo Fuel Heater
    73-11-22     45731-1251-1     *****     *****     *****    
Sensor Vibration bearing No.1/4 (each)
    77-31-15     301-776-902-0     —     —     *****    
P.M.C
    73-21-3x     7157M66P03     —     —     *****    
FLEXIBLE SHAFT
    75-31-31     121762-X     —     —     *****    
VBV GEAR MOTOR at subcontractor
    75-31-12     706400-X     *****     —     *****    
HPTCC Timer Solenoid
    75-21-23     301-787-401-0     *****     *****     *****    

Notes:

1.   Material Replacement (charged at catalog price plus H/C) not included in
above fixed prices.   2.   Major Repair of component housings not included in
above fixed prices.   3.   Updated to November 2004, adjusted annually each
subsequent November.

Confidential treatment has been requested by Kitty Hawk, Inc. for certain
portions of this document. Confidential portions have been filed separately with
the Securities and Exchange Commission. Omitted portions are indicated in this
agreement with “*****”.

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ANNEX 1A

Return Conditions

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Redelivery Location:
    Kitty Hawk Maintenance Base, Fort Wayne, Indiana or such other location as
shall be mutually agreed by Lessor and Lessee    
Engine Thrust Setting:
    20,000 pounds    
Minimum APU Limit:
    1,500 Flight Hours remaining to next overhaul    
Minimum Component Calendar Life:
    12 months    
Minimum Component Cycles:
    2,500 Cycles    
Minimum Component Flight Hours:
    3,000 Flight Hours    
Minimum Engine Cycles:
    3,000 Cycles    
Minimum Engine LLP Cycles:
    3,000 Cycles    
Minimum Engine Flight Hours:
    3,000 Flight Hours    
Minimum Landing Gear Calendar Time:
    15 months    
Minimum Landing Gear Cycles:
    3,000 Cycles    
Minimum Landing Gear Flight Hours:
    3,000 Flight Hours    
Redelivery Check:
    Ex the next sequential “C” Check, or higher check if applicable, in block
format so that all airframe inspections falling due within the next following
4,000 Flight Hours of operation in accordance with the Manufacturer’s
Maintenance Planning Document have been accomplished    
Required EGT Margin:
    13°C, 25°C or 35C°    
AD Compliance Period:
    90 days    
Additional Return Condition Requirements:
    Yes, as set forth on Schedule G    

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DELIVERY CONDITION REQUIREMENTS

The Delivery Condition described below is solely a description of such condition
precedent and shall not be construed as a representation, warranty or agreement
of any kind whatsoever, express or implied, by Lessor with respect to the
Aircraft or its condition, all of which have been disclaimed by Lessor and
waived by Lessee as set forth in the Lease, including in the Common Terms
Agreement.

For purposes of Schedule 4, Part 2 of the CTA:

             
Minimum APU Limit:
    At least 1,500 hours of expected life remaining    
Minimum Component Calendar Life:
    12 months    
Minimum Component Cycles:
    2,500 Cycles    
Minimum Component Flight Hours:
    3,000 Flight Hours    
Minimum Engine Cycles:
    3,000 Cycles    
Minimum Engine LLP Cycles:
    3,000 Cycles    
Minimum Engine Flight Hours:
    3,000 Flight Hours    
Minimum Landing Gear Calendar Time:
    15 months    
Minimum Landing Gear Cycles:
    3,000 Cycles    
Minimum Landing Gear Flight Hours:
    3,000 Flight Hours    

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Schedulre “G”
Procedures And Operating Condition At Redelivery

On the Return Occasion the Aircraft, subject to ordinary wear and tear of a kind
and to an extent consistent with similar aircraft engaged in commercial airline
operations, will be redelivered to Lessor by Lessee in accordance with the
procedures and in any event in the condition set out below. For the avoidance of
doubt, any damage assessment and/or rectification criteria used in assessing the
redelivery condition shall be as prescribed in the Manufacturer’s maintenance
manual and/or the Manufacturer’s structural repair manual (“SRM”), as
appropriate. Any damage outside the scope of the SRM shall require FAA 8110-3
certification or the equivalent certification by the civil aviation authority by
the State of Design.

1.1   FINAL INSPECTION

Immediately prior to the Return Occasion, Lessee will make the Aircraft
available to Lessor and Owner for inspection (“Final Inspection”) in order to
verify that the condition of the Aircraft complies with the Lease. The Final
Inspection will include, and be long enough to permit Lessor to:

  (a)   inspect the Aircraft Documents and Records;     (b)   inspect the
Aircraft (including an examination of all compartments and bays, with Lessee to
open or remove panels as reasonably required by Lessor or Owner during the
Redelivery Check), uninstalled Parts and the APU (including a complete video
borescope inspection of the APU);     (c)   inspect the Engines, including (i) a
complete video borescope inspection of (A) the low pressure and high pressure
compressors and (B) turbine area (including combusters) and (ii) engine
condition runs (including full take-off power engine run-up performed in
accordance with the performance test in the Manufacturer’s maintenance manual,
and the Engines shall not exceed corrected limits for all parameters using
temperature corrected charts, and power assurance runs); and     (d)   observe a
two (2) hour demonstration flight at Lessee’s cost (with Lessor’s and Owner’s
representatives as on-board observers (to the extent permitted by FARs)).

Furthermore, Lessee acknowledges that a purchaser or the next operator of the
Aircraft may need to inspect the Aircraft, the Engines and the Aircraft
Documents and Records prior to redelivery and Lessee hereby agrees to cooperate
reasonably at all times during the Term with Lessor, Owner and/or such purchaser
or such next operator in order to coordinate, assist and grant access for the
above inspections and/or meetings as necessary; provided that no such inspection
shall unreasonably interfere with or materially interrupt Lessee’s normal use,
operation or maintenance of the Aircraft.

Lessor or Owner, as the case may be, is responsible for and will indemnify
Lessee against all Losses arising from the death or injury to any observer or
any employee of Lessor or Owner, as the case may be, in connection with the
inspection of the Aircraft under this Section 1.1.

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1.2   GENERAL CONDITION

The Aircraft will:

  (a)   be clean by major cargo airline standards immediately prior to
redelivery and will be in the same configuration as at Delivery subject to any
post-Delivery modifications, repairs or maintenance to the Aircraft which are
permitted or required by the Lease;     (b)   have installed the full complement
of equipment, parts, accessories, furnishings and loose equipment as when
originally delivered to Lessee (and, in addition, shall include any
post-Delivery modifications, repairs or maintenance which were paid for or
otherwise provided by or on behalf of Lessor or which are required or permitted
by the Lease or mutually agreed). The Aircraft (including the Aircraft Documents
and Records) shall be in a condition suitable for immediate operations under FAR
Part 121, without waiver, unless, subject to Lessor’s consent, the benefit of
such waiver is applicable to the next operator of the Aircraft, or restriction
(other than those applicable generally to aircraft of similar make and model);
and if any of the engines or parts tendered for redelivery with the Aircraft is
not one of the Engines or Parts referred to in the Certificate of Acceptance or
a Replacement Engine installed pursuant to Section 8.11 (a) following an Engine
Event of Loss in respect of an Engine, Lessor shall have no obligation to accept
such engine or part unless Lessee furnishes to Lessor all the documents and
evidence in respect of such engine or part in accordance with Section 8.11 (b),
as if such engine were a Replacement Engine or such part were a replacement
Part, and otherwise complies with such Section 8.11(b) with respect thereto;    
(c)   have in existence a valid and effective certificate of airworthiness (and
if required by Lessor, a valid and effective export certificate of
airworthiness) issued by the Air Authority. In the case of an export certificate
of airworthiness, such certificate shall not be issued any earlier than ten
(10) days prior to the Return Occasion;     (d)   comply with the manufacturer’s
original specifications as at the Delivery Date, except as modified during the
Term in accordance with the Manufacturer’s service bulletins or letters,
Airworthiness Directives, Air Authority approved data (all of which should have
supporting State of Design approval) or otherwise as permitted by the Lease;    
(e)   have undergone, immediately prior to redelivery, the Redelivery Check so
that all Airframe and structural inspections, including but not limited to
corrosion prevention and control program inspections falling due within the “C”
Check interval as defined in the Lessee’s Maintenance Program or the
Manufacturer’s Maintenance Planning Document (if, and

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      to the extent that, the Lessee’s Maintenance Program does not comply with
the requirements of the Manufacturer’s Maintenance Planning Document), have been
accomplished in accordance with the Lessee’s Maintenance Program on the Return
Occasion;     (f)   have had accomplished all outstanding Airworthiness
Directives affecting that model of Aircraft requiring compliance during the Term
or within the AD Compliance Period; for this purpose, compliance shall be by
terminating action if:

  (i)   Lessee has complied by terminating action for other aircraft of the same
model and series then operated by Lessee; or     (ii)   the latest date
permitted by such Airworthiness Directive for required compliance by terminating
action falls within the AD Compliance Period.

      In no event shall there be any time extensions, waivers, deviations or
alternative means of compliance with any Airworthiness Directives or other
regulations that are non-transferable by Lessee.     (g)   have installed all
applicable vendor’s and manufacturer’s service bulletin kits received free of
charge by Lessee that relate to the Aircraft and, to the extent not installed,
those kits will be furnished free of charge to Lessor;     (h)   be in such
external livery (freshly painted) as may be requested by Lessor, such painting
to include the fuselage, empennage, wings, engine cowlings and pylons, stripped
(or sanded if only two or less coats of paint) and painted in accordance with
standard industry practice, including any required re-balancing of flight
controls and required re-weighing or recalculation of the Aircraft or the
Aircraft weight;     (i)   have all signs and decals clean, secure and legible;
    (j)   meet the requirements of FAR Part 36, Appendix C, Stage 3 noise
compliance as in effect at the Delivery Date, without waiver or restriction;    
(k)   have no open, deferred, continued, carry over, or placarded maintenance
items or watch items and all log book discrepancies shall be cleared;     (l)  
have had all repairs and damage requiring repetitive inspections or future
upgrading repaired to a permanent repair standard such that future repetitive
inspections or upgrading shall not be required; and     (m)   have all its
systems serviceable and fully operational for their intended functions in
accordance with the Manufacturer’s maintenance manual specifications.

