FN>


                               FINANCING AGREEMENT




                  This  FINANCING  AGREEMENT  (this  "Agreement"),  dated  as of
December  13,  2000,  is entered into by and between  AMERICAN  TRANS AIR,  INC.
("ATA"),  an Indiana  corporation,  and  GENERAL  ELECTRIC  CAPITAL  CORPORATION
("GECC"), a New York corporation.


                  WHEREAS,  ATA and GECC wish to set forth  their  understanding
regarding the leveraged lease  financings or single investor lease financings of
(Confidential Material Omitted) new Boeing B737-800 aircraft, each equipped with
two CFM56-7 engines  (collectively,  the "Aircraft") to be delivered pursuant to
the Purchase  Agreement No. 2262 dated as of June 30, 2000, as amended,  between
ATA and The Boeing  Company  (the "ATA  Purchase  Contract")  or pursuant to the
Purchase Agreement No. 1905 dated as of April 25, 1996, as amended, between GECC
and The Boeing Company (the "GE Purchase  Contract"  and,  together with the ATA
Purchase Contract, the "Purchase Contracts"); and


                  WHEREAS, in furtherance  thereof,  ATA and GECC wish to commit
to execute and deliver  certain agreed  documents  relating to such financing of
each  Aircraft on or before the date (the "Tender  Date") that such  Aircraft is
tendered  for  delivery  by The Boeing  Company  under the  applicable  Purchase
Contract  (which  date  will,  if  the  closing  of  the  applicable   financing
transaction  as described  herein  occurs on such date, be the Delivery Date for
such Aircraft).


                  NOW, THEREFORE, the parties hereto agree as follows:

     1. Leveraged Transactions. (a) ATA and GECC agree to enter into a leveraged
lease  financing  transaction,  on and  subject  to  the  terms  and  conditions
described  herein  (a  "Leveraged  Transaction"),  with  respect  to each of the
(Confidential  Material  Omitted)  Aircraft  identified  on Exhibit A (the "Firm
Aircraft").

     (b) (Confidential Material Omitted).

     (c) Each of the Firm Aircraft.  (Confidential Material Omitted) is referred
to herein as a "Leveraged Aircraft".


<PAGE>



                                      - 7 -

2.  Single-Investor  Transactions.  ATA and GECC  agree  to enter  into a single
investor lease financing transaction, on and subject to the terms and conditions
described   herein  (a  "SIL   Transaction"),   with  respect  to  each  of  the
(Confidential  Material  Omitted)  Aircraft  identified  on  Exhibit B (the "SIL
Aircraft").  The SIL Transactions and the Leveraged Transactions are referred to
collectively as the "Transactions".

3.  Leveraged  Documents.  Attached as Exhibit C are the forms of the agreements
and other documents (collectively,  the "Leveraged Documents") which the parties
have  negotiated  and  agreed  to  utilize  to  effect  each  of  the  Leveraged
Transactions.  Capitalized  terms used in this Agreement  without  definition in
relation to the Leveraged  Transactions shall have the meanings set forth in the
Leveraged Documents.  Subject to the terms and conditions of this Agreement, ATA
agrees that, on or before the Tender Date of each Leveraged Aircraft,  it shall,
with respect to such Aircraft,  (a) execute and deliver,  as Lessee, each of the
Leveraged Documents to which Lessee is to be a party as provided therein and (b)
procure that the parties  identified  therein as Owner  Trustee and as Mortgagee
and Loan Participant,  respectively (or other institutions reasonably acceptable
to  GECC)  execute  and  deliver  the  applicable  Leveraged  Documents  in such
capacities.  GECC agrees that, on the Tender Date of each Leveraged Aircraft, it
shall (or shall cause an Affiliate  that is a Permitted  Institution  to),  with
respect to such Aircraft, execute and deliver, as Owner Participant, each of the
Leveraged  Documents  to which  Owner  Participant  is to be  party as  provided
therein.


                  The  parties  agree  that  the  Leveraged  Documents  for each
  Leveraged  Aircraft  shall be in the form set forth in  Exhibit  C,  except as
  modified only to  incorporate  (a) the Delivery Date (and other dates measured
  with reference thereto),  serial numbers and registration number applicable to
  such Aircraft;  (b) the actual Lessor's Cost, as determined in accordance with
  Section 5 below;  (c) the Actual  Pricing,  as determined  in accordance  with
  Section 6 below;  (d) changes to reflect the terms of the Debt  Financing,  to
  the extent  agreed by the parties,  as  contemplated  in Section 7 below;  (e)
  changes,  if requested by GECC, to effect a like kind exchange as described in
  Exhibit E; and (f) the actual  Payment  Dates  (which will  correspond  to the
  interest payment dates under the Debt Financing).

4. SIL  Documents.  Attached as Exhibit D are the forms of agreements  and other
documents (collectively,  the "SIL Documents") which the parties have negotiated
and agreed to utilize to effect each of the SIL Transactions.  Capitalized terms
used in this Agreement  without  definition in relation to the SIL  Transactions
shall have the meanings set forth in the SIL Documents. Subject to the terms and
conditions  of this  Agreement,  ATA agrees that, on the Tender Date of each SIL
Aircraft, it shall (a) execute,  deliver and perform, as Lessee, each of the SIL
Documents to which  Lessee is to be a party as provided  therein and (b) procure
that the party  identified  therein as Owner  Trustee  (or  another  institution
reasonably  acceptable to GECC) execute and deliver the applicable SIL Documents
in such capacity.  GECC agrees that, on the Tender Date of each SIL Aircraft, it
shall  (or  shall  cause a  Permitted  Institution  to),  with  respect  to such
Aircraft,  execute,  deliver and perform, as Owner Participant,  each of the SIL
Documents to which Owner Participant is to be a party as provided therein.


                  The parties agree that the SIL Documents for each SIL Aircraft
shall  be in the form set  forth  in  Exhibit  D,  except  as  modified  only to
incorporate  (a) the  Delivery  Date (and other dates  measured  with  reference
thereto),  serial numbers and registration  number  applicable to such Aircraft;
(b) the actual  Lessor's Cost, as determined in accordance with Section 5 below;
(c) the Actual Pricing,  as determined in accordance  with Section 6 below;  (d)
changes,  if requested by GECC,  to effect a like kind  exchange as described in
Exhibit E; and (e) the actual Payment  Dates;  provided that with respect to the
Aircraft  identified  on  Exhibit  B as "GE  Purchase  Contract"  aircraft,  the
additional changes described in Exhibit F shall be made.

5. Lessor's Cost. In the Pricing Assumptions,  Lessor's Cost has been assumed to
be (Confidential  Material  Omitted) for each Aircraft to be delivered under the
ATA Purchase Contract and  (Confidential  Material Omitted) for each Aircraft to
be delivered  under the GE Purchase  Contract.  Lessor's  Cost for each Aircraft
shall be  adjusted  to be equal to the sum of (a) the actual  purchase  price of
such  Aircraft  under the  applicable  Purchase  Contract  (including  any price
escalation provided for therein) and (b) capitalized interest.

6. Pricing. (a) The Basic Rent payments and allocations, Stipulated Loss Values,
Termination  Values  and  EBO  Price  (collectively,  the  "Pricing")  for  each
Aircraft,  based on the pricing assumptions set forth in Exhibit G (the "Pricing
Assumptions"),  are set  forth in  Exhibit  H (the  "Assumed  Pricing")  for the
Leveraged  Aircraft  and the  SIL  Aircraft  respectively.  The  actual  Pricing
("Actual  Pricing") for each Aircraft  will be the Assumed  Pricing  adjusted as
provided in the following provisions of this Section 6.


                    (b) The Net  Economic  Return  shall be adjusted by changing
the net after-tax book yield component thereof to reflect any difference between
(1)  (Confidential  Material  Omitted) as quoted on the  (Confidential  Material
Omitted)  page (ask side  based on a 30/360  day  convention)  as of the  second
Business Day prior to the Delivery Date and (2) (Confidential Material Omitted).


                    (c) The Assumed  Pricing shall be  recalculated  (upwards or
downwards)  as of the  Delivery  Date by GECC,  in order to (i) maintain the Net
Economic  Return  (adjusted  as  provided  in Secton 6(b) above) and (ii) to the
extent possible consistent with clause (i), to minimize the Net Present Value of
Rents to Lessee, to reflect (A) any change in:

     (1) the Delivery  Date;  (2) the amount of Lessor's Cost; (3) the amount of
Transaction  Expenses;  or (4) in respect  of the  Leveraged  Transactions,  the
original  principal amount,  interest rate or amortization  schedule of the Debt
Financing from that set forth in the Pricing Assumptions; (Confidential Material
Omitted)and (C) any Change in Tax Law enacted, adopted, issued or (to the extent
described as a "proposed change" in the following definition of a "Change in Tax
Law") proposed on or prior to the Delivery  Date.  "Change in Tax Law" means (i)
any change, or any proposed change that has a proposed effective date that is on
or prior to the Delivery  Date,  in the Code  (provided  that,  in the case of a
proposed change in the Code, such change must have been "reported  favorably" by
the House Ways and Means  Committee  or the  Senate  Finance  Committee)  or the
Treasury  Regulations  (provided  that, in the case of a proposed  change in the
Treasury Regulations, such change must have been issued by the Department of the
Treasury)  or (ii) any  change  in the  interpretation  of the Code or  Treasury
Regulations in a decision by the United States Supreme Court,  the United States
Tax Court,  the United States Court of Claims or any of the United States Courts
of Appeal or  District  Courts,  or any  issuance of a revenue  ruling,  revenue
procedure or any pronouncement by the Internal Revenue Service or the Department
of the  Treasury  (other than a change in the  alternative  minimum tax or other
change that results in Owner  Participant's being subject to alternative minimum
tax or unable to use all tax benefits  because of its particular tax situation).
Subject to the following  paragraph,  in the event of any such proposed  change,
the parties  hereto shall  cooperate in order to determine the  methodology  for
taking into account in such recalculation the effect of such proposed change.


Any  such  recalculation  shall be  prepared  by GECC,  in  compliance  with the
provisions  of ss.  3.2.1(e)  of the Lease and  subject to  verification  in the
manner  provided  in  ss.  3.2.1(d)  of the  Lease,  on the  basis  of the  same
methodology  and assumptions  used by GECC in determining  the Assumed  Pricing,
except as such  assumptions have been modified to reflect the events giving rise
to such  recalculation and taking into account the law applicable at the time of
such recalculation (and, in respect of the EBO Price, subject to the constraints
set forth in ss. 3.2.1(b)(3) of the Lease). All recalculations (1) shall be made
so as to avoid  characterization  of the Lease as a  "disqualified  leaseback or
long-term agreement" within the meaning of Code ss. 467 and Treasury Regulations
thereunder and (2) shall be in compliance  with the  requirements of ss.4(1) and
ss. 4(6) of Revenue Procedure 75-21 and ss.ss.  4.02(5),  4.07(1) and 4.07(2) of
Revenue Procedure 75-28. In connection with any such  recalculations to payments
and allocations of Basic Rent,  appropriate  corresponding  adjustments shall be
made to the percentages set forth on the Schedules of Stipulated Loss Values and
Termination  Values in the  columns  headed  "Deferred  Basic Rent  Amount"  and
"Prepaid Basic Rent Amount."

     (d) In the  event  that  any  adjustment  to the  Pricing  for an  Aircraft
occasioned  by a Change In Tax Law  pursuant to clause (B) of Section 6(c) would
cause the Net  Present  Value of Rents (as defined in the  applicable  Lease) to
increase by more than (Confidential Material Omitted) in the case of an Aircraft
delivered under the GE Purchase  Contract or (Confidential  Material Omitted) in
the case of an  Aircraft  delivered  under the ATA  Purchase  Contract,  ATA may
terminate  this  Agreement  with respect to such  Aircraft by written  notice to
GECC, unless GECC, in its sole discretion, by written notice to ATA given within
four Business  Days after ATA gives such  termination  notice,  agrees to revise
such  adjustment  so that such present  value  increase  shall be  (Confidential
Material Omitted) or (Confidential Material Omitted),  respectively, or less. If
ATA  terminates  this  Agreement  with respect to any Aircraft  pursuant to this
Section 6(d), ATA shall not effect any lease or other financing of such Aircraft
that would reflect a Net Present Value of Rents (or the equivalent)  equal to or
greater  than the Net  Present  Value of Rents that  would  have  applied in the
transaction contemplated by this Agreement with respect to such Aircraft.

                  (e) In the event that any  recalculation  pursuant  to Section
6(c) results in a "back-ended  rent profile" for purposes of ss. 467 of the Code
and the Treasury Regulations thereunder, (i) the (Confidential Material Omitted)
requirement set forth in clause (A) of the definition of "Applicable Percentage"
shall apply to the first two Renewal  Terms,  and (ii) the provisions of Section
17 of the Lease shall be modified accordingly.

     (Confidentail Material Omitted)



8. Dates.  ATA shall give to GECC not less than five Business Days' prior notice
of the  scheduled  Delivery  Date of each  Aircraft,  provided that ATA shall be
entitled  to postpone  the  scheduled  Delivery  Date for an Aircraft by written
notice  to GECC  given  at any  time  prior  to 2:00 PM (New  York  time) on the
scheduled  Delivery  Date for such  Aircraft,  which  notice  may  specify a new
scheduled  Delivery  Date  on  a  subsequent   Business  Day.  If  notice  of  a
postponement does not specify a new scheduled Delivery Date, ATA shall give GECC
not less than two Business Days' notice of the new scheduled  Delivery Date with
respect to such Aircraft.

9. Return of Funds. If the closing of a Transaction  with respect to an Aircraft
fails to occur on the  scheduled  Delivery  Date and GECC  shall have made funds
available for such closing, ATA shall cause such funds to be returned to GECC in
immediately  available  funds by 3:30  p.m.  (New York  time) on such  scheduled
Delivery Date, unless GECC shall have agreed otherwise in writing.

10. Expenses. If the applicable Transaction with respect to an Aircraft fails to
close for any reason prior to the  termination  of this  Agreement,  pursuant to
Section 12 below,  ATA will pay all fees and expenses  (including the reasonable
legal fees and  expenses of GECC's  counsel)  incurred in  connection  with such
Transaction;  provided  that if the  Transaction  fails to close by  reason of a
breach  by  GECC  of its  obligations  under  this  Agreement  or by  the  Owner
Participant  of  any of  its  obligations  under  the  applicable  Participation
Agreement,  GECC  shall  pay  all  reasonable  fees  and  expenses  incurred  in
connection  with such  Transaction  (including  the  reasonable  legal  fees and
expenses of ATA's  counsel)  but  excluding  in any event any fees and  expenses
related to the Debt Financing.

11.  Conditions.

 (a) The obligation of GECC to participate in the  Transactions
with respect to each Aircraft as contemplated by this Agreement shall be subject
to the fulfillment or the waiver by GECC, on or before the Delivery Date of such
Aircraft,  of the conditions set forth in ss. 5.1 (except subsections 5.1.15 and
5.1.16 thereof) of the applicable  Participation  Agreement with respect to such
Transaction and the further conditions that (Confidential Material Omitted) (ii)
the Delivery  Date for such  Aircraft  shall have occurred on or before the date
contemplated  by clause  (ii) of Section 12 hereof  and  (Confidential  Material
Omitted).


     (b) The obligations of ATA to participate in the  Transaction  with respect
to each Aircraft as  contemplated  by this Agreement shall be subject to (i) the
satisfaction, or waiver by ATA, on or before the Delivery Date of such Aircraft,
of the conditions set forth in ss. 5.4 of the applicable Participation Agreement
and (ii) with respect to the Leveraged  Transactions,  the agreement of GECC and
the debt  providers on debt/equity  matters (to the extent  different from those
reflected  in the  form of  Mortgage  included  in  Exhibit  C) by the  date set
contemplated by clause (ii) of Section 12 hereof.

     12. Termination.  The obligations of ATA and GECC under this Agreement with
respect to any Aircraft shall  terminate and be of no further force or effect on
the earlier of (i) the consummation of the  Transactions  with respect to all of
the  Aircraft and (ii) the Outside Date (as defined  below)  applicable  to such
Aircraft,  provided that the obligations of ATA and GECC under Section 10 hereof
shall survive, and remain in full force and effect following, the termination of
this  Agreement.  For purposes of this Section 12, "Outside Date" means December
31, 2002 with respect to the Firm  Aircraft and the SIL  (Confidential  Material
Omitted) (such date, in each case, the "Expiry Date"),  provided that if a labor
strike or similar  event occurs at The Boeing  Company  prior to the  applicable
Expiry  Date and such  strike or event  causes  the date of  delivery  under the
Purchase Agreement in respect of any of the Aircraft to be delayed, the "Outside
Date"  shall be deemed to mean the  earlier  of (x) the date which  follows  the
applicable  Expiry  Date by the  number of days  that  such  strike or event has
continued  in effect and (y) the date which is six months  after the  applicable
Expiry Date.

     13. Related  Matters.  (a) Upon execution and delivery of this Agreement by
ATA, GECC shall return to ATA the letter of credit provided by ATA in connection
with  leveraged  lease  transaction  [ATA 1996 B]  covering  the Boeing  757-23N
aircraft having manufacturer's serial number 27974 and shall execute and deliver
an appropriate amendment to the Participation Agreement dated as of December 16,
1996 in such  transaction  releasing  ATA from the  provisions  of Section 8(ee)
thereof that require such letter of credit.

                  (Confidential Material Omitted)

     14. GE Purchase  Contract.  GECC confirms that the purchase  price for each
Aircraft to be delivered under the GE Purchase Contract (with the specifications
set forth in Boeing Detail Specification Ref. (Confidential Material Omitted)

                  GECC agrees that it will not, in respect of any Aircraft  that
is subject to this Agreement,  further amend the price,  specifications or other
terms of the GE Purchase  Contract  without  ATA's  written  consent.  GECC also
agrees that it will agree to reasonable  change orders and  amendments to the GE
Purchase  Contract,  with  respect  to any  Aircraft  that  is  subject  to this
Agreement, that are requested by ATA and accepted by the Boeing Company.

     15. Entire Agreement.  This Agreement,  as of the date hereof,  constitutes
the entire  agreement of the parties  hereto with respect to the subject  matter
hereof,  and  all  prior  understandings,  written  or oral  (including  without
limitation  the letter of intent  dated May 3, 2000 insofar as it relates to the
Aircraft),  between the parties  hereto with respect to such subject  matter are
hereby superseded in their entireties.

     16. Notices. All notices and other communications contemplated hereby shall
be in writing and shall be effective when delivered  addressed to a party at its
address or facsimile  number set forth under its  signature  hereto,  or to such
other address or facsimile number as any such party shall specify.

     17.  Miscellaneous.  This  Agreement  may  be  executed  in any  number  of
counterparts,  and each fully-executed counterpart of this Agreement shall be an
original and all of such counterparts  together shall constitute one instrument.
Neither this Agreement nor any of the terms hereof may be amended, supplemented,
waived or modified  orally,  but only by an instrument in writing  signed by the
party against which the  enforcement  of the  amendment,  supplement,  waiver or
modification  is sought.  The  parties  intend  that this  Agreement  shall be a
binding  agreement  with  respect to matters  set forth  herein.  The rights and
obligations  of the parties  hereto shall not be  assignable,  and any purported
assignment shall be voided.

     18.  Governing Law. This  Agreement  shall be governed by, and construed in
accordance  with, the laws of the State of New York applicable to contracts made
and to be performed wholly within such State.

<PAGE>






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


                     AMERICAN TRANS AIR, INC.

                     By:  /s/ Charles T. Cleaver

                              __________________________________
                              Name:    Charles T. Cleaver
                              Title:   Treasurer

                       Address:        7337 West Washington Street
                                       Indianapolis, IN  46231

                       Attention:      Treasurer

                       Facsimile:      317-240-7091




                     GENERAL ELECTRIC CAPITAL CORPORATION

                     By:  /s/ Norman Liu

                              _________________________________
                              Name:     Norman Liu
                              Title:    Vice President

                       Address:   201 High Ridge Road
                                  Stamford, CT 06927

                       Attention: Contracts Leader

                       Facsimile: 203-357-3201


<PAGE>





                                                                       Exhibit A

                               Leveraged Aircraft



  Aircraft Under ATA Purchase Contract        Month of Scheduled Delivery


 (Confidential Material Omitted)


<PAGE>


     Exhibit B
                         Single-Investor Lease Aircraft



     Aircraft Under ATA Purchase Contract     Month of Scheduled Delivery

     (Confidential Material Omitted)



     Aircraft Under GE Purchase Contract

     (Confidential Material Omitted)


<PAGE>


                                                                     Exhibit B-1


 (Confidential Material Omitted)







<PAGE>


                                                                       Exhibit C


                            Leveraged Lease Documents


                  Attached are forms of the following Leveraged Documents:


                  1.  Participation Agreement (including Annex A - Definitions)

                  2.  Lease

                  3.  Trust Agreement

                  4.  Tax Indemnity Agreement

                  5.  Guarantee

                  6.  Purchase Agreement Assignment

                  7.  Consent and Agreement

                  8.  Mortgage and Equipment Notes




<PAGE>


                                                                       Exhibit D


                         Single-Investor Lease Documents



                  Attached  are forms of the  following  Single  Investor  Lease
                  Documents:


                  1.  Participation Agreement (including Annex A - Definitions)

                  2.  Lease

                  3.  Trust Agreement

                  4.  Tax Indemnity Agreement

                  5.  Guarantee

                  6.  Purchase Agreement Assignment

                  7.  Consent and Agreement





<PAGE>


                                                                       Exhibit E

                               Like Kind Exchange

The Owner  Participant may elect,  with respect to any of the Aircraft,  to fund
its equity  investment  pursuant to a like kind  exchange  arranged by the Owner
Participant  with a qualified  intermediary.  If such an  election is made,  the
following new ss. 10.3 will be added to the applicable Participation Agreement:

         "10.3    Like Kind Exchange

                      Notwithstanding  anything to the contrary contained in any
              of the Operative Agreements,  upon notice to Lessee, each of Owner
              Trustee's  and  Owner  Participant's  rights  (but  not any of its
              obligations  other than the obligation to pay Owner  Participant's
              Commitment  for the Aircraft)  under this Agreement to acquire the
              Aircraft may be assigned to [the  Intermediary] in connection with
              a like kind  exchange  under Section 1031 of the Code and pursuant
              to the Like Kind  Exchange  Documents (as defined in Schedule 3 to
              this  Agreement).  Notwithstanding  the  first  sentence  of  this
              Section 10.3, Owner  Participant  shall be responsible to make its
              Commitment  available in  accordance  with the  provisions of this
              Agreement  if the  Intermediary  fails  to  make  such  Commitment
              available,  and  any  such  assignment  shall  not  release  Owner
              Participant  or  Owner  Trustee  from  any  of  their   respective
              obligations hereunder or under any other Operative Agreement.  Any
              Lessor  Lien  attributable  to the  Intermediary  shall be  deemed
              attributable  to Owner  Participant  for purposes of the Operative
              Agreements."

The Like Kind Exchange Documents will consist of the following:

     1.  Assignment  and Acceptance  Replacement  Property  Contract,  dated the
Delivery Date, among Owner Participant, Owner Trustee and Intermediary.

     2. Notice of  Assignment  to Qualified  Intermediary  of Certain  Rights in
Participation  Agreement and Purchase  Agreement,  dated the Delivery Date, from
Owner Participant and Owner Trustee,  with  acknowledgment of receipt by Lessee,
Manufacturer, Mortgagee and Loan Participant.

     3.   Direction  of  Title   Transfer  dated  the  Delivery  Date  from  the
Intermediary and acknowledged and agreed by Lessee and Manufacturer.

     4.  Reassignment and Reacceptance  Replacement  Property Contract dated the
Delivery  Date among the  Intermediary,  Owner  Participant  and Owner  Trustee,
acknowledged by Lessee and Manufacturer.

The Owner Participant shall indemnify Lessee, on a net after-tax basis,  against
any obligation,  liability,  loss or expense  (including legal fees) of any kind
that Lessee pays or incurs as a result of any  like-kind  exchange  described in
this Exhibit E, and such like-kind exchange shall be excluded from the indemnity
obligations of Lessee under the applicable transaction documents.

ATA shall not be required  to adjust the timing of  delivery of any  Aircraft in
order to permit GECC to effect any such like-kind exchange.


<PAGE>


                                                                       Exhibit F


                          GE PURCHASE CONTRACT AIRCRAFT



                  The  Purchase   Agreement   Assignment  and  the  Consent  and
Agreement,  as set  forth  in  Exhibit  D,  with  respect  to the  SIL  Aircraft
identified  on Exhibit B as Aircraft  under the GE Purchase  Contract,  shall be
modified to reflect the fact that GECC,  rather than ATA, is the purchaser under
the GE  Purchase  Contract  and will be the party  assigning  rights  under that
contract  to the Owner  Trustee,  and  references  thereto in the  Participation
Agreement shall be modified accordingly.



<PAGE>


                                                                       Exhibit G


                               Pricing Assumptions



                                                    SIL Transactions

                         Leveraged       ATA                 GE
Assumptions              Transactions    Purchase Contract   Purchase Contract

1.  Delivery Date                   (Confidential Material Omitted)

2.  Lessor's Cost
      ($ million)

3.  Transaction
    Expenses
    (% of Lessor's
    Cost)

4.  Basic Lease Term

5.  Tax Rate

(Confidential Material
Omitted)

7.  Foreign Source
       Usage

8.  Pricing Files


<PAGE>






                                                                       Exhibit H


                                 Assumed Pricing


The Assumed Pricing consists of the following:

                  For the Leveraged Aircraft:

1.       Basic Rent Payments:

                         As set forth in Exhibit H-1

2.       Basic Rent Allocations:

                         As set forth in Exhibit H-2

                         (Confidential Material Omitted)

5.       Termination Values:

                         As set forth in Exhibit H-5

6.       Stipulated Loss Values:

                         Identical to Termination Values as set forth in Exhibit
                         H-5

7.       EBO:

                         As set forth in Exhibit H-6



                  For the SIL Aircraft (GE Contract):

1.       Basic Rent Payments:

                         As set forth in Exhibit H-7

2.       Basic Rent Allocations:

                         As set forth in Exhibit H-8

3.       Termination Values:

                         As set forth in Exhibit H-9

4.       Stipulated Loss Values:

                         Identical to Termination Values as set forth in Exhibit
                         H-9

5.       EBO:

                    As set forth in Exhibit H-10



                  For the SIL Aircraft (ATA Contract):

1.       Basic Rent Payments:

                         As set forth in Exhibit H-11

2.       Basic Rent Allocations:

                         As set forth in Exhibit H-12

3.       Termination Values:

                         As set forth in Exhibit H-13

4.       Stipulated Loss Values:

                         Identical to Termination Values as set forth in
                         Exhibit H-13

5.       EBO:

                         As set forth in Exhibit H-14





<PAGE>



                                                                     Exhibit H-1




              Rent Schedule in Percentages of Total Cost



       Rental Date                              Total Rent
                              (Confidential Material Omitted)
      Jun 15 2001
      Jul 15 2001
      Oct 15 2001
      Jan 15 2002
      Apr 15 2002
      Jul 15 2002
      Oct 15 2002
      Jan 15 2003
      Apr 15 2003
      Jul 15 2003
      Oct 15 2003
      Jan 15 2004
      Apr 15 2004
      Jul 15 2004
      Oct 15 2004
      Jan 15 2005
      Apr 15 2005
      Jul 15 2005
      Oct 15 2005
      Jan 15 2006
      Apr 15 2006
      Jul 15 2006
      Oct 15 2006
      Jan 15 2007
      Apr 15 2007
      Jul 15 2007
      Oct 15 2007
      Jan 15 2008
      Apr 15 2008
      Jul 15 2008
      Oct 15 2008
      Jan 15 2009
      Apr 15 2009
      Jul 15 2009
      Oct 15 2009
      Jan 15 2010
      Apr 15 2010
      Jul 15 2010
      Oct 15 2010
      Jan 15 2011
      Apr 15 2011
      Jul 15 2011
      Oct 15 2011
      Jan 15 2012
      Apr 15 2012
      Jul 15 2012
      Oct 15 2012
      Jan 15 2013
      Apr 15 2013
      Jul 15 2013
      Oct 15 2013
      Jan 15 2014
      Apr 15 2014
      Jul 15 2014
      Oct 15 2014
      Jan 15 2015
      Apr 15 2015
      Jul 15 2015
      Oct 15 2015
      Jan 15 2016
      Apr 15 2016
      Jul 15 2016
      Oct 15 2016
      Jan 15 2017
      Apr 15 2017
      Jul 15 2017
      Oct 15 2017
      Jan 15 2018
      Apr 15 2018
      Jul 15 2018
      Oct 15 2018
      Jan 15 2019
      Apr 15 2019
      Jul 15 2019
      Oct 15 2019
      Jan 15 2020
      Apr 15 2020
      Jul 15 2020
      Oct 15 2020
      Jan 15 2021
      Apr 15 2021
      Jun 15 2021












<PAGE>





                                                                     Exhibit H-2



                                Allocation to Cash Rent Report


   Allocation Year    Allocation      Cash Rent             Cash Rent Date

        2001          (Confidential Material Omitted)         15-Jul-01
                                                              15-Oct-01
        2002                                                  15-Oct-01
                                                              15-Jan-02
                                                              15-Apr-02
        2003                                                  15-Apr-02
                                                              15-Jul-02
                                                              15-Oct-02
                                                              15-Jan-03
        2004                                                  15-Jan-03
                                                              15-Apr-03
                                                              15-Jul-03
                                                              15-Oct-03
                                                              15-Jan-04
        2005                                                  15-Jan-04
                                                              15-Apr-04
                                                              15-Jul-04
                                                              15-Oct-04
        2006                                                  15-Jan-05
                                                              15-Apr-05
                                                              15-Jul-05
                                                              15-Oct-05
        2007                                                  15-Jan-06
                                                              15-Apr-06
                                                              15-Jul-06
                                                              15-Oct-06
        2008                                                  15-Jan-07
                                                              15-Apr-07
                                                              15-Jul-07
                                                              15-Oct-07
        2009                                                  15-Jan-08
                                                              15-Apr-08
                                                              15-Jul-08
                                                              15-Oct-08
        2010                                                  15-Jan-09
                                                              15-Apr-09
                                                              15-Jul-09
                                                              15-Oct-09
        2011                                                  15-Jan-10
                                                              15-Apr-10
                                                              15-Jul-10
                                                              15-Oct-10
        2012                                                  15-Jan-11
                                                              15-Apr-11
                                                              15-Jul-11
                                                              15-Oct-11
        2013                                                  15-Jan-12
                                                              15-Apr-12
                                                              15-Jul-12
                                                              15-Oct-12
        2014                                                  15-Jan-13
                                                              15-Apr-13
                                                              15-Jul-13
                                                              15-Oct-13
        2015                                                  15-Jan-14
                                                              15-Apr-14
                                                              15-Jul-14
                                                              15-Oct-14
        2016                                                  15-Jan-15
                                                              15-Apr-15
                                                              15-Jul-15
                                                              15-Oct-15
        2017                                                  15-Jan-16
                                                              15-Apr-16
                                                              15-Jul-16
                                                              15-Oct-16
        2018                                                  15-Jan-17
                                                              15-Apr-17
                                                              15-Jul-17
                                                              15-Oct-17
        2019                                                  15-Jan-18
                                                              15-Apr-18
                                                              15-Jul-18
                                                              15-Oct-18
        2020                                                  15-Jan-19
                                                              15-Apr-19
                                                              15-Jul-19
                                                              15-Oct-19
        2021                                                  15-Jan-20
                                                              15-Apr-20
                                                              15-Jul-20
                                                              15-Oct-20
                                                              15-Jan-21
                                                              15-Apr-21
<PAGE>

                                                                     Exhibit H-3
                                   (Confidential Material Omitted)
<PAGE>
                                                                      Exhibt H-4

                                   (Confidential Material Omitted
<PAGE>





<PAGE>



                                                                     Exhibit H-5

                                               Termination Values

        Date              TV           Rent Adjustment      Net TV

Jun 15 2001      (Confidential Material Omitted)
Jul 15 2001
Oct 15 2001
Jan 15 2002
Apr 15 2002
Jul 15 2002
Oct 15 2002
Jan 15 2003
Apr 15 2003
Jul 15 2003
Oct 15 2003
Jan 15 2004
Apr 15 2004
Jul 15 2004
Oct 15 2004
Jan 15 2005
Apr 15 2005
Jul 15 2005
Oct 15 2005
Jan 15 2006
Apr 15 2006
Jul 15 2006
Oct 15 2006
Jan 15 2007
Apr 15 2007
Jul 15 2007
Oct 15 2007
Jan 15 2008
Apr 15 2008
Jul 15 2008
Oct 15 2008
Jan 15 2009
Apr 15 2009
Jul 15 2009
Oct 15 2009
Jan 15 2010
Apr 15 2010
Jul 15 2010
Oct 15 2010
Jan 15 2011
Apr 15 2011
Jul 15 2011
Oct 15 2011
Jan 15 2012
Apr 15 2012
Jul 15 2012
Oct 15 2012
Jan 15 2013
Apr 15 2013
Jul 15 2013
Oct 15 2013
Jan 15 2014
Apr 15 2014
Jul 15 2014
Oct 15 2014
Jan 15 2015
Apr 15 2015
Jul 15 2015
Oct 15 2015
Jan 15 2016
Apr 15 2016
Jul 15 2016
Oct 15 2016
Jan 15 2017
Apr 15 2017
Jul 15 2017
Oct 15 2017
Jan 15 2018
Apr 15 2018
Jul 15 2018
Oct 15 2018
Jan 15 2019
Apr 15 2019
Jul 15 2019
Oct 15 2019
Jan 15 2020
Apr 15 2020
Jul 15 2020
Oct 15 2020
Jan 15 2021
Apr 15 2021
Jun 15 2021




<PAGE>


                                                                    Exhibit H-6



   EBO Amount


       EBO            EBO Price         Rent Adjustment          EBO Amount*
  Payment Date      (Percentage of       (Percentage of        (Percentage of
                    Lessor's Cost)       Lessor's Cost)        Lessor's Cost)

(Confidential Material Omitted)





<PAGE>


                                                                     Exhibit H-7



 Rent Schedule in Percentages of Total Cost


                      Rental Date                             Total Rent

                      Jun 15 2001          (Confidential Material Omitted)
                      Jul 15 2001
                      Oct 15 2001
                      Jan 15 2002
                      Apr 15 2002
                      Jul 15 2002
                      Oct 15 2002
                      Jan 15 2003
                      Apr 15 2003
                      Jul 15 2003
                      Oct 15 2003
                      Jan 15 2004
                      Apr 15 2004
                      Jul 15 2004
                      Oct 15 2004
                      Jan 15 2005
                      Apr 15 2005
                      Jul 15 2005
                      Oct 15 2005
                      Jan 15 2006
                      Apr 15 2006
                      Jul 15 2006
                      Oct 15 2006
                      Jan 15 2007
                      Apr 15 2007
                      Jul 15 2007
                      Oct 15 2007
                      Jan 15 2008
                      Apr 15 2008
                      Jul 15 2008
                      Oct 15 2008
                      Jan 15 2009
                      Apr 15 2009
                      Jul 15 2009
                      Oct 15 2009
                      Jan 15 2010
                      Apr 15 2010
                      Jul 15 2010
                      Oct 15 2010
                      Jan 15 2011
                      Apr 15 2011
                      Jul 15 2011
                      Oct 15 2011
                      Jan 15 2012
                      Apr 15 2012
                      Jul 15 2012
                      Oct 15 2012
                      Jan 15 2013
                      Apr 15 2013
                      Jul 15 2013
                      Oct 15 2013
                      Jan 15 2014
                      Apr 15 2014
                      Jul 15 2014
                      Oct 15 2014
                      Jan 15 2015
                      Apr 15 2015
                      Jul 15 2015
                      Oct 15 2015
                      Jan 15 2016
                      Apr 15 2016
                      Jul 15 2016
                      Oct 15 2016
                      Jan 15 2017
                      Apr 15 2017
                      Jul 15 2017
                      Oct 15 2017
                      Jan 15 2018
                      Apr 15 2018
                      Jul 15 2018
                      Oct 15 2018
                      Jan 15 2019
                      Apr 15 2019
                      Jul 15 2019
                      Oct 15 2019
                      Jan 15 2020
                      Apr 15 2020
                      Jul 15 2020
                      Oct 15 2020
                      Jan 15 2021
                      Apr 15 2021
                      Jun 15 2021










<PAGE>


                                                                     Exhibit H-8



 Allocation to Cash Rent Report


  Allocation   Allocation    Cash Rent                Cash Rent Date
     Year
               (Confidential Material Omitted)
 2001                                                   15-Jul-01
                                                        15-Oct-01
 2002                                                   15-Oct-01
                                                        15-Jan-02
 2003                                                   15-Jan-02
                                                        15-Apr-02
                                                        15-Jul-02
                                                        15-Oct-02
                                                        15-Jan-03
 2004                                                   15-Jan-03
                                                        15-Apr-03
                                                        15-Jul-03
                                                        15-Oct-03
                                                        15-Jan-04
 2005                                                   15-Jan-04
                                                        15-Apr-04
                                                        15-Jul-04
                                                        15-Oct-04
                                                        15-Jan-05
 2006                                                   15-Jan-05
                                                        15-Apr-05
                                                        15-Jul-05
                                                        15-Oct-05
                                                        15-Jan-06
 2007                                                   15-Jan-06
                                                        15-Apr-06
                                                        15-Jul-06
                                                        15-Oct-06
 2008                                                   15-Jan-07
                                                        15-Apr-07
                                                        15-Jul-07
                                                        15-Oct-07
 2009                                                   15-Jan-08
                                                        15-Apr-08
                                                        15-Jul-08
                                                        15-Oct-08
 2010                                                   15-Jan-09
                                                        15-Apr-09
                                                        15-Jul-09
                                                        15-Oct-09
 2011                                                   15-Jan-10
                                                        15-Apr-10
                                                        15-Jul-10
                                                        15-Oct-10
 2012                                                   15-Jan-11
                                                        15-Apr-11
                                                        15-Jul-11
                                                        15-Oct-11
 2013                                                   15-Jan-12
                                                        15-Apr-12
                                                        15-Jul-12
                                                        15-Oct-12
 2014                                                   15-Jan-13
                                                        15-Apr-13
                                                        15-Jul-13
                                                        15-Oct-13
 2015                                                   15-Jan-14
                                                        15-Apr-14
                                                        15-Jul-14
                                                        15-Oct-14
 2016                                                   15-Jan-15
                                                        15-Apr-15
                                                        15-Jul-15
                                                        15-Oct-15
 2017                                                   15-Jan-16
                                                        15-Apr-16
                                                        15-Jul-16
                                                        15-Oct-16
 2018                                                   15-Jan-17
                                                        15-Apr-17
                                                        15-Jul-17
                                                        15-Oct-17
 2019                                                   15-Jan-18
                                                        15-Apr-18
                                                        15-Jul-18
                                                        15-Oct-18
 2020                                                   15-Jan-19
                                                        15-Apr-19
                                                        15-Jul-19
                                                        15-Oct-19
 2021                                                   15-Jan-20
                                                        15-Apr-20
                                                        15-Jul-20
                                                        15-Oct-20
                                                        15-Jan-21
                                                        15-Apr-21






<PAGE>


                                                                       Exhibit 9



     Termination Values


     Date            TV               Rent Adjustment         Net TV

Jun 15 2001                   (Confidential Material Omitted)
Jul 15 2001
Oct 15 2001
Jan 15 2002
Apr 15 2002
Jul 15 2002
Oct 15 2002
Jan 15 2003
Apr 15 2003
Jul 15 2003
Oct 15 2003
Jan 15 2004
Apr 15 2004
Jul 15 2004
Oct 15 2004
Jan 15 2005
Apr 15 2005
Jul 15 2005
Oct 15 2005
Jan 15 2006
Apr 15 2006
Jul 15 2006
Oct 15 2006
Jan 15 2007
Apr 15 2007
Jul 15 2007
Oct 15 2007
Jan 15 2008
Apr 15 2008
Jul 15 2008
Oct 15 2008
Jan 15 2009
Apr 15 2009
Jul 15 2009
Oct 15 2009
Jan 15 2010
Apr 15 2010
Jul 15 2010
Oct 15 2010
Jan 15 2011
Apr 15 2011
Jul 15 2011
Oct 15 2011
Jan 15 2012
Apr 15 2012
Jul 15 2012
Oct 15 2012
Jan 15 2013
Apr 15 2013
Jul 15 2013
Oct 15 2013
Jan 15 2014
Apr 15 2014
Jul 15 2014
Oct 15 2014
Jan 15 2015
Apr 15 2015
Jul 15 2015
Oct 15 2015
Jan 15 2016
Apr 15 2016
Jul 15 2016
Oct 15 2016
Jan 15 2017
Apr 15 2017
Jul 15 2017
Oct 15 2017
Jan 15 2018
Apr 15 2018
Jul 15 2018
Oct 15 2018
Jan 15 2019
Apr 15 2019
Jul 15 2019
Oct 15 2019
Jan 15 2020
Apr 15 2020
Jul 15 2020
Oct 15 2020
Jan 15 2021
Apr 15 2021
Jun 15 2021





<PAGE>


                                                                    Exhibit H-10

                                   EBO Amount


      EBO            EBO Price          Rent Adjustment         EBO Amount*
 Payment Date      (Percentage of       (Percentage of         (Percentage of
                   Lessor's Cost)       Lessor's Cost)         Lessor's Cost)

(Confidential Material Omitted)





<PAGE>


                                                                    Exhibit H-11

                        Rent Schedule in Percentages of Total Cost


                      Rental Date                            Total Rent

                      Jun 15 2001            (Confidential Material Omitted)
                      Jul 15 2001
                      Oct 15 2001
                      Jan 15 2002
                      Apr 15 2002
                      Jul 15 2002
                      Oct 15 2002
                      Jan 15 2003
                      Apr 15 2003
                      Jul 15 2003
                      Oct 15 2003
                      Jan 15 2004
                      Apr 15 2004
                      Jul 15 2004
                      Oct 15 2004
                      Jan 15 2005
                      Apr 15 2005
                      Jul 15 2005
                      Oct 15 2005
                      Jan 15 2006
                      Apr 15 2006
                      Jul 15 2006
                      Oct 15 2006
                      Jan 15 2007
                      Apr 15 2007
                      Jul 15 2007
                      Oct 15 2007
                      Jan 15 2008
                      Apr 15 2008
                      Jul 15 2008
                      Oct 15 2008
                      Jan 15 2009
                      Apr 15 2009
                      Jul 15 2009
                      Oct 15 2009
                      Jan 15 2010
                      Apr 15 2010
                      Jul 15 2010
                      Oct 15 2010
                      Jan 15 2011
                      Apr 15 2011
                      Jul 15 2011
                      Oct 15 2011
                      Jan 15 2012
                      Apr 15 2012
                      Jul 15 2012
                      Oct 15 2012
                      Jan 15 2013
                      Apr 15 2013
                      Jul 15 2013
                      Oct 15 2013
                      Jan 15 2014
                      Apr 15 2014
                      Jul 15 2014
                      Oct 15 2014
                      Jan 15 2015
                      Apr 15 2015
                      Jul 15 2015
                      Oct 15 2015
                      Jan 15 2016
                      Apr 15 2016
                      Jul 15 2016
                      Oct 15 2016
                      Jan 15 2017
                      Apr 15 2017
                      Jul 15 2017
                      Oct 15 2017
                      Jan 15 2018
                      Apr 15 2018
                      Jul 15 2018
                      Oct 15 2018
                      Jan 15 2019
                      Apr 15 2019
                      Jul 15 2019
                      Oct 15 2019
                      Jan 15 2020
                      Apr 15 2020
                      Jul 15 2020
                      Oct 15 2020
                      Jan 15 2021
                      Apr 15 2021
                      Jun 15 2021



                                                                    Exhibit H-12



                      Allocation to Cash Rent Report


   Allocation Year     Allocation            Cash Rent       Cash Rent Date
                       (Confidential Material Omitted)

         2001                                                     15-Jul-01
                                                                  15-Oct-01
         2002                                                     15-Oct-01
                                                                  15-Jan-02
         2003                                                     15-Jan-02
                                                                  15-Apr-02
                                                                  15-Jul-02
                                                                  15-Oct-02
                                                                  15-Jan-03
         2004                                                     15-Jan-03
                                                                  15-Apr-03
                                                                  15-Jul-03
                                                                  15-Oct-03
                                                                  15-Jan-04
         2005                                                     15-Jan-04
                                                                  15-Apr-04
                                                                  15-Jul-04
                                                                  15-Oct-04
                                                                  15-Jan-05
         2006                                                     15-Jan-05
                                                                  15-Apr-05
                                                                  15-Jul-05
                                                                  15-Oct-05
                                                           )      15-Jan-06
         2007                                                     15-Jan-06
                                                                  15-Apr-06
                                                                  15-Jul-06
                                                                  15-Oct-06
         2008                                                     15-Jan-07
                                                                  15-Apr-07
                                                                  15-Jul-07
                                                                  15-Oct-07
         2009                                                     15-Jan-08
                                                                  15-Apr-08
                                                                  15-Jul-08
                                                                  15-Oct-08
         2010                                                     15-Jan-09
                                                                  15-Apr-09
                                                                  15-Jul-09
                                                                  15-Oct-09
         2011                                                     15-Jan-10
                                                                  15-Apr-10
                                                                  15-Jul-10
                                                                  15-Oct-10
         2012                                                     15-Jan-11
                                                                  15-Apr-11
                                                                  15-Jul-11
                                                                  15-Oct-11
         2013                                                     15-Jan-12
                                                                  15-Apr-12
                                                                  15-Jul-12
                                                                  15-Oct-12
         2014                                                     15-Jan-13
                                                                  15-Apr-13
                                                                  15-Jul-13
                                                                  15-Oct-13
         2015                                                     15-Jan-14
                                                                  15-Apr-14
                                                                  15-Jul-14
                                                                  15-Oct-14
         2016                                                     15-Jan-15
                                                                  15-Apr-15
                                                                  15-Jul-15
                                                                  15-Oct-15
         2017                                                     15-Jan-16
                                                                  15-Apr-16
                                                                  15-Jul-16
                                                                  15-Oct-16
         2018                                                     15-Jan-17
                                                                  15-Apr-17
                                                                  15-Jul-17
                                                                  15-Oct-17
         2019                                                     15-Jan-18
                                                                  15-Apr-18
                                                                  15-Jul-18
                                                                  15-Oct-18
         2020                                                     15-Jan-19
                                                                  15-Apr-19
                                                                  15-Jul-19
                                                                  15-Oct-19
         2021                                                     15-Jan-20
                                                                  15-Apr-20
                                                                  15-Jul-20
                                                                  15-Oct-20
                                                                  15-Jan-21
                                                                  15-Apr-21






<PAGE>


                                                                    Exhibit H-13



                        Termination Values


     Date             TV          Rent Adjustment        Net TV

Jun 15 2001           (Confidential Material Omitted)

Jul 15 2001
Oct 15 2001
Jan 15 2002
Apr 15 2002
Jul 15 2002
Oct 15 2002
Jan 15 2003
Apr 15 2003
Jul 15 2003
Oct 15 2003
Jan 15 2004
Apr 15 2004
Jul 15 2004
Oct 15 2004
Jan 15 2005
Apr 15 2005
Jul 15 2005
Oct 15 2005

Jan 15 2006
Apr 15 2006
Jul 15 2006
Oct 15 2006
Jan 15 2007
Apr 15 2007
Jul 15 2007
Oct 15 2007
Jan 15 2008
Apr 15 2008
Jul 15 2008
Oct 15 2008
Jan 15 2009
Apr 15 2009
Jul 15 2009
Oct 15 2009
Jan 15 2010
Apr 15 2010
Jul 15 2010
Oct 15 2010
Jan 15 2011
Apr 15 2011

Jul 15 2011
Oct 15 2011
Jan 15 2012
Apr 15 2012
Jul 15 2012
Oct 15 2012
Jan 15 2013
Apr 15 2013
Jul 15 2013
Oct 15 2013
Jan 15 2014
Apr 15 2014
Jul 15 2014
Oct 15 2014
Jan 15 2015
Apr 15 2015
Jul 15 2015
Oct 15 2015
Jan 15 2016
Apr 15 2016
Jul 15 2016
Oct 15 2016
Jan 15 2017
Apr 15 2017
Jul 15 2017
Oct 15 2017
Jan 15 2018
Apr 15 2018
Jul 15 2018
Oct 15 2018
Jan 15 2019
Apr 15 2019
Jul 15 2019
Oct 15 2019
Jan 15 2020
Apr 15 2020
Jul 15 2020
Oct 15 2020
Jan 15 2021
Apr 15 2021
Jun 15 2021







<PAGE>


                                                                    Exhibit H-14




                                   EBO Amount


      EBO            EBO Price          Rent Adjustment         EBO Amount*
 Payment Date      (Percentage of       (Percentage of         (Percentage of
                   Lessor's Cost)       Lessor's Cost)         Lessor's Cost)

(Confidential Material Omitted)







                        PARTICIPATION AGREEMENT N___AT

                           dated as of __________, 200_

                                      among

                            AMERICAN TRANS AIR, INC.,
                                     Lessee,

                      GENERAL ELECTRIC CAPITAL CORPORATION,
                               Owner Participant,

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
          NOT IN ITS INDIVIDUAL CAPACITY EXCEPT AS EXPRESSLY PROVIDED HEREIN,
          BUT SOLELY AS OWNER TRUSTEE, Owner Trustee,

                                       and

     WILMINGTON  TRUST  COMPANY,  NOT  IN  ITS  INDIVIDUAL  CAPACITY  EXCEPT  AS
EXPRESSLY  PROVIDED HEREIN, BUT SOLELY AS MORTGAGEE,  SUBORDINATION  AGENT UNDER
THE  INTERCREDITOR  AGREEMENT,  AND  PASS-THROUGH  TRUSTEE  UNDER  EACH  OF  THE
PASS-THROUGH TRUST AGREEMENTS, Mortgagee and Loan Participant



     One Boeing model 737-800 aircraft bearing  manufacturer's  serial no. _____
and U.S. registration no. N___AT







<PAGE>





                                    CONTENTS


          1. DEFINITIONS AND CONSTRUCTION......................................2

          2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES; .....2
           TERMINATION OF OBLIGATION TOPARTICIPATE
          2.1 Participation in Lessor's Cost...................................2
            2.2 Nature of Obligations of Participants..........................3
            2.3 Termination of Obligation to Participate.......................3

          3. LEASE OF AIRCRAFT.................................................3

          4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST;
          POSTPONEMENT OF SCHEDULED DELIVERY DATE..............................4
            4.1 Notices of Scheduled Delivery Date.............................4
            4.2 Payment of Lessor's Cost.......................................4
            4.3 Postponement of Scheduled Delivery Date........................5
            4.4 Closing........................................................5

          5. CLOSING CONDITIONS................................................5
            5.1 Conditions to Participants'Obligations.........................6
            5.2 Conditions to Owner Trustee's Obligations.....................11
            5.3 Conditions to Mortgagee's Obligations.........................12
            5.4 Conditions to Lessee's Obligations............................12
            5.5 Post-Registration Opinion.....................................13

          6. REPRESENTATIONS AND WARRANTIES............... ...................13
            6.1 Lessee's Representations and Warranties.......................13
            6.2 Owner Participant's Representations and Warranties............17
            6.3 FSB's Representations and Warranties..........................20
            6.4 WTC's Representations and Warranties..........................22

          7. COVENANTS........................................................25
            7.1 Lessee's Covenants............................................25
            7.2 Owner Participant's Covenants.................................27
            7.3 FSB's and Owner Trustee's Covenants...........................30
            7.4 WTC's Covenants...............................................32
            7.5 Note Holders'Covenants........................................33
            7.6 Other Agreements..............................................34

          8. CONFIDENTIALITY..................................................41

           9. INDEMNIFICATION AND EXPENSES....................................42
            9.1 General Indemnity.............................................42
            9.2 Expenses......................................................49
            9.3 General Tax Indemnity.........................................50
            9.4 Payments......................................................61
            9.5 Interest......................................................62
            9.6 Benefit of Indemnities........................................62

          10. ASSIGNMENT OR TRANSFER OF INTERESTS.............................62
            10.1 Participants, Owner Trustee, and Note Holders....... ........62
            10.2 Effect of Transfer...........................................64

          11. RE-FUNDING AND CERTAIN OTHER MATTERS............................65
            11.1 Re-Funding Generally.........................................65
            11.2 Limitations on Obligation to Refund..........................67
            11.3 Execution of Facilitating Documents..........................68
            11.4 ERISA........................................................68
            11.5 Consent to Optional Redemptions..............................68
            11.6 Lessee's Assumption of Equipment Notes.......................68

          12. SECTION 1110....................................................72

          13. CHANGE OF CITIZENSHIP...........................................72
            13.1 Generally....................................................72
            13.2 Owner Participant............................................72
            13.3 Owner Trustee................................................73
            13.4 Mortgagee....................................................73

          14. CONCERNING OWNER TRUSTEE........................................73

          15. MISCELLANEOUS...................................................74
            15.1 Amendments...................................................74
            15.2 Severability.................................................74
            15.3 Survival.....................................................74
            15.4 Reproduction of Documents....................................74
            15.5 Counterparts.................................................75
            15.6 No Waiver....................................................75
            15.7 Notices......................................................75
            15.8 Governing Law; Submission to Jurisdiction; Venue... .........76
            15.9 Third-Party Beneficiary......................................77
            15.10 Entire Agreement............................................77
            15.11 Further Assurances..........................................77

          ANNEX A        Definitions

          SCHEDULE 1     Accounts; Addresses
          SCHEDULE 2     Commitments
          SCHEDULE 3     Certain Terms


          EXHIBIT A      Opinion of special  counsel to Lessee
          EXHIBIT B      Opinion of  corporate counsel  to  Lessee
          EXHIBIT C      Opinion  of  corporate   counsel  to  Airframe
                         Manufacturer Trustee
          EXHIBIT D      Opinion of special counsel to Owner
          EXHIBIT E      Opinion of special counsel to Mortgagee and Loan
                         Participants
          EXHIBIT F      Opinion of special counsel to Owner Participant
          EXHIBIT G      Opinion of FAA Counsel
          EXHIBIT H      Opinion of corporate counsel to Owner Participant
          EXHIBIT I      Form of Assignment and Assumption Agreement
          EXHIBIT J      Form of Owner Participant Guaranty


<PAGE>






                         PARTICIPATION AGREEMENT N___AT

     This  Participation  Agreement  N___AT  (this  "AGREEMENT"),  dated  as  of
__________,  200_,  is entered  into by and among (1) American  Trans Air,  Inc.
("LESSEE"),  an Indiana  corporation,  (2) General Electric Capital  Corporation
("OWNER PARTICIPANT"), a New York corporation, (3) First Security Bank, National
Association,  a national  banking  association,  not in its individual  capacity
(except as  expressly  provided  herein),  but solely as Owner  Trustee  (in its
capacity as Owner Trustee,  "OWNER  TRUSTEE" or "LESSOR",  and in its individual
capacity,  "FSB"), (4) Wilmington Trust Company, a Delaware banking corporation,
not in its individual capacity (except as expressly provided herein), but solely
as mortgagee (in its capacity as Mortgagee,  "MORTGAGEE",  and in its individual
capacity,  "WTC"), (5) Wilmington Trust Company,  not in its individual capacity
(except as expressly  provided  herein) but solely as trustee  under each of the
Pass-Through  Trust  Agreements  (each,  a  "PASS-THROUGH   TRUSTEE"),  and  (6)
Wilmington  Trust Company,  not in its individual  capacity (except as expressly
provided  herein),  but solely as  subordination  agent under the  Intercreditor
Agreement ("SUBORDINATION AGENT").

     RECITALS

     A...........Owner   Participant   and  FSB  are  entering  into  the  Trust
Agreement,  pursuant to which Owner Trustee  agrees to hold the Trust Estate for
the use and benefit of Owner Participant.

     B...........Lessee  and  Airframe  Manufacturer  entered  into the Purchase
Agreement, pursuant to which Airframe Manufacturer agreed to manufacture certain
aircraft  (including the Aircraft) and sell them to Lessee, and Lessee agreed to
buy certain aircraft (including the Aircraft) from Airframe Manufacturer.

     C...........Seller  will sell the Aircraft to Owner Trustee pursuant to the
terms of this Participation Agreement.

     D...........Lessee  and  Owner  Trustee  are  entering  into  the  Purchase
Agreement Assignment and the Engine Manufacturer Warranty Agreement, pursuant to
which  Lessee  assigns to Owner  Trustee  certain of Lessee's  rights  under the
Purchase Agreement and the Engine Manufacturer Warranty Agreement.

     E...........Pursuant  to each of the Pass-Through Trust Agreements,  on the
Issuance  Date,  the  Pass-Through  Trusts  were  created  and the  Pass-Through
Certificates were issued and sold.

     F...........Pursuant  to the Note  Purchase  Agreement,  each  Pass-Through
Trustee  agreed to use a portion of the  proceeds  from the issuance and sale of
the Pass-Through Certificates issued by each Pass-Through Trust to purchase from
Owner Trustee,  on behalf of the related  Pass-Through Trust, the Equipment Note
bearing the same interest rate as the Pass-Through  Certificates  issued by such
Pass-Through Trust.

     G...........Owner  Trustee and Mortgagee are entering into the Mortgage for
the benefit of the Note Holders,  pursuant to which Owner Trustee  agrees (1) to
issue Equipment Notes, in the amounts and otherwise as provided in the Mortgage,
the proceeds of which will be used to pay a portion of Lessor's Cost, and (2) to
mortgage,  pledge, and assign to Mortgagee all of Owner Trustee's right,  title,
and  interest in the  Collateral  to secure the Secured  Obligations,  including
Owner Trustee's obligations under the Equipment Notes.

     H...........Lessor  and Lessee are  entering  into the Lease,  pursuant  to
which  Lessor is leasing  the  Aircraft  to Lessee  and  Lessee is  leasing  the
Aircraft from Lessor.

     I...........The  parties  to  this  Agreement  want  to set  forth  in this
Agreement  the terms and  conditions  upon and  subject  to which the  foregoing
transactions shall be effected.

     The parties hereto agree as follows:

     1. DEFINITIONS AND CONSTRUCTION

     The terms defined in Annex A, when capitalized as in Annex A, have the same
meanings when used in this Agreement.  Annex A also contains rules of usage that
control construction in this Agreement.

     2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES; TERMINATION
OF OBLIGATION TO PARTICIPATE

     2.1 PARTICIPATION IN LESSOR'S COST

     Subject to the terms and  conditions  of this  Agreement,  on the  Delivery
Date, Owner Participant and each  Pass-Through  Trustee shall participate in the
payment of Lessor's Cost as follows:  (a) Owner  Participant  shall finance,  in
part,  Owner  Trustee's  payment of Lessor's  Cost for the Aircraft by making an
equity  investment in the beneficial  ownership of the Aircraft in the amount in
Dollars equal to Owner Participant's Percentage multiplied by Lessor's Cost; and
(b) each  Pass-Through  Trustee shall make a non-recourse  secured loan to Owner
Trustee to finance,  in part,  Owner  Trustee's  payment of Lessor's Cost in the
amount in Dollars equal to such Pass-Through Trustee's PTT Percentage multiplied
by Lessor's  Cost,  such loan to be  evidenced by one or more  Equipment  Notes,
dated the Delivery Date, issued to Subordination  Agent as the registered holder
on behalf of each such Pass-Through  Trustee for the related  Pass-Through Trust
by Owner Trustee in  accordance  with this  Agreement  and the  Mortgage,  in an
aggregate  principal  amount equal to the  Commitment of each such  Pass-Through
Trustee.

     2.2 NATURE OF OBLIGATIONS OF PARTICIPANTS

     The obligations  hereunder of each Participant are several,  and not joint,
and a Participant  shall have no  obligation to make  available to Owner Trustee
any  portion of any  amount not paid  hereunder  by any other  Participant.  The
failure by any Participant to perform its obligations hereunder shall not affect
the  obligations  of Lessee toward any other  Participant,  except to the extent
provided in ss. 5.4.

     2.3 TERMINATION OF OBLIGATION TO PARTICIPATE

     NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT,  IF THE CLOSING DOES
NOT OCCUR ON OR BEFORE THE COMMITMENT  TERMINATION  DATE, THE COMMITMENT OF EACH
PARTICIPANT  AND ITS  OBLIGATION TO  PARTICIPATE IN THE PAYMENT OF LESSOR'S COST
SHALL EXPIRE AND BE OF NO FURTHER FORCE AND EFFECT; PROVIDED, THAT THE LIABILITY
OF ANY PARTICIPANT THAT HAS DEFAULTED IN THE PAYMENT OF ITS COMMITMENT SHALL NOT
BE RELEASED.



     3. LEASE OF AIRCRAFT

     Subject to the terms and conditions of this  Agreement,  concurrently  with
the issuance of the Equipment  Notes on the Delivery  Date,  Owner Trustee shall
purchase and accept  delivery of the Aircraft  from Seller under and pursuant to
the Purchase  Agreement  and the Purchase  Agreement  Assignment,  and thereupon
Owner  Trustee  shall lease the  Aircraft to Lessee,  and Lessee shall lease the
Aircraft from Owner Trustee, under the Lease.

     4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; POSTPONEMENT OF
SCHEDULED DELIVERY DATE

     4.1 NOTICES OF SCHEDULED DELIVERY DATE

     Without limiting its obligations to the Loan Participant  under ss. 1(b) of
the Note Purchase Agreement, Lessee agrees to give Participants,  Owner Trustee,
and  Mortgagee  at least one  Business  Day's  written  notice of the  Scheduled
Delivery Date, which notice shall set forth Lessor's Cost and the amount of each
Participant's  Commitment.  Each  Participant  agrees that making its Commitment
available shall constitute a waiver of such notice.  Owner Trustee and Mortgagee
shall be deemed to have waived such notice if WTC receives from each Participant
funds in the full amount of its respective Commitment.

     4.2 PAYMENT OF LESSOR'S COST

     (a).........Each Participant agrees, subject to the terms and conditions of
this  Agreement,  to  make  the  Dollar  amount  of  its  respective  Commitment
available,  by wire transfer of immediately  available funds to WTC's account at
Wilmington Trust Company, ABA No. __________, account no. __________,  reference
American  Trans Air, Inc.  Lease N5__AT,  at or before 12:00 noon, New York City
time,  on the Scheduled  Delivery  Date.  All such funds made  available by each
Participant  to WTC shall,  until  payment  thereof to Seller as provided in ss.
4.2(b)(2) or return  thereof to the  respective  Participant  as provided in ss.
4.3.2, be held by WTC in trust for the benefit of the respective Participant, as
the sole and exclusive property of the respective Participant and not as part of
the Trust Estate or the Collateral.

     (b).........Subject to the satisfaction, or waiver by the applicable party,
of the  conditions  precedent  set forth in ss. 5, and  simultaneously  with the
receipt by the parties  hereto of all amounts to be paid to them on the Delivery
Date pursuant to this ss. 4.2, Owner Trustee shall:

     (1) purchase, take title to, and accept delivery of the Aircraft;

     (2) in  consideration  of the  transfer  of title to the  Aircraft to Owner
Trustee,  direct WTC to pay,  from the funds made  available to WTC hereunder by
the  Participants,  all of the Commitments of the Participants to Seller,  which
payments in the aggregate  shall be equal to Lessor's  Cost, by wire transfer of
immediately  available  funds to Seller's  account set forth in Schedule 1 or as
otherwise directed by Seller;

     (3) execute an application for registration of the Aircraft with the FAA;

     (4) execute the Mortgage  and issue the  Equipment  Notes to  Subordination
Agent in accordance withss. 2.1(b);

     (5) lease the Aircraft to Lessee pursuant to the Lease; and

     (6) take such other action as may be required to be taken by Owner  Trustee
on the Delivery Date by the terms of any Operative Agreement.

     4.3 POSTPONEMENT OF SCHEDULED DELIVERY DATE

     4.3.1 POSTPONEMENT

     If  for  any  reason  whatsoever  the  Closing  is not  consummated  on the
Scheduled  Delivery Date,  Lessee may,  subject to the provisions of 1(e) of the
Note Purchase Agreement,  by telephonic notice, given by 5:00 p.m. New York City
time (such  telephonic  notice to be promptly  confirmed  in writing by personal
delivery or  facsimile)  on the Scheduled  Delivery  Date, to each  Participant,
Owner Trustee,  and Mortgagee,  designate a Delayed Delivery Date, in which case
Owner Participant will keep its funds available, and each Loan Participant shall
comply with its obligations under ss. 5.01 of each applicable Pass-Through Trust
Agreement.

     4.3.2 RETURN OF FUNDS

     WTC shall promptly return to each Participant that makes funds available to
it in accordance  with ss.  4.2(a) such funds,  together with interest or income
earned  thereon,  if the Closing fails to occur on the Scheduled  Delivery Date,
PROVIDED,  that any such funds made available by the Loan  Participant  shall be
returned on such Scheduled Delivery Date.

     4.4 CLOSING

     The Closing  shall occur at the offices of Troutman  Sanders LLP, 5200 Bank
of America Plaza,  Atlanta,  GA (with a set of Operative  Agreements  also being
delivered in New York City), or such other place as the parties shall agree.

     5. CLOSING CONDITIONS

     5.1 CONDITIONS TO PARTICIPANTS' OBLIGATIONS

     Each  Participant's  obligation to make the Dollar amount of its Commitment
available  for  payment as  directed by Owner  Trustee on the  Delivery  Date is
subject  to the  satisfaction  or such  Participant's  waiver,  on or before the
Delivery Date, of the conditions in this ss. 5.1; PROVIDED, that it shall not be
a condition to the obligation of any  Participant  that any document be produced
or action  taken that is to be  produced  or taken by such  Participant  or by a
Person within such Participant's control; PROVIDED, FURTHER, that ss. 5.1.2 (a),
(m), and (u)(8) shall not be  conditions to the Loan  Participants'  obligations
and ss. 5.1.15 and ss.  5.1.16 shall not be  conditions  to Owner  Participant's
obligations.

     5.1.1 NOTICE

     Such  Participant  received the notice described in ss. 4.1 or, in the case
of a Delayed Delivery Date, ss. 4.3, when and as required thereby.