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1.3   COMPONENTS

  (a)   If the Aircraft Lease Agreement specifies Minimum Component Flight Hours
and/or Minimum Component Cycles, each Flight Hour and Cycle controlled Hard Time
Component (other than the APU, but including the components installed on the
APU) shall have not less than the Minimum Component Flight Hours and the Minimum
Component Cycles of life remaining to the next scheduled removal, in accordance
with the Lessee’s Maintenance Program or the Manufacturer’s Maintenance Planning
Document (to the extent that Lessee’s Maintenance Program does not comply with
the Manufacturer’s Maintenance Planning Document) and shall be supported by
documentation indicating date of installation and by appropriate certification
documentation indicating TSO and CSO in the form of JAA Form 1 or FAA Form
8130-3 as applicable; for this purpose “Hard Time Component” means any component
which has a limited on-wing life in accordance with the Lessee’s Maintenance
Program and which can have life fully restored through appropriate maintenance;
    (b)   If the Aircraft Lease Agreement specifies a Minimum component Calendar
Life, each Calendar Limited Component including safety equipment will have not
less than its Minimum Component Calendar Life remaining to the next scheduled
removal in accordance with the Lessee’s Maintenance Program or the
Manufacturer’s Maintenance Planning Document (to the extent that Lessee’s
Maintenance Program does not comply with the Manufacturer’s Maintenance Planning
Document) and shall be supported by documentation indicating date of
installation and by appropriate certification documentation indicating date of
manufacture (where applicable) and date of overhaul in the form of JAA Form 1 or
FAA Form 8130-3 as applicable; for this purpose “Calendar Limited Component”
means any component which has a limited on-wing life in accordance with the
Lessee’s Maintenance Program and which has a life limit specified as calendar
time since manufacture or which can have life fully restored through appropriate
maintenance;     (c)   Each “on-condition” and “condition-monitored” component
will be serviceable and those components installed on the Aircraft within the
last twenty-four (24) months shall be supported by documentation indicating date
of installation and by appropriate certification documentation such as JAA
Form 1 or FAA Form 8130-3;     (d)   [Intentionally omitted.]     (e)   If the
Aircraft Lease Agreement specifies Minimum Component Flight Hours and/or Minimum
Component Cycles, each Airframe Life-Limited Component will have not less than
the Minimum

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      Component Flight Hours and the Minimum Component Cycles remaining to next
expected removal and will be supported by certification documentation necessary
to demonstrate total cycles accumulated since new; for this purpose
“Airframe-Life Limited Component” means a component with an ultimate life which
cannot be restored through appropriate maintenance.

1.4   ENGINES

  (a)   Each Engine (or a Replacement Engine as and to the extent permitted by
Section 1.2(b)) will be installed on the Aircraft and comply with the following:
        If the Aircraft Lease Agreement specifies Minimum Engine Flight Hours
and/or Minimum Engine Cycles and/or Minimum Engine LLP Cycles, each Engine will
have not less than the Minimum Engine Flight Hours and Minimum Engine Cycles
expected life remaining to the next expected removal and the life limited Parts
shall have not less than the Minimum Engine LLP Cycles release life remaining.
The expected life remaining will be determined by the inspection and checks
accomplished by Lessor in accordance with the Lease which shall include the
following:

  (i)   full borescope inspection;     (ii)   analysis of trend data;    
(iii)   sea level outside air temperature limit assessment if recommended by the
Manufacturer as an appropriate means to determine engine condition (e.g., CFM 56
test CESM 15);     (iv)   maximum power assurance ground runs;     (v)  
technical log analysis for a minimum of the previous three (3) months’ of
operation;     (vi)   previous shop visit assessment (if applicable); and    
(vii)   reference to the manufacturer’s maintenance manual;

  (b)   Following the demonstration flight provided for by Section 1.1(d) of
this Schedule 6 each Engine shall have just accomplished at the Redelivery
Location a complete video borescope inspection of all Engine gas path modules,
which inspection shall be performed at Lessor’s expense, and a power assurance
run performed at Lessee’s expense in accordance with the Lessee’s Maintenance
Program or Manufacturer’s maintenance manual and any defects discovered in such
inspections which exceed the Engine manufacturer’s in-service limits shall be
corrected at Lessee’s expense. Lessee shall cause such borescope inspections to
be performed and to be

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      recorded on videotape by an agency selected by Lessor and shall provide
Lessor with a copy of such videotape on the Return Occasion. No Engine shall be
on “watch” for any reason requiring any special or out of sequence inspection.
Each such Engine shall comply with the operations specification of Lessee
without waiver or exceptions. All items beyond the Engine manufacturer’s
in-service limits shall be repaired;

  (c)   If the Aircraft Lease Agreement specifies Minimum Engine LLP Cycles,
each Engine Life-Limited Part will have not less than the Minimum Engine LLP
Cycles remaining in accordance with the manufacturer’s then current limitations
for the part number in question, and will be supported by certification
documentation necessary to demonstrate Back-to-Birth Traceability; for this
purpose “Life Limited Part” means a component with an ultimate life which cannot
be restored through appropriate maintenance approved by the State of Design of
the manufacturer and “Back-to-Birth Traceability” means certified documentation
necessary to identify precisely where, when and with which aircraft operator the
expired life and previous maintenance in relation to the Life Limited Part
occurred since such Engine Life-Limited Part was new;     (d)   Each Engine will
have no less than the Minimum Engine Cycles and the Minimum Engine Flight Hours
before any defect, condition or restriction requires any inspection, testing,
repair or replacement in accordance with the Engine manufacturer’s maintenance
manual limits;     (e)   Each Engine will be in a condition to operate at a
maximum rated take-off power at sea level under corner point or flat rate
conditions and with the Required EGT Margin; and     (f)   Each Engine shall be
rated at the Engine Thrust Setting and all redelivery conditions of this
Section 1.4 are based on such Engine Thrust Setting.

1.5   FUSELAGE, WINDOWS AND DOORS

  (a)   The fuselage will be free of dents and abrasions which exceed the limits
specified in the Manufacturer’s maintenance manual or the SRM;     (b)   Cockpit
windows will be free of delamination which exceeds the limits specified in the
Manufacturer’s maintenance manual or SRM;     (c)   Cabin windows will be
substantially free of blemishes and crazing and will be properly sealed;    
(d)   Doors will be free moving, correctly rigged and be fitted with serviceable
seals; and     (e)   To the extent that Lessee was provided with a dent, repair
and scratch survey of the Aircraft exterior at Delivery (with specific
locations) then

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      Lessee shall provide an updated survey to Lessor on the Return Occasion.

1.6   WINGS AND EMPENNAGE

  (a)   Leading edges will be free from damage in excess of the limits specified
in the Manufacturer’s maintenance manual or SRM; and     (b)   Unpainted
surfaces of the wings and empennage will be polished.

1.7   INTERIOR AND COCKPIT

  (a)   Lessor may carry out the inspections contemplated by Schedule 12. Lessee
shall ensure that any replacements, repairs or repainting which are required in
accordance with Schedule 12 are effected at Lessee’s cost. For the purposes of
this Section 1.7 only, references in Schedule 12 to “Maintenance Manual” shall
be deemed to refer to Lessee’s Maintenance Program manual.     (b)   Carpets and
seat covers will be in good condition, clean and free of stains and meet FAR
fire resistance regulations.

1.8   LANDING GEAR; WHEELS AND BRAKES

  (a)   The Landing Gear and wheel wells will be clean, free of leaks and
repaired as necessary;     (b)   Each installed Landing Gear shall have no more
Cycles accumulated than the Airframe and, if the Aircraft Lease Agreement
specifies Minimum Landing Gear Flight hours and/or Minimum Landing Gear Cycles
and/or Minimum Landing Gear Calendar Time, in any event shall have not less than
the Minimum Landing Gear Flight Hours and the Minimum Landing Gear Cycles and
the Minimum Landing Gear Calendar Time to the next scheduled overhaul or
removal, as the case may be, in accordance with Lessee’s Maintenance Program
which shall not be less restrictive than the Manufacturer’s Maintenance Planning
Document; and     (c)   The wheels and brakes will have not less than half of
their useful life remaining.

1.9   RETURN OF AUXILIARY POWER UNIT (APU)       The APU shall have just
completed a borescope inspection and shall meet all air outputs and temperature
limitations under load in accordance with the Lessee’s Maintenance Program and
the Manufacturer’s maintenance manual, and any defects discovered in such
inspection, which exceed the APU manufacturer’s in-service limits, shall be
corrected at Lessee’s expense. If the Aircraft Lease Agreement specifies a
Minimum APU Limit, the APU shall have not more than the Minimum APU Limit.

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1.10   CORROSION

  (a)   The Aircraft shall be in compliance with the Manufacturer’s corrosion
prevention and control program (CPCP) requirements as implemented in Lessee’s
Maintenance Program. All CPCP inspections which would normally be accomplished
while access is provided during structural inspection in accordance with the
Lessee’s Maintenance Program during the Term shall have been accomplished;    
(b)   The entire fuselage will be substantially free from corrosion and will be
adequately treated in accordance with Lessee’s corrosion prevention program
(which shall include the requirements of the Manufacturer’s Maintenance Planning
Document); and     (c)   Fuel tanks will be free from contamination and
corrosion and a tank treatment program will be in operation.

1.11   FUEL       At redelivery, Lessor will pay to Lessee or Lessee will pay to
Lessor (as the case may require) a cash adjustment in respect of the difference
in fuel on board at Delivery versus redelivery, at the then prevailing cost of
fuel at the Redelivery Location.