     5.1.2 DELIVERY OF DOCUMENTS

     Except as otherwise  provided in this ss. 5.1.2, such Participant  receives
executed counterparts of the following documents, and such counterparts (x) have
been duly authorized,  executed,  and delivered by the party or parties thereto,
(y) are reasonably  satisfactory in form and substance to such Participant,  and
(z) are in full force and effect:

     (a) the  Lease  (Mortgagee  to  receive  the sole  executed  chattel  paper
original thereof);

     (b) the Tax Indemnity Agreement;  PROVIDED, that only Owner Participant and
Lessee shall receive copies of the Tax Indemnity Agreement;

     (c) the Trust Agreement;

     (d) the Mortgage;

     (e) the Purchase Agreement Assignment;

     (f)  the  Consent  and  Agreement  and  the  Engine  Manufacturer  Warranty
Agreement;

     (g) the Equipment  Notes dated the Delivery Date;  PROVIDED,  that only the
Subordination Agent shall receive the authenticated Equipment Notes;

     (h) an excerpted copy of the Purchase  Agreement to the extent  relating to
Airframe   Manufacturer's  or  Engine   Manufacturer's   warranties  or  related
obligations  or any right in the Purchase  Agreement  assigned to Owner  Trustee
pursuant to the Purchase Agreement Assignment; PROVIDED, that only Owner Trustee
and Mortgagee  shall receive  copies of such  agreement  (copies of which may be
inspected by Participants and their  respective  special counsel on the Delivery
Date, but after the Delivery Date such copies shall be retained by Owner Trustee
and  Mortgagee and may be inspected  and reviewed by Owner  Participant  or Loan
Participant or their counsel if and only if a Lease Default exists);

     (i) the Bills of Sale;

     (j) the Guarantee;

     (k) an invoice from Seller  specifying  the amount due to Seller in respect
of the Aircraft, which amount shall equal Lessor's Cost of the Aircraft;

     (l) the broker's report and insurance certificates required byss. 11 of the
Lease;

     (m) an  appraisal  or  appraisals  from an  Appraiser,  which  appraisal or
appraisals  shall be  reasonably  satisfactory  in form and  substance  to Owner
Participant;  PROVIDED, that only Owner Participant shall receive copies of such
appraisal(s);

     (n)  (1) a  copy  of  Lessee's  articles  of  incorporation,  by-laws,  and
resolutions,  in each case certified as of the Delivery Date by the Secretary or
an Assistant Secretary of Lessee, duly authorizing Lessee's execution, delivery,
and performance of the Lessee Operative  Agreements  required to be executed and
delivered  by Lessee on or  before  the  Delivery  Date in  accordance  with the
provisions  hereof  and  thereof;   (2)  a  copy  of  Guarantor's   articles  of
incorporation,  by-laws,  and  resolutions,  in each  case  certified  as of the
Delivery  Date by the  Secretary or an Assistant  Secretary of  Guarantor,  duly
authorizing  Guarantor's execution,  delivery, and performance of the Guarantee;
(3) incumbency certificates of Lessee,  Guarantor,  Owner Participant,  FSB, and
WTC as to the person(s) authorized to execute and deliver the relevant Operative
Agreements  on behalf  of such  party;  and (4)  copies  of the  certificate  or
articles of incorporation,  by-laws, and general authorizing  resolutions of the
boards of directors (or executive  committees) or other satisfactory evidence of
authorization of Owner  Participant,  FSB, and WTC, certified as of the Delivery
Date  by  the  Secretary  or  an  Assistant  or  Attesting  Secretary  of  Owner
Participant, FSB, and WTC, respectively, which authorize the execution, delivery
and performance by Owner Participant, FSB, and WTC, respectively, of each of the
Operative Agreements to which it is a party,  together with such other documents
and evidence with respect to it as Lessee or any Participant reasonably requests
in order to establish the consummation of the transactions  contemplated by this
Agreement and the taking of all corporate proceedings in connection therewith;

     (o) an Officer's  Certificate of Lessee,  dated the Delivery Date,  stating
that its  representations  and warranties in this Agreement are true and correct
as of the  Delivery  Date (or,  to the extent that any such  representation  and
warranty  expressly  relates to an  earlier  date,  true and  correct as of such
earlier date);

     (p) an Officer's  Certificate of FSB, dated the Delivery Date, stating that
its  representations  and  warranties,  in its individual  capacity and as Owner
Trustee,  in this Agreement are true and correct as of the Delivery Date (or, to
the extent that any such  representation  and warranty  expressly  relates to an
earlier date, true and correct as of such earlier date);

     (q) an Officer's Certificate of Owner Participant, dated the Delivery Date,
stating that its  representations  and warranties in this Agreement are true and
correct as of the Delivery Date (or, to the extent that any such  representation
and warranty  expressly  relates to an earlier date, true and correct as of such
earlier date);

     (r) an Officer's  Certificate of WTC, dated the Delivery Date, stating that
its representations and warranties, in its individual capacity, or as Mortgagee,
a Pass-Through Trustee, or Subordination Agent (as applicable) in this Agreement
are true and  correct as of the  Delivery  Date (or, to the extent that any such
representation  and  warranty  expressly  relates to an earlier  date,  true and
correct as of such earlier date);

     (s) an  application  for  registration  of the Aircraft with the FAA in the
name of Owner  Trustee (FAA Counsel to receive the sole  executed  copy thereof,
for filing with the FAA);

     (t) the Financing Statements;

     (u) the  following  opinions  of counsel,  in each case dated the  Delivery
Date:

     (1) an opinion  of  Troutman  Sanders  LLP,  special  counsel to Lessee and
Guarantor, substantially in the form of Exhibit A;

     (2) an opinion of Lessee's and Guarantor's Legal Department,  substantially
in the form of Exhibit B;

     (3) an opinion of corporate counsel to Airframe Manufacturer, substantially
in the form of Exhibit C;

     (4) an opinion of Ray, Quinney & Nebeker, special counsel to Owner Trustee,
substantially in the form of Exhibit D;

     (5) an opinion of Richards,  Layton & Finger,  special counsel to Mortgagee
and the Loan Participants, substantially in the form of Exhibit E;

     (6)  an  opinion  of  Dewey   Ballantine  LLP,  special  counsel  to  Owner
Participant, substantially in the form of Exhibit F;

     (7) an opinion of FAA Counsel,  substantially in the form of Exhibit G;

     (8) an  opinion  of Dewey  Ballantine  LLP,  special  tax  counsel to Owner
Participant,  with  respect  to certain  tax  consequences  of the  transactions
contemplated  hereby;  PROVIDED,  that only Owner Participant shall receive such
opinion; and

     (9) an opinion of corporate counsel of Owner Participant,  substantially in
the form of Exhibit H, and

     (v)  each  Participant  receives  copies  of  such  other  documents  as it
reasonably requests,  except as provided in clauses (b), (h), (m), and (u)(8) of
this ss. 5.1.2.

     5.1.3 OTHER COMMITMENTS

     Each other  Participant makes available the Dollar amount of its Commitment
in accordance with ss. 4.

     5.1.4 VIOLATION OF LAW

     No change occurs after the date of this Agreement in any applicable
Law  that  makes  it a  violation  of  Law  for  (a)  Lessee,  any  Participant,
Subordination  Agent,  Owner  Trustee,  or  Mortgagee to execute,  deliver,  and
perform the Operative Agreements to which it is a party or to be a party subject
to the  obligations  of the Operative  Agreements to which such  Participant  is
bound,  or (b) any  Participant  to make the  Dollar  amount  of its  Commitment
available or, in the case of any Loan Participant, to acquire an Equipment Note,
or to realize the benefits of the security afforded by the Mortgage.

     5.1.5 PERFECTED SECURITY INTEREST

     After  giving  effect to the  filing  of the  FAA-Filed  Documents  and the
Financing  Statements,  Mortgagee  shall  have a  duly-perfected  first-priority
security  interest in all of Owner Trustee's  right,  title, and interest in the
Aircraft and the Lease, subject only to Permitted Liens.

     5.1.6 REPRESENTATIONS, WARRANTIES, AND COVENANTS

     The  representations  and  warranties of each other party to this Agreement
made, in each case, in any Operative  Agreement to which it is a party, are true
and accurate in all material  respects as of the Delivery  Date (unless any such
representation  and warranty was made with  reference  to a specified  date,  in
which case such  representation  and  warranty  was true and accurate as of such
specified  date),  and each other  party to this  Agreement  has  performed  and
observed,  in all material  respects,  all of its  covenants,  obligations,  and
agreements in each Operative  Agreement to which it is a party to be observed or
performed by it as of the Delivery Date.

     5.1.7 NO DEFAULT

     On the Delivery Date, no Lease Default or Mortgage  Default exists or would
result from the sale, mortgage, or lease of the Aircraft.

     5.1.8 NO EVENT OF LOSS

     No Event of Loss with respect to the  Airframe or any Engine has  occurred,
and no circumstance, condition, act, or event has occurred that, with the giving
of notice or lapse of time,  would give rise to or  constitute  an Event of Loss
with respect to the Airframe or any Engine.

     5.1.9 TITLE

     Owner Trustee has good title (subject to filing and  recordation of the FAA
Bill of Sale with the FAA) to the Aircraft,  free and clear of Liens, except (a)
the rights of Lessee under the Lease, (b) the Lien created by the Mortgage,  (c)
the beneficial interest of Owner Participant created by the Trust Agreement, (d)
Liens  permitted  by clause (d)  (solely  for taxes not yet due) of ss. 6 of the
Lease, and (e) Liens permitted by clause (e) of ss. 6 of the Lease.

     5.1.10 CERTIFICATION

     The Aircraft  has been duly  certificated  by the FAA as to type,  and upon
registration in Owner  Trustee's name will be eligible for an FAA  airworthiness
certificate.

     5.1.11 SECTION 1110

     Owner  Trustee,  as lessor under the Lease (and  Mortgagee,  as assignee of
Owner Trustee under the  Mortgage),  is entitled to the benefits of Section 1110
(as  currently in effect) with  respect to the right to take  possession  of the
Airframe  and  Engines  as  provided  in the Lease in the event of a case  under
Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.

     5.1.12 FILING

     The FAA-Filed Documents are on the Delivery Date duly filed for recordation
with the FAA in accordance  with the  Transportation  Code,  and each  Financing
Statement  has been duly  filed or is in the  process of being duly filed in the
appropriate jurisdiction.

     5.1.13 NO PROCEEDINGS

     No action or proceeding has been instituted,  nor is any action  threatened
in writing, before any Government Entity, nor has any order, judgment, or decree
been  issued or proposed to be issued by any  Government  Entity,  to set aside,
restrain,  enjoin,  or prevent the completion and  consummation of any Operative
Agreement or the Transactions.

     5.1.14 GOVERNMENTAL ACTION

     All appropriate action required to have been taken before the Delivery Date
by the FAA, or any other Government  Entity of the United States,  in connection
with  the  Transactions  has  been  taken,  and all  orders,  permits,  waivers,
authorizations,  exemptions,  and approvals of such  entities  required to be in
effect  on the  Delivery  Date in  connection  with the  Transactions  have been
issued.

     5.1.15 NOTE PURCHASE AGREEMENT

     The conditions  precedent to the obligations of the Loan  Participants  and
the other  requirements  relating to the Aircraft and the Equipment Notes in the
Note Purchase Agreement have been satisfied.

     5.2 CONDITIONS TO OWNER TRUSTEE'S OBLIGATIONS

     Owner  Trustee's  obligation to direct WTC to apply the  Commitments to pay
Lessor's  Cost on the  Delivery  Date is  subject to the  satisfaction  or Owner
Trustee's  waiver, on or before the Delivery Date, of the conditions in this ss.
5.2.

     5.2.1 NOTICE

     Owner Trustee receives the notice described in ss. 4.1 or, in the case of a
Delayed Delivery Date, ss. 4.3, when and as required thereby.

     5.2.2 DOCUMENTS

     Owner Trustee receives executed originals of the documents described in ss.
5.1.2,  except as otherwise provided therein,  unless the failure to receive any
such document is the result of any action or inaction by Owner Trustee.

     5.2.3 OTHER CONDITIONS PRECEDENT

     Each of the  conditions  in  ss.ss.  5.1.4,  5.1.6,  5.1.7,  and  5.1.11 is
satisfied,  unless the  failure of any such  condition  to be  satisfied  is the
result of any action or inaction by Owner Trustee.

     5.3 CONDITIONS TO MORTGAGEE'S OBLIGATIONS

     Mortgagee's  obligation to authenticate the Equipment Notes on the Delivery
Date is subject to the  satisfaction  or  Mortgagee's  waiver,  on or before the
Delivery Date, of the conditions in this ss. 5.3.

     5.3.1 NOTICE

     Mortgagee  receives  the notice  described  in ss. 4.1 or, in the case of a
Delayed Delivery Date, ss. 4.3, when and as required thereby.

     5.3.2 DOCUMENTS

     Mortgagee  receives  executed  originals of the documents  described in ss.
5.1.2,  except as otherwise provided therein,  unless the failure to receive any
such document is the result of any action or inaction by Mortgagee.

     5.3.3 OTHER CONDITIONS PRECEDENT

     Each of the conditions in ss.ss.  5.1.4,  5.1.6, 5.1.7, and 5.1.11 has been
satisfied,  unless the  failure of any such  condition  to be  satisfied  is the
result of any action or inaction by Mortgagee.

     5.4 CONDITIONS TO LESSEE'S OBLIGATIONS

     Lessee's  obligation  to lease the Aircraft on the Delivery Date is subject
to the satisfaction or Lessee's  waiver,  on or before the Delivery Date, of the
conditions in this ss. 5.4.

     5.4.1 DOCUMENTS

     Lessee receives executed originals of the documents described in ss. 5.1.2,
except as  otherwise  provided  therein,  and they are  satisfactory  to Lessee,
unless the failure to receive  any such  document is the result of any action or
inaction by Lessee.

     5.4.2 TAXES

     Lessee is satisfied that no sales, use, value-added, goods-and-services, or
like tax, and no stamp tax duty,  is payable with respect to the delivery of the
Aircraft  on the  Delivery  Date (to the  extent  that  Lessee  could be  liable
therefor under ss. 9.3).

     5.4.3 OTHER CONDITIONS

     Each of the  conditions in ss.ss.  5.1.3 (as to all  Participants),  5.1.4,
5.1.6, 5.1.7 (as to Mortgage Defaults' not constituting Lease Defaults),  5.1.8,
5.1.9, 5.1.10,  5.1.11,  5.1.12, 5.1.13, and 5.1.14 has been satisfied or waived
by Lessee,  unless the  failure of any such  condition  to be  satisfied  is the
result of any action or inaction by Lessee.

     5.5 POST-REGISTRATION OPINION

     Promptly after the  registration of the Aircraft and the recordation of the
FAA-Filed  Documents pursuant to the Transportation  Code, Lessee will cause FAA
Counsel to  deliver to Lessee,  each  Participant,  Subordination  Agent,  Owner
Trustee, and Mortgagee a favorable opinion or opinions addressed to each of them
with respect to such recordation.

     6. REPRESENTATIONS AND WARRANTIES

     6.1 LESSEE'S REPRESENTATIONS AND WARRANTIES

     Lessee  represents  and  warrants  to  each  Participant,   Owner  Trustee,
Subordination Agent, and Mortgagee that:

     6.1.1 ORGANIZATION; QUALIFICATION

     Lessee is a corporation duly  incorporated,  validly existing,  and in good
standing under the Laws of Indiana, and has the corporate power and authority to
conduct the business in which it is  currently  engaged and to own or hold under
lease its  properties  and to enter into and perform its  obligations  under the
Lessee  Operative  Agreements.  Lessee is duly  qualified  to do  business  as a
foreign  corporation in good standing in each  jurisdiction  in which the nature
and extent of the business  conducted by it, or the ownership of its properties,
requires such  qualification,  except where the failure to be so qualified would
not give rise to a Materially Adverse Change to Lessee.

     6.1.2 CORPORATE AUTHORIZATION

     Lessee has taken,  or caused to be taken,  all necessary  corporate  action
(including  obtaining  any consent or approval of  stockholders  required by its
articles of incorporation or by-laws) to authorize its execution,  delivery, and
performance of its obligations under each of the Lessee Operative Agreements.

     6.1.3 NO VIOLATION

     Lessee's execution,  delivery, and performance of its obligations under the
Lessee  Operative  Agreements  do not and will not (a) violate any  provision of
Lessee's articles of incorporation or by-laws, (b) violate any Law applicable to
or binding on Lessee, or (c) violate or constitute any default under (other than
any violation or default that would not result in a Materially Adverse Change to
Lessee),  or result in the creation of any Lien (other than as  permitted  under
the Lease) upon the Aircraft under, any lease, loan, or other material agreement
to which Lessee is a party or by which Lessee or any of its properties is bound.

     6.1.4 APPROVALS

     Lessee's  execution  and delivery of, and  performance  of its  obligations
under, the Lessee  Operative  Agreements do not and will not require the consent
or approval of, the giving of notice to, the registration with, the recording or
filing of any  documents  with,  or the taking of any other action in respect of
(a) any  trustee  or other  holder  of any Debt of  Lessee,  (b) any  Government
Entity, or (c) any other Person,  other than (x) the FAA-Filed Documents and the
Financing  Statements  (and  continuation  statements  periodically),   and  (y)
filings,  recordings,  notices,  corporate  approvals of Lessee (which have been
duly obtained) or other ministerial  actions pursuant to any routine  recording,
contractual, or regulatory requirements.

     6.1.5 VALID AND BINDING AGREEMENTS

     The Lessee Operative  Agreements have been duly authorized,  executed,  and
delivered by Lessee,  and  (assuming  their due  authorization,  execution,  and
delivery by the other parties  thereto)  constitute  legal,  valid,  and binding
obligations  of Lessee and are  enforceable  against  Lessee in accordance  with
their  terms,  except  as such  enforceability  may be  limited  by  bankruptcy,
insolvency,  and other similar Laws affecting the rights of creditors  generally
and general principles of equity.

     6.1.6 LITIGATION

     Except as set forth in Guarantor's  most recent Annual Report on Form 10-K,
filed by Lessee with the SEC on or before the Delivery Date, or in any Quarterly
Report on Form 10-Q or Current  Report on Form 8-K filed by  Guarantor  with the
SEC  subsequent to such Form 10-K and on or before the Delivery Date, no action,
claim,  or  proceeding  is  now  pending  or,  to  Lessee's  Actual   Knowledge,
threatened,  against Lessee,  Guarantor, or any of their Affiliates,  before any
Government Entity or any arbitrator,  that is reasonably likely to be determined
adversely  to Lessee and if  determined  adversely  to Lessee  would result in a
Materially Adverse Change.

     6.1.7 FINANCIAL CONDITION

     Guarantor's audited  consolidated  balance sheet for its most-recent fiscal
year, included in Guarantor's Annual Report on Form 10-K filed by Guarantor with
the SEC for  such  fiscal  year,  and the  related  consolidated  statements  of
operations  and cash flows for the period  then  ended,  have been  prepared  in
accordance  with GAAP and fairly present in all material  respects the financial
condition of Guarantor and its consolidated subsidiaries as of such date and the
results of its operations and cash flows for such period,  and since the date of
such  balance  sheet,  there  has  been no  Materially  Adverse  Change  in such
financial  condition  or  operations,  except for matters  disclosed  in (a) the
financial  statements referred to above, or (b) any subsequent  Quarterly Report
on Form 10-Q or Current Report on Form 8-K filed by Guarantor with the SEC on or
before the Delivery Date.

     6.1.8 REGISTRATION AND RECORDATION

     Except  for (a)  registering  the  Aircraft  with the FAA  pursuant  to the
Transportation  Code in the name of Owner  Trustee,  (b) filing for  recordation
(and  recording) the FAA-Filed  Documents,  (c) filing the Financing  Statements
(and  continuation  statements  relating  thereto at  periodic  intervals),  (d)
Mortgagee's   taking   possession  and  retaining  the  chattel  paper  original
counterpart of the Lease, and (e) affixing the placards referred to in ss. 7.1.3
of the Lease,  no further  action,  including  filing or recording  any document
(including any financing statement under UCC Article 9) is necessary in order to
establish  and  perfect  Owner  Trustee's  right,   title,  and  interest,   and
Mortgagee's security interest,  in the Aircraft and the Lease, as against Lessee
and any other Person, in any applicable jurisdiction in the United States.

     6.1.9 CHIEF EXECUTIVE OFFICE

     Lessee's chief executive office (as defined in UCC Article 9) is located at
7337 West Washington Street, Indianapolis, Indiana, 46231.

     6.1.10 NO DEFAULT

     No Lease Default exists.

     6.1.11 NO EVENT OF LOSS

     No Event of Loss has  occurred  with respect to the Airframe or any Engine,
and, to Lessee's Actual Knowledge, no circumstance, condition, act, or event has
occurred that,  with the giving of notice or lapse of time,  gives or would give
rise to or constitutes  or would  constitute an Event of Loss to the Airframe or
any Engine.

     6.1.12 COMPLIANCE WITH LAWS

     (a) Lessee is a Citizen of the United States and a U.S. Air Carrier.

     (b) Lessee holds all licenses, permits, and franchises from the appropriate
Government  Entities  necessary  to authorize  Lessee  lawfully to engage in air
transportation  and to  carry  on  scheduled  commercial  passenger  service  as
currently  conducted,  except to the  extent  that the  failure to hold any such
license, permit, or franchise would not give rise to a Materially Adverse Change
to Lessee.

     (c)  Lessee is not an  "investment  ompany" or a company  controlled  by an
"investment company" within the meaning of the Investment Company Act of 1940.

     6.1.13 SECURITIES LAWS

     Neither Lessee nor any Person  authorized to act on its behalf has directly
or  indirectly  offered any  beneficial  interest  or  Security  relating to the
ownership  of the  Aircraft or the Lease or any interest in the Trust Estate and
the Trust  Agreement,  or any of the Equipment Notes or any other interest in or
security under the Mortgage,  for sale to, or solicited any offer to acquire any
such  interest or security  from,  or has sold any such interest or security to,
any Person in violation of the Securities Act.

     6.1.14 BROKER'S FEES

     No Person acting on behalf of Lessee is or will be entitled to any broker's
fee, commission, or finder's fee in connection with the Transactions, except for
fees payable to Lessee's Advisor(s), if any.

     6.1.15 SECTION 1110

     Owner Trustee, as lessor under the Lease (and Mortgagee,  as assignee under
the Mortgage), will be entitled to the benefits of Section 1110 (as currently in
effect),  with  respect  to the right to take  possession  of the  Airframe  and
Engines as provided in the Lease, in the event of a case under Chapter 11 of the
Bankruptcy Code in which Lessee is a debtor.

     6.1.16 NO GOVERNMENT CONSENTS

     Neither  Lessee's  execution  and  delivery of any of the Lessee  Operative
Agreements nor Lessee's  performance of its obligations  hereunder  requires the
consent or approval of, the giving of notice to, or the  registration  with,  or
the taking of any other action in respect of any Government  Entity,  except for
(a) the orders, permits,  waivers,  exemptions,  authorizations and approvals of
the  regulatory  authorities  having  jurisdiction  over  the  operation  of the
Aircraft by Lessee, which orders, permits, waivers,  exemptions,  authorizations
and approvals  have been duly obtained and are, or will on the Delivery Date be,
in full force and effect,  and the  registration  and filings referred to herein
and  (b)  any  normal  periodic  and  other  reporting  requirements  under  the
applicable  rules of the FAA to the extent required to be given or obtained only
on or after the Delivery Date.

     6.1.17 PAYMENT OF TAXES

     Lessee and its  Affiliates  have  filed or caused to be filed all  federal,
state, and material local and non-U.S. tax returns that are required to be filed
and have paid or caused to be paid all taxes shown to be due on such  returns or
on any  assessment  received  by Lessee or its  Affiliates,  except any that are
being contested diligently and in good faith by appropriate  proceedings and for
which  adequate  provision  for payment has been made in  accordance  with GAAP.
There is no ongoing audit or, to the knowledge of Lessee, other investigation by
any Government Entity of the tax liability of Lessee or its Affiliates and there
is no  unresolved  claim  by a  taxing  authority  concerning  Lessee's  or  any
Affiliate's  tax liability,  for any period for which returns have been filed or
were  due,  that,  in  either  case,  reasonably  may be  expected  to result in
liability  of  Lessee  which  could  have a  materially  adverse  effect  on the
business,  operations or financial  condition of Lessee or the ability of Lessee
to perform its obligations under the Operative Agreements.

     6.2 OWNER PARTICIPANT'S REPRESENTATIONS AND WARRANTIES

     Owner Participant represents and warrants to Lessee, the Loan Participants,
Subordination Agent, Owner Trustee, and Mortgagee that:

     6.2.1 ORGANIZATION, ETC.

     Owner Participant (a) is a corporation duly incorporated,  validly existing
and in  good  standing  under  the  Laws  of the OP  Jurisdiction,  (b)  has the
corporate  power and  authority to conduct the business in which it is currently
engaged,  to own or hold  under  lease  its  properties,  and to enter  into and
perform its obligations  under the Owner Participant  Agreements,  and (c) has a
tangible net worth (exclusive of goodwill) greater than $50 million.

     6.2.2 CORPORATE AUTHORIZATION

     Owner Participant has taken (or caused to be taken) all necessary corporate
action (including obtaining any consent or approval of stockholders  required by
its  certificate  of  incorporation  or by-laws)  to  authorize  its  execution,
delivery, and performance of its obligations under each of the Owner Participant
Agreements.

     6.2.3 NO VIOLATION

     Owner Participant's execution, delivery, and performance of its obligations
under each of the Owner  Participant  Agreements do not and will not (a) violate
any provision of Owner  Participant's  certificate of  incorporation or by-laws,
(b)  violate  any  Law  applicable  to  or  binding  on  Owner  Participant  (no
representation  or  warranty  is made with  respect to ERISA,  other than as set
forth in ss. 6.2.9) or (c) violate or  constitute  any default under (other than
any violation or default that would not result in a Materially Adverse Change to
Owner  Participant),  or  result  in the  creation  of any Lien  (other  than as
provided for or otherwise permitted in the Operative  Agreements) upon the Trust
Estate  under,  any lease,  loan,  or other  material  agreement  to which Owner
Participant is a party or by which Owner Participant or any of its properties is
bound.

     6.2.4 APPROVALS

     Owner Participant's execution, delivery, and performance of its obligations
under each of the Owner  Participant  Agreements do not and will not require the
consent or  approval  of, the giving of notice to, the  registration  with,  the
recording or filing of any documents  with, or the taking of any other action in
respect of (a) any trustee or other holder of any Debt of Owner Participant, and
(b) any  Government  Entity,  other than filing the FAA-Filed  Documents and the
Financing Statements and routine regulatory filings.

     6.2.5 VALID AND BINDING AGREEMENTS

     The Owner Participant  Agreements have been duly authorized,  executed, and
delivered by Owner Participant, and (assuming the due authorization,  execution,
and delivery by the other parties thereto)  constitute legal, valid, and binding
obligations of Owner  Participant and are enforceable  against Owner Participant
in accordance with their terms,  except as such enforceability may be limited by
bankruptcy, insolvency, and other similar Laws affecting the rights of creditors
generally and general principles of equity.

     6.2.6 CITIZENSHIP

     Owner Participant is a Citizen of the United States.

     6.2.7 NO LIENS

     There are no Lessor Liens  attributable to Owner  Participant on all or any
part of the Trust Estate.

     6.2.8 INVESTMENT BY OWNER PARTICIPANT

     Owner Participant is acquiring its beneficial  interest in the Trust Estate
for  its own  account,  for  investment  and not  with a view to any  resale  or
distribution  thereof;  PROVIDED,  that, subject to the transfer restrictions in
ss. 10, its disposition of its beneficial  interest in the Trust Estate shall at
all times be within its control.

     6.2.9 ERISA

     No part of the funds to be used by Owner Participant to acquire or hold its
interests in the Trust Estate  directly or  indirectly  constitutes  assets of a
Plan.

     6.2.10 LITIGATION

     There  are  no  pending  or,  to  Owner  Participant's   Actual  Knowledge,
threatened   actions  or  proceedings   against  Owner  Participant  before  any
Government  Entity that, if  determined  adversely to Owner  Participant,  would
materially   adversely  affect  Owner  Participant's   ability  to  perform  its
obligations under the Owner Participant Agreements.

     6.2.11 SECURITIES LAWS

     Neither Owner  Participant nor any Person Owner  Participant has authorized
to act on its behalf has directly or indirectly offered any beneficial  interest
in or Security  relating to the ownership of the Aircraft or any interest in the
Trust Estate, or any of the Equipment Notes or any other interest in or Security
under the  Mortgage,  for sale to, or solicited  any offer to acquire any of the
same from,  any Person in violation of the  Securities  Act or applicable  state
securities  Laws (with the  understanding  that Owner  Participant  shall not be
deemed to have  authorized  Lessee's  Advisor(s)  to act on Owner  Participant's
behalf).

     6.2.12 BROKER'S FEES

     No Person acting on behalf of Owner  Participant  is or will be entitled to
any  broker's  fee,   commission,   or  finder's  fee  in  connection  with  the
Transactions.

     6.3 FSB'S REPRESENTATIONS AND WARRANTIES

     FSB  represents  and  warrants  to  Lessee,  Owner  Participant,  the  Loan
Participants, Subordination Agent, and Mortgagee that:

     6.3.1 ORGANIZATION, ETC.

     FSB is a national banking association duly organized,  validly existing and
in  good  standing  under  the  Laws  of the  United  States,  holding  a  valid
certificate  to do  business  as a national  banking  association  with  banking
authority  to execute,  deliver,  and perform  its  obligations  under the Owner
Trustee Agreements.

     6.3.2 CORPORATE AUTHORIZATION

     FSB has  taken  (or  caused to be taken)  all  necessary  corporate  action
(including obtaining any consent or approval of stockholders  required by Law or
by its  articles of  association  or by-laws) to  authorize  the  execution  and
delivery by FSB or Owner Trustee, of each of the Owner Trustee  Agreements,  and
the performance of its obligations thereunder.

     6.3.3 NO VIOLATION

     FSB's and Owner  Trustee's  execution,  delivery,  and performance of their
respective  obligations  under the Owner Trustee  Agreements do not and will not
(a) violate any  provision  of FSB's  articles of  association  or by-laws,  (b)
violate any Utah Law or federal  banking Law  applicable  to or binding on Owner
Trustee or FSB, or (c) violate or  constitute  any default under (other than any
violation or default that would not result in a Materially Adverse Change to FSB
or Owner Trustee), or result in the creation of any Lien (other than the Lien of
the  Mortgage)  upon  any  property  of  FSB,  Owner  Trustee,  or any of  FSB's
subsidiaries under, any lease, loan, or other material agreement to which FSB or
Owner  Trustee  is a party  or by  which  FSB,  Owner  Trustee,  or any of their
properties is or may be bound or affected.

     6.3.4 APPROVALS

     FSB's and Owner  Trustee's  execution,  delivery,  and performance of their
respective  obligations  under the Owner Trustee  Agreements do not and will not
require the consent, approval, or authorization of, the giving of notice to, the
registration  with, the recording or filing of any documents with, or the taking
of any other  action in respect of, (a) any trustee or other  holder of any Debt
of FSB, or (b) any Government Entity governing  banking and trust powers,  other
than filing the FAA-Filed Documents and the Financing Statements.

     6.3.5 VALID AND BINDING AGREEMENTS

     The Owner  Trustee  Agreements  have been duly  authorized,  executed,  and
delivered  by FSB and  Owner  Trustee,  and  (assuming  the  due  authorization,
execution,  and delivery thereof by the other parties thereto) constitute legal,
valid,  and binding  obligations  of FSB and Owner  Trustee and are  enforceable
against FSB and Owner  Trustee in  accordance  with their terms,  except as such
enforceability may be limited by bankruptcy,  insolvency, and other similar Laws
affecting the rights of creditors generally and general principles of equity.

     6.3.6 CITIZENSHIP

     FSB is a Citizen of the United States.

     6.3.7 CHIEF EXECUTIVE OFFICE

     The chief  executive  office (as defined in UCC Article 9) of Owner Trustee
is located at 79 South Main Street, Salt Lake City, Utah 84111.

     6.3.8 TITLE

     On the Delivery Date,  Owner Trustee shall have received  whatever title to
the Aircraft as was conveyed to it by Seller.

     6.3.9 NO LIENS; FINANCING STATEMENTS

     There are no Lessor Liens  attributable  to FSB or Owner Trustee in respect
of all or any part of the Aircraft, Trust Estate, or the Collateral.  Except for
the  Financing  Statements,  neither FSB nor Owner  Trustee has executed any UCC
financing statement relating to the Aircraft or the Lease.

     6.3.10 LITIGATION

     There are no pending or, to FSB's Actual Knowledge,  threatened  actions or
proceedings  against FSB or Owner Trustee before any Government  Entity that, if
determined  adversely to FSB, would  materially  adversely affect the ability of
FSB or Owner  Trustee  to  perform  its  obligations  under  the  Owner  Trustee
Agreements.

     6.3.11 SECURITIES LAWS

     Neither FSB, nor any Person  authorized to act on its behalf,  has directly
or  indirectly  offered any  beneficial  interest  or  Security  relating to the
ownership  of the  Aircraft or any  interest  in the Trust  Estate or any of the
Equipment Notes or any other interest in or security under the Mortgage for sale
to, or solicited any offer to acquire any such interest or security from, or has
sold any such  interest or security to, any Person other than the  Participants,
except for the offering and sale of the Pass-Through Certificates.

     6.3.12 EXPENSES AND TAXES

     There are no Expenses  or Taxes that may be imposed on or asserted  against
the Trust, the Trust Estate,  or any part thereof or any interest  therein,  the
Collateral,  Lessee, Owner Participant, any Pass-Through Trustee,  Subordination
Agent, Owner Trustee, or Mortgagee (except as to Owner Trustee, Taxes imposed on
the fees payable to Owner  Trustee)  under the laws of Utah in  connection  with
Owner Trustee's execution,  delivery,  or performance of any Operative Agreement
or in connection  with the issuance of the Equipment  Notes,  which  Expenses or
Taxes would not have been imposed if Owner Trustee had not (x) had its principal
place of business in Utah, (y) performed (in its individual capacity or as Owner
Trustee) any or all of its duties under the Operative Agreements in Utah, or (z)
engaged in any  activities  unrelated to the  transactions  contemplated  by the
Operative Agreements in Utah.

     6.4 WTC'S REPRESENTATIONS AND WARRANTIES

     WTC, Mortgagee,  Pass-Through  Trustee and Subordination  Agent, each as to
itself,  represent  and  warrant  (with  respect  to ss.  6.4.10,  solely in its
capacity as Subordination Agent) to Lessee, Owner Participant, and Owner Trustee
that:

     6.4.1 ORGANIZATION, ETC.

     WTC is a Delaware banking corporation duly organized,  validly existing and
in good standing  under the Laws of the State of Delaware,  and authorized to do
business as a Delaware banking  corporation  with banking  authority to execute,
deliver,  and  perform  its  obligations  under the  Mortgagee  Agreements,  the
Pass-Through Trustee Agreements, and the Subordination Agent Agreements.

     6.4.2 CORPORATE AUTHORIZATION

     WTC has  taken  (or  caused to be taken)  all  necessary  corporate  action
(including obtaining any consent or approval of stockholders  required by Law or
by its certificate of  incorporation  or by-laws) to authorize the execution and
delivery by WTC, Mortgagee,  each Pass-Through  Trustee, and Subordination Agent
(as  applicable)  of  the  Mortgagee   Agreements,   the  Pass-Through   Trustee
Agreements,  and the Subordination  Agent Agreements and the performance by WTC,
Mortgagee, each Pass-Through Trustee, and Subordination Agent (as applicable) of
its obligations thereunder.

     6.4.3 NO VIOLATION

     The execution and delivery by WTC,  Mortgagee,  each Pass-Through  Trustee,
and  Subordination  Agent  (as  applicable)  of the  Mortgagee  Agreements,  the
Pass-Through Trustee Agreements, and the Subordination Agent Agreements, and the
performance by WTC,  Mortgagee,  each  Pass-Through  Trustee,  and Subordination
Agent (as  applicable) of its  obligations  thereunder,  do not and will not (a)
violate any provision of WTC's  certificate  of  incorporation  or by-laws,  (b)
violate any Law of the United States or of Delaware  applicable to or binding on
WTC or  (except  in the case of any Law  relating  to any Plan)  Mortgagee,  any
Pass-Through  Trustee, or Subordination  Agent, or (c) violate or constitute any
default  under  (other than any  violation or default that would not result in a
Materially  Adverse  Change to WTC,  Mortgagee,  any  Pass-Through  Trustee,  or
Subordination Agent), or result in the creation of any Lien (other than the Lien
of the Mortgage) upon any property of WTC, Mortgagee,  any Pass-Through Trustee,
Subordination  Agent,  or any of WTC's  subsidiaries  under any lease,  loan, or
other  agreement  to  which  WTC,  Mortgagee,   any  Pass-Through   Trustee,  or
Subordination  Agent is a party or by which  WTC,  Mortgagee,  any  Pass-Through
Trustee, Subordination Agent, or any of their properties is bound.

     6.4.4 APPROVALS

     The execution and delivery by WTC,  Mortgagee,  each Pass-Through  Trustee,
and  Subordination  Agent  (as  applicable)  of the  Mortgagee  Agreements,  the
Pass-Through Trustee Agreements, and the Subordination Agent Agreements to which
it is a party, and the performance by WTC, Mortgagee, each Pass-Through Trustee,
and Subordination  Agent (as applicable) of its obligations  thereunder,  do not
and will not require the consent,  approval,  or authorization of, the giving of
notice to, the registration  with, the recording or filing of any document with,
or the taking of any other  action in respect of (a) any trustee or other holder
of any Debt of WTC,  or (b) any  Government  Entity of the  United  States or of
Delaware,   other  than  filing  the  FAA-Filed   Documents  and  the  Financing
Statements.

     6.4.5 VALID AND BINDING AGREEMENTS

     The Mortgagee  Agreements,  the Pass-Through  Trustee  Agreements,  and the
Subordination  Agent  Agreements  have  been  duly  authorized,   executed,  and
delivered by WTC, Mortgagee,  each Pass-Through Trustee, and Subordination Agent
(as applicable), and (assuming the due authorization, execution, and delivery by
the other parties thereto)  constitute legal,  valid, and binding obligations of
WTC,  Mortgagee,   each  Pass-Through   Trustee,  and  Subordination  Agent  (as
applicable)  and are  enforceable  against  WTC,  Mortgagee,  each  Pass-Through
Trustee, and Subordination Agent (as applicable) in accordance with their terms,
except as such enforceability may be limited by bankruptcy, insolvency, or other
similar Laws affecting the rights of creditors  generally and general principles
of equity.

     6.4.6 CITIZENSHIP

     WTC is a Citizen of the United States.

     6.4.7 NO LIENS

     There are no Lessor Liens attributable to WTC in respect of all or any part
of the Trust Estate or the Collateral.

     6.4.8 LITIGATION

     There are no pending or, to WTC's Actual Knowledge,  threatened  actions or
proceedings against WTC, Mortgagee,  any Pass-Through  Trustee, or Subordination
Agent (as applicable) before any Government Entity that, if determined adversely
to WTC,  Mortgagee,  any  Pass-Through  Trustee,  and  Subordination  Agent  (as
applicable),  would materially  adversely affect the ability of WTC,  Mortgagee,
any  Pass-Through  Trustee,  or  Subordination  Agent to perform its obligations
under any of the Mortgagee Agreements,  the Pass-Through Trustee Agreements,  or
the Subordination Agent Agreements.

     6.4.9 SECURITIES LAWS

     Other than as contemplated herein and in the Operative Agreements,  neither
WTC nor any Person  authorized  to act on its behalf has directly or  indirectly
offered any  beneficial  interest or Security  relating to the  ownership of the
Aircraft or any interest in the Collateral or any of the Equipment  Notes or any
other  interest in or security  under the Mortgage for sale to, or solicited any
offer to  acquire  any such  interest  or  security  from,  or has sold any such
interest or security to, any Person other than the Participants,  except for the
offering and sale of the Pass-Through Certificates.

     6.4.10 INVESTMENT

     THE  EQUIPMENT  NOTES TO BE  ACQUIRED  BY  SUBORDINATION  AGENT  ARE  BEING
ACQUIRED BY IT FOR THE ACCOUNT OF THE PASS-THROUGH  TRUSTEES, FOR INVESTMENT AND
NOT WITH A VIEW TO ANY RESALE OR DISTRIBUTION THEREOF; PROVIDED THAT, SUBJECT TO
THE TRANSFER  RESTRICTIONS IN SS. 10.1.3, ITS DISPOSITION OF ITS EQUIPMENT NOTES
SHALL AT ALL TIMES BE WITHIN ITS CONTROL.

     6.4.11 TAXES

     There are no Taxes  payable by any  Pass-Through  Trustee or WTC imposed by
Delaware or any political  subdivision or taxing authority thereof in connection
with such Pass-Through  Trustee's or WTC's execution,  delivery, and performance
of this Agreement or any Pass-Through Trustee Agreement (other than franchise or
other taxes based on or  measured  by any fees or  compensation  received by any
such  Pass-Through  Trustee or WTC for services  rendered in connection with the
transactions  contemplated by any of the  Pass-Through  Trust  Agreements),  and
there  are no Taxes  payable  by any  Pass-Through  Trustee  or WTC  imposed  by
Delaware  or  any  political   subdivision   thereof  in  connection   with  the
acquisition, possession, or ownership by any such Pass-Through Trustee of any of
the Equipment Notes (other than franchise or other taxes based on or measured by
any fees or compensation  received by any such  Pass-Through  Trustee or WTC for
services rendered in connection with the transactions contemplated by any of the
Pass-Through  Trust  Agreements),  and,  assuming that the trusts created by the
Pass-Through Trust Agreements will not be taxable as corporations,  but, rather,
that each will be  characterized  as a grantor  trust under Part I, subpart E of
Subchapter  J of the Code or as a  partnership  under  Subchapter K of the Code,
such  trusts  will not be  subject  to any  Taxes  imposed  by  Delaware  or any
political subdivision thereof.

     6.4.12 CONTROL

            WTC is not an Affiliate of Owner Participant or Owner Trustee.

     6.4.13 BROKER'S FEES

     No Person acting on behalf of WTC, Mortgagee,  any Pass-Through Trustee, or
Subordination Agent is or will be entitled to any broker's fee,  commission,  or
finder's fee in connection with the Transactions.

     7. COVENANTS

     7.1 LESSEE'S COVENANTS

     Lessee agrees for the benefit of Owner Participant,  the Loan Participants,
Owner Trustee, and Mortgagee as follows:

     7.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER

     Lessee  shall at all times  maintain  its  corporate  existence,  except as
permitted  byss.  13.2 of the Lease,  and shall at all times  remain a U.S.  Air
Carrier.

     7.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE

     Lessee will give to Owner Participant,  Owner Trustee, and Mortgagee timely
written  notice of (but in any event within 90 days after) any relocation of its
chief executive office (as defined in UCC Article 9), and will promptly take any
action required by ss. 7.1.3(c) as a result of sucH relocation.

     7.1.3 CERTAIN ASSURANCES

     (a) Lessee  shall duly  execute,  acknowledge,  and deliver (or cause to be
executed,  acknowledged, and delivered) all such further documents, and shall do
and cause to be done such further things, as Owner  Participant,  Owner Trustee,
or Mortgagee  reasonably  requests to  accomplish  the purposes of the Operative
Agreements,  provided  that no  document  so  executed by Lessee will expand any
obligations or limit any rights of Lessee in respect of the Transactions.

     (b) Lessee shall  promptly take such action with respect to the  recording,
filing,  re-recording,  and refiling of the Lease, the Trust Agreement,  and the
Mortgage,  and any  supplements  thereto,  as shall be necessary  to  establish,
perfect, and protect Owner Trustee's interests and rights in and to the Aircraft
and under the Lease and the  perfection  and priority of the Lien created by the
Mortgage.  Lessee  shall  furnish to Owner  Participant  or Owner  Trustee  such
information (other than with respect to the citizenship of Owner Participant and
Owner  Trustee) in Lessee's  possession  or  otherwise  reasonably  available to
Lessee and required to enable  Owner  Participant  or Owner  Trustee to apply to
register the Aircraft under the Transportation  Code (subject to Lessee's rights
under  ss.  7.1.2  of  the  Lease),  and  shall  pay or  cause  to be  paid  all
out-of-pocket costs and expenses thereof (includinG  reasonable  attorneys' fees
and disbursements).

     (c) Lessee will cause the FAA-Filed  Documents,  the Financing  Statements,
and  all  continuation  statements  (and  any  amendments  necessitated  by  any
combination,  consolidation, or merger pursuant to ss. 13.2 of the Lease, or any
relocation of its chief executive office) in respect oF the Financing Statements
to be prepared and,  subject only to the execution and delivery thereof by Owner
Trustee or Mortgagee (as  applicable),  duly and timely filed and  recorded,  or
filed for  recordation,  to the extent permitted under the  Transportation  Code
(with respect to the FAA-Filed Documents) or the UCC or similar law of any other
applicable jurisdiction (with respect to such other documents).

     (d) If the Aircraft is registered in a country other than the United States
pursuant  to ss.  7.1.2 of the Lease,  Lessee  will  furnish  tO Owner  Trustee,
Mortgagee,   and  each   Participant   annually   while  the   Aircraft  is  not
U.S.-registered  (starting  with the calendar  year after such  registration  is
effected)  an  opinion  of  special  counsel  reasonably  satisfactory  to Owner
Participant and Mortgagee  stating that, in the opinion of such counsel,  either
(1)  such  action  has  been  taken  with  respect  to  the  recording,  filing,
re-recording,  and re-filing of the Operative Agreements and any supplements and
amendments  thereto as is necessary to  establish,  perfect,  and protect  Owner
Trustee's and Mortgagee's  right,  title and interest in and to the Aircraft and
the Operative  Agreements,  reciting the details of such actions, or (2) no such
action is  necessary  to  maintain  the  perfection  of such right,  title,  and
interest.

     7.1.4 SECURITIES LAWS

     Neither Lessee nor any Person authorized to act on its behalf will directly
or  indirectly  offer  any  beneficial  interest  or  Security  relating  to the
ownership  of the  Aircraft or the Lease or any interest in the Trust Estate and
Trust  Agreement  or any of the  Equipment  Notes or any  other  interest  in or
security  under the  Mortgage  for sale to, or solicit  any offer to acquire any
such  interest or security  from,  or sell any such interest or security to, any
Person  in  violation  of the  Securities  Act or  applicable  state or  foreign
securities Laws.

     7.1.5 CERTIFICATION

     Lessee  shall  cause the  Aircraft  to be duly  certified  by the FAA as to
airworthiness and shall,  immediately upon registration of the Aircraft in Owner
Trustee's name, obtain an FAA airworthiness certificate for the Aircraft.

     7.2 OWNER PARTICIPANT'S COVENANTS

     Owner  Participant  agrees  for the  benefit of Lessee,  and  (except  with
respect to ss.  7.2.4) Loan  Participants,  Owner  Trustee,  and  Mortgagee,  aS
follows:

     7.2.1 LIENS

     Owner  Participant (a) (1) will not directly or indirectly  create,  incur,
assume, or suffer to exist any Lessor Lien attributable to it on or with respect
to all or any part of the Trust Estate, the Collateral, or the Aircraft, and (2)
will, at its own cost and expense,  promptly take such action as is necessary to
discharge any Lessor Lien  attributable to Owner  Participant on all or any part
of the Trust  Estate,  the  Collateral  or the  Aircraft;  PROVIDED,  that Owner
Participant  shall not be required to comply with the  foregoing  provisions  of
this  clause (a) if it shall in good faith by  appropriate  proceedings  contest
claims or charges  resulting  in any such Lien as long as such  contest does not
involve any material danger of the sale, forfeiture, loss, or loss of use of the
Aircraft or the interest of Lessor,  Mortgagee,  or any Participant therein; and
(b) will hold harmless and indemnify  Lessee,  Owner Trustee,  each Note Holder,
Mortgagee,  each of  their  respective  Affiliates,  successors,  and  permitted
assigns,  the Trust Estate,  and the Collateral from and against (1) any and all
Expenses, (2) any reduction in the amount payable out of the Trust Estate or the
Collateral,  and (3) any interference with the possession,  operation,  or other
use of all or any part of the Aircraft, in each case imposed on, incurred by, or
asserted  against any of the foregoing as a consequence  of any such Lessor Lien
(without regard to the proviso to the foregoing clause (a)).

     7.2.2 REVOCATION OF TRUST AGREEMENT

     (a)  Owner  Participant  will  comply  with  the  provisions  of the  Trust
Agreement  applicable to it, will not terminate or revoke the Trust Agreement or
the trusts created  thereunder  without the prior written  consent of Lessee and
Mortgagee,  and will not amend,  modify,  or supplement the Trust Agreement,  or
waive  any  of  the  provisions  thereof,   if  such  amendment,   modification,
supplement,  or waiver would have any adverse effect (1) on Lessee,  without the
consent of Lessee,  or (2) on Mortgagee or any Note Holder,  without the consent
of Mortgagee.

     (b) Notwithstanding ss. 7.2.2(a),  Owner Participant may at any time remove
Owner Trustee  pursuant to ss. 9.1 of the Trust Agreement or terminate the Trust
Agreement pursuant to ss. 11.2 of the Trust Agreement.

     7.2.3 CHANGE OF SITUS OF OWNER TRUST

     If, at any time, any Tax Indemnitee or the Trust Estate becomes  subject to
any Taxes for which it is indemnified  pursuant to ss. 9.3 of thiS Agreement and
if, as a  consequence  thereof,  Lessee  requests that the situs of the Trust be
moved to another  state in the United  States from the state in which it is then
located,  the situs of the Trust may be moved with the written  consent of Owner
Participant  (which  consent  shall  not be  unreasonably  withheld)  and  Owner
Participant will take whatever action is reasonably necessary to accomplish such
removal;  PROVIDED, that, in any event, (a) Lessee shall provide such additional
tax   indemnification   as  Owner  Participant  and  the  Note  Holders  or  the
Pass-Through  Trustees reasonably request to cover any additional  unindemnified
Taxes or loss of Tax benefits  described in the assumptions in the Tax Indemnity
Agreement  resulting from such change in situs,  (b) the rights and  obligations
under  the  Operative  Agreements  of  Owner  Participant,   the  Note  Holders,
Pass-Through Trustees, and Mortgagee shall not be adversely affected as a result
of the taking of such action,  (c) the Lien of the Mortgage,  on the  Collateral
shall not be  adversely  affected by such action,  and Lessee and Owner  Trustee
shall  execute and deliver such  documents as Mortgagee  reasonably  requests to
protect  and  maintain  the  perfection  and  priority  of such Lien,  (d) Owner
Participant,  the Pass-Through  Trustees, and Mortgagee shall receive an opinion
or  opinions  of counsel  (which  counsel is  reasonably  satisfactory  to Owner
Participant,  the Pass-Through  Trustees,  and Mortgagee),  in scope,  form, and
substance  reasonably  satisfactory  to  Owner  Participant,   the  Pass-Through
Trustees,  and  Mortgagee,  to the effect that (1) the Trust,  as thus  removed,
remains a  validly-established  trust, (2) any amendments to the Trust Agreement
necessitated by such removal have been duly authorized,  executed, and delivered
and constitute  valid and binding  obligations  of such parties,  enforceable in
accordance  with  their  terms,   (3)  covering  such  other  matters  as  Owner
Participant,  the Pass-Through Trustees, or Mortgagee reasonably request, (e) if
such removal involves the replacement of Owner Trustee,  then Owner Participant,
the Pass-Through  Trustees, and Mortgagee shall receive an opinion of counsel to
such successor Owner Trustee, in form and substance  reasonably  satisfactory to
Owner  Participant,  the  Pass-Through  Trustees,  and  Mortgagee,  covering the
matters described in the opinion delivered pursuant to ss. 5.1.2(u)(4),  and (f)
Lessee shall  indemnify anD hold harmless Owner  Participant,  the Note Holders,
Pass-Through Trustees, FSB, and Owner Trustee, on a net after-tax basis, against
any and all reasonable  out-of-pocket costs and expenses  (including  attorneys'
fees  and   disbursements),   fees  and  expenses  of  any  new  owner  trustee,
registration,   recording,   or  filing  fees,   and  taxes  incurred  by  Owner
Participant,  the Note  Holders,  Pass-Through  Trustees,  or Owner  Trustee  in
connection with such change of situs.  Owner  Participant  agrees,  for Lessee's
benefit,  that Owner  Participant  will not consent to or direct a change in the
situs of the Trust Estate without Lessee's prior written consent.

     7.2.4 COMPLIANCE WITH LEASE PROVISIONS

     Owner Participant  agrees,  solely for Lessee's benefit, to comply with the
express provisions applicable to Owner Participant in the Lease.

     7.2.5 SECURITIES ACT

     Owner  Participant  will not directly or  indirectly  offer any  beneficial
interest or security  relating to the  ownership of the Aircraft or any interest
in the Trust Estate or any of the  Equipment  Notes or any other  interest in or
security  under the  Mortgage  for sale to, or solicit  any offer to acquire any
such  interest or security  from,  or sell any such interest or security to, any
Person  in  violation  of the  Securities  Act or  applicable  state or  foreign
securities  Laws,  PROVIDED,  that  this ss.  7.2.5  shall  not  impose on Owner
Participant  any  responsibility  with  respect  to any  such  offer,  sale,  oR
solicitation by any other party hereto.

     7.2.6 REGARDING OWNER TRUSTEE

     Owner  Participant  will direct  Owner  Trustee to perform its  obligations
under each Owner Trustee Agreement.

     7.3 FSB'S AND OWNER TRUSTEE'S COVENANTS

     FSB and Owner Trustee agree for the benefit of Lessee,  Owner  Participant,
each Note Holder, and Mortgagee as follows:

     7.3.1 LIENS

     FSB (a) will not directly or indirectly create, incur, assume, or suffer to
exist any Lessor Lien  attributable to it or Owner Trustee on all or any part of
the Trust Estate, the Collateral, or the Aircraft, (b) will, at its own cost and
expense,  promptly take such action as is necessary to discharge any Lessor Lien
attributable to FSB or Owner Trustee on all or any part of the Trust Estate, the
Collateral, or the Aircraft, and (c) will personally hold harmless and indemnify
Lessee,  Owner  Participant,   each  Note  Holder,   Mortgagee,  each  of  their
Affiliates,  successors,  and  permitted  assigns,  the  Trust  Estate,  and the
Collateral  from and against (1) any and all Expenses,  (2) any reduction in the
amount  payable  out  of the  Trust  Estate  or  the  Collateral,  and  (3)  any
interference with the possession,  operation, or other use of all or any part of
the Aircraft  imposed on, incurred by, or asserted  against any of the foregoing
as a consequence of any such Lessor Lien.

     7.3.2 OTHER BUSINESS

     Owner Trustee will not enter into any business or other activity  except as
contemplated by the Operative Agreements.

     7.3.3 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE

     FSB and Owner Trustee will give to Lessee, each Participant,  and Mortgagee
30 days' prior written  notice of any relocation of its chief  executive  office
(as defined in UCC Article 9), and will promptly take any action required by ss.
7.3.8 as a result of such relocation.

     7.3.4 SECURITIES ACT

     Neither  FSB nor  Owner  Trustee  will  directly  or  indirectly  offer any
beneficial interest or Security relating to the ownership of the Aircraft or any
interest in the Trust Estate or any of the Equipment Notes or any other interest
in or security  under the  Mortgage for sale to, or solicit any offer to acquire
any such  interest or security  from,  or sell any such interest or security to,
any Person in violation of the  Securities  Act or  applicable  state or foreign
securities Laws,  PROVIDED,  that the foregoing shall not impose on FSB or Owner
Trustee any responsibility with respect to any such offer, sale, or solicitation
by any other party hereto.

     7.3.5 PERFORMANCE OF AGREEMENTS

     Owner  Trustee  shall  perform  its  obligations  under the  Owner  Trustee
Agreements in accordance with the terms thereof.

     7.3.6 RELEASE OF LIEN OF MORTGAGE

     In each  instance  referred  to in the  Lease  in which a  transfer  of any
property is required to be made by Owner  Trustee to Lessee or any other  Person
(other than Mortgagee or Owner  Participant),  Owner Trustee shall,  at Lessee's
request and expense, use reasonable efforts to procure from Mortgagee the prompt
release of the Lien of the Mortgage with respect to such property.

     7.3.7 NOTICES; DOCUMENTS

     If any claim with respect to any liabilities is filed against Owner Trustee
and Owner  Trustee  has  Actual  Knowledge  thereof,  then Owner  Trustee  shall
promptly  notify  Lessee in writing  thereof.  Owner Trustee  further  agrees to
provide to Lessee promptly any documents  (including the certificate of aircraft
registration) that it receives from the FAA with respect to the Aircraft.

     7.3.8 FILINGS

     After the Delivery  Date,  Owner  Trustee shall duly execute and deliver to
Lessee all  filings and  recordings  (including  all  filings and UCC  financing
statements under the  Transportation  Code and the UCC and any amendments to UCC
financing  statements  necessitated  by any  relocation  of its chief  executive
office),  prepared  and  delivered  to it by Lessee,  required to perfect  Owner
Trustee's title to the Aircraft and the liens of and security  interests granted
by the Mortgage (or to maintain such perfection) and to make such title,  liens,
and security interests valid and enforceable.

     7.3.9 TRUST AGREEMENT

     FSB and Owner  Trustee  hereby (a) agree for the  benefit  of Lessee,  Loan
Participants,  and Mortgagee not to amend,  supplement,  terminate, or otherwise
modify any provision of the Trust  Agreement in a manner that adversely  affects
the rights of any such party  without the prior  written  consent of such party,
and (b) agree for the benefit of Lessee, Loan Participant,  and Mortgagee not to
revoke the trust created by the Trust Agreement so long as the Mortgage  remains
undischarged  or if such  revocation  would  have an  adverse  effect on Lessee.
Nothing in this  Agreement  shall impair any right under the Trust  Agreement of
FSB to resign as Owner  Trustee in accordance  with the  provisions of the Trust
Agreement.

     7.4 WTC'S COVENANTS

     WTC, Mortgagee, each Pass-Through Trustee, and Subordination Agent, each as
to itself, agree for the benefit of Lessee, Owner Participant, and Owner Trustee
as follows:

     7.4.1 LIENS

     Other than Liens arising in connection with the  transactions  contemplated
in the Operative  Agreements,  WTC (a) will not directly or  indirectly  create,
incur,  assume, or suffer to exist any Lessor Lien attributable to it on or with
respect to all or any part of the Trust Estate, the Collateral, or the Aircraft,
(b) will, at its own cost and expense, promptly take such action as is necessary
to discharge any Lessor Lien attributable to WTC on all or any part of the Trust
Estate, the Collateral,  or the Aircraft,  and (c) will personally hold harmless
and indemnify Lessee, Owner Participant,  each Note Holder, Owner Trustee,  each
of their respective  Affiliates,  successors,  and permitted assigns,  the Trust
Estate,  and the Collateral  from and against (1) any and all Expenses,  (2) any
reduction in the amount payable out of the Trust Estate or the  Collateral,  and
(3) any interference with the possession,  operation, or other use of all or any
part of the Aircraft,  imposed on,  incurred by, or asserted  against any of the
foregoing as a consequence of any such Lessor Lien.

     7.4.2 SECURITIES ACT

     WTC,  Mortgagee,   each  Pass-Through   Trustee,  and  Subordination  Agent
(respectively)  will not offer any beneficial  interest or Security  relating to
the  ownership of the Aircraft or any interest in the  Collateral  or any of the
Equipment Notes or any other interest in or security under the Mortgage for sale
to, or solicit any offer to acquire any such interest or security  from, or sell
any such interest or security to, any Person in violation of the  Securities Act
or applicable  state or foreign  securities Laws,  PROVIDED,  that the foregoing
shall not impose on WTC any responsibility with respect to any such offer, sale,
or solicitation by any other party hereto.

     7.4.3 PERFORMANCE OF AGREEMENTS

     WTC,  Mortgagee,   each  Pass-Through   Trustee,  and  Subordination  Agent
(respectively) shall perform its obligations under the Mortgage Agreements,  the
Pass-Through  Trustee  Agreements,  and the  Subordination  Agent  Agreements in
accordance with their terms.

     7.4.4 WITHHOLDING TAXES

     WTC shall  indemnify  (on an  after-tax  basis) and hold  harmless  Lessee,
Lessor,  and Owner Participant  against any United States withholding taxes (and
related interest,  penalties, and additions to tax) as a result of WTC's failure
to withhold  on  payments  to any Note Holder who does not provide to  Mortgagee
necessary certificates or forms to substantiate the right to exemption from such
withholding tax.

     7.5 NOTE HOLDERS' COVENANTS

     Each Note Holder (including Subordination Agent), as to itself only, agrees
for the benefit of Lessee,  Owner Participant,  Owner Trustee,  and Mortgagee as
follows:

     7.5.1 WITHHOLDING TAXES

     Such Note Holder (if it is a Non-U.S.  Person)  agrees to indemnify  (on an
after-tax  basis) and hold  harmless  Lessee,  Lessor,  Owner  Participant,  and
Mortgagee  against any United States  withholding  taxes (and related  interest,
penalties,  and additions to tax) as a result of the inaccuracy or invalidity of
any  certificate or form provided by such Note Holder to Mortgagee in connection
with such  withholding  taxes.  Any amount payable under this ss. 7.5.1 shall be
paid within 30 days after the pertinent  Note Holder  receives a written  demand
therefor.

     7.5.2 TRANSFER; COMPLIANCE

     (a) Such Note Holder will (1) not transfer any  Equipment  Note or interest
therein  in  violation  of the  Securities  Act or  applicable  state or foreign
securities  Law;  PROVIDED,  that the foregoing  provisions of this ss. 7.5.2(a)
shall not impose on such Note  Holder  any  responsibility  for any such  offer,
sale, or solicitation by any other party hereto, and (2) perform and comply with
the  obligations  specified  to be  imposed on it (as a Note  Holder)  under the
Mortgage and the Equipment Note.

     (b) Except as  otherwise  required by the terms of ss. 2.13 of the Mortgage
or ss. 11 hereof, such Note Holder will not sell, assign,  convEy,  exchange, or
otherwise transfer any Equipment Note or any interest in, or represented by, any
Equipment  Note  (this  provision  not  being  applicable  to  the  Pass-Through
Certificates)  unless the proposed  transferee thereof first provides Lessee and
Owner Participant with both of the following:

     (1) a written  representation  and covenant  that either (aa) no portion of
the funds it uses to purchase, acquire, and hold such Equipment Note or interest
directly or indirectly constitutes,  or may be deemed under the Code or ERISA or
any rulings,  regulations,  or court  decisions  thereunder to  constitute,  the
assets  of any Plan,  or (bb) the  transfer,  and  subsequent  holding,  of such
Equipment Note or interest shall not involve or give rise to a transaction  that
constitutes a prohibited transaction within the meaning of ERISA ss. 406 or CodE
ss. 4975(c)(1)  involving Lessee,  Owner  Participant,  a Pass-Through  Trustee,
Subordination  Agent, or the proposed  transferee (other than A transaction that
is exempted from the  prohibitions of such sections by applicable  provisions of
ERISA  or  the  Code  or   administrative   exemptions  or  regulations   issued
thereunder); and

     (2) a written  covenant that it will not transfer any Equipment Note or any
interest  in, or  represented  by, any  Equipment  Note  unless  the  subsequent
transferee  also makes the  representation  described  in clause (1) of this ss.
7.5.2(b) and agrees to comply with thiS clause (2).

     7.6 OTHER AGREEMENTS

     7.6.1 OWNER TRUSTEE IS OWNER FOR ALL PURPOSES

     Lessee,  Owner Participant,  and Owner Trustee agree that for all purposes,
after the Closing,  Owner Trustee will be the owner of the Aircraft (except that
Owner  Participant will be the owner for income tax purposes) and Lessee will be
the lessee  thereof.  No transfer,  by operation of Law or  otherwise,  of Owner
Participant's  beneficial  interest in and to the Trust Estate shall  operate to
transfer legal title to any part of the Trust Estate to any transferee thereof.

     7.6.2 COMMENCEMENT OF BANKRUPTCY PROCEEDINGS

     Lessee, each Participant,  each Note Holder,  FSB, Owner Trustee,  WTC, and
Mortgagee  agree for the benefit of each of the others that it will not commence
or join in any proceeding under the Bankruptcy Code to commence a case under ss.
303 of the Bankruptcy Code against the Trust Estate.  NothinG  contained  herein
shall be deemed  to  preclude  any  Participant,  any Note  Holder,  FSB,  Owner
Trustee, WTC, or Mortgagee from filing any claim against the Trust Estate in any
case commenced against the Trust Estate.

     7.6.3 CERTAIN BANKRUPTCY MATTERS

     If (a) all or any part of the Trust  Estate  becomes  the  property  of, or
Owner  Trustee  or  Owner   Participant   becomes,   a  debtor  subject  to  the
reorganization   provisions  of  the  Bankruptcy  Code,  (b)  pursuant  to  such
reorganization  provisions (including Bankruptcy Code ss. 1111(b)), FSB or OwneR
Participant is required, by reason of FSB's or Owner Participant's being held to
have recourse  liability to any Note Holder or Mortgagee  directly or indirectly
(other  than the  recourse  liability  of FSB or Owner  Participant  under  this
Agreement or the Mortgage or by separate agreement),  to make payment on account
of any amount payable as principal,  Make-Whole  Amount (if any),  interest,  or
other  amounts on the  Equipment  Notes,  and (c) any Note  Holder or  Mortgagee
actually  receives  any Excess  Amount (as defined  below)  which  reflects  any
payment by FSB or Owner  Participant on account of clause (b) of this paragraph,
then  such  Note  Holder  or  Mortgagee  shall  promptly  refund to FSB or Owner
Participant (whichever shall have made such payment) such Excess Amount.

     For purposes of this ss. 7.6.3,  "EXCESS  AMOUNT" means the amount by which
such payment  exceeds the amount that would have been  received by a NotE Holder
or Mortgagee if FSB or Owner  Participant had not become subject to the recourse
liability referred to in clause (b) of the preceding paragraph.  Nothing in this
ss. 7.6.3 shall prevent a Note Holder or Mortgagee  from  enforcing any personal
recourse  obligation  (and  retaining  the  proceeds  thereof)  oF FSB or  Owner
Participant under this Agreement (other than as referred to in clause (b) of the
preceding paragraph) or the Mortgage (including any exhibits or annexes thereto)
or from  retaining  any amount paid by Owner  Participant  under ss. 2.13 or ss.
4.03 of the Mortgage.

     7.6.4 QUIET ENJOYMENT; SALE BY OWNER TRUSTEE BINDING

     (a) Each of Owner  Participant,  each Pass-Through  Trustee,  Subordination
Agent, each Note Holder,  Owner Trustee, and Mortgagee agrees (as to itself) for
the benefit of Lessee that, unless a Lease Event of Default exists,  such Person
shall not interfere (and shall not permit any Affiliate or other Person claiming
by,  through,  or under it to interfere) with Lessee's rights in accordance with
the Lease to the quiet enjoyment, possession, and use of the Aircraft during the
Term.

     (b) Any assignment,  sale, transfer, or other conveyance of the Aircraft by
Owner  Trustee made  pursuant to the terms of this  Agreement or the Lease shall
bind Owner Participant,  and shall be effective to transfer or convey all right,
title,  and  interest  of Owner  Trustee  and  Owner  Participant  in and to the
Aircraft.  No purchaser or other  grantee shall be required to inquire as to the
authorization,  necessity,  expediency, or regularity of such assignment,  sale,
transfer, or conveyance,  or as to the application of any sale or other proceeds
with respect thereto by Owner Trustee, as regards Owner Participant.

     7.6.5 RELEASE OF LIEN OF MORTGAGE

     Each of Lessee, Lessor, and Mortgagee agrees that in each instance referred
to in the Lease in which a transfer  of any  property  is required to be made by
Lessor to Lessee or any other Person (other than  Mortgagee),  Mortgagee  shall,
upon request of Lessor and  compliance  with the  applicable  provisions  of the
Lease and the Mortgage (including payment of all amounts then due and payable to
each Liquidity Provider and the Policy Provider as Supplemental Rent),  promptly
execute (at Lessee's  cost and  expense)  such  instruments  as Lessor or Lessee
reasonably  requests to evidence the release of the Lien of the Mortgage on such
property.

     7.6.6 NON-RECOURSE

     Loan  Participant and Mortgagee agree that (a) obligations of Owner Trustee
under the  Mortgage or any other  Operative  Agreement  and with  respect to the
Equipment Notes shall be  non-recourse to Owner  Participant and to FSB, and (b)
they will look solely to the income and  proceeds  from the Trust Estate and the
Collateral to the extent  available for distribution to Note Holder or Mortgagee
as  provided in the  Mortgage,  and neither  Owner  Participant  nor FSB will be
personally  liable to Loan  Participant or Mortgagee for any amounts  payable by
Owner Trustee  under the Mortgage or any other  Operative  Agreement;  PROVIDED,
that the  foregoing  is not  intended  nor  shall it be  construed  to limit any
recourse liability of Owner Participant or FSB to the extent that such liability
is expressly set forth in this  Agreement or in any of the Operative  Agreements
or arises by reason of the breach of any  representation or warranty or covenant
given by such Person (in the case of FSB, in its individual capacity).

     7.6.7 OTHER DOCUMENTS; AMENDMENT

     (a) Each of Owner  Participant  and Owner  Trustee  hereby  agrees  for the
benefit  of  Lessee,  the  Loan  Participants,   and  Mortgagee  not  to  amend,
supplement, or otherwise modify any provision of the Trust Agreement in a manner
that could  adversely  affect such party,  without the prior written  consent of
such party.  Notwithstanding  the  foregoing,  so long as the Lease has not been
terminated or expired,  each  Participant,  Mortgagee,  and Owner Trustee hereby
agree for the benefit of Lessee that,  without Lessee's  consent,  they will not
amend,  supplement,  or  otherwise  modify (1) ss. 3, ss. 9, or ss.  2.05 of the
Mortgage,  (2) any  provision of any  Operative  Agreement  that will affect the
stated principal amount of or premium or interest on the Equipment Notes, or (3)
any other  provision of the  Mortgage or Equipment  Notes in a manner that could
adversely  affect Lessee.  Mortgagee and Owner Trustee agree to furnish promptly
to Lessee copies of any supplement, amendment, waiver, or modification of any of
the Operative  Agreements to which Lessee is not a party.  Each Loan Participant
agrees  that it will not take any  action in respect  of the  Collateral  except
through  Mortgagee  pursuant  to  the  Mortgage  or as  otherwise  permitted  by
Mortgage.

     (b) Owner  Trustee  agrees to join with Lessee to the extent that action on
its part is  necessary  or  appropriate  (1) to cause the  following  to be duly
accomplished in accordance with applicable United States federal Law by the time
the Aircraft is delivered  under this Agreement and the Lease:  (aa) to apply to
register  the  Aircraft in Owner  Trustee's  name,  and (bb) all related  action
necessary  in order for  Lessee to have  temporary  or  permanent  authority  to
operate the  Aircraft  as  contemplated  by the Lease,  and (2)  forthwith  upon
delivery  of the  Aircraft  under this  Agreement  and the  Lease,  to cause all
necessary documents to be duly filed for recording in accordance with applicable
United States federal Law.

     7.6.8 CONSENTS

     Each of each Participant,  each Pass-Through Trustee,  Subordination Agent,
Owner Trustee, and Mortgagee covenants and agrees, for Lessee's benefit, that it
shall not unreasonably withhold its consent to any consent or approval requested
of it or of Owner  Trustee or Mortgagee  under the terms of any of the Operative
Agreements which by its terms is not to be unreasonably withheld.

     7.6.9 INSURANCE

     Each of Owner Participant, the Pass-Through Trustees,  Subordination Agent,
and Owner Trustee agrees not to obtain or maintain insurance for its own account
as permitted by ss. 11.2 of the Lease if such  insurance  would limit,  increase
the cost of,  or  otherwise  adversely  affect  the  coverage  of anY  insurance
required to be obtained or maintained  by Lessee  pursuant to ss. 11 and Annex D
of the Lease.

     7.6.10 EXTENT OF NOTE HOLDER'S INTEREST

     A Note Holder  shall not, as such,  have any further  interest in, or other
right  with  respect  to,  the Trust  Estate or the  Collateral  when and if the
principal and  Make-Whole  Amount (if any) of and interest on the Equipment Note
held by such Note Holder,  and all other sums, then due and payable to such Note
Holder under any Operative Agreement, have been paid in full.

     7.6.11 FOREIGN REGISTRATION

     (a) Each  Participant,  Owner  Trustee,  and  Mortgagee  hereby  agree  for
Lessee's  benefit  that,  subject  to ss.  7.1.2 of the Lease,  LesseE  shall be
entitled to register the Aircraft or cause the  Aircraft to be  registered  in a
country other than the United States, if:

     (1) such registration is made only after the Tax Attribute  Period,  unless
Lessee prepays on a lump-sum basis any liability that would be due under the Tax
Indemnity  Agreement as a result of such registration  based upon the assumption
that such  registration  would  continue  for the  remainder  of the term of the
Permitted Sublease described in clause (3) below;

     (2) no Special Default or Lease Event of Default exists at the time of such
registration;

     (3) such  proposed  change of  registration  is made in  connection  with a
Permitted  Sublease  to a  Permitted  Air  Carrier,  and  such  country  is such
Permitted Air Carrier's domicile;

     (4) such country is a country with which the United  States then  maintains
normal  diplomatic  relations  (or, if Taiwan,  the United States then maintains
diplomatic  relations at least as good as those in effect on the Delivery  Date,
PROVIDED  that Lessee may not effect such  registration  in Taiwan unless it has
obtained the prior written consent of Owner Participant, which Owner Participant
may withhold in its sole and absolute discretion); and

     (5) Owner Participant,  Owner Trustee,  and Mortgagee receive an opinion of
counsel  (subject to  customary  exceptions)  reasonably  satisfactory  to Owner
Participant (and, while the Policy is in effect, the Policy Provider), addressed
to each such party, to the effect that:

     (aa) such country  recognizes  Owner  Trustee's  ownership  interest in the
Aircraft;

     (bb) Lessee's obligations,  and Owner Trustee's rights and remedies,  under
the  Lease  are  valid,   binding,  and  enforceable  under  the  laws  of  such
jurisdiction;

     (cc)  after  giving  effect  to such  change  in  registration,  (x)  Owner
Trustee's title continues as a valid and protected interest, (y) the Lien of the
Mortgage on Owner Trustee's  right,  title,  and interest in and to the Aircraft
and the Lease  continue as a valid and  duly-perfected  first-priority  security
interest,  and (z) all filing,  recording,  or other action necessary to protect
those matters addressed in (x) and (y) above have been accomplished (or, if such
opinion  cannot be given at the time of such  proposed  change  in  registration
because such change in registration is not yet effective,  (1) the opinion shall
detail what  filing,  recording,  or other  action is  necessary,  and (2) Owner
Participant, Owner Trustee and Mortgagee shall receive a certificate from Lessee
that all possible preparations to accomplish such filing,  recording,  and other
action are done, and such filing,  recording, and other action are accomplished,
and  a  supplemental  opinion  to  that  effect  shall  be  delivered  to  Owner
Participant,  Owner Trustee and Mortgagee  promptly  after the effective date of
such change in registration;

     (dd)  it is not  necessary,  solely  as a  consequence  of such  change  in
registration  and without  giving effect to any other activity of Owner Trustee,
Owner Participant,  or Mortgagee (or any Affiliate thereof),  for Owner Trustee,
Owner Participant, or Mortgagee (respectively) to qualify to do business in such
jurisdiction  as a result of such  reregistration  or in order to  exercise  any
rights or remedies with respect to the Aircraft pursuant to the Lease;

     (ee) there is no tort  liability  of the owner or lessor of an aircraft not
in possession thereof under the laws of such jurisdiction (it being agreed that,
if  such  latter  opinion  cannot  be  given  in a form  satisfactory  to  Owner
Participant,  such opinion shall be waived if insurance reasonably  satisfactory
to Owner Participant is provided to cover such risk); and

     (ff)  unless  Lessee  agrees  to  provide  insurance  covering  the risk of
requisition of use of the Aircraft by the government of such country (so long as
the Aircraft is  registered  under the laws of such  country),  the laws of such
country  require fair  compensation by the government of such country payable in
currency freely  convertible into Dollars and freely removable from such country
(without  license or permit,  unless Lessee before such proposed  reregistration
has  obtained  such  license or permit)  for the taking or  requisition  by such
government of such use.

     (b) In addition,  as a condition  precedent to any change in  registration,
Lessee  shall give to Owner  Participant  and  Mortgagee  assurances  reasonably
satisfactory to each of them:

     (1) that the provisions ofss. 11 of the Lease have been complied with after
giving effect to such change of registration;

     (2)  of  Lessee's  payment,  on  an  after-tax  basis,  of  all  reasonable
out-of-pocket expenses of Lessor, each Participant,  and Mortgagee in connection
with  such  change  of  registry,   including  (aa)  the  reasonable   fees  and
disbursements of counsel to Lessee,  Lessor,  and Mortgagee,  (bb) any filing or
recording  fees,  Taxes,  or similar  payments  incurred in connection  with the
change of  registration  of the Aircraft and the creation and  perfection of the
security interest therein in favor of Mortgagee for the benefit of Note Holders,
and  (cc) all  costs  and  expenses  incurred  in  connection  with any  filings
necessary  to  continue  in the United  States the  perfection  of the  security
interest in the Aircraft and the Lease in favor of Mortgagee  for the benefit of
Note Holders; and

     (3) that the tax and other  indemnities in favor of each Person named as an
indemnitee  under  any other  Operative  Agreement  afford  to each such  Person
substantially the same protection as provided before such change of registration
(or Lessee agrees to provide,  or cause to be provided,  additional  indemnities
that,  together with such original  indemnities,  in the reasonable  judgment of
Owner Participant, Lessor, and Mortgagee, afford such protection).

     7.6.12 OTHER COMMERCIAL RELATIONS UNAFFECTED

     Notwithstanding  anything  to the  contrary  set  forth  in  any  Operative
Agreement:

     (a) except as set forth in the Purchase  Agreement  Assignment,  nothing in
the Operative  Agreements shall constitute or be deemed to be a waiver by Lessee
of any rights,  remedies, or claims it may have against Airframe Manufacturer or
Engine  Manufacturer  or any  subcontractor  or  supplier  of  either;  and  the
Operative  Agreements  do not and shall not be construed or deemed to create any
rights, waivers,  immunities,  or indemnities in favor of Airframe Manufacturer,
Engine Manufacturer,  or any subcontractor or supplier of either with respect to
any such rights, remedies, or claims of Lessee; and

     (b) neither  Airframe  Manufacturer,  by its  execution and delivery of the
Consent and Agreement, nor Engine Manufacturer, by its execution and delivery of
the Engine Manufacturer  Warranty Agreement,  shall be deemed to have waived any
rights,  remedies,  or claims which Airframe Manufacturer or Engine Manufacturer
(or any  subcontractor  or  supplier  of either)  has  against  Lessee;  and the
Operative  Agreements  do not and shall not be construed or deemed to create any
rights, waivers,  immunities,  or indemnities in favor of Lessee with respect to
any such  rights,  remedies,  or  claims  of  Airframe  Manufacturer  or  Engine
Manufacturer (or any subcontractor or supplier of either).

     7.6.13 INTEREST IN CERTAIN ENGINES

     Each  Participant,  Owner Trustee,  and Mortgagee agree, for the benefit of
each  lessor,  conditional  seller,  or secured  party of any airframe or engine
leased to, purchased by, or owned by Lessee or any Permitted  Sublessee  subject
to a lease,  conditional  sale,  or other  security  agreement  that it will not
acquire or claim, as against such lessor,  conditional seller, or secured party,
any right, title, or interest in any engine as the result of the installation of
such  engine on the  Airframe  at any time while such  engine is subject to such
lease, conditional sale, or other security agreement and owned by such lessor or
conditional  seller or subject to a security  interest in favor of such  secured
party.

     8. CONFIDENTIALITY

     Lessee, Owner Participant, Note Holders, Owner Trustee, and Mortgagee shall
keep  Annexes  B,  C,  and D and  Schedules  1, 2, 3,  and 4 to the  Lease,  the
Participation  Agreement,  the  Purchase  Agreement  Assignment,   and  the  Tax
Indemnity Agreement confidential,  and shall not disclose them, or cause them to
be disclosed, to any Person, except (a) to prospective and permitted transferees
of Lessee's,  Owner Participant's,  a Note Holder's,  each Liquidity Provider's,
Policy Provider's, Owner Trustee's,  Mortgagee's, or other Mortgage Indemnitee's
interest or their counsel,  independent  insurance brokers,  auditors,  or other
agents who agree to hold such information  confidential,  (b) to Lessee's, Owner
Participant's,  a Note Holder's, each Liquidity Provider's, Policy Provider's, a
Pass-Through  Trustee's,  Owner  Trustee's,   Mortgagee's,   or  other  Mortgage
Indemnitee's counsel,  independent insurance brokers, auditors, or other agents,
Affiliates, or investors who agree to hold such information confidential, (c) as
may be required by any statute,  court, or administrative order or decree, legal
process, or governmental ruling or regulation, including those of any applicable
insurance  regulatory  bodies  (including the National  Association of Insurance
Commissioners),  federal or state banking  examiners,  Internal  Revenue Service
auditors,  or  any  stock  exchange,  (d)  with  respect  to  Lessee  and  Owner
Participant,  by mutual  agreement of such  parties,  (e) with respect to a Note
Holder or any Pass-Through Trustee, to a nationally-recognized rating agency for
the purpose of  obtaining a rating on the  Equipment  Notes or the  Pass-Through
Trust  Certificates or to support an NAIC rating for the Equipment Notes, or (f)
to such other Persons as are reasonably deemed necessary by the disclosing party
in order to protect the interests of such party or for the purposes of enforcing
such documents by such party;  PROVIDED,  that any and all disclosures permitted
by  clauses  (c),  (d),  (e),  and (f) above  shall be made  only to the  extent
necessary to meet the specific  requirements or needs of the Persons making such
disclosures.

     9. INDEMNIFICATION AND EXPENSES

     9.1 GENERAL INDEMNITY

     9.1.1 INDEMNITY

     Whether  or not  any of the  Transactions  are  consummated,  Lessee  shall
indemnify, protect, defend, and hold harmless each Indemnitee from, against, and
in respect of, and shall pay on a net after-tax  basis,  any and all Expenses of
any kind or nature whatsoever,  including those imposed on, incurred or suffered
by, or asserted  against any Indemnitee,  relating to, based on, resulting from,
or arising out of or in connection  with,  in each case directly or  indirectly,
any one or more of the following:

     (a)  the  Operative  Agreements,   the  Pass-Through  Agreements,   or  the
enforcement  of any of the  terms  of  any of the  Operative  Agreements  or the
Pass-Through Agreements;

     (b) the Aircraft,  the Airframe,  any Engine, or any Part, including,  with
respect   thereto,   (1)  the   manufacture,   design,   purchase,   acceptance,
nonacceptance,     rejection,    ownership,    registration,     reregistration,
deregistration,  delivery, nondelivery, lease, sublease, assignment, possession,
use, non-use,  operation,  maintenance,  testing, repair,  overhaul,  condition,
alteration,   modification,   addition,  improvement,   storage,  airworthiness,
replacement,  repair, sale, substitution,  return,  abandonment,  redelivery, or
other  disposition  of the Aircraft,  any Engine,  or any Part, (2) any claim or
penalty  arising out of  violations  of  applicable  Laws,  (3) tort  liability,
whether or not arising out of the negligence of any Indemnitee  (whether active,
passive,  or imputed,  and including  strict  liability  and  liability  without
fault),  (4) death or property damage of passengers,  shippers,  or others,  (5)
environmental control, noise, or pollution, (6) any claim for patent, trademark,
or  copyright  infringement  and (7) any Liens in respect of the  Aircraft,  any
Engine, or any Part;

     (c) the offer,  sale,  or delivery  of any  Equipment  Notes,  Pass-Through
Certificates, or any interest therein or represented thereby; and

     (d)  any  breach  of or  failure  to  perform  or  observe,  or  any  other
noncompliance with, any covenant, agreement, or other obligation to be performed
by Lessee under any Lessee Operative Agreement,  or any Pass-Through  Agreement,
or the  falsity  of any  representation  or  warranty  of Lessee  in any  Lessee
Operative  Agreement  or any  Pass-Through  Agreement,  other  than  in the  Tax
Indemnity Agreement.

                        9.1.2                         EXCEPTIONS

            Notwithstanding  anything in ss. 9.1.1, Lessee shall not be required
to indemnify,  protect, defend, and hold harmless any Indemnitee pursuant tO ss.
9.1.1 against any Expense of such Indemnitee:

     (a) for any  Taxes  or a loss of Tax  benefit,  whether  or not  Lessee  is
required  to  indemnify  therefor  pursuant  to ss.  9.3 or  the  TaX  Indemnity
Agreement  (other than amounts  required to be paid to render the payment of any
Expense payable under ss. 9.1.1 on aN after-tax basis);

     (b) except to the extent  attributable  to acts or events  occurring  prior
thereto,  acts  or  events  (other  than  acts or  events  related  to  Lessee's
performance  of its  obligations  pursuant to the terms of the Lessee  Operative
Agreements) that occur after: (1) with respect to the Airframe,  any Engine,  or
any Part, the return of possession  (which, if the Aircraft is placed in storage
as provided  inss.  5 of the Lease,  is the date that the  Aircraft is placed in
storage) of such  Airframe,  Engine,  or Part  pursuant to the Lease (other than
pursuant toss. 15 thereof,  in which case Lessee's  liability under thisss.  9.1
shall  survive  for so long as Lessor iS entitled  to  exercise  remedies  under
suchss.  15 or in  connection  with Lessee in the event of exercise of its early
termination option underss. 9 of the Lease or its purchase options underss. 17.3
of the Lease), and (2) the termination of the Term in accordance witH the Lease;

     (c) to the extent  attributable to any Transfer  (voluntary or involuntary)
by or on behalf of such  Indemnitee of any Equipment  Note or interest  therein,
except (1) for out-of-pocket costs and expenses incurred as a result of any such
Transfer  pursuant to the  exercise of remedies  under any  Operative  Agreement
resulting  from a Lease Event of Default,  and (2) as otherwise  required by the
terms of ss. 2.15 of the Mortgage or ss. 11 hereof;

     (d) to the extent  attributable to any Transfer  (voluntary or involuntary)
by or on behalf of Owner  Participant  of any  interest  in the  Aircraft or the
Trust Estate,  except for out-of-pocket  costs and expenses incurred as a result
of such  Transfer  during  the  existence  of a Lease  Event of  Default  (or in
connection with Lessee in the event of exercise of its early termination  option
under ss. 9 of the Lease or its purchase options under ss. 17.3 of the Lease);

     (e)  to  the  extent  attributable  to  the  gross  negligence  or  willful
misconduct  of such  Indemnitee  or any related  Indemnitee  (as defined  below)
(other than gross  negligence  or willful  misconduct  imputed to such Person by
reason of its interest in the Aircraft or any Operative Agreement);

     (f) in the case of FSB, to the extent attributable to matters enumerated in
the proviso toss. 14;

     (g) to the  extent  attributable  to the  incorrectness  or  breach  of any
representation  or  warranty  of  such  Indemnitee  or  any  related  Indemnitee
contained in or made  pursuant to any  Operative  Agreement or any  Pass-Through
Agreement;

     (h) to the extent  attributable  to the failure,  by such Indemnitee or any
related Indemnitee, to perform or observe any agreement,  covenant, or condition
on its part to be  performed  or  observed  in any  Operative  Agreement  or any
Pass-Through Agreement;

     (i) to the extent  attributable  to the offer or sale by such Indemnitee or
any related Indemnitee of any interest in the Aircraft, the Equipment Notes, the
Pass-Through Trust  Certificates,  the Trust Estate, or the Trust Agreement,  or
any similar  interest,  in violation of the Securities  Act or other  applicable
federal, state, or foreign securities Laws (other than any thereof caused by the
acts or omissions of Lessee or any person acting on behalf of Lessee);

     (j) (1) with  respect  to  Mortgagee,  to the  extent  attributable  to its
negligence  or willful  misconduct  in the  distribution  of funds  received and
distributable  by it in accordance with the Mortgage,  (2) with respect to Owner
Trustee,  to the extent  attributable to its negligence or willful misconduct in
the  distribution of funds received and  distributable  by it in accordance with
the Trust  Agreement,  (3) with respect to  Subordination  Agent,  to the extent
attributable  to its  negligence or willful  misconduct in the  distribution  of
funds  received and  distributable  by it in accordance  with the  Intercreditor
Agreement,  (4)  with  respect  to the  Pass-Through  Trustees,  to  the  extent
attributable  to its  negligence or willful  misconduct in the  distribution  of
funds received and distributable by it in accordance with the Pass-Through Trust
Agreements,  (5) with respect to Escrow Agent, to the extent attributable to its
negligence or willful misconduct in the payment of funds received and payable by
it in accordance with any Escrow Agreement,  (6) with respect to Depository,  to
the extent  attributable to  Depository's  failure to pay funds payable by it in
accordance with any Deposit Agreement,  and (7) with respect to Paying Agent, to
the  extent  attributable  to  its  negligence  or  willful  misconduct  in  the
distribution  of funds received and  distributable  by it in accordance with any
Escrow Agreement,

     (k) other than during the  existence  of a Lease  Event of Default,  to the
extent  attributable to the authorization or giving or withholding of any future
amendments,  supplements,  waivers,  or consents  with respect to any  Operative
Agreement  or  Pass-Through  Agreement,  other than any  requested  by Lessee or
required  by or made  pursuant  to the  terms  of the  Operative  Agreements  or
Pass-Through  Agreements (unless such requirement results from the actions of an
Indemnitee  not required by or made pursuant to the Operative  Agreements or the
Pass-Through Agreements);

     (l) to the extent attributable to any amount which any Indemnitee expressly
agrees to pay or such  Indemnitee  expressly  agrees  shall not be paid by or be
reimbursed by Lessee;

     (m) to the extent that it is an ordinary  and usual  operating  or overhead
expense of such Indemnitee;

     (n) with  respect to Owner  Participant  or Owner  Trustee,  or any related
Indemnitee,  to the extent  attributable to the  deregistration  of the Aircraft
under the Transportation  Code as a result of the failure of such Person (or any
related  Indemnitee  of such  Person) to be a Citizen of the United  States as a
result of any act (other than  reregistration  of the  Aircraft  pursuant to ss.
7.1.2  of thE  Lease)  of Owner  Participant  or Owner  Trustee  or any  related
Indemnitee of such Person (not taken at the request of Lessee);

     (o) for any Lessor  Lien  attributable  to such  Indemnitee  or any related
Indemnitee;

     (p) to the extent constituting principal, Make-Whole Amount, or interest on
the  Equipment  Notes  attributable  solely to a Mortgage  Event of Default  not
constituting a Lease Event of Default; or

     (q) to the extent incurred by or asserted  against an Indemnitee other than
Owner  Participant (but without limiting the other provisions of this ss. 9.1.2,
including  clauses  (g) and (h),  as to Owner  Participant)  as a result  of any
"prohibited  transaction",  within  thE  meaning  of ERISA  ss.  406 or Code ss.
4975(c)(1).

     With respect to the Pass-Through  Indemnitees,  Lessee's  obligations under
this ss. 9.1 shall be limited to the same extent that Lessee'S  obligations  are
limited in clause (5) of the  definition  of  Supplemental  Rent.  In  addition,
"Expenses"  payable  by Lessee  pursuant  to this ss. 9.1 shall bE deemed not to
include  amounts  payable under clauses (2), (3), (4), and (5) of the definition
of Supplemental Rent in the Lease, the "Lease" for any other "Leased  Aircraft",
or the third  paragraph of ss. 2.02 of any "Owned Aircraft  Indenture"  (each as
defined  in the Note  Purchase  Agreement),  in each  case,  assuming  each such
definition or third  paragraph is in the form attached as Exhibit A-1 or C-2, as
the case may be, to the Note  Purchase  Agreement as originally in effect (which
amounts shall be payable as  Supplemental  Rent or  "Supplemental  Rent" under a
"Lease", or pursuant to ss. 2.02 of the Mortgage, aS applicable).

            For  purposes  of this ss.  9.1,  a Person  shall  be  considered  a
"related Indemnitee" of an Indemnitee if that Person is an Affiliate or employer
oF such Indemnitee, a director,  officer,  employee, or agent of such Indemnitee
or any such  Affiliate,  or a  successor  or  permitted  assignee  of any of the
foregoing;  PROVIDED,  that  Owner  Trustee  and FSB  shall  not be deemed to be
related  Indemnitees  of Owner  Participant  merely  because  of their  trust or
fiduciary relationships.

     9.1.3 SEPARATE AGREEMENT

     This  Agreement  constitutes  a  separate  agreement  with  respect to each
Indemnitee, and is enforceable directly by each such Indemnitee.

     9.1.4 NOTICE

     If an Indemnitee makes a claim for any Expense indemnifiable under this ss.
9.1,  such  Indemnitee  shall  give  prompt  written  notice  thereof tO Lessee.
Notwithstanding  the  foregoing,  any  Indemnitee's  failure to notify Lessee as
provided in this ss. 9.1.4,  or in ss. 9.1.5,  shall not release Lessee fRom any
of its obligations to indemnify such Indemnitee hereunder,  except to the extent
that such  failure  results in an  additional  Expense to Lessee (in which event
Lessee  shall not be  responsible  for such  additional  expense) or  materially
impairs Lessee's ability to contest such claim.

     9.1.5 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS


     (a) If any action,  suit,  or  proceeding  for which Lessee is  responsible
under this ss. 9.1 is brought  against any  Indemnitee,  such  Indemnitee  shall
notify  Lessee of the  commencement  thereof,  and Lessee may,  at its  expense,
participate in and, to the extent that it so desires  (subject to the provisions
of the following paragraph),  assume and control its defense and, subject to ss.
9.1.5(c),  settle or compromise it. Unless OwneR  Participant  agrees in writing
otherwise, no settlement of any claim hereunder may require Owner Participant to
agree to any remedy  apart from the  payment  of money  damages  (for which such
payment of money damages Lessee will in any event indemnify the Indemnitees).

     (b) Lessee or its insurer(s) shall have the right, at its or their expense,
to investigate or, if Lessee or its insurer(s) agree not to dispute liability to
the Indemnitee giving notice of such action,  suit, or proceeding under this ss.
9.1.5 for indemnification  hereunder or under anY insurance policies pursuant to
which  coverage  is sought,  control  the  defense  of,  any  action,  suit,  or
proceeding, relating to any Expense for which indemnification is sought pursuant
to this  ss.  9.1,  and each  Indemnitee  shall  cooperate  with  Lessee  or its
insurer(s) with respect thereto;  PROVIDED, thaT Lessee shall not be entitled to
control the defense of any such action,  suit,  or  proceeding,  or to settle or
compromise  any such  Expense,  (i) while any Special  Default or Lease Event of
Default  under ss. 14.1 of the Lease  exists,  or (ii) if such action,  suit, or
proceeding will involve a material risk of thE sale, forfeiture,  or loss of, or
the  creation of any Lien (other than a  Permitted  Lien) on the  Aircraft,  the
Trust  Estate,  or any part  thereof,  unless Lessee shall have posted a bond or
other security or collateral  satisfactory to Owner Participant and Mortgagee in
respect to such risk, or (iii) if such action,  suit, or proceeding could in the
good faith opinion of such Indemnitee  entail any risk of criminal  liability or
material  civil  liability  or present a conflict  of interest  making  separate
representation  necessary. In connection with any such Lessee-controlled action,
suit,  or  proceeding,  such  Indemnitee  shall  have the  right to  participate
therein, at its sole cost and expense,  with counsel reasonably  satisfactory to
Lessee,  provided  that  such  Indemnitee's   participation  does  not,  in  the
reasonable  opinion  of the  independent  counsel  appointed  by  Lessee  or its
insurers to conduct such proceedings, interfere with the defense of such case.

     (c) In no event  shall any  Indemnitee  enter  into a  settlement  or other
compromise  with respect to any Expense  without  Lessee's prior written consent
(which shall not be  unreasonably  withheld or delayed),  unless such Indemnitee
waives its right to be  indemnified  with respect to such Expense under this ss.
9.1.

     (d) To the extent that any Expense  indemnified by Lessee  hereunder may be
covered by insurance maintained by Lessee, at Lessee's expense,  each Indemnitee
agrees  to  cooperate  with the  insurers  in the  exercise  of their  rights to
investigate, defend, or compromise that Expense as may be required to retain the
benefits of the insurance for that Expense.

     (e) If an Indemnitee is not a party to this  Agreement,  Lessee may require
that  Indemnitee  to agree in  writing  to the terms of this ss. 9 and ss.  15.8
before making any payment to such Indemnitee under this ss. 9.

     (f)  Nothing  herein  shall be  deemed  to be an  assumption  by  Lessee of
obligations  of Owner  Trustee with respect to, or a guarantee by Lessee of, any
amounts  payable by Owner  Trustee  upon  Equipment  Notes or a guarantee of any
residual value of the Aircraft.

     (g) Nothing in this ss. 9.1.5 shall  require an  Indemnitee  to contest any
Expense or to assume  responsibility  for or control of any judicial  proceeding
with respect thereto.

     9.1.6 INFORMATION

     Lessee will  provide the  relevant  Indemnitee  with such  information  not
within the control of such  Indemnitee  (but in Lessee's  control or  reasonably
available  to  Lessee)  which  such  Indemnitee  reasonably  requests,  and will
otherwise  cooperate  with such  Indemnitee  so as to enable such  Indemnitee to
fulfill its  obligations  under ss. 9.1.5 and to control or  participate  in any
proceeding to the extent  permitted by ss. 9.1.5.  The  IndemniTee  shall supply
Lessee  with such  information  not  within the  control of Lessee  (but in such
Indemnitee's  control or reasonably  available to such Indemnitee)  which Lessee
reasonably  requests to control or  participate  in any proceeding to the extent
permitted by ss. 9.1.5.

     9.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER ASSURANCES

     Upon  payment in full by or on behalf of Lessee of any  indemnity  provided
for under this  Agreement,  without  any  further  action and to the full extent
permitted by Law,  Lessee will be  subrogated  to all rights and remedies of the
Person  indemnified  (other  than  with  respect  to  any of  such  Indemnitee's
insurance  policies or in connection with any indemnity claim of such Indemnitee
under  ss.  5.03 or ss.  7 of the  Mortgage  or ss.  5.3 or ss.  7 of the  Trust
Agreement) in respect of the matter as to which such  indemnity  was paid.  Each
Indemnitee  will give such further  assurances or agreements  and cooperate with
Lessee to permit  Lessee to pursue any such  claims,  to the  extent  reasonably
requested by Lessee and at Lessee's expense.

     9.1.8 REFUNDS

     If an Indemnitee  receives any refund, in whole or in part, with respect to
any  Expense  paid by or on behalf of Lessee  hereunder,  that  Indemnitee  will
promptly  pay the  amount  refunded  (but not an amount in excess of the  amount
Lessee or any of its  insurers  has paid in  respect  of such  Expense)  over to
Lessee unless a Lease Event of Default  exists,  in which case such amount shall
be paid over to Owner Trustee (or, if the Mortgage has not been  discharged,  to
Mortgagee)  to hold as  security  for  Lessee's  obligations  under  the  Lessee
Operative  Agreements  or, if  requested  by Lessee,  applied  to satisfy  those
obligations. Any subsequent loss of such recovery or tax benefit or refund shall
be subject to the provisions of ss. 9.1 and ss. 9.3.

     9.2 EXPENSES

     9.2.1 INVOICES AND PAYMENT

     Each of Owner  Trustee,  Mortgagee,  Owner  Participant,  the  Pass-Through
Trustees, and Subordination Agent shall promptly submit to Lessee for its prompt
approval  (which  shall not be  unreasonably  withheld)  copies of  invoices  in
reasonable  detail of the  Transaction  Expenses for which it is responsible for
providing  information  as they are  received  (and not later  than the 90th day
after the Delivery Date). If so submitted and approved, Owner Participant agrees
promptly  (and not later than the later of (i) the 105th day after the  Delivery
Date and (ii) the  tenth  Business  Day  following  such  approval)  to pay such
Transaction Expenses . Notwithstanding the foregoing,  Lessee at its sole option
shall have the right to pay directly any and all Transaction Expenses payable to
Lessee  Advisor  or  Lessee's  counsel  or (if such  payment  does not result in
adverse tax  consequences to Owner  Participant)  to any other Person.  If Owner
Participant  fails to pay any  Transaction  Expense  that it is obligated to pay
hereunder, Lessee shall pay such Transaction Expense. Any such payment by Lessee
shall not affect Owner  Participant's  obligations  or Lessee's  rights  against
Owner Participant for its failure to make any such payment.

     9.2.2 PAYMENT OF OTHER EXPENSES

     Lessee  shall pay (a) the ongoing  fees and  expenses of Owner  Trustee and
Mortgagee,  and (b) all reasonable  out-of-pocket  costs and expenses (including
the reasonable fees and  disbursements  of counsel)  incurred by any Participant
attributable  to (1)  any  transfer  of  title  to the  Aircraft  or any  Engine
contemplated  by  ss.  4.5 of  the  Lease,  or (2)  any  waiver,  amendment,  or
modification of any Operative Agreement to the extent requested by Lessee.

     9.2.3 INDEMNIFICATION INTEREST

     Lessee will pay to each Indemnitee upon demand,  to the extent permitted by
applicable  Law,  interest at the Past Due Rate on any amount of  indemnity  not
paid when due pursuant to this ss. 9 until the same shall be paid.

     9.3 GENERAL TAX INDEMNITY

     9.3.1 GENERAL

     Except as provided in ss.  9.3.2,  Lessee  agrees that each payment of Rent
paid by Lessee pursuant to the Lease, and any other payment or indemnitY paid by
Lessee to a Tax Indemnitee under any Operative  Agreement,  shall be free of all
withholdings or deductions with respect to Taxes of any nature, and if Lessee is
required by  applicable  law to make any such  withholding  or deduction for any
such payment, (a) Lessee shall make all such withholdings or deductions, (b) the
amount  payable by Lessee shall be increased so that,  after making all required
withholdings or deductions, such Tax Indemnitee receives the same amount that it
would have received had no such  withholdings  or deductions  been made, and (c)
Lessee  shall pay the full amount  withheld or deducted to the  relevant  Taxing
Authority in accordance  with  applicable law. Lessee further agrees that, if it
is required to withhold  from any payment of Basic Rent,  Stipulated  Loss Value
(and amounts determined by reference thereto), and amounts payable upon exercise
of Lessee's  purchase option pursuant to ss. 17.3 of the Lease,  any Tax imposed
upon Owner Participant or Owner Trustee  (including any withholding Tax based on
income or  receipts  of Owner  Participant  or Owner  Trustee),  and such Tax is
excluded  from  indemnification  pursuant to ss.  9.3.2,  Lessee  shall pay such
additional  amount (if any)  required  so that thE total  amount  paid by Lessee
(after making all required withholdings) is equal to (assuming timely payment of
the Equipment  Notes before the relevant  Payment Date) the aggregate  principal
amount of scheduled  installments due on the Equipment Notes  outstanding on the
relevant  Payment Date,  together with accrued and unpaid  interest,  due on the
Equipment  Notes; and Owner  Participant or Owner Trustee (as applicable)  shall
reimburse Lessee for any such additional  amounts within two Business Days after
demand therefor.  Except as provided in ss. 9.3.2, and whether or not any of the
Transactions arE consummated,  Lessee shall pay, indemnify, protect, defend, and
hold harmless on an after-tax  basis each Tax Indemnitee  from all Taxes imposed
by any Taxing Authority imposed on or asserted against any Tax Indemnitee or the
Aircraft,  the Airframe,  any Engine, or any Part, or any interest in any of the
foregoing (whether or not indemnified against by any other Person), upon or with
respect to the  Operative  Agreements  and the  Pass-Through  Agreements,  their
execution,  or the transactions or payments contemplated thereby,  including any
Tax imposed upon or with respect to (w) the Aircraft,  the Airframe, any Engine,
any  Part,  any  Operative  Agreement  (including  any  Equipment  Notes,  their
issuance,  acquisition,  transfer or  refinancing  or the payment of  principal,
interest,  premium or other  amounts with  respect  thereto),  any  Pass-Through
Agreement,  any data, or any other thing  delivered or to be delivered  under an
Operative Agreement, (x) the purchase, manufacture, acceptance, rejection, sale,
transfer of title, return, ownership,  mortgaging, delivery, transport, charter,
rental,  lease,  re-lease,  sublease,  assignment,   possession,   repossession,
presence,  use,  condition,  storage,  preparation,  maintenance,  modification,
alteration,   improvement,   operation,  registration,  transfer  or  change  of
registration,  reregistration, repair, replacement, overhaul, location, control,
imposition  of any Lien  (other  than a  Lessor  Lien),  financing,  refinancing
requested by Lessee,  abandonment,  or other  disposition  of the Aircraft,  the
Airframe,  any Engine, any Part, any data, or any other thing delivered or to be
delivered  under an Operative  Agreement,  (y) rent,  interest,  fees,  or other
income, proceeds, receipts, or earnings, whether actual or deemed, arising upon,
in connection with, or in respect of any of the Operative Agreements  (including
the property or income or other  proceeds  with respect to property held as part
of the  Trust  Estate)  or the  transactions  contemplated  thereby,  or (z) the
Pass-Through Certificates,  their issuance or acquisition, or the payment of any
amounts thereof.

     9.3.2 CERTAIN EXCEPTIONS

     The  provisions  of ss.  9.3.1 shall not apply to, and Lessee shall have no
liability hereunder for, Taxes:

     (a) imposed on a Tax  Indemnitee  by the federal  government  of the United
States or any Taxing Authority or governmental  subdivision of the United States
or any state or local Taxing Authority (1) on, based on, or measured by gross or
net income or gross or net  receipts,  including  capital  gains  taxes,  excess
profits taxes,  minimum taxes from tax preferences,  alternative  minimum taxes,
branch profits taxes,  accumulated  earnings  taxes,  personal  holding  company
taxes,  succession taxes and estate taxes,  and any withholding  taxes on, based
on, or measured by gross or net income or  receipts,  or (2) on, or with respect
to, or measured by capital or net worth or in the nature of a franchise tax or a
tax for the privilege of doing  business  (other than, in the case of clause (1)
or (2), Taxes in the nature of sales, use,  license,  value added (to the extent
not imposed as a substitute for an income tax), transfer,  stamp, ad valorem, or
property Taxes);

     (b) imposed on a Tax  Indemnitee  by any Taxing  Authority or  governmental
subdivision  thereof or therein  outside of the  United  States  (including  any
Taxing Authority in or of a territory, possession, or commonwealth of the United
States)  (1) on,  based  on, or  measured  by gross or net  income or  receipts,
including  capital gains taxes,  excess  profits  taxes,  minimum taxes from tax
preferences,  alternative  minimum  taxes,  branch  profits  taxes,  accumulated
earnings  taxes,  personal  holding company taxes,  succession  taxes and estate
taxes,  and any  withholding  taxes on,  based on, or  measured  by gross or net
income or receipts, or (2) on, or with respect to, or measured by capital or net
worth or in the nature of a franchise  tax or a tax for the  privilege  of doing
business  (other than, in the case of clause (1) or (2),  Taxes in the nature of
(aa) sales, use, license, value added (to the extent not imposed as a substitute
for an income tax), transfer,  stamp, ad valorem, or property Taxes, or (bb) any
Taxes  imposed by any Taxing  Authority  (other than a Taxing  Authority  within
whose jurisdiction such Tax Indemnitee is incorporated or organized or maintains
its  principal  place of  business) if such Tax  Indemnitee  would not have been
subject  to  such  Taxes  by  such   jurisdiction  but  for  (i)  the  location,
registration,  use, or operation of the Aircraft,  the Airframe,  any Engine, or
any Part  thereof  by a Lessee  Person  within  the  jurisdiction  of the Taxing
Authority imposing such Tax, or (ii) the activities of any Lessee Person (except
for activities of a Lessee Person who is not an Affiliate,  successor, or assign
of Lessee acting in its capacity other than as a Lessee Person, which activities
are unrelated to the transactions  contemplated by the Operative  Agreements) in
such  jurisdiction,  including  use of any  other  aircraft  by  Lessee  in such
jurisdiction, (iii) the status of any Lessee Person as a foreign entity or as an
entity owned in whole or in part by foreign  persons,  (iv) Lessee's having made
(or having been deemed to have made)  payments to such Tax  Indemnitee  from the
relevant  jurisdiction,  or (v) in the case of the  Pass-Through  Trustees,  any
Participant,  or  any  related  Tax  Indemnitee,  Lessee's  being  incorporated,
organized, or maintaining a place of business in such jurisdiction);

     (c) on, with  respect to, or  measured  by any trustee  fees,  commissions,
premiums,  or  compensation  received by Owner  Trustee,  Pass-Through  Trustee,
Subordination Agent, Policy Provider or Mortgagee;

     (d) on the Trust or the Trust  Estate  that result  from  treatment  of the
Trust or the Trust  Estate as an entity,  such as a  corporation,  separate  and
apart from Owner Participant;

     (e) that are being contested as provided inss. 9.3.4 during the pendency of
such contest;

     (f) imposed on any Tax Indemnitee to the extent that such Taxes result from
the  gross  negligence  or  willful  misconduct  of such Tax  Indemnitee  or any
Affiliate thereof (other than the gross negligence or willful misconduct imputed
to such Tax Indemnitee by reason of such Tax  Indemnitee's  participation in the
transactions contemplated by the Operative Agreements);

     (g)  imposed  on  or  with  respect  to a  Tax  Indemnitee  (including  the
transferee  in those  cases in which the Tax on  transfer  is imposed  on, or is
collected from, the  transferee) as a result of a transfer or other  disposition
(including a deemed transfer or disposition) by such Tax Indemnitee or a related
Tax Indemnitee (or, in the case of Owner Participant,  by Owner Trustee,  or, in
the case of Taxes imposed on a transferee, by the transferor) of any interest in
the Aircraft,  the Airframe,  any Engine,  or any Part, the Rent (other than the
assignment of Rent to Mortgagee pursuant to the Mortgage),  the Trust, the Trust
Estate,  the Collateral,  the Lease, or any interest arising under the Operative
Agreements  or any  Equipment  Note or a transfer or  disposition  (including  a
deemed transfer or disposition) of any interest in a Tax Indemnitee  (other than
(1) a substitution,  replacement,  modification,  pooling, or improvement of the
Aircraft,  the  Airframe,  any  Engine  or any Part by a Lessee  Person  that is
treated for Tax purposes as a transfer or disposition,  (2) a transfer  pursuant
to an exercise of remedies upon a  then-existing  Lease Event of Default,  (3) a
transfer pursuant toss. 17.3 orss. 9 of the Lease, or (4) a transfer pursuant to
an Event of Loss);

     (h) in excess of those that would  have been  imposed  had there not been a
transfer  or other  disposition  by or to such Tax  Indemnitee  or a related Tax
Indemnitee described in clause (g) of this ss. 9.3.2;

     (i) imposed on Owner  Participant and indemnified by Lessee pursuant to the
Tax Indemnity Agreement;

     (j) imposed  with  respect to any period  after the  expiration  or earlier
termination of the Term and, if required pursuant to the terms of the Lease, the
return of  possession  of the  Aircraft to Lessor or placement in storage at the
request of Lessor in accordance with the Lease  (PROVIDED,  that this clause (j)
shall  not apply to Taxes  imposed  after  such  period  arising  as a result of
payments  by Lessee  under the  Operative  Agreements  after such  period or are
attributable to events  occurring prior to or coincident with such expiration or
earlier termination of the Term);

     (k) consisting of any interest, penalties, or additions to tax imposed on a
Tax  Indemnitee  as a result  (in  whole or in  part) of a  failure  of such Tax
Indemnitee or a related Tax  Indemnitee to file any return  properly and timely,
unless such failure is caused by Lessee's failure to fulfill its obligations, if
any, under ss. 9.3.6 with respect to such return;

     (l) resulting from, or that would not have been imposed but for, any Lessor
Liens  arising  as a result  of  claims  against,  or acts or  omissions  of, or
otherwise attributable to such Tax Indemnitee or a related Tax Indemnitee;

     (m)  imposed  on any Tax  Indemnitee  as a result of the breach by such Tax
Indemnitee or a related Tax Indemnitee of any covenant of such Tax Indemnitee or
any Affiliate thereof contained in any Operative  Agreement or the inaccuracy of
any  representation  or warranty by such Tax Indemnitee or any Affiliate thereof
in any Operative Agreement;

     (n) in the nature of an  intangible or similar Tax (1) upon or with respect
to the value or principal  amount of the interest of any Loan Participant or any
Note Holder in any Equipment Note or the loan evidenced thereby,  or (2) upon or
with  respect to the value of the  interest  of Owner  Participant  in the Trust
Estate  or the  Trust,  in each case  only if such  Taxes  are in the  nature of
franchise Taxes or result from the conduct of business by such Tax Indemnitee in
the taxing jurisdiction and are imposed because of the place of incorporation or
the activities  unrelated to the Transactions in the taxing jurisdiction of such
Tax Indemnitee;

     (o) that is included in Lessor's  Cost and paid to the  appropriate  Taxing
Authority;

     (p) other than any Tax described in ss. 9.3.2(b)  hereof,  imposed on a Tax
Indemnitee by a Taxing Authority of a jurisdiction outside thE United States, to
the extent  that such Taxes  would not have been  imposed  but for a  connection
between the Tax  Indemnitee or a related Tax  Indemnitee  and such  jurisdiction
imposing such Tax unrelated to the Transactions; or

     (q) relating to ERISA or to Codess. 4975.

            For purposes  hereof, a Tax Indemnitee and any other Tax Indemnitees
who are successors,  assigns, agents, or Affiliates of such Tax Indemnitee shall
be related  Tax  Indemnitees;  PROVIDED,  that  neither  Mortgagee  nor any Loan
Participant  shall be  deemed a  related  Tax  Indemnitee  as to Lessor or Owner
Participant merely because of the assignment made in the Mortgage.

     9.3.3 PAYMENT

     (a) Without regard to ss. 9.3.2(a),  (b), or (h) hereof, Lessee's indemnity
obligation  to a Tax  Indemnitee  under this ss. 9.3 shall be The amount  which,
after  taking into  account  any Tax imposed  upon the receipt or accrual of the
amounts payable under this ss. 9.3 and any tax benefits  actuallY  recognized by
such Tax Indemnitee as a result of the indemnifiable Tax (including any benefits
recognized as a result of such Tax Indemnitee's use of an indemnifiable Tax as a
credit against Taxes not indemnifiable under this ss. 9.3), equals the amount of
the Tax indemnifiable under this ss. 9.3.

     (b) At Lessee's  request,  the  computation  of the amount of any indemnity
payment owed by Lessee or any amount owed by a Tax Indemnitee to Lessee pursuant
to this ss.  9.3  shall be  verified  and  certified  by an  independent  public
accounting  firm selected by such Tax Indemnitee and reasonablY  satisfactory to
Lessee.  Such  verification  shall be  binding.  The costs of such  verification
(including  the fee of such  public  accounting  firm)  shall be borne by Lessee
unless such  verification  results in an adjustment  in Lessee's  favor of 5% or
more of the net present value of the payment as computed by such Tax Indemnitee,
in which case such Tax Indemnitee shall pay those costs.

     (c) Each Tax Indemnitee shall provide Lessee with such certifications,  and
such  information and  documentation  in such Tax  Indemnitee's  possession,  as
Lessee  reasonably  requests to minimize any indemnity  payment pursuant to this
ss. 9.3;  PROVIDED,  that  notwithstanding  anything to the contrarY in this ss.
9.3.3(c),  no Tax  Indemnitee  shall be required to provide  Lessee with any Tax
returns.

     (d) Each Tax  Indemnitee  shall  promptly  forward  to Lessee  any  written
notice,  bill,  or advice  that such Tax  Indemnitee  receives  from any  Taxing
Authority concerning any Tax for which it seeks  indemnification  under this ss.
9.3. Lessee shall pay any amount for which it is liable pursuant tO this ss. 9.3
directly to the appropriate  Taxing  Authority if legally  permissible,  or upon
demand of a Tax Indemnitee, to such Tax Indemnitee within 30 dayS of such demand
(or, if a contest  occurs in accordance  with ss. 9.3.4,  within 30 days after a
Final Determination (as defined below)),  but in no event morE than one Business
Day before the related Tax is due. If requested by a Tax  Indemnitee in writing,
Lessee  shall  furnish to the  appropriate  Tax  Indemnitee  the  original  or a
certified copy of a receipt for Lessee's  payment of any Tax paid by Lessee,  or
such  other  evidence  of  payment  of such  Tax as is  acceptable  to such  Tax
Indemnitee. Lessee shall also furnish promptly upon written request such data as
any Tax Indemnitee  reasonably  requires to enable such Tax Indemnitee to comply
with the  requirements  of any  taxing  jurisdiction,  unless  such data are not
reasonably  available to Lessee or (unless such data are specifically  requested
by a Taxing  Authority) are not  customarily  furnished by domestic air carriers
under   similar   circumstances.   For  purposes  of  this  ss.  9.3,  a  "FINAL
DETERMINATION" is (1) a decision,  judgment, decree, or other order by any court
of competent  jurisdiction  that occurs pursuant to thE provisions of ss. 9.3.4,
which  decision,   judgment,  decree,  or  other  order  has  become  final  and
unappealable,  (2) a closing  agreement or settlement  agreemenT entered into in
accordance  with ss. 9.3.4 that has become binding and is not subject to further
review or appeal (absent fraud, misrepresentation, etc.), oR (3) the termination
of  administrative  proceedings and the expiration of the time for instituting a
claim in a court proceeding.

     (e) If any Tax Indemnitee  actually realizes a tax savings by reason of any
Tax paid or  indemnified  by Lessee  pursuant to this ss. 9.3 (whether  such tax
savings  arise by means of a foreign tax credit,  depreciation  or cost recovery
deduction, or otherwise),  and such savings are not otherwise taken into account
in computing such payment or indemnity,  such Tax Indemnitee shall pay to Lessee
an amount  equal to the lesser of (1) the amount of such tax  savings,  plus any
additional net tax savings recognized as the result of any payment made pursuant
to this sentence,  when, as, if, and to the extent realized,  and (2) the amount
of all payments  pursuant to this ss. 9.3 by Lessee to such Tax Indemnitee (less
any payments  previously  made bY such Tax Indemnitee to Lessee pursuant to this
ss.  9.3.3(e))  (and the excess,  if any, of the amount  described in clause (1)
over the amount  described iN clause (2) shall be carried forward and applied to
reduce PRO TANTO any  subsequent  obligations of Lessee to make payments to such
Tax  Indemnitee  pursuant to this ss. 9.3);  PROVIDED,  that such Tax Indemnitee
shall not be required to make any payment pursuant to this sentence so long as a
Special  Default or A Lease Event of Default of a monetary  nature exists.  If a
tax benefit is later  disallowed or denied,  the disallowance or denial shall be
treated as a Tax indemnifiable  under ss. 9.3.1 without regard to the provisions
of ss. 9.3.2 (other than ss.  9.3.2(f)).  Each such Tax Indemnitee shall in good
faitH use  reasonable  efforts in filing  its tax  returns  and in dealing  with
Taxing Authorities to seek and claim any such tax benefit.

     9.3.4 CONTEST

     (a) If a written  claim is made  against a Tax  Indemnitee  for Taxes  that
Lessee could be liable to pay or indemnify for hereunder, or if a Tax Indemnitee
determines that a Tax is due and that Lessee could have an indemnity  obligation
for that Tax  hereunder,  such Tax Indemnitee  shall  promptly  notify Lessee in
writing of such claim  (PROVIDED,  that  failure so to notify  Lessee  shall not
relieve  Lessee of its  indemnity  obligations  hereunder  unless the failure to
notify  effectively  forecloses  Lessee's  rights to  require a contest  of such
claim),  and shall take no action with  respect to such claim  without  Lessee's
prior written  consent for 30 days  following  Lessee's  receipt of such notice;
PROVIDED,  that, if applicable  Law requires such Tax  Indemnitee to take action
before the end of such 30-day period,  such Tax Indemnitee shall, in such notice
to Lessee, so inform Lessee, and such Tax Indemnitee shall take no action for as
long as it is legally able to avoid taking action (and a Tax Indemnitee shall be
entitled  to pay the Tax  claimed  and sue for a refund  before  the end of such
30-day period if (1)(aa) the failure to pay the Tax would result in  substantial
penalties  (unless  immediately  reimbursed by Lessee) and the act of paying the
Tax would not materially  prejudice the right to contest, or (bb) the failure to
pay would result in criminal  penalties,  and (2) such Tax Indemnitee shall take
any action so required in connection  with so paying the Tax in a manner that is
the least  prejudicial  to the pursuit of the  contest).  In addition,  such Tax
Indemnitee   shall  (provided  that  Lessee  shall  have  agreed  to  keep  such
information  confidential other than to the extent necessary in order to contest
the claim) furnish Lessee with copies of any requests for  information  from any
Taxing  Authority  relating  to such Taxes with  respect to which  Lessee may be
required to indemnify  hereunder.  If  requested by Lessee in writing  within 30
days after its receipt of such notice,  such Tax Indemnitee  shall,  at Lessee's
expense (including all reasonable costs, expenses, and reasonable attorneys' and
accountants' fees and disbursements), in good faith contest (or, if permitted by
applicable law, allow Lessee to contest) through appropriate  administrative and
judicial proceedings the validity, applicability, or amount of such Taxes by (x)
resisting  payment  thereof,  (y) not paying the Taxes except  under  protest if
protest is necessary and proper, or (z) if the payment is made, using reasonable
efforts to obtain a refund thereof in an appropriate  administrative or judicial
proceeding. If requested to do so by Lessee, the Tax Indemnitee shall appeal any
adverse  administrative  or judicial  decision,  except that the Tax  Indemnitee
shall not be required to pursue any appeals to the United States  Supreme Court.
If and to the extent that the Tax  Indemnitee  is able to separate the contested
issue(s)  from other  issues  arising  in the same  administrative  or  judicial
proceeding  that  are  unrelated  to  the  Transactions  without  (in  such  Tax
Indemnitee's good faith judgment) adversely affecting such Tax Indemnitee,  such
Tax Indemnitee shall permit Lessee to control the conduct of any such proceeding
and shall provide to Lessee (at Lessee's cost and expense) with such information
or data in such Tax Indemnitee's  control or possession and reasonably necessary
to conduct such contest  (other than such Tax  Indemnitee's  federal  income Tax
returns) in which case Lessee shall keep such Tax Indemnitee reasonably informed
concerning the progress of such contest. If the contest is being controlled by a
Tax  Indemnitee,  such Tax  Indemnitee  shall  consult with Lessee in good faith
regarding the manner of contesting  such claim and shall keep Lessee  reasonably
informed regarding the progress of such contest. A Tax Indemnitee shall not fail
to take any action  expressly  required by this ss. 9.3.4  (including anY action
regarding any appeal of an adverse  determination  with respect to any claim) or
settle or compromise any claim without Lessee's prior written consent (except as
contemplated by ss. 9.3.4(b) or (c)).

     (b)  Notwithstanding  the foregoing,  in no event shall a Tax Indemnitee be
required  to pursue any  contest  (or to permit  Lessee to pursue  any  contest)
unless  (1)  Lessee  agrees to pay to such Tax  Indemnitee  on demand  and on an
after-tax  basis all  reasonable  costs and  expenses  that such Tax  Indemnitee
incurs in  connection  with  contesting  such Taxes,  including  all  reasonable
out-of-pocket costs and expenses and reasonable attorneys' and accountants' fees
and disbursements, (2) if such contest involves the payment of the claim, Lessee
advances the amount thereof (to the extent indemnified hereunder) plus interest,
penalties,  and  additions to tax with  respect  thereto that are required to be
paid before  commencing the contest on an  interest-free  net after-Tax basis to
such Tax Indemnitee,  (3) such Tax Indemnitee does not reasonably determine that
the action to be taken will result in any material risk of forfeiture,  sale, or
loss of the Aircraft (unless Lessee makes provisions to protect the interests of
any  such  Tax  Indemnitee  in a  manner  reasonably  satisfactory  to such  Tax
Indemnitee)  (PROVIDED,  that such Tax Indemnitee shall notify Lessee in writing
promptly after it becomes aware of any such risk), (4) no Lease Event of Default
exists,  unless Lessee has provided  security for its  obligations  hereunder by
advancing to such Tax  Indemnitee,  before  proceeding or  continuing  with such
contest, the amount of the Tax being contested,  plus any interest and penalties
and an amount  estimated in good faith by such Tax Indemnitee for expenses,  (5)
before commencing any judicial action controlled by Lessee,  Lessee acknowledges
its liability for such claim hereunder in writing,  PROVIDED,  that Lessee shall
not be  bound  by its  acknowledgment  if the  Final  Determination  articulates
conclusions  of law and fact that  demonstrate  that Lessee has no liability for
the contested amounts hereunder,  (6) such Tax Indemnitee shall have received at
Lessee's sole expense,  an opinion  independent tax counsel,  such counsel to be
selected by Lessee and  reasonably  satisfactory  to such Tax  Indemnitee  ("Tax
Counsel"),  to the effect  that a  reasonable  basis,  within the meaning of ABA
Formal Opinion No. 85-352,  exists for contesting such claim,  (7) the amount of
payments  or  indemnification  that  would  be  required  as a  result  of  such
adjustment, when aggregated with further potential payments or adjustments where
the subject matter of the proposed  adjustment is of a continuing  nature, as to
the  Aircraft  and all other  aircraft  operated  by  Lessee,  shall be at least
$10,000,  and (8) the issue  shall not be  substantially  identical  as an issue
previously contested hereunder and decided adversely, unless such Tax Indemnitee
shall have received,  at Lessee's sole expense,  a written opinion,  in form and
substance reasonably satisfactory to such Tax Indemnitee,  of Tax Counsel to the
effect  that  the  applicable  circumstances  or law have  changed  and in light
thereof,  there is reasonable basis under ABA Formal Opinion No. 85-352 that the
tax  treatment  of the item which is the  subject of the claim will be upheld in
litigation if the claimed tax  treatment is  challenged  by a Taxing  Authority.
Notwithstanding  the  foregoing,   if  any  Tax  Indemnitee  releases,   waives,
compromises,  or settles any claim that may be  indemnifiable by Lessee pursuant
to this ss. 9.3 and which such Tax Indemnitee is otherwise  obligated to contest
under this ss. 9.3.4 without Lessee's written permissiOn, Lessee's obligation to
indemnify   such  Tax   Indemnitee   with   respect   to  such  claim  (and  all
directly-related  claims,  and claims  based on the outcome of such claim) shall
terminate,  subject  to ss.  9.3.4(c),  and  subject to ss.  9.3.4(c),  such Tax
Indemnitee shall repay to Lessee any amount  previously paid or advanCed to such
Tax Indemnitee with respect to such claim,  plus interest at the rate that would
have been payable by the relevant Taxing Authority on a refund of such Tax.

     (c) Notwithstanding  anything in this ss. 9.3, a Tax Indemnitee will not be
required to contest the  imposition of any Tax, and shall bE permitted to settle
or compromise  any claim without  Lessee's  consent,  if such Tax Indemnitee (1)
waives its right to  indemnity  under this ss. 9.3 witH respect to such Tax (and
any  directly-related  claim,  and any claim the outcome of which is  determined
based upon the outcome of such claim),  (2) pays to Lessee any amount previously
paid or  advanced by Lessee  pursuant to this ss. 9.3 with  respect to such Tax,
plus  interest at the rate that would have beeN payable by the  relevant  Taxing
Authority  on a refund of such Tax,  and (3) agrees to discuss  with  Lessee the
views  or  positions  of any  relevant  Taxing  Authority  with  respect  to the
imposition of such Tax PROVIDED,  that if Lessee has agreed in writing to settle
a claim for a stated amount and the relevant Tax Indemnitee settles the claim on
more favorable  terms,  such Tax  Indemnitee  shall not be required to waive the
indemnity for such claim to the extent of the amount agreed to by Lessee.

     9.3.5 REFUND

     If any Tax Indemnitee receives a refund of, or becomes entitled to a credit
against other liability for, all or any part of any Taxes paid,  reimbursed,  or
advanced by Lessee,  such Tax  Indemnitee  shall pay to Lessee within 30 days of
such  receipt an amount  equal to the lesser of (a) the amount of such refund or
credit plus any net tax benefit  (taking into account any Taxes incurred by such
Tax  Indemnitee by reason of the receipt of such refund or  realization  of such
credit)  actually  realized by such Tax Indemnitee as a result of any payment by
such Tax Indemnitee made pursuant to this sentence  (including this clause (a)),
and (b) such tax  payment,  reimbursement,  or  advance  by  Lessee  to such Tax
Indemnitee theretofore made pursuant to this ss. 9.3 (and the excess, if any, of
the amount described in clause (a) over the amount described in clause (b) shall
be carried forward and applied to reduce PRO TANTO any subsequent  obligation of
Lessee to make payments to such Tax Indemnitee pursuant to this ss. 9.3). If, in
addition to such refund or credit,  sucH Tax Indemnitee receives (or is credited
with) an amount  representing  interest  on the amount of such refund or credit,
such Tax  Indemnitee  shall pay to  Lessee  within 30 days  after  receiving  or
realizing such credit the portion of such interest fairly  attributable to Taxes
paid,  reimbursed,  or advanced  by Lessee  before the receipt of such refund or
realization  of such credit.  Notwithstanding  the  foregoing,  a Tax Indemnitee
shall not be obligated to make any payment to Lessee  pursuant to this ss. 9.3.5
if a Special Default or a Lease Event of Default has occurred and is continuing.
If it is later  determined  thaT such Tax  Indemnitee  was not  entitled to such
refund or credit,  the  portion of the refund or credit  repaid,  recaptured  or
disallowed  (and any  interest and tax savings  paid by such Tax  Indemnitee  to
Lessee with  respect  thereto)  shall be treated as Taxes for which  Lessee must
indemnify  such Tax  Indemnitee  pursuant to this ss. 9.3 without  regard to ss.
9.3.2 hereof other than ss. 9.3.2(f).

     9.3.6 TAX FILING

     Lessee shall timely file any report,  return, or statement that is required
to be filed with  respect to any Tax which is subject to  indemnification  under
this ss. 9.3 (except  for any such  report,  return,  or  statement  which a Tax
Indemnitee  has  timely  notified  Lessee in  writing  that sucH Tax  Indemnitee
intends to file, or for which such Tax Indemnitee is required by law to file, in
its own name);  PROVIDED,  that the relevant Tax Indemnitee shall furnish Lessee
with any  information  in such Tax  Indemnitee's  possession  or control that is
reasonably  necessary to file any such  return,  report,  or statement  and that
Lessee  reasonably  requests  in writing  (but the Tax  Indemnitee  shall not be
required  to  furnish  copies of its  actual  tax  returns,  although  it may be
required to furnish relevant information contained therein). Lessee shall either
file such report,  return,  or statement and send a copy to such Tax  Indemnitee
(and to Owner  Trustee,  if the Tax  Indemnitee  is not Owner  Trustee),  or, if
Lessee is not  permitted to file such report,  return,  or  statement,  it shall
notify such Tax  Indemnitee  of such  requirement  and prepare and deliver  such
report,  return,  or statement  to such Tax  Indemnitee  in a manner  reasonably
satisfactory  to such Tax  Indemnitee  within a reasonable  time before the time
such report, return, or statement is to be filed.

     9.3.7 FORMS

     Each  Tax  Indemnitee  agrees  to  furnish  from  time to  time to  Lessee,
Mortgagee,  or such other  Person as Lessee or  Mortgagee  shall  designate,  at
Lessee's or Mortgagee's request, such duly-executed and properly-completed forms
as may be  necessary  or  appropriate  in  order to claim  any  reduction  of or
exemption from any withholding or other Tax imposed by any Taxing Authority,  if
(a) such  reduction or exemption  is available to such Tax  Indemnitee,  and (b)
Lessee has  provided  such Tax  Indemnitee  with any  information  necessary  to
complete such form not otherwise reasonably available to such Tax Indemnitee.

     9.3.8 NON-PARTIES

     If a Tax  Indemnitee is not a party to this  Agreement,  Lessee may require
the Tax  Indemnitee  to agree in writing,  in a form  reasonably  acceptable  to
Lessee,  to the terms of this ss. 9.3 and ss. 15.8 before  making any payment to
such Tax Indemnitee under this ss. 9.3.

     9.3.9 FOREIGN TAX ON LOAN PAYMENTS

     If an Owner Participant is incorporated or organized,  or maintains a place
of  business  in a country  other  than the  United  States  or in a  territory,
possession,  or commonwealth of the United States (within the meaning of the tax
law of that foreign jurisdiction),  and if as a result thereof any foreign Taxes
(including   withholding  Taxes)  are  imposed  on  the  Pass-Through  Trustees,
Pass-Through  Trusts,  or  Note  Holders,  then  such  Owner  Participant  shall
reimburse  Lessee for any  payments  that  Lessee is  required  to make to or on
behalf of any  Pass-Through  Trustee,  Pass-Through  Trust, or Note Holder under
this ss. 9.3 as a result of the imposition of such Taxes.  The amount payable by
Owner Participant to Lessee shall be an amount which,  after takinG into account
any such Taxes,  any Tax  imposed  upon the receipt or accrual by Lessee of such
payment by such Owner Participant,  and any tax benefits or tax savings realized
by Lessee  with  respect to the payment of such  withholding  Tax or the payment
hereunder,  shall equal the amount of  Lessee's  payment to or on behalf of such
Pass-Through Trustee or Note Holder.

     9.4 PAYMENTS

     Any payments  made  pursuant to ss. 9.1 or ss. 9.3 shall be due on the 30th
day after demand,  and shall be made directly to the relevant  IndemniTee or Tax
Indemnitee or to Lessee, in immediately  available funds at such bank or to such
account  as  specified  by such  Indemnitee  or Tax  Indemnitee  or  Lessee  (as
applicable)  in written  directives to the payor,  or, if no such  direction has
been given,  by check of the payor  payable to the order of, and mailed to, such
Indemnitee  or Tax  Indemnitee  or Lessee (as  applicable)  by  certified  mail,
postage prepaid, at its address as set forth in this Agreement.

     9.5 INTEREST

     If any amount,  payable by Lessee,  any  Indemnitee,  or any Tax Indemnitee
under ss. 9.1 or ss. 9.3 is not paid when due, the Person obligated to mAke such
payment  shall pay on demand,  to the  extent  permitted  by Law,  to the Person
entitled thereto,  interest on any such amount for the period from and including
the due date for such amount to but  excluding  the date the amount is paid,  at
the Past-Due Rate.  Such interest shall be paid in the same manner as the unpaid
amount in respect of which such interest is due.

     9.6 BENEFIT OF INDEMNITIES

     Lessee's  obligations  for  indemnities,   obligations,   adjustments,  and
payments in ss. 9.1 or ss. 9.3 are expressly  made for the benefit of, and shAll
be enforceable by, the Indemnitee or Tax Indemnitee  entitled  thereto,  without
declaring  the Lease to be in default or taking  other  action  thereunder,  and
notwithstanding any provision of the Mortgage.


     10. ASSIGNMENT OR TRANSFER OF INTERESTS

     10.1 PARTICIPANTS, OWNER TRUSTEE, AND NOTE HOLDERS

     10.1.1 OWNER PARTICIPANT

     (a) During the Term, Owner Participant shall not Transfer any or all of its
right,  title, or interest in the Trust Estate or the Trust Agreement or to this
Agreement unless:

     (1) the Transferee has full power,  authority,  and legal right to execute,
deliver,  and  perform  the  obligations  of Owner  Participant  under the Owner
Participant  Agreements and provides  reasonably  satisfactory  evidence of such
power and authority to Lessee, Owner Trustee, and Mortgagee;

     (2) the Transferee  enters into a legal,  valid,  binding,  and enforceable
agreement,  substantially  in the form of Exhibit I hereto (or otherwise in form
and substance  reasonably  satisfactory to Lessee and  Mortgagee),  effective to
confirm  that such  Transferee  agrees  to be bound by all the terms of,  and to
undertake  all  of  the   obligations   arising  after  such  transfer  of,  the
transferring Owner Participant in the Owner Participant Agreements, and in which
it makes  representations and warranties  substantially the same as those in ss.
6.2 of thiS Agreement;

     (3) upon such  Transfer  Lessee  shall not be  obligated to pay any greater
amount or incur  any  greater  obligation  than  that  which it would  have been
obliged to pay or incur under the Lease or other Lessee  Operative  Agreement if
no transfer or assignment had taken place,  and upon such Transfer the terms and
conditions  of the Lessee  Operative  Agreements  insofar as they  relate to the
rights and obligations of Lessee or the Loan Participant are not altered;

     (4) Owner Participant shall deliver to Lessee, Owner Trustee, and Mortgagee
an opinion of counsel reasonably satisfactory to each of them to the effect that
such agreement or agreements referred to in ss. 10.1.1(a)(2) and, if applicable,
ss.  10.1.1(a)(6)  or (a)(7) Are legal,  binding,  and enforceable in accordance
with  its  or  their  terms  and  that  such   transfer  will  not  violate  the
Transportation  Code, the registration  provisions of the Securities Act, or any
other applicable Federal law;

     (5) the Transfer  shall relate to Owner  Participant's  entire  interest as
Owner  Participant;  or, if it relates to less than its entire interest as Owner
Participant,  then (aa) Lessee shall have given its prior written consent to the
partial  Transfer,   and  (bb)  all  amendments  to  the  Operative  Agreements,
reasonably  requested  by Lessee or Owner  Participant,  that are  necessary  or
appropriate to accommodate the existence of multiple Owner  Participants,  shall
be agreed to and  executed  by the  parties  thereto,  all at the expense of the
Owner Participants under ss. 10.1.1(c);

     (6) the  Transferee  is a Citizen of the United  States  (such status to be
determined  without  considering  FAR ss. 47.9 or anY other  provision  that may
restrict  Lessee's  use or  operation  of the  Aircraft),  or shall use a voting
powers  trust or similar  arrangement  in order to hold an interest in the Trust
Estate such that the Aircraft can be registered  in the United  States  (without
considering FAR ss. 47.9 oR any other  provision that may restrict  Lessee's use
or operation of the Aircraft); and

     (7) the  Transferee  is a single  Person  and is  either  (aa) a  Permitted
Institution,   (bb)  or  an  Affiliate  of  a  Permitted  Institution,  if  such
Affiliate's obligations under the Owner Participant Agreements are guaranteed by
such Permitted Institution pursuant to a written guaranty,  substantially in the
form of  Exhibit  J  hereto  (or  otherwise  in form  and  substance  reasonably
satisfactory  to Lessee,  Owner  Trustee and  Mortgagee),  or (cc) with Lessee's
prior written consent,  any other Person the obligations of whom under the Owner
Participant  Agreements are guaranteed by a Permitted  Institution pursuant to a
written guaranty, in form and substance reasonably satisfactory to Lessee, Owner
Trustee, and Mortgagee.

            (b)  Owner   Participant   shall  give  written  notice  to  Lessee,
Mortgagee,  and  Owner  Trustee  at least  10 days  before  any  such  Transfer,
specifying  the name and  address  of the  proposed  Transferee,  and  providing
financial   statements  of  the  proposed  Transferee  or  guarantor  evidencing
satisfaction of the requirements described in ss. 10.1.1(a)(7)(aa) or (bb).

            (c) Any  reasonable  fees,  charges,  and  expenses,  including  the
reasonable  legal  fees,  charges,   and  expenses  incurred  by  Lessee,  Owner
Participant, Mortgagee, any Note Holder, or Owner Trustee in connection with any
Transfer by Owner Participant permitted by this ss. 10.1.1, or by thE Transferee
in any such case, will be paid for by Owner Participant.

     10.1.2 OWNER TRUSTEE

     Owner Trustee may transfer its interests in the Trust Agreement pursuant to
ss. 9 thereof.

     10.1.3 NOTE HOLDERS

     Subject to ss. 7.5.2 hereof and ss. 2.07 of the  Mortgage,  any Note Holder
may, at any time, Transfer or grant  participations in all or any portIon of the
Equipment  Notes  or all or  any  portion  of  its  beneficial  interest  in its
Equipment  Notes and the  Collateral  to any  Person  (the sale or  issuance  of
Pass-Through  Certificates  by a  Pass-Through  Trustee not being  considered  a
Transfer  or  participation);   PROVIDED,  that  any  participant  in  any  such
participations  shall not have any direct rights under the Operative  Agreements
or any Lien on all or any part of the Aircraft or  Collateral,  and Lessee shall
not  have  any  increased  liability  or  obligations  as a  result  of any such
participation.  In the case of any such Transfer, the Transferee,  by acceptance
of Equipment  Notes in connection  with such Transfer,  shall be bound by all of
the covenants of Note Holders in the Operative Agreements.