1.12   MAINTENANCE PROGRAM

  (a)   Prior to the Return Occasion and upon Lessor’s or Owner’s request,
Lessee will provide Lessor or Owner or its agent reasonable access to the
Lessee’s Maintenance Program and the Aircraft Documents and Records in order to
facilitate the Aircraft’s integration into any subsequent operator’s fleet; and
    (b)   Upon redelivery of the Aircraft, Lessee will, if requested by Lessor
or Owner to do so, provide a certified true current and complete copy of the
Lessee’s Maintenance Program to Lessor or Owner. Lessor and any Person to whom
Lessor grants access to Lessee’s Maintenance Program shall agree that it will
not disclose the contents of the Lessee’s Maintenance Program to any other
Person except to the extent necessary to monitor Lessee’s compliance with the
Lease and/or to bridge the maintenance program for the Aircraft from the
Lessee’s Maintenance Program to another program after the Return Occasion.

1.13   AIRCRAFT DOCUMENTS AND RECORDS

At redelivery Lessee will return the following Aircraft Documents and Records to
Lessor; provided, however, that to the extent that an item on this list was not
provided to Lessee at Delivery and is not otherwise a mandatory requirement
under the provisions of the Lease, then Lessee will not be obligated to return
such document at redelivery:

     
A.
  Certificates

40

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A001
  Certificate of Airworthiness
 
   
A002
  Current Aircraft Registration
 
   
A003
  C of A for Export (if applicable)
 
   
A004
  Noise Limitation Certificate (AFM page)
 
   
A005
  Radio Station License
 
   
A007
  Aircraft deregistration confirmation
 
   
A008
  Burn Certificates – Cabin Interiors – as follows:

Certification of compliance with the applicable fire blocking requirements as
outlined in FAR/JAR Part 25 including:

     
-
  Seat cushions*
 
   
-
  Back rest cushions*
 
   
-
  Dress covers*
 
   
-
  Carpets
 
   
-
  Curtains
 
   
-
  Interior Surfaces (if refurbished)

--------------------------------------------------------------------------------

* Including “in combination” burn certification

     
B.
  Aircraft Maintenance Status Summaries
 
   
B001
  Certified current Time in Service (Hours & Cycles) and maintenance status
 
   
B002
  Certified status of Airworthiness Directives including method of compliance
 
   
B003
  Certified status of Service Bulletin Status
 
   
B004
  Certified status of SSI
 
   
B005
  Certified status of CPCP (if applicable)
 
   
B006
  Certified inventory of Hard Time Components (Fitted listing)
 
   
B007
  Certified inventory of OC/CM Components (Fitted listing)
 
   
B008
  Certified status of all non-SB and Major Modifications/STC’s including
acceptable State of Manufacture Certification
 
   
B009
  Certified status of Check/Inspection History & Current Status of Checks
 
   
B010
  List of Deferred Maintenance Items

41

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B011
  List of Out of Phase Checks, Special Requirements, Time Limited Repairs (if
any).
 
   
B012
  Aircraft Accident & Incident Report.
 
   
B013
  Structural repairs and damage (including Dent & Buckle Chart).
 
   
C.
  Aircraft Maintenance Records
 
   
C001
  Technical Logs (Minimum of 2 years)
 
   
C002
  A Checks
 
    Last complete cycle of A Checks (or equivalent)
 
   
C003
  C Checks
 
    Last Complete cycle of C Checks (or equivalent)
 
   
C004
  All Major Checks
 
   
C005
  CPCP Tasks (if applicable)
 
   
C006
  Periodic Tasks
 
   
C007
  Dirty Finger Print Certification – AD’s
 
   
C008
  Dirty Finger Print Certification – SB’s
 
   
C009
  Dirty Finger Print Certification – All other modification
 
   
C010
  Last Weight Report including Schedule
 
   
C011
  Compass Swing Report
 
   
C012
  Last Test Flight Report
 
   
C013
  Certified ETOPS compliance report (if applicable)
 
   
C014
  Dirty Finger Print certification — All Structural repairs/structural damage
 
   
C015
  Details of State of Manufacture certification basis – A non-SRM Structural
repairs
 
   
C016
  Aircraft Log Book(s) if applicable
 
   
D.
  Configuration Status
 
   
D001
  Approved and certified LOPA
 
   
D002
  Galley Drawings/Component OHM
 
   
D003
  Emergency Equipment Drawing/Listing
 
   
D004
  Loose Equipment Inventory

42

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D005
  Inventory Listing of Avionic installed Units.
 
   
E.
  Aircraft Historical Records
 
   
E001
  C of A (Export) from State of Manufacture
 
   
E002
  Manufacturer’s AD Report
 
   
E003
  Manufacturer’s Inspection Report, Initial Equipment list
 
   
E004
  Manufacturer’s repair/alteration report
 
   
E005
  Manufacturer’s SB Report
 
   
E006
  Service Difficulty Reports (if any)
 
   
E007
  Aircraft Historical Log
 
   
E008
  Last Flight Data Recorder Read-Out & Corrections
 
   
E009
  Weighing report
 
   
F.
  Engine Records
 
   
F001
  Certified Statement of Status of Each Engine
 
   
F002
  AD Compliance Report and Compliance Documents
 
   
F003
  Manufacturer’s Modifications & SB Status
 
   
F004
  In-house Modifications (if applicable)
 
   
F005
  Certified LLP Listing
 
   
F006
  Certified listing of installed units
 
   
F007
  Manufacturer Delivery Document
 
   
F008
  Complete copies of all historical engine/module Shop Visit Reports
 
   
F009
  State of Manufacture LLP Traceability
 
   
F010
  Conditioning Monitoring Report
 
   
F011
  Engine Log Book/Master Records of Installation/Removals
 
   
F012
  Last Borescope Report, including video if available
 
   
F013
  Test Cell Run Report
 
   
F014
  Last On-Wing Ground Run
 
   
F015
  Certified Statement that Engines are not involved in an Accident

43

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F016
  Approved Release to Service Certification for installed rotables
 
   
F017
  Approved ETOPS compliance report (if applicable)
 
   
G.
  APU
 
   
G001
  Certified Statement on Status of APU (if applicable)
 
   
G002
  Certified SB Compliance Report/AD Status Report
 
   
G003
  Approved Release to Service Certification for installed units
 
   
G004
  APU Log Book/Master Record of Installation/Removals
 
   
G005
  Complete copies of all APU Shop Visit Reports & Reason for Removal
 
   
G006
  Statement of APU Hours to Aircraft Flying Hours
 
   
G007
  LLP Status and Full Traceability to birth
 
   
G008
  APU Borescope Report
 
   
G009
  Last On-Wing/Health Check Data sheets (if applicable)
 
   
G010
  Last Test Cell Run
 
   
G011
  Approved ETOPS compliance report
 
   
H.
  Component Records
 
   
H001
  Approved Release to Service Certification for Hard Time Components
 
   
H002
  Approved Release to Service Certification for OC/CM Components (to the extent
that this is required by the Air Authority including retention period)
 
   
I.
  Landing Gears
 
   
I001
  Approved Release to Service Certification for major assemblies on each Gear
 
   
I002
  Approved LLP Listings for each Gear (evidencing total accumulated cycles)
 
   
I003
  Last Shop Visit Report (OH)
 
   
J.
  Manuals

All Manufacturer’s Manuals delivered with the Aircraft under the Lease updated
to the latest revision standard (applicable as at the Return Occasion) or
provided with comprehensive approved supplements as may be reasonably requested
by Lessor

Microfilm or CD:

     
J006
  WDM

44

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J007
  IPC
 
   
J008
  Maintenance Manual
 
   
J009
  Schematics
 
   
J010
  Hook Up Listing
 
   
K.
  Miscellaneous
 
   
K006
  Maintenance Program Specifications (Operator’s)
 
   
K007
  Reference Material for Interpretation of Status Summaries, or cross-reference
for Part Numbers

45

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Schedule No.: 3

SCHEDULE
to

Full Service Aircraft Services Agreement,
dated March 7, 2005 between
Aviation Services International, LLC
and Kitty Hawk Aircargo, Inc.

This Schedule is issued pursuant to the Full Service Aircraft Services
Agreement, dated March 7, 2005 (the “General Terms Agreement”), between Aviation
Services International LLC (“Supplier”) and Kitty Hawk, Aircargo Inc.
(“Customer”) (any capitalized term used herein and not defined herein shall have
the meaning given to it in the General Terms Agreement).

(1)   Coverage       This Schedule applies to the Components (as that term is
described in paragraph 2 hereof) on Customer’s 737-300 SF Aircraft, a list of
which Aircraft is set out in Annex 1.   (2)   Definitions; Interpretation

  2.1   Definitions         Unless the context otherwise requires, for the
purposes of this Schedule, the following terms shall have the following
meanings:

“Advance Exchange” shall mean the provision of an Exchange Component as
replacement for an Unserviceable Component on payment of an exchange fee.

“Airframe Components” shall mean any Repairable or Rotable Component fitted to
an Aircraft.

“AOG” means an Aircraft on ground situation where such Aircraft is unable to
continue or be returned to revenue service until the appropriate action is taken
and indicates the highest priority designation to process a requirement for .
Airframe Components.

“APU” shall mean- an auxiliary power unit.

“APU LRUs” shall mean those line replaceable units in respect of an auxiliary
power unit.

 

--------------------------------------------------------------------------------

 

“Charges” shall mean the charges for the T3 Program Component Services set forth
in Paragraph 7 hereof.

“Commencement Date” shall mean the date provided in Paragraph 9.

“Component” shall mean any (i) Airframe Component, (ii) QECs and (iii) APU LRUs
which are fitted to an Aircraft and which shall be serviced by Supplier subject
to the provisions and exclusions of this Schedule (other than the categories of
Excluded Components listed on Annex 6).

“Component Findings Report” shall mean a report which sets out brief details of
the Repair and Overhaul services carried out on a particular Component.

“Component Maintenance Manual” and “CMM” shall mean the component maintenance
manual issued by the Manufacturer of a Component (as amended from time to time).

“Configuration” shall mean the configuration of an individual Component to
prescribed modification status.