     10.2 EFFECT OF TRANSFER

     Upon any Transfer in accordance with ss. 10.1.1,  ss. 10.1.2, or ss. 10.1.3
(other  than any  Transfer  by any Note  Holder,  to the  extent it only  gRants
participations in Equipment Notes or in its beneficial  interest  therein),  the
Transferee  shall be deemed "Owner  Participant",  "Owner  Trustee",  or a "Note
Holder",  respectively, for all purposes of the Operative Agreements and, in the
case of a Transferee of Owner Participant or any Note Holder, shall be deemed to
have  paid  its  ratable  portion  of  Lessor's  Cost  previously  made by Owner
Participant  or Loan  Participant,  respectively,  making  such  conveyance  and
represented by the interest being conveyed,  and each reference  herein to Owner
Participant,  Owner Trustee, or Note Holder,  respectively,  shall thereafter be
deemed a reference to such  Transferee  for all purposes,  and the  transferring
Owner  Participant,  Owner Trustee,  Loan  Participant,  or Note Holder shall be
released  (including,  in the  case of Owner  Participant,  any  Guarantor  with
respect to any guaranty provided by it under ss.  10.1.1(a)(7))  from all of itS
liabilities  and obligations  under the Operative  Agreements to the extent such
liabilities and obligations  arise after such Transfer and, in each case, to the
extent such liabilities and obligations are assumed by the Transferee; PROVIDED,
that such transferring Owner Participant, Owner Trustee, or Note Holder (and its
Affiliates,   successors,  assigns,  agents,  representatives,   directors,  and
officers) will continue to have the benefit of any rights or  indemnities  under
any Operative Agreement vested or relating to circumstances,  conditions,  acts,
or events before such Transfer.

     11. RE-FUNDING AND CERTAIN OTHER MATTERS

     11.1 RE-FUNDING GENERALLY

     Subject to ss.  11.2 and ss.  11.4,  if at any time Lessee  notifies  Owner
Participant,  Owner  Trustee,  and  Mortgagee  that Lessee  requests  that OwNer
Trustee  voluntary  redeem  all  (but  not  less  than  all) of the  outstanding
Equipment  Notes (in  compliance  with ss. 2.11 and ss. 2.12 of the Mortgage) as
part oF a re-funding transaction, Owner Participant will negotiate in good faith
and  promptly  conclude  an  agreement  with  Lessee  as to the  terms  of  such
re-funding  transaction  (including  the  terms  of any  debt  to be  issued  in
connection with such re-funding transaction and the documentation to be executed
in  connection  therewith),  and after Lessee and Owner  Participant  shall have
concluded such an agreement:

     11.1.1 RE-FUNDING CERTIFICATE

     Within 10 Business Days after reaching such  agreement,  Owner  Participant
will deliver a Re-Funding  Certificate to Lessee.  Within 10 Business Days after
receiving the Re-Funding Certificate, Lessee may demand a verification (pursuant
to ss. 3.2.1(d) of the Lease) of the information in thE Re-Funding  Certificate.
Upon Lessee's  acceptance of the accuracy of the  information  in the Re-Funding
Certificate or the determination pursuant to such verification procedures of the
Re-Funding Information,  the appropriate parties will take the actions specified
in ss. 11.1.2 through ss. 11.1.7.

     11.1.2 FINANCING AGREEMENTS

     The appropriate  parties will enter into appropriate  documentation  (which
may include an underwriting  agreement or similar private  placement  agreement)
with the institution or institutions to be named therein providing for (a) Owner
Trustee's  issuance  and  sale of the New  Debt  to such  institution(s)  on the
Re-Funding  Date, and (b) the application of the proceeds of the sale of the New
Debt to the  redemption  of all such  Equipment  Notes on the  Re-Funding  Date.
Lessee,  acting on behalf of Owner  Trustee,  shall give  Mortgagee  at least 30
days'  revocable  prior  written  notice of the  proposed  date of the  optional
redemption.

     11.1.3 LEASE AMENDMENTS

     As a condition  to the closing of the  re-funding  transaction,  Lessee and
Owner  Trustee  will amend the Lease,  as  contemplated  by ss.  3.2.1(b) oF the
Lease,  to provide that (a) Basic Rent payments and  allocations  for the period
from and  after the  Re-Funding  Date  shall be as  provided  in the  Re-Funding
Information,  and (b) Stipulated Loss Values,  Termination  Values,  and the EBO
Price,  from  and  after  the  Re-Funding  Date,  shall  be as  provided  in the
Re-Funding Information.

     11.1.4 SECURITY AGREEMENTS

     Owner  Trustee will enter into an agreement to provide for securing the New
Debt similarly to the Equipment  Notes,  and will enter into such amendments and
supplements to the Mortgage (or such new indenture or other security  agreement)
and the other Operative Agreements as are appropriate to effect such re-funding.

     11.1.5 EXPENSES

     Whether or not such re-funding transaction is consummated, Lessee shall pay
or  reimburse  on a net  after tax  basis  all of the  reasonable  out-of-pocket
expenses  of  all  parties  to  such  re-funding   transaction,   including  any
underwriting  or  placement  fees and the  reasonable  fees and expenses of such
parties' counsel and any related loan or commitment fees.

     11.1.6 MAKE WHOLE AMOUNT

     At the closing of such  re-funding,  Owner  Trustee  shall pay to Mortgagee
(for the  account of each Note  Holder),  upon  receipt of the same from  Lessee
(which Lessee shall pay as  Supplemental  Rent, as a condition to the closing to
the  re-funding  transaction,  at no  after-tax  cost to Owner  Trustee or Owner
Participant),  any Make-Whole  Amount payable to such Note Holder under ss. 2.11
of the Mortgage.

     11.1.7 RETURN OF EQUIPMENT NOTES

     Subject to Owner  Trustee's  and Lessee's  compliance  with all  applicable
terms and  conditions  for  voluntary  prepayment  under the  Mortgage  and this
Agreement,  each Note Holder will transfer to Owner Trustee the Equipment  Notes
held by such Note Holder for cancellation (and Owner Trustee shall cancel them),
against receipt by such Note Holder of the then-outstanding  principal amount of
such Equipment  Notes,  accrued and unpaid  interest and any  Make-Whole  Amount
thereon,  and all other  amounts then payable to such Note Holder and  Mortgagee
hereunder or under the Mortgage.

     11.2 LIMITATIONS ON OBLIGATION TO REFUND

     Notwithstanding  the foregoing,  Owner Participant shall have no obligation
to proceed with any re-funding transaction as contemplated by this ss. 11:

     (a) if such  transaction  would have,  or creates a risk of, an adverse tax
consequence to Owner  Participant  (as  determined by Owner  Participant in good
faith),  unless Lessee agrees to indemnify Owner Participant,  or to cause Owner
Participant to be indemnified, against such adverse tax consequence by a written
agreement  in form and  substance  and from a Person (if not Lessee)  reasonably
satisfactory to Owner Participant,  and such indemnification would not give rise
to a Materially Adverse Change with respect to Lessee;

     (b)  unless  Lessee   indemnifies  Owner  Participant  for  any  liability,
obligation  (other than the obligation to pay principal and interest and related
payments in respect of the New Debt),  cost,  or expense  (including  reasonable
attorneys'  fees)  related to or arising  out of any such  re-funding,  and such
indemnification  would not give rise to a Materially Adverse Change with respect
to Lessee;

     (c) if a Special Default or Lease Event of Default exists;

     (d) if two re-funding  transactions  have  previously  been  consummated at
Lessee's request pursuant to thisss. 11;

     (e) if such re-funding would cause (i) the principal amount of the New Debt
to exceed the then-outstanding  principal amount of the Equipment Notes, or (ii)
the  Weighted  Average  Life to Maturity of the New Debt to exceed the  Weighted
Average Life to Maturity of the Equipment  Notes, or (iii) the final maturity to
the New Debt to be later than the final maturity of the Equipment Notes; or

     (f) if the  structure  or  documentation  for such  re-funding  results  in
greater obligations or liabilities,  or lesser rights, of Owner Trustee or Owner
Participant,  compared to those contained in the structure and documentation for
the original Equipment Notes.

     11.3 EXECUTION OF FACILITATING DOCUMENTS

     Lessee,  Owner Participant,  Owner Trustee,  and Mortgagee will execute any
document  necessary or advisable to implement this ss. 11 (includinG  executing,
delivering,  or providing  any  appropriate  additional  or modified  amendment,
representation, warranty, certificate, opinion, or other document that Lessee or
any other Person reasonably requests).

     11.4 ERISA

     Owner   Participant  shall  not  be  obligated  to  conclude  the  proposed
re-funding  transaction  unless  the  agreements  used to effect it  contain  an
agreement by the initial holders of the New Debt  substantially  the same as ss.
7.5.2(b) of this  Agreement  (unless  the New Debt is sold in a public  offerinG
under the Securities Act or a private placement  intended for resale pursuant to
Rule 144A under the  Securities  Act,  in which case the holders of the New Debt
shall be subject to the restrictions relating to ERISA substantially the same as
those generally applicable to purchasers of pass-through  certificates issued by
U.S. airlines and sold to the public in SEC-registered form).

     11.5 CONSENT TO OPTIONAL REDEMPTIONS

     Each of Owner Participant, Owner Trustee, and Mortgagee agrees for Lessee's
benefit not to cause an  optional  redemption  of the  Equipment  Notes  without
Lessee's  consent  except as set forth in ss. 2.13 of the  Mortgage or elsewhere
herein.

     11.6 LESSEE'S ASSUMPTION OF EQUIPMENT NOTES

     11.6.1 LESSEE'S ELECTION; DOCUMENTATION

     If no Special Default  exists,  upon exercising a purchase option under ss.
17.3 of the Lease,  Lessee may elect to assume and apply as part of thE Purchase
Price the debt evidenced by all of the outstanding  Equipment Notes,  subject to
this ss. 11.6 and ss. 2.15 of the Mortgage.  Lessee shall notify OwNer  Trustee,
each  Participant,  and  Mortgagee of such election no later than 30 days before
the effective date of such assumption.  Subject to this ss. 11.6 anD ss. 2.15 of
the Mortgage,  the parties agree to cooperate and to enter into such  amendments
or  supplemental  agreements as may be necessary to effectuate  thE  transaction
contemplated by this ss. 11.6.

     If Lessee so elects,  then,  upon  compliance  with ss.  17.3 of the Lease,
Owner Trustee will transfer to Lessee,  without  recourse or warrantY (except as
to the absence of Lessor Liens) but subject to the Lien of the Mortgage,  all of
Owner Trustee's right,  title, and interest in and to the Aircraft,  and each of
the  parties  hereto  shall  execute  and  deliver   appropriate   documentation
permitting  Lessee to assume such  obligations  on the basis of full recourse to
Lessee, maintaining for the benefit of the Note Holders the security interest in
the Aircraft created by the Mortgage, and upon compliance with this ss. 11.6 and
ss. 2.15 of the Mortgage,  such  documentation  shall become effective and Owner
Participant  and Owner Trustee shall be released from All future  obligations in
respect  of  the  Equipment  Notes,  the  Mortgage,   and  all  other  Operative
Agreements, except any obligations arising (or with respect to events occurring)
before  such  assumption,  and take all such  other  actions  as are  reasonably
necessary to permit such assumption by Lessee.

     11.6.2 CLOSING CONDITIONS

     In connection with such assumption:

     (1) Lessee shall execute and deliver an instrument, reasonably satisfactory
in form and  substance to Mortgagee  and Owner  Trustee,  (aa) pursuant to which
Lessee  irrevocably  and  unconditionally  assumes  and  undertakes,  with  full
recourse  to  Lessee,  to pay  when  due (at the  stated  maturity  thereof,  by
acceleration,  or  otherwise)  the  principal  of,  and any  Make-Whole  Amount,
interest,  and other  Secured  Obligations  owing on, all  Equipment  Notes then
outstanding in accordance with their terms and punctually to perform and observe
all of the covenants and obligations (monetary or otherwise) hereunder and under
the  Mortgage  and the  Equipment  Notes (as  amended  in  connection  with such
assumption)  to be performed  or observed by Owner  Trustee,  which  obligations
shall be secured by a  first-priority  lien under the  Mortgage,  and (bb) which
contains  amendments  to  the  Mortgage,   in  form  and  substance   reasonably
satisfactory  to Mortgagee  and Owner  Trustee,  that  incorporate  therein such
provisions  from the  Lease and this  Agreement  as are  appropriate,  including
events of default  substantially  identical  in scope and effect to those in the
Lease  but  including  any such  additional  defaults  as  Mortgagee  reasonably
requests  to  provide  the  same  level of  protection  as in the  Mortgage  and
covenants substantially identical to the covenants of Lessee hereunder and under
the Lease.

     (2) The instrument  referred to in clause (1), any Uniform  Commercial Code
financing  statements  relating  thereto,  and  any  other  documents  that  are
necessary (or reasonably  requested by Mortgagee) to establish Lessee's title to
and interest in the Aircraft or to reflect the  substitution of Lessee for Owner
Trustee  under the  Operative  Agreements  or to continue the  perfection of the
security  interests in the  Aircraft  and the other rights and  interests of the
registered owners of the Equipment Notes (or Lessee's  substituted  obligations)
shall be filed  in such  form,  manner,  and  places  as are  necessary  or,  in
Mortgagee's or Owner Trustee's reasonable opinion, advisable for such purpose.

     (3) Mortgagee and Owner  Trustee shall receive an insurance  report,  dated
the effective date of such assumption,  of an independent  insurance broker, and
certificates of insurance, each in form and substance reasonably satisfactory to
such  Person,  as to  the  due  compliance  as of the  effective  date  of  such
assumption  with ss.  11 of the  Lease  (as  incorporated  into  the  instrument
referred to in (1) of this ss.  11.6.2) as it relates to the Note Holders,  each
Certificate  Holder, and Mortgagee relating to the insurance with respect to the
Aircraft.

     (4) Mortgagee and Owner  Trustee  shall  receive  evidence  that, as of the
effectiveness  of such  assumption,  the Aircraft is free and clear of all Liens
other than the Lien of the Mortgage and other
Permitted Liens (other than Lessor Liens).

     (5) Mortgagee  and Owner  Trustee  shall receive a certificate  from Lessee
that no Special Default exists on the effective date of such assumption.

     (6) Mortgagee  receives (aa) a Guarantor  Confirmation under which Holdings
expressly   acknowledges  and  agrees  that  each  of  the  Assumed  Obligations
constitute Guaranteed Obligations (as defined in the Guarantee) for all purposes
of the  Guarantee,  and (bb) restated  Equipment  Notes showing Lessee as issuer
(which  Mortgagee  shall also  authenticate)  evidencing such assumption and the
full recourse nature of Lessee's obligations thereunder.

     (7) Mortgagee  receives  such other  documentation  or evidence  reasonably
requested by Mortgagee to establish the authority of Lessee,  Owner Trustee, and
Owner Participant to consummate the transactions  contemplated by the assumption
and the taking of all corporate proceedings in connection therewith.

     (8) Each Loan Participant and Pass-Through  Certificate  holder  ("HOLDER")
shall  receive (by  delivery  to its  Pass-Though  Trustee,  in the case of each
Holder)  (aa) an opinion of  Troutman  Sanders  LLP,  or other  independent  tax
counsel  chosen by Lessee and  reasonably  acceptable  to each Loan  Participant
(Troutman  Sanders LLP or such other  counsel being the "TAX  COUNSEL"),  to the
effect that the  Pass-Through  Trusts will not be subject to U.S. federal income
tax as a result of Lessee's  assumption of the Equipment  Notes, and (bb) either
(i) an opinion  of Tax  Counsel to the  effect  that the Loan  Participants  and
Holders will not recognize income, gain, or loss for federal income tax purposes
as a result of Lessee's  assumption of the Equipment  Notes, and will be subject
to federal income tax in the same amounts,  in the same manner,  and at the same
time as would have been the case if such  assumption  had not occurred,  or (ii)
(x) an opinion  of Tax  Counsel to the  effect  that the Loan  Participants  and
Holders  should not  recognize  income,  gain,  or loss for  federal  income tax
purposes as a result of Lessee's  assumption of the Equipment  Notes, and should
be subject to federal income tax in the same amounts, in the same manner, and at
the same time as would have been the case if such  assumption  had not occurred,
and (y) an  indemnity  on an  After-Tax  Basis from  Lessee for any  adverse tax
consequences to each Loan Participant and Holder resulting from such assumption,
such  indemnity to be in form and substance  reasonably  acceptable to each Loan
Participant.

     (9) Each Note Holder, each Pass-Through Certificate holder,  Mortgagee, and
Owner Trustee shall receive (by delivery to its Pass-Though Trustee, in the case
of each  Holder):  (aa) a legal  opinion from  counsel for Lessee  (which may be
in-house counsel),  in form and substance  reasonably  satisfactory to each Note
Holder,  Mortgagee,  and  Owner  Trustee,  to the  effect  that  the  assumption
contemplated  by this ss.  11.6  does noT  contravene  Lessee's  certificate  of
incorporation  or by-laws,  or any agreement or instrument known to such counsel
to which Lessee is a party or by which it is bound, and as to (x) the compliance
of the assumption contemplated by this ss. 11.6 with the terms and conditions of
this  ss.  11.6  and ss.  2.15  oF the  Mortgage,  (y)  the  due  authorization,
execution, delivery, validity, and enforceability of the instruments referred to
in clauses (1) and (6), and (z) the continued  perfection of the  first-priority
Lien on the Aircraft for the benefit of the  registered  owners of the Equipment
Notes,  and the due filing of the Uniform  Commercial Code financing  statements
and the  other  documents  referred  to in clause  (2),  (bb)  from  counsel  to
Mortgagee,  counsel  to Lessee and  Guarantor,  counsel  to Owner  Trustee,  and
special aviation counsel, a legal opinion comparable to the respective  opinions
delivered on the Delivery Date (including,  in the case of Lessee's  counsel,  a
favorable opinion regarding the availability of the protections  available under
Section  1110 of the  Bankruptcy  Code),  with such  changes  therein  as may be
appropriate  in light of such  assumption,  and (cc) in the case of each opinion
described in subclause (aa) or (bb) of this clause (9), covering such additional
matters as Mortgagee, Owner Trustee, or any Note Holder reasonably requests.

            (10)  Each  Note  Holder  and  Mortgagee   receive  a  copy  of  the
Application  for  Aircraft  Registration  filed  with  the  FAA  (or  any  other
registration  application  filed  with the  applicable  Aviation  Authority)  in
connection with such assumption.

     12. SECTION 1110

     Lessee,  Owner  Participant,  Loan  Participants,  the Note  Holders  (such
intention  being  evidenced by each of their  acceptance of an Equipment  Note),
Owner  Trustee,  and Mortgagee  intend that Owner  Trustee,  as lessor under the
Lease (and Mortgagee as assignee of Owner Trustee under the Mortgage),  shall be
entitled to the benefits of Section 1110 in the event of a case under Chapter 11
of the Bankruptcy Code in which Lessee is a debtor.

     13. CHANGE OF CITIZENSHIP

     13.1 GENERALLY

     Without prejudice to the  representations,  warranties,  or covenants as to
any party's status as a Citizen of the United States:

     (a) Each of Lessee,  FSB, WTC, and Mortgagee agrees that,  immediately upon
obtaining  knowledge  of any facts that  would  cast  doubt upon its  continuing
status as a Citizen of the United States, and promptly upon public disclosure of
negotiations in respect of any transaction which would or might adversely affect
such  status,  it will  notify all  parties  hereto of all  relevant  matters in
connection therewith; and

     (b)  Owner  Participant  agrees  that,  if its  status  is to change or has
changed as a Citizen of the United  States,  or it makes  public  disclosure  of
circumstances  as a result of which it  believes  that such  status is likely to
change, it will notify all the other parties to this Participation  Agreement of
(1) such change in status promptly after obtaining Actual Knowledge thereof, and
(2) such belief as soon as practicable  after such public disclosure (but in any
event within 10 Business Days after such public disclosure).

     13.2 OWNER PARTICIPANT

     Owner  Participant  agrees,  solely for the  benefit of Lessee and the Note
Holders,  that if, when the Aircraft is  registered  in the United  States,  (a)
Owner Participant is not be a Citizen of the United States, and (b) the Aircraft
shall be, or would therefore become,  ineligible for registration in the name of
Owner Trustee under the  Transportation  Code and  regulations  then  applicable
thereunder  (without  considering  FAR ss. 47.9 or any other  provisioN that may
restrict  Lessee's  or  any  Permitted  Sublessee's  use  or  operation  of  the
Aircraft),  then Owner  Participant  shall as soon as is reasonably  practicable
(but in any event  within  30 days  after  obtaining  Actual  Knowledge  of such
ineligibility and of such loss of citizenship), (y) effect voting trust or other
similar  arrangements  (in which case any provisions  contained in the Operative
Agreements  restricting Owner  Participant's or Owner Trustee's ability to amend
the Trust Agreement shall not apply to the extent necessary to permit the use of
such a voting  trust or other  similar  arrangement)  or take any  other  action
necessary  to  prevent  any   deregistration   or  maintain  the  United  States
registration  of the Aircraft,  or (z) transfer in accordance  with the terms of
this Agreement all its right, title, and interest in and to this Agreement,  the
Trust Estate, and the Trust Agreement in accordance with ss. 10.1.

     13.3 OWNER TRUSTEE

     Upon FSB's giving any notice in accordance with ss. 13.1(a),  Owner Trustee
shall,  subject to ss. 9.1.1 of the Trust  Agreement,  resign as OwNer  Trustee.
Upon  its  receipt  of such  notice,  Owner  Participant  shall as  promptly  as
practicable  appoint a Citizen of the United  States as successor  Owner Trustee
pursuant to ss. 9.1 of the Trust Agreement.

     13.4 MORTGAGEE

     If WTC gives any notice under ss. 13.1(a),  WTC shall (if such  citizenship
is  necessary  under  the  Transportation  Code or, if it is not  necessary,  if
Mortgagee's   citizenship   could  have  any  adverse  effect  on  Lessee,   any
Participant, or any Note Holder), subject to ss. 8.02 of the Mortgage, resign aS
Mortgagee promptly upon its ceasing to be such a citizen.

     14. CONCERNING OWNER TRUSTEE

     Except as otherwise  expressly provided herein, in the Trust Agreement,  or
in the Mortgage,  Owner Trustee is entering  into this  Agreement  solely in its
capacity as trustee as provided in the Trust Agreement and not in its individual
capacity,  and in no case  whatsoever  will it be liable or  accountable  in its
individual  capacity  for any of the  statements,  representations,  warranties,
agreements,  or  obligations  of  Owner  Trustee  hereunder,  or for any loss in
respect  thereof,  as to all of which the  parties  agree to look  solely to the
Trust  Estate;  PROVIDED,  that  nothing in this ss. 14 shall  limiT in scope or
substance the personal  liability of FSB (a) to Owner  Participant  as expressly
set  forth  in the  Trust  Agreement,  (b) in  respect  of the  representations,
warranties,  and agreements of FSB expressly made as such herein or in any other
Operative  Agreement to which it is a party, and (c) for the consequences of its
own gross  negligence,  willful  misconduct,  and,  in  receiving,  handling  or
remitting  of funds  only,  its willful  misconduct  or simple  negligence  as a
trustee.

     15. MISCELLANEOUS

     15.1 AMENDMENTS

     No  provision  of this  Agreement  may be  amended,  supplemented,  waived,
modified,  discharged,  terminated,  or otherwise varied orally,  but only by an
instrument  in  writing  that  specifically  identifies  the  provision  of this
Agreement  that it  purports to amend,  supplement,  waive,  modify,  discharge,
terminate,  or  otherwise  vary and is  signed  by the  party  against  whom the
enforcement  of the  amendment,  supplement,  waiver,  modification,  discharge,
termination,  or variance is sought.  Each such amendment,  supplement,  waiver,
modification, discharge, termination, or variance shall be effective only in the
specific  instance  and for the  specific  purpose  for  which it is  given.  No
provision  of  this  Agreement   shall  be  varied  or   contradicted   by  oral
communication,  course of dealing or performance,  or other manner not set forth
in  writing  and signed by the party  against  whom  enforcement  of the same is
sought.

     15.2 SEVERABILITY

     If  any  provision  of  this  Agreement  is  held  invalid,   illegal,   or
unenforceable in any respect in any jurisdiction,  then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such  jurisdiction,  and (b) such invalidity,  illegality,  or  unenforceability
shall not affect the validity,  legality, or enforceability of such provision in
any other jurisdiction.  If, however,  any Law pursuant to which such provisions
are held invalid,  illegal,  or unenforceable may be waived,  the parties hereto
hereby  waive  that  Law to the full  extent  permitted,  to the end  that  this
Agreement shall be a valid and binding agreement in all respects, enforceable in
accordance with its terms.

     15.3 SURVIVAL

     The  indemnities in this Agreement  shall survive the delivery or return of
the  Aircraft,  the  Transfer  of any  interest  of  Owner  Participant  in this
Agreement,  the Trust  Estate,  and the Trust  Agreement,  the  Transfer  of any
interest by any Note Holder of its Equipment  Note,  and the expiration or other
termination of any Operative Agreement,  except to the extent otherwise provided
therein.

     15.4 REPRODUCTION OF DOCUMENTS

     This Agreement (including all annexes,  schedules, and exhibits hereto) and
all documents  relating  hereto,  including (a) future  consents,  waivers,  and
modifications,  and (b) past and future financial statements,  certificates, and
other  information  furnished  to any party  hereto,  may be  reproduced  by any
photographic,  photostatic,  microfilm,  micro-card,  miniature photographic, or
other  similar  process,  and any party may destroy any  original  documents  so
reproduced.  Any such  reproduction  shall be as  admissible  in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original  exists and  whether or not such  party  made the  reproduction  in the
regular  course  of  business),  and  any  enlargement,  facsimile,  or  further
reproduction of such reproduction also shall be so admissible in evidence.

     15.5 COUNTERPARTS

     This Agreement and any amendments, waivers, consents, or supplements hereto
may be executed in any number of counterparts (or upon separate  signature pages
bound together into one or more counterparts),  each fully-executed set of which
shall be deemed to be an original.

     15.6 NO WAIVER

     No failure on the part of any party hereto to exercise, and no delay by any
party hereto in exercising,  any of its rights, powers,  remedies, or privileges
under this Agreement or otherwise  available shall impair,  prejudice,  or waive
any such right,  power,  remedy, or privilege or be construed as a waiver of any
breach hereof or default hereunder or as an acquiescence  therein, nor shall any
single or partial  exercise  of any such  right,  power,  remedy,  or  privilege
preclude  any other or further  exercise  thereof by it or the  exercise  of any
other right,  power,  remedy,  or privilege by it. No notice to or demand on any
party hereto in any case shall,  unless otherwise required under this Agreement,
entitle such party to any other or further  notice or demand in similar or other
circumstances,  or waive the rights of any party  hereto to any other or further
action in any circumstances without notice or demand.

     15.7 NOTICES

     Unless  otherwise  expressly  permitted by the terms  hereof,  all notices,
requests,  demands,  authorizations,  directions,  consents,  waivers, and other
communications  required or permitted  to be made,  given,  furnished,  or filed
hereunder  shall be in writing  (and the  specification  of a writing in certain
instances  and not in others does not imply an  intention  that a writing is not
required as to the latter),  shall refer  specifically  to this  Agreement,  and
shall be personally  delivered,  sent by fax or  telecommunication  transmission
(which  in  either  case  provides  written  confirmation  to the  sender of its
delivery),  sent by registered mail or certified mail, return receipt requested,
or sent by next-business-day courier service, in each case to the address or fax
number  set forth for such  party in  Schedule  1, or to such  other  address or
number as such party hereafter  specifies by notice to the other parties hereto.
Each such notice, request, demand, authorization, direction, consent, waiver, or
other  communication  shall be  effective  when  received  or,  if made,  given,
furnished, or filed by fax or telecommunication transmission, when confirmed.

     15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE

     (A) THIS AGREEMENT  SHALL IN ALL RESPECTS BE GOVERNED BY AND INTERPRETED IN
ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW YORK,  INCLUDING  ALL  MATTERS  OF
CONSTRUCTION, VALIDITY, AND PERFORMANCE.

     (B) EACH PARTY  HERETO  HEREBY  IRREVOCABLY  AGREES,  ACCEPTS,  AND SUBMITS
ITSELF TO THE NON-EXCLUSIVE  JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
IN THE CITY AND  COUNTY OF NEW YORK AND OF THE UNITED  STATES  FOR THE  SOUTHERN
DISTRICT OF NEW YORK, IN CONNECTION  WITH ANY LEGAL ACTION,  SUIT, OR PROCEEDING
WITH RESPECT TO ANY MATTER  RELATING TO OR ARISING OUT OF OR IN CONNECTION  WITH
THE OPERATIVE AGREEMENTS.

     (C) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES TO THE SERVICE
OF ANY AND ALL LEGAL  PROCESS,  SUMMONS,  NOTICES,  AND  DOCUMENTS OF ANY OF THE
AFOREMENTIONED  COURTS IN ANY SUCH SUIT,  ACTION,  OR PROCEEDING  MAY BE MADE BY
DELIVERING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,  POSTAGE PREPAID,  AT
THE ADDRESS SET FORTH PURSUANT TO SS. 15.7. EACH PARTY HERETO HEREBY AGREES THAT
SERVICE UPON IT, OR ANY OF ITS AGENTS,  IN EACH CASE IN ACCORDANCE WITH THIS SS.
15.8(C),  SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY,
AND EACH PARTY  HERETO  HEREBY  AGREES  THAT THE FAILURE OF ANY OF ITS AGENTS TO
GIVE ANY NOTICE OF SUCH  SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN
ANY WAY THE VALIDITY OF SUCH  SERVICE ON SUCH PARTY OR ANY JUDGMENT  RENDERED IN
ANY ACTION OR PROCEEDING BASED THEREON.

     (D) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE  LAW, AND AGREES NOT TO ASSERT,  BY WAY OF MOTION,  AS A DEFENSE,  OR
OTHERWISE,  IN ANY LEGAL ACTION OR  PROCEEDING  BROUGHT  HEREUNDER IN ANY OF THE
ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM,  THAT  VENUE  FOR THE  ACTION  OR  PROCEEDING  IS  IMPROPER,  OR THAT ANY
OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.

            (E) EACH PARTY HERETO HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION  BASED UPON OR ARISING
OUT OF OR RELATING TO THE OPERATIVE AGREEMENTS.

     15.9 THIRD-PARTY BENEFICIARY

     This  Agreement  is not  intended to provide  (and shall not  provide)  any
Person not a party hereto (other than each Liquidity Provider,  Policy Provider,
Escrow  Agent,  and  Paying  Agent,  each of  which is an  intended  third-party
beneficiary  with respect to the provisions of ss. 9.1 (and any otheR  provision
hereunder  pursuant  to  which  any  such  party  is  expressly  granted  rights
hereunder) with any rights of any nature  whatsoever  against any of the parties
hereto,  and no Person not a party hereto (other than each  Liquidity  Provider,
Policy Provider,  Escrow Agent, and Paying Agent, with respect to the provisions
of ss. 9.1 (and any other provision  hereunder  pursuant to which any such party
is expressly granted rights hereunder) shall have any right, power, or privilege
in respect of any party hereto, or have any benefit or interest,  arising out of
this Agreement.

     15.10 ENTIRE AGREEMENT

     This Agreement,  together with the other Operative Agreements, on and as of
the date hereof,  constitutes  the entire  agreement of the parties  hereto with
respect  to  the  subject  matter  hereof,  and  all  prior   understandings  or
agreements,  whether  written  or oral,  among any of the  parties  hereto  with
respect to such subject matter are hereby superseded in their entireties.

     15.11 FURTHER ASSURANCES

     Each party hereto shall execute,  acknowledge,  and deliver (or cause to be
executed, acknowledged, and delivered) all such further agreements, instruments,
certificates, or other documents, and shall do and cause to be done such further
things,  as any other party hereto  reasonably  requests in connection  with the
administration  of,  or to carry out more  effectively  the  purposes  of, or to
assure and  confirm  better to such other  party the rights and  benefits  to be
provided under, this Agreement and the other Operative Agreements.



     [THIS REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK]


<PAGE>







            IN WITNESS  WHEREOF,  the parties have executed  this  Participation
Agreement N___AT.


                                   AMERICAN TRANS AIR, INC., Lessee


                                   By: ____________________________

                                  Name:
                                  Title:

                                   GENERAL ELECTRIC CAPITAL
                                   CORPORATION, Owner Participant


                                   By: ____________________________

                                       Name:
                                       Title:

                                   FIRST SECURITY BANK, NATIONAL  ASSOCIATION,
                                   NOT IN ITS INDIVIDUAL CAPACITY
                                   (EXCEPT AS EXPRESSLY PROVIDED HEREIN), e
                                   BUT SOLELY AS TRUSTEE, Owner Truste

                                   By: _____________________________

                                   Name:
                                   Title:

                                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                                   IN ITS INDIVIDUAL CAPACITY
                                   (AS EXPRESSLY PROVIDED HEREIN)

                                   By: _________________________________

                                    Name:
                                    Title:



<PAGE>




                                   WILMINGTON  TRUST  COMPANY,
                                   NOT  IN ITS  INDIVIDUAL  CAPACITY
                                   (EXCEPT  AS EXPRESSLY PROVIDED HEREIN),
                                   BUT SOLELY AS TRUSTEE, Mortgagee

                                   By: _________________________________

                                   Name:
                                   Title:




                                   WILMINGTON  TRUST  COMPANY,
                                   NOT  IN ITS  INDIVIDUAL  CAPACITY
                                   (EXCEPT  AS EXPRESSLY PROVIDED HEREIN),
                                   BUT SOLELY AS TRUSTEE,  Pass-Through Trustee
                                   under the Pass-Through Trust Agreement
                                   for the American Trans Air, Inc.
                                   Pass-Through Trust, 200_-1G

                                   By: _________________________________


                                   Name:
                                   Title:

                                   WILMINGTON  TRUST  COMPANY,
                                   NOT  IN ITS  INDIVIDUAL  CAPACITY
                                   (EXCEPT  AS EXPRESSLY PROVIDED HEREIN),
                                   BUT SOLELY AS TRUSTEE,  Pass-Through Trustee
                                   under the Pass-Through Trust Agreement
                                   for the American Trans Air, Inc.
                                   Pass-Through Trust, 200_-1C

     `                             By: ________________________________

                                   Name:
                                   Title:


                                   WILMINGTON  TRUST  COMPANY,
                                   NOT  IN ITS  INDIVIDUAL  CAPACITY
                                   (EXCEPT  AS EXPRESSLY PROVIDED HEREIN),
                                   BUT SOLELY AS SUBORDINATION AGENT


                                   By: _________________________________________

                                   Name:
                                   Title:



<PAGE>








                               ACCOUNTS; ADDRESSES
                 Account for Payments        Address for Notices

AMERICAN        (Confidential Material       American Trans Air, Inc.
TRANS AIR, INC   Omitted)                   7337 West Washington Street
                                             Indianapolis, Indiana  46231
                                             Attention: Exec. VP and CFO
                                             fax: (317) 240-7091

OWNER                                        General Electric Capital
PARTICIPANT                                  Corp.
                                             _______________________
                                             Attention: _________________
                                             fax: (____) __________



THE BOEING                                   The Boeing Company
COMPANY                                      P.O. Box 3707
                                             Seattle, WA 98124-3707
                                             Attention: Treasurer
                                             M/S 68-34
                                             fax: (206) 237-8746


FIRST SECURITY                               First Security Bank, N.A.
BANK,NATIONAL                                79 South Main Street
ASSOCIATION                                  Salt Lake City, UT  84111
                                             Attention: Corporate Trust
                                             Department
                                             fax: (801) 246-5053


WILMINGTON                                   Wilmington Trust Company
TRUST COMPANY,                               Rodney Square North
AS MORTGAGEE                                 1100 North Market Street
                                             Wilmington, DE  19890-0001
                                             Attention:Corporate Trust
                                             Administration
                                             fax: (302)651-8882


WILMINGTON TRUST                             Wilmington Trust Company
COMPANY, AS                                  Rodney Square North
SUBORDINATION AGENT                          1100 North Market Street
                                             Wilmington, DE  19890-0001
                                             Attention: Corporate Trust
                                             Administration
                                             fax: (302) 651-8882


WILMINGTON TRUST                             Wilmington Trust Company
COMPANY, AS                                  Rodney Square North
PASS-THROUGH TRUSTEE                         1100 North Market Street
FOR THE 200_-1G                              Wilmington, DE  19890-0001
PASS-THROUGH TRUST                           Attention: Corporate Trust
                                             Administration
                                             fax: (302) 651-8882



WILMINGTON TRUST                             Wilmington Trust Company
COMPANY, AS                                  Rodney Square North
PASS-THROUGH TRUSTEE                         1100 North Market Street
FOR THE 200_-1c                              Wilmington, DE  19890-0001
PASS-THROUGH TRUST                           Attention: Corporate Trust
                                             Administration
                                             fax: (302) 651-8882

AMBAC ASSURANCE                              Ambac Assurance Corporation
CORPORATION                                  1 State Street Plaza
                                             New York, NY  10004
                                             Attention:  David Nemschoff
                                             fax:  (212) 208-3113








<PAGE>








                                   COMMITMENTS

PARTICIPANT                PERCENTAGE OF LESSOR'S COST            DOLLAR AMOUNT

OWNER PARTICIPANT          OWNER PARTICIPANT'S PERCENTAGE
                           PERCENTAGE
General Electric Capital     __________%                             $__________
Corporation

PASS-THROUGH TRUSTEE       LOAN PARTICIPANT'S PTT PERCENTAGE

200_-1G Pass-Through Trustee  __________%                            $__________



200_-1C Pass-Through Trustee  __________%                            $__________



TOTAL                         100%                                   $__________



<PAGE>




                                  CERTAIN TERMS


DEFINED TERM                                       DEFINITION

Commitment Termination Date                        __________, 200_

Lessee's Advisor(s)                                Capstar Partners, LLC

Lessor's Cost                                      $_______________

OP Jurisdiction                                    New York

Owner Participant's Special Counsel                Dewey Ballantine LLP

Trust Company Jurisdiction                         Utah








                         PARTICIPATION AGREEMENT N___AT

                          dated as of __________, 200_

                                      among

                            AMERICAN TRANS AIR, INC.,
                                     Lessee,

                      GENERAL ELECTRIC CAPITAL CORPORATION,
                               Owner Participant,

                                       and

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
       not in its individual capacity except as expressly provided herein,
                          but solely as Owner Trustee,
                                 Owner Trustee



                            One Boeing model 737-800
                         aircraft bearing manufacturer's
                                serial no. _____
                        and U.S. registration no. N___AT







<PAGE>




                                                               CONTENTS


1. DEFINITIONS AND CONSTRUCTION................................................1

2. PARTICIPATION IN LESSOR'S COST; ............................................2
   ISSUANCE OF EQUIPMENT NOTES; TERMINATION OF OBLIGATION TO PARTICIPATE
         2.1 Participation in Lessor's Cost....................................2
         2.2 Termination of Obligation to Participate..........................2

3. LEASE OF AIRCRAFT...........................................................2

4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; ...................3
   POSTPONEMENT OF SCHEDULED DELIVERY DATE
         4.1 Notices of Scheduled Delivery Date................................3
         4.2 Payment of Lessor's Cost..........................................3
         4.3 Postponement of Scheduled Delivery Date...........................4
         4.4 Closing...........................................................4

5. CLOSING CONDITIONS..........................................................4
         5.1 Conditions to Participants' Obligations...........................4
         5.2 Conditions to Owner Trustee's Obligations.........................9
         5.4 Conditions to Lessee's Obligations...............................10
         5.5 Post-Registration Opinion........................................10

6. REPRESENTATIONS AND WARRANTIES.............................................11
         6.1 Lessee's Representations and Warranties..........................11
         6.2 Owner Participant's Representations and Warranties...............15
         6.3 FSB's Representations and Warranties.............................17

7. COVENANTS..................................................................19
         7.1 Lessee's Covenants...............................................19
         7.2 Owner Participant's Covenants....................................21
         7.3 FSB's and Owner Trustee's Covenants..............................23
         7.6 Other Agreements.................................................25

8. CONFIDENTIALITY............................................................30

9. INDEMNIFICATION AND EXPENSES...............................................30
         9.1 General Indemnity................................................30
         9.2 Expenses.........................................................36
         9.3 General Tax Indemnity............................................37
         9.4 Payments.........................................................48
         9.5 Interest.........................................................48
         9.6 Benefit of Indemnities...........................................48

10. ASSIGNMENT OR TRANSFER OF INTERESTS.......................................49
         10.1 Participants, Owner Trustee, and Note Holders...................49
         10.2 Effect of Transfer..............................................50

11. RE-FUNDING AND CERTAIN OTHER MATTERS......................................51

12. SECTION 1110..............................................................51

13. CHANGE OF CITIZENSHIP.....................................................51
         13.1 Generally.......................................................51
         13.2 Owner Participant...............................................52
         13.3 Owner Trustee...................................................52

14. CONCERNING OWNER TRUSTEE..................................................52

15. MISCELLANEOUS   53
         15.1 Amendments......................................................53
         15.2 Severability....................................................53
         15.3 Survival........................................................53
         15.4 Reproduction of Documents.......................................53
         15.5 Counterparts....................................................54
         15.6 No Waiver.......................................................54
         15.7 Notices.........................................................54
         15.8 Governing Law; Submission to Jurisdiction; Venue................55
         15.9 Third-Party Beneficiary.........................................56
         15.10 Entire Agreement...............................................56
         15.11 Further Assurances.............................................56

ANNEX A                  Definitions

SCHEDULE 1               Accounts; Addresses
SCHEDULE 2               Commitments
SCHEDULE 3               Certain Terms


EXHIBIT A                Opinion of special counsel to Lessee
EXHIBIT B                Opinion of corporate counsel to Lessee
EXHIBIT C                Opinion of corporate counsel to Airframe Manufacturer
EXHIBIT D                Opinion of special counsel to Owner Trustee
EXHIBIT E                Opinion of special counsel to Owner Participant
EXHIBIT F                Opinion of FAA Counsel
EXHIBIT G                Opinion of corporate counsel to Owner Participant
EXHIBIT H                Form of Assignment and Assumption Agreement
EXHIBIT I                Form of Owner Participant Guaranty


<PAGE>





                         PARTICIPATION AGREEMENT N___AT

         This  Participation  Agreement N___AT (this  "Agreement"),  dated as of
__________,  200_,  is entered  into by and among (1) American  Trans Air,  Inc.
("Lessee"),  an Indiana  corporation,  (2) General Electric Capital  Corporation
("Owner  Participant"),  a New York  corporation,  and (3) First  Security Bank,
National  Association,  a national  banking  association,  not in its individual
capacity (except as expressly provided herein),  but solely as Owner Trustee (in
its  capacity  as  Owner  Trustee,  "Owner  Trustee"  or  "Lessor",  and  in its
individual capacity, "FSB").

                                                               RECITALS

         A........Owner   Participant  and  FSB  are  entering  into  the  Trust
Agreement,  pursuant to which Owner Trustee  agrees to hold the Trust Estate for
the use and benefit of Owner Participant.

         B........Lessee  and  Airframe  Manufacturer  entered into the Purchase
Agreement, pursuant to which Airframe Manufacturer agreed to manufacture certain
aircraft  (including the Aircraft) and sell them to Lessee, and Lessee agreed to
buy certain aircraft (including the Aircraft) from Airframe Manufacturer.

         C........Seller will sell the Aircraft to Owner Trustee pursuant to the
terms of this Participation Agreement.

         D........Lessee  and  Owner  Trustee  are  entering  into the  Purchase
Agreement Assignment and the Engine Manufacturer Warranty Agreement, pursuant to
which  Lessee  assigns to Owner  Trustee  certain of Lessee's  rights  under the
Purchase Agreement and the Engine Manufacturer Warranty Agreement.

         E........Lessor  and Lessee are  entering  into the Lease,  pursuant to
which  Lessor is leasing  the  Aircraft  to Lessee  and  Lessee is  leasing  the
Aircraft from Lessor.

         F........The  parties  to  this  Agreement  want to set  forth  in this
Agreement  the terms and  conditions  upon and  subject  to which the  foregoing
transactions shall be effected.

         The parties hereto agree as follows:

     1. DEFINITIONS AND CONSTRUCTION

     The terms defined in Annex A, when capitalized as in Annex A, have the same
meanings when used in this Agreement.  Annex A also contains rules of usage that
control construction in this Agreement.

     2. PARTICIPATION IN LESSOR'S COST; TERMINATION OF OBLIGATION TO PARTICIPATE

         2.1             Participation in Lessor's Cost

     Subject to the terms and  conditions  of this  Agreement,  on the  Delivery
Date,  Owner  Participant  shall  participate in the payment of Lessor's Cost as
follows:

     Owner  Participant  shall finance Owner Trustee's  payment of Lessor's Cost
for the Aircraft by making an equity  investment in the beneficial  ownership of
the Aircraft in the amount in Dollars equal to Lessor's Cost.

         2.2             Termination of Obligation to Participate

     Notwithstanding any other provision of this Agreement,  if the Closing does
not occur on or before the Commitment  Termination Date, the Commitment of Owner
Participant  and its  obligation to  participate in the payment of Lessor's Cost
shall expire and be of no further force and effect; provided, that the liability
of Owner  Participant if it has defaulted in the payment of its Commitment shall
not be released.

     3. LEASE OF AIRCRAFT

     Subject to the terms and  conditions  of this  Agreement,  on the  Delivery
Date,  Owner  Trustee  shall  purchase and accept  delivery of the Aircraft from
Seller under and pursuant to the Purchase  Agreement and the Purchase  Agreement
Assignment,  and thereupon Owner Trustee shall lease the Aircraft to Lessee, and
Lessee shall lease the Aircraft from Owner Trustee, under the Lease.

     4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; POSTPONEMENT OF
SCHEDULED DELIVERY DATE

         4.1             Notices of Scheduled Delivery Date

     Lessee  agrees to give  Owner  Participant  and Owner  Trustee at least one
Business Day's written notice of the Scheduled Delivery Date, which notice shall
set forth Lessor's Cost and the amount of Owner Participant's Commitment.  Owner
Participant  agrees that making its  Commitment  available  shall  constitute  a
waiver of such notice.

         4.2             Payment of Lessor's Cost

     (a) Owner Participant  agrees,  subject to the terms and conditions of this
Agreement,  to make the  Dollar  amount  of its  Commitment  available,  by wire
transfer of immediately available funds to FSB's account at First Security Bank,
National Association,  ABA No. _______,  account no. ______,  reference American
Trans Air, Inc.  Lease N___AT,  at or before 12:00 noon,  New York City time, on
the Scheduled  Delivery Date. All such funds made available by Owner Participant
to FSB shall,  until payment  thereof to Seller as provided in ss.  4.2(b)(2) or
return thereof to Owner  Participant as provided in ss. 4.3.2, be held by FSB in
trust  for the  benefit  of the  Owner  Participant  as the sole  and  exclusive
property of the Owner Participant and not as part of the Trust Estate.

     (b) Subject to the satisfaction,  or waiver by the applicable party, of the
conditions  precedent set forth in ss. 5, and simultaneously with the receipt by
the  parties  hereto  of all  amounts  to be paid to them on the  Delivery  Date
pursuant to this ss. 4.2, Owner Trustee shall:

     (1) purchase, take title to, and accept delivery of the Aircraft;

     (2) in  consideration  of the  transfer  of title to the  Aircraft to Owner
Trustee,  direct FSB to pay,  from the funds made  available to FSB hereunder by
Owner  Participant,  all such funds,  which  payments in the aggregate  shall be
equal to Lessor's  Cost,  by wire  transfer of  immediately  available  funds to
Seller's account set forth in Schedule 1 or as otherwise directed by Seller;

     (3) execute an application for registration of the Aircraft with the FAA;

     (4) lease the Aircraft to Lessee pursuant to the Lease; and

     (5) take such other action as may be required to be taken by Owner  Trustee
on the Delivery Date by the terms of any Operative Agreement.

     4.3 Postponement of Scheduled Delivery Date

                  4.3.1                 Postponement

     If  for  any  reason  whatsoever  the  Closing  is not  consummated  on the
Scheduled  Delivery Date,  Lessee may,  subject to the provisions of 1(e) of the
Note Purchase Agreement,  by telephonic notice, given by 5:00 p.m. New York City
time (such  telephonic  notice to be promptly  confirmed  in writing by personal
delivery or facsimile) on the Scheduled  Delivery Date, to Owner Participant and
Owner  Trustee,   designate  a  Delayed  Delivery  Date,  in  which  case  Owner
Participant will keep its funds available.

     FSB shall promptly return to Owner  Participant all funds made available to
FSB in  accordance  with ss.  4.2(a),  together  with  interest or income earned
thereon, if the Closing fails to occur on the Scheduled Delivery Date.

     4.4 Closing

     The Closing  shall occur at the offices of Troutman  Sanders LLP, 5200 Bank
of America Plaza,  Atlanta,  GA (with a set of Operative  Agreements  also being
delivered in New York City), or such other place as the parties shall agree.

5.       CLOSING CONDITIONS

     5.1 Conditions to Owner Participant's Obligations

     Owner Participant's  obligation to make the Dollar amount of its Commitment
available  for  payment as  directed by Owner  Trustee on the  Delivery  Date is
subject to the satisfaction or such Owner Participant's waiver, on or before the
Delivery Date, of the conditions in this ss. 5.1; provided, that it shall not be
a condition to the obligation of Owner Participant that any document be produced
or action taken that is to be produced or taken by such Owner  Participant or by
a Person within Owner Participant's control.

     5.1.1 Notice

         Owner  Participant  received the notice described in ss. 4.1 or, in the
case of a Delayed Delivery Date, ss. 4.3, when and as required thereby.

     5.1.2 Delivery of Documents

     Except as otherwise provided in this ss. 5.1.2, Owner Participant  receives
executed counterparts of the following documents, and such counterparts (x) have
been duly authorized,  executed,  and delivered by the party or parties thereto,
(y) are reasonably satisfactory in form and substance to Owner Participant,  and
(z) are in full force and effect:

     (a) the Lease (Lessor to receive the sole executed  chattel paper  original
thereof);

     (b) the Tax Indemnity Agreement;  provided, that only Owner Participant and
Lessee shall receive copies of the Tax Indemnity Agreement;

     (c) the Trust Agreement;

     (d) the Purchase Agreement Assignment;

     (e)  the  Consent  and  Agreement  and  the  Engine  Manufacturer  Warranty
Agreement;

     (f) an excerpted copy of the Purchase  Agreement to the extent  relating to
Airframe   Manufacturer's  or  Engine   Manufacturer's   warranties  or  related
obligations  or any right in the Purchase  Agreement  assigned to Owner  Trustee
pursuant to the Purchase Agreement Assignment; provided, that only Owner Trustee
shall  receive  copies of such  agreement  (copies of which may be  inspected by
Owner  Participant  and its special  counsel on the Delivery Date, but after the
Delivery  Date  such  copies  shall  be  retained  by Owner  Trustee  and may be
inspected  and  reviewed  by Owner  Participant  or its counsel if and only if a
Default exists);

     (g) the Bills of Sale;

     (h) the Guarantee;

     (i) an invoice from Seller  specifying  the amount due to Seller in respect
of the Aircraft, which amount shall equal Lessor's Cost of the Aircraft;

     (j) the broker's report and insurance certificates required byss. 11 of the
Lease;

     (k) an  appraisal  or  appraisals  from an  Appraiser,  which  appraisal or
appraisals  shall be  reasonably  satisfactory  in form and  substance  to Owner
Participant;  provided, that only Owner Participant shall receive copies of such
appraisal(s);

     (l)  (1) a  copy  of  Lessee's  articles  of  incorporation,  by-laws,  and
resolutions,  in each case certified as of the Delivery Date by the Secretary or
an Assistant Secretary of Lessee, duly authorizing Lessee's execution, delivery,
and performance of the Lessee Operative  Agreements  required to be executed and
delivered  by Lessee on or  before  the  Delivery  Date in  accordance  with the
provisions  hereof  and  thereof;   (2)  a  copy  of  Guarantor's   articles  of
incorporation,  by-laws,  and  resolutions,  in each  case  certified  as of the
Delivery  Date by the  Secretary or an Assistant  Secretary of  Guarantor,  duly
authorizing  Guarantor's execution,  delivery, and performance of the Guarantee;
(3) incumbency certificates of Lessee, Guarantor, Owner Participant,  and FSB as
to the  person(s)  authorized  to execute  and deliver  the  relevant  Operative
Agreements  on behalf  of such  party;  and (4)  copies  of the  certificate  or
articles of incorporation,  by-laws, and general authorizing  resolutions of the
boards of directors (or executive  committees) or other satisfactory evidence of
authorization of Owner Participant and FSB, certified as of the Delivery Date by
the Secretary or an Assistant or Attesting  Secretary of Owner  Participant  and
FSB,  which   authorize  the  execution,   delivery  and  performance  by  Owner
Participant and FSB, respectively,  of each of the Operative Agreements to which
it is a party,  together with such other  documents and evidence with respect to
it as Lessee or Owner Participant  reasonably requests in order to establish the
consummation of the  transactions  contemplated by this Agreement and the taking
of all corporate proceedings in connection therewith;

     (m) an Officer's  Certificate of Lessee,  dated the Delivery Date,  stating
that its  representations  and warranties in this Agreement are true and correct
as of the  Delivery  Date (or,  to the extent that any such  representation  and
warranty  expressly  relates to an  earlier  date,  true and  correct as of such
earlier date);

     (n) an Officer's  Certificate of FSB, dated the Delivery Date, stating that
its  representations  and  warranties,  in its individual  capacity and as Owner
Trustee,  in this Agreement are true and correct as of the Delivery Date (or, to
the extent that any such  representation  and warranty  expressly  relates to an
earlier date, true and correct as of such earlier date);

     (o) an Officer's Certificate of Owner Participant, dated the Delivery Date,
stating that its  representations  and warranties in this Agreement are true and
correct as of the Delivery Date (or, to the extent that any such  representation
and warranty  expressly  relates to an earlier date, true and correct as of such
earlier date);

     (p) an  application  for  registration  of the Aircraft with the FAA in the
name of Owner  Trustee (FAA Counsel to receive the sole  executed  copy thereof,
for filing with the FAA);

     (q) the Financing Statements;

     (r) the  following  opinions  of counsel,  in each case dated the  Delivery
Date:

     (1) an opinion  of  Troutman  Sanders  LLP,  special  counsel to Lessee and
Guarantor, substantially in the form of Exhibit A;

     (2) an opinion of Lessee's and Guarantor's Legal Department,  substantially
in the form of Exhibit B;

     (3) an opinion of corporate counsel to Airframe Manufacturer, substantially
in the form of Exhibit C;

     (4) an opinion of Ray, Quinney & Nebeker, special counsel to Owner Trustee,
substantially in the form of Exhibit D;

     (5)  an  opinion  of  Dewey   Ballantine  LLP,  special  counsel  to  Owner
Participant, substantially in the form of Exhibit E;

     (6) an opinion of FAA Counsel, substantially in the form of Exhibit F;

     (7) an  opinion  of Dewey  Ballantine  LLP,  special  tax  counsel to Owner
Participant,  with  respect  to certain  tax  consequences  of the  transactions
contemplated  hereby;  provided,  that only Owner Participant shall receive such
opinion; and

     (8) an opinion of corporate counsel of Owner Participant,  substantially in
the form of Exhibit G, and

     (s)  Owner  Participant  receives  copies  of such  other  documents  as it
reasonably requests, except as provided in clause (f) of this ss. 5.1.2.

     5.1.3 Violation of Law

     No change  occurs after the date of this  Agreement in any  applicable  Law
that makes it a violation  of Law for (a) Lessee,  Owner  Participant,  or Owner
Trustee to execute, deliver, and perform the Operative Agreements to which it is
a party or to be a party subject to the obligations of the Operative  Agreements
to which Owner Participant is bound, or (b) Owner Participant to make the Dollar
amount of its Commitment available.

     5.1.4 Representations, Warranties, and Covenants

     The  representations  and  warranties of each other party to this Agreement
made, in each case, in any Operative  Agreement to which it is a party, are true
and accurate in all material  respects as of the Delivery  Date (unless any such
representation  and warranty was made with  reference  to a specified  date,  in
which case such  representation  and  warranty  was true and accurate as of such
specified  date),  and each other  party to this  Agreement  has  performed  and
observed,  in all material  respects,  all of its  covenants,  obligations,  and
agreements in each Operative  Agreement to which it is a party to be observed or
performed by it as of the Delivery Date.

     5.1.5 No Default

     On the Delivery  Date,  no Default  exists or would result from the sale or
lease of the Aircraft.

     5.1.6 No Event of Loss

     No Event of Loss with respect to the  Airframe or any Engine has  occurred,
and no circumstance, condition, act, or event has occurred that, with the giving
of notice or lapse of time,  would give rise to or  constitute  an Event of Loss
with respect to the Airframe or any Engine.

     5.1.7 Title

     Owner Trustee has good title (subject to filing and  recordation of the FAA
Bill of Sale with the FAA) to the Aircraft,  free and clear of Liens, except (a)
the  rights of Lessee  under the Lease,  (b) the  beneficial  interest  of Owner
Participant  created by the Trust  Agreement,  (c) Liens permitted by clause (d)
(solely for taxes not yet due) of ss. 6 of the Lease, and (d) Liens permitted by
clause (e) of ss. 6 of the Lease.

     5.1.8 Certification

         The Aircraft has been duly certificated by the FAA as to type, and upon
     registration   in  Owner  Trustee's  name  will  be  eligible  for  an  FAA
airworthiness
certificate.

     5.1.9 Section 1110

     Owner  Trustee,  as lessor under the Lease,  is entitled to the benefits of
Section  1110  (as  currently  in  effect)  with  respect  to the  right to take
possession  of the Airframe and Engines as provided in the Lease in the event of
a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.

     5.1.10 Filing

     The FAA-Filed Documents are on the Delivery Date duly filed for recordation
with the FAA in accordance  with the  Transportation  Code,  and each  Financing
Statement  has been duly  filed or is in the  process of being duly filed in the
appropriate jurisdiction.

     5.1.11 No Proceedings

     No action or proceeding has been instituted,  nor is any action  threatened
in writing, before any Government Entity, nor has any order, judgment, or decree
been  issued or proposed to be issued by any  Government  Entity,  to set aside,
restrain,  enjoin,  or prevent the completion and  consummation of any Operative
Agreement or the Transactions.

     5.1.12 Governmental Action

     All appropriate action required to have been taken before the Delivery Date
by the FAA, or any other Government  Entity of the United States,  in connection
with  the  Transactions  has  been  taken,  and all  orders,  permits,  waivers,
authorizations,  exemptions,  and approvals of such  entities  required to be in
effect  on the  Delivery  Date in  connection  with the  Transactions  have been
issued.

     5.2 Conditions to Owner Trustee's Obligations

     Owner Trustee's obligation to apply the Commitments to pay Lessor's Cost on
the Delivery Date is subject to the satisfaction or Owner Trustee's  waiver,  on
or before the Delivery Date, of the conditions in this ss. 5.2.

     5.2.1 Notice

     Owner Trustee receives the notice described in ss. 4.1 or, in the case of a
Delayed Delivery Date, ss. 4.3, when and as required thereby.

     5.2.2 Documents Owner Trustee receives executed  originals of the documents
described in ss. 5.1.2, except as otherwise provided therein, unless the failure
to receive  any such  document  is the result of any action or inaction by Owner
Trustee.

     5.2.3 Other Conditions Precedent

     Each of the  conditions  in  ss.ss.  5.1.3,  5.1.4,  5.1.5,  and  5.1.9  is
satisfied,  unless the  failure of any such  condition  to be  satisfied  is the
result of any action or inaction by Owner Trustee.

     5.3 Conditions to Lessee's Obligations

     Lessee's  obligation  to lease the Aircraft on the Delivery Date is subject
to the satisfaction or Lessee's  waiver,  on or before the Delivery Date, of the
conditions in this ss. 5.3.

     5.3.1 Documents

     Lessee receives executed originals of the documents described in ss. 5.1.2,
except as  otherwise  provided  therein,  and they are  satisfactory  to Lessee,
unless the failure to receive  any such  document is the result of any action or
inaction by Lessee.

     5.3.2 Taxes

     Lessee is satisfied that no sales, use, value-added, goods-and-services, or
like tax, and no stamp tax duty,  is payable with respect to the delivery of the
Aircraft  on the  Delivery  Date (to the  extent  that  Lessee  could be  liable
therefor under ss. 9.3).

     5.3.3 Other Conditions

     Each of the conditions in ss.ss.  5.1.3, 5.1.4, 5.1.5, 5.1.6, 5.1.7, 5.1.8,
5.1.9, 5.1.10, 5.1.11, and 5.1.12 has been satisfied or waived by Lessee, unless
the failure of any such condition to be satisfied is the result of any action or
inaction by Lessee.

     5.4 Post-Registration Opinion

     Promptly after the  registration of the Aircraft and the recordation of the
FAA-Filed  Documents pursuant to the Transportation  Code, Lessee will cause FAA
Counsel to deliver to Lessee,  Owner Participant,  and Owner Trustee a favorable
opinion or opinions addressed to each of them with respect to such recordation.

     6. REPRESENTATIONS AND WARRANTIES

     6.1 Lessee's Representations and Warranties

     Lessee represents and warrants to Owner Participant and Owner Trustee that:

     6.1.1 Organization; Qualification

     Lessee is a corporation duly  incorporated,  validly existing,  and in good
standing under the Laws of Indiana, and has the corporate power and authority to
conduct the business in which it is  currently  engaged and to own or hold under
lease its  properties  and to enter into and perform its  obligations  under the
Lessee  Operative  Agreements.  Lessee is duly  qualified  to do  business  as a
foreign  corporation in good standing in each  jurisdiction  in which the nature
and extent of the business  conducted by it, or the ownership of its properties,
requires such  qualification,  except where the failure to be so qualified would
not give rise to a Materially Adverse Change to Lessee.

     6.1.2 Corporate Authorization

     Lessee has taken,  or caused to be taken,  all necessary  corporate  action
(including  obtaining  any consent or approval of  stockholders  required by its
articles of incorporation or by-laws) to authorize its execution,  delivery, and
performance of its obligations under each of the Lessee Operative Agreements.

     6.1.3 No Violation

     Lessee's execution,  delivery, and performance of its obligations under the
Lessee  Operative  Agreements  do not and will not (a) violate any  provision of
Lessee's articles of incorporation or by-laws, (b) violate any Law applicable to
or binding on Lessee, or (c) violate or constitute any default under (other than
any violation or default that would not result in a Materially Adverse Change to
Lessee),  or result in the creation of any Lien (other than as  permitted  under
the Lease) upon the Aircraft under, any lease, loan, or other material agreement
to which Lessee is a party or by which Lessee or any of its properties is bound.

     6.1.4 Approvals

     Lessee's  execution  and delivery of, and  performance  of its  obligations
under, the Lessee  Operative  Agreements do not and will not require the consent
or approval of, the giving of notice to, the registration with, the recording or
filing of any  documents  with,  or the taking of any other action in respect of
(a) any  trustee  or other  holder  of any Debt of  Lessee,  (b) any  Government
Entity, or (c) any other Person,  other than (x) the FAA-Filed Documents and the
Financing  Statements  (and  continuation  statements  periodically),   and  (y)
filings,  recordings,  notices,  corporate  approvals of Lessee (which have been
duly obtained) or other ministerial  actions pursuant to any routine  recording,
contractual, or regulatory requirements.

     6.1.5 Valid and Binding Agreements

     The Lessee Operative  Agreements have been duly authorized,  executed,  and
delivered by Lessee,  and  (assuming  their due  authorization,  execution,  and
delivery by the other parties  thereto)  constitute  legal,  valid,  and binding
obligations  of Lessee and are  enforceable  against  Lessee in accordance  with
their  terms,  except  as such  enforceability  may be  limited  by  bankruptcy,
insolvency,  and other similar Laws affecting the rights of creditors  generally
and general principles of equity.

     6.1.6 Litigation

     Except as set forth in Guarantor's  most recent Annual Report on Form 10-K,
filed by Lessee with the SEC on or before the Delivery Date, or in any Quarterly
Report on Form 10-Q or Current  Report on Form 8-K filed by  Guarantor  with the
SEC  subsequent to such Form 10-K and on or before the Delivery Date, no action,
claim,  or  proceeding  is  now  pending  or,  to  Lessee's  Actual   Knowledge,
threatened,  against Lessee,  Guarantor, or any of their Affiliates,  before any
Government Entity or any arbitrator,  that is reasonably likely to be determined
adversely  to Lessee and if  determined  adversely  to Lessee  would result in a
Materially Adverse Change.

     6.1.7 Financial Condition

     Guarantor's audited  consolidated  balance sheet for its most-recent fiscal
year, included in Guarantor's Annual Report on Form 10-K filed by Guarantor with
the SEC for  such  fiscal  year,  and the  related  consolidated  statements  of
operations  and cash flows for the period  then  ended,  have been  prepared  in
accordance  with GAAP and fairly present in all material  respects the financial
condition of Guarantor and its consolidated subsidiaries as of such date and the
results of its operations and cash flows for such period,  and since the date of
such  balance  sheet,  there  has  been no  Materially  Adverse  Change  in such
financial  condition  or  operations,  except for matters  disclosed  in (a) the
financial  statements referred to above, or (b) any subsequent  Quarterly Report
on Form 10-Q or Current Report on Form 8-K filed by Guarantor with the SEC on or
before the Delivery Date.

     6.1.8 Registration and Recordation

     Except  for (a)  registering  the  Aircraft  with the FAA  pursuant  to the
Transportation  Code in the name of Owner  Trustee,  (b) filing for  recordation
(and  recording) the FAA-Filed  Documents,  (c) filing the Financing  Statements
(and  continuation  statements  relating  thereto at  periodic  intervals),  (d)
Lessor's taking possession and retaining the chattel paper original  counterpart
of the Lease,  and (e)  affixing  the  placards  referred to in ss. 7.1.3 of the
Lease, no further action,  including filing or recording any document (including
any financing  statement under UCC Article 9) is necessary in order to establish
and perfect Owner Trustee's right, title, and interest,  in the Aircraft and the
Lease, as against Lessee and any other Person, in any applicable jurisdiction in
the United States.

     6.1.9 Chief Executive Office

     Lessee's chief executive office (as defined in UCC Article 9) is located at
7337 West Washington Street, Indianapolis, Indiana, 46231.

     6.1.10 No Default

     No Default exists.

     6.1.11 No Event of Loss

     No Event of Loss has  occurred  with respect to the Airframe or any Engine,
and, to Lessee's Actual Knowledge, no circumstance, condition, act, or event has
occurred that,  with the giving of notice or lapse of time,  gives or would give
rise to or constitutes  or would  constitute an Event of Loss to the Airframe or
any Engine.

     6.1.12 Compliance With Laws

     (a) Lessee is a Citizen of the United States and a U.S. Air Carrier.

     (b) Lessee holds all licenses, permits, and franchises from the appropriate
Government  Entities  necessary  to authorize  Lessee  lawfully to engage in air
transportation  and to  carry  on  scheduled  commercial  passenger  service  as
currently  conducted,  except to the  extent  that the  failure to hold any such
license, permit, or franchise would not give rise to a Materially Adverse Change
to Lessee.

     (c) Lessee is not an  "investment  company" or a company  controlled  by an
"investment company" within the meaning of the Investment Company Act of 1940.

     6.1.13 Securities Laws

     Neither Lessee nor any Person  authorized to act on its behalf has directly
or  indirectly  offered any  beneficial  interest  or  Security  relating to the
ownership  of the  Aircraft or the Lease or any interest in the Trust Estate and
the Trust  Agreement  for sale to, or  solicited  any offer to acquire  any such
interest or security  from,  or has sold any such  interest or security  to, any
Person in violation of the Securities Act.

     6.1.14 Broker's Fees

     No Person acting on behalf of Lessee is or will be entitled to any broker's
fee, commission, or finder's fee in connection with the Transactions, except for
fees payable to Lessee's Advisor(s), if any.

     6.1.15 Section 1110

     Owner Trustee,  as lessor under the Lease, will be entitled to the benefits
of Section  1110 (as  currently  in effect),  with  respect to the right to take
possession of the Airframe and Engines as provided in the Lease, in the event of
a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.

     6.1.16 No Government Consents

     Neither  Lessee's  execution  and  delivery of any of the Lessee  Operative
Agreements nor Lessee's  performance of its obligations  hereunder  requires the
consent or approval of, the giving of notice to, or the  registration  with,  or
the taking of any other action in respect of any Government  Entity,  except for
(a) the orders, permits,  waivers,  exemptions,  authorizations and approvals of
the  regulatory  authorities  having  jurisdiction  over  the  operation  of the
Aircraft by Lessee, which orders, permits, waivers,  exemptions,  authorizations
and approvals  have been duly obtained and are, or will on the Delivery Date be,
in full force and effect,  and the  registration  and filings referred to herein
and  (b)  any  normal  periodic  and  other  reporting  requirements  under  the
applicable  rules of the FAA to the extent required to be given or obtained only
on or after the Delivery Date.

     6.1.17 Payment of Taxes

     Lessee and its  Affiliates  have  filed or caused to be filed all  federal,
state, and material local and non-U.S. tax returns that are required to be filed
and have paid or caused to be paid all taxes shown to be due on such  returns or
on any  assessment  received  by Lessee or its  Affiliates,  except any that are
being contested diligently and in good faith by appropriate  proceedings and for
which  adequate  provision  for payment has been made in  accordance  with GAAP.
There is no ongoing audit or, to the knowledge of Lessee, other investigation by
any Government Entity of the tax liability of Lessee or its Affiliates and there
is no  unresolved  claim  by a  taxing  authority  concerning  Lessee's  or  any
Affiliate's  tax liability,  for any period for which returns have been filed or
were  due,  that,  in  either  case,  reasonably  may be  expected  to result in
liability  of  Lessee  which  could  have a  materially  adverse  effect  on the
business,  operations or financial  condition of Lessee or the ability of Lessee
to perform its obligations under the Operative Agreements.

     6.2 Owner Participant's Representations and Warranties

     Owner Participant represents and warrants to Lessee and Owner Trustee that:

     6.2.1 Organization, etc.

     Owner Participant (a) is a corporation duly incorporated,  validly existing
and in  good  standing  under  the  Laws  of the OP  Jurisdiction,  (b)  has the
corporate  power and  authority to conduct the business in which it is currently
engaged,  to own or hold  under  lease  its  properties,  and to enter  into and
perform its obligations  under the Owner Participant  Agreements,  and (c) has a
tangible net worth (exclusive of goodwill) greater than $50 million.

     6.2.2 Corporate Authorization

     Owner Participant has taken (or caused to be taken) all necessary corporate
action (including obtaining any consent or approval of stockholders  required by
its  certificate  of  incorporation  or by-laws)  to  authorize  its  execution,
delivery, and performance of its obligations under each of the Owner Participant
Agreements.

     6.2.3 No Violation

     Owner Participant's execution, delivery, and performance of its obligations
under each of the Owner  Participant  Agreements do not and will not (a) violate
any provision of Owner  Participant's  certificate of  incorporation or by-laws,
(b)  violate  any  Law  applicable  to  or  binding  on  Owner  Participant  (no
representation  or  warranty  is made with  respect to ERISA,  other than as set
forth in ss. 6.2.9) or (c) violate or  constitute  any default under (other than
any violation or default that would not result in a Materially Adverse Change to
Owner  Participant),  or  result  in the  creation  of any Lien  (other  than as
provided for or otherwise permitted in the Operative  Agreements) upon the Trust
Estate  under,  any lease,  loan,  or other  material  agreement  to which Owner
Participant is a party or by which Owner Participant or any of its properties is
bound.

     6.2.4 Approvals

     Owner Participant's execution, delivery, and performance of its obligations
under each of the Owner  Participant  Agreements do not and will not require the
consent or  approval  of, the giving of notice to, the  registration  with,  the
recording or filing of any documents  with, or the taking of any other action in
respect of (a) any trustee or other holder of any Debt of Owner Participant, and
(b) any  Government  Entity,  other than filing the FAA-Filed  Documents and the
Financing Statements and routine regulatory filings.

     6.2.5 Valid and Binding Agreements

     The Owner Participant  Agreements have been duly authorized,  executed, and
delivered by Owner Participant, and (assuming the due authorization,  execution,
and delivery by the other parties thereto)  constitute legal, valid, and binding
obligations of Owner  Participant and are enforceable  against Owner Participant
in accordance with their terms,  except as such enforceability may be limited by
bankruptcy, insolvency, and other similar Laws affecting the rights of creditors
generally and general principles of equity.

     6.2.6 Citizenship

     Owner Participant is a Citizen of the United States.

     6.2.7 No Liens

     There are no Lessor Liens  attributable to Owner  Participant on all or any
part of the Trust Estate.

     6.2.8 Investment by Owner Participant

     Owner Participant is acquiring its beneficial  interest in the Trust Estate
for  its own  account,  for  investment  and not  with a view to any  resale  or
distribution  thereof;  provided,  that, subject to the transfer restrictions in
ss. 10, its disposition of its beneficial  interest in the Trust Estate shall at
all times be within its control.

     6.2.9 ERISA

     No part of the funds to be used by Owner Participant to acquire or hold its
interests in the Trust Estate  directly or  indirectly  constitutes  assets of a
Plan.

     6.2.10 Litigation

     There  are  no  pending  or,  to  Owner  Participant's   Actual  Knowledge,
threatened   actions  or  proceedings   against  Owner  Participant  before  any
Government  Entity that, if  determined  adversely to Owner  Participant,  would
materially   adversely  affect  Owner  Participant's   ability  to  perform  its
obligations under the Owner Participant Agreements.

     6.2.11 Securities Laws

     Neither Owner  Participant nor any Person Owner  Participant has authorized
to act on its behalf has directly or indirectly offered any beneficial  interest
in or Security  relating to the ownership of the Aircraft or any interest in the
Trust  Estate for sale to, or  solicited  any offer to  acquire  any of the same
from,  any  Person  in  violation  of the  Securities  Act or  applicable  state
securities  Laws (with the  understanding  that Owner  Participant  shall not be
deemed to have  authorized  Lessee's  Advisor(s)  to act on Owner  Participant's
behalf).

     6.2.12 Broker's Fees

     No Person acting on behalf of Owner  Participant  is or will be entitled to
any  broker's  fee,   commission,   or  finder's  fee  in  connection  with  the
Transactions.

     6.3 FSB's Representations and Warranties

     FSB represents and warrants to Lessee and Owner Participant that:

     6.3.1 Organization, etc.

     FSB is a national banking association duly organized,  validly existing and
in  good  standing  under  the  Laws  of the  United  States,  holding  a  valid
certificate  to do  business  as a national  banking  association  with  banking
authority  to execute,  deliver,  and perform  its  obligations  under the Owner
Trustee Agreements.

     6.3.2 Corporate Authorization

     FSB has  taken  (or  caused to be taken)  all  necessary  corporate  action
(including obtaining any consent or approval of stockholders  required by Law or
by its  articles of  association  or by-laws) to  authorize  the  execution  and
delivery by FSB or Owner Trustee, of each of the Owner Trustee  Agreements,  and
the performance of its obligations thereunder.

     6.3.3 No Violation

     FSB's and Owner  Trustee's  execution,  delivery,  and performance of their
respective  obligations  under the Owner Trustee  Agreements do not and will not
(a) violate any  provision  of FSB's  articles of  association  or by-laws,  (b)
violate any Utah Law or federal  banking Law  applicable  to or binding on Owner
Trustee or FSB, or (c) violate or  constitute  any default under (other than any
violation or default that would not result in a Materially Adverse Change to FSB
or Owner  Trustee),  or result in the  creation of any Lien upon any property of
FSB, Owner Trustee,  or any of FSB's  subsidiaries  under,  any lease,  loan, or
other  material  agreement to which FSB or Owner  Trustee is a party or by which
FSB, Owner Trustee, or any of their properties is or may be bound or affected.

     6.3.4 Approvals

     FSB's and Owner  Trustee's  execution,  delivery,  and performance of their
respective  obligations  under the Owner Trustee  Agreements do not and will not
require the consent, approval, or authorization of, the giving of notice to, the
registration  with, the recording or filing of any documents with, or the taking
of any other  action in respect of, (a) any trustee or other  holder of any Debt
of FSB, or (b) any Government Entity governing  banking and trust powers,  other
than filing the FAA-Filed Documents and the Financing Statements.

     6.3.5 Valid and Binding Agreements

     The Owner  Trustee  Agreements  have been duly  authorized,  executed,  and
delivered  by FSB and  Owner  Trustee,  and  (assuming  the  due  authorization,
execution,  and delivery thereof by the other parties thereto) constitute legal,
valid,  and binding  obligations  of FSB and Owner  Trustee and are  enforceable
against FSB and Owner  Trustee in  accordance  with their terms,  except as such
enforceability may be limited by bankruptcy,  insolvency, and other similar Laws
affecting the rights of creditors generally and general principles of equity.

     6.3.6 Citizenship

     FSB is a Citizen of the United States.

     6.3.7 Chief Executive Office

     The chief  executive  office (as defined in UCC Article 9) of Owner Trustee
is located at 79 South Main Street, Salt Lake City, Utah 84111.

     6.3.8 Title

     On the Delivery Date,  Owner Trustee shall have received  whatever title to
the Aircraft as was conveyed to it by Seller.

     6.3.9 No Liens; Financing Statements

     There are no Lessor Liens  attributable  to FSB or Owner Trustee in respect
of all or any  part  of the  Aircraft,  or the  Trust  Estate.  Except  for  the
Financing  Statements,  neither  FSB nor  Owner  Trustee  has  executed  any UCC
financing statement relating to the Aircraft or the Lease.

     6.3.10 Litigation

     There are no pending or, to FSB's Actual Knowledge,  threatened  actions or
proceedings  against FSB or Owner Trustee before any Government  Entity that, if
determined  adversely to FSB, would  materially  adversely affect the ability of
FSB or Owner  Trustee  to  perform  its  obligations  under  the  Owner  Trustee
Agreements.

     6.3.11 Securities Laws

     Neither FSB, nor any Person  authorized to act on its behalf,  has directly
or  indirectly  offered any  beneficial  interest  or  Security  relating to the
ownership of the Aircraft or any interest in the Trust  Estate,  for sale to, or
solicited any offer to acquire any such  interest or security  from, or has sold
any such interest or security to, any Person other than Owner Participant.

     6.3.12 Expenses and Taxes

     There are no Expenses  or Taxes that may be imposed on or asserted  against
the Trust, the Trust Estate, or any part thereof or any interest therein, Lessee
or Owner  Participant  (except as to Owner  Trustee,  Taxes  imposed on the fees
payable  to Owner  Trustee)  under  the laws of Utah in  connection  with  Owner
Trustee's execution,  delivery, or performance of any Operative Agreement, which
Expenses or Taxes would not have been  imposed if Owner  Trustee had not (x) had
its  principal  place of  business in Utah,  (y)  performed  (in its  individual
capacity  or as Owner  Trustee)  any or all of its  duties  under the  Operative
Agreements  in  Utah,  or  (z)  engaged  in  any  activities  unrelated  to  the
transactions contemplated by the Operative Agreements in Utah.

     7. COVENANTS

     7.1 Lessee's Covenants

     Lessee  agrees for the benefit of Owner  Participant  and Owner  Trustee as
follows:

     7.1.1 Corporate Existence; U.S. Air Carrier

     Lessee  shall at all times  maintain  its  corporate  existence,  except as
permitted  byss.  13.2 of the Lease,  and shall at all times  remain a U.S.  Air
Carrier.

     7.1.2 Notice of Change of Chief Executive Office

     Lessee will give to Owner  Participant  and Owner  Trustee  timely  written
notice of (but in any event  within 90 days after) any  relocation  of its chief
executive  office (as  defined in UCC  Article  9), and will  promptly  take any
action required by ss. 7.1.3(c) as a result of such relocation.

     7.1.3 Certain Assurances

     (a) Lessee  shall duly  execute,  acknowledge,  and deliver (or cause to be
executed,  acknowledged, and delivered) all such further documents, and shall do
and cause to be done such further things,  as Owner Participant or Owner Trustee
reasonably  requests to  accomplish  the purposes of the  Operative  Agreements,
provided that no document so executed by Lessee will expand any  obligations  or
limit any rights of Lessee in respect of the Transactions.

     (b) Lessee shall  promptly take such action with respect to the  recording,
filing, re-recording, and refiling of the Lease and the Trust Agreement, and any
supplements  thereto, as shall be necessary to establish,  perfect,  and protect
Owner Trustee's interests and rights in and to the Aircraft and under the Lease.
Lessee shall  furnish to Owner  Participant  or Owner  Trustee such  information
(other  than with  respect to the  citizenship  of Owner  Participant  and Owner
Trustee) in Lessee's possession or otherwise  reasonably available to Lessee and
required to enable Owner  Participant  or Owner Trustee to apply to register the
Aircraft  under the  Transportation  Code (subject to Lessee's  rights under ss.
7.1.2 of the Lease),  and shall pay or cause to be paid all out-of-pocket  costs
and expenses thereof (including reasonable attorneys' fees and disbursements).

     (c) Lessee will cause the FAA-Filed  Documents,  the Financing  Statements,
and  all  continuation  statements  (and  any  amendments  necessitated  by  any
combination,  consolidation, or merger pursuant to ss. 13.2 of the Lease, or any
relocation of its chief executive office) in respect of the Financing Statements
to be prepared and,  subject only to the execution and delivery thereof by Owner
Trustee,  duly and timely filed and recorded,  or filed for recordation,  to the
extent  permitted under the  Transportation  Code (with respect to the FAA-Filed
Documents) or the UCC or similar law of any other applicable  jurisdiction (with
respect to such other documents).

     (d) If the Aircraft is registered in a country other than the United States
pursuant to ss.  7.1.2 of the Lease,  Lessee will  furnish to Owner  Trustee and
Owner Participant  annually while the Aircraft is not U.S.-registered  (starting
with the  calendar  year  after such  registration  is  effected)  an opinion of
special counsel  reasonably  satisfactory to Owner Participant  stating that, in
the opinion of such counsel,  either (1) such action has been taken with respect
to  the  recording,  filing,  re-recording,   and  re-filing  of  the  Operative
Agreements  and any  supplements  and  amendments  thereto  as is  necessary  to
establish, perfect, and protect Owner Trustee's right, title and interest in and
to the  Aircraft  and the  Operative  Agreements,  reciting  the details of such
actions,  or (2) no such action is necessary to maintain the  perfection of such
right, title, and interest.

     7.1.4 Securities Laws

     Neither Lessee nor any Person authorized to act on its behalf will directly
or  indirectly  offer  any  beneficial  interest  or  Security  relating  to the
ownership  of the  Aircraft or the Lease or any interest in the Trust Estate and
Trust  Agreement  for sale to, or solicit any offer to acquire any such interest
or  security  from,  or sell any such  interest  or  security  to, any Person in
violation of the Securities Act or applicable state or foreign securities Laws.

                  7.1.5                 Certification

     Lessee  shall  cause the  Aircraft  to be duly  certified  by the FAA as to
airworthiness and shall,  immediately upon registration of the Aircraft in Owner
Trustee's name, obtain an FAA airworthiness certificate for the Aircraft.

     7.2 Owner Participant's Covenants

     Owner  Participant  agrees for the  benefit of Lessee and Owner  Trustee as
follows:

     7.2.1 Liens

     Owner  Participant (a) (1) will not directly or indirectly  create,  incur,
assume, or suffer to exist any Lessor Lien attributable to it on or with respect
to all or any part of the Trust Estate or the Aircraft, and (2) will, at its own
cost and expense,  promptly  take such action as is  necessary to discharge  any
Lessor Lien  attributable  to Owner  Participant on all or any part of the Trust
Estate or the Aircraft;  provided,  that Owner Participant shall not be required
to comply with the  foregoing  provisions of this clause (a) if it shall in good
faith by appropriate proceedings contest claims or charges resulting in any such
Lien as long as such contest  does not involve any material  danger of the sale,
forfeiture,  loss,  or loss of use of the  Aircraft or the interest of Lessor or
Owner  Participant  therein;  and (b) will hold harmless and  indemnify  Lessee,
Owner Trustee, each of their respective  Affiliates,  successors,  and permitted
assigns, and the Trust Estate from and against (1) any and all Expenses, (2) any
reduction  in  the  amount  payable  out  of  the  Trust  Estate,  and  (3)  any
interference with the possession,  operation, or other use of all or any part of
the Aircraft,  in each case imposed on, incurred by, or asserted  against any of
the  foregoing as a consequence  of any such Lessor Lien (without  regard to the
proviso to the foregoing clause (a)).

     7.2.2 Revocation of Trust Agreement

     (a)  Owner  Participant  will  comply  with  the  provisions  of the  Trust
Agreement  applicable to it, will not terminate or revoke the Trust Agreement or
the trusts created  thereunder  without the prior written consent of Lessee, and
will not amend,  modify, or supplement the Trust Agreement,  or waive any of the
provisions thereof, if such amendment, modification, supplement, or waiver would
have any adverse effect on Lessee, without the consent of Lessee.

     (b) Notwithstanding ss. 7.2.2(a),  Owner Participant may at any time remove
Owner Trustee  pursuant to ss. 9.1 of the Trust Agreement or terminate the Trust
Agreement pursuant to ss. 11.2 of the Trust Agreement.

     7.2.3 Change of Situs of Owner Trust

     If, at any time, any Tax Indemnitee or the Trust Estate becomes  subject to
any Taxes for which it is indemnified  pursuant to ss. 9.3 of this Agreement and
if, as a  consequence  thereof,  Lessee  requests that the situs of the Trust be
moved to another  state in the United  States from the state in which it is then
located,  the situs of the Trust may be moved with the written  consent of Owner
Participant  (which  consent  shall  not be  unreasonably  withheld)  and  Owner
Participant will take whatever action is reasonably necessary to accomplish such
removal;  provided, that, in any event, (a) Lessee shall provide such additional
tax  indemnification  as Owner  Participant  reasonably  requests  to cover  any
additional  unindemnified  Taxes  or  loss  of  Tax  benefits  described  in the
assumptions in the Tax Indemnity  Agreement resulting from such change in situs,
(b)  the  rights  and  obligations  under  the  Operative  Agreements  of  Owner
Participant  shall not be  adversely  affected as a result of the taking of such
action,  (c) Owner  Participant  shall receive an opinion or opinions of counsel
(which counsel is reasonably satisfactory to Owner Participant), in scope, form,
and substance reasonably  satisfactory to Owner Participant,  to the effect that
(1) the Trust, as thus removed,  remains a  validly-established  trust,  (2) any
amendments to the Trust  Agreement  necessitated  by such removal have been duly
authorized, executed, and delivered and constitute valid and binding obligations
of such parties,  enforceable in accordance with their terms,  (3) covering such
other  matters as Owner  Participant  reasonably  requests,  (d)if such  removal
involves the replacement of Owner Trustee,  then Owner Participant shall receive
an opinion of counsel to such  successor  Owner  Trustee,  in form and substance
reasonably satisfactory to Owner Participant,  covering the matters described in
the  opinion  delivered  pursuant  to ss.  5.1.2(r)(4),  and  (e)  Lessee  shall
indemnify and hold harmless Owner Participant,  FSB, and Owner Trustee, on a net
after-tax basis, against any and all reasonable out-of-pocket costs and expenses
(including  attorneys'  fees and  disbursements),  fees and  expenses of any new
owner trustee,  registration,  recording,  or filing fees, and taxes incurred by
Owner  Participant  or Owner  Trustee in  connection  with such change of situs.
Owner Participant agrees, for Lessee's benefit,  that Owner Participant will not
consent to or direct a change in the situs of the Trust Estate without  Lessee's
prior written consent.

     7.2.4 Compliance with Lease Provisions

     Owner Participant  agrees,  solely for Lessee's benefit, to comply with the
express provisions applicable to Owner Participant in the Lease.

     7.2.5 Securities Act

     Owner  Participant  will not directly or  indirectly  offer any  beneficial
interest or security  relating to the  ownership of the Aircraft or any interest
in the Trust  Estate  for sale to, or  solicit  any  offer to  acquire  any such
interest or security  from, or sell any such interest or security to, any Person
in violation of the  Securities  Act or applicable  state or foreign  securities
Laws,  provided,  that this ss. 7.2.5 shall not impose on Owner  Participant any
responsibility  with respect to any such offer,  sale,  or  solicitation  by any
other party hereto.

     7.2.6 Regarding Owner Trustee

     Owner  Participant  will direct  Owner  Trustee to perform its  obligations
under each Owner Trustee Agreement.

     7.3 FSB's and Owner Trustee's Covenants

     FSB and Owner Trustee agree for the benefit of Lessee and Owner Participant
as follows:

     7.3.1 Liens

     FSB (a) will not directly or indirectly create, incur, assume, or suffer to
exist any Lessor Lien  attributable to it or Owner Trustee on all or any part of
the  Trust  Estate  or the  Aircraft,  (b)  will,  at its own cost and  expense,
promptly  take  such  action  as is  necessary  to  discharge  any  Lessor  Lien
attributable  to FSB or Owner  Trustee on all or any part of the Trust Estate or
the Aircraft,  and (c) will personally hold harmless and indemnify Lessee, Owner
Participant,  each of their Affiliates,  successors,  and permitted assigns, and
the Trust Estate from and against (1) any and all Expenses, (2) any reduction in
the amount payable out of the Trust Estate,  and (3) any  interference  with the
possession,  operation,  or other use of all or any part of the Aircraft imposed
on,  incurred by, or asserted  against any of the foregoing as a consequence  of
any such Lessor Lien.

     7.3.2 Other Business

     Owner Trustee will not enter into any business or other activity  except as
contemplated by the Operative Agreements.

     7.3.3 Notice of Change of Chief Executive Office

     FSB and Owner  Trustee will give to Lessee and Owner  Participant  30 days'
prior written notice of any relocation of its chief executive office (as defined
in UCC Article 9), and will promptly take any action  required by ss. 7.3.7 as a
result of such relocation.

     7.3.4 Securities Act

     Neither  FSB nor  Owner  Trustee  will  directly  or  indirectly  offer any
beneficial interest or Security relating to the ownership of the Aircraft or any
interest  in the Trust  Estate for sale to, or solicit  any offer to acquire any
such  interest or security  from,  or sell any such interest or security to, any
Person  in  violation  of the  Securities  Act or  applicable  state or  foreign
securities Laws,  provided,  that the foregoing shall not impose on FSB or Owner
Trustee any responsibility with respect to any such offer, sale, or solicitation
by any other party hereto.

     7.3.5 Performance of Agreements

     Owner  Trustee  shall  perform  its  obligations  under the  Owner  Trustee
Agreements in accordance with the terms thereof.

     7.3.6 Notices; Documents

     If any claim with respect to any liabilities is filed against Owner Trustee
and Owner  Trustee  has  Actual  Knowledge  thereof,  then Owner  Trustee  shall
promptly  notify  Lessee in writing  thereof.  Owner Trustee  further  agrees to
provide to Lessee promptly any documents  (including the certificate of aircraft
registration) that it receives from the FAA with respect to the Aircraft.

     7.3.7 Filings

     After the Delivery  Date,  Owner  Trustee shall duly execute and deliver to
Lessee all  filings and  recordings  (including  all  filings and UCC  financing
statements under the  Transportation  Code and the UCC and any amendments to UCC
financing  statements  necessitated  by any  relocation  of its chief  executive
office),  prepared  and  delivered  to it by Lessee,  required to perfect  Owner
Trustee's  title to the  Aircraft  and to make such title,  liens,  and security
interests valid and enforceable.

     7.3.8 Trust Agreement

     FSB and Owner  Trustee  hereby  (a) agree for the  benefit of Lessee not to
amend,  supplement,  terminate,  or otherwise  modify any provision of the Trust
Agreement  in a manner  that  adversely  affects  the  rights of any such  party
without the prior written  consent of such party,  and (b) agree for the benefit
of  Lessee  not to revoke  the trust  created  by the  Trust  Agreement  if such
revocation  would have an adverse  effect on Lessee.  Nothing in this  Agreement
shall  impair  any right  under the  Trust  Agreement  of FSB to resign as Owner
Trustee in accordance with the provisions of the Trust Agreement.

     7.4 Other Agreements

     7.4.1 Owner Trustee Is Owner for All Purposes

     Lessee,  Owner Participant,  and Owner Trustee agree that for all purposes,
after the Closing,  Owner Trustee will be the owner of the Aircraft (except that
Owner  Participant will be the owner for income tax purposes) and Lessee will be
the lessee  thereof.  No transfer,  by operation of Law or  otherwise,  of Owner
Participant's  beneficial  interest in and to the Trust Estate shall  operate to
transfer legal title to any part of the Trust Estate to any transferee thereof.

     7.4.2 Commencement of Bankruptcy Proceedings

     Lessee, Owner Participant,  FSB, and Owner Trustee agree for the benefit of
each of the others that it will not commence or join in any proceeding under the
Bankruptcy  Code to commence a case under ss. 303 of the Bankruptcy Code against
the Trust Estate.  Nothing  contained  herein shall be deemed to preclude  Owner
Participant,  FSB,  or Owner  Trustee  from  filing any claim  against the Trust
Estate in any case commenced against the Trust Estate.

     7.4.3 Quiet Enjoyment; Sale by Owner Trustee Binding

     (a) Owner  Participant  and Owner  Trustee  agree for the benefit of Lessee
that,  unless an Event of Default  exists,  such Person shall not interfere (and
shall not permit any Affiliate or other Person claiming by, through, or under it
to  interfere)  with Lessee's  rights in accordance  with the Lease to the quiet
enjoyment, possession, and use of the Aircraft during the Term.

     (b) Any assignment,  sale, transfer, or other conveyance of the Aircraft by
Owner  Trustee made  pursuant to the terms of this  Agreement or the Lease shall
bind Owner Participant,  and shall be effective to transfer or convey all right,
title,  and  interest  of Owner  Trustee  and  Owner  Participant  in and to the
Aircraft.  No purchaser or other  grantee shall be required to inquire as to the
authorization,  necessity,  expediency, or regularity of such assignment,  sale,
transfer, or conveyance,  or as to the application of any sale or other proceeds
with respect thereto by Owner Trustee, as regards Owner Participant.

     7.4.4 Other Documents; Amendment

     (a) Each of Owner  Participant  and Owner  Trustee  hereby  agrees  for the
benefit of Lessee not to amend, supplement, or otherwise modify any provision of
the Trust Agreement in a manner that could adversely affect such party,  without
the prior  written  consent  of such  party.  Owner  Trustee  agrees to  furnish
promptly to Lessee copies of any supplement,  amendment, waiver, or modification
of any of the Operative Agreements to which Lessee is not a party.

     (b) Owner  Trustee  agrees to join with Lessee to the extent that action on
its part is  necessary  or  appropriate  (1) to cause the  following  to be duly
accomplished in accordance with applicable United States federal Law by the time
the Aircraft is delivered  under this Agreement and the Lease:  (aa) to apply to
register  the  Aircraft in Owner  Trustee's  name,  and (bb) all related  action
necessary  in order for  Lessee to have  temporary  or  permanent  authority  to
operate the  Aircraft  as  contemplated  by the Lease,  and (2)  forthwith  upon
delivery  of the  Aircraft  under this  Agreement  and the  Lease,  to cause all
necessary documents to be duly filed for recording in accordance with applicable
United States federal Law.

     7.4.5 Consents

     Each of Owner  Participant  and Owner  Trustee  covenants  and agrees,  for
Lessee's  benefit,  that it shall not  unreasonably  withhold its consent to any
consent or approval  requested of it or of Owner  Trustee under the terms of any
of the  Operative  Agreements  which  by  its  terms  is not to be  unreasonably
withheld.

     7.4.6 Insurance

     Each of Owner  Participant  and  Owner  Trustee  agrees  not to  obtain  or
maintain  insurance for its own account as permitted by ss. 11.2 of the Lease if
such insurance would limit,  increase the cost of, or otherwise adversely affect
the coverage of any  insurance  required to be obtained or  maintained by Lessee
pursuant to ss. 11 and Annex D of the Lease.

     7.4.7 Foreign Registration

     (a) Owner  Participant and Owner Trustee hereby agree for Lessee's  benefit
that,  subject to ss.  7.1.2 of the Lease,  Lessee shall be entitled to register
the Aircraft or cause the Aircraft to be  registered in a country other than the
United States, if:

     (1) such registration is made only after the Tax Attribute  Period,  unless
Lessee prepays on a lump-sum basis any liability that would be due under the Tax
Indemnity  Agreement as a result of such registration  based upon the assumption
that such  registration  would  continue  for the  remainder  of the term of the
Permitted Sublease described in clause (3) below;

     (2) no  Special  Default  or Event of  Default  exists  at the time of such
registration;

     (3) such  proposed  change of  registration  is made in  connection  with a
Permitted  Sublease  to a  Permitted  Air  Carrier,  and  such  country  is such
Permitted Air Carrier's domicile;

     (4) such country is a country with which the United  States then  maintains
normal  diplomatic  relations  (or, if Taiwan,  the United States then maintains
diplomatic  relations at least as good as those in effect on the Delivery  Date,
provided  that Lessee may not effect such  registration  in Taiwan unless it has
obtained the prior written consent of Owner Participant, which Owner Participant
may withhold in its sole and absolute discretion); and

     (5) Owner  Participant  and Owner  Trustee  receive  an  opinion of counsel
(subject to customary exceptions) reasonably  satisfactory to Owner Participant,
addressed to each such party, to the effect that:

     (aa) such country  recognizes  Owner  Trustee's  ownership  interest in the
Aircraft;

     (bb) Lessee's obligations,  and Owner Trustee's rights and remedies,  under
the  Lease  are  valid,   binding,  and  enforceable  under  the  laws  of  such
jurisdiction;

     (cc) after giving effect to such change in  registration,  Owner  Trustee's
title continues as a valid and protected interest, and all filing, recording, or
other  action   necessary  to  protect  Owner   Trustee's   interest  have  been
accomplished  (or, if such opinion  cannot be given at the time of such proposed
change in registration because such change in registration is not yet effective,
(1) the  opinion  shall  detail  what  filing,  recording,  or other  action  is
necessary,  and  (2)  Owner  Participant  and  Owner  Trustee  shall  receive  a
certificate  from Lessee  that all  possible  preparations  to  accomplish  such
filing,  recording,  and other action are done, and such filing,  recording, and
other action are accomplished,  and a supplemental  opinion to that effect shall
be delivered to Owner Participant and Owner Trustee promptly after the effective
date of such change in registration;

     (dd)  it is not  necessary,  solely  as a  consequence  of such  change  in
registration and without giving effect to any other activity of Owner Trustee or
Owner  Participant,  for Owner  Trustee  or Owner  Participant  to qualify to do
business in such jurisdiction as a result of such  reregistration or in order to
exercise any rights or remedies  with  respect to the  Aircraft  pursuant to the
Lease;

     (ee) there is no tort  liability  of the owner or lessor of an aircraft not
in possession thereof under the laws of such jurisdiction (it being agreed that,
if  such  latter  opinion  cannot  be  given  in a form  satisfactory  to  Owner
Participant,  such opinion shall be waived if insurance reasonably  satisfactory
to Owner Participant is provided to cover such risk); and

     (ff)  unless  Lessee  agrees  to  provide  insurance  covering  the risk of
requisition of use of the Aircraft by the government of such country (so long as
the Aircraft is  registered  under the laws of such  country),  the laws of such
country  require fair  compensation by the government of such country payable in
currency freely  convertible into Dollars and freely removable from such country
(without  license or permit,  unless Lessee before such proposed  reregistration
has  obtained  such  license or permit)  for the taking or  requisition  by such
government of such use.

         (b)  In   addition,   as  a  condition   precedent  to  any  change  in
registration,  Lessee  shall  give to Owner  Participant  assurances  reasonably
satisfactory to each of them:

     (1) that the provisions ofss. 11 of the Lease have been complied with after
giving effect to such change of registration;

     (2)  of  Lessee's  payment,  on  an  after-tax  basis,  of  all  reasonable
out-of-pocket  expenses of Lessor and Owner  Participant in connection with such
change of registry,  including (aa) the  reasonable  fees and  disbursements  of
counsel to Lessee and  Lessor,  (bb) any filing or  recording  fees,  Taxes,  or
similar  payments  incurred in connection with the change of registration of the
Aircraft; and

     (3) that the tax and other  indemnities in favor of each Person named as an
indemnitee  under  any other  Operative  Agreement  afford  to each such  Person
substantially the same protection as provided before such change of registration
(or Lessee agrees to provide,  or cause to be provided,  additional  indemnities
that,  together with such original  indemnities,  in the reasonable  judgment of
Owner Participant and Lessor, afford such protection).

     7.4.8 Other Commercial Relations Unaffected

     Notwithstanding  anything  to the  contrary  set  forth  in  any  Operative
Agreement:

     (a) except as set forth in the Purchase  Agreement  Assignment,  nothing in
the Operative  Agreements shall constitute or be deemed to be a waiver by Lessee
of any rights,  remedies, or claims it may have against Airframe Manufacturer or
Engine  Manufacturer  or any  subcontractor  or  supplier  of  either;  and  the
Operative  Agreements  do not and shall not be construed or deemed to create any
rights, waivers,  immunities,  or indemnities in favor of Airframe Manufacturer,
Engine Manufacturer,  or any subcontractor or supplier of either with respect to
any such rights, remedies, or claims of Lessee; and

     (b) neither  Airframe  Manufacturer,  by its  execution and delivery of the
Consent and Agreement, nor Engine Manufacturer, by its execution and delivery of
the Engine Manufacturer  Warranty Agreement,  shall be deemed to have waived any
rights,  remedies,  or claims which Airframe Manufacturer or Engine Manufacturer
(or any  subcontractor  or  supplier  of either)  has  against  Lessee;  and the
Operative  Agreements  do not and shall not be construed or deemed to create any
rights, waivers,  immunities,  or indemnities in favor of Lessee with respect to
any such  rights,  remedies,  or  claims  of  Airframe  Manufacturer  or  Engine
Manufacturer (or any subcontractor or supplier of either).

     7.4.9 Interest in Certain Engines

     Owner  Participant and Owner Trustee agree, for the benefit of each lessor,
conditional  seller,  or  secured  party of any  airframe  or engine  leased to,
purchased by, or owned by Lessee or any Permitted  Sublessee subject to a lease,
conditional sale, or other security agreement that it will not acquire or claim,
as against such lessor,  conditional seller, or secured party, any right, title,
or  interest in any engine as the result of the  installation  of such engine on
the Airframe at any time while such engine is subject to such lease, conditional
sale, or other security agreement and owned by such lessor or conditional seller
or subject to a security interest in favor of such secured party.

     8. CONFIDENTIALITY

     Lessee, Owner Participant, and Owner Trustee shall keep Annexes B, C, and D
and  Schedules 1, 2, 3, and 4 to the Lease,  the  Participation  Agreement,  the
Purchase Agreement Assignment, and the Tax Indemnity Agreement confidential, and
shall not disclose  them, or cause them to be disclosed,  to any Person,  except
(a) to prospective and permitted  transferees of Lessee's,  Owner Participant's,
or Owner Trustee's  interest or their counsel,  independent  insurance  brokers,
auditors, or other agents who agree to hold such information  confidential,  (b)
to  Lessee's,  Owner  Participant's,  or Owner  Trustee's  counsel,  independent
insurance brokers, auditors, or other agents, Affiliates, or investors who agree
to hold such  information  confidential,  (c) as may be required by any statute,
court, or administrative  order or decree, legal process, or governmental ruling
or regulation,  including those of any applicable  insurance  regulatory  bodies
(including  the National  Association  of Insurance  Commissioners),  federal or
state  banking  examiners,  Internal  Revenue  Service  auditors,  or any  stock
exchange, (d) with respect to Lessee and Owner Participant,  by mutual agreement
of such parties, or (e) to such other Persons as are reasonably deemed necessary
by the  disclosing  party in order to protect the interests of such party or for
the purposes of enforcing such documents by such party;  provided,  that any and
all disclosures  permitted by clauses (c), (d), and (e) above shall be made only
to the  extent  necessary  to meet  the  specific  requirements  or needs of the
Persons making such disclosures.

     9. INDEMNIFICATION AND EXPENSES

     9.1 General Indemnity

     9.1.1 Indemnity

     Whether  or not  any of the  Transactions  are  consummated,  Lessee  shall
indemnify, protect, defend, and hold harmless each Indemnitee from, against, and
in respect of, and shall pay on a net after-tax  basis,  any and all Expenses of
any kind or nature whatsoever,  including those imposed on, incurred or suffered
by, or asserted  against any Indemnitee,  relating to, based on, resulting from,
or arising out of or in connection  with,  in each case directly or  indirectly,
any one or more of the following:

     (a) the Operative Agreements, or the enforcement of any of the terms of any
of the Operative Agreements;

     (b) the Aircraft,  the Airframe,  any Engine, or any Part, including,  with
respect   thereto,   (1)  the   manufacture,   design,   purchase,   acceptance,
nonacceptance,     rejection,    ownership,    registration,     reregistration,
deregistration,  delivery, nondelivery, lease, sublease, assignment, possession,
use, non-use,  operation,  maintenance,  testing, repair,  overhaul,  condition,
alteration,   modification,   addition,  improvement,   storage,  airworthiness,
replacement,  repair, sale, substitution,  return,  abandonment,  redelivery, or
other  disposition  of the Aircraft,  any Engine,  or any Part, (2) any claim or
penalty  arising out of  violations  of  applicable  Laws,  (3) tort  liability,
whether or not arising out of the negligence of any Indemnitee  (whether active,
passive,  or imputed,  and including  strict  liability  and  liability  without
fault),  (4) death or property damage of passengers,  shippers,  or others,  (5)
environmental control, noise, or pollution, (6) any claim for patent, trademark,
or  copyright  infringement  and (7) any Liens in respect of the  Aircraft,  any
Engine, or any Part; and

     (c)  any  breach  of or  failure  to  perform  or  observe,  or  any  other
noncompliance with, any covenant, agreement, or other obligation to be performed
by  Lessee  under  any  Lessee  Operative  Agreement,  or  the  falsity  of  any
representation  or warranty of Lessee in any Lessee Operative  Agreement,  other
than in the Tax Indemnity Agreement.

     9.1.2 Exceptions

     Notwithstanding  anything  in ss.  9.1.1,  Lessee  shall not be required to
indemnify,  protect,  defend,  and hold harmless any Indemnitee  pursuant to ss.
9.1.1 against any Expense of such Indemnitee:

     (a) for any  Taxes  or a loss of Tax  benefit,  whether  or not  Lessee  is
required  to  indemnify  therefor  pursuant  to ss.  9.3 or  the  Tax  Indemnity
Agreement  (other than amounts  required to be paid to render the payment of any
Expense payable under ss. 9.1.1 on an after-tax basis);

     (b) except to the extent  attributable  to acts or events  occurring  prior
thereto,  acts  or  events  (other  than  acts or  events  related  to  Lessee's
performance  of its  obligations  pursuant to the terms of the Lessee  Operative
Agreements) that occur after: (1) with respect to the Airframe,  any Engine,  or
any Part, the return of possession  (which, if the Aircraft is placed in storage
as provided  inss.  5 of the Lease,  is the date that the  Aircraft is placed in
storage) of such  Airframe,  Engine,  or Part  pursuant to the Lease (other than
pursuant toss. 15 thereof,  in which case Lessee's  liability under thisss.  9.1
shall  survive  for so long as Lessor is entitled  to  exercise  remedies  under
suchss.  15 or in  connection  with Lessee in the event of exercise of its early
termination option underss. 9 of the Lease or its purchase options underss. 17.3
of the Lease), and (2) the termination of the Term in accordance with the Lease;

     (c) to the extent  attributable to any Transfer  (voluntary or involuntary)
by or on behalf of Owner  Participant  of any  interest  in the  Aircraft or the
Trust Estate,  except for out-of-pocket  costs and expenses incurred as a result
of such  Transfer  during the existence of an Event of Default (or in connection
with Lessee in the event of exercise of its early termination option under ss. 9
of the Lease or its purchase options under ss. 17.3 of the Lease);

     (d)  to  the  extent  attributable  to  the  gross  negligence  or  willful
misconduct  of such  Indemnitee  or any related  Indemnitee  (as defined  below)
(other than gross  negligence  or willful  misconduct  imputed to such Person by
reason of its interest in the Aircraft or any Operative Agreement);

     (e) in the case of FSB, to the extent attributable to matters enumerated in
the proviso toss. 13;

     (f) to the  extent  attributable  to the  incorrectness  or  breach  of any
representation  or  warranty  of  such  Indemnitee  or  any  related  Indemnitee
contained in or made pursuant to any Operative Agreement;

     (g) to the extent  attributable  to the failure,  by such Indemnitee or any
related Indemnitee, to perform or observe any agreement,  covenant, or condition
on its part to be performed or observed in any Operative Agreement;

     (h) to the extent  attributable  to the offer or sale by such Indemnitee or
any related Indemnitee of any interest in the Aircraft, the Trust Estate, or the
Trust Agreement,  or any similar interest, in violation of the Securities Act or
other  applicable  federal,  state,  or foreign  securities Laws (other than any
thereof caused by the acts or omissions of Lessee or any person acting on behalf
of Lessee);

     (i) with  respect  to Owner  Trustee,  to the  extent  attributable  to its
negligence  or willful  misconduct  in the  distribution  of funds  received and
distributable by it in accordance with the Trust Agreement,

     (j) other than during the  existence of an Event of Default,  to the extent
attributable  to the  authorization  or  giving  or  withholding  of any  future
amendments,  supplements,  waivers,  or consents  with respect to any  Operative
Agreement, other than any requested by Lessee or required by or made pursuant to
the terms of the Operative  Agreements (unless such requirement results from the
actions of an  Indemnitee  not  required by or made  pursuant  to the  Operative
Agreements);

     (k) to the extent attributable to any amount which any Indemnitee expressly
agrees to pay or such  Indemnitee  expressly  agrees  shall not be paid by or be
reimbursed by Lessee;

     (l) to the extent that it is an ordinary  and usual  operating  or overhead
expense of such Indemnitee;

     (m) with  respect to Owner  Participant  or Owner  Trustee,  or any related
Indemnitee,  to the extent  attributable to the  deregistration  of the Aircraft
under the Transportation  Code as a result of the failure of such Person (or any
related  Indemnitee  of such  Person) to be a Citizen of the United  States as a
result of any act (other than  reregistration  of the  Aircraft  pursuant to ss.
7.1.2  of the  Lease)  of Owner  Participant  or Owner  Trustee  or any  related
Indemnitee of such Person (not taken at the request of Lessee);

     (n) for any Lessor  Lien  attributable  to such  Indemnitee  or any related
Indemnitee; or

     (o) to the extent incurred by or asserted  against an Indemnitee other than
Owner  Participant (but without limiting the other provisions of this ss. 9.1.2,
including  clauses  (f) and (g),  as to Owner  Participant)  as a result  of any
"prohibited  transaction",  within  the  meaning  of ERISA  ss.  406 or Code ss.
4975(c)(1).

     For  purposes  of this ss.  9.1, a Person  shall be  considered  a "related
Indemnitee"  of an Indemnitee if that Person is an Affiliate or employer of such
Indemnitee,  a director,  officer,  employee, or agent of such Indemnitee or any
such  Affiliate,  or a successor or permitted  assignee of any of the foregoing;
provided,  that  Owner  Trustee  and  FSB  shall  not be  deemed  to be  related
Indemnitees  of Owner  Participant  merely  because of their trust or  fiduciary
relationships.

     9.1.3 Separate Agreement

     This  Agreement  constitutes  a  separate  agreement  with  respect to each
Indemnitee, and is enforceable directly by each such Indemnitee.

     9.1.4 Notice

     If an Indemnitee makes a claim for any Expense indemnifiable under this ss.
9.1,  such  Indemnitee  shall  give  prompt  written  notice  thereof to Lessee.
Notwithstanding  the  foregoing,  any  Indemnitee's  failure to notify Lessee as
provided in this ss. 9.1.4,  or in ss. 9.1.5,  shall not release Lessee from any
of its obligations to indemnify such Indemnitee hereunder,  except to the extent
that such  failure  results in an  additional  Expense to Lessee (in which event
Lessee  shall not be  responsible  for such  additional  expense) or  materially
impairs Lessee's ability to contest such claim.

     9.1.5 Notice of Proceedings; Defense of Claims; Limitations

     (a) If any action,  suit,  or  proceeding  for which Lessee is  responsible
under this ss. 9.1 is brought  against any  Indemnitee,  such  Indemnitee  shall
notify  Lessee of the  commencement  thereof,  and Lessee may,  at its  expense,
participate in and, to the extent that it so desires  (subject to the provisions
of the following paragraph),  assume and control its defense and, subject to ss.
9.1.5(c),  settle or compromise it. Unless Owner  Participant  agrees in writing
otherwise, no settlement of any claim hereunder may require Owner Participant to
agree to any remedy  apart from the  payment  of money  damages  (for which such
payment of money damages Lessee will in any event indemnify the Indemnitees).

     (b) Lessee or its insurer(s) shall have the right, at its or their expense,
to investigate or, if Lessee or its insurer(s) agree not to dispute liability to
the Indemnitee giving notice of such action,  suit, or proceeding under this ss.
9.1.5 for indemnification  hereunder or under any insurance policies pursuant to
which  coverage  is sought,  control  the  defense  of,  any  action,  suit,  or
proceeding, relating to any Expense for which indemnification is sought pursuant
to this  ss.  9.1,  and each  Indemnitee  shall  cooperate  with  Lessee  or its
insurer(s) with respect thereto;  provided, that Lessee shall not be entitled to
control the defense of any such action,  suit,  or  proceeding,  or to settle or
compromise any such Expense,  (i) while any Special  Default or Event of Default
under ss. 14.1 of the Lease exists, or (ii) if such action,  suit, or proceeding
will  involve  a  material  risk of the  sale,  forfeiture,  or loss of,  or the
creation of any Lien (other than a Permitted  Lien) on the  Aircraft,  the Trust
Estate,  or any part  thereof,  unless  Lessee shall have posted a bond or other
security or  collateral  satisfactory  to Owner  Participant  in respect to such
risk,  or (iii) if such  action,  suit,  or  proceeding  could in the good faith
opinion of such  Indemnitee  entail any risk of criminal  liability  or material
civil liability or present a conflict of interest making separate representation
necessary.  In  connection  with any such  Lessee-controlled  action,  suit,  or
proceeding,  such Indemnitee shall have the right to participate therein, at its
sole cost and expense, with counsel reasonably  satisfactory to Lessee, provided
that such Indemnitee's  participation does not, in the reasonable opinion of the
independent  counsel  appointed  by  Lessee  or its  insurers  to  conduct  such
proceedings, interfere with the defense of such case.

     (c) In no event  shall any  Indemnitee  enter  into a  settlement  or other
compromise  with respect to any Expense  without  Lessee's prior written consent
(which shall not be  unreasonably  withheld or delayed),  unless such Indemnitee
waives its right to be  indemnified  with respect to such Expense under this ss.
9.1.

     (d) To the extent that any Expense  indemnified by Lessee  hereunder may be
covered by insurance maintained by Lessee, at Lessee's expense,  each Indemnitee
agrees  to  cooperate  with the  insurers  in the  exercise  of their  rights to
investigate, defend, or compromise that Expense as may be required to retain the
benefits of the insurance for that Expense.

     (e) If an Indemnitee is not a party to this  Agreement,  Lessee may require
that  Indemnitee  to agree in  writing  to the terms of this ss. 9 and ss.  15.8
before making any payment to such Indemnitee under this ss. 9.

     (f) Nothing  herein shall be deemed to be a guarantee of any residual value
of the Aircraft.

     (g) Nothing in this ss. 9.1.5 shall  require an  Indemnitee  to contest any
Expense or to assume  responsibility  for or control of any judicial  proceeding
with respect thereto.

     9.1.6 Information

     Lessee will  provide the  relevant  Indemnitee  with such  information  not
within the control of such  Indemnitee  (but in Lessee's  control or  reasonably
available  to  Lessee)  which  such  Indemnitee  reasonably  requests,  and will
otherwise  cooperate  with such  Indemnitee  so as to enable such  Indemnitee to
fulfill its  obligations  under ss. 9.1.5 and to control or  participate  in any
proceeding to the extent  permitted by ss. 9.1.5.  The  Indemnitee  shall supply
Lessee  with such  information  not  within the  control of Lessee  (but in such
Indemnitee's  control or reasonably  available to such Indemnitee)  which Lessee
reasonably  requests to control or  participate  in any proceeding to the extent
permitted by ss. 9.1.5.

     9.1.7 Effect of Other Indemnities; Subrogation; Further Assurances

     Upon  payment in full by or on behalf of Lessee of any  indemnity  provided
for under this  Agreement,  without  any  further  action and to the full extent
permitted by Law,  Lessee will be  subrogated  to all rights and remedies of the
Person  indemnified  (other  than  with  respect  to  any of  such  Indemnitee's
insurance  policies or in connection with any indemnity claim of such Indemnitee
under ss.  5.3 or ss. 7 of the Trust  Agreement)  in respect of the matter as to
which such indemnity was paid. Each Indemnitee will give such further assurances
or  agreements  and  cooperate  with Lessee to permit  Lessee to pursue any such
claims, to the extent reasonably requested by Lessee and at Lessee's expense.

     9.1.8 Refunds

     If an Indemnitee  receives any refund, in whole or in part, with respect to
any  Expense  paid by or on behalf of Lessee  hereunder,  that  Indemnitee  will
promptly  pay the  amount  refunded  (but not an amount in excess of the  amount
Lessee or any of its  insurers  has paid in  respect  of such  Expense)  over to
Lessee  unless an Event of Default  exists,  in which case such amount  shall be
paid over to Owner  Trustee to hold as security for Lessee's  obligations  under
the Lessee Operative  Agreements or, if requested by Lessee,  applied to satisfy
those obligations. Any subsequent loss of such recovery or tax benefit or refund
shall be subject to the provisions of ss. 9.1 and ss. 9.3.

     9.2 Expenses

     9.2.1 Invoices and Payment

     Owner Trustee and Owner Participant shall promptly submit to Lessee for its
prompt approval (which shall not be unreasonably withheld) copies of invoices in
reasonable  detail of the  Transaction  Expenses for which it is responsible for
providing  information  as they are  received  (and not later  than the 90th day
after the Delivery Date). If so submitted and approved, Owner Participant agrees
promptly  (and not later than the later of (i) the 105th day after the  Delivery
Date and (ii) the  tenth  Business  Day  following  such  approval)  to pay such
Transaction Expenses . Notwithstanding the foregoing,  Lessee at its sole option
shall have the right to pay directly any and all Transaction Expenses payable to
Lessee  Advisor  or  Lessee's  counsel  or (if such  payment  does not result in
adverse tax  consequences to Owner  Participant)  to any other Person.  If Owner
Participant  fails to pay any  Transaction  Expense  that it is obligated to pay
hereunder, Lessee shall pay such Transaction Expense. Any such payment by Lessee
shall not affect Owner  Participant's  obligations  or Lessee's  rights  against
Owner Participant for its failure to make any such payment.

     9.2.2 Payment of Other Expenses

     Lessee shall pay (a) the ongoing fees and  expenses of Owner  Trustee,  and
(b) all reasonable  out-of-pocket  costs and expenses  (including the reasonable
fees and disbursements of counsel) incurred by Owner Participant attributable to
(1) any transfer of title to the Aircraft or any Engine  contemplated by ss. 4.5
of the Lease,  or (2) any waiver,  amendment,  or  modification of any Operative
Agreement to the extent requested by Lessee.

     9.2.3 Indemnification Interest

     Lessee will pay to each Indemnitee upon demand,  to the extent permitted by
applicable  Law,  interest at the Past Due Rate on any amount of  indemnity  not
paid when due pursuant to this ss. 9 until the same shall be paid.

     9.3 General Tax Indemnity

     9.3.1 General

     Except as provided in ss.  9.3.2,  Lessee  agrees that each payment of Rent
paid by Lessee pursuant to the Lease, and any other payment or indemnity paid by
Lessee to a Tax Indemnitee under any Operative  Agreement,  shall be free of all
withholdings or deductions with respect to Taxes of any nature, and if Lessee is
required by  applicable  law to make any such  withholding  or deduction for any
such payment, (a) Lessee shall make all such withholdings or deductions, (b) the
amount  payable by Lessee shall be increased so that,  after making all required
withholdings or deductions, such Tax Indemnitee receives the same amount that it
would have received had no such  withholdings  or deductions  been made, and (c)
Lessee  shall pay the full amount  withheld or deducted to the  relevant  Taxing
Authority in accordance  with  applicable  law. Except as provided in ss. 9.3.2,
and whether or not any of the Transactions  are  consummated,  Lessee shall pay,
indemnify,  protect,  defend,  and hold harmless on an after-tax  basis each Tax
Indemnitee from all Taxes imposed by any Taxing Authority imposed on or asserted
against any Tax  Indemnitee or the Aircraft,  the Airframe,  any Engine,  or any
Part,  or any  interest  in any of the  foregoing  (whether  or not  indemnified
against by any other Person),  upon or with respect to the Operative Agreements,
their execution, or the transactions or payments contemplated thereby, including
any Tax imposed  upon or with respect to (w) the  Aircraft,  the  Airframe,  any
Engine,  any  Part,  any  Operative  Agreement,  any data,  or any  other  thing
delivered or to be delivered  under an Operative  Agreement,  (x) the  purchase,
manufacture,  acceptance, rejection, sale, transfer of title, return, ownership,
delivery,  transport,  charter, rental, lease, re-lease,  sublease,  assignment,
possession,   repossession,  presence,  use,  condition,  storage,  preparation,
maintenance,  modification,  alteration,  improvement,  operation, registration,
transfer  or  change  of  registration,   reregistration,  repair,  replacement,
overhaul,  location, control, imposition of any Lien (other than a Lessor Lien),
financing, refinancing requested by Lessee, abandonment, or other disposition of
the Aircraft,  the Airframe,  any Engine, any Part, any data, or any other thing
delivered  or to be  delivered  under  an  Operative  Agreement,  or  (y)  rent,
interest, fees, or other income, proceeds, receipts, or earnings, whether actual
or  deemed,  arising  upon,  in  connection  with,  or in  respect of any of the
Operative  Agreements  (including  the property or income or other proceeds with
respect  to  property  held as part of the  Trust  Estate)  or the  transactions
contemplated thereby.

     9.3.2 Certain Exceptions

     The  provisions  of ss.  9.3.1 shall not apply to, and Lessee shall have no
liability hereunder for, Taxes:

     (a) imposed on a Tax  Indemnitee  by the federal  government  of the United
States or any Taxing Authority or governmental  subdivision of the United States
or any state or local Taxing Authority (1) on, based on, or measured by gross or
net income or gross or net  receipts,  including  capital  gains  taxes,  excess
profits taxes,  minimum taxes from tax preferences,  alternative  minimum taxes,
branch profits taxes,  accumulated  earnings  taxes,  personal  holding  company
taxes,  succession taxes and estate taxes,  and any withholding  taxes on, based
on, or measured by gross or net income or  receipts,  or (2) on, or with respect
to, or measured by capital or net worth or in the nature of a franchise tax or a
tax for the privilege of doing  business  (other than, in the case of clause (1)
or (2), Taxes in the nature of sales, use,  license,  value added (to the extent
not imposed as a substitute for an income tax), transfer,  stamp, ad valorem, or
property Taxes);

     (b) imposed on a Tax  Indemnitee  by any Taxing  Authority or  governmental
subdivision  thereof or therein  outside of the  United  States  (including  any
Taxing Authority in or of a territory, possession, or commonwealth of the United
States)  (1) on,  based  on, or  measured  by gross or net  income or  receipts,
including  capital gains taxes,  excess  profits  taxes,  minimum taxes from tax
preferences,  alternative  minimum  taxes,  branch  profits  taxes,  accumulated
earnings  taxes,  personal  holding company taxes,  succession  taxes and estate
taxes,  and any  withholding  taxes on,  based on, or  measured  by gross or net
income or receipts, or (2) on, or with respect to, or measured by capital or net
worth or in the nature of a franchise  tax or a tax for the  privilege  of doing
business  (other than, in the case of clause (1) or (2),  Taxes in the nature of
(aa) sales, use, license, value added (to the extent not imposed as a substitute
for an income tax), transfer,  stamp, ad valorem, or property Taxes, or (bb) any
Taxes  imposed by any Taxing  Authority  (other than a Taxing  Authority  within
whose jurisdiction such Tax Indemnitee is incorporated or organized or maintains
its  principal  place of  business) if such Tax  Indemnitee  would not have been
subject  to  such  Taxes  by  such   jurisdiction  but  for  (i)  the  location,
registration,  use, or operation of the Aircraft,  the Airframe,  any Engine, or
any Part  thereof  by a Lessee  Person  within  the  jurisdiction  of the Taxing
Authority imposing such Tax, or (ii) the activities of any Lessee Person (except
for activities of a Lessee Person who is not an Affiliate,  successor, or assign
of Lessee acting in its capacity other than as a Lessee Person, which activities
are unrelated to the transactions  contemplated by the Operative  Agreements) in
such  jurisdiction,  including  use of any  other  aircraft  by  Lessee  in such
jurisdiction, (iii) the status of any Lessee Person as a foreign entity or as an
entity owned in whole or in part by foreign  persons,  (iv) Lessee's having made
(or having been deemed to have made)  payments to such Tax  Indemnitee  from the
relevant jurisdiction,  or (v) in the case of Owner Participant,  or any related
Tax Indemnitee,  Lessee's being incorporated,  organized, or maintaining a place
of business in such jurisdiction);

     (c) on, with  respect to, or  measured  by any trustee  fees,  commissions,
premiums, or compensation received by Owner Trustee;

     (d) on the Trust or the Trust  Estate  that result  from  treatment  of the
Trust or the Trust  Estate as an entity,  such as a  corporation,  separate  and
apart from Owner Participant;

     (e) that are being contested as provided inss. 9.3.4 during the pendency of
such contest;

     (f) imposed on any Tax Indemnitee to the extent that such Taxes result from
the  gross  negligence  or  willful  misconduct  of such Tax  Indemnitee  or any
Affiliate thereof (other than the gross negligence or willful misconduct imputed
to such Tax Indemnitee by reason of such Tax  Indemnitee's  participation in the
transactions contemplated by the Operative Agreements);

     (g)  imposed  on  or  with  respect  to a  Tax  Indemnitee  (including  the
transferee  in those  cases in which the Tax on  transfer  is imposed  on, or is
collected from, the  transferee) as a result of a transfer or other  disposition
(including a deemed transfer or disposition) by such Tax Indemnitee or a related
Tax Indemnitee (or, in the case of Owner Participant,  by Owner Trustee,  or, in
the case of Taxes imposed on a transferee, by the transferor) of any interest in
the Aircraft,  the Airframe,  any Engine,  or any Part, the Rent, the Trust, the
Trust Estate, the Lease, or any interest arising under the Operative  Agreements
or a transfer or disposition (including a deemed transfer or disposition) of any
interest  in a Tax  Indemnitee  (other  than  (1) a  substitution,  replacement,
modification,  pooling, or improvement of the Aircraft, the Airframe, any Engine
or any Part by a Lessee Person that is treated for Tax purposes as a transfer or
disposition,  (2) a  transfer  pursuant  to  an  exercise  of  remedies  upon  a
then-existing  Event of Default,  (3) a transfer  pursuant toss. 17.3 orss. 9 of
the Lease, or (4) a transfer pursuant to an Event of Loss);

     (h) in excess of those that would  have been  imposed  had there not been a
transfer  or other  disposition  by or to such Tax  Indemnitee  or a related Tax
Indemnitee described in clause (g) of this ss. 9.3.2;

     (i) imposed on Owner  Participant and indemnified by Lessee pursuant to the
Tax Indemnity Agreement;

     (j) imposed  with  respect to any period  after the  expiration  or earlier
termination of the Term and, if required pursuant to the terms of the Lease, the
return of  possession  of the  Aircraft to Lessor or placement in storage at the
request of Lessor in accordance with the Lease  (provided,  that this clause (j)
shall  not apply to Taxes  imposed  after  such  period  arising  as a result of
payments  by Lessee  under the  Operative  Agreements  after such  period or are
attributable to events  occurring prior to or coincident with such expiration or
earlier termination of the Term);

     (k) consisting of any interest, penalties, or additions to tax imposed on a
Tax  Indemnitee  as a result  (in  whole or in  part) of a  failure  of such Tax
Indemnitee or a related Tax  Indemnitee to file any return  properly and timely,
unless such failure is caused by Lessee's failure to fulfill its obligations, if
any, under ss. 9.3.6 with respect to such return;

     (l) resulting from, or that would not have been imposed but for, any Lessor
Liens  arising  as a result  of  claims  against,  or acts or  omissions  of, or
otherwise attributable to such Tax Indemnitee or a related Tax Indemnitee;

     (m)  imposed  on any Tax  Indemnitee  as a result of the breach by such Tax
Indemnitee or a related Tax Indemnitee of any covenant of such Tax Indemnitee or
any Affiliate thereof contained in any Operative  Agreement or the inaccuracy of
any  representation  or warranty by such Tax Indemnitee or any Affiliate thereof
in any Operative Agreement;

     (n) in the nature of an  intangible  or similar Tax upon or with respect to
the value of the interest of Owner Participant in the Trust Estate or the Trust,
only if such  Taxes are in the  nature  of  franchise  Taxes or result  from the
conduct of business by such Tax  Indemnitee in the taxing  jurisdiction  and are
imposed because of the place of incorporation or the activities unrelated to the
Transactions in the taxing jurisdiction of such Tax Indemnitee;

     (o) that is included in Lessor's  Cost and paid to the  appropriate  Taxing
Authority;

     (p) other than any Tax described in ss. 9.3.2(b)  hereof,  imposed on a Tax
Indemnitee by a Taxing Authority of a jurisdiction outside the United States, to
the extent  that such Taxes  would not have been  imposed  but for a  connection
between the Tax  Indemnitee or a related Tax  Indemnitee  and such  jurisdiction
imposing such Tax unrelated to the Transactions; or

     (q) relating to ERISA or to Codess. 4975.

     For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees who are
successors,  assigns,  agents,  or  Affiliates of such Tax  Indemnitee  shall be
related Tax Indemnitees.

     9.3.3 Payment

     (a) Without regard to ss. 9.3.2(a),  (b), or (h) hereof, Lessee's indemnity
obligation  to a Tax  Indemnitee  under this ss. 9.3 shall be the amount  which,
after  taking into  account  any Tax imposed  upon the receipt or accrual of the
amounts payable under this ss. 9.3 and any tax benefits  actually  recognized by
such Tax Indemnitee as a result of the indemnifiable Tax (including any benefits
recognized as a result of such Tax Indemnitee's use of an indemnifiable Tax as a
credit against Taxes not indemnifiable under this ss. 9.3), equals the amount of
the Tax indemnifiable under this ss. 9.3.

     (b) At Lessee's  request,  the  computation  of the amount of any indemnity
payment owed by Lessee or any amount owed by a Tax Indemnitee to Lessee pursuant
to this ss.  9.3  shall be  verified  and  certified  by an  independent  public
accounting  firm selected by such Tax Indemnitee and reasonably  satisfactory to
Lessee.  Such  verification  shall be  binding.  The costs of such  verification
(including  the fee of such  public  accounting  firm)  shall be borne by Lessee
unless such  verification  results in an adjustment  in Lessee's  favor of 5% or
more of the net present value of the payment as computed by such Tax Indemnitee,
in which case such Tax Indemnitee shall pay those costs.

     (c) Each Tax Indemnitee shall provide Lessee with such certifications,  and
such  information and  documentation  in such Tax  Indemnitee's  possession,  as
Lessee  reasonably  requests to minimize any indemnity  payment pursuant to this
ss. 9.3;  provided,  that  notwithstanding  anything to the contrary in this ss.
9.3.3(c),  no Tax  Indemnitee  shall be required to provide  Lessee with any Tax
returns.

     (d) Each Tax  Indemnitee  shall  promptly  forward  to Lessee  any  written
notice,  bill,  or advice  that such Tax  Indemnitee  receives  from any  Taxing
Authority concerning any Tax for which it seeks  indemnification  under this ss.
9.3. Lessee shall pay any amount for which it is liable pursuant to this ss. 9.3
directly to the appropriate  Taxing  Authority if legally  permissible,  or upon
demand of a Tax Indemnitee, to such Tax Indemnitee within 30 days of such demand
(or, if a contest  occurs in accordance  with ss. 9.3.4,  within 30 days after a
Final Determination (as defined below)),  but in no event more than one Business
Day before the related Tax is due. If requested by a Tax  Indemnitee in writing,
Lessee  shall  furnish to the  appropriate  Tax  Indemnitee  the  original  or a
certified copy of a receipt for Lessee's  payment of any Tax paid by Lessee,  or
such  other  evidence  of  payment  of such  Tax as is  acceptable  to such  Tax
Indemnitee. Lessee shall also furnish promptly upon written request such data as
any Tax Indemnitee  reasonably  requires to enable such Tax Indemnitee to comply
with the  requirements  of any  taxing  jurisdiction,  unless  such data are not
reasonably  available to Lessee or (unless such data are specifically  requested
by a Taxing  Authority) are not  customarily  furnished by domestic air carriers
under   similar   circumstances.   For  purposes  of  this  ss.  9.3,  a  "Final
Determination" is (1) a decision,  judgment, decree, or other order by any court
of competent  jurisdiction  that occurs pursuant to the provisions of ss. 9.3.4,
which  decision,   judgment,  decree,  or  other  order  has  become  final  and
unappealable,  (2) a closing  agreement or settlement  agreement entered into in
accordance  with ss. 9.3.4 that has become binding and is not subject to further
review or appeal (absent fraud, misrepresentation, etc.), or (3) the termination
of  administrative  proceedings and the expiration of the time for instituting a
claim in a court proceeding.

     (e) If any Tax Indemnitee  actually realizes a tax savings by reason of any
Tax paid or  indemnified  by Lessee  pursuant to this ss. 9.3 (whether  such tax
savings  arise by means of a foreign tax credit,  depreciation  or cost recovery
deduction, or otherwise),  and such savings are not otherwise taken into account
in computing such payment or indemnity,  such Tax Indemnitee shall pay to Lessee
an amount  equal to the lesser of (1) the amount of such tax  savings,  plus any
additional net tax savings recognized as the result of any payment made pursuant
to this sentence,  when, as, if, and to the extent realized,  and (2) the amount
of all payments  pursuant to this ss. 9.3 by Lessee to such Tax Indemnitee (less
any payments  previously  made by such Tax Indemnitee to Lessee pursuant to this
ss.  9.3.3(e))  (and the excess,  if any, of the amount  described in clause (1)
over the amount  described in clause (2) shall be carried forward and applied to
reduce pro tanto any  subsequent  obligations of Lessee to make payments to such
Tax  Indemnitee  pursuant to this ss. 9.3);  provided,  that such Tax Indemnitee
shall not be required to make any payment pursuant to this sentence so long as a
Special  Default or an Event of Default of a monetary  nature  exists.  If a tax
benefit is later  disallowed  or denied,  the  disallowance  or denial  shall be
treated as a Tax indemnifiable  under ss. 9.3.1 without regard to the provisions
of ss. 9.3.2 (other than ss.  9.3.2(f)).  Each such Tax Indemnitee shall in good
faith use  reasonable  efforts in filing  its tax  returns  and in dealing  with
Taxing Authorities to seek and claim any such tax benefit.

     9.3.4 Contest

     (a) If a written  claim is made  against a Tax  Indemnitee  for Taxes  that
Lessee could be liable to pay or indemnify for hereunder, or if a Tax Indemnitee
determines that a Tax is due and that Lessee could have an indemnity  obligation
for that Tax  hereunder,  such Tax Indemnitee  shall  promptly  notify Lessee in
writing of such claim  (provided,  that  failure so to notify  Lessee  shall not
relieve  Lessee of its  indemnity  obligations  hereunder  unless the failure to
notify  effectively  forecloses  Lessee's  rights to  require a contest  of such
claim),  and shall take no action with  respect to such claim  without  Lessee's
prior written  consent for 30 days  following  Lessee's  receipt of such notice;
provided,  that, if applicable  Law requires such Tax  Indemnitee to take action
before the end of such 30-day period,  such Tax Indemnitee shall, in such notice
to Lessee, so inform Lessee, and such Tax Indemnitee shall take no action for as
long as it is legally able to avoid taking action (and a Tax Indemnitee shall be
entitled  to pay the Tax  claimed  and sue for a refund  before  the end of such
30-day period if (1)(aa) the failure to pay the Tax would result in  substantial
penalties  (unless  immediately  reimbursed by Lessee) and the act of paying the
Tax would not materially  prejudice the right to contest, or (bb) the failure to
pay would result in criminal  penalties,  and (2) such Tax Indemnitee shall take
any action so required in connection  with so paying the Tax in a manner that is
the least  prejudicial  to the pursuit of the  contest).  In addition,  such Tax
Indemnitee   shall  (provided  that  Lessee  shall  have  agreed  to  keep  such
information  confidential other than to the extent necessary in order to contest
the claim) furnish Lessee with copies of any requests for  information  from any
Taxing  Authority  relating  to such Taxes with  respect to which  Lessee may be
required to indemnify  hereunder.  If  requested by Lessee in writing  within 30
days after its receipt of such notice,  such Tax Indemnitee  shall,  at Lessee's
expense (including all reasonable costs, expenses, and reasonable attorneys' and
accountants' fees and disbursements), in good faith contest (or, if permitted by
applicable law, allow Lessee to contest) through appropriate  administrative and
judicial proceedings the validity, applicability, or amount of such Taxes by (x)
resisting  payment  thereof,  (y) not paying the Taxes except  under  protest if
protest is necessary and proper, or (z) if the payment is made, using reasonable
efforts to obtain a refund thereof in an appropriate  administrative or judicial
proceeding. If requested to do so by Lessee, the Tax Indemnitee shall appeal any
adverse  administrative  or judicial  decision,  except that the Tax  Indemnitee
shall not be required to pursue any appeals to the United States  Supreme Court.
If and to the extent that the Tax  Indemnitee  is able to separate the contested
issue(s)  from other  issues  arising  in the same  administrative  or  judicial
proceeding  that  are  unrelated  to  the  Transactions  without  (in  such  Tax
Indemnitee's good faith judgment) adversely affecting such Tax Indemnitee,  such
Tax Indemnitee shall permit Lessee to control the conduct of any such proceeding
and shall provide to Lessee (at Lessee's cost and expense) with such information
or data in such Tax Indemnitee's  control or possession and reasonably necessary
to conduct such contest  (other than such Tax  Indemnitee's  federal  income Tax
returns) in which case Lessee shall keep such Tax Indemnitee reasonably informed
concerning the progress of such contest. If the contest is being controlled by a
Tax  Indemnitee,  such Tax  Indemnitee  shall  consult with Lessee in good faith
regarding the manner of contesting  such claim and shall keep Lessee  reasonably
informed regarding the progress of such contest. A Tax Indemnitee shall not fail
to take any action  expressly  required by this ss. 9.3.4  (including any action
regarding any appeal of an adverse  determination  with respect to any claim) or
settle or compromise any claim without Lessee's prior written consent (except as
contemplated by ss. 9.3.4(b) or (c)).