“Consignment Stock” shall mean the stock of Components as set out in Annex 2 to
this Schedule that is supplied and replenished by Supplier. The Consignment
Stock shall be located at the Customer Fort Wayne Hub, the Customer Dallas
Maintenance Base and the Customer out-station bases (collectively “Customer
Premises” or “Customer Locations”), and, in all events, shall be managed and
insured by Customer.

“Critical” shall mean a situation where an Aircraft will be prevented from
meeting a scheduled flight departure time within 24 (twenty four) hours of
advising of a critical requirement due to a fault in a Component.

“Customer Representative” shall mean the person nominated by Customer and
authorized to make binding decisions and/or commitments on its behalf in respect
of this Schedule.

“Engine LRUs” shall mean those line replaceable units in respect of an engine.

“Exchange Component” shall mean a Component, APU or Landing Gear provided to
Customer by Supplier by way of Advance Exchange in return for Customer’s
Unserviceable Component in accordance with the provisions of this Schedule.

“Excluded Component” shall mean those Components included in the categories
listed on Annex 6 which are excluded from the T3 Program Component Services.

“FAA” shall mean the United States Federal Aviation Administration.

2

--------------------------------------------------------------------------------

 

“Flight Cycle” shall mean one take-off and landing of an Aircraft including
touch and go.

“Flight Hour” shall mean each hour or part thereof elapsing from the moment at
which the wheels of an Aircraft leave the ground on the take off of such
Aircraft until the wheels of such Aircraft touch the ground on the landing of
such Aircraft following such take off and recorded in such Aircraft’s log book.

“Flight Hour Charges” shall mean the charges per Flight Hour for maintenance of
Components, which are set forth in Section 7.1 hereof.

“Freight Forwarder Premises” shall mean the premises of Supplier’s Freight
Forwarder at [ ]

“GECAS” shall mean GE Capital Aviation Services, Inc., and its affiliates and
successors, lessor of the Aircraft to Customer.

“Go Items” means those Components covered by this Schedule other than No Go
Items.

“Go If Items” shall mean those Components listed on Annex 3 to this Schedule
under the heading “Go If Items”.

“Landings” shall mean one Flight Cycle.

“Landing Gear” shall mean the part of an Aircraft structure that supports an
Aircraft when it is not flying.

“Lifed Component” shall mean a Component requiring Overhaul after a certain
number of hours or cycles or calendar months as defined as such in Customer’s
Maintenance Programme or by the Component Manufacturer.

“Loan Component” shall mean any Component to be loaned by Supplier to Customer.

“Logistics Desk” shall mean the contact point for Customer at Supplier, in
connection with the provision of 24 hour, 365 day, AOG, critical and other
operational support to Customer. Notwithstanding the foregoing, the Logistics
Desk will not be provided on the Jewish Day of Atonement holiday.

“Man-hour” shall mean the allocation of one (1) man to any specified task,
including the supervision/inspection of that task, for an elapsed time of one
(1) hour or pro-rata part thereof.

“Manufacturer” shall mean the original equipment manufacturer of a Component.

“Materials” shall mean individually or collectively any of the following:

3

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  (a)   “Consumables” – generally bulk type materials such as lubricants,
cements, compounds, paints, chemicals, dyes, splices and patches called out in
Maintenance and Repair procedures for Component items.     (b)   “Expendable” –
a part for which no authorized repair procedure exists or for which the cost of
repair would be uneconomical.     (c)   “Repairable” – a part which is
continually reworked to a fully serviceable condition using authorized repair
procedures in the appropriate manufacturer’s repair manual until such rework
becomes uneconomical.     (d)   “Rotable” – a serially numbered Component having
a life expectancy, through repetitive repair and/or overhaul and under normal
operating conditions, approximating to the life of the Aircraft and flight
equipment to which it is related.

“MPD” shall mean the Manufacturer’s Maintenance Planning Document produced by
the Manufacturer detailing the maintenance, servicing actions and intervals
recommended to maintain the Aircraft.

“No Go Items” shall mean those Components listed on Annex 3 to this Schedule.

“Overhaul” or “Overhauled” shall mean the restoration of any Component so that
it may achieve its defined full overhaul life as set out in the relevant CMM.

“Pool Stock” shall mean the Components held or managed by Supplier directly or
through its subcontractors.

“Quick Engine Change” or “QEC” shall mean those line replaceable units
pertaining to a quick engine change.

“Repair” or “Repaired” shall mean the minimum work necessary to certify a
Component to airworthy status as set out in the relevant CMM.

“Return Conditions” Shall mean the engine lease return conditions for the
Aircraft specified in the aircraft leases between GECAS and Customer and
attached to Schedule 2 as Annex 1A.

“Serviceable” or “Serviceability” shall mean the status of a Component that will
be either:

  (i)   new; or     (ii)   Repaired; or     (iii)   Overhauled

4

--------------------------------------------------------------------------------

 

At Supplier’s discretion and which has been certified for return to service.

“Signature Date” shall mean the last date as of which both Parties shall have
signed the General Terms Agreement and this Schedule.

“Sub-contract” shall mean a Sub-contract entered into by Supplier in respect of
the whole or any part or parts of the T3 Program Component Services.

“Sub-contractor” shall mean any party who is the provider of any part or parts
of the Services pursuant to a Sub-contract.

“Supplier Account Manager” shall mean the nominated Supplier representative who
shall co-ordinate the day-to-day management of this Schedule.

"Supplier’s Freight Forwarder’ shall meanthe freight forwarding agents of
Supplier, whose address and contact numbers are as follows:

"T3 Program Component Services” shall mean the provision of the Airframe
Components, Engine LRUs, APUs, APU LRUs and Landing Gear listed on Annex 1 by
Supplier to Customer in accordance with the provisions and specific exclusions
set forth in this Schedule. For the sake of clarity, the Excluded Components are
not included in the T3 Program Component Services.

“Unserviceable Component, APU, Landing Gear” shall mean a Component or Landing
Gear that has become un-Serviceable and/or requires Repair and/or Overhaul while
installed in or attached to an Aircraft.

  2.2   Interpretation

  (a)   Any expression in the singular shall, where the context requires,
include the plural and vice versa.     (b)   In this Schedule all references to
“Sections”, “Sub-sections”, “Paragraphs”, “Sub-paragraphs”, “Annexes” and
“Exhibits” are to sections, sub-sections, paragraphs, sub-paragraphs,
appendices, annexes and exhibits to this Schedule, unless expressly stated
otherwise.     (c)   Paragraph headings are inserted for convenience of
reference only and shall be ignored in the construction of this Schedule.    
(d)   Any technical expressions used in this Schedule and not defined herein
shall, unless the context otherwise requires, have the meanings specified

5

--------------------------------------------------------------------------------

 

      in the latest edition from time to time of the World Airlines Technical
Operations Glossary (WATOG) published by the International Airline Transport
Association. Where a definition does not appear in WATOG, then reference shall
be made to the World Airlines Suppliers Guide (WASG), provided that WATOG shall
take precedence in the case of any conflict of definitions.

(3)   Objective       This Schedule details the scope of the T3 Program
Component Services to be supplied by Supplier.       The T3 Program Component
Services shall consist of the following:

  (a)   Provision and support of Components within the Consignment Stock as set
out in Annex 2;     (b)   Provision of the Pool Stock (on an Advance Exchange
basis); and     (c)   Off-wing maintenance of Unserviceable Components.

(4)   Services   4.1   T3 Program Component Services included under this
Schedule:

  (a)   Provision and support of the Consignment Stock         The Consignment
Stock shall be located at the Customer Fort Wayne Hub, Dallas Maintenance Base
and out-station bases [7-10; to be specified in a letter from Customer prior to
effective date of this Schedule]. Supplier shall provide and support the
Consignment Stock as follows. The contents of the Consignment Stock as of the
date of this Agreement are set forth in Annex 2. Changes to Annex 2 may be made
in the sole discretion of Supplier.

  (1)   Supplier shall:

  (i)   use all reasonable efforts to prepare for supply of the Components
comprising the Consignment Stock as follows:         Consignment Stock Component
and LRU replacement will be carried out by Supplier within

6

--------------------------------------------------------------------------------

 

      eight (8) days from the date a Component is readied by Customer for pick
up by Supplier at the applicable Customer Premises.     (ii)   carry out regular
audits on the Consignment Stock.     (iii)   guarantee that No Go Items will be
available when needed by the Customer 97% of the time and that Go Items and Go
If Items will be available when needed by the Customer 95% of the time.    
(iv)   provide replacement Components from the Pool Stock or other sources as
applicable.

  (2)   Customer shall:

  (i)   provide (at each of the Customer Facilities where Consignment Stocks
shall be located) a segregated enclosed, roofed and heated/air conditioned
secure place, segregated from its own components, for storage of the Consignment
Stock. The Consignment Stock shall be clearly marked as Supplier property;    
(ii)   be responsible for control and management of the Consignment Stock and
shall bear all risks of loss and/or damage to the Consignment Stock. For the
avoidance of doubt, title to all Components comprising the Consignment Stock
shall remain with Supplier and/or the owner of the Components until receipt by
Supplier of an acceptable Unserviceable Component;     (iii)   maintain, during
the Term property insurance, covering the Consignment Stock for its full

7

--------------------------------------------------------------------------------

 

      replacement value and liability insurance, each with insurance companies
reasonably accepted to Supplier (the “Consignment Stock Insurance Coverage”).
The Consignment Stock Insurance Coverage shall be subject to the terms and
conditions of Article XIII of the General Terms Agreement.