     (b)  Notwithstanding  the foregoing,  in no event shall a Tax Indemnitee be
required  to pursue any  contest  (or to permit  Lessee to pursue  any  contest)
unless  (1)  Lessee  agrees to pay to such Tax  Indemnitee  on demand  and on an
after-tax  basis all  reasonable  costs and  expenses  that such Tax  Indemnitee
incurs in  connection  with  contesting  such Taxes,  including  all  reasonable
out-of-pocket costs and expenses and reasonable attorneys' and accountants' fees
and disbursements, (2) if such contest involves the payment of the claim, Lessee
advances the amount thereof (to the extent indemnified hereunder) plus interest,
penalties,  and  additions to tax with  respect  thereto that are required to be
paid before  commencing the contest on an  interest-free  net after-Tax basis to
such Tax Indemnitee,  (3) such Tax Indemnitee does not reasonably determine that
the action to be taken will result in any material risk of forfeiture,  sale, or
loss of the Aircraft (unless Lessee makes provisions to protect the interests of
any  such  Tax  Indemnitee  in a  manner  reasonably  satisfactory  to such  Tax
Indemnitee)  (provided,  that such Tax Indemnitee shall notify Lessee in writing
promptly  after it  becomes  aware of any such  risk),  (4) no Event of  Default
exists,  unless Lessee has provided  security for its  obligations  hereunder by
advancing to such Tax  Indemnitee,  before  proceeding or  continuing  with such
contest, the amount of the Tax being contested,  plus any interest and penalties
and an amount  estimated in good faith by such Tax Indemnitee for expenses,  (5)
before commencing any judicial action controlled by Lessee,  Lessee acknowledges
its liability for such claim hereunder in writing,  provided,  that Lessee shall
not be  bound  by its  acknowledgment  if the  Final  Determination  articulates
conclusions  of law and fact that  demonstrate  that Lessee has no liability for
the contested amounts hereunder,  (6) such Tax Indemnitee shall have received at
Lessee's sole expense,  an opinion  independent tax counsel,  such counsel to be
selected by Lessee and  reasonably  satisfactory  to such Tax  Indemnitee  ("Tax
Counsel"),  to the effect  that a  reasonable  basis,  within the meaning of ABA
Formal Opinion No. 85-352,  exists for contesting such claim,  (7) the amount of
payments  or  indemnification  that  would  be  required  as a  result  of  such
adjustment, when aggregated with further potential payments or adjustments where
the subject matter of the proposed  adjustment is of a continuing  nature, as to
the  Aircraft  and all other  aircraft  operated  by  Lessee,  shall be at least
$10,000,  and (8) the issue  shall not be  substantially  identical  as an issue
previously contested hereunder and decided adversely, unless such Tax Indemnitee
shall have received,  at Lessee's sole expense,  a written opinion,  in form and
substance reasonably satisfactory to such Tax Indemnitee,  of Tax Counsel to the
effect  that  the  applicable  circumstances  or law have  changed  and in light
thereof,  there is reasonable basis under ABA Formal Opinion No. 85-352 that the
tax  treatment  of the item which is the  subject of the claim will be upheld in
litigation if the claimed tax  treatment is  challenged  by a Taxing  Authority.
Notwithstanding  the  foregoing,   if  any  Tax  Indemnitee  releases,   waives,
compromises,  or settles any claim that may be  indemnifiable by Lessee pursuant
to this ss. 9.3 and which such Tax Indemnitee is otherwise  obligated to contest
under this ss. 9.3.4 without Lessee's written permission, Lessee's obligation to
indemnify   such  Tax   Indemnitee   with   respect   to  such  claim  (and  all
directly-related  claims,  and claims  based on the outcome of such claim) shall
terminate,  subject  to ss.  9.3.4(c),  and  subject to ss.  9.3.4(c),  such Tax
Indemnitee shall repay to Lessee any amount  previously paid or advanced to such
Tax Indemnitee with respect to such claim,  plus interest at the rate that would
have been payable by the relevant Taxing Authority on a refund of such Tax.

     (c) Notwithstanding  anything in this ss. 9.3, a Tax Indemnitee will not be
required to contest the  imposition of any Tax, and shall be permitted to settle
or compromise  any claim without  Lessee's  consent,  if such Tax Indemnitee (1)
waives its right to  indemnity  under this ss. 9.3 with respect to such Tax (and
any  directly-related  claim,  and any claim the outcome of which is  determined
based upon the outcome of such claim),  (2) pays to Lessee any amount previously
paid or  advanced by Lessee  pursuant to this ss. 9.3 with  respect to such Tax,
plus  interest at the rate that would have been payable by the  relevant  Taxing
Authority  on a refund of such Tax,  and (3) agrees to discuss  with  Lessee the
views  or  positions  of any  relevant  Taxing  Authority  with  respect  to the
imposition of such Tax provided,  that if Lessee has agreed in writing to settle
a claim for a stated amount and the relevant Tax Indemnitee settles the claim on
more favorable  terms,  such Tax  Indemnitee  shall not be required to waive the
indemnity for such claim to the extent of the amount agreed to by Lessee.

     9.3.5 Refund

     If any Tax Indemnitee receives a refund of, or becomes entitled to a credit
against other liability for, all or any part of any Taxes paid,  reimbursed,  or
advanced by Lessee,  such Tax  Indemnitee  shall pay to Lessee within 30 days of
such  receipt an amount  equal to the lesser of (a) the amount of such refund or
credit plus any net tax benefit  (taking into account any Taxes incurred by such
Tax  Indemnitee by reason of the receipt of such refund or  realization  of such
credit)  actually  realized by such Tax Indemnitee as a result of any payment by
such Tax Indemnitee made pursuant to this sentence  (including this clause (a)),
and (b) such tax  payment,  reimbursement,  or  advance  by  Lessee  to such Tax
Indemnitee theretofore made pursuant to this ss. 9.3 (and the excess, if any, of
the amount described in clause (a) over the amount described in clause (b) shall
be carried forward and applied to reduce pro tanto any subsequent  obligation of
Lessee to make payments to such Tax Indemnitee pursuant to this ss. 9.3). If, in
addition to such refund or credit,  such Tax Indemnitee receives (or is credited
with) an amount  representing  interest  on the amount of such refund or credit,
such Tax  Indemnitee  shall pay to  Lessee  within 30 days  after  receiving  or
realizing such credit the portion of such interest fairly  attributable to Taxes
paid,  reimbursed,  or advanced  by Lessee  before the receipt of such refund or
realization  of such credit.  Notwithstanding  the  foregoing,  a Tax Indemnitee
shall not be obligated to make any payment to Lessee  pursuant to this ss. 9.3.5
if a Special  Default or an Event of Default has occurred and is continuing.  If
it is later  determined that such Tax Indemnitee was not entitled to such refund
or credit, the portion of the refund or credit repaid,  recaptured or disallowed
(and any  interest and tax savings  paid by such Tax  Indemnitee  to Lessee with
respect  thereto) shall be treated as Taxes for which Lessee must indemnify such
Tax Indemnitee pursuant to this ss. 9.3 without regard to ss. 9.3.2 hereof other
than ss. 9.3.2(f).

     9.3.6 Tax Filing

     Lessee shall timely file any report,  return, or statement that is required
to be filed with  respect to any Tax which is subject to  indemnification  under
this ss. 9.3 (except  for any such  report,  return,  or  statement  which a Tax
Indemnitee  has  timely  notified  Lessee in  writing  that such Tax  Indemnitee
intends to file, or for which such Tax Indemnitee is required by law to file, in
its own name);  provided,  that the relevant Tax Indemnitee shall furnish Lessee
with any  information  in such Tax  Indemnitee's  possession  or control that is
reasonably  necessary to file any such  return,  report,  or statement  and that
Lessee  reasonably  requests  in writing  (but the Tax  Indemnitee  shall not be
required  to  furnish  copies of its  actual  tax  returns,  although  it may be
required to furnish relevant information contained therein). Lessee shall either
file such report,  return,  or statement and send a copy to such Tax  Indemnitee
(and to Owner  Trustee,  if the Tax  Indemnitee  is not Owner  Trustee),  or, if
Lessee is not  permitted to file such report,  return,  or  statement,  it shall
notify such Tax  Indemnitee  of such  requirement  and prepare and deliver  such
report,  return,  or statement  to such Tax  Indemnitee  in a manner  reasonably
satisfactory  to such Tax  Indemnitee  within a reasonable  time before the time
such report, return, or statement is to be filed.

     9.3.7 Forms

     Each Tax Indemnitee  agrees to furnish from time to time to Lessee, or such
other Person as Lessee shall designate,  at Lessee's request, such duly-executed
and  properly-completed  forms as may be  necessary or  appropriate  in order to
claim any reduction of or exemption from any withholding or other Tax imposed by
any Taxing  Authority,  if (a) such  reduction or exemption is available to such
Tax  Indemnitee,  and (b)  Lessee  has  provided  such Tax  Indemnitee  with any
information  necessary to complete such form not otherwise  reasonably available
to such Tax Indemnitee.

     9.3.8 Non-Parties

     If a Tax  Indemnitee is not a party to this  Agreement,  Lessee may require
the Tax  Indemnitee  to agree in writing,  in a form  reasonably  acceptable  to
Lessee,  to the terms of this ss. 9.3 and ss. 15.8 before  making any payment to
such Tax Indemnitee under this ss. 9.3.

     9.4 Payments

     Any payments  made  pursuant to ss. 9.1 or ss. 9.3 shall be due on the 30th
day after demand,  and shall be made directly to the relevant  Indemnitee or Tax
Indemnitee or to Lessee, in immediately  available funds at such bank or to such
account  as  specified  by such  Indemnitee  or Tax  Indemnitee  or  Lessee  (as
applicable)  in written  directives to the payor,  or, if no such  direction has
been given,  by check of the payor  payable to the order of, and mailed to, such
Indemnitee  or Tax  Indemnitee  or Lessee (as  applicable)  by  certified  mail,
postage prepaid, at its address as set forth in this Agreement.

     9.5 Interest

     If any amount,  payable by Lessee,  any  Indemnitee,  or any Tax Indemnitee
under ss. 9.1 or ss. 9.3 is not paid when due, the Person obligated to make such
payment  shall pay on demand,  to the  extent  permitted  by Law,  to the Person
entitled thereto,  interest on any such amount for the period from and including
the due date for such amount to but  excluding  the date the amount is paid,  at
the Past-Due Rate.  Such interest shall be paid in the same manner as the unpaid
amount in respect of which such interest is due.

     9.6 Benefit of Indemnities

     Lessee's  obligations  for  indemnities,   obligations,   adjustments,  and
payments in ss. 9.1 or ss. 9.3 are expressly  made for the benefit of, and shall
be enforceable by, the Indemnitee or Tax Indemnitee  entitled  thereto,  without
declaring the Lease to be in default or taking other action thereunder.


     10. ASSIGNMENT OR TRANSFER OF INTERESTS

     10.1 Owner Participant and Owner Trustee

     10.1.1 Owner Participant

     (a) During the Term, Owner Participant shall not Transfer any or all of its
right,  title, or interest in the Trust Estate or the Trust Agreement or to this
Agreement unless:

     (1) the Transferee has full power,  authority,  and legal right to execute,
deliver,  and  perform  the  obligations  of Owner  Participant  under the Owner
Participant  Agreements and provides  reasonably  satisfactory  evidence of such
power and authority to Lessee and Owner Trustee;

     (2) the Transferee  enters into a legal,  valid,  binding,  and enforceable
agreement,  substantially  in the form of Exhibit I hereto (or otherwise in form
and substance reasonably satisfactory to Lessee), effective to confirm that such
Transferee  agrees to be bound by all the terms of, and to undertake  all of the
obligations  arising after such transfer of, the transferring  Owner Participant
in the Owner Participant  Agreements,  and in which it makes representations and
warranties substantially the same as those in ss. 6.2 of this Agreement;

     (3) upon such  Transfer  Lessee  shall not be  obligated to pay any greater
amount or incur  any  greater  obligation  than  that  which it would  have been
obliged to pay or incur under the Lease or other Lessee  Operative  Agreement if
no transfer or assignment had taken place,  and upon such Transfer the terms and
conditions  of the Lessee  Operative  Agreements  insofar as they  relate to the
rights and obligations of Lessee are not altered;

     (4) Owner  Participant shall deliver to Lessee and Owner Trustee an opinion
of  counsel  reasonably  satisfactory  to each of them to the  effect  that such
agreement or agreements referred to in ss. 10.1.1(a)(2) and, if applicable,  ss.
10.1.1(a)(6)  or (a)(7) are legal,  binding,  and enforceable in accordance with
its or their terms and that such  transfer  will not violate the  Transportation
Code, the registration provisions of the Securities Act, or any other applicable
Federal law;

     (5) the Transfer  shall relate to Owner  Participant's  entire  interest as
Owner  Participant;  or, if it relates to less than its entire interest as Owner
Participant,  then (aa) Lessee shall have given its prior written consent to the
partial  Transfer,   and  (bb)  all  amendments  to  the  Operative  Agreements,
reasonably  requested  by Lessee or Owner  Participant,  that are  necessary  or
appropriate to accommodate the existence of multiple Owner  Participants,  shall
be agreed to and  executed  by the  parties  thereto,  all at the expense of the
Owner Participants under ss. 10.1.1(c);

     (6) the  Transferee  is a Citizen of the United  States  (such status to be
determined  without  considering  FAR ss. 47.9 or any other  provision  that may
restrict  Lessee's  use or  operation  of the  Aircraft),  or shall use a voting
powers  trust or similar  arrangement  in order to hold an interest in the Trust
Estate such that the Aircraft can be registered  in the United  States  (without
considering FAR ss. 47.9 or any other  provision that may restrict  Lessee's use
or operation of the Aircraft); and

     (7) the  Transferee  is a single  Person  and is  either  (aa) a  Permitted
Institution,   (bb)  or  an  Affiliate  of  a  Permitted  Institution,  if  such
Affiliate's obligations under the Owner Participant Agreements are guaranteed by
such Permitted Institution pursuant to a written guaranty,  substantially in the
form of  Exhibit  J  hereto  (or  otherwise  in form  and  substance  reasonably
satisfactory to Lessee and Owner  Trustee),  or (cc) with Lessee's prior written
consent,  any other Person the  obligations of whom under the Owner  Participant
Agreements  are  guaranteed  by a  Permitted  Institution  pursuant to a written
guaranty,  in form and  substance  reasonably  satisfactory  to Lessee and Owner
Trustee.

     (b) Owner Participant shall give written notice to Lessee and Owner Trustee
at least 10 days before any such  Transfer,  specifying  the name and address of
the proposed  Transferee,  and  providing  financial  statements of the proposed
Transferee or guarantor evidencing satisfaction of the requirements described in
ss. 10.1.1(a)(7)(aa) or (bb).

     (c) Any reasonable fees,  charges,  and expenses,  including the reasonable
legal fees,  charges,  and expenses incurred by Lessee,  Owner  Participant,  or
Owner Trustee in connection with any Transfer by Owner Participant  permitted by
this ss.  10.1.1,  or by the  Transferee  in any such case,  will be paid for by
Owner Participant.

     10.1.2 Owner Trustee

     Owner Trustee may transfer its interests in the Trust Agreement pursuant to
ss. 9 thereof.

     10.2 Effect of Transfer

     Upon  any  Transfer  in  accordance  with ss.  10.1.1  or ss.  10.1.2,  the
Transferee shall be deemed "Owner Participant" or "Owner Trustee", respectively,
for all purposes of the Operative Agreements and, in the case of a Transferee of
Owner Participant,  shall be deemed to have paid its ratable portion of Lessor's
Cost  previously  made  by  Owner   Participant,   making  such  conveyance  and
represented by the interest being conveyed,  and each reference  herein to Owner
Participant  or Owner  Trustee  shall  thereafter  be deemed a reference to such
Transferee for all purposes,  and the  transferring  Owner  Participant or Owner
Trustee  shall be released  (including,  in the case of Owner  Participant,  any
Guarantor  with respect to any guaranty  provided by it under ss.  10.1.1(a)(7))
from all of its liabilities and  obligations  under the Operative  Agreements to
the extent such  liabilities and  obligations  arise after such Transfer and, in
each case, to the extent such  liabilities  and  obligations  are assumed by the
Transferee; provided, that such transferring Owner Participant, or Owner Trustee
will  continue  to have the  benefit  of any  rights  or  indemnities  under any
Operative  Agreement vested or relating to circumstances,  conditions,  acts, or
events before such Transfer.

     11. SECTION 1110

     Lessee, Owner Participant,  and Owner Trustee intend that Owner Trustee, as
lessor under the Lease, shall be entitled to the benefits of Section 1110 in the
event of a case under  Chapter 11 of the  Bankruptcy  Code in which  Lessee is a
debtor.

     12. CHANGE OF CITIZENSHIP

     12.1 Generally

     Without prejudice to the  representations,  warranties,  or covenants as to
any party's status as a Citizen of the United States:

     (a) Lessee and FSB agree that,  immediately upon obtaining knowledge of any
facts  that would  cast  doubt  upon its  continuing  status as a Citizen of the
United States, and promptly upon public disclosure of negotiations in respect of
any  transaction  which would or might  adversely  affect such  status,  it will
notify all parties hereto of all relevant matters in connection therewith; and

     (b)  Owner  Participant  agrees  that,  if its  status  is to change or has
changed as a Citizen of the United  States,  or it makes  public  disclosure  of
circumstances  as a result of which it  believes  that such  status is likely to
change, it will notify all the other parties to this Participation  Agreement of
(1) such change in status promptly after obtaining Actual Knowledge thereof, and
(2) such belief as soon as practicable  after such public disclosure (but in any
event within 10 Business Days after such public disclosure).

     12.2 Owner Participant

     Owner Participant  agrees,  solely for the benefit of Lessee, that if, when
the Aircraft is registered in the United States, (a) Owner Participant is not be
a  Citizen  of the  United  States,  and (b) the  Aircraft  shall  be,  or would
therefore become, ineligible for registration in the name of Owner Trustee under
the  Transportation  Code and regulations  then applicable  thereunder  (without
considering  FAR ss. 47.9 or any other  provision that may restrict  Lessee's or
any  Permitted  Sublessee's  use or  operation  of  the  Aircraft),  then  Owner
Participant shall as soon as is reasonably  practicable (but in any event within
30 days after obtaining Actual Knowledge of such  ineligibility and of such loss
of citizenship), (y) effect voting trust or other similar arrangements (in which
case any  provisions  contained in the Operative  Agreements  restricting  Owner
Participant's or Owner Trustee's  ability to amend the Trust Agreement shall not
apply to the extent  necessary to permit the use of such a voting trust or other
similar  arrangement)  or  take  any  other  action  necessary  to  prevent  any
deregistration  or maintain the United States  registration of the Aircraft,  or
(z)  transfer  in  accordance  with the terms of this  Agreement  all its right,
title,  and interest in and to this Agreement,  the Trust Estate,  and the Trust
Agreement in accordance with ss. 10.1.

     12.3 Owner Trustee

     Upon FSB's giving any notice in accordance with ss. 12.1(a),  Owner Trustee
shall,  subject to ss. 9.1.1 of the Trust  Agreement,  resign as Owner  Trustee.
Upon  its  receipt  of such  notice,  Owner  Participant  shall as  promptly  as
practicable  appoint a Citizen of the United  States as successor  Owner Trustee
pursuant to ss. 9.1 of the Trust Agreement.

     13. CONCERNING OWNER TRUSTEE

     Except as otherwise  expressly  provided herein, or in the Trust Agreement,
Owner Trustee is entering into this Agreement  solely in its capacity as trustee
as provided in the Trust Agreement and not in its individual capacity, and in no
case whatsoever will it be liable or accountable in its individual  capacity for
any of the statements,  representations,  warranties, agreements, or obligations
of Owner Trustee  hereunder,  or for any loss in respect  thereof,  as to all of
which the  parties  agree to look  solely to the Trust  Estate;  provided,  that
nothing in this ss. 13 shall limit in scope or substance the personal  liability
of FSB (a) to Owner  Participant as expressly set forth in the Trust  Agreement,
(b) in  respect  of  the  representations,  warranties,  and  agreements  of FSB
expressly made as such herein or in any other Operative Agreement to which it is
a party,  and (c) for the  consequences  of its own  gross  negligence,  willful
misconduct, and, in receiving,  handling or remitting of funds only, its willful
misconduct or simple negligence as a trustee.

     14. MISCELLANEOUS

     14.1 Amendments

     No  provision  of this  Agreement  may be  amended,  supplemented,  waived,
modified,  discharged,  terminated,  or otherwise varied orally,  but only by an
instrument  in  writing  that  specifically  identifies  the  provision  of this
Agreement  that it  purports to amend,  supplement,  waive,  modify,  discharge,
terminate,  or  otherwise  vary and is  signed  by the  party  against  whom the
enforcement  of the  amendment,  supplement,  waiver,  modification,  discharge,
termination,  or variance is sought.  Each such amendment,  supplement,  waiver,
modification, discharge, termination, or variance shall be effective only in the
specific  instance  and for the  specific  purpose  for  which it is  given.  No
provision  of  this  Agreement   shall  be  varied  or   contradicted   by  oral
communication,  course of dealing or performance,  or other manner not set forth
in  writing  and signed by the party  against  whom  enforcement  of the same is
sought.

     14.2 Severability

     If  any  provision  of  this  Agreement  is  held  invalid,   illegal,   or
unenforceable in any respect in any jurisdiction,  then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such  jurisdiction,  and (b) such invalidity,  illegality,  or  unenforceability
shall not affect the validity,  legality, or enforceability of such provision in
any other jurisdiction.  If, however,  any Law pursuant to which such provisions
are held invalid,  illegal,  or unenforceable may be waived,  the parties hereto
hereby  waive  that  Law to the full  extent  permitted,  to the end  that  this
Agreement shall be a valid and binding agreement in all respects, enforceable in
accordance with its terms.

     14.3 Survival

     The  indemnities in this Agreement  shall survive the delivery or return of
the  Aircraft,  the  Transfer  of any  interest  of  Owner  Participant  in this
Agreement,  the Trust Estate,  and the Trust  Agreement,  and the  expiration or
other  termination of any Operative  Agreement,  except to the extent  otherwise
provided therein.

     14.4 Reproduction of Documents

     This Agreement (including all annexes,  schedules, and exhibits hereto) and
all documents  relating  hereto,  including (a) future  consents,  waivers,  and
modifications,  and (b) past and future financial statements,  certificates, and
other  information  furnished  to any party  hereto,  may be  reproduced  by any
photographic,  photostatic,  microfilm,  micro-card,  miniature photographic, or
other  similar  process,  and any party may destroy any  original  documents  so
reproduced.  Any such  reproduction  shall be as  admissible  in evidence as the
original itself in any judicial or administrative proceeding (whether or not the
original  exists and  whether or not such  party  made the  reproduction  in the
regular  course  of  business),  and  any  enlargement,  facsimile,  or  further
reproduction of such reproduction also shall be so admissible in evidence.

     14.5 Counterparts

     This Agreement and any amendments, waivers, consents, or supplements hereto
may be executed in any number of counterparts (or upon separate  signature pages
bound together into one or more counterparts),  each fully-executed set of which
shall be deemed to be an original.

     14.6 No Waiver

     No failure on the part of any party hereto to exercise, and no delay by any
party hereto in exercising,  any of its rights, powers,  remedies, or privileges
under this Agreement or otherwise  available shall impair,  prejudice,  or waive
any such right,  power,  remedy, or privilege or be construed as a waiver of any
breach hereof or default hereunder or as an acquiescence  therein, nor shall any
single or partial  exercise  of any such  right,  power,  remedy,  or  privilege
preclude  any other or further  exercise  thereof by it or the  exercise  of any
other right,  power,  remedy,  or privilege by it. No notice to or demand on any
party hereto in any case shall,  unless otherwise required under this Agreement,
entitle such party to any other or further  notice or demand in similar or other
circumstances,  or waive the rights of any party  hereto to any other or further
action in any circumstances without notice or demand.

     14.7 Notices

         Unless otherwise  expressly permitted by the terms hereof, all notices,
requests,  demands,  authorizations,  directions,  consents,  waivers, and other
communications  required or permitted  to be made,  given,  furnished,  or filed
hereunder  shall be in writing  (and the  specification  of a writing in certain
instances  and not in others does not imply an  intention  that a writing is not
required as to the latter),  shall refer  specifically  to this  Agreement,  and
shall be personally  delivered,  sent by fax or  telecommunication  transmission
(which  in  either  case  provides  written  confirmation  to the  sender of its
delivery),  sent by registered mail or certified mail, return receipt requested,
or sent by next-business-day courier service, in each case to the address or fax
number  set forth for such  party in  Schedule  1, or to such  other  address or
number as such party hereafter  specifies by notice to the other parties hereto.
Each such notice, request, demand, authorization, direction, consent, waiver, or
other  communication  shall be  effective  when  received  or,  if made,  given,
furnished, or filed by fax or telecommunication transmission, when confirmed.

     14.8 Governing Law; Submission to Jurisdiction; Venue

     (a) This Agreement  shall in all respects be governed by and interpreted in
accordance  with the laws of the state of New York,  including  all  matters  of
construction, validity, and performance.

     (b) Each party  hereto  hereby  irrevocably  agrees,  accepts,  and submits
itself to the non-exclusive  jurisdiction of the courts of the state of New York
in the city and  county of New York and of the United  States  for the  Southern
District of New York, in connection  with any legal action,  suit, or proceeding
with respect to any matter  relating to or arising out of or in connection  with
the Operative Agreements.

     (c) Each party hereto hereby irrevocably consents and agrees to the service
of any and all legal  process,  summons,  notices,  and  documents of any of the
aforementioned  courts in any such suit,  action,  or proceeding  may be made by
delivering copies thereof by registered or certified mail,  postage prepaid,  at
the address set forth pursuant to ss. 14.7. Each party hereto hereby agrees that
service upon it, or any of its agents,  in each case in accordance with this ss.
14.8(c),  shall constitute valid and effective personal service upon such party,
and each party  hereto  hereby  agrees  that the failure of any of its agents to
give any notice of such  service to any such party shall not impair or affect in
any way the validity of such  service on such party or any judgment  rendered in
any action or proceeding based thereon.

     (d) Each party hereto hereby irrevocably waives, to the extent permitted by
applicable  law, and agrees not to assert,  by way of motion,  as a defense,  or
otherwise,  in any legal action or  proceeding  brought  hereunder in any of the
above-named courts, that such action or proceeding is brought in an inconvenient
forum,  that  venue  for the  action  or  proceeding  is  improper,  or that any
Operative Agreement may not be enforced in or by such courts.

         (e) Each party  hereto  hereby  waives its right to a jury trial of any
claim or cause of action in any court in any jurisdiction  based upon or arising
out of or relating to the Operative Agreements.

     14.9 Third-Party Beneficiary

     This  Agreement  is not  intended to provide  (and shall not  provide)  any
Person not a party hereto with any rights of any nature  whatsoever  against any
of the parties  hereto,  and no Person not a party  hereto shall have any right,
power,  or  privilege  in respect of any party  hereto,  or have any  benefit or
interest, arising out of this Agreement.

     14.10 Entire Agreement

     This Agreement,  together with the other Operative Agreements, on and as of
the date hereof,  constitutes  the entire  agreement of the parties  hereto with
respect  to  the  subject  matter  hereof,  and  all  prior   understandings  or
agreements,  whether  written  or oral,  among any of the  parties  hereto  with
respect to such subject matter are hereby superseded in their entireties.

     14.11 Further Assurances

     Each party hereto shall execute,  acknowledge,  and deliver (or cause to be
executed, acknowledged, and delivered) all such further agreements, instruments,
certificates, or other documents, and shall do and cause to be done such further
things,  as any other party hereto  reasonably  requests in connection  with the
administration  of,  or to carry out more  effectively  the  purposes  of, or to
assure and  confirm  better to such other  party the rights and  benefits  to be
provided under, this Agreement and the other Operative Agreements.



     [This rest of this page is intentionally left blank]


<PAGE>







         IN WITNESS  WHEREOF,  the  parties  have  executed  this  Participation
Agreement N___AT.


                         AMERICAN TRANS AIR, INC., Lessee


                         By: ___________________________________________________

                             Name:
                             Title:

                         GENERAL ELECTRIC CAPITAL CORPORATION, Owner Participant



                         By: ___________________________________________________

                             Name:
                             Title:

                         FIRST     SECURITY    BANK,
                         NATIONAL  ASSOCIATION,  not
                         in its individual  capacity
                         (except    as     expressly
                         provided    herein),    but
                         solely  as  trustee,  Owner
                         Trustee


                         By: ___________________________________________________

                             Name:
                             Title:

                         FIRST SECURITY BANK, NATIONAL ASSOCIATION,(as
                         in its individual capacity
                         expressly provided herein)


                         By: ___________________________________________________

                             Name:
                             Title:




<PAGE>







                             ACCOUNTS; ADDRESSES

                   Account for Payments           Address for Notices
American                                          American Trans Air, Inc.
Trans Air, Inc.                                   7337 West Washington Street
                                                  Indianapolis, Indiana  46231
                                                  Attention: Exec. VP and CFO
                                                  fax: (317) 240-7091

Owner Participant                                 General Electric Capital
                                                  Corp.
                                                  Attention: _________________
                                                  Fax: (____) __________



The Boeing                                        The Boeing Company
Company                                           P.O. Box 3707
                                                  Seattle, WA 98124-3707
                                                  Attention: Treasurer
                                                  M/S 68-34
                                                  fax: (206) 237-8746



First Security                                    First Security Bank, N.A.
Bank,National                                     79 South Main Street
Association                                       Salt Lake City, UT  84111
                                                  Attention: Corporate
                                                  Trust Department
                                                  fax: (801) 246-5053



<PAGE>

                                   COMMITMENTS

   Participant             Percentage of Lessor's Cost       Dollar Amount

Owner Participant          Owner Participant's Percentage

General Electric Capital   100%                              $__________
 Corporation


<PAGE>







     CERTAIN TERMS


Defined Term                             Definition

Commitment Termination Date              __________, 200_

Lessee's Advisor(s)                      Capstar Partners, LLC

Lessor's Cost                            $_______________

OP Jurisdiction                          New York

Owner Participant's Special Counsel      Dewey Ballantine LLP

Trust Company Jurisdiction               Utah






                             LEASE AGREEMENT N___AT


                          dated as of __________, 200_

                                     between



                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
               NOT IN ITS INDIVIDUAL CAPACITY, EXCEPT AS EXPRESSLY
                  PROVIDED HEREIN, BUT SOLELY AS OWNER TRUSTEE,

                                     Lessor

                                       and

                            AMERICAN TRANS AIR, INC.,

                                     Lessee

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

     One Boeing model 737-800  aircraft  bearing United States  registration no.
N___AT and  manufacturer's  serial no. _____,  including  two CFM  International
model  CFM56-7  engines  bearing  manufacturer's  serial  nos.  _____  and _____
-------------------------------------------------------------

CERTAIN OF LESSOR'S  RIGHTS UNDER THIS LEASE AND IN THE AIRCRAFT  COVERED HEREBY
HAVE BEEN  ASSIGNED  TO, AND ARE  SUBJECT TO A  SECURITY  INTEREST  IN FAVOR OF,
WILMINGTON  TRUST  COMPANY,  AS  MORTGAGEE  UNDER TRUST  INDENTURE  AND MORTGAGE
N___AT,  DATED AS OF THE DATE OF THIS  LEASE.  THIS LEASE HAS BEEN  EXECUTED  IN
COUNTERPARTS;  SEE SS. 18.5 FOR INFORMATION  CONCERNING THE RIGHTS OF HOLDERS OF
THE VARIOUS COUNTERPARTS.


<PAGE>





                                    CONTENTS



1. DEFINITIONS AND CONSTRUCTION................................................1


2. DELIVERY AND ACCEPTANCE.....................................................1

  2.1 Delivery and Lease of Aircraft...........................................1
  2.2 Acceptance by Lessee.....................................................1

3. TERM AND RENT...............................................................1

  3.1 Term   1
  3.2 Rent   1
  3.3 Payments.................................................................4

4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS..............5

  4.1 Disclaimer of Warranties.................................................5
  4.2 Certain Agreements of Lessor.............................................6
  4.3 Quiet Enjoyment..........................................................6
  4.4 Investment of Funds Held as Security.....................................6
  4.5 Title Transfers by Lessor................................................7
  4.6 Lessor's Interest in Certain Engines.....................................8
  4.7 Lease For U.S. Federal Income Tax Law Purposes; Section 1110
      of Bankruptcy Code.......................................................8
5. RETURN OF AIRCRAFT..........................................................8

  5.1 Compliance with Annex B..................................................8
  5.2 Parking and Related Matters..............................................9
  5.3 Return of Other Engines..................................................9
  5.4 Fuel   9

6. LIENS     10


7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING.........................10

  7.1 Registration and Operation..............................................10
  7.2 Possession..............................................................12
  7.3 Certain Limitations on Subleasing or Other Relinquishment of Possession.17

8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
             MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS.............18

  8.1 Maintenance; Replacement and Pooling of Parts; Alterations,
      Modifications, and Additions............................................18
  8.2 Information, Certificates, Notices, and Reports.........................18

9. VOLUNTARY TERMINATION UPON OBSOLESCENCE....................................20

  9.1 Right of Termination....................................................20
  9.2 Election by Lessor to Sell..............................................20
  9.3 Retention of Aircraft by Lessor.........................................23

10. LOSS, DESTRUCTION, REQUISITION, ETC.......................................24

  10.1 Event of Loss to the Aircraft..........................................24
  10.2 Event of Loss to an Engine; Engine Exchanges...........................27
  10.3 Conditions to any Replacement..........................................28
  10.4 Conveyance to Lessee...................................................30
  10.5 Application of Payments................................................30
  10.6 Requisition of Aircraft for Use........................................31
  10.7 Requisition of an Engine for Use.......................................32
  10.8 Application of Payments................................................32
  10.9 Application of Payments During Default.................................32

11. INSURANCE.................................................................32

  11.1 Lessee's Obligation to Insure..........................................33
  11.2 Insurance for Own Account..............................................33
  11.3 Indemnification by Government in Lieu of Insurance.....................33
  11.4 Application of Insurance Proceeds......................................33
  11.5 Application of Payments During Default.................................34

12. INSPECTION................................................................34


13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE...............................35

  13.1 In General.............................................................35
  13.2 Merger of Lessee.......................................................35
  13.3 Assignment as Security for Lessor's Obligations........................36
  13.4 Successor Owner Trustee................................................37

14. LEASE EVENTS OF DEFAULT...................................................37

  14.1 Payments...............................................................37
  14.2 Insurance..............................................................38
  14.3 Other Covenants........................................................38
  14.4 Representations and Warranties.........................................38
  14.5 Bankruptcy and Insolvency..............................................38
  14.6 Repudiation or Invalidity of Guarantee.................................39

15. REMEDIES AND WAIVERS......................................................39

  15.1 Remedies...............................................................39
  15.2 Limitations Under CRAF.................................................43
  15.3 Right to Perform for Lessee............................................43
  15.4 Determination of Fair Market Rental Value and Fair Market Sales Value..44
  15.5 Remedies Cumulative....................................................44

16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC........................44


17. RENEWAL AND PURCHASE OPTIONS..............................................45

  17.1 Notices Generally......................................................45
  17.2 Renewal Options........................................................45
  17.3 Purchase Option........................................................47
  17.4 Appraisals.............................................................50

18. MISCELLANEOUS.............................................................51

  18.1 Amendments.............................................................51
  18.2 Severability...........................................................51
  18.3 Third-Party Beneficiary................................................51
  18.4 Reproduction of Documents..............................................51
  18.5 Counterparts...........................................................52
  18.6 Notices................................................................52
  18.7 Governing Law..........................................................52
  18.8 No Waiver..............................................................52
  18.9 Entire Agreement.......................................................53


ANNEXES, EXHIBITS, AND SCHEDULES

ANNEX A             Definitions
ANNEX B             Return Conditions
ANNEX C             Maintenance
ANNEX D             Insurance

EXHIBIT A           Aircraft Description
EXHIBIT B           Form of Return Acceptance Supplement

SCHEDULE 1          Certain Terms
SCHEDULE 2          Basic Rent Payments
SCHEDULE 2A         Basic Rent Allocations
SCHEDULE 3          Stipulated Loss Value Schedule
SCHEDULE 4          Termination Value Schedule
SCHEDULE 5          EBO Price Schedule
SCHEDULE 6          Permitted Countries
SCHEDULE 7          Placards



<PAGE>






                             LEASE AGREEMENT N___AT


         This Lease  Agreement  N___AT (this  "LEASE")  dated as of  __________,
200_, between (1) First Security Bank, National Association,  a national banking
association,  not in its  individual  capacity  (except  as  expressly  provided
herein) but solely as Owner Trustee ("LESSOR"), and (2) American Trans Air, Inc.
("LESSEE"), an Indiana corporation.

         Lessor and Lessee agree as follows:

                         1. DEFINITIONS AND CONSTRUCTION

         The terms defined in Annex A, when  capitalized as in Annex A, have the
same meanings when used in this Lease. Annex A also contains rules of usage that
control construction in this Lease.

                           2. DELIVERY AND ACCEPTANCE

         2.1               DELIVERY AND LEASE OF AIRCRAFT

         Lessor  hereby  leases the Aircraft to Lessee for the Term,  and Lessee
hereby leases the Aircraft from Lessor for the Term.

         2.2               ACCEPTANCE BY LESSEE

         Lessee hereby  confirms to Lessor that Lessee has duly and  irrevocably
accepted delivery of the Aircraft for all purposes of this Lease.

                                3. TERM AND RENT

         3.1               TERM

         The Aircraft shall be leased hereunder for the Term,  unless this Lease
or the leasing of the  Aircraft is earlier  terminated  in  accordance  with any
provision of this Lease.

         3.2               RENT

     3.2.1 BASIC RENT; ADJUSTMENTS TO BASIC RENT AND CERTAIN OTHER AMOUNTS

         (a)......During  the Base Term,  Lessee  shall pay to  Lessor,  on each
Payment Date,  Basic Rent in the amount equal to the percentage of Lessor's Cost
specified  in  Schedule 2 for such  Payment  Date.  The  amounts  and periods of
Lessee's  liability  for Basic Rent shall be as  allocated  in  accordance  with
Schedule 2A. Such Basic Rent payments and such allocations shall be (i) adjusted
pursuant to ss.  3.2.1(b),  or (ii) increased in an amounT equal to any increase
in the amount of interest due on the  Equipment  Notes on the  relevant  Payment
Date pursuant to ss. 2(e) of the Registration  Rights Agreement (or,  subsequent
to any such increase,  decreased by the amount oF such increase  pursuant to ss.
2(e) of the  Registration  Rights  Agreement).  During any Renewal Term,  Lessee
shall paY to Lessor,  on each Payment Date, Basic Rent equal to the Renewal Rent
for that Renewal Term, determined pursuant to ss. 17.2.2.

         (b)......Basic  Rent, Basic Rent  allocations,  Stipulated Loss Values,
Termination Values, and EBO Price shall be subject to adjustment as follows:

                  (1) If Transaction Expenses paid by Lessor pursuant to ss. 9.2
         of the ParticipatioN  Agreement are determined to be other than 2.0% of
         Lessor's Cost, then the Basic Rent percentages in Schedule 2, the Basic
         Rent allocations in Schedule 2A, the Stipulated Loss Value  percentages
         in Schedule 3, the Termination Value percentages in Schedule 4, and the
         EBO  Price  shall  be  recalculated  (upwards  or  downwards)  by Owner
         Participant,  on or before the 120th day after the Delivery  Date using
         the same methods and assumptions used to calculate original Basic Rent,
         EBO Price, Stipulated Loss Value, and Termination Value percentages, in
         order (aa) to maintain Owner  Participant's  Net Economic  Return,  and
         (bb) to the extent  possible  consistent  with  clause (aa) of this ss.
         3.2.1(b)(1), to minimizE the Net Present Value of Rents to Lessee.

                  (2) In the event of a refinancing as contemplated by ss. 11 of
         the  ParticipatioN  Agreement,  then  the  Basic  Rent  percentages  in
         Schedule 2, the Basic Rent  allocations  in Schedule 2A, the Stipulated
         Loss Value percentages in Schedule 3, the Termination Value percentages
         in  Schedule  4,  and the EBO  Price  shall  be  adjusted  (upwards  or
         downwards)  by Owner  Participant  as  contemplated  by such ss.  11 to
         reflect  the  change,  if any, in  interest  rate  resulting  from such
         refinancing, in order (aa) to maintain Owner Participant's Net Economic
         Return, and (bb) to the extent possible  consistent with clause (aa) of
         this ss.  3.2.1(b)(2),  to minimize  the Net Present  Value of Rents to
         Lessee.

                  (3)  Notwithstanding  the  foregoing,  in no event  shall  any
         adjustment  to the EBO  Price be made  such  that the EBO Price is less
         than the greatest of (aa) the adjusted  Stipulated Loss Value as of the
         EBO Date,  (bb) the estimated  fair market value of the Aircraft on the
         EBO Date as set forth in the Appraisal  referred to in ss.  5.1.2(m) of
         the Participation  Agreement, and (cc) the sum of the presenT values of
         (i) Basic Rent payable, as adjusted, during the Base Term after the EBO
         Date,  and (ii) the appraised  fair market value of the Aircraft at the
         end of the Base Term as estimated in the  Appraisal  referred to in ss.
         5.1.2(m) of the  Participation  Agreement,  each discounted back to the
         EBO Date (using A discount rate of 16.5%).

         (c) All adjustments  pursuant to ss. 3.2.1(b) shall be made as promptly
as  practicable  after  eitheR Owner  Participant  or Lessee gives notice to the
other that an event has occurred that requires an adjustment.  Owner Participant
and  Lessee  shall give  prompt  notice to the other of any event  requiring  an
adjustment.  Any recalculation of the percentages of Basic Rent payments,  Basic
Rent allocations,  Stipulated Loss Value, Termination Value, and EBO Price shall
be  prepared by Owner  Participant,  subject to  verification  at the request of
Lessee  in  accordance  with  this  ss.  3.2.1(c),  on the  basis  of  the  same
methodology  and  assumptions  used by  OwneR  Participant  in  determining  the
percentages of Basic Rent,  Stipulated Loss Value,  Termination  Value,  and EBO
Price as of the Delivery Date,  except as such assumptions have been modified to
reflect the events giving rise to adjustments  hereunder and taking into account
the law applicable at the time of such adjustment.  Promptly after an adjustment
is made hereunder,  Owner  Participant  shall deliver to Lessee a description of
such adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments (1) shall be made so as to avoid  characterization of the Lease as a
"disqualified  leaseback or long-term  agreement" within the meaning of Code ss.
467 and Treasury Regulations thereunder, and (2) shall be in compliance with the
requirements  of ss.  4(1) And ss.  4(6) of Revenue  Procedure  75-21 and ss.ss.
4.02(5),  4.07(l),  and 4.07(2) of Revenue Procedure 75-28, except tO the extent
that on the Delivery  Date the Lease  constituted a  "disqualified  leaseback or
long-term  agreement"  or was  not in  compliance  with  the  Revenue  Procedure
sections  referred to in clause (2). In connection with any such  adjustments to
payments and allocations of Basic Rent,  appropriate  corresponding  adjustments
shall be made to the  percentages  set forth on Schedules 3 and 4 in the columns
headed "Deferred Basic Rent Amount" and "Prepaid Basic Rent Amount".  All of the
foregoing  adjustments  shall be set forth in an  amendment  to this Lease,  and
promptly after execution thereof by Lessor and Lessee,  Lessee shall give a copy
thereof to Mortgagee.

         (d) If  Lessee  believes  that any  calculations  by Owner  Participant
pursuant to ss. 3.2.1(c) are iN error,  and if, after  consultation,  Lessee and
Owner  Participant do not agree on an adjustment,  then a  nationally-recognized
firm of  accountants  selected by Lessee and  reasonably  satisfactory  to Owner
Participant  shall  verify  such  calculations.   Owner  Participant  will  make
available to such firm (but not to Lessee or any  representative  of Lessee) the
methodology  and assumptions  referred to in ss. 3.2.1(c) and any  modifications
theretO made to reflect the events giving rise to adjustments hereunder (subject
to the  execution  by  such  firm  of a  confidentiality  agreement,  reasonably
acceptable to Owner Participant,  prohibiting disclosure of such methodology and
assumptions to any third party).  The  determination by such firm of accountants
shall be  final.  Lessee  will pay the  reasonable  costs and  expenses  of such
verification by such accountants, except that if it results in (1) a decrease in
Basic Rent which  decreases  the  remaining Net Present Value of Rents by ten or
more basis points from the remaining Net Present Value of Rents as  recalculated
by Owner  Participant,  or (2) a material  reduction in Stipulated  Loss Values,
Termination Values, or the EBO Price, then Owner Participant will pay such costs
and expenses.

         (e)   Notwithstanding   anything  to  the  contrary  in  any  Operative
Agreement,  the  amount of the  payment  of Basic  Rent due and  payable on each
Payment  Date shall be at least  sufficient  to pay in full,  as of such Payment
Date  (assuming  timely  payment of the Equipment  Notes before such Date),  the
aggregate principal amount of scheduled  installments due on the Equipment Notes
outstanding on such Payment Date,  together with the accrued and unpaid interest
thereon,  due on such Payment Date in respect of the Equipment Notes;  PROVIDED,
that no installment of Basic Rent shall be increased to the extent such increase
would be based upon (1) any  attachment or diversion of Basic Rent on account of
Lessor Liens,  (2) any modification of the payment terms of the Equipment Notes,
other than as required or permitted by any  Operative  Agreement  (including  as
permitted  upon  the  occurrence  of a  Lease  Event  of  Default),  or (3)  the
acceleration of any Equipment  Note(s) due solely to the existence of a Mortgage
Event of Default that does not constitute a Lease Event of Default.

                           3.2.2            SUPPLEMENTAL RENT

         Lessee  shall pay to Lessor,  or to whomever is entitled to it, any and
all Supplemental Rent when and as it becomes due and owing. Lessee will also pay
to Lessor, or to whomever is entitled to it, as Supplemental Rent, to the extent
permitted by  applicable  Law,  interest at the Past-Due Rate on any part of any
amount of Rent  (including  Supplemental  Rent) not paid by 11:00 a.m., New York
time, on the date when due (so long as, in the case of any Person not a party to
the Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made),  for the period from and  including
the date on which the same was due to (but  excluding)  the date of  payment  in
full.

         3.3               PAYMENTS

         (a)  Payments  of Rent by  Lessee  shall  be paid by wire  transfer  of
immediately available Dollars, not later than 11:00 a.m., New York City time, on
the date when due,  to the  account  of Lessor  specified  in  Schedule 1 to the
Participation Agreement (or to such other account in the United States as Lessor
specifies to Lessee in writing at least 10 Business  Days before such payment of
Rent is due),  or, in the case of any  payment of  Supplemental  Rent  expressly
payable to a Person  other than  Lessor,  to the Person  that shall be  entitled
thereto, to such account in the United States as such Person specifies from time
to time to Lessee at least 10 Business Days before such payment of Rent is due.

         (b) Except as otherwise expressly provided herein, whenever any payment
of Rent shall be due on a day that is not a Business  Day, such payment shall be
made on the next day that is a Business  Day,  and,  if such  payment is made on
such next Business  Day, no interest  shall accrue on the amount of such payment
during such extension.

         (c) So  long as  Lessee  has  not  received  written  notice  from  the
Mortgagee that the Lien of the Mortgage has been discharged, and notwithstanding
ss. 3.3(a),  Lessor hereby directs, and Lessee agrees, that alL payments of Rent
payable by Lessee,  other than  Excluded  Payments,  shall be paid  directly  to
Mortgagee on behalf of Lessor by wire transfer of immediately  available Dollars
to the  account  of  Mortgagee  specified  in  Schedule  1 to the  Participation
Agreement (or to such other account in the United States as Mortgagee  specifies
by written  notice to Lessor and Lessee at least 10  Business  Days  before such
payment of Rent is due).

         (d)  Excluded  Payments  payable  to any  Person  shall be paid by wire
transfer  of  immediately  available  Dollars  to the  account  of  such  Person
specified  in the  Participation  Agreement  or,  if not so  specified,  to such
account in the United States such Person  specifies by written  notice to Lessor
and Lessee  from time to time at least 10 Business  Days before such  payment is
required to be made.

         (e) All  computations of interest under this Lease shall be made on the
basis of a year of 360 days composed of twelve 30-day months.

     4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS

         4.1               DISCLAIMER OF WARRANTIES

         LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS,  WHERE-IS."  LESSEE
ACKNOWLEDGES  AND AGREES THAT, AS BETWEEN LESSEE AND EACH OF LESSOR,  MORTGAGEE,
AND ANY  PARTICIPANT,  (A) LESSEE HAS SELECTED  THE  AIRCRAFT  AND  MANUFACTURER
THEREOF,  AND (B) NEITHER LESSOR NOR MORTGAGEE NOR ANY  PARTICIPANT  MAKES,  HAS
MADE, OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE EXPRESSLY
DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:

     (1)   THE   AIRWORTHINESS,    VALUE,    CONDITION,    DESIGN,    OPERATION,
MERCHANTABILITY,  OR  FITNESS  FOR  USE OR FOR  ANY  PARTICULAR  PURPOSE  OF THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;

     (2)  THE  QUALITY  OF THE  MATERIAL  OR  WORKMANSHIP  WITH  RESPECT  TO THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;

     (3) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME,  ANY ENGINE,
OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;

     (4) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, OR COPYRIGHT,
OR THE LIKE; OR

     (5) THE ABSENCE OF  OBLIGATIONS  BASED ON STRICT  LIABILITY IN TORT, OR ANY
OTHER  IMPLIED  REPRESENTATION  OR  WARRANTY  WHATSOEVER  WITH  RESPECT  TO  THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF.

         4.2               CERTAIN AGREEMENTS OF LESSOR

         Unless a Lease Event of Default exists, Lessor agrees to make available
to Lessee such rights as Lessor may have under any warranty  with respect to the
Aircraft  made,  or  made   available,   by  Airframe   Manufacturer  or  Engine
Manufacturer,  or any of their  subcontractors or suppliers,  pursuant to and in
accordance with the terms of the Purchase Agreement Assignment.

         4.3               QUIET ENJOYMENT

         So long as no Lease Event of Default exists, Lessor shall not interfere
with Lessee's rights hereunder to continued  possession,  use, and operation of,
and quiet enjoyment of, the Aircraft during the Term.

         4.4               INVESTMENT OF FUNDS HELD AS SECURITY

                           4.4.1            INVESTMENT

         Any money required to be paid to or retained by Lessor that is required
to be paid to Lessee or applied as provided  herein shall,  until paid to Lessee
as  provided  herein or applied as provided  herein,  be invested by Lessor from
time to time as directed in writing by Lessee (or, if Lessee does not so direct,
by or as directed  by Lessor in its sole  discretion)  and at Lessee's  risk and
expense in Cash Equivalents so long as such Cash Equivalents specified by Lessee
or Lessor (as  applicable)  can be acquired by Lessor using its reasonable  best
efforts;  PROVIDED,  that so  long as the  Lien  of the  Mortgage  has not  been
discharged,  such money shall be invested and held by Mortgagee,  as assignee of
Lessor,  in  accordance  with  this  Lease,  and upon  discharge  of such  Lien,
Mortgagee  shall pay any such money held by it to Lessor to be held and invested
in accordance with this ss. 4.4.1.

                           4.4.2            PAYMENT OF GAIN OR LOSS

         Any net gain (including  interest  received)  realized as the result of
investments  pursuant  to ss.  4.4.1  (net of any fees,  commissions,  and other
reasonable  expenses  incurred in connection with such investment) shall be held
and applied in the same manner as the principal amount is to be held and applied
hereunder. Lessee will promptly pay to Lessor, on demand, the amount of any loss
realized  as  the  result  of any  such  investment  (together  with  any  fees,
commissions,  and other  reasonable  expenses  incurred in connection  with such
investment),  such  amount  so  paid  to  be  held  and  applied  by  Lessor  as
contemplated in ss. 4.4.1.

                           4.4.3            LIMITATION OF LIABILITY

         All  investments  under  this ss.  4.4  shall be at  Lessee's  risk and
expense,  and Lessor and  Mortgagee  shalL not be liable for any loss  resulting
from any investment  made under this ss. 4.4 other than by reason of itS willful
misconduct or gross negligence.  Any such investment may be sold (without regard
to its maturity) by Lessor without instructions  whenever such sale is necessary
to make a distribution required by this Lease.

         4.5               TITLE TRANSFERS BY LESSOR

         If Lessor  shall be  required to transfer  title to the  Aircraft,  the
Airframe,  or any Engine to Lessee or any other  Person  pursuant to this Lease,
then  (a)  Lessor  shall  (1)  transfer  to  Lessee  or such  other  Person  (as
applicable)  all of Lessor's  right,  title and interest in and to the Aircraft,
the Airframe, or such Engine (as applicable), free and clear of all Lessor Liens
attributable to Lessor,  FSB, or Owner  Participant,  (2) so long as the Lien of
the Mortgage has not been discharged,  comply with the Mortgage  relating to the
release of the Aircraft,  the Airframe,  or such Engine, (3) assign to Lessee or
such other  Person (as  applicable),  if and to the extent  permitted  under the
Purchase  Agreement,   all  warranties  of  Airframe   Manufacturer  and  Engine
Manufacturer with respect to the Aircraft, the Airframe, or such Engine, and (4)
assign to Lessee or such  other  Person  (as  applicable),  if and to the extent
permitted, all claims, if any, for damage to the Aircraft, the Airframe, or such
Engine, in each case free of Lessor Liens attributable to Lessor,  FSB, or Owner
Participant,  and without recourse or warranty of any kind whatsoever (except as
to the  transfer  described  in clause  (1) above and as to the  absence of such
Lessor  Liens),  and (b) Lessor shall  promptly  deliver to Lessee or such other
Person (as applicable), a bill of sale and agreements of assignment,  evidencing
such transfer and  assignment,  and such other  instruments of transfer,  all in
form and substance  reasonably  satisfactory to Lessee (or such other Person, as
applicable),  as Lessee (or such other Person,  as  applicable)  may  reasonably
request and furnish to Lessor.

         4.6               LESSOR'S INTEREST IN CERTAIN ENGINES

         Lessor  hereby  agrees  for the  benefit  of each  lessor,  conditional
seller, or secured party of any engine (other than an Engine) leased, purchased,
or owned by Lessee or any Permitted  Sublessee  subject to a lease,  conditional
sale,  or other  security  agreement  that Lessor will not acquire or claim,  as
against such lessor,  conditional seller, or secured party, any right, title, or
interest in such engine as the result of the  installation of such engine on the
Airframe  at any time while such  engine is subject to such  lease,  conditional
sale, or other security agreement and owned by such lessor or conditional seller
or subject to a security interest in favor of such secured party.

     4.7  LEASE  FOR U.S.  FEDERAL  INCOME  TAX LAW  PURPOSES;  SECTION  1110 OF
BANKRUPTCY CODE

     (a) Lessee and Lessor  agree that this Lease is, and shall be treated as, a
lease for U.S. federal income tax purposes of the Aircraft,  Airframe,  Engines,
and Parts.

         (b) Lessee and Lessor intend that Lessor (and  Mortgagee as assignee of
Lessor  under the  Mortgage)  shall be entitled to the  benefits of Section 1110
with respect to the right to take possession of the Aircraft, Airframe, Engines,
and Parts as provided in this Lease.

                              5. RETURN OF AIRCRAFT

         5.1               COMPLIANCE WITH ANNEX B

         Lessee  shall  comply  with each of the  provisions  of Annex B,  which
provisions  are hereby  incorporated  by this  reference as if set forth in full
herein.

         5.2               PARKING AND RELATED MATTERS

         If Lessor  gives  written  notice to Lessee,  not less than 10 days nor
more  than  120 days  before  the end of the  Term,  requesting  parking  of the
Aircraft upon its return  hereunder,  Lessee will assist Lessor in procuring (or
cause Lessor to be provided  with) outdoor  parking  facilities for the Aircraft
for a storage  period up to 30 days,  starting on the date of such  return,  and
upon  Lessor's  request to Lessee  made at least 10 days  before the end of such
initial  30-day  period,   for  an  additional  90-day  period  commencing  upon
expiration of such initial period, at such storage facility in the 48 contiguous
states of the United States as Lessee selects. Such storage shall be at Lessor's
risk, and Lessor shall pay all applicable storage fees, except that Lessee shall
pay the parking fees for the initial 30-day  storage  period;  PROVIDED  FURTHER
that  Lessee's  obligation  to provide  parking  shall be  subject  to  Lessor's
entering into an agreement with the storage facility,  before the storage period
begins, providing that Lessor shall bear all maintenance charges and other costs
incurred, and that Lessee's obligations hereunder will be solely for the payment
of parking fees for the initial 30-day period  pursuant to the terms of this ss.
5.2. Unless Lessor and Lessee otherwise agree, the location of such parking wilL
also constitute the return location for the Aircraft.

         5.3               RETURN OF OTHER ENGINES

         If any Engine  owned by Lessor is not  installed on the Airframe at the
time of return  hereunder,  Lessee shall return the  Airframe  hereunder  with a
Replacement  Engine meeting the  requirements of, and in accordance with, ss. 10
and Annex B. Thereupon,  Lessor will transfer to Lessee the Engine  constituting
part of such  AircrafT  but not  installed  on such  Airframe at the time of the
return of the Airframe.

         5.4               FUEL

         Upon the return of the  Airframe  upon any  termination  of this Lease,
Lessor shall pay Lessee,  as  compensation  for any fuel or oil contained in the
fuel or oil tanks of such  Airframe,  the value of such fuel or oil at the price
paid by Lessee for such fuel or oil. However,  if the Aircraft is being returned
in  connection  with the exercise of remedies  pursuant to ss. 15,  Lessor shall
have no  obligation  to make such payment to LesseE until Lessor shall have been
paid all amounts due to it pursuant to ss. 15.

                                    6. LIENS

         Lessee shall not,  directly or indirectly,  create,  incur,  assume, or
suffer to exist any Lien on or with respect to the Aircraft,  the Airframe,  any
Engine, or any Part, title to any of the foregoing,  or any interest therein, or
Lessee's rights in and to this Lease or any Permitted  Sublease,  except (a) the
rights of Lessor,  Mortgagee,  the Participants,  and Lessee under the Operative
Agreements,  and of any Permitted  Sublessee under any Permitted  Sublease;  (b)
Lessor Liens;  (c) the rights of others under  agreements or arrangements to the
extent permitted by ss. 7.2, ss. 7.3, or Annex C; (d) Liens for Taxes either not
yet due or being  contested  in good faith by  appropriate  proceedings  if such
Liens and such  proceedings  do not involve  more than a DE MINIMIS  risk of the
sale,  forfeiture,  or loss of the Aircraft,  the Airframe,  any Engine,  or the
interest of any  Participant  therein,  or impair the Lien of the Mortgage;  (e)
materialmen's, mechanics', workers', repairers', employees', or other like Liens
arising in the  ordinary  course of  business  for  amounts the payment of which
either is not yet delinquent for more than 60 days or is being contested in good
faith by  appropriate  proceedings,  if such Liens and such  proceedings  do not
involve any more than a DE MINIMIS risk of the sale, forfeiture,  or loss of the
Aircraft,  the Airframe, any Engine, or the interest of any Participant therein,
or impair the Lien of the  Mortgage;  (f) Liens  arising out of any  judgment or
award against Lessee, if, within 60 days after the entry thereof,  that judgment
or award is discharged or vacated,  or has its execution  stayed pending appeal,
or is discharged,  vacated,  or reversed  within 60 days after the expiration of
such  stay,  and if during  any such  60-day  period  there is not,  or any such
judgment  or award does not  involve,  more than a DE MINIMIS  risk of the sale,
forfeiture,  or loss of the Aircraft,  the Airframe, any Engine, or the interest
of any Participant  therein, or impairment of the Lien of the Mortgage;  and (g)
any other Lien with respect to which Lessee or any Permitted  Sublessee provides
a bond, cash collateral, or other security adequate in the reasonable opinion of
Lessor.  Lessee shall  promptly  take or cause to be taken such action as may be
necessary  duly to  discharge  (by bonding or  otherwise)  any Lien not excepted
above that arises in respect of the Aircraft,  the Airframe,  any Engine, or any
Part during the Term.

              7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING

         7.1               REGISTRATION AND OPERATION

                           7.1.1            REGISTRATION AND RECORDATION

         Subject  to  Lessor's  and Owner  Participant's  compliance  with their
obligations under ss. 13 of thE Participation Agreement,  Lessee shall cause the
Aircraft to be, and at all times during the Term to remain, duly registered with
the FAA under the Transportation  Code or with such other country of registry as
shall be permitted  under ss. 7.1.2  hereof,  in the name of Lessor as owner and
lessor  (except to the extent that sucH  registration  under the  Transportation
Code is prevented or lost because of Lessor's or Owner Participant's  failure to
comply with the citizenship  requirements for registration of the Aircraft under
the Transportation Code). Lessor shall execute and deliver all such documents as
Lessee  or any  Permitted  Sublessee  reasonably  requests  for the  purpose  of
effecting and continuing such  registration.  Unless  Mortgagee has given Lessee
notice  that the  Mortgage  has been  discharged,  Lessee  shall  also cause the
Mortgage  to be  duly  recorded  and at all  times  maintained  of  record  as a
first-priority  perfected mortgage (subject to Permitted Liens) on the Aircraft,
the Airframe,  and each of the Engines  (except to the extent such perfection or
priority  cannot be  maintained  solely as a result of the  failure by Lessor or
Mortgagee  to  execute  and  deliver  any  necessary  documents).  Each  of  the
registrations and recordations  referenced in this ss. 7.1.1 will be at Lessee's
cost and expense, except aS otherwise provided in this Lease.

                           7.1.2            REREGISTRATION

         After the Tax Attribute  Period (or before such date,  provided  Lessee
pre-pays on a lump-sum basis any liability due under the Tax Indemnity Agreement
as a result of such registration on the assumption that such registration  would
continue for the  remainder of the term of the Permitted  Sublease  described in
ss. 7.6.11(a)(3) of the Participation  Agreement, if no Special Default or Lease
Event of Default exists, Lessee may, by written notice to Lessor (with a copy of
such notice to Owner Participant), request to change the country of registration
of the  Aircraft.  Any such change in  registration  shall be  effected  only in
compliance  with,  and subject to all of the conditions set forth in, ss. 7.6.11
of the Participation Agreement.

                           7.1.3            MARKINGS

         If permitted by  applicable  Law, on or reasonably  promptly  after the
Delivery  Date,  Lessee  will cause to be affixed  to,  and  maintained  in, the
cockpit of the Airframe and on each  Engine,  in each case in a clearly  visible
location,  a placard of a reasonable size and shape bearing the legend set forth
in Schedule 6. Such placards may be removed  temporarily,  if necessary,  in the
course of maintenance of the Airframe or Engines. If any such placard is damaged
or becomes illegible,  Lessee shall promptly replace it with a placard complying
with the requirements of this ss. 7.1.3.

                           7.1.4            COMPLIANCE WITH LAWS

         Lessee  shall not,  and shall not allow any other  Person to,  operate,
use, maintain, service, repair, overhaul, improve, or modify the Aircraft (a) in
violation of any Law binding on or applicable to the Aircraft,  the Airframe, or
any Engine, or (b) in violation of any airworthiness  certificate,  license,  or
registration of any Government Entity relating to the Aircraft, the Airframe, or
any Engine,  except (1) immaterial or  non-recurring  violations with respect to
which corrective  measures are taken promptly by Lessee or a Permitted Sublessee
(as  applicable)  upon  discovery  thereof,  and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement  relating to any such certificate,  license, or registration in good
faith in any  reasonable  manner  which does not involve  more than a DE MINIMIS
risk of the sale, forfeiture,  or loss of the Aircraft, the Airframe, any Engine
or the interest of any Participant therein, any risk of criminal liability or of
material civil penalty against Lessor,  Mortgagee,  or any Participant or impair
the lien of the Mortgage.

                           7.1.5            OPERATION

         Lessee  agrees  not to  operate,  use,  or  locate  the  Aircraft,  the
Airframe,  or any Engine, or allow the Aircraft,  the Airframe, or any Engine to
be operated,  used,  or located,  (a) in any area  excluded from coverage by any
insurance  required by the terms of ss. 11,  except in the case of a requisition
by the U.S.  Government where thE U.S.  Government provides an indemnity in lieu
of such insurance, or insurance from the U.S. Government, covering such area, in
accordance  with ss. 11.3, or (b) in any recognized  area of hostilities  unless
fully  covered iN accordance  with Annex D by war-risk  insurance as required by
the terms of ss. 11 (including ss. 11.3), unless in Any case referred to in this
ss. 7.1.5 the Aircraft is only  temporarily  operated,  used, or located in such
area as A result of an emergency,  equipment  malfunction,  navigational  error,
hijacking, weather condition, or other similar unforeseen circumstances, so long
as Lessee diligently and in good faith proceeds to remove the Aircraft from such
area.

         7.2               POSSESSION

         Lessee will not,  without the prior written consent of Lessor and Owner
Participant,   sublease  or  otherwise  in  any  manner  deliver,  transfer,  or
relinquish  possession of the Aircraft,  the Airframe, or any Engine, or install
any Engine, or permit any Engine to be installed, on any airframe other than the
Airframe;  PROVIDED,  that,  subject to the  provisions of ss. 7.3,  Lessee may,
without such prior written consent:

                           7.2.1            INTERCHANGE AND POOLING

         Subject or permit any  Permitted  Sublessee to subject (a) the Airframe
         to  normal   interchange   agreements   (provided  that  (1)  any  such
         interchange  agreement does not contemplate that Lessee (or a Permitted
         Sublessee) will be out of possession of the Airframe for more than five
         consecutive  days at a time  (absent  weather,  maintenance,  or  other
         exigencies),  and (2) the  party  to such  interchange  agreement  is a
         Permitted  Air Carrier,  not in  bankruptcy,  organized  and having its
         principal  place of business in a country with which the United  States
         then maintains  normal  diplomatic  relations and which  recognizes and
         gives  effect to the  rights,  title,  and  interests  of Lessor in the
         Airframe), or (b) any Engine (but only if such Engine is then installed
         upon  an  aircraft)  to  normal   interchange   agreements  or  pooling
         agreements or  arrangements,  in each case  customary in the commercial
         airline industry and entered into by Lessee or such Permitted Sublessee
         in the  ordinary  course  of  business;  PROVIDED,  that  (1)  no  such
         agreement or  arrangement  shall require any transfer of Lessor's title
         to the Airframe or such Engine,  and (2) if Lessor's  title to any such
         Engine  is   nevertheless   divested   under  any  such   agreement  or
         arrangement, then such Engine shall be deemed to have suffered an Event
         of  Loss as of the  date  of such  divestiture,  and  Lessee  shall  be
         required to replace such Engine with a Replacement  Engine  meeting the
         requirements of, and in accordance with, ss. 10.

                           7.2.2            TESTING AND SERVICE

         Deliver or permit any Permitted  Sublessee to deliver possession of the
         Aircraft, the Airframe, any Engine, or any Part (a) to the manufacturer
         thereof  or to  any  third-party  maintenance  provider,  for  testing,
         service,  repair,  maintenance,  or  overhaul  work  on  the  Aircraft,
         Airframe,  any  Engine,  or any Part,  or, to the  extent  required  or
         permitted by the terms of Annex C, for alterations or  modifications in
         or additions to the Aircraft,  the Airframe,  or any Engine,  or (b) to
         any Person for the purpose of transport to a Person  referred to in the
         preceding clause (a).

     7.2.3 TRANSFER TO U.S. GOVERNMENT

         Transfer or permit any  Permitted  Sublessee to transfer  possession of
         the  Aircraft,  the  Airframe,  or any  Engine  to the U.S.  Government
         pursuant to CRAF or  otherwise,  in which event Lessee  shall  promptly
         notify  Lessor  and  Mortgagee  in  writing  of any  such  transfer  of
         possession (and, in the case of any transfer  pursuant to CRAF, in such
         notification shall identify by name, address, and telephone numbers the
         Contracting Office  Representative(s)  for the Military Airlift Command
         of the  United  States Air Force to whom  notices  must be given and to
         whom  requests  or claims must be made to the extent  applicable  under
         CRAF).

     7.2.4 INSTALLATION OF ENGINES ON OWNED AIRCRAFT

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe owned by Lessee or such Permitted  Sublessee free and clear of
         all Liens except (a)  Permitted  Liens,  (b) Liens that do not apply to
         the  Engines,  and  (c)  the  rights  of  third  parties  under  normal
         interchange  or  pooling   agreements  and  arrangements  of  the  type
         permitted under ss. 7.2.1.

     7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe leased to Lessee or such Permitted Sublessee,  or purchased or
         owned by Lessee  or such  Permitted  Sublessee  subject  to a  security
         agreement,  conditional sale, or other secured  financing  arrangement,
         but only if (a) such airframe is free and clear of all Liens except (1)
         the  rights  of  the  parties  to  such  lease  or  secured   financing
         arrangement,  covering  such  airframe,  and  (2)  Liens  of  the  type
         permitted by clauses (a) and (b) of ss.  7.2.4,  and (b) Lessee or such
         Permitted  Sublessee has received from the lessor,  secured  party,  oR
         conditional  seller,  in respect of such airframe,  a written agreement
         (which may be a copy of the lease, security agreement, conditional sale
         agreement,  or other agreement  covering such  airframe),  whereby such
         Person  agrees that it will not acquire or claim any right,  title,  or
         interest in, or Lien on, such Engine by reason of the  installation  of
         such  Engine on such  airframe at any time while such Engine is subject
         to this Lease or is owned by Lessor.

     7.2.6 INSTALLATIONS OF ENGINES ON FINANCED AIRCRAFT

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe owned by Lessee or such Permitted Sublessee,  leased to Lessee
         or such  Permitted  Sublessee,  or purchased or owned by Lessee or such
         Permitted  Sublessee  subject to a conditional  sale or other  security
         agreement  under  circumstances  where  neither ss. 7.2.4 nor ss. 7.2.5
         applies;  PROVIDED, that any such installation shall be deemed an EvEnt
         of Loss with respect to such  Engine,  and Lessee shall comply with ss.
         10.2 in respect  thereof.  UntiL ss. 10.2 has been fully complied with,
         Lessor's  interest  in such  Engine  shall  continue  in full force anD
         effect.

                           7.2.7            SUBLEASING

     With respect to the Aircraft,  the Airframe,  or any Engine,  if no Special
Default  or Lease  Event of  Default  exists,  enter  into a  sublease  with any
Permitted Air Carrier, but only if:

     (a)  Lessee  provides  written  notice  to  Lessor  (with a copy  to  Owner
Participant) and Mortgagee (such notice in the event of a sublease to a U.S. Air
Carrier to be given promptly after entering into any such sublease,  and, in the
case of a sublease to any other  Permitted  Air  Carrier,  10  Business  Days in
advance of entering into such sublease);

     (b) at the time that Lessee enters into such  sublease,  such Permitted Air
Carrier  shall  not be  subject  to  any  bankruptcy,  insolvency,  liquidation,
reorganization,   dissolution,   or  similar  proceeding,  and  shall  not  have
substantially all of its property in the possession of any liquidator,  trustee,
receiver, or similar Person;

     (c) any such  sublease (1) shall not extend  beyond the  expiration  of the
Base Term or any  Renewal  Term then in effect or  irrevocably  committed  to by
Lessee,  or contain a purchase  option,  unless  expressly  subject to  Lessee's
exercise of its renewal or purchase  options in accordance with the terms of ss.
17,  and in any event  subject  to the  requirements  of clause  (4) of this ss.
7.2.7(c),  (2) shall Not  contain  any  purchase  option  exercisable  at a date
earlier than such date permitted  under ss. 17.3, (3) shall  explicitly  require
that  sublessee or sublessor  (or both with  specified  allocations)  will fully
comply with the Lease's  maintenance,  operation,  possession,  inspection,  and
insurance  requirements,  and (4) shall be expressly  subject and subordinate to
all the  terms of this  Lease  and to  Lessor's  rights,  powers,  and  remedies
hereunder,  including Lessor's rights under ss. 15 to repossess the Aircraft and
tO terminate such sublease if a Lease Event of Default exists;

     (d) in connection with a sublease to a Permitted  Foreign Air Carrier,  (1)
the United States maintains diplomatic relations with the country of domicile of
such Permitted  Foreign Air Carrier,  and (2) Lessee furnishes to Lessor,  Owner
Participant   and   Mortgagee  a  favorable   opinion  of  counsel,   reasonably
satisfactory to Lessor and Owner  Participant  (and, so long as the Policy is in
effect,  to  Mortgagee),  located in the country of  domicile of such  Permitted
Foreign Air Carrier,  that (aa) the terms of such sublease are legal, valid, and
binding  obligations of the parties thereto,  enforceable under the laws of such
jurisdiction,  (bb)  it is not  necessary  for  Owner  Participant,  Lessor,  or
Mortgagee  to register or qualify to do  business in such  jurisdiction,  if not
already so registered or qualified,  as a result of the proposed sublease,  (cc)
Lessor's  title to,  and  Mortgagee's  first-priority  Lien in  respect  of, the
Aircraft,  Airframe,  and Engines will be recognized in such jurisdiction,  (dd)
the Laws of such  jurisdiction  of domicile  require  fair  compensation  by the
government of such  jurisdiction,  payable in a currency freely convertible into
Dollars,  for the loss of title to the  Aircraft,  Airframe,  or  Engines in the
event  of the  requisition  by such  government  of such  title  (unless  Lessee
provides  insurance in the amounts required with respect to hull insurance under
ss. 11 covering thE requisition of title to the Aircraft,  Airframe,  or Engines
by the government of such  jurisdiction  so long as the Aircraft,  Airframe,  or
Engines  are  subject  to such  sublease),  (ee) such  Permitted  Air  Carrier's
agreement that its rights under the sublease are subject and  subordinate to all
the terms of this Lease is enforceable  against such Permitted Air Carrier under
applicable Law, and (ff) such sublease will subject Lessor, Mortgagee, and Owner
Participant  to no greater tort  liability than in the United States of America,
OR, if such sublease will subject  Lessor,  Mortgagee,  or Owner  Participant to
greater  tort  liability  than in the  United  States  of  America,  Lessee  (or
Permitted  Sublessee) has provided  insurance to insure against such  additional
liability;

     (e) Lessee furnishes to Lessor,  Mortgagee,  and Owner Participant evidence
reasonably  satisfactory to Lessor that the insurance  required byss. 11 remains
in effect;

     (f) all necessary documents are duly filed, registered, or recorded in such
public  offices as are required  fully to preserve the title of Lessor,  and the
first-priority  security interest (subject to Permitted Liens) of Mortgagee,  in
the Aircraft, Airframe, and Engines;

     (g) Lessee shall reimburse Lessor, Mortgagee, and Owner Participant for all
of their reasonable  out-of-pocket fees and expenses (including  reasonable fees
and disbursements of counsel) incurred in connection with any such sublease;

     (h) no such sublease  shall be made to a "tax exempt  entity" as defined in
ss. 168(h)(2) oF the Code, including a Permitted Foreign Air Carrier, before the
end of the Tax Attribute  Period unless Lessee  prepays on a lump-sum  basis any
liability  due under the Tax  Indemnity  Agreement as a result of such  sublease
based upon the assumption  that such sublease were to continue for the remainder
of the term of such sublease;

     (i)  no  such  sublease  will  adversely  affect  Lessor's  or  Mortgagee's
protection under Section 1110;

     (j) no such  sublease  shall permit the Permitted  Sublessee  thereunder to
sub-sublease  or transfer the Airframe or any Engine,  except for transfers by a
Permitted sublessee  permitted by the foregoing  provisions of this ss. 7.2, and
except that a Permitted  Sublessee who is a manufacturer maY sub-sublease to any
Person to whom a sublease  would be permitted  under this ss.  7.2.7;  PROVIDED,
that (1) such  sub-sublease  shall  not  permit  any  sub-sub-subleasing  of the
Aircraft,  the Airframe,  or any Engine, and (2) such sub-sublease must meet the
requirement of a Permitted Sublease;

                  (k) if the term of such  Sublease  is  greater  than one year,
         Lessee  will assign such  Sublease to Lessor as security  for  Lessee's
         obligations hereunder.

     7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER RELINQUISHMENT OF POSSESSION

         Notwithstanding anything to the contrary in ss. 7.2:

         (a) The rights of any Person who receives possession of the Aircraft in
accordance  with ss. 7.2 shalL be subject  and  subordinate  to all the terms of
this Lease, and to Lessor's rights,  powers, and remedies  hereunder,  including
(1) Lessor's  right to repossess  the Aircraft  pursuant to ss. 15, (2) Lessor's
right  tO  terminate   and  avoid  such   sublease,   delivery,   transfer,   or
relinquishment  of  possession if a Lease Event of Default  exists,  and (3) the
right to require  such Person to deliver  the  Aircraft,  Airframe,  and Engines
forthwith if a Lease Event of Default exists.

         (b) Lessee shall remain  primarily liable hereunder for the performance
of all the terms of this Lease to the same  extent as if such  transfer  had not
occurred,  and no transfer of  possession of the  Aircraft,  the  Airframe,  any
Engine,  or any Part shall in any way  discharge  or  diminish  any of  Lessee's
obligations to Lessor hereunder or under any other Operative Agreement.

         (c) Lessee  shall  ensure  that no  sublease,  delivery,  transfer,  or
relinquishment   permitted   under  ss.  7.2  shall  affect  the  United  States
registration of the Aircraft, unless also made in accordance with thE provisions
of ss. 7.1.2.

         (d) Any event  that  constitutes  or would,  with the  passage of time,
constitute an Event of Loss under clause (3),  (4), or (5) of the  definition of
such  term  (as set  forth  in  Annex A) shall  not be  deemed  to  violate  the
provisions of ss. 7.2.

         (e)  No  Wet  Lease  shall   constitute   a  delivery,   transfer,   or
relinquishment of possession for purposes of ss. 7.2, nor shall it be prohibited
by the terms hereof.

     8.   MAINTENANCE;   REPLACEMENT   AND   POOLING   OF  PARTS;   ALTERATIONS,
MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS

     8.1   MAINTENANCE;   REPLACEMENT   AND   POOLING  OF  PARTS;   ALTERATIONS,
MODIFICATIONS, AND ADDITIONS

         At all times during the Term,  Lessee shall comply with (or cause to be
complied  with) each of the  provisions of Annex C, which  provisions are hereby
incorporated by this reference as if set forth in full herein.

         8.2               INFORMATION, CERTIFICATES, NOTICES, AND REPORTS

                           8.2.1            FINANCIAL INFORMATION

         Lessee will furnish to Lessor and Owner Participant:

                  (a)  within 90 days  after the end of each of the first  three
         fiscal quarters in each fiscal year of Lessee,  a consolidated  balance
         sheet  of  Lessee  and  Guarantor  as of the end of such  quarter,  and
         related  statements of income and cash flows for the period  commencing
         at the end of the previous  fiscal year and ending with the end of such
         quarter,   setting  forth  in  each  case  in   comparative   form  the
         corresponding  figures for the  corresponding  period in the  preceding
         fiscal year,  prepared in accordance  with GAAP;  PROVIDED,  that while
         Lessee or Guarantor  is subject to the  reporting  requirements  of the
         Securities  Exchange  Act of 1934,  a copy of Lessee's  or  Guarantor's
         report on Form 10-Q for such fiscal quarter  (excluding  exhibits) will
         satisfy this clause (a).

                  (b)  within  120 days  after  the end of each  fiscal  year of
         Lessee, a consolidated  balance sheet of Lessee and Guarantor as of the
         end of such fiscal year and related statements of income and cash flows
         of Lessee and Guarantor for such fiscal year, in comparative  form with
         the preceding fiscal year,  prepared in accordance with GAAP,  together
         with a report of Lessee's and Guarantor's  independent certified public
         accountants  with respect to their audit of such financial  statements;
         PROVIDED,  that while Lessee or  Guarantor is subject to the  reporting
         requirements of the Securities Exchange Act of 1934, a copy of Lessee's
         or  Guarantor's  report on Form 10-K for such  fiscal  year  (excluding
         exhibits) will satisfy this clause (b).

                           8.2.2            ANNUAL CERTIFICATE

         Within 120 days after the close of each fiscal  year of Lessee,  Lessee
shall  deliver  to  Lessor,  Owner  Participant,   and  Mortgagee  an  Officer's
Certificate  of Lessee to the effect that such  officer is familiar  with or has
reviewed or caused to be reviewed the relevant terms of this Lease and the other
Lessee  Operative  Agreements,  and that such officer does not have knowledge of
the existence as at the date of such  certificate  of any Lease Event of Default
(or, if any Lease Event of Default  exists,  specifying the nature and period of
existence  thereof  and the action  Lessee has taken or is taking or proposes to
take with respect thereto).

                           8.2.3            INFORMATION FOR FILINGS

         Lessee  shall  promptly  furnish to Owner  Participant  or Lessor  such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's  possession,  or reasonably
available to or  obtainable  by Lessee or such  Permitted  Sublessee,  as may be
required to enable Lessor to file in a timely manner any reports  required to be
filed by it as lessor under the Lease or to enable Owner  Participant to file in
a timely manner any reports required to be filed by it as the beneficiary of the
Trust  Estate,  in either case,  with any  Government  Entity  because of, or in
connection  with,  the interest of Owner  Participant or Lessor in the Aircraft,
this Lease, or any other part of the Trust Estate;  PROVIDED, that, with respect
to any such information which Lessee reasonably deems commercially  sensitive or
confidential,  Owner Participant or Lessor (as applicable) shall afford Lessee a
reasonable  opportunity (to the extent  reasonably  obtainable) to seek from any
such Government Entity a waiver of the obligation of Owner Participant or Lessor
to file any such information, or shall consent to the filing of such information
directly by Lessee in lieu of filing by Owner Participant or Lessor,  and if any
such waiver or consent is  evidenced  to the  reasonable  satisfaction  of Owner
Participant  or Lessor (as  applicable),  then  Lessee  shall not be required to
furnish such information to Owner Participant or Lessor.

                           8.2.4            OTHER INFORMATION

         Lessee shall provide to Owner  Participant from time to time such other
information  or data as Owner  Participant  reasonably  requests  concerning the
Aircraft,   Lessee's   financial   condition,   or  otherwise  relating  to  the
transactions or matters contemplated in the Operative  Agreements,  in each case
to the extent  within  Lessee's  or any  Permitted  Sublessee's  possession,  or
reasonably available to or obtainable by Lessee or such Permitted Sublessee.

                   9. VOLUNTARY TERMINATION UPON OBSOLESCENCE

         9.1               RIGHT OF TERMINATION

         (a)  Provided  there  is then no  Special  Default  or  Lease  Event of
Default,  Lessee  shall  have the right at its  option to  terminate  this Lease
during the Base Term, effective only on a Termination Date occurring on or after
the seventh anniversary of the Delivery Date, if:

                  (1) Lessee makes a good faith  determination that the Aircraft
         either  has become  economically  obsolete  or is  surplus to  Lessee's
         requirements,  and  Lessee's  Chief  Financial  Officer or Treasurer so
         certifies in writing to Lessor; and

                  (2) Lessee provides Lessor (with a copy to Owner  Participant)
         with written notice of Lessee's exercise of such termination option not
         less than 180 days and not more than 360 days  before  the  Termination
         Date specified in such notice.

         (b) Lessor shall notify Lessee and  Mortgagee of Lessor's  intention to
sell or retain the  Aircraft,  as provided in this ss. 9, not less than 120 days
before the  Termination  Date  specified in the written  noticE  pursuant to ss.
9.1(a)(2).  Any failure by Lessor to give such notice of its  election  shall be
deemed to be aN election to sell the Aircraft, as provided in this ss. 9.

         (c) In the event of any  termination  pursuant  to this ss.  9,  Lessee
shall not acquire  additionaL  737-800  aircraft during the 24 months  following
such  termination,  except to  replace  any lost or  damaged  aircraft  or under
short-term  operating leases, and Lessee shall notify Lessor in the event Lessee
plans to enter into such an operating lease to discuss the possible  re-lease of
the Aircraft from Lessor to Lessee under such short-term operating lease.

         9.2               ELECTION BY LESSOR TO SELL

                           9.2.1            BIDS; CLOSING OF SALE

         Unless  Lessor has notified  Lessee of Lessor's  election to retain the
Aircraft,  Lessee, as agent for Lessor,  shall, until the date ten Business Days
before the Termination Date, use commercially  reasonable efforts to obtain bids
for a cash  purchase  of the  Aircraft,  and Lessor may, if it desires to do so,
also  seek to obtain  such  bids.  If  Lessee  receives  any bid,  Lessee  shall
promptly,  and in any event at least ten  Business  Days before the  Termination
Date,  certify  to Lessor in writing  the amount and terms of such bid,  and the
name and  address of the Person  (who  shall not be Lessee or any  Affiliate  of
Lessee or any Person with whom Lessee or any such  Affiliate has an  arrangement
for the future use of the Aircraft by Lessee or any such  Affiliate)  submitting
such bid. If Lessor  receives  any bid on or before the date ten  Business  Days
before the Termination Date, Lessor shall, at least ten Business Days before the
Termination Date, certify to Lessee in writing the amount and terms of such bid,
and the name and address of the Person submitting such bid.

                           9.2.2            CLOSING OF SALE

         (a) On the  Termination  Date (1) Lessee shall deliver the Airframe and
Engines or engines  constituting part of the Aircraft to the bidder (if any) who
shall have  submitted  the highest  cash bid on or before the date ten  Business
Days before such  Termination  Date, in the same manner as if delivery were made
to Lessor  pursuant to ss. 5 and Annex B and in full  compliance  with the terms
thereof,  and shall duly  transfer tO Lessor title to any such engines not owned
by Lessor, all in accordance with the terms of ss. 5 and Annex B, anD (2) Lessor
shall  simultaneously  therewith transfer the Airframe and Engines or engines to
such bidder,  in the manner described in ss. 4.5, against cash paid to Lessor in
the  amount  of such  highest  bid and in the  manner  and iN  funds of the type
specified in ss. 3.3.

         (b) All proceeds of any sale described in ss. 9.2.2(a) shall be paid to
and  retained  by Lessor  and,  on such  Termination  Date,  and as a  condition
precedent  to such sale and the  delivery of the Aircraft and Engines or engines
to such bidder,  Lessee  shall pay to Lessor,  in the manner and in funds of the
type specified in ss. 3.3:

     (1) all unpaid  Basic Rent due at any time  before such  Termination  Date;
plus

     (2) the excess (if any) of the Termination Value for the Aircraft, computed
as of such Termination Date, over the proceeds of such sale; plus

     (3) as provided in ss.  3.2.2,  interest  on the amounts  specified  in the
foregoing  clausE (1) at the Past-Due  Rate from and including the date on which
any such amount was due to the date of payment of such amount in full.

         As a further  condition  precedent  to such sale and  delivery,  Lessee
shall  pay all  Supplemental  Rent due by Lessee to  Lessor,  Mortgagee,  or the
Participants  under this Lease (including (aa)  Supplemental  Rent in respect of
Make-Whole  Amount (if any) payable  pursuant to ss.  2.11(b) of the Mortgage in
connection  with a prepayment  oF the Equipment  Notes upon such sale,  (bb) all
interest  charges  provided for  hereunder  or under any other Lessee  Operative
Agreement  with respect to the late payment of any amounts so payable,  (cc) all
reasonable and  previously-invoiced  out-of-pocket fees and expenses  (including
reasonable  fees and expenses of counsel,  but excluding  brokerage  commissions
payable to any Person not retained by Lessee) incurred by Lessor, Mortgagee, and
Owner  Participant in connection  with such sale and the related  termination of
this  Lease),  (dd) all  previously-invoiced  commissions  payable to any Person
retained by Lessee in connection  with such sale, and (ee) all sales,  transfer,
or similar Taxes then due with respect to such sale). To the extent not invoiced
or due on the Termination  Date,  Lessee shall pay in due course the obligations
described in the foregoing clauses (cc), (dd), and (ee).

         (c) Upon and  subject  to any such  sale and  receipt  of  proceeds  by
Lessor, and full and final payment of all amounts described in ss. 9.2.2(b), and
compliance by Lessee with all the other provisions of this ss. 9.2,

                  (1) Lessor will  transfer to Lessee,  in  accordance  with ss.
         4.5, any Engines  constitutinG  part of the Aircraft but which were not
         then installed on the Airframe and sold therewith; and

                  (2) the  obligation  of Lessee to pay Basic Rent,  on or after
         the Payment Date with reference to which Termination Value is computed,
         shall  cease,  and the Term shall end  effective as of the date of such
         sale.

         (d) A sale of the Aircraft  pursuant to this ss. 9.2.2 shall take place
only on a Termination  Date.  Subject to ss. 9.3, if no sale shall have occurred
on or as of the proposed  Termination  Date,  this Lease shalL  continue in full
force and effect, and all of Lessee's obligations shall continue,  including its
obligation  to pay Rent,  in each case, as if the notice under ss. 9.1 shall not
have been given and,  subject to ss.  9.2.3(a),  LesSee may give another  notice
pursuant to ss. 9.1.

         (e) Lessor shall be under no duty to solicit  bids, to inquire into the
efforts of Lessee to obtain bids,  or otherwise to take any action in connection
with any such sale other than to transfer to the purchaser  named in the highest
bid  referred  to  above  (or to such  purchaser  and,  in the  case of  Engines
described  in ss.  9.2.2(c),  to Lessee)  the  Airframe  and  Engines or engines
against receipt of the payments described in ss. 9.2.2(B)

                           9.2.3            WITHDRAWAL OF NOTICE OF TERMINATION

         (a) So long as Lessor has not elected to retain the  Aircraft  pursuant
to ss. 9.1, Lessee may withdraW any notice given pursuant to ss. 9.1 at any time
on or before the date five Business Days before the proposeD  Termination  Date,
whereupon this Lease shall continue in full force and effect and all of Lessee's
obligations  shall continue,  including its obligation to pay Rent, in each case
as if the  notice  under ss. 9.1 were not  given,  and  Lessee may give  another
notice pursuant to ss. 9.1; PROVIDED,  that Lessee shall not be entitled to give
morE than three termination notices pursuant to ss. 9.1 during the Term.

         (b)  Lessee  shall  pay,  on  an  after-tax   basis,   all   reasonable
out-of-pocket  fees  and  expenses  of  Lessor  (including  reasonable  fees and
expenses of counsel),  Mortgagee,  and Owner  Participant in connection with any
notice of  termination  withdrawn by Lessee or in connection  with any notice of
termination pursuant to which a sale of the Aircraft fails to occur.

         9.3               RETENTION OF AIRCRAFT BY LESSOR

     (a) If Lessor elects to retain the Aircraft in accordance  withss.  9.1, on
the Termination Date:

                  (1) (aa) Lessor  shall pay or cause to be paid,  in the manner
         and in funds of the type  specified  in ss. 3.3, to the  Mortgagee,  an
         amount sufficient to prepay all outstanding Equipment NoteS pursuant to
         ss.  2.11(b) of the Mortgage,  and (bb) Lessee shall pay any Make-Whole
         Amount then due;

                  (2) subject to Mortgagee's  receipt of the funds  described in
         clause  (1)(aa) of this ss.  9.3(a),  Lessee shall deliver the Airframe
         and  Engines or engines  constituting  part of the  Aircraft  tO Lessor
         pursuant  to ss. 5 and  Annex B and in full  compliance  with the terms
         thereof,  and shall dulY  transfer to Lessor  title to any such engines
         not  owned by  Lessor,  all in  accordance  with the terms of ss. 5 and
         Annex B;

     (3)  Lessee  shall pay to  Lessor,  in the  manner and in funds of the type
specified inss. 3.3:

     (aa) all unpaid  Basic Rent due at any time before such  Termination  Date;
plus

     (bb)  any  Make-Whole  Amount  due as a  result  of the  prepayment  of all
outstanding Equipment Notes pursuant toss. 2.11(b) of the Mortgage; plus

     (cc) as provided in ss.  3.2.2,  interest on the amounts  specified  in the
foregoinG clauses (aa) and (bb) at the Past-Due Rate from and including the date
on which any such  amount was due to the date of payment of such amount in full;
and

                  (4)  Lessee  shall  also  pay all  Supplemental  Rent  due and
         payable by Lessee to Lessor,  Mortgagee,  or any Participant under this
         Lease,  including all interest  charges provided for hereunder or under
         any other Lessee  Operative  Agreement with respect to the late payment
         of any amounts so payable,  and the reasonable  out-of-pocket  fees and
         expenses  incurred  by  Lessor,  Mortgagee,  and Owner  Participant  in
         connection  with such  termination  and  delivery of the  Airframe  and
         Engine or engines (excluding brokerage commissions and similar expenses
         payable to any Person(s) not retained by Lessee).

         (b)  Upon  full  and  final  payment  to  Lessor,  Mortgagee,  and  the
Participants  of the amounts  described in ss.  9.3(a)(1),  and (3) and (4), and
compliance by Lessee with all the applicable provisions of ss. 9.3(a)(2),

                  (1) Lessor will  transfer to Lessee,  in  accordance  with ss.
         4.5, any Engines  constitutinG  part of the Aircraft but which were not
         then installed on the Airframe and sold therewith; and

                  (2) Lessee's  obligation to pay Basic Rent otherwise due on or
         after the Termination  Date shall cease,  and the Term for the Aircraft
         shall end effective as of such Termination Date.

                    10. LOSS, DESTRUCTION, REQUISITION, ETC.

         10.1              EVENT OF LOSS TO THE AIRCRAFT

                           10.1.1           NOTICE AND ELECTION

         (a) If an Event of Loss to the Airframe  (and any  Engine(s)  installed
thereon)  occurs,  Lessee shall  promptly (and in any event within 15 days after
such occurrence) notify Lessor, Owner Participant and Mortgagee of such Event of
Loss. Within 60 days after such occurrence,  Lessee shall give to Lessor (with a
copy to Owner  Participant) and Mortgagee written notice of Lessee's election to
make payment in respect of such Event of Loss, as provided in ss. 10.1.2,  or to
replace the Airframe and any such Engine(s) as provided in ss. 10.1.3.

         (b)  Lessee's  failure to give the notice of election  described in ss.
10.1.1(a)  shall be  deemed to bE an  election  of the  option  set forth in ss.
10.1.2. In addition,  Lessee shall not be entitled to elect the optioN set forth
in ss. 10.1.3 if, at the time Lessor  receives such notice from Lessee or on the
replacement date, A Special Default or a Lease Event of Default exists.

         (c) For purposes of ss. 10.1.2,  an Event of Loss to the Airframe shall
be deemed to constitute  aN Event of Loss to the  Aircraft.  For purposes of ss.
10.1.3, any Engine not actually suffering an Event of LosS shall not be required
to be replaced.

     10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE

         (a) If Lessee elects, in accordance with ss. 10.1.1, to make payment in
respect of any such Event oF Loss,  then Lessee  shall pay, in the manner and in
funds of the type specified in ss. 3.3, the following amounts:

                  (1) on the date (the "LOSS PAYMENT  DATE") that is the earlier
         of (x) the  Stipulated  Loss Value Date  first  following  the 75th day
         following the date of the occurrence of such Event of Loss, and (y) the
         Stipulated  Loss Value Date first  following  the fourth  Business  Day
         following  the receipt of the  insurance  proceeds with respect to such
         occurrence  (but in any event  not  earlier  than the date of  Lessee's
         election  under ss.  10.1.1 to make  payment  under  this ss.  10.1.2),
         Lessee shall pay to Lessor:

     (aa) all unpaid  Basic Rent due at any time before the Loss  Payment  Date;
plus

     [(bb) all Basic Rent due on the Loss Payment Date; plus]

     (cc) the Stipulated  Loss Value  computed as of the  Stipulated  Loss Value
Date  immediately  preceding the Loss Payment Date (or, if the Loss Payment Date
is a Stipulated Loss Value Date, the Loss Payment Date), plus

     (dd) if the Loss  Payment  Date is not a  Stipulated  Loss Value  Date,  an
additional  amount  equal to  interest,  at the rate per annum  equal to the SLV
Rate, on the amount of the excess  referred to in clause (cc) above for each day
from and including the  Stipulated  Loss Value Date referred to in clause [(cc)]
to but excluding the Loss Payment Date; plus

     (ee) as provided in ss.  3.2.2,  interest  on the amount  specified  in the
foregoing  clause (aa) at the Past-Due Rate from and including the date on which
any such amount was due to the date of payment of such amount in full; and

                  (2) on or before the date  required for payment of the amounts
         specified  in clause  10.1.2(a)(1),  Lessee  shall  also pay to Lessor,
         Mortgagee,  and the  Participants  all other amounts due and payable by
         Lessee to Lessor, Mortgagee, and the Participants under this Lease, the
         Participation  Agreement,  or any other Lessee Operative Agreement and,
         on an after-tax basis, all out-of-pocket  fees and expenses  (including
         reasonable  fees and  expenses  of counsel)  incurred  by Lessor,  each
         Participant, and Mortgagee in connection with such Event of Loss.

         (b) Upon payment in full of all amounts  described in the foregoing ss.
10.1.2(a)(1),  (1) Lessee'S  liability for use of the Aircraft and obligation to
pay Basic Rent hereunder with respect to the Aircraft shall  terminate,  (2) the
Term for the Aircraft  shall end,  and (3) Lessor will  transfer the Aircraft to
Lessee,  as-is and where-is,  and subject to any insurer's  salvage rights,  but
otherwise in the manner described in ss. 4.5.

                           10.1.3           REPLACEMENT OF AIRFRAME AND ENGINES

         (a) If Lessee elects,  in accordance  with ss.  10.1.1,  to replace the
Airframe and any Engine(s)  suffering the Event of Loss,  then Lessee shall,  as
promptly as possible  and in any event within 120 days after the  occurrence  of
such Event of Loss, convey or cause to be conveyed to Lessor, in compliance with
ss. 10.3 and aS replacement for the Airframe and any such Engine(s),  title to a
Replacement Airframe (which shall comply with ss. 10.1.3(b)),  and for each such
Engine a Replacement Engine, in each case free and clear of all Liens other thaN
Permitted Liens (PROVIDED,  that if such conveyance  occurs after the end of the
Term,  Lessee  shall pay rent for the  Aircraft  from the end of the Term  until
return  thereof  pursuant  to ss. 5 at a daily rate equal to the  averagE  daily
Basic Rent or Renewal Rent, as applicable,  over the Base Term or  then-expiring
Renewal Term, as applicable).  If Lessee makes such election, but for any reason
does not effect such replacement  within such time period and in compliance with
the  requirements  set forth in ss.  10.3,  then Lessee  shall be deemed to have
initiallY  made the election set forth in ss. 10.1.2 with the effect that Lessee
shall pay,  in the manner and in funds of thE type  specified  in ss.  3.3,  the
amounts required under, and in accordance with, ss. 10.1.2 (except that the tIme
period for payment  referenced in ss.  10.1.2(a)(1)  shall,  for the purposes of
this ss.  10.1.3(a),  in all cases be on the  Stipulated  Loss  Value Date first
following the 120th day  following  the date of the  occurrence of such Event of
Loss).

         (b) Any such Replacement Airframe shall be an airframe  manufactured by
the Airframe  Manufacturer that is the same model as the Airframe to be replaced
thereby, or an improved model, and that has a current value,  estimated residual
value,  utility,  and remaining economic useful life (without regard to hours or
cycles remaining until the next regular  maintenance check,  provided no Special
Default or Lease Event of Default then exists) at least equal to the Airframe to
be  replaced  thereby  (assuming  that  such  Airframe  had been  maintained  in
accordance  with this Lease),  immediately  prior to such Event of Loss and that
has a year of  manufacture  no earlier than that of the Airframe to be replaced.
Any such  Replacement  Engine shall meet the requirements of, and be conveyed by
Lessee to Lessor in accordance with, ss. 10.2 (other than the notice requirement
set forth iN ss. 10.2.1).

         10.2              EVENT OF LOSS TO AN ENGINE; ENGINE EXCHANGES

                           10.2.1           NOTICE

         If an Event of Loss to an Engine occurs under circumstances in which no
Event of Loss to the Airframe  occurs,  Lessee shall  promptly (and in any event
within 15 days after such occurrence) notify Lessor of such Event of Loss.

                           10.2.2           REPLACEMENT OF ENGINE

         Lessee  shall,  promptly  and in any  event  within  60 days  after the
occurrence of such Event of Loss,  convey or cause to be conveyed to Lessor,  in
compliance with ss. 10.3 and as replacement for the Engine witH respect to which
any Event of Loss occurred, title to a Replacement Engine, free and clear of all
Liens other than Permitted  Liens.  Such  Replacement  Engine shall be an engine
manufactured by Engine  Manufacturer  that is the same model as the Engine to be
replaced  thereby,  or an improved model,  and that is suitable for installation
and use on the Airframe, and that has a current value, estimated residual value,
utility,  and remaining economic useful life (without regard to hours and cycles
remaining until overhaul,  provided no Special Default or Lease Event of Default
then exists) at least equal to the Engine to be replaced thereby  (assuming that
such Engine had been maintained in accordance with the Lease)  immediately prior
to such Event of Loss.

                           10.2.3           ENGINE EXCHANGE

         Upon not less than five Business  Days' prior written  notice to Lessor
(with a copy to  Owner  Participant),  Lessee  may  replace  any  Engine  leased
hereunder with another engine (the "EXCHANGED  ENGINE") meeting the requirements
of ss.  10.2.2.  Such  Exchanged  Engine  shall be deemed  to be a  "Replacement
Engine", and Lessor anD Lessee shall comply with the provisions of ss. 10.3 with
regard to the Exchanged Engine and the Engine so replaced.

         10.3              CONDITIONS TO ANY REPLACEMENT

                           10.3.1           DOCUMENTS

         Before  or at the  time  of  conveyance  of  title  to any  Replacement
Airframe  or  Replacement  Engine  to  Lessor,  Lessee  shall  take  each of the
following actions:

         (a) furnish Lessor with a full warranty (as to title) bill of sale duly
conveying to Lessor such Replacement Airframe or Replacement Engine, in form and
substance  reasonably  satisfactory to Lessor and Owner  Participant,  and cause
such  Replacement  Airframe to be duly registered in the name of Lessor pursuant
to the Transportation Code (or such other applicable Law of a jurisdiction other
than the United States where the Aircraft is  registered in accordance  with ss.
7.1.2);

         (b) cause (1) a supplement to this Lease,  subjecting such  Replacement
Airframe or  Replacement  Engine to this Lease,  duly executed by Lessee,  to be
delivered to Lessor for  execution,  and, upon such  execution,  to be filed for
recordation  with the FAA  pursuant  to the  Transportation  Code (or such other
applicable Law of a jurisdiction other than the United States where the Aircraft
is registered in accordance  with ss. 7.1.2),  (2) A supplement to the Mortgage,
subjecting such Replacement  Airframe or Replacement Engine to the Mortgage,  to
be delivered  to Lessor for  execution,  and,  upon  execution,  to be filed for
recordation  with the FAA  pursuant  to the  Transportation  Code (or such other
applicable Law of a jurisdiction other than the United States where the Aircraft
is registered in accordance with ss. 7.1.2),  and (3) such Financing  Statements
and other filings, as OwneR Participant or Mortgagee  reasonably  request,  duly
executed  by Lessee and (to the extent  applicable)  Lessor and  Mortgagee  (and
Lessor and Mortgagee  shall  execute and deliver the same),  to be filed in such
locations as any such party reasonably requests;

         (c) furnish such evidence of compliance  with the insurance  provisions
of ss. 11 with respect to sucH  Replacement  Airframe or  Replacement  Engine as
Owner Participant reasonably requests;

         (d) furnish an opinion or opinions  of Lessee's  counsel  (which may be
Lessee's legal  department)  reasonably  satisfactory  to Owner  Participant and
addressed to Lessor,  Owner  Participant,  and  Mortgagee to the effect that (1)
such full  warranty  bill of sale referred to in ss.  10.3.1(a)  constitutes  an
effective  instrumenT for the conveyance of title to the Replacement Airframe or
Replacement  Engine,  and (2) in the  case  of a  Replacement  Airframe  or of a
Replacement  Engine  substituted  under ss. 10.2.3 in the absence of an Event of
Loss, (aa) Lessor and Mortgagee,  as assignee of Lessor, will be entitled to the
benefits of Section 1110 with respect to the Replacement  Airframe,  and (bb) as
to the  U.S.  federal  income  tax  consequences  to  Owner  Participant  of the
replacement;

         (e) furnish an opinion of  Lessee's  aviation  law  counsel  reasonably
satisfactory to Owner  Participant and addressed to Lessor,  Owner  Participant,
and Mortgagee as to the due  registration of any such  Replacement  Airframe and
the due  filing  for  recordation  of each  supplement  to this  Lease  and each
supplement  to the  Mortgage  with  respect  to  such  Replacement  Airframe  or
Replacement Engine under the  Transportation  Code (or such other applicable Law
of a jurisdiction  other than the United States where the Aircraft is registered
in accordance with ss. 7.1.2);

         (f) with respect to the  replacement  of the Airframe and any Engine(s)
installed  thereon  at the  time of the  Event of Loss,  if  requested  by Owner
Participant and at Lessee's  expense,  furnish a certified report of a qualified
independent aircraft appraiser,  such report and such appraiser to be reasonably
satisfactory to Owner Participant, certifying that such Replacement Airframe and
any such Replacement Engine complies with the current value,  estimated residual
value, utility, and remaining economic useful life requirements set forth in ss.
10.1.3(b); and

         (g) take such other  actions and furnish  such other  certificates  and
documents as Lessor or Owner  Participant  may reasonably  request in order that
such Replacement  Airframe or Replacement  Engine be duly and properly titled in
Lessor, leased hereunder and subjected to the Lien of the Trust Indenture to the
same extent as initially required under the Operative Agreements with respect to
the Airframe or Engine so replaced.

         Lessor  and  Lessee  understand  and agree  that if, at the time of any
replacement of the Airframe or any Engine(s) as contemplated in this ss. 10, the
Airframe was registered in a jurisdiction other than the UniteD States, then the
requirements  set forth above in this ss. 10.3.1 relating to compliance with the
requirements oF the  Transportation  Code or the FAA shall be deemed to refer to
the  comparable  applicable  Law of, and the Aviation  Authority  of, such other
jurisdiction.

                           10.3.2           OTHER OBLIGATIONS

         (a)  Lessor  and  Lessee  agree  that,  when and after any  Replacement
Airframe  becomes the  Airframe  hereunder,  and when and after any  Replacement
Engine becomes an Engine  hereunder,  this Lease shall continue to be, and shall
be treated as, a lease for U.S.  federal income tax purposes of such Replacement
Airframe and such Replacement Engine. Without limiting the foregoing, Lessee and
Lessor intend that Lessor shall,  in all events,  be entitled to the benefits of
Section 1110 with respect to any Replacement Airframe or Replacement Engine, and
Lessee  and  Lessor  shall  cooperate  and take  such  action  as the  other may
reasonably  request  so as to  ensure  that  Lessor  shall be  entitled  to such
benefits.

         (b) No Event of Loss to an Engine, or to an Airframe,  shall result in,
or  otherwise  allow or permit  (other than as provided in ss.  10.1.2(b)),  any
reduction,  deferral,  discharge, or other change in the timing oR amount of any
Rent payable by Lessee  hereunder,  and (subject to such ss.  10.1.2(b))  Lessee
shall pay all such RenT and other  amounts as though  such Event of Loss had not
occurred.

         10.4              CONVEYANCE TO LESSEE

         Upon compliance by Lessee with the applicable  terms of ss.ss.  10.1.3,
10.2, and 10.3.1,  Lessor will transFer to Lessee the Airframe or Engine(s),  as
applicable,  with respect to which such Event of Loss  occurred,  in  accordance
with ss. 4.5.

         10.5              APPLICATION OF PAYMENTS

         Any amounts, other than insurance proceeds in respect of damage or loss
not  constituting an Event of Loss (the  application of which is provided for in
ss. 11), received at any time by Lessor, Lessee, or any PermitteD Sublessee from
any  Government  Entity or any other Person in respect of any Event of Loss will
be paid over to Lessor (or to  Mortgagee if  Mortgagee  has not notified  Lessee
that the Lien of the Mortgage has been duly  discharged,  except with respect to
Excluded Payments) to be held in accordance with ss. 4.5 and applied as follows:

                           10.5.1           REPLACEMENT OF AIRFRAME AND ENGINES

         If such  amounts  are  received  with  respect to the  Airframe  or any
Engine(s)  installed  thereon at the time of such Event of Loss,  upon  Lessee's
compliance with the applicable  terms of ss. 10.1.3 with respect to the EvenT of
Loss for which such amounts are  received,  such amounts  shall  (subject to ss.
10.9) be paid over to, or retaineD by, Lessee.

                           10.5.2           LOSS OF ENGINE

         If such amounts are received  with respect to an Engine  (other than an
Engine  installed on the Airframe  when the Airframe  suffers an Event of Loss),
upon Lessee's compliance with the applicable terms of ss. 10.2.2 witH respect to
the Event of Loss for which  such  amounts  are  received,  such  amounts  shall
(subject to ss. 10.9) be paiD over to, or retained by, Lessee.

                           10.5.3           PAYMENT OF LOSS

         If such amounts are received,  in whole or in part, with respect to the
Airframe,  and Lessee makes, has made or is deemed to have made the election set
forth in ss. 10.1.2, such amounts shall be applied as follows:

         (a) FIRST, if the sum described in ss. 10.1.2 has not then been paid in
full by  Lessee,  such  amountS  shall be paid to  Lessor  (or to  Mortgagee  if
Mortgagee  has not  notified  Lessee that the Lien of the Mortgage has been duly
discharged, except with respect to Excluded Payments) to the extent necessary to
pay in full such sum; and

     (b) SECOND,  the remainder,  if any, shall (subject toss.  10.9) be paid to
Lessee.

         10.6              REQUISITION OF AIRCRAFT FOR USE

         If any Government  Entity  requisitions the use of the Airframe and the
Engines or engines installed thereon, and if the requisition does not constitute
an Event of Loss,  Lessee shall  promptly  notify  Lessor and  Mortgagee of such
requisition,  and all of Lessee's obligations under this Lease shall continue to
the same extent as if such requisition had not occurred;  PROVIDED, that, if the
Airframe and Engines or engines  installed thereon are not returned to Lessor by
Lessee at the end of the Term or within 30 days thereafter, then Lessee shall be
deemed to have made the  election  set forth in ss.  10.1.2 with the effect that
Lessee shall be obligated to pay thE Stipulated Loss Value and all other amounts
payable  pursuant to ss.  10.1.2 with  respect to the Aircraft as if aN Event of
Loss  had  occurred  as of the end of the  Term.  If such  requisition  does not
constitute  an Event of Loss,  Lessee  shall be obligated to return the Airframe
and Engine(s) or engine(s) to Lessor  pursuant to, and in all other  respects to
comply  with the  provisions  of,  ss. 5  promptly  upon  their  return  by such
Government  Entity,  anD Lessee  shall pay (or cause to be paid) to Lessor  upon
such return an amount  equal to the average  daily Basic Rent  payable by Lessee
during the Term for each day after the end of the Term to but  excluding the day
of such return,  up to a maximum of 30 days,  which payment may be made from any
payments  received by Lessor or Lessee from any Government Entity for the use of
the Aircraft  (notwithstanding  any  language to the  contrary  contained in ss.
10.8).

         10.7              REQUISITION OF AN ENGINE FOR USE

         If any Government  Entity  requisitions  for use any Engine but not the
Airframe,  Lessee will replace  such Engine by  complying  with ss. 10.2 and ss.
10.3 to the same  extent as if an Event of Loss with  respect to that EngIne had
occurred,  and any  payments  received by Lessor or Lessee from such  Government
Entity with respect to such requisition  shall be paid or retained in accordance
with ss. 10.5.2.

         10.8              APPLICATION OF PAYMENTS

         All payments received by Lessor or Lessee, or any Permitted  Sublessee,
from  any  Government  Entity  for  the use of the  Airframe  and  Engine(s)  or
engine(s)  installed  thereon during the Term shall be paid over to, or retained
by,  Lessee,  and all payments  received by Lessor or Lessee from any Government
Entity for the use of the Airframe and Engine(s) or engine(s)  installed thereon
after the Term shall be paid over to, or retained by, Lessor; PROVIDED, that, if
such  requisition  constitutes an Event of Loss, then all such payments shall be
paid over to Lessor (or to Mortgagee if Mortgagee  has not notified  Lessee that
the Lien of the Mortgage has been discharged), and held as provided in ss. 10.5.

         10.9              APPLICATION OF PAYMENTS DURING DEFAULT

         Any amount  described in this ss. 10 that is payable or creditable  to,
or  retainable  by,  Lessee  shall noT be paid or credited  to, or retained  by,
Lessee if a Special  Default or Lease Event of Default exists when such payment,
credit, or retention would otherwise occur, but shall instead be held by or paid
over to Lessor (or to Mortgagee if  Mortgagee  has not notified  Lessee that the
Mortgage has been  discharged) as security for Lessee's  obligations  under this
Lease and the other Lessee Operative Agreements,  and shall be invested pursuant
to ss. 4.4 hereof,  unless and until such  amount is  applied,  at the option of
Lessor, or upon Lessee's written request to Lessor, from time to time during the
existence of a Lease Event of Default, to Lessee's  obligations under this Lease
as and when due (any such application  shall be made to such Lessee  obligations
as Lessor determines in its sole discretion). If and when no Special Default and
no Lease Event of Default  exists,  such  amount  shall be paid to Lessee to the
extent not previously applied in accordance with this ss. 10.9.

                                  11. INSURANCE

         11.1              LESSEE'S OBLIGATION TO INSURE

         Lessee  shall comply with,  or cause to be complied  with,  each of the
provisions  of  Annex  D,  which  provisions  are  hereby  incorporated  by this
reference as if set forth in full herein.

         11.2              INSURANCE FOR OWN ACCOUNT

         Nothing in ss. 11 shall limit or prohibit  (a) Lessee from  maintaining
the policies of insurance  requireD  under Annex D with higher limits than those
specified  in Annex D, or (b)  Lessor,  Mortgagee,  or  Owner  Participant  from
obtaining  insurance  for its own account (and any proceeds  payable  under such
separate insurance shall be payable as provided in the policy relating thereto);
PROVIDED,  that no insurance may be obtained or  maintained  that would limit or
otherwise adversely affect the coverage of or increase the cost of any insurance
required  to be  obtained or  maintained  by Lessee  pursuant to this ss. 11 and
Annex D.

         11.3              INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE

         During the period of any Government Entity's requisition for use of the
Aircraft or any Engine, Lessor, Mortgagee, and each Participant shall accept, in
lieu of insurance  against any risk with  respect to the  Aircraft  described in
Annex D, indemnification from, or insurance provided by, the U.S. Government, or
upon Owner Participant's written consent,  other Government Entity, against such
risk in an  amount  that,  when  added to the  amount  of  insurance  (including
permitted  self-insurance),  if any,  against  such  risk  that  Lessee  (or any
Permitted  Sublessee) may continue to maintain,  in accordance with this ss. 11,
during the period of such requisition,  shalL be at least equal to the amount of
insurance against such risk otherwise required by this ss. 11.

         11.4              APPLICATION OF INSURANCE PROCEEDS

         As between  Lessor and Lessee,  all  insurance  proceeds  received as a
result of the occurrence of an Event of Loss to the Aircraft or any Engine under
policies  required to be  maintained  by Lessee  pursuant to this ss. 11 will be
applied in accordance  with ss. 10.5.  All proceeds of insurance  required to be
maintained by Lessee, iN accordance with ss. 11 and ss. B of Annex D, in respect
of any  property  damage  or  loss  not  constituting  an  Event  of Loss to the
Aircraft,  the  Airframe,  or any Engine will be applied to pay (or to reimburse
Lessee) for repairs or for replacement property  incorporated in accordance with
ss. 8.1,  and any  balance  remaining  after such  repairs oR  replacement  with
respect to such damage or loss shall be paid over to, or retained by, Lessee.

         11.5              APPLICATION OF PAYMENTS DURING DEFAULT

         Any amount  described in this ss. 11 that is payable or creditable  to,
or  retainable  by,  Lessee  shall noT be paid or credited  to, or retained  by,
Lessee if a Special  Default or Lease Event of Default exists when such payment,
credit, or retention would otherwise occur, but shall instead be held by or paid
over to Lessor (or to if Mortgagee has not notified  Lessee that the Lien of the
Mortgage has been  discharged) as security for Lessee's  obligations  under this
Lease, and shall be invested pursuant to ss. 4.4 unless and until such amount is
applied,  aT Lessor's option,  or upon Lessee's written request to Lessor,  from
time to time  during the  existence  of a Lease  Event of  Default,  to Lessee's
obligations  under this Lease and the other Lessee  Operative  Agreements as and
when due (any  such  application  to be made to such  obligations  of  Lessee as
Lessor  determines in its sole  discretion).  If and when no Special Default and
Lease Event of Default exists, such amount shall be paid to Lessee to the extent
not previously applied in accordance with this ss. 11.5.

                                 12. INSPECTION

         (a) At all reasonable times Lessor,  Mortgagee,  Owner Participant,  or
their authorized  representatives (the "INSPECTING  PARTIES") may (not more than
once every 12 months by each such Person, unless a Lease Event of Default exists
or during the last 12 months of the Base Term and any  Renewal  Term,  then such
inspection  right shall not be so limited) inspect the Aircraft and the Aircraft
Documents,  and any such  Inspecting  Party  may  make  copies  of the  Aircraft
Documents not reasonably deemed confidential by Lessee or a Permitted Sublessee.

         (b) Any  inspection  of the  Aircraft  hereunder  shall be limited to a
visual,  walk-around inspection that may include going on board the Aircraft and
visually examining the contents of any open panels, bays, or other components of
the  Airframe  or Engines,  but shall not  include  the opening of any  unopened
panels, bays, or other components of the Aircraft,  and no such inspection shall
interfere with Lessee's or any Permitted Sublessee's maintenance or operation of
the Aircraft, the Airframe, or any Engine.

         (c) Lessor,  Owner Participant and Mortgagee shall not have any duty or
liability to make,  or any duty or  liability by reason of not making,  any such
visit, inspection or survey.

         (d) Each  Inspecting  Party shall bear its own  expenses in  connection
with any such  inspection  (including  the cost of any copies made in accordance
with ss. 12(a)), except following a Lease Event of Default, iN which case Lessee
will bear the costs of inspection and pay the same on demand.

         (e) Upon Lessor's  request,  during the last 12 months of the Base Term
and any Renewal Term, Lessee will give 10 Business Days' prior written notice to
Lessor and Owner Participant of any scheduled  maintenance checks,  inspections,
surveys,  or  repair  visits.  During  such  period,  Owner  Participant  or its
representative  may attend  any and all such  maintenance  checks,  inspections,
surveys, or repair visits.

                 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE

         13.1              IN GENERAL

         This Lease and the other  Lessee  Operative  Agreements  shall bind and
benefit Lessor and Lessee and their successors and permitted assigns.  Except as
otherwise  expressly  permitted  by the terms of the  Lease or any other  Lessee
Operative Agreement, Lessee will not, without the prior written consent of Owner
Participant and Mortgagee, assign any of its rights under this Lease.

         13.2              MERGER OF LESSEE

                           13.2.1           IN GENERAL

         Lessee shall not consolidate  with or merge into any other Person under
circumstances  in which  Lessee is not the  surviving  corporation,  or  convey,
transfer,  or lease in one or more  transactions all or substantially all of its
assets to any other Person, unless:

     (a) such Person is organized, existing, and in good standing under the Laws
of the United States,  any state of the United States, or the District Columbia,
and,  upon  consummation  of such  transaction,  such Person will be a U.S.  Air
Carrier;

     (b) such Person  executes and  delivers to Lessor,  Owner  Participant  and
Mortgagee a duly authorized,  legal, valid, binding, and enforceable  agreement,
reasonably  satisfactory in form and substance to Owner Participant,  containing
an effective  assumption by such Person of the due and punctual  performance and
observance of each covenant,  agreement,  and condition in the Lessee  Operative
Agreements to be performed or observed by Lessee;

     (c) such Person makes such filings and recordings  with the FAA pursuant to
the Transportation  Code as shall be necessary to evidence such consolidation or
merger;

         (d) Lessee furnishes Lessor and Owner Participant an opinion of counsel
reasonably  satisfactory  to Owner  Participant  (and,  while  the  Policy is in
     effect, reasonably satisfactory to Policy Provider) to the effect that such
consolidation  or merger has satisfied at the closing of such  consolidation  or
merger items (a), (b) and (c) above;

     (e) immediately  after giving effect to such  consolidation  or merger,  no
Special Default or Lease Event of Default exists;

     (f) unless Owner Participant  otherwise consents,  immediately after giving
effect to such  consolidation  or merger,  such Person will have a tangible  net
worth  of at least  the  lesser  of (i)  100% of  Lessee's  tangible  net  worth
immediately prior to such  consolidation or merger, and (ii) the greater of (aa)
the tangible net worth of Lessee as of March 31, 2000,  and (bb) 65% of Lessee's
tangible net worth immediately prior to such consolidation or merger; and

     (g) upon such consolidation or merger becoming effective, Lessor will enjoy
the same degree of protection under Section 1110 with respect to the Aircraft as
Lessor enjoyed prior to such merger.

                           13.2.2           EFFECT OF MERGER

         Upon any such  consolidation  or merger of Lessee with or into,  or the
conveyance,  transfer,  or lease by  Lessee of all or  substantially  all of its
assets to, any Person in accordance with this ss. 13.2, such Person wilL succeed
to, and be  substituted  for, and may exercise  every right and power of, Lessee
under the Lessee Operative Agreements with the same effect as if such Person had
been named as  "Lessee"  therein.  No such  consolidation,  merger,  conveyance,
transfer, or lease shall have the effect of releasing Lessee or such Person from
any of Lessee's obligations,  liabilities,  covenants, or undertakings under the
Lessee Operative Agreements.

         13.3              ASSIGNMENT AS SECURITY FOR LESSOR'S OBLIGATIONS

         In order to secure the  indebtedness  evidenced by the Equipment Notes,
Lessor  agrees in the Mortgage to assign this Lease to Mortgagee and to mortgage
the Aircraft to Mortgagee,  subject to the reservations  and conditions  therein
set forth.  Lessee  hereby  accepts and consents to the  assignment  of Lessor's
right,  title,  and  interest in and to this Lease  pursuant to the terms of the
Mortgage.  In  accordance  with ss.  3.3(c),  Lessee  agreeS to pay  directly to
Mortgagee (or, after receipt by Lessee of notice from Mortgagee of the discharge
of the Lien of the  Mortgage,  to  Lessor),  all  amounts  of Rent  (other  than
Excluded Payments) due or to become due hereunder and assigned to Mortgagee, and
Lessee  agrees  that  Mortgagee's  right  to such  payments  hereunder  shall be
absolute  and  unconditional  and shall  not be  affected  by any  circumstance,
including  the  circumstances  set forth in ss. 16 hereof.  Notwithstanding  the
foregoing  assignment of this Lease,  Lessee's  obligations to Lessor to perform
the terms and conditions of this Lease shall remain in full force and effect.

         13.4              SUCCESSOR OWNER TRUSTEE

         If any successor is appointed to serve as Owner Trustee pursuant to the
terms of the  Participation  Agreement and the Trust  Agreement,  such successor
shall,  upon  written  notice by such  successor  to Lessee,  succeed to all the
rights,  powers,  and  title of  Lessor  hereunder,  and  shall be  deemed to be
"Lessor"  and the owner of the Aircraft and the other assets of the Trust Estate
for all purposes hereof,  without the need for any consent or approval by Lessee
and without in any way altering the terms of this Lease or Lessee's  obligations
hereunder.  An appointment and designation of a successor as Owner Trustee shall
not exhaust the right to appoint and designate further  successors or additional
trustees as Owner Trustees pursuant to the Participation Agreement and the Trust
Agreement,  and such  right may be  exercised  repeatedly  as long as this Lease
shall be in effect.

                           14. LEASE EVENTS OF DEFAULT

         The  existence  of any  one or  more  of the  following  circumstances,
conditions,  acts,  or events,  for any reason  whatsoever  and whether any such
circumstance,  condition,  act, or event is  voluntary or  involuntary  or comes
about or is effected by  operation of Law or pursuant to or in  compliance  with
any judgment, decree, order, rule, or regulation of any Government Entity, shall
constitute a Lease Event of Default so long as it shall not have been remedied:

         14.1              PAYMENTS

         Lessee fails to pay any amount of Basic Rent, Stipulated Loss Value, or
Termination  Value  within five  Business  Days after it becomes  due; or Lessee
fails  to pay any  Supplemental  Rent  (other  than  Stipulated  Loss  Value  or
Termination Value) when due and such failure continues for a period in excess of
ten Business  Days from and after the date of any written  notice to Lessee from
Lessor of the failure to make such  payment  when due;  PROVIDED,  that any such
failure  to pay any  Excluded  Payment  shall not  constitute  a Lease  Event of
Default until Owner  Participant  gives  written  notice to Lessee and Mortgagee
that such  failure  constitutes  a Lease Event of Default  and such  failure has
continued for a period in excess of ten Business Days after such notice.

         14.2              INSURANCE

         Lessee  fails to  carry  and  maintain,  or  cause  to be  carried  and
maintained,  insurance on and in respect of the Aircraft in accordance  with the
provisions of ss. 11.

         14.3              OTHER COVENANTS

         Lessee  fails to  observe  or  perform  (or  cause to be  observed  and
performed) in any material respect any other covenant,  agreement, or obligation
of Lessee in any Lessee  Operative  Agreement (other than those contained in the
Tax Indemnity Agreement),  and such failure continues unremedied for a period of
30 days from and after the date of  written  notice  thereof  to Lessee  (or the
Guarantor,  as the case may be) from Lessor,  Owner  Participant,  or Mortgagee,
unless  such  failure  is capable of being  corrected  and Lessee is  diligently
proceeding  to correct  such  failure,  and such  failure  poses no imminent and
material risk of Lessor, Owner Participant, or Mortgagee losing their respective
interests  in the  Aircraft,  in which  case  there  shall be no Lease  Event of
Default unless and until such failure  continues  unremedied for a period of 270
days after  receipt of such  notice;  PROVIDED,  that in all events  Lessee must
remedy  such  failures  within  90  days of  Lessee's  obtaining  access  to the
Aircraft.

         14.4              REPRESENTATIONS AND WARRANTIES

         Any  representation  or warranty made by Lessee in any Lessee Operative
Agreement  (other  than  Lessee's  representations  and  warranties  in the  Tax
Indemnity  Agreement)  (a)  proves to have  been  untrue  or  inaccurate  in any
material  respect as of the date made,  (b) is material at the time in question,
and  (c)  remains  uncured  (to  the  extent  of  the  adverse  impact  of  such
incorrectness  on the  interest of the  Participants  or Lessor) for a period in
excess of 30 days from and after the date of written notice thereof from Lessor,
Owner  Participant,  or Mortgagee to Lessee (or Guarantor,  as the case may be);
provided that clause (c) above will not apply to Lessee's  representations as to
the financial condition of Lessee.

         14.5              BANKRUPTCY AND INSOLVENCY

         (a) Lessee or Guarantor consents to the appointment of or the taking of
possession by a receiver,  trustee,  or liquidator of itself or of substantially
all of its property,  or Lessee or Guarantor  admits in writing its inability to
pay its debts generally as they come due, or does not pay its debts generally as
they become due or makes a general  assignment for the benefit of creditors,  or
Lessee or  Guarantor  files a voluntary  petition in  bankruptcy  or a voluntary
petition or an answer seeking  reorganization,  liquidation or other relief in a
case under any bankruptcy  Laws or other  insolvency  Laws (as in effect at such
time), or Lessee or Guarantor  seeks relief by voluntary  petition,  answer,  or
consent  under the  provisions  of any other  bankruptcy  or other  similar  Law
providing for the  reorganization or winding-up of corporations (as in effect at
such time); or

         (b) an order,  judgment, or decree is entered by any court of competent
jurisdiction  appointing,  without Lessee's or Guarantor's  consent, a receiver,
trustee,  or  liquidator of Lessee or Guarantor or of  substantially  all of the
property of Lessee or Guarantor, or substantially all of Lessee's or Guarantor's
property is sequestered,  and any such order, judgment, or decree of appointment
or sequestration  remains in force  undismissed,  unstayed,  and unvacated for a
period of 90 days after the date of entry thereof; or

         (c) a  petition  against  Lessee  or  Guarantor  in a  case  under  any
bankruptcy  Laws or other  insolvency  Laws (as in effect at such time) is filed
and not  withdrawn  or  dismissed  within 90 days  thereafter,  or if, under the
provisions of any Law providing for reorganization or winding-up of corporations
that applies to Lessee or Guarantor, any court of competent jurisdiction assumes
jurisdiction, custody, or control of Lessee or Guarantor or of substantially all
of its  property,  and such  jurisdiction,  custody or control  remains in force
unrelinquished, unstayed, and unterminated for a period of 90 days.

         14.6     REPUDIATION OR INVALIDITY OF GUARANTEE

         Either (a) Guarantor  repudiates its obligations,  in whole or in part,
under  the  Guarantee;  or (b) the  Guarantee  ceases to be in full  effect,  is
determined to be invalid, or becomes unenforceable for any reason.

                            15. REMEDIES AND WAIVERS

         15.1              REMEDIES

         If any Lease Event of Default exists,  Lessor may, at its option and at
any time  and  from  time to  time,  exercise  any one or more of the  following
remedies as Lessor in its sole discretion shall elect:

                           15.1.1           RETURN AND REPOSSESSION

         Lessor may cause  Lessee,  upon  giving  written  notice to Lessee,  to
return promptly,  and Lessee shall return promptly,  the Airframe and Engines as
Lessor  shall so  demand,  to Lessor or its order in the  manner  and  condition
required by, and otherwise in accordance  with,  all the provisions of ss. 5, as
if the Airframe or EnginE were being  returned at the end of the Term or Lessor,
at its option,  may enter upon the premises where the Airframe or any Engine, or
any Part  thereof,  is located and take  immediate  possession of and remove the
same by summary  proceedings  or otherwise,  all without  liability  accruing to
Lessor for or by reason of such entry or taking of  possession,  whether for the
restoration of damage to property caused by such taking or otherwise.

                           15.1.2           SALE AND USE

         Lessor may sell the  Airframe or any Engine at public or private  sale,
at such time(s) and place(s),  and to such Person(s) (including Mortgagee or any
Participant),  as Lessor  determines;  or Lessor may otherwise dispose of, hold,
use,  operate,  lease to others,  or keep idle the  Airframe or any  Engine,  as
Lessor,  in its sole  discretion,  shall  determine,  all free and  clear of any
rights of Lessee and without any duty to account to Lessee with  respect to such
action  or  inaction  or for  any  proceeds  with  respect  thereto,  except  as
hereinafter  set  forth in this ss.  15,  and  except  to the  extent  that such
proceeds  would  constitute,  under  applicable  Law, a  mitigation  oF Lessor's
damages  suffered or incurred as a result of the subject Lease Event of Default.
Lessor shall give to Lessee at least 15 days' prior  written  notice of the date
fixed for any  public  sale of the  Airframe  or any Engine or of the date on or
after which will occur the  execution of any contract  providing for any private
sale.

                           15.1.3           CERTAIN LIQUIDATED DAMAGES

         Whether or not Lessor shall have exercised,  or shall thereafter at any
time exercise,  any of its rights under ss. 15.1.1 or ss. 15.1.2 with respect to
the Airframe or any Engine,  or any Part thereof,  Lessor,  by writTen notice to
Lessee specifying a payment date (which shall be the first Stipulated Loss Value
Date occurring not less than 10 days after the date of such notice),  may demand
that  Lessee to pay to Lessor,  and Lessee  shall pay to Lessor,  on the payment
date so  specified  and in the manner and in funds of the type  specified in ss.
3.3, aS  liquidated  damages for loss of a bargain and not as a penalty (in lieu
of the Basic Rent (as  applicable)  for the  Aircraft  in respect of all periods
commencing  on or after the date  specified  for  payment in such  notice),  the
following amounts:

     (a) all unpaid Basic Rent due at any time before the Stipulated  Loss Value
Date specified in such notice; plus

     (b)  whichever of the  following  amounts  Lessor,  in its sole  discretion
specifies in such notice:

                  (1) an  amount  equal to the  excess  (if any) of the  present
         value,  computed as of the Stipulated Loss Value Date specified in such
         notice,  discounted  to such  date at a rate  equal to the  Debt  Rate,
         compounded   quarterly,   of  all   unpaid   Basic   Rent   during  the
         then-remaining  portion  of the Base  Term (or,  if a Renewal  Term has
         commenced,  of all unpaid  Basic Rent during the  remaining  portion of
         such  Renewal  Term) over the Fair Market  Rental Value of the Aircraft
         for the  remainder  of the Term,  after  discounting  such Fair  Market
         Rental  Value to present  value (at a rate per annum  equal to the Debt
         Rate,  compounded  quarterly)  as of the  Stipulated  Loss  Value  Date
         specified in such notice, or

                  (2) an amount  equal to the excess (if any) of the  Stipulated
         Loss Value for the Aircraft,  computed as of the Stipulated  Loss Value
         Date specified in such notice,  over the Fair Market Sales Value of the
         Aircraft,  as of the  Stipulated  Loss  Value  Date  specified  in such
         notice; plus

         (c) interest on the amounts  specified in the  foregoing  clause (a) at
the Past-Due  Rate from and  including the date on which any such amount was due
to the date of payment of such amount; plus

         (d) interest on the amount  specified in the foregoing clause (b)(1) or
(b)(2),  according to Lessor's election, at the Past-Due Rate from and including
the  Stipulated  Loss Value Date specified in such notice to the date of payment
of such amount.

                           15.1.4           LIQUIDATED DAMAGES UPON SALE

         If,  pursuant  to ss.  15.1.2 or  applicable  Law,  Lessor has sold the
Airframe or any Engine,  then, in lieu oF exercising its rights under ss. 15.1.3
with  respect to the  Aircraft,  the  Airframe,  or any Engine (as  applicable),
Lessor may, if Lessor so elects,  upon giving written  notice to Lessee,  demand
that  Lessee to pay to Lessor,  and Lessee  shall pay to Lessor,  on the date of
such sale and in the manner and in funds of the type  specified  in ss.  3.3, as
liquidated  damages  for loss of a bargain  and not as a penalty (in lieu of the
Basic Rent for thE Aircraft in respect of all periods commencing on or after the
date of such sale), the following amounts:

     (a) all unpaid Basic Rent due at any time before the Stipulated  Loss Value
Date on or immediately preceding the date of such sale; plus

     (b) an amount equal to the excess, if any, of (1) the Stipulated Loss Value
of the Aircraft,  computed as of the  Stipulated  Loss Value Date referred to in
the foregoing clause (a), over (2) the proceeds of such sale; plus

     (c) if the date of such sale is not a Stipulated Loss Value Date, an amount
equal to interest, at the rate per annum equal to the SLV Rate, on the amount of
Stipulated Loss Value referred to in clause (b)(1) above, from and including the
Stipulated  Loss Value Date referred to in the foregoing  clause (a) to the date
of such sale; plus

     (d) all brokerage  and other  out-of-pocket  fees and expenses  incurred by
Lessor, Mortgagee, and any Participant in connection with such sale; plus

     (e) interest on the amounts  specified in the  foregoing  clause (a) at the
Past-Due  Rate from and  including  the date on which any such amount was due to
the date of payment of such amount; plus

     (f) interest on the sum of the amounts  specified in the foregoing  clauses
(b), (d) and (e) at the Past-Due  Rate from and  including the date of such sale
to the date of payment of such amounts.

                           15.1.5           RESCISSION

         Lessor may (a) at its option, rescind or terminate this Lease as to the
Aircraft,  the Airframe, or any Engine, or any Part thereof, or (b) exercise any
other  right or  remedy  that may be  available  to it under  applicable  Law or
proceed by  appropriate  court  action to enforce the terms hereof or to recover
damages for the breach hereof.

                           15.1.6           OTHER REMEDIES

         In addition to the  foregoing  remedies  (but  without  duplication  of
amounts  otherwise  paid under this ss. 15),  Lessee shall be liable for any and
all unpaid Rent due  hereunder  before,  during,  or after  (except aS otherwise
provided  herein) the  exercise  of any of the  foregoing  remedies  and for all
reasonable  attorneys'  fees and other costs and expenses of Lessor,  Mortgagee,
Owner Participant,  and the Note Holders,  including interest on overdue Rent at
the rate as herein  provided,  incurred by reason of the  existence of any Lease
Event of Default or the  exercise of Lessor's  remedies  with  respect  thereto,
including all  reasonable  costs and expenses  incurred in  connection  with the
return of the Airframe or any Engine in  accordance  with the terms of ss. 5, or
in  placing  thE  Airframe  or any  Engine in the  condition  and  airworthiness
required by ss. 5.