  (3)   At any time after the second anniversary of the Commencement Date of
this Schedule, and upon not less than sixty (60) days prior written notice,
Customer may purchase the then remaining Consignment Stock for a price equal to
that paid by Supplier therefor. Such sale shall take place thirty (30) days
after Supplier shall have received such notice. At the closing of such sale,
Customer shall wire transfer the purchase price, in immediately available funds,
to the account specified in Article X(F) of the General Terms Agreement.
Supplier, upon receipt of such wire, shall convey such remaining Consignment
Stock to Customer by a bill of sale, which shall provide, among other things,
that such conveyance is free of all liens, claims and emcumbrances by, or
through, Supplier. Such price shall be reduced by 6% in respect of each year
(pro rata for partial years) commencing with the second anniversary of the
Commencement Date. For inventory added to the Consignment Stock after
Commencement Date of this schedule, the additional Consignment Stock shall be
available to purchase by Customer two (2) years after adding additional
Consignment Stock upon the same terms and conditions as the original Consignment
Stock.     (4)   To the extent Customer shall not have purchased all of the
Consignment Stock pursuant to paragraph (3) above, upon the end of the Term,
whether through termination or expiration, Customer shall collect all of the
remaining Consignment Stock (the “Remaining Consignment Stock”) to its Fort
Wayne Hub, maintain the Remaining Consignment Stock in a secure, protected and
segregated area, and make the Remaining Consignment Stock available to

8

--------------------------------------------------------------------------------

 

      Supplier (or its designated representative) to enter the premises of the
Fort Wayne Hub, take possession of the Remaining Consignment Stock and remove
the Remaining Consignment Stock therefrom.

  (b)   Provision of Components within the Pool Stock

  (1)   Supplier shall:

  (i)   use all reasonable efforts to provide Customer with access, on an
Advance Exchange basis, to the Pool Stock; and     (ii)   arrange for
transportation of Components from the Pool Stock to the applicable Customer
Premises. For the avoidance of doubt, the cost of transportation (inclusive of
insurance) of components from the Pool Stock to a location other than either of
the Customer Premises shall be chargeable as Supplemental Work in accordance
with Paragraph 7.2 below.

  (2)   Customer shall:

  (i)   notify Supplier in writing of a requirement via fax or E-mail in
accordance with the procedure set forth in Annex 4 to this Schedule;     (ii)  
ensure that each Unserviceable Component is available to be dispatched to
Supplier from the applicable Customer Premises in accordance with
Paragraph 5.3(a) below and that Supplier is notified thereof within 3
(three) days of receipt by Customer of an Exchange Component therefor.

  (c)   Off-wing maintenance of Unserviceable Components, APUs and Landing Gears

9

--------------------------------------------------------------------------------

 

  (1)   Supplier shall manage the inspection, Repair and Overhaul of all
Unserviceable Components, APUs and Landing Gears which are removed from an
Aircraft, tagged and dated on or after the Commencement Date and which shall
include the following services:

  (i)   receiving inspection;     (ii)   disassembly;     (iii)   cleaning
process;     (iv)   parts inspection/crack detection (NDT);     (v)   parts
replacement;(vi) re-assembly;     (vii)   bench test;     (viii)   finishing
stages;     (ix)   packaging and shipping.

  (2)   Supplier shall, upon receipt of an Unserviceable Component, APU or
Landing Gear Repair or Overhaul at its discretion such Component, APU or Landing
Gear but only to the extent necessary to return such Unserviceable Component to
Serviceable Condition.     (3)   All Components, APUs or Landing Gears shall be
repaired by suitably approved vendors and released with FAA certification.    
(4)   For the avoidance of doubt, (i) Customer shall insure that all ADs and SBs
outstanding prior to the Commencement Date shall have been fully complied with
and closed as of the Commencement Date; and (ii) the Charges set out in
Paragraph 7 for T3 Program Component Services shall not include the
incorporation of any ADs/SBs, which shall be chargeable separately to Customer
in accordance with Clause (d) below.         Supplier shall provide Customer,
upon 90 days prior notice, a Landing Gear set in Assembly/Installation
configuration on an advance exchange basis. Customer shall deliver the Landing
Gear within ten (10) days of receiving the advance exchange Landing Gear.
Customer’s Landing Gear must be supported with full life details, and where
applicable, “Back to Birth Records”.

10

--------------------------------------------------------------------------------

 

      Supplier reserves the right to refuse acceptance of any units missing
vital relevant information or to scrap-on-site any Life Limited Components
missing the correct traceability and documentation. (For the sake of clarity,
each Landing Gear shall be overhauled only once during the term of the
agreement).

  (d)   Supplemental Work         Supplemental Work shall mean:

  (1)   Repairs or any other maintenance services, which are required to be
performed on a Component, APU or Landing Gear as a result of damage due to FOD,
misuse, abuse, mishandling and accident.     (2)   All material charges in
connection with the performance of regular Service Bulletins (“SBs”), if
requested by Customer, and/or Airworthiness Directives of the FAA (“ADs”) and
mandatory SBs which come into force on and after the Commencement Date; all
associated labor costs shall be borne by Supplier.         Service Bulletins
performed at Supplier’s option to extend life or improve reliability shall not
be considered Supplemental Work.     (3)   All costs above 70% on a Customer
owned and originated BER item of Equipment.     (4)   Requests of Customer that
are not included in the T3 Program Component Services.     (5)   Changes
requested by Customer to the Consignment Stock and/or the No Go Items (unless
mutually agreed to by both of the Parties).     (6)   The support of Excluded
Components at Customer’s request and subject to availability; the supply by
Supplier of such Excluded Components to be either (1) on an Advance Exchange
basis or (2) on a loan basis.     (7)   All work associated with Paragraphs
5.3(b) and (c) hereof.

11

--------------------------------------------------------------------------------

 

  (8)   All costs associated with (i) the Repair of Unserviceable Components
with major damage (such as, but not limited to, physical and/or internal damage
following mishandling, abuse, accident, FOD or military use); and (ii) an
Unserviceable Component that contains non-standard OEM parts or which has been
subject to maintenance, installation, storage, operation or use, that is
improper or not in accordance with the applicable CMM or other appropriate
instructions.

For the avoidance of doubt, in cases where Supplier agrees to perform
Supplemental Work, Supplier shall have no liability for any failure to meet the
time and service level obligations set forth in Paragraph 4.3 caused thereby.

  (e)   All Charges for the above T3 Program Component Services shall be as
stipulated in Paragraph 7 of this Schedule.

4.2   Logistics and Administration       Supplier shall, in respect of the T3
Program Component Services defined in Paragraph 4.1 above, provide:

  (a)   Customer account management through Supplier’s Program Manager as
referred to in Sub-paragraph 4.4(a) below;     (b)   a twenty-four (24) hours
per day, 365 days per year (excluding the Jewish Yom Kippur holiday) , Logistics
Desk, which shall handle and arrange for the dispatch of Components to Customer
for operational requirements;     (c)   the administration of all warranty
claims in respect of the Components;     (d)   warehousing, processing of
Customer requests for the supply of Components, receipt of Unserviceable
Components, management of Repair and Overhaul processes thereof, updates on
delivery dates, dispatch and shipping information, including transport, data,
information, documents and records via computer systems;     (e)   in respect of
Lifed Components, other than Life Limited Parts, JAR certification and/or dual
(FAA/JAA) release certification;     (f)   in respect of Life Limited Parts,
back-to-birth traceability documents; and

12

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  (g)   a program liaison manager at Customer’s Premises for the first three
(3) months following the Commencement Date (or as otherwise mutually agreed by
Supplier and Customer).

4.3   Performance       Subject to Customer performing its obligations as set
out in Paragraph 5, Supplier agrees to provide the T3 Program Component Services
set out in Paragraph 4.1 above in accordance with the following procedures and
time scales:

  (a)   where there is an AOG requirement:

  (i)   Customer shall send a request to Supplier’s Logistics Desk for the
required Component, APU or in accordance with the procedures set out in Annex 4.
Each request shall be acknowledged by Supplier within one (1) hour from receipt
thereof;     (ii)   Supplier shall advise Customer in writing or via an
electronic format if such Component, APU or is available from the Pool Stock. If
not available from the Pool Stock the requested Component, APU or will be
procured from other sources and made available to Customer within the same
timeframe as if the Component, APU or were in the Pool Stock. The requested
Component, APU or shall be ready for dispatch to Customer within three (3) hours
of receipt by Supplier of Customer’s request in (i) above and delivered to the
applicable Customer Premises (i) if Customer’s request is received by Supplier
on or before 1500 hours on any one day, within 8-12 hours and (ii) if Customer’s
request is received by Supplier after 1500 hours on any one day, within 18
hours, in each case of such receipt by Supplier of such Customer request;

  (b)   where there is a Critical requirement: (EST)

  (i)   Customer shall send a request to Supplier’s Logistics Desk for the
required Component, APU or in accordance with the procedures set out in Annex 4.
Each request shall be acknowledged by Supplier within one (1) hour from receipt
thereof;     (ii)   Supplier shall advise Customer in writing or via an
electronic format if such Component, APU or

13

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      is available from the Pool Stock. If not available from the Pool Stock the
requested Component, APU or will be procured from other sources and made
available to the Customer within the same timeframe as if the Component, APU or
were in the Pool Stock. The requested Component, APU or shall be ready for
dispatch to Customer within five (5) hours of receipt by Supplier of Customer’s
request in (i) above and delivered to the applicable Customer Premises. (i) if
Customer’s request is received by Supplier on or before 1500 hours on any one
day, within 36 (thirty-six) hours and (ii) if Customer’s request is received by
Supplier after 1500 hours on any one day, within 48 hours, in each case of such
receipt by Supplier of such Customer request;

  (c)   where there is a routine requirement:

  (i)   Customer shall send a request to Supplier’s Logistics Desk for the
required Component, or APU, in accordance with the procedures set out in Annex
4. Each request shall be acknowledged by Supplier within one (1) hour from
receipt thereof;     (ii)   Supplier shall advise Customer in writing or via an
electronic format if such Component or, APU, is available from the Pool Stock.
The requested Component, APU, shall be ready for dispatch to Customer within
eight (8) hours of receipt by Supplier of Customer’s request in (i) above and
delivered to the Customer Premises within 72 hours of such receipt by Supplier
of such Customer request.     (iii)   Landing Gear will be available for
scheduled removals forty-eight (48) hours prior to a scheduled removal and shall
be returned to Supplier within seventy-two (72) hours after installation of the
repaired Landing Gear or Thrust Reverser, as applicable. For unscheduled
removals of Landing Gears and Thrust Reversers, Supplier shall use its best
efforts to provide temporary replacement as soon as practicable after being
notified of an unscheduled removal.

  (d)   Supplier shall be responsible for arranging transportation and transit
insurance:

14

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  (i)   of all Customer requested Components or, APUs, (other than the
Components listed on Annex 6which shall be charged as Supplemental Work) to
Customer at the applicable Customer Premises;     (ii)   for the collection of
Unserviceable Components or, APUs, from Customer at the applicable Customer
Premises;     (iii)   of both Serviceable and Unserviceable Components or, APUs,
to and from a Repair Facility and the Pool Stock location.

All costs incurred in respect of (b)(i), (ii), (iii) above and/or any other
transport/transit insurance costs shall be included within the Charges set out
in Paragraph 7 below.

  (e)   Supplier shall provide for adequate and accurate record keeping. Upon
Redelivery of any Component, APU or      , Landing Gear , Supplier shall provide
Customer with the following:

  (i)   major repair/alteration certifications, as applicable;     (ii)   a life
limited parts log;
    (iii)   a serviceability tag;     (iv)   Customer’s original records,
properly updated, and all other related documentation, if any, for the work that
shall have been performed;     (v)   an incoming inspection report;     (vi)  
an off/on log;     (vii)   an SB status report;     (viii)   an AD status
report;     (ix)   a test cell data summary sheet (if applicable); and     (x)  
a shop finding report within ten (10) days after equipment is redelivered.

Supplier shall continue to retain all such records and documentation for a
period of at least two (2) years beyond the expiration by its terms, or
termination, of the General Terms Agreement.

  (f)   Supplier shall retain the Components Findings Report of all
Unserviceable Components, APUs, Landing Gears sent for Repair and Overhaul and
ensure that they are made available to Customer upon reasonable notice of a
request from Customer to do so.

15

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  (g)   Supplier shall provide Customer with engineering support as follows:

  (i)   Work scopeing of all Component, APU, or Landing Gear maintenance in
coordination with Customer.     (ii)   Establishing a continuously monitored
reliability program for the Components, APUs or, Landing Gears and providing
monthly reports thereof.     (iii)   Preparing, together with Customer,
maintenance programs for the Components, APUs or, Landing Gears, recording all
maintenance and providing monthly reports thereof.

  (h)   Monitoring of such maintenance programs.

4.4   Customer/Company Liaison

  (a)   Customer and Supplier shall work together through their respective
representatives; namely, the Program Manager and the Customer Representative, to
administer the day to day accomplishment of the T3 Program Component Services;
and     (b)   Supplier’s Program Manager shall visit the Customer Premises as
and when reasonably required by Customer and shall be the focus of day to day
communication between Supplier and Customer.

4.5   Computer Links       Supplier shall provide Customer with online internet
service for Component/LRU/APU/ Landing Gear information available twenty-four
(24) hours per day. Such service shall be updated on a daily basis. It will
provide: (i) password protected access; (ii) complete interacting status reports
sorted by part number or repair order; (iii) on-line tracking of part numbers;
(iv) redelivery reports; and (v) finding reports.

5.   Customer Obligations       All documentation, data and/or other such
information required by Supplier from Customer shall be provided by Customer to
Supplier in the English language.

5.1   Literature and Publications       Customer shall provide the following,
without charge, prior to the commencement of T3 Program Component Services:

16

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  (a)   information with regard to Component, APU or, Landing Gear usage and
removal rates as Customer can reasonably provide for up to five (5) years prior
to the Commencement Date;     (b)   customised Illustrated Parts Catalogues
covering the Components;     (c)   list of Lifed Components for each Aircraft,
detailing part numbers, descriptions and scheduled removal periods and the next
scheduled removal date for Components together with any updates which may become
available for a minimum six months in advance;     (d)   letter of authority in
the form shown in Annex 5 authorizing the airframe manufacturer and Equipment
vendors to provide technical information relating to Components fitted on
Customer’s Aircraft; and

5.2   Data       Customer shall provide the following on a regular basis,
without charge, during the Term:

  (a)   the Flight Hours and Landings flown by each Aircraft and recorded in the
applicable Aircraft log book on a monthly basis, to be provided no later than
the 5th day of each next calendar month during the Term (and of the calendar
month following the expiration of the Term, in respect of the Flight Hours and
Landings for the last month of the Term);     (b)   routine amendments to
Illustrated Parts Catalogues;     (c)   all other technical data requested in
order for Supplier to perform the T3 Program Component Services.     (d)   all
removals from, and all placements into, the Consignment Stock (by part number)
and serial number, on a Consignment Stock Reporting Form in the form annexed
hereto as Annex 7.

5.3   Performance

  (a)   Customer, using Supplier’s Freight Forwarder, shall return to Supplier
(at the Freight Forwarder Premises) the applicable Unserviceable Component or,
Landing Gear within three (3) days of receipt of an Exchange Component from
Supplier. Customer shall insure that the packing of all Unserviceable Components
shall be in accordance with OEM instructions for transportation purposes.    
    Each Unserviceable Component shall be accompanied by the following
documentation:

17

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  (i)   an unserviceable tag containing information, such as the description of
the Component (part number and serial number) the reason(s) for removal (e.g.,
pilots quawk or failure indication);     (ii)   full records and traceability
documents to the last Overhaul, Aircraft tail number, date of removal, in
respect of each Component;     (iii)   full back-to-birth records and
traceability documents in respect of each LLP;     (iv)   a copy of the pilot’s
report (PIREP); and     (iv)   where applicable, a copy of the on-Aircraft built
in test equipment (BITE) read out.

In addition, Customer shall inform Supplier, if any of the Unserviceable
Components are “incident related” or have been subject to unusual stress or
extreme heat during utilization thereof by Customer.

  (b)   Customer shall ensure that any Unserviceable Component delivered to
Supplier shall be repairable and must be the same or an exchangeable part number
and same modification status as the applicable Exchange Component. The original
data plate must be attached to an Unserviceable Component. Where the original
data plate is not attached to an Unserviceable Component, then such
Unserviceable Component shall be sent to its OEM for a full Overhaul. In the
event an Unserviceable Component does not meet with the conditions in this
Sub-paragraph 5.3(b), then Supplier shall be entitled to convert such Advance
Exchange transaction to an outright purchase and Customer shall be charged as
Supplemental Work in accordance with Paragraph 7.2(b).     (c)   In the event an
Unserviceable Component is not made available for collection by Supplier at the
Customer Premises within the time period specified in Paragraph 5.3(a) above,
Supplier shall be entitled to charge to Customer (as Supplemental Work) a sum
equivalent to two percent (2%) of the CLP of the Exchange Component for each day
or part thereof until such time such Unserviceable Component is returned to
Supplier. If an acceptable Unserviceable Component and documents are not
returned to Supplier within thirty (30) days from receipt by Customer of an
Exchange Component, then Supplier shall, in addition, be entitled to convert the
Advance Exchange transaction to an outright purchase and Customer shall be

18

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charged as Supplemental Work in accordance with Paragraph 7.2(b).

  (d)   If Customer fails to meet any of its obligations as stated in this
Paragraph 5, any costs incurred by Supplier, including, without limitation,
transportation and insurance costs, the costs of the loan and/or exchange of
Components required to support other customers, or any penalties incurred
whatsoever, shall be rechargeable to Customer as Supplemental Work.         The
impact of any such failure by Customer on the ability of Supplier to comply with
its subsequent obligations shall be considered an event of Excusable Delay on
the part of Supplier and shall not be considered a failure on the part of
Supplier to meet its service levels in Paragraph 4.3 above.     (e)   Beginning
one (1) year after entry into revenue service of Customer’s first Aircraft that
shall have been converted to special freighter configuration pursuant to this
General Terms Agreement, Customer agrees, in the event that the percentage of
AOG requests exceeds seven and one-half percent (7.5%) of all Components
requested by Customer in any one calendar month, to pay an additional charge of
$ 10 per AFH per Aircraft in respect of such month     (f)   Customer shall pass
all warranties (in respect of the Components) to Supplier and/or any
Sub-Contractor (as Supplier may from time to time require) at the same time as a
Component is returned to Supplier.     (g)   Customer shall be responsible for
all costs of insurance, costs of storage of Consignment Stock and associated
charges incurred in the performance of this Schedule.

(6)   Title to Components and Risk of Loss or Physical Damage

6.1   Title and risk of loss or damage to any Component in the Consignment Stock
or supplied by Supplier and/or its Sub-Contractor from the Pool Stock (unless
specified as a Loan Component) pursuant to the T3 Program Component Services
contemplated under this Schedule and any Sub-contract, shall pass from Supplier
to Customer at the time of receipt by Customer of such Component. Title to (but
not risk of loss or damage) an Unserviceable Component shall simultaneously pass
from Customer or the owner of such Component to Supplier or as it directs. Risk
in an Unserviceable Component shall pass on receipt thereof by Supplier;
provided, that, where Customer has not delivered an Unserviceable Component to
Supplier within the time periods set out in Paragraph 5.3(a) above or is unable
to pass or procure the passage of good title to or warranty for (if applicable)
such Unserviceable Component or fails to comply with the provisions of
Paragraphs 5.3(a) and (b) above with respect to delivery of relevant documents
and the condition of such

19

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    Unserviceable Component, title to the Component supplied by Supplier shall
not pass to Customer until such time as Customer has made full payment or
provided the warranty (if applicable) or an acceptable Unserviceable Component
or documents to Supplier for the supplied Component. For the avoidance of doubt
and notwithstanding the above, Customer shall bear all risks of loss or damage
to the Component supplied by Supplier upon receipt thereof.   6.2   Except as
provided in Paragraph 4.1 above, Customer shall not, without Supplier’s prior
written consent, sell, assign, lease, transfer possession of or in any way
dispose of any Component nor permit any lien or encumbrance to be imposed upon
any Component or any part thereof.   (7)   Charges   7.1   In respect of the T3
Program Component Services set out in Paragraph 4.1(c) above, and provision of
access to the Pool Stock, Customer shall pay to Supplier (i)

          No. of Flight Hours   Payment per   per Month Per Aircraft   Flight
Hour  
Minimum of 960
  $ *****  
From 961 to 1,400
  $ *****  
From 1,401 to 1,700
  $ *****  
More than 1,700
  $ *****  

The appropriate rate per AFH from the table above in respect of Components and
provision of access to the Pool Stock; and (ii) $***** per month per Aircraft in
respect of Landing Gears (the “Monthly Charge”).