         15.2              LIMITATIONS UNDER CRAF

         Notwithstanding  the provisions of ss. 15.1, during any period that the
Aircraft,  the Airframe, or anY Engine is subject to CRAF in accordance with the
provisions  of ss. 7.2.3 and in the  possession of the U.S.  Government,  Lessor
shall not,  as a result of any Lease  Event of Default,  exercise  its  remedies
hereunder in such manner as to limit  Lessee's  control under this Lease (or any
Permitted Sublessee's control under any Permitted Sublease) of the Aircraft, the
Airframe, or such Engine, unless Lessor or Mortgagee gives at least 30 days' (or
such  other  period as may then  apply  under  CRAF)  written  notice of default
hereunder  by  registered  or  certified  mail  to  Lessee  (and  any  Permitted
Sublessee)  with  a  copy  to  the   Contracting   Officer   Representative   or
Representatives  for the Military Airlift Command of the United States Air Force
to whom  notices  must be given under the  contract  governing  Lessee's (or any
Permitted  Sublessee's)  participation in CRAF with respect to the Aircraft, the
Airframe, or any Engine.

         15.3              RIGHT TO PERFORM FOR LESSEE

         If Lessee (a) fails to make any payment of Rent  required to be made by
it  hereunder  or (b)  fails to  perform  or comply  with any of its  agreements
contained  herein and such failure  under this clause (b) continues for a period
of 30 days after the earlier of Lessor,  Owner Participant,  or Mortgagee giving
written  notice  thereof  to  Lessee,  or (c) fails to  maintain  the  insurance
required  hereunder and such failure under this clause (c) continues for 10 days
after such notice, then Lessor,  Owner Participant,  or Mortgagee may (but shall
not be obligated to) make such payment or perform or comply with such agreement,
and the amount of such payment and the amount of the  expenses of Lessor,  Owner
Participant,  or  Mortgagee  incurred  in  connection  with such  payment or the
performance of or compliance with such agreement (as applicable),  together with
interest  thereon  at the  Past-Due  Rate,  shall be deemed  Supplemental  Rent,
payable  by Lessee  upon  demand by Lessor,  Owner  Participant,  or  Mortgagee,
whichever is entitled thereto. No such payment, performance, or compliance shall
be  deemed  to waive  any  Lease  Default  or  otherwise  relieve  Lessee of its
obligations with respect thereto.

     15.4 DETERMINATION OF FAIR MARKET RENTAL VALUE AND FAIR MARKET SALES VALUE

         For the  purpose of this ss. 15, the Fair  Market  Rental  Value or the
Fair Market Sales Value of thE Aircraft,  the  Airframe,  or any Engine shall be
determined  on an "as is, where is" basis and shall take into account  customary
brokerage and other  out-of-pocket  fees and expenses which  typically  would be
incurred in connection with a re-lease or sale of such an aircraft, airframe, or
engine. Any such determination shall be made by an Appraiser selected by Lessor,
and the  costs  and  expenses  associated  therewith  shall be borne by  Lessee;
PROVIDED, that, if Lessor does not obtain possession of the Aircraft pursuant to
this ss. 15, an AppraiseR  shall not be appointed,  and Fair Market Rental Value
and Fair Market Sales Value for purposes of this ss. 15 shalL be zero.

         15.5              REMEDIES CUMULATIVE

         Nothing  contained in this Lease shall be construed to limit in any way
any right,  power,  remedy,  or privilege of Lessor hereunder or under any other
Operative  Agreement or now or hereafter existing at law or in equity.  Each and
every  right,  power,  remedy,  and  privilege  hereby given to, or retained by,
Lessor in this Lease  shall be in  addition  to and not in  limitation  of every
other right, power,  remedy, and privilege given under the Operative  Agreements
or now or hereafter existing at law or in equity.  Each and every right,  power,
remedy,  and  privilege  of Lessor  under  this  Lease  and any other  Operative
Agreement may be exercised from time to time or simultaneously  and as often and
in such order as may be deemed  expedient by Lessor.  All such  rights,  powers,
remedies, and privileges shall be cumulative and not mutually exclusive, and the
exercise of one shall not be deemed a waiver of the right to exercise any other.
Lessee hereby waives to the extent  permitted by applicable  Law any right which
it may have to require Lessor to choose or elect remedies.

             16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.

         (a)  Lessee's  obligation  to pay all Rent payable  hereunder  shall be
absolute  and  unconditional,  and  shall  not  be  affected  by  any  event  or
circumstance,  including: (1) any setoff, counterclaim,  recoupment, defense, or
other right that Lessee may have against Lessor, Mortgagee, any Participant, any
Note Holder,  or any other Person for any reason  whatsoever;  (2) any defect in
the title, airworthiness,  condition,  design, operation, or fitness for use of,
or any damage to or loss or destruction of, the Aircraft,  the Airframe,  or any
Engine,  or any  interruption  or cessation in the use or possession  thereof by
Lessee   for   any   reason   whatsoever;   (3)  any   insolvency,   bankruptcy,
reorganization, or similar proceedings by or against Lessee or any other Person;
or (4) any other circumstance,  happening,  or event whatsoever,  whether or not
similar to any of the foregoing.

         (b) If for any reason  whatsoever  this Lease  shall be  terminated  in
whole  or in  part by  operation  of law or  otherwise  except  as  specifically
provided herein,  Lessee  nonetheless agrees to pay an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms  hereof had this Lease not been  terminated  in whole or in part.
Lessee hereby  waives,  to the extent  permitted by applicable  Law, any and all
rights that it may now have or that at any time  hereafter may be conferred upon
it, by statute or otherwise,  to  terminate,  cancel,  quit,  or surrender  this
Lease, except in accordance with the express terms hereof.

         (c)  Nothing  set forth in this ss. 16 shall be  construed  to prohibit
Lessee  from  separately  pursuinG  any claim that it may have from time to time
against  Lessor or any other Person with  respect to any matter  (other than the
absolute and unconditional nature of Lessee's obligations hereunder to pay Rent,
and other than the matters specified in paragraphs (a) and (b) above).

                        17. RENEWAL AND PURCHASE OPTIONS

         17.1              NOTICES GENERALLY

         (a) Unless otherwise  provided by this ss. 17, at least 270 days and no
more than 365 days  before thE  Scheduled  Expiration  Date for the Base Term or
then-current  Renewal Term,  Lessee may provide  irrevocable  written  notice to
Lessor  (a  "PRELIMINARY  NOTICE"),   with  a  copy  of  such  notice  to  Owner
Participant,  that Lessee  intends to exercise  the option  either to extend the
leasing of the Aircraft  for a Renewal Term  pursuant to ss. 17.2 or tO purchase
the Aircraft on the Scheduled Expiration Date pursuant to ss. 17.3.

         (b) If Lessee gives a Preliminary  Notice,  then Lessee shall provide a
further notice, at least 30 days before the following Scheduled Expiration Date,
specifying  which  option it intends  to elect,  pursuant  to ss.  17.2.1 or ss.
17.3.1 (as applicable).  If Lessee fails to give such further notice at least 30
days before  sUch  Scheduled  Expiration  Date,  Lessee  shall be deemed to have
elected its option to purchase the Aircraft pursuant to ss. 17.3.1.

         17.2              RENEWAL OPTIONS

                           17.2.1           RENEWAL NOTICE

     (a) If Lessee has given a Preliminary Notice, as specified in ss. 17.1, and
subject to the terms anD  conditions  of this ss. 17.2,  Lessee may exercise its
option to extend  the  leasing of the  Aircraft  hereunder  untiL the  following
Scheduled Expiration Date, on the same terms (except as contemplated by this ss.
17) as in the LesseE  Operative  Agreements  with  respect to the Base Term,  by
delivering a notice (a "RENEWAL  NOTICE") to Lessor not less than 30 days before
the Scheduled Expiration Date.

     (b) Notwithstanding anything to the contrary in any Operative Agreement:

                  (1) No  Preliminary  Notice or Renewal Notice shall be binding
         on Lessor  or oblige  Lessor to  extend  the  leasing  of the  Aircraft
         hereunder  for a Renewal Term if any Special  Default or Lease Event of
         Default  exists  on and as of the date  that such  Renewal  Term  would
         otherwise commence.

                  (2) A Renewal  Notice  shall be  revocable  by Lessee until 10
         Business Days after the Renewal Rent is  determined in accordance  with
         ss.  17.2.2,  and unless  revoked by written notice by Lessee to LessoR
         shall   thereafter   become   irrevocable   and  shall   constitute  an
         unconditional  obligation  of  Lessee  to  extend  the  leasing  of the
         Aircraft  hereunder  for the Renewal Term to which such Renewal  Notice
         relates.  If Lessee revokes a Renewal Notice as indicated above, Lessee
         will be deemed to have  irrevocably  elected its option to purchase the
         Aircraft pursuant to ss. 17.3.1.

                  (3) Lessee shall not be entitled to give any Renewal Notice if
         it (aa) has not  delivered  a  Preliminary  Notice to Lessor,  (bb) has
         delivered a Purchase Notice to Lessor, or (cc) has previously delivered
         four Renewal Notices to Lessor.

                           17.2.2           RENEWAL RENT

         (a)  During  each  Renewal  Term,  Lessee  shall  pay to Lessor on each
Payment Date,  in the manner and in the funds of the type  specified in ss. 3.3,
Renewal Rent in arrears.

         (b) The Renewal Rent payable by Lessee on each Payment Date during each
Renewal Term shall be the Fixed Rate (or, if less, the Applicable  Percentage of
the Fair  Market  Rental  Value).  Any such Fair  Market  Rental  Value shall be
determined  not more than 120 days and not less than 100 days  before  the first
day of such Renewal Term by mutual agreement of Lessor and Lessee or, if they do
not agree, by an appraisal in accordance with ss. 17.4.

     17.2.3 STIPULATED LOSS AND TERMINATION VALUES

         (a) For any Renewal Term,  Stipulated  Loss Value Dates and Termination
Value Dates shall be extended  throughout such Renewal Term on the same days and
for the same months as during the Base Term.

         (b)  Stipulated  Loss  Value and  Termination  Value  amounts  that are
payable  during any such Renewal Term shall be  determined at the same time that
the  Renewal  Rent  for  such  Renewal  Term is  determined  under  ss.  17.2.2.
Stipulated Loss Values and  Termination  Values for any such Renewal Term shall,
commencing  on the firsT day of such Renewal  Term,  be equal to the Fair Market
Sales Value of the Aircraft on such day, and shall decline  ratably on a monthly
basis to the salvage  value of the Aircraft as of the last day of its  remaining
useful life.

         (c) For purposes of calculating  Stipulated  Loss Value and Termination
Value  amounts  applicable  during any Renewal  Term,  the  "salvage  value" and
"useful life" shall be determined by mutual agreement of Lessor and Lessee,  or,
if they do not agree, by an appraisal in accordance with ss. 17.4.

         17.3              PURCHASE OPTIONS

                           17.3.1           PURCHASE NOTICE

         (a) Provided  that at the time of such  election no Special  Default or
Lease  Event of Default  exists,  Lessee  may,  subject to ss. 17.1 and this ss.
17.3, elect to purchase the Aircraft: (1) on the EBO Date as shown on Schedule 5
at the price  indicated  thereon;  (2) on any Purchase Date, at a purchase price
equal to the Fair Market Sales Value of the Aircraft computed as of the Purchase
Date; or (3) (aa) on any Payment Date occurring after the Tax Attribute  Period,
if a Burdensome  Indemnity  Payment not waived by Owner Participant shall become
due and  owing,  if  Lessee  did not cause  such  indemnity  with the  intent of
permitting  such purchase and if such purchase would eliminate such indemnity on
a future  basis,  or (bb) on any Payment Date after the EBO Date,  if Lessee has
committed to (but not commenced) a Significant Expenditure,  then (whether as to
clause  (aa) or (bb)) at a purchase  price  equal to the greater of (x) the Fair
Market  Sales  Value of the  Aircraft  computed  as of such  Payment  Date  (not
including   any  portion  of  the  Fair  Market  Sales  Value  of  the  Aircraft
attributable to any Significant  Expenditure) and (y) the Termination  Value for
the Aircraft computed as of such Payment Date.

         (b) Lessee may  exercise  such  option to  purchase  the  Aircraft,  by
delivery of a written  notice (a  "PURCHASE  NOTICE") to Lessor  (with a copy of
such  Purchase  Notice to Owner  Participant)  not less than 60 days and no more
than 365 days before the EBO Date (for a purchase under ss.  17.3.1(a)(1)),  not
less  than 30 days and nO more than 365 days  before  the  Purchase  Date (for a
purchase  under ss.  17.3.1(a)(2)),  and not less than 120 days anD no more than
365 days  before the  Payment  Date  specified  in such  Purchase  Notice (for a
voluntary termination purchase under ss. 17.3.1(a)(3)).

     (c) Notwithstanding anything to the contrary in any Operative Agreement:

                  (1) Any  Purchase  Notice  delivered  or  deemed  to have been
         delivered pursuant to ss.  17.3.1(a)(1) or (2) shall be irrevocable and
         shall constitute an unconditional  obligation of Lessee tO purchase the
         Aircraft  under  this  ss.  17.3;  and any  Purchase  Notice  delivered
         pursuant to ss. 17.3.1(a)(3), shall be revocable until 10 Business Days
         after the  determination  of the Fair Market Sales Value in  accordance
         with ss.  17.3.2,  and unless so revoked by written notice by Lessee to
         Lessor  (with a copy tO  Owner  Participant)  shall  thereafter  become
         irrevocable and shall constitute an unconditional  obligation of Lessee
         to purchase the Aircraft under this ss. 17.3.

     (2) Lessee shall not be entitled to give any Purchase Notice pursuant toss.
17.3.1(a)(2) if it has not delivered a Preliminary Notice.

     17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE

         The Fair Market Sales Value of the  Aircraft  shall be  determined  not
more than 120 days and not less than 100 days  before  the  applicable  Purchase
Date or Payment Date by mutual agreement of Lessor and Lessee, or, if they shall
be unable to agree, by an appraisal in accordance with ss. 17.4.

                           17.3.3   PAYMENTS BY LESSEE

         (a) If Lessee elects to purchase the Aircraft pursuant to clause (1) of
ss.  17.3.1(a),  then on thE EBO Date Lessee shall pay to Lessor in  immediately
available funds:

         (1)      all unpaid Basic Rent due before the EBO Date; plus

         (2)      the EBO Price; plus

         (3)      all  Supplemental  Rent  then due  (including  any  Make-Whole
                  Amount then due),  and any sales or  transfer  tax then due in
                  connection with such purchase.

         (b) If Lessee elects to purchase the Aircraft pursuant to clause (2) of
ss. 17.3.1(a),  then on thE applicable  Purchase Date Lessee shall pay to Lessor
in immediately available funds:

     (1) all unpaid Basic Rent due on or before such Purchase Date; plus

     (2) the applicable purchase price for the Aircraft; plus

     (3) all Supplemental  Rent then due, and any sales or transfer tax then due
in connection with such purchase.

     (c) If Lessee elects to purchase the Aircraft pursuant to clause (3) of ss.
17.3.1(a),  then on thE Payment  Date on which  Lessee  elects to  purchase  the
Aircraft, Lessee shall pay to Lessor in immediately available funds:

     (1) all unpaid Basic Rent due on or before such Payment Date; plus

     (2) the purchase price of the Aircraft pursuant to such clause (3); plus

     (3) all  Supplemental  Rent then due (including any Make-Whole  Amount then
due), and any sales or transfer tax then due in connection with such purchase.

                           17.3.4           TITLE

         Upon full and final  payment  by  Lessee of (a) the  applicable  amount
payable under ss. 17.3.3,  (b) on aN after-tax basis, all out-of-pocket fees and
expenses (including reasonable fees and expenses of counsel) incurred by Lessor,
each Participant, and Mortgagee in connection with such purchase and invoiced to
Lessee prior  thereto,  and (c) all other amounts then due and payable by Lessee
under the  Operative  Agreements,  Lessor will  transfer to Lessee  title to the
Aircraft in accordance with ss. 4.5.

                           17.3.5           INSTALLMENT EBO PURCHASE

         Lessee and Lessor  acknowledge that at Lessee's  election the EBO Price
may be payable in  installments  as  provided  in  Schedule 5. Lessor and Lessee
agree  that  if  Lessee  elects  to  purchase  the  Aircraft   pursuant  to  ss.
17.3.1(a)(1) and elects to pay the EBO Price in  installments,  Lessee agrees to
provide security to Lessor tO secure the unpaid balance of the EBO Price,  which
security  shall  be  required  to be in an  amount  and  otherwise  in form  and
substance  reasonably  satisfactory to Lessor and Owner Participant.  Subject to
the foregoing,  upon payment of the initial  installment of the EBO Price as set
forth in  Schedule 5 [with such  payment  being  sufficient  to pay all  amounts
referenced in ss. 2.10(b) of the Mortgage]  together with all amounts  otherwisE
payable pursuant to ss. 17.3.3(a) and ss. 17.3.4,  Lessor will transfer title to
the Aircraft in accordance with ss. 4.5.

                           17.3.6           ASSUMPTION OF EQUIPMENT NOTES

         Lessor and Lessee agree that, if Lessee elects to purchase the Aircraft
pursuant  to ss.  17.3.1(a)(3)  oF this  Lease,  Lessee  may elect to assume the
Equipment  Notes  pursuant  to ss.  2.14 of the  Mortgage  and  ss.  11.6 of The
Participation Agreement.

         17.4              APPRAISALS

         Whenever  Fair Market  Rental  Value or Fair Market  Sales Value of the
Aircraft is required to be determined by an appraisal  under this ss. 17, Lessee
and Lessor  shall  appoint a  mutually-satisfactory  Appraiser  tO conduct  such
appraisal.  If Lessee and Lessor  fail to agree upon a  satisfactory  Appraiser,
then each shall promptly appoint a separate Appraiser, and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor does not so appoint an
Appraiser,  the determination of the single Appraiser  appointed shall be final.
If two Appraisers  are appointed and within seven days after the  appointment of
the latter of such two Appraisers,  they do not agree upon such amount, such two
Appraisers  shall,  within eight days after such latter  appointment,  appoint a
third Appraiser,  and such amount shall be determined by such three  Appraisers,
who shall  make their  separate  appraisals  within  seven  days  following  the
appointment  of the third  Appraiser,  and any  determination  so made  shall be
conclusive  and binding  upon Lessor and Lessee.  If no such third  Appraiser is
appointed within such eight-day period, either Lessor or Lessee may apply to the
American  Arbitration  Association  to make such  appointment,  and both parties
shall be bound by such appointment.  The foregoing  appraisal procedure shall in
any event be  completed no less than 125 days before the end of the Base Term or
any Renewal Term (unless such procedure is undertaken in connection  with ss. 15
or ss.  17.3.1(a),  in  which  case it shall be  completed  promptlY).  If three
Appraisers are appointed and the difference  between the determination  which is
further from the middle  determination and the middle determination is more than
125%  of  the  difference  between  the  middle   determination  and  the  third
determination,  then such further determination shall be excluded, the remaining
two  determinations  shall be  averaged,  and such  average  shall be final  and
binding   upon  Lessor  and  Lessee.   Otherwise,   the  average  of  all  three
determinations  shall be final and binding upon Lessor and Lessee.  The fees and
expenses of all such  Appraisers  and such  appraisal  procedure  shall be borne
equally by Lessee and Lessor.

                                18. MISCELLANEOUS

         18.1              AMENDMENTS

         No  provision  of this  Lease  may be  amended,  supplemented,  waived,
modified,  discharged,  terminated,  or otherwise varied orally,  but only by an
instrument in writing that  specifically  identifies the provision of this Lease
that it purports to amend, supplement,  waive, modify, discharge,  terminate, or
otherwise  vary and is  signed  by  Lessor  and  Lessee.  Each  such  amendment,
supplement, waiver, modification,  discharge,  termination, or variance shall be
effective only in the specific  instance and for the specific  purpose for which
it is given.  No provision of this Lease shall be varied or contradicted by oral
communication,  course of dealing or performance,  or other manner not set forth
in an  agreement,  document,  or  instrument in writing and signed by Lessor and
Lessee.

         18.2              SEVERABILITY

         If  any   provision   hereof  shall  be  held  invalid,   illegal,   or
unenforceable in any respect in any jurisdiction,  then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such  jurisdiction,  and (b) such invalidity,  illegality,  or  unenforceability
shall not affect the validity,  legality, or enforceability of such provision in
any other jurisdiction.  If, however,  any Law pursuant to which such provisions
are held invalid,  illegal,  or unenforceable  may be waived,  Lessor and Lessee
hereby waive such Law to the full extent  permitted,  to the end that this Lease
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.

         18.3              THIRD-PARTY BENEFICIARY

         This Lease is not  intended  to  provide,  and shall not  provide,  any
Person not a party hereto (other than Mortgagee, the Participants,  the Mortgage
Indemnitees,  and the  Persons  referred  to in ss.  4.6) with any rights oF any
nature  whatsoever  against  either of the parties  hereto,  and no Person not a
party hereto (other than Mortgagee, the Participants,  the Mortgage Indemnitees,
and the  Persons  referred  to in ss.  4.6)  shall  have anY  right,  power,  or
privilege in respect of this Lease, or have any benefit or interest  arising out
of this Lease.

         18.4              REPRODUCTION OF DOCUMENTS

         This Lease (including all annexes,  schedules, and exhibits hereto) and
all  agreements,  instruments,  and  documents  relating  hereto,  including (a)
consents,  waivers,  and modifications  that may hereafter be executed,  and (b)
financial  statements,   certificates,   and  other  information  previously  or
hereafter  furnished to any party hereto, may be reproduced by such party by any
photographic,  photostatic,  microfilm,  micro-card,  miniature photographic, or
other  similar  process,  and such party may destroy any  original  documents so
reproduced.  Any  such  reproduction  shall be  admissible  in  evidence  as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such  reproduction  was made by such
party in the regular course of business),  and any  enlargement,  facsimile,  or
further reproduction of such reproduction likewise is admissible in evidence.

         18.5              COUNTERPARTS

         This Lease and any amendments, waivers, consents, or supplements hereto
may be executed in any number of counterparts (or upon separate  signature pages
bound together into one or more counterparts),  each fully-executed set of which
when  so  executed  shall  be  deemed  to be  an  original,  and  all  of  which
counterparts,  taken together, shall constitute one and the same instrument. The
single fully-executed  original of this Lease marked "Original" on the signature
page  hereof  is  the  original  for  chattel  paper  purposes,  and  all  other
counterparts   are   duplicates  for  chattel  paper  purposes  and  are  marked
"duplicate" on the signature page hereof. No security interest in this Lease may
be perfected by the possession of any counterpart other than the "Original".

         18.6              NOTICES

         Unless otherwise  expressly permitted by the terms hereof, all notices,
requests,  demands,  authorizations,  directions,  consents,  waivers, and other
communications  required or permitted  to be made,  given,  furnished,  or filed
hereunder shall be made, given, furnished, or filed, and shall become effective,
in the manner prescribed in ss. 15.7 of the Participation Agreement.

         18.7              GOVERNING LAW

         THIS LEASE  SHALL IN ALL  RESPECTS  BE GOVERNED  BY, AND  CONSTRUED  IN
ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK,  INCLUDING  ALL MATTERS OF
CONSTRUCTION,  VALIDITY,  AND PERFORMANCE.  THIS LEASE IS BEING DELIVERED IN THE
STATE OF NEW YORK.

         18.8              NO WAIVER

         No failure on the part of Lessor to exercise, and no delay by Lessor in
exercising,  any of its rights, powers, remedies, or privileges under this Lease
or  provided  at Law,  in  equity  or  otherwise  shall  impair,  prejudice,  or
constitute  a waiver  of any such  right,  power,  remedy,  or  privilege  or be
construed  as a waiver  of any  breach  hereof  or  default  hereunder  or as an
acquiescence  therein,  nor shall any  single or  partial  exercise  of any such
right,  power,  remedy,  or  privilege  preclude  any other or further  exercise
thereof  by Lessor  or the  exercise  of any  other  right,  power,  remedy,  or
privilege by Lessor. No notice to or demand on Lessee in any case shall,  unless
otherwise  required  under this  Lease,  entitle  Lessee to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of Lessor to any other or  further  action in any  circumstances  without
notice or demand.

         18.9              ENTIRE AGREEMENT

         This Lease, together with the other Operative Agreements,  on and as of
the date hereof  constitute  the entire  agreement  of the  parties  hereto with
respect to the subject matter hereof and thereof,  and all prior  understandings
or agreements,  whether written or oral, between the parties hereto with respect
to such subject matter are hereby superseded in their entirety.

              [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]





<PAGE>




         IN  WITNESS  WHEREOF,  Lessor  and  Lessee  have  executed  this  Lease
Agreement N___AT.



                      FIRST SECURITY BANK, NATIONAL
                      ASSOCIATION,   NOT  IN  ITS
INDIVIDUAL CAPACITY,  EXCEPT AS EXPRESSLY PROVIDED HEREIN, BUT SOLELY AS TRUSTEE
UNDER THE TRUST AGREEMENT, as Lessor



                  By:
                      ----------------------------------------------------------
                        Name:
                        Title:



                  AMERICAN TRANS AIR, INC., as Lessee



                  By:
                      ----------------------------------------------------------
                        Name:
                        Title:



     [This is the ORIGINAL  counterpart of the Lease for chattel paper purposes,
and  the  receipt  hereof  is   acknowledged   by  X  ,  --  [print],   [title],
WILMINGTON TRUST COMPANY.

                                                            [or]

              [This                     is a DUPLICATE executed counterpart, and
                                        is NOT the original counterpart,  of the
                                        Lease, for chattel paper purposes.]





<PAGE>






                              AIRCRAFT DESCRIPTION



The Aircraft is a Boeing model 737-800  aircraft,  consisting of (1) an airframe
bearing FAA registration no. N___AT and  manufacturer's  serial no.  __________,
(2) two CFM  International  model CFM56-7 engines (each of which has 750 or more
rated takeoff horsepower or its equivalent),  bearing manufacturer's serial nos.
__________  and  __________,   and  (3)  all  appliances,   parts,  instruments,
appurtenances,   accessories,  furnishings,  and  other  equipment  or  property
incorporated in such airframe and engines.





<PAGE>







                       RETURN ACCEPTANCE SUPPLEMENT N___AT



         This Supplement,  dated __________, ____, is entered into between First
Security Bank, National Association, a national banking association,  not in its
individual  capacity but solely as Owner Trustee under Trust  Agreement  N___AT,
dated as of  __________________,  ____, with the Owner Participant named therein
(such Owner Trustee, in its capacity as trustee, being referred to as "LESSOR"),
and American Trans Air, Inc. ("Lessee"), an Indiana corporation.

         Lessor  and  Lessee  have  entered  into Lease  Agreement  N___AT  (the
"LEASE"),  dated as of  [_____________,  ____],  relating  to the  Boeing  model
737-800  aircraft  described  below.  Terms  defined  in the Lease have the same
meanings when used in this Supplement.

         Lessor and Lessee hereby agree as follows:

         1. Lessor and Lessee are executing this Return Acceptance Supplement to
confirm that,  on the date hereof,  Lessee  returned the following  Airframe and
Engines to Lessor:

     Airframe:   U.S.   registration  no.  N___AT;   manufacturer's  serial  no.
__________; and

     Engines: two CFM International engines,  bearing manufacturer's serial nos.
__________  and  ----------.  2.  This  Return  Acceptance  Supplement  is being
delivered in _____________________.

     3.  Lessor and Lessee  agree that the Lease is  terminated,  except for the
provisions thereof that expressly survive termination.



<PAGE>



         IN WITNESS  WHEREOF,  Lessor  and  Lessee  have  executed  this  Return
Acceptance Supplement N___AT.



                                                   FIRST SECURITY BANK, NATIONAL
                                                    ASSOCIATION,   NOT  IN  ITS
INDIVIDUAL CAPACITY,  EXCEPT AS EXPRESSLY PROVIDED HEREIN, BUT SOLELY AS TRUSTEE
UNDER THE TRUST AGREEMENT, as Lessor



              By:
                  ----------------------------------------------------------
                    Name:
                    Title:



              AMERICAN TRANS AIR, INC., as Lessee



              By:
                  ----------------------------------------------------------
                    Name:
                    Title:







<PAGE>






                                  CERTAIN TERMS



             DEFINED TERM                  DEFINITION

Commencement Date                      __________, 200_

Fixed Rate                             $__________ per quarterly Payment Date
                                       [60% OF AVERAGE BASIC RENT DURING THE
                                       BASE TERM]

Minimum Liability Insurance Amount     (CONFIDENTIAL MATERIAL OMITTED)

Past-Due Rate                          (CONFIDENTIAL MATERIAL OMITTED)

Scheduled                              Expiration Date
                                       (a)   for   the
                                       Base Term,  the
                                       20th
                                       anniversary  of
                                       the    Delivery
                                       Date,  and  (b)
                                       for  a  Renewal
                                       Term,  the  day
                                       before      the
                                       first
                                       anniversary  of
                                       the  first  day
                                       of that Renewal
                                       Term

Similar Aircraft                       Boeing model 737-800 aircraft (other than
                                       the Aircraft)

SLV Rate                               (CONFIDENTIAL MATERIAL OMITTED)

Threshold Amount                       (CONFIDENTIAL MATERIAL OMITTED)



<PAGE>






                               BASIC RENT PAYMENTS



                                                                PERCENTAGE OF
                  PAYMENT DATE                                   LESSOR'S COST




<PAGE>




                             BASIC RENT ALLOCATIONS

          FROM (BUT                                               ALLOCATION OF
       NOT INCLUDING)              THROUGH                          BASIC RENT



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





<PAGE>






                              STIPULATED LOSS VALUE



     STIPULATED        STIPULATED      PREPAID BASIC          DEFERRED BASIC
   LOSS VALUE DATE     LOSS VALUE       RENT AMOUNT            RENT AMOUNT





<PAGE>



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



                                TERMINATION VALUE




    TERMINATION       TERMINATION VALUE       PREPAID BASIC       DEFERRED BASIC
    VALUE DATE                                 RENT AMOUNT        RENT AMOUNT





<PAGE>



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

                               EBO PRICE SCHEDULE





                    Unadjusted                                    Adjusted EBO
                     EBO Price           Rent Adjustment             Amount
                  (Percentage of         (Percentage of          (Percentage of
   EBO Date       Lessor's Cost)         Lessor's Cost)          Lessor's Cost)










<PAGE>






                               PERMITTED COUNTRIES





<PAGE>




Argentina*

Australia

Austria

Bahamas

Belgium

Bermuda

Brazil*

Canada

Chile*

Denmark

Ecuador*

Egypt*

Finland

France

Germany

Greece*

Hungary*

Iceland

India*

Indonesia*

Ireland

Italy**

Jamaica*

Japan

Liechtenstein*

Luxembourg

Malaysia*

Malta*

Mexico**

Monaco

Morocco*

Netherlands

New Zealand

Norway

Paraguay*

Peoples Republic of China*

Philippines*

Portugal

Republic of China (Taiwan)*

Singapore*

South Africa*

South Korea*

Spain

Sweden

Switzerland

Thailand*

United Kingdom

Uruguay*

Venezuela*

United States of America

*SUBLEASING AND  RE-REGISTRATION  PERMITTED ONLY WITH OWNER  PARTICIPANT'S PRIOR
  WRITTEN CONSENT,  WHICH CONSENT OWNER PARTICIPANT MAY WITHHOLD IN ITS SOLE AND
  ABSOLUTE DISCRETION.

**APPROVED  FOR  SUBLEASING  BUT LESSEE MAY NOT  RE-REGISTER IN SUCH COUNTRY
  WITHOUT  OWNER  PARTICIPANT'S  PRIOR  WRITTEN  CONSENT,  WHICH  CONSENT  OWNER
  PARTICIPANT MAY WITHHOLD IN ITS SOLE AND ABSOLUTE DISCRETION..



<PAGE>





                                    PLACARDS



                                   Leased from
                   First Security Bank, National Association,
                                as owner trustee

                                and mortgaged to
                            Wilmington Trust Company,
                                   as trustee



<PAGE>






                                     ANNEX B

                                RETURN CONDITIONS

         This Annex B shall apply to the return of the  Aircraft by or on behalf
of Lessee  under the Lease,  whether at a Scheduled  Expiration  Date,  upon the
exercise  of  Lessee's  rights  under ss. 9 of the Lease,  upon thE  exercise of
Lessor's  remedies  following  the  occurrence  of a Lease Event of Default,  or
otherwise.  However, this Annex B shall not apply (1) if an Event of Loss to the
Aircraft occurs (unless the Aircraft is replaced under ss. 10.1.3 of the Lease),
or (2) if Lessee buys the Aircraft in accordance with ss. 17 of the Lease.

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized  as in Annex A, have the same  meanings  when  used in this  "Return
Conditions"   Annex.   Annex  A  also  contains  rules  of  usage  that  control
construction in this "Return Conditions" Annex.

         (CONFIDENTIAL MATERIAL OMITTED)





<PAGE>






                                     ANNEX C

                                   MAINTENANCE

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized   as  in  Annex  A,  have  the  same  meanings  when  used  in  this
"Maintenance"  Annex.  Annex  A  also  contains  rules  of  usage  that  control
construction in this "Maintenance" Annex.

         A.       MAINTENANCE.
                  -----------

         Lessee shall maintain,  service,  repair, and overhaul the Aircraft (or
cause the Aircraft to be  maintained,  serviced,  repaired,  and  overhauled) in
accordance  with  (1)  maintenance   standards  required  by,  or  substantially
equivalent to those required by, the FAA or the central civil aviation authority
of Canada, Japan, and the JAA for the Aircraft (the "MAINTENANCE  PROGRAM"),  so
as (aa) to keep  the  Aircraft  in as good  operating  condition  as  originally
delivered  hereunder,  ordinary  wear  and tear  excepted,  and (bb) to keep the
Aircraft  in  such  operating  condition  as  may be  necessary  to  enable  the
applicable airworthiness certificate for the Aircraft to be maintained under the
regulations of the FAA or other Aviation Authority then having jurisdiction over
the  operation  of the  Aircraft,  other than  during (x)  temporary  periods of
storage  in  accordance  with  applicable   regulations,   (y)  maintenance  and
modification  permitted  hereunder,  and (z) periods  when the FAA or such other
Aviation  Authority has revoked or suspended the airworthiness  certificates for
Similar Aircraft;  and (2) except during periods when a Permitted Sublease is in
effect,  the same  standards as Lessee uses with respect to similar  aircraft of
similar  size in its fleet  operated  by Lessee in  similar  circumstances  and,
during any period in which a Permitted Sublease is in effect, the same standards
used by the Permitted Sublessee with respect to similar aircraft of similar size
in its fleet and operated by the Permitted  Sublessee in similar  circumstances.
Lessee  further  agrees that the Aircraft will be  maintained,  used,  serviced,
repaired,  overhauled,  or inspected in  compliance  with  applicable  Laws with
respect  to  the  maintenance  of  the  Aircraft  and in  compliance  with  each
applicable airworthiness certificate,  license, and registration relating to the
Aircraft  issued by the  Aviation  Authority,  other than minor or  nonrecurring
violations  with respect to which  corrective  measures are taken upon discovery
thereof and except to the extent Lessee or Permitted  Sublessee is contesting in
good faith the validity or application  of any such Law or requirement  relating
to any such certificate, license, or registration in any reasonable manner which
does not create a material  risk of sale,  loss,  or forfeiture of the Aircraft,
the  Airframe,  or any Engine or the  interest of any  Participant  therein or a
material risk of criminal  liability or material civil penalty  against  Lessor,
Owner Participant, or Mortgagee. Lessee shall cause the Aircraft Documents to be
maintained in English and promptly  furnish  Lessor and Owner  Participant  with
information   necessary  for  filing  with  applicable   governmental   aviation
authorities.

         B.       REPLACEMENT OF PARTS.
                  --------------------

         Except as otherwise  provided herein,  Lessee will promptly replace (or
cause to be  replaced)  all  Parts  that are from time to time  incorporated  or
installed  in or attached  to the  Aircraft,  and that  become  worn out,  lost,
stolen, destroyed,  seized,  confiscated,  damaged beyond repair, or permanently
rendered unfit for use for any reason whatsoever. In addition, Lessee may remove
(or  permit to be  removed)  any Parts in the  ordinary  course of  maintenance,
service,  repair,  overhaul, or testing, whether or not such Parts are worn out,
lost,  stolen,  destroyed,  seized,  confiscated,   damaged  beyond  repair,  or
permanently rendered unfit for use; PROVIDED, that, except as otherwise provided
herein,  Lessee will replace or cause the  replacement of such Parts as promptly
as  practicable.  All  replacement  Parts  shall be free and clear of all Liens,
except for Permitted Liens and pooling  arrangements to the extent  permitted by
ss. C below and shall be in good operating  condition and (except in thE case of
replacement  property  installed on the basis of operational  exigencies) have a
value and  utility  not less than the value and  utility  of the Parts  replaced
(assuming such replaced Parts were in the condition  required under this Lease).
Except as  otherwise  provided  herein,  all Parts at any time  removed from the
Aircraft  shall remain the property of Lessor,  no matter where  located,  until
they are  replaced  by Parts  that have been  incorporated  or  installed  in or
attached to the Aircraft and that meet the  requirements  for replacement  Parts
specified  above. As soon as a replacement  Part is incorporated or installed in
or attached to the Aircraft as above provided, without further act, (1) title to
the  replaced  Part shall vest in Lessee (or if a Permitted  Sublease is then in
effect,  in the Permitted  Sublessee) free and clear of all Lessor Liens and all
rights  of  Lessor,  and the  replaced  Part  shall no  longer  be deemed a Part
hereunder, (2) title to such replacement Part shall vest in Lessor, subject only
to Permitted  Liens and pooling  arrangements  to the extent  permitted by ss. C
below and except in the case of replacement property temporarily installed on an
emergency  basis,  and (3) such  replacement  Part shall become  subject to this
Lease and the  Mortgage  and be deemed  part of the  Aircraft  for all  purposes
hereof and thereof to the same extent as the Parts  originally  incorporated  or
installed in or attached to such Aircraft.

         C.       POOLING OF PARTS.
                  ----------------

         Any Part  removed  from the  Aircraft  may be  subjected by Lessee or a
Permitted  Sublessee to a normal  pooling  arrangement  customary in the airline
industry and entered  into in the ordinary  course of business of Lessee or such
Permitted  Sublessee,  so long as a Part  replacing  such  removed Part shall be
incorporated  or installed in or attached to the Aircraft in accordance with ss.
B of this Annex C as promptly as  practicable  afteR the removal of such removed
Part. In addition,  any  replacement  Part when  incorporated or installed in or
attached  to the  Aircraft  may be owned by any third  party  subject  to such a
normal  pooling  arrangement,  so long as  Lessee  or  Permitted  Sublessee,  as
promptly  thereafter  as  reasonably  possible,  either (1) causes title to such
replacement  Part to vest in Lessor in  accordance  with ss. B of this  Annex C,
free and clear of all Liens (excepT Permitted Liens), or (2) replaces (or causes
to be replaced)  such  replacement  Part by  incorporating  or  installing in or
attaching  to the  Aircraft  a  further  replacement  Part  owned by Lessee or a
Permitted  Sublessee free and clear of all Liens (except Permitted Liens) and by
causing title to such further  replacement  Part to vest in Lessor in accordance
with ss. B of this Annex C.

         D.       ALTERATIONS, MODIFICATIONS, AND ADDITIONS.
                  -----------------------------------------

         Lessee  shall  make  (or  cause  to  be  made)  such   alterations  and
modifications  in and  additions to the Aircraft as may be required from time to
time to meet the  applicable  standards of the FAA or other  Aviation  Authority
having  jurisdiction  over the  operation  of the  Aircraft,  to the extent made
mandatory in respect of the  Aircraft (a  "MANDATORY  MODIFICATION");  PROVIDED,
that Lessee or any  Permitted  Sublessee  may, in good faith and by  appropriate
procedure,  contest the validity or application of any law, rule, regulation, or
order in any  reasonable  manner which does not have more than a DE MINIMIS risk
of adversely  affecting  Lessor's  interest in the Aircraft (and, so long as any
Equipment Notes are outstanding, the Mortgagee) and does not involve more than a
DE MINIMIS risk of sale, forfeiture,  or loss of the Aircraft or the interest of
any Participant therein,  more than a DE MINIMIS risk of material civil penalty,
or any risk of criminal  liability being imposed on Lessor,  Owner  Participant,
Mortgagee, or the holder of any Equipment Note. In addition,  Lessee may make or
permit to be made such  alterations  and  modifications  in and additions to the
Aircraft (each an "OPTIONAL  MODIFICATION") as Lessee or any Permitted Sublessee
deems  desirable in the proper  conduct of its  business,  including  removal of
Parts which Lessee deems are obsolete or no longer  suitable or appropriate  for
use in the Aircraft (PROVIDED, that Lessee's right to remove obsolete Parts will
be  limited to Parts  having an  aggregate  original  cost not  exceeding  1% of
Lessor's Cost of the Aircraft with Lessor having the right to request such parts
be shipped to Owner Participant upon removal at Lessee's expense; PROVIDED, that
no such  Optional  Modification  shall  (1)  diminish  the  fair  market  value,
estimated  residual value,  utility,  or economic useful life of the Aircraft or
any Engine below its fair market value,  estimated residual value,  utility,  or
economic useful life immediately before such Optional Modification (assuming the
Aircraft or such Engine was in the condition  required by the Lease  immediately
before such Optional Modification),  (2) cause the Aircraft to cease to have the
applicable  standard  airworthiness  certificate,  or (3) cause the  Aircraft to
become "limited use property" within the meaning of Rev. Proc. 79-48.  Except as
otherwise  provided  herein,  title to all Parts (other than Removable Parts (as
defined below))  incorporated or installed in or attached to the Aircraft as the
result of such Optional  Modification shall, without further act, vest in Lessor
and become subject to this Lease and the Mortgage.  Notwithstanding  anything to
the  contrary in this ss. D, Lessee or a  Permitted  Sublessee  may, at any time
during  the Term,  removE any Part  (such  Part  being  referred  to herein as a
"REMOVABLE PART") if (aa) such Part is in addition to, and not in replacement of
or  substitution  for,  any Part  originally  incorporated  or  installed  in or
attached to the  Aircraft at the time of delivery  thereof to Lessee or any Part
in replacement  of, or  substitution  for, any such Part,  (bb) such Part is not
required to be incorporated or installed in or attached to the Aircraft pursuant
to the  terms of ss. A of this  Annex C or the first  sentence  of this ss. D or
pursuant to the terms of any insuraNCE policies required to be carried hereunder
or any  applicable  law,  and (cc) such Part can be removed from the Airframe or
Engine  without in any  material  respect  diminishing  the fair  market  value,
estimated  residual value,  utility,  or remaining economic useful life that the
Airframe or Engine  would have had at the time of removal  had such  removal not
occurred,  assuming that such Airframe or Engine was in the condition and repair
required to be  maintained by the terms hereof and such  Removable  Part had not
been  incorporated or installed in or attached to the Aircraft.  Removable Parts
may be leased from or financed by third parties other than Lessor.  Title to any
Removable  Part  shall  not  vest in  Lessor  or be  subject  to the Lien of the
Mortgage; except that any Part not removed before the return to Lessor hereunder
of the Airframe or Engine on which it is  incorporated,  installed,  or attached
shall become the property of Lessor.

         E.       RECORDS.
                  -------

         Lessee  shall  maintain  (or  cause  to  be  maintained)  all  Aircraft
Documents. All Aircraft Documents that are specific to the Aircraft shall be the
property  of Lessor,  but shall  become the  property  of Lessee  upon  Lessee's
purchase  of the  Aircraft  pursuant  to the  terms  of this  Lease  or upon the
occurrence of an Event of Loss and Lessee's compliance with ss. 10.





<PAGE>






                                     ANNEX D

                                    INSURANCE

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized as in Annex A, have the same meanings when used in this  "Insurance"
Annex.  Annex A also contains rules of usage that control  construction  in this
"Insurance" Annex.

A.       LIABILITY INSURANCE

         1. Except as provided in ss. A2 below, Lessee will carry or cause to be
carried at all times, at nO expense to Lessor, Owner Participant,  or Mortgagee,
comprehensive  airline legal liability (including passenger liability,  property
damage, and contractual  liability insurance) with respect to the Aircraft which
is (a) in an amount not less than the greater of (x) the amount of comprehensive
airline legal liability insurance from time to time applicable to aircraft owned
or leased  and  operated  by Lessee of the same type and  operating  on  similar
routes as the  Aircraft,  and (y) the  Minimum  Liability  Insurance  Amount per
occurrence;  (b) of the type and  covering  the same  risks as from time to time
applicable to aircraft,  operated by Lessee and similarly-situated  carriers, of
the same type as the  Aircraft;  and (c)  maintained  in effect with insurers of
internationally recognized responsibility in the international aviation industry
(such insurers being referred to herein as "APPROVED INSURERS").

         2.  During any  period  that the  Aircraft  is on the ground and not in
operation,  Lessee may carry or cause to be  carried,  in lieu of the  insurance
required by ss. A1 above,  insurance otherwise conforming with thE provisions of
ss. A1 except that (a) the  amounts of coverage  shall not be required to exceed
the amounts of publiC  liability and property damage insurance from time to time
applicable  to  aircraft  owned or  operated  by  Lessee of the same type as the
Aircraft which are on the ground and not in operation,  and (b) the scope of the
risks  covered and the type of insurance  shall be the same as from time to time
shall be  applicable  to  aircraft  owned or operated by Lessee of the same type
which are on the ground and not in operation.

B.       HULL INSURANCE

         1. Except as provided in ss. B2 below, Lessee will carry or cause to be
carried at all times, at nO expense to Lessor, Owner Participant,  or Mortgagee,
with Approved  Insurers  "all-risk"  ground and flight  aircraft hull  insurance
covering the  Aircraft  (including  the Engines  when they are  installed on the
Airframe  or any  other  airframe)  which  is of the  type as from  time to time
applicable  to aircraft  operated by Lessee of the same type as the Aircraft for
an amount denominated in United States Dollars not less than the Stipulated Loss
Value of the Aircraft

         Any  policies  of  insurance  carried  in  accordance  with this ss. B1
covering the Aircraft and any policieS taken out in  substitution or replacement
for any such policies (a) shall name  Mortgagee (or, if the Lien of the Mortgage
has been discharged, Lessor) as exclusive loss payee for any proceeds to be paid
under such policies up to an amount equal to the Stipulated Loss Value,  and (b)
shall provide that (aa) in the event of a loss  involving  proceeds in excess of
the Threshold Amount, the proceeds in respect of such loss up to an amount equal
to the Stipulated Loss Value for the Aircraft shall be payable to Mortgagee (or,
if the Lien of the Mortgage has been discharged,  to Lessor), except in the case
of a loss with  respect to an Engine  installed  on an  airframe  other than the
Airframe,  in which case Lessee (or any Permitted  Sublessee)  shall endeavor to
arrange for any payment of insurance proceeds in respect of such loss to be held
for the  account  of  Mortgagee  (or,  if the  Lien  of the  Mortgage  has  been
discharged,  Lessor),  whether such payment is made to Lessee (or any  Permitted
Sublessee)  or any third party [and,  if Mortgagee  (or Lessor)  receives such a
payment  otherwise  than in respect of an Event of Loss,  then,  upon receipt of
evidence reasonably satisfactory to Mortgagee (or Lessor) that the damage giving
rise to such payment has been  repaired or that such payment is then required to
pay for repairs then being made,  Mortgagee  (or Lessor) shall pay the amount of
such  payment to Lessee or its  order],  and (bb) the entire  amount of any loss
involving proceeds of the Threshold Amount or less or the amount of any proceeds
of any loss in excess of the  Stipulated  Loss Value for the  Aircraft  shall be
paid to Lessee or its  order  unless a Lease  Event of  Default  exists  and the
insurers have been notified thereof by Lessor or the Mortgagee. In the case of a
loss with respect to an engine (other than an Engine) installed on the Airframe,
Lessor shall hold any payment to it of any insurance  proceeds for that loss for
the account of Lessee or any other  third party who is entitled to receive  such
proceeds.

         2.  During any  period  that the  Aircraft  is on the ground and not in
operation,  Lessee may carry or cause to be  carried,  in lieu of the  insurance
required by ss. B1 above,  insurance otherwise conforming with thE provisions of
ss. B1,  except that the scope of the risks and the type of  insurance  shall be
the same as from timE to time applicable to aircraft owned by Lessee of the same
type similarly on the ground and not in operation,  PROVIDED,  that Lessee shall
maintain  insurance  against risk of loss or damage to the Aircraft in an amount
equal to the Stipulated  Loss Value of the Aircraft  during such period that the
Aircraft is on the ground and not in operation.

C.       WAR-RISK, HIJACKING, AND ALLIED PERILS INSURANCE

         If Lessee (or any Permitted  Sublessee) operates or proposes to operate
the  Aircraft,  the  Airframe,  or any  Engine  (1) in any  area  of  recognized
hostilities,  or (2) on  international  routes  and  Lessee  (or such  Permitted
Sublessee) maintains war-risk,  hijacking,  or allied perils insurance for other
aircraft that it operates on such routes or in such areas, Lessee shall maintain
or cause to be maintained  war-risk,  hijacking,  and allied perils insurance of
substantially  the same type carried by similar  United  States  commercial  air
carriers  operating the same or comparable  models of aircraft on similar routes
or in such  areas,  and in no event in an amount less than the  Stipulated  Loss
Value.

D.       GENERAL PROVISIONS

         Any policies of insurance  carried in accordance  with ss.ss. A, B, and
C, including any policies  taken out IN  substitution  or  replacement  for such
policies:

     (1) shall name Lessor,  each Participant,  the Liquidity Provider (if any),
and Mortgagee  (and in respect of liability  insurances,  to the extent they are
available  without  unreimbursed  additional  cost  to  Lessee,  each  of  their
respective successors,  assigns, directors,  agents, officers, and employees) as
additional insureds (the "ADDITIONAL INSUREDS"), as their interests may appear;

     (2)  shall  apply  worldwide  and  have  no  territorial   restrictions  or
limitations  (except  only in the  case of war,  hijacking,  and  allied  perils
insurance  required  under  ss.  C,  which  shall  apply to thE  fullest  extent
available in the international insurance market);

     (3) shall  provide  that,  in respect of the  interests  of the  Additional
Insureds in such policies, the insurance shall not be invalidated or impaired by
any act or omission  (including  misrepresentation  and nondisclosure) by Lessee
(or any  Permitted  Sublessee)  or any other Person  (including  use for illegal
purposes  of the  Aircraft  or any  Engine),  and shall  insure  the  Additional
Insureds regardless of any breach or violation of any representation,  warranty,
declaration,  term,  or condition  contained in such  policies by Lessee (or any
Permitted Sublessee);

     (4) shall  provide  that,  if the insurers  cancel such  insurance  for any
reason whatsoever, or if it is allowed to lapse for nonpayment of premium, or if
any  material  change  is made in the  insurance  which  adversely  affects  the
interest of any of the Additional Insureds, such cancellation,  lapse, or change
shall not be effective as to the Additional  Insureds for 30 days (seven days in
the case of war risk,  hijacking,  and allied perils insurance) after receipt by
the Additional Insureds of written notice by such insurers of such cancellation,
lapse or change,  PROVIDED,  that if any notice  period  specified  above is not
reasonably obtainable, such policies shall provide for as long a period of prior
notice as shall then be reasonably obtainable;

     (5) shall waive any rights of recourse,  subrogation, setoff (including for
unpaid  premiums),  recoupment,  counterclaim,  or other  deduction,  whether by
attachment or otherwise, against each Additional Insured;

     (6) shall be primary without right of contribution from any other insurance
that may be available to any Additional Insured;

     (7) shall provide that all of the liability  insurance  provisions thereof,
except the limits of  liability,  shall operate in all respects as if a separate
policy had been issued covering each party insured thereunder;

     (8) shall provide that none of the Additional  Insureds shall be liable for
any insurance premium; and

     (9)  shall  contain  a 50/50  Clause  per  Lloyd's  Aviation  Underwriters'
Association Standard Policy Form AVS 103;

     PROVIDED,  that any such  endorsements may be subject to any limitations on
endorsements  generally  prevailing in the airline insurance  marketplace at the
time (E.G., AVN67B).

E.       REPORTS AND CERTIFICATES; OTHER INFORMATION

         On or before the  Delivery  Date and on or before each  renewal date of
the insurance  policies required  hereunder (and no less often than on an annual
basis),  Lessee  will  furnish  or  cause  to  be  furnished  to  Lessor,  Owner
Participant,  and  Mortgagee  insurance  certificates  describing  in reasonable
detail the insurance maintained hereunder and a report,  signed by Lessee's or a
Permitted  Sublessee's  regular  independent  insurance  broker (the  "INSURANCE
BROKER"), stating the opinion of such Insurance Broker that (1) all premiums for
the insurance then due have been paid, and (2) such insurance  complies with the
terms  of  this  Annex  D. To the  extent  that  such  agreement  is  reasonably
obtainable,  Lessee  will  also  cause the  Insurance  Broker to agree to notify
Lessor,  Owner  Participant,  and  Mortgagee  in writing  of any  default in the
payment of any premium and of any other act or omission on the part of Lessee of
which the Insurance  Broker has  knowledge and which might  invalidate or render
unenforceable,  in whole or in part, any insurance on the Aircraft or Engines or
cause the  cancellation or termination of such insurance,  and to notify Lessor,
Owner  Participant,  and  Mortgagee  in writing at least 30 days (seven days for
war-risk and allied perils  coverage,  or such shorter period therefor as may be
available in the  international  insurance  market,  as  applicable)  before the
cancellation,  lapse, or materially  adverse change of any insurance  maintained
pursuant to this Annex D.

F.       RIGHT TO PAY PREMIUMS

         Each  Additional  Insured shall have the rights but not the obligations
of an additional named insured.  No Additional Insured shall have any obligation
to pay any premium,  commission,  assessment,  or call due on any such insurance
(including  reinsurance).   Notwithstanding  the  foregoing,  in  the  event  of
cancellation of any required insurance due to the nonpayment of premium, each of
Lessor,  Owner  Participant,  and Mortgagee  shall have the option,  in its sole
discretion,  to pay any such premium and to maintain such  coverage,  as Lessor,
Owner Participant,  or Mortgagee may require, until the scheduled expiry date of
such insurance and, in such event, Lessee shall, upon demand,  reimburse Lessor,
Owner Participant, and Mortgagee for amounts that they so pay.

G.       DEDUCTIBLES; SELF-INSURANCE

         Lessee  may  self-insure  by way  of  deductible,  premium  adjustment,
franchise  provisions,  or  otherwise  (including,  with  respect  to  insurance
maintained  pursuant to ss. B, insuring for a maximum  amount which is lesS than
the  Stipulated  Loss Value of the Aircraft)  the  insurance  covering the risks
required  to be  insured  against  pursuant  to ss. 11 and this  Annex D under a
program  applicable to all aircraft in Lessee's fleet,  but in no casE shall the
aggregate  amount of  self-insurance  (including any  applicable  deductible) in
regard to ss. 11 and thiS Annex D during any policy  year,  with  respect to the
Aircraft,  exceed (CONFIDENTIAL MATERIAL OMITTED). In addition,  Lessee (and any
Permitted   Sublessee)  may  self-insure  to  the  extent  that  any  applicable
deductible per aircraft that does not exceed  industry  standards for major U.S.
airlines.









                             LEASE AGREEMENT N___AT


                          dated as of __________, 200_

                                     between



                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
               NOT IN ITS INDIVIDUAL CAPACITY, EXCEPT AS EXPRESSLY
                  PROVIDED HEREIN, BUT SOLELY AS OWNER TRUSTEE,

                                     Lessor

                                       and

                            AMERICAN TRANS AIR, INC.,

                                     Lessee


     One Boeing model 737-800  aircraft  bearing United States  registration no.
N___AT and  manufacturer's  serial no. _____,  including  two CFM  International
model  CFM56-7  engines  bearing  manufacturer's  serial  nos.  _____  and _____
-------------------------------------------------------------

     THIS LEASE HAS BEEN EXECUTED IN COUNTERPARTS;  SEE SS. 18.5 FOR INFORMATION
CONCERNING THE RIGHTS OF HOLDERS OF THE VARIOUS COUNTERPARTS.


<PAGE>





                                    CONTENTS



1. DEFINITIONS AND CONSTRUCTION................................................1


2. DELIVERY AND ACCEPTANCE.....................................................1

  2.1 Delivery and Lease of Aircraft...........................................1
  2.2 Acceptance by Lessee.....................................................1

3. TERM AND RENT...............................................................1

  3.1 Term   1
  3.2 Rent   1
  3.3 Payments.................................................................4

4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS..............4

  4.1 Disclaimer of Warranties.................................................4
  4.2 Certain Agreements of Lessor.............................................5
  4.3 Quiet Enjoyment..........................................................5
  4.4 Investment of Funds Held as Security.....................................5
  4.5 Title Transfers by Lessor................................................6
  4.6 Lessor's Interest in Certain Engines.....................................7
  4.7 Lease For U.S. Federal Income Tax Law Purposes; Section 1110
  of Bankruptcy Code...........................................................7

5. RETURN OF AIRCRAFT..........................................................7

  5.1 Compliance with Annex B..................................................7
  5.2 Parking and Related Matters..............................................7
  5.3 Return of Other Engines..................................................8
  5.4 Fuel   8

6. LIENS     8


7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING..........................9

  7.1 Registration and Operation...............................................9
  7.2 Possession..............................................................11
  7.3 Certain Limitations on Subleasing or Other Relinquishment of Possession.15

8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
   MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS.................. ....16

  8.1 Maintenance; Replacement and Pooling of Parts; Alterations,
  Modifications, and Additions................................................16
  8.2 Information, Certificates, Notices, and Reports.........................16

9. VOLUNTARY TERMINATION UPON OBSOLESCENCE....................................18

  9.1 Right of Termination....................................................18
  9.2 Election by Lessor to Sell..............................................19
  9.3 Retention of Aircraft by Lessor.........................................21

10. LOSS, DESTRUCTION, REQUISITION, ETC.......................................22

  10.1 Event of Loss to the Aircraft..........................................22
  10.2 Event of Loss to an Engine; Engine Exchanges...........................25
  10.3 Conditions to any Replacement..........................................26
  10.4 Conveyance to Lessee...................................................28
  10.5 Application of Payments................................................28
  10.6 Requisition of Aircraft for Use........................................29
  10.7 Requisition of an Engine for Use.......................................29
  10.8 Application of Payments................................................30
  10.9 Application of Payments During Default.................................30

11. INSURANCE.................................................................30

  11.1 Lessee's Obligation to Insure..........................................30
  11.2 Insurance for Own Account..............................................30
  11.3 Indemnification by Government in Lieu of Insurance.....................31
  11.4 Application of Insurance Proceeds......................................31
  11.5 Application of Payments During Default.................................31

12. INSPECTION................................................................32


13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE...............................33

  13.1 In General.............................................................33
  13.2 Merger of Lessee.......................................................33
  13.3 Assignment as Security for Lessor's Obligations........................34
  13.4 Successor Owner Trustee................................................34

14. LEASE EVENTS OF DEFAULT...................................................34

  14.1 Payments...............................................................35
  14.2 Insurance..............................................................35
  14.3 Other Covenants........................................................35
  14.4 Representations and Warranties.........................................35
  14.5 Bankruptcy and Insolvency..............................................36
  14.6 Repudiation or Invalidity of Guarantee.................................36

15. REMEDIES AND WAIVERS......................................................37

  15.1 Remedies...............................................................37
  15.2 Limitations Under CRAF.................................................40
  15.3 Right to Perform for Lessee............................................40
  15.4 Determination of Fair Market Rental Value and Fair Market Sales Value..41
  15.5 Remedies Cumulative....................................................41

16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC........................41


17. RENEWAL AND PURCHASE OPTIONS..............................................42

  17.1 Notices Generally......................................................42
  17.2 Renewal Options........................................................42
  17.3 Purchase Options.......................................................44
  17.4 Appraisals.............................................................46

18. MISCELLANEOUS.............................................................47

  18.1 Amendments.............................................................47
  18.2 Severability...........................................................48
  18.3 Third-Party Beneficiary................................................48
  18.4 Reproduction of Documents..............................................48
  18.5 Counterparts...........................................................48
  18.6 Notices................................................................49
  18.7 Governing Law..........................................................49
  18.8 No Waiver..............................................................49
  18.9 Entire Agreement.......................................................49


ANNEXES, EXHIBITS, AND SCHEDULES

ANNEX A             Definitions
ANNEX B             Return Conditions
ANNEX C             Maintenance
ANNEX D             Insurance

EXHIBIT A           Aircraft Description
EXHIBIT B           Form of Return Acceptance Supplement

SCHEDULE 1          Certain Terms
SCHEDULE 2          Basic Rent Payments
SCHEDULE 2A         Basic Rent Allocations
SCHEDULE 3          Stipulated Loss Value Schedule
SCHEDULE 4          Termination Value Schedule
SCHEDULE 5          EBO Price Schedule
SCHEDULE 6          Permitted Countries
SCHEDULE 7          Placards



<PAGE>





                             LEASE AGREEMENT N___AT


         This Lease  Agreement  N___AT (this  "LEASE")  dated as of  __________,
200_, between (1) First Security Bank, National Association,  a national banking
association,  not in its  individual  capacity  (except  as  expressly  provided
herein) but solely as Owner Trustee ("LESSOR"), and (2) American Trans Air, Inc.
("LESSEE"), an Indiana corporation.

         Lessor and Lessee agree as follows:

                         1. DEFINITIONS AND CONSTRUCTION

         The terms defined in Annex A, when  capitalized as in Annex A, have the
same meanings when used in this Lease. Annex A also contains rules of usage that
control construction in this Lease.

                           2. DELIVERY AND ACCEPTANCE

         2.1               DELIVERY AND LEASE OF AIRCRAFT

         Lessor  hereby  leases the Aircraft to Lessee for the Term,  and Lessee
hereby leases the Aircraft from Lessor for the Term.

         2.2               ACCEPTANCE BY LESSEE

         Lessee hereby  confirms to Lessor that Lessee has duly and  irrevocably
accepted delivery of the Aircraft for all purposes of this Lease.

                                3. TERM AND RENT

         3.1               TERM

         The Aircraft shall be leased hereunder for the Term,  unless this Lease
or the leasing of the  Aircraft is earlier  terminated  in  accordance  with any
provision of this Lease.

         3.2               RENT

     3.2.1 BASIC RENT; ADJUSTMENTS TO BASIC RENT AND CERTAIN OTHER AMOUNTS

         (a)......During  the Base Term,  Lessee  shall pay to  Lessor,  on each
Payment Date,  Basic Rent in the amount equal to the percentage of Lessor's Cost
specified  in  Schedule 2 for such  Payment  Date.  The  amounts  and periods of
Lessee's  liability  for Basic Rent shall be as  allocated  in  accordance  with
Schedule  2A. Such Basic Rent  payments and such  allocations  shall be adjusted
pursuant to ss. 3.2.1(b).  During any Renewal Term,  Lessee shall pay to Lessor,
on each  Payment  Date,  Basic Rent equal to the Renewal  Rent for that  Renewal
Term, determined pursuant to ss. 17.2.2.

         (b)......Basic  Rent, Basic Rent  allocations,  Stipulated Loss Values,
Termination Values, and EBO Price shall be subject to adjustment as follows:

                  (1) If Transaction Expenses paid by Lessor pursuant to ss. 9.2
         of the Participation  Agreement are determined to be other than 2.0% of
         Lessor's Cost, then the Basic Rent percentages in Schedule 2, the Basic
         Rent allocations in Schedule 2A, the Stipulated Loss Value  percentages
         in Schedule 3, the Termination Value percentages in Schedule 4, and the
         EBO  Price  shall  be  recalculated  (upwards  or  downwards)  by Owner
         Participant,  on or before the 120th day after the Delivery  Date using
         the same methods and assumptions used to calculate original Basic Rent,
         EBO Price, Stipulated Loss Value, and Termination Value percentages, in
         order (aa) to maintain Owner  Participant's  Net Economic  Return,  and
         (bb) to the extent  possible  consistent  with  clause (aa) of this ss.
         3.2.1(b)(1), to minimize the Net Present Value of Rents to Lessee.

                  (2)  Notwithstanding  the  foregoing,  in no event  shall  any
         adjustment  to the EBO  Price be made  such  that the EBO Price is less
         than the greatest of (aa) the adjusted  Stipulated Loss Value as of the
         EBO Date,  (bb) the estimated  fair market value of the Aircraft on the
         EBO Date as set forth in the Appraisal  referred to in ss.  5.1.2(m) of
         the Participation  Agreement, and (cc) the sum of the present values of
         (i) Basic Rent payable, as adjusted, during the Base Term after the EBO
         Date,  and (ii) the appraised  fair market value of the Aircraft at the
         end of the Base Term as estimated in the  Appraisal  referred to in ss.
         5.1.2(m) of the  Participation  Agreement,  each discounted back to the
         EBO Date (using a discount rate of 16.5 %).

         (c) All adjustments  pursuant to ss. 3.2.1(b) shall be made as promptly
as  practicable  after  either Owner  Participant  or Lessee gives notice to the
other that an event has occurred that requires an adjustment.  Owner Participant
and  Lessee  shall give  prompt  notice to the other of any event  requiring  an
adjustment.  Any recalculation of the percentages of Basic Rent payments,  Basic
Rent allocations,  Stipulated Loss Value, Termination Value, and EBO Price shall
be  prepared by Owner  Participant,  subject to  verification  at the request of
Lessee  in  accordance  with  this  ss.  3.2.1(c),  on the  basis  of  the  same
methodology  and  assumptions  used by  Owner  Participant  in  determining  the
percentages of Basic Rent,  Stipulated Loss Value,  Termination  Value,  and EBO
Price as of the Delivery Date,  except as such assumptions have been modified to
reflect the events giving rise to adjustments  hereunder and taking into account
the law applicable at the time of such adjustment.  Promptly after an adjustment
is made hereunder,  Owner  Participant  shall deliver to Lessee a description of
such adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments (1) shall be made so as to avoid  characterization of the Lease as a
"disqualified  leaseback or long-term  agreement" within the meaning of Code ss.
467 and Treasury Regulations thereunder, and (2) shall be in compliance with the
requirements  of ss.  4(1) and ss.  4(6) of Revenue  Procedure  75-21 and ss.ss.
4.02(5),  4.07(l),  and 4.07(2) of Revenue Procedure 75-28, except to the extent
that on the Delivery  Date the Lease  constituted a  "disqualified  leaseback or
long-term  agreement"  or was  not in  compliance  with  the  Revenue  Procedure
sections  referred to in clause (2). In connection with any such  adjustments to
payments and allocations of Basic Rent,  appropriate  corresponding  adjustments
shall be made to the  percentages  set forth on Schedules 3 and 4 in the columns
headed "Deferred Basic Rent Amount" and "Prepaid Basic Rent Amount".  All of the
foregoing adjustments shall be set forth in an amendment to this Lease.

         (d) If  Lessee  believes  that any  calculations  by Owner  Participant
pursuant to ss. 3.2.1(c) are in error,  and if, after  consultation,  Lessee and
Owner  Participant do not agree on an adjustment,  then a  nationally-recognized
firm of  accountants  selected by Lessee and  reasonably  satisfactory  to Owner
Participant  shall  verify  such  calculations.   Owner  Participant  will  make
available to such firm (but not to Lessee or any  representative  of Lessee) the
methodology  and assumptions  referred to in ss. 3.2.1(c) and any  modifications
thereto made to reflect the events giving rise to adjustments hereunder (subject
to the  execution  by  such  firm  of a  confidentiality  agreement,  reasonably
acceptable to Owner Participant,  prohibiting disclosure of such methodology and
assumptions to any third party).  The  determination by such firm of accountants
shall be  final.  Lessee  will pay the  reasonable  costs and  expenses  of such
verification by such accountants, except that if it results in (1) a decrease in
Basic Rent which  decreases  the  remaining Net Present Value of Rents by ten or
more basis points from the remaining Net Present Value of Rents as  recalculated
by Owner  Participant,  or (2) a material  reduction in Stipulated  Loss Values,
Termination Values, or the EBO Price, then Owner Participant will pay such costs
and expenses.

                           3.2.2            SUPPLEMENTAL RENT

         Lessee  shall pay to Lessor,  or to whomever is entitled to it, any and
all Supplemental Rent when and as it becomes due and owing. Lessee will also pay
to Lessor, or to whomever is entitled to it, as Supplemental Rent, to the extent
permitted by  applicable  Law,  interest at the Past-Due Rate on any part of any
amount of Rent  (including  Supplemental  Rent) not paid by 11:00 a.m., New York
time, on the date when due (so long as, in the case of any Person not a party to
the Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made),  for the period from and  including
the date on which the same was due to (but  excluding)  the date of  payment  in
full.

         3.3               PAYMENTS

         (a)  Payments  of Rent by  Lessee  shall  be paid by wire  transfer  of
immediately available Dollars, not later than 11:00 a.m., New York City time, on
the date when due,  to the  account  of Lessor  specified  in  Schedule 1 to the
Participation Agreement (or to such other account in the United States as Lessor
specifies to Lessee in writing at least 10 Business  Days before such payment of
Rent is due),  or, in the case of any  payment of  Supplemental