7.2   In respect of the Supplemental Work set out in Paragraph 4.1(d) above,
Customer shall pay the following charges:

  (a)   Supplier’s rate for all Supplemental Work performed by Supplier’s
sub-contractor, IAI, shall be $*****/Man Hour.     (b)   The cost of purchased
or acquired materials and subcontracted work shall be based upon invoice cost,
plus transport (and insurance) and a 12% handling charge.     (c)   With respect
to the repair of Excluded Components, (i) invoice cost for each such Component,
plus a 12% handling charge, and (ii) charges for transportation, insurance and
logistics, plus a 12% handling charge

Confidential treatment has been requested by Kitty Hawk, Inc. for certain
portions of this document. Confidential portions have been filed separately with
the Securities and Exchange Commission. Omitted portions are indicated in this
agreement with “*****”.

20

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  (d)   The Charges do not include Services on Components to meet any lease
return conditions except for the Landing Gear. Supplier warrants that it will be
fully responsible and assume all liability, including financial liability, for
the Lease Return Conditions of the Landing Gear.(Please supply Landing Gears
returns condition or is it the same as noted in Redelivery Condition+SchG form,
item 1.3)

7.3   In respect of the Consignment Stock, Customer shall pay to Supplier a
monthly availability charge of *****% of an agreed value per part number (agreed
upon by Supplier) of the Consignment Stock.

7.4   Assumptions

  (a)   The prices contained in Paragraph 7, are based on the assumptions that
(i) a guaranteed annual minimum of 960 Flight Hours per Aircraft on an Aircraft
fleet basis; and (ii) in respect of the APUs only, an hours to cycle ratio of
1.5:1 or 2:1 on an Aircraft fleet basis.     (b)   The prices contained in this
Paragraph 7 are also based on the assumption that: (y) Components and APUs are
in normal run out condition; and (z) coverage is of all Components in Customer’s
B737-300 SF fleet, other than the Excluded Components.     (c)   Supplier
reserves the right to revise all Charges payable under this Schedule in the
event any of the foregoing assumptions change during the Term; provided that, in
the event of any such change, Supplier will advise Customer in advance and they
shall, in good faith, negotiate such price changes which shall be within a
reasonable range of the prices provided in this Schedule.

7.5   Escalation       All charges are (i) net, free of all customs charges,
taxes, withholdings, deductions, impositions and/or charges of whatever kind,
other than Supplier’s U.S. income taxes and IAI’s Israeli income taxes, and
(ii) expressed in 2004 Dollars, which shall be escalated annually, commencing
January 2005, at the rate of two and one-half percent (2.5%) per annum.

7.6   Terms of Payment

  (1)   Payments of the Flight Hour Charges and the charges for the Pool Stock
shall be made in accordance with the provisions of Article X(B) of the General
Terms Agreement.     (2)   Payments for Supplemental Work and the monthly
availability charge for the Consignment Stock shall be made in accordance with
the provisions of Article

Confidential treatment has been requested by Kitty Hawk, Inc. for certain
portions of this document. Confidential portions have been filed separately with
the Securities and Exchange Commission. Omitted portions are indicated in this
agreement with “*****”.

21

--------------------------------------------------------------------------------

 

      X(A) of the General Terms Agreement. Payments of the Monthly Change shall
be made in accordance with Article X(A) of the General Terms Agreement, except
that such payments shall be made on the later of (i) the fifteenth day of each
month for the previous month or (ii) receipt of an invoice of such Monthly
Charge.

7.7   Beyond Economic Repair (BER)

  (a)   In the event that a Component is found to be BER, Customer shall be
liable for payment of 30% of the replacement cost for comparable replacement
Component (the “Replacement Costs”), plus the cost of the repair vendor
evaluation fee. Notwithstanding the foregoing, Customer shall not be liable in
respect of the BER condition of a Component supplied by Supplier, except where
such BER condition is caused, in whole or in part, by Customer’s act or failure
to act.     (b)   Should the cost of repair of a BER Component exceed 70% of the
Replacement Cost, Customer shall be notified, and in parallel Supplier will
search the market for a replacement Component. Should such a Component be
available on the market at less than 70% of its Replacement Cost, Supplier shall
purchase such Component at no additional cost to Customer.

7.8   No Fault Found (“NFF”)

  (a)   In order to limit no fault found Shop Visits, Customer shall maintain
any removed Components in quarantine for 48 hours, except for No Go Items, which
shall be quarantines for 24 hours (in either case, the “Quarantine Period”)
prior to pick-up by Supplier. If, during the Quarantine Period:

  (i)   the replacement Component from the Pool Stock for such quarantined
Component does not clear fault on fitment, then the fault shall be deemed not to
have been caused by the quarantined Component, and such quarantined Component
shall be re-fitted to the Aircraft and continue to be used by Customer. Customer
shall arrange to have such replacement Component made available for collection
by Supplier’s Freight Forwarder, together with all documentation originally
supplied by Supplier with such replacement Component; and

22

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  (ii)   conversely, if the replacement Component does clear fault on fitment,
then the fault shall be deemed to have been caused by the quarantined Component
and it shall be made available by Customer for pick-up by Supplier’s Freight
Forwarder.

  (b)   For each NFF occurrence, which is more than 10% (20%, in the first six
(6) months of the Term) of all Components returned by Customer as Unserviceable
Components (“Customer Returns”) Supplier shall charge a restocking fee of $
350.00 in respect of each Component returned to the Consignment Stock.     (c)  
If NFF occurrences in respect of Components are more than 10% (20%, in the first
six (6) month of the Term) of “Customer Returns” during any twelve (12) month
period of the Term commencing with the first full calendar month after the
Signature Date, Customer shall pay to Supplier $ 350.00 for each NFF occurrence
in excess of such 10% of Customer Returns.

8.   Warranty

  (1)   The warranty provisions of the General Terms Agreement shall be
applicable hereto; except that they shall only be applicable with respect to the
T3 Program Component Services in respect of the last Redelivery of a Component
prior to expiration of the Term.     (2)   For the purposes of this Schedule,
the Warranty Periods shall be:

  (i)   for repair — Eight (8) months after Redelivery or 1,000 AFH, whichever
occurs first. (ii) for overhaul — Twelve (12) months after Redelivery or 1,200
AFH, whichever occurs first.     (ii)   for overhaul — Twelve (12) months after
Redelivery or 1,200 AFH, whichever occurs first.

23

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  (3)   Supplier Failures

  (i)   In the event of failure of Supplier to meet the AOG commitments in
Paragraph 4.3(a) or the Critical commitments in Paragraph 4(b), then, Customer
may, at its option to insure continuous Aircraft operation, purchase, borrow or
lease a replacement Component or LRU and Supplier will reimburse Customer for
all costs incurred in connection therewith.     (ii)   In the event of failure
of Supplier to meet the service level guarantees of Section 4.1(a)(1)(iii) over
a one-year period (a “Measurement Period”), then (y) if the service level
reached during such Measurement Period is more than 10% below the guaranteed
percentages, then Customer shall have the right, but shall not be obligated, to
terminate all or any portion of this Schedule without any obligations beyond
those that have accrued up to such termination; and (z) if the service level
reached during a Measurement Period is 10% or less below the guaranteed
percentages, then for each percentage below the guaranteed percentages, Supplier
shall invest one-half of a percent (0.5%) of the total Flight Hour payments made
by the Customer during that year in the purchase or leasing of additional
Components for the Consignment Stock.

9.   Term; Termination

  (A)   This Schedule shall have a term commencing on delivery of the first
Aircraft to Customer (on or about March 14, 2005)_, 2005 (the “Commencement
Date”) and expiring ten (10) years thereafter or the actual lease term of the
Aircraft, whichever is longer. (the “Term”). For the purposes of the Flight Hour
Payments and the payments in respect of the Pool Stock, and the Monthly Charge,
as applicable,

  (1)   the period commencing on the Commencement Date and ending on the last
day of the calendar month in which the Commencement Date falls (the “Stub
Period”), shall be a separate “month” for calculating such Payments and the
Monthly charge or the Minimum AFH per month per Aircraft for the Stub Period
shall be a pro rata portion (i.e., the number of actual days in the Stub Period,
counting

24

--------------------------------------------------------------------------------

 

      both the Commencement Date and such last day of the month) of the
applicable Minimum monthly AFH; as applicable and     (2)   the full Minimum AFH
per month shall apply to the first full calendar month during the Term and to
each full calendar month thereafter occurring during the Term.

  (B)   In the event of a termination of either (i) this Schedule under the
provisions of Article VII of the General Terms Agreement or (ii) the expiration
by its terms of this Schedule, then, with respect to the Consignment Stock:

  (1)   On expiration or termination of this Schedule, Customer shall, at
Supplier’s request, repackage in accordance with the Manufacturers’ shipping
instructions and dispatch, at (i) Customer’s expense, in the case of a
termination which is due to its default or (ii) Supplier’s expense, in the case
of expiration by its terms of this Schedule or termination which is due to
Supplier’s default, all Components comprising the Consignment Stock complete
with all approved documentation and other necessary paperwork in accordance with
Supplier’s reasonable instructions.     (2)   In the event Customer fails to
repackage and dispatch the Consignment Stock in accordance with (1) above,
Supplier shall be entitled to, and Customer shall enable Supplier to, have
immediate access to the Customer Facilities for the purposes of re-possessing
the Consignment Stock.     (3)   Customer shall undertake that all Components
comprising the Consignment Stock that are returned to Supplier shall be in the
same or substantially the same condition and quality as at the time of their
original delivery to the Customer Premises. In the event of any material
disparity in such condition or quality of such Components which can reasonably
be attributed to Customer’s negligence or willful misconduct, Supplier shall
carry out such remedial action as it considers necessary and invoice Customer
for the costs reasonably incurred by Supplier in carrying out such remedial
action.

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  (4)   Until Supplier shall have received a return of all of the Consignment
Stock remaining upon such termination or expiration, and carried out, to its
reasonable satisfaction, any remedial actions under paragraph (3) above,
Customer shall maintain the Consignment Stock Insurance in full force and
effect. And shall continue to pay the monthly availability charge for the
Consignment Stock.

10.   Condition Precedent

  (a)   It shall be a condition precedent to the obligation of Supplier to
perform this Schedule that (i) on or before the Signature Date, Customer shall
have provided to Supplier a detailed list of all Components currently fitted on
each Aircraft; (ii) Customer pay to Supplier a down payment in the amount of
$*****, such amount to be credited pro rata against the last two (2) monthly
payments under the Agreement and this Schedule, and; provided further that if
upon the second anniversary of this Schedule, Customer has not had any payment
defaults under the Agreement and is not then currently in default of any
payments under the Agreement, the entire down payment shall be refunded to
customer.

11.   Additional Provisions

  (A)   The provisions of Article I (E) [“BER Procedures"] of the General Terms
Agreement shall not be applicable to this Schedule. They are replaced in their
entirety by the provisions of Paragraph 7.7 of this Schedule.     (B)   The
provisions of Article II (5) [“LRU and Component No Fault Found Removals"] of
the General Terms Agreement shall not be applicable to this Schedule. They are
replaced in their entirety by the provisions of Paragraph 7.8 of this Schedule.
    (C)   The provisions of Article I (3) [“Customer’s Responsibility under the
T3 Program"] of the General Terms Agreement shall not be applicable to this
Schedule. They are replaced in their entirety by the provisions of Paragraphs
4.1(a)(2), (b)(2) and (c)(4) of this Schedule.     (D)   The provisions of
Article I.1(D) of the General Terms Agreement shall not be applicable to this
Schedule. They are replaced in their entirety by the provisions of Paragraphs
4.2(a) and 4.4 of this Schedule.

12.   Part of General Terms Agreement

Confidential treatment has been requested by Kitty Hawk, Inc. for certain
portions of this document. Confidential portions have been filed separately with
the Securities and Exchange Commission. Omitted portions are indicated in this
agreement with “*****”.

26

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This Schedule, when countersigned by the parties hereto, dated and numbered,
shall be incorporated into, and form an integral part of, the General Terms
Agreement. By their execution and delivery of this Schedule, the parties hereby
reaffirm all of the terms and conditions of the General Terms Agreement, except,
as to this Schedule only, to the extent modified or deleted under Paragraph 11
above.

All annexes to this Schedule are hereby incorporated herein and made a part
hereof as if such annexes were set forth in this Schedule at length.

          Date: March 7, 2005   AVIATION SERVICES INTERNATIONAL, LLC

  (Supplier)    
 
       

  By:    

         
 
  Print Name:              

  Title:              

              KITTY HAWK AIRCARGO, INC.

  (Customer)    
 
       

  By:              

  Print Name:   Steven Markhoff
 
       
 
  Title:   Vice President Strategic Planning, General Counsel

      and Secretary

27

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      Annexes    
Annex 1
  List of Aircraft
Annex 2
  List of Consignment Stock
Annex 3
  List of No Go Items
Annex 4
  Procedure for Ordering Components
Annex 5
  Form of Letter to Vendors
Annex 6
  Excluded Components

28

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ANNEX 1

[List of the Aircraft Subject to Schedule No. 3]

 

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Aircraft
Type
  Aircraft
Registration   MSN No.   Engine Type   APU
TYPE   Comments

Customer shall be entitled, subject to the provisions of this Schedule, to add
additional or subtract Aircraft to the above list by giving Supplier not less
than 60 (sixty) days’ written notice of its intention to do so. If Customer
decreases the number of Aircraft in the list above, Supplier shall have the
right to review this Schedule and all Charges and prices in their entirety.

 

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ANNEX 2

[List of the Consignment Stock]

 

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ANNEX 3

[List of the No Go Items]

 

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ANNEX 4

[Procedure for Ordering Components]

 

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PROCEDURE FOR ORDERING COMPONENT

1.0   Contact Details

Customer shall send both Critical/Routine and AOG demands to the Supplier’s
Logistics Desk at the following number or Email:-

Fax: + 00-972-3-_____________

Email

Component demands should be filled out on a Component Request Form (attached
below) and then e-mailed or faxed to Supplier at the address or number above.

2.0   AOG Demands

In the case of an AOG, wherever possible, Customer should telephone the number
for confirmation of receipt after e-mailing or faxing the Component Request
Form.

Customer will receive confirmation of its request within one hour of its receipt
by Supplier’s Logistics Desk. This confirmation will be the Component Request
Form either faxed or e-mailed back to Customer’s contact numbers and address
below with the transaction details, including (reference no.) tracking numbers,
written in the “Comments” field.

Fax:  00
Tel:   00

E-Mail:

3.0   Tracking

When Customer is aware of the serial number of an Unserviceable Component being
removed, it will endorse this confirmation with the serial number and either fax
or e-mail it back to Supplier so that Supplier may match the Unserviceable
Component coming in from Customer with the Exchange Component that is being
dispatched to/or collected by Customer.

4.0   Authority

Unless otherwise expressly agreed in writing, the contact numbers in Paragraphs
1.0 and 2.0 above shall be the prime means of communication between the Parties
hereto. Subject to any written agreement to the contrary, Supplier shall not
accept any demands faxed/e-mailed to numbers and address other than that stated
above.

2

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COMPONENT REQUEST

COMPLETE & FAX OR E-MAIL TO:-
       
FAX: + 00-972
       
E-MAIL:
         
TELEPHONE CONTACT FOR SUPPLIER: — + 00 972
       

                               
Date:
    Time:     A/C Regn:                   If AOG also phone: -           + 00 ,
M.E.L Limitation:                         Part Number:                    
Description:                     IPC Reference:                     Tech Log
Defect &       Comments:                                     Delivery Address:  
                                 
Customer Contact (incl.

    TEL:     FAX:    
Dialing Code):
                                      S                                        
                                    WE ACKNOWLEDGE RECEIPT OF THIS DEMAND.      
       
Signature:
    Date:     AWB No.:    

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Comments:

4

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ANNEX 5

[Form of Letter from Customer to Vendors]

 

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[Customer Letterhead]

(Date)

(Name and Address
of Original Equipment Manufacturer)

Attn:

Re: Certain Components on B737-300/400 and B737-200 Aircraft

Dear (Sir/Madam):

Kitty Hawk Aircargo, Inc. (“KHA”) is the operator of the Boeing 737 Aircraft
described in Exhibit 1. You (“OEM”) have supplied certain components (the
“Components”), which are described in Exhibit 2, to such Aircraft.

KHA and Aviation Services International, LLC (“ASI”) have now entered into a
separate Agreement, as supplemented by Schedule No. 3 (as so supplemented, the
“Maintenance Agreement”) for the maintenance, repair and overhaul of components
on such Aircraft.

Please indicate your agreement to (i) the assignment by us (Customer) of all of
the warranties and guaranties to which we, (Customer) are entitled, with respect
to the Components; and (ii) provide to ASI all the technical information needed
for its performance of the Maintenance Agreement, and requested from you in
writing, in each instance, until you receive further written instructions from
ASI.

Please indicate your concurrence with such assignment, and your agreement to
provide such technical information, by signing in the space provided below and
returning a copy of this letter to the undersigned.

Very truly yours,

KITTY HAWK AIRCARGO, INC.

By:                                                             
Print Name:                                               
Title:                                                          

ACCEPTED AND AGREED TO:

[OEM]

By:                                                             
Print Name:                                               
Title:                                                          

 

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Annex 6

Excluded Components

 

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Annex 6

The following components are excluded from the T3 Program Component Services:

     
Chapter 11
  All Placards and markings
 
   
Chapter 24
  Main Battery
 
   
Chapter 25
  All equipment and furnishings, IFE. (excluding Escape Slides)
 
   
Chapter 27
  On wing Flight Control Surfaces
 
   
Chapter 28
  Fuel tanks (excluding Tank accessories)
 
   
Chapter 29
  Hydraulic Fuses
 
   
Chapter 32
  Nose and main doors and Wheels, Brakes & Tires
 
   
Chapter 33
  All filaments, florescent tubes and batteries (excluding control equipment)
 
   
Chapter 35
  All oxygen equipment (excluding regulators, pilot’s masks, portable breathing
equipment and indicating equipment)
 
   
Chapter 38
  Sinks, basins, and toilet units (excluding Pumps)
 
   
Chapter 52
  All doors and stairs (excluding actuators, motors and dampers)
 
   
Chapter 53
  Radome
 
   
Chapter 54
  All nacelles and pylons
 
   
Chapter 55
  Stabilizers
 
   
Chapter 56
  Windshield, Windows
 
   
Chapter 57
  Wings
 
   
Chapter 70-80
  Engines (excluding LRU’s such as ignition exciter, CSD, AC generator, CSD, oil
temperature switch, hydraulic pump starter valves, starter and fuel flow
transmitters).
 
   
Chapter xxx
  Cargo Loading Systems

  Nose Cowls

For the sake of clarity those Components noted as excluded within parentheses on
this Annex 6 are included in the T3 Program Component Services.

 

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ANNEX 7

Aviation Services International LLC
c/o Israel Aircraft Industries Ltd.
Ben Gurion International airport
70100 Israel

Consignment Stock Reporting Form

     
Date of Activity:
 
 
    Type of Activity (into or out of Consignment)
 
   
Part Number
                                          
 
   
Serial Number
                                          
 
   
Signature:
                                          
 
   
Print Name
                                          
 
   
Title:
                                          
 
   
Date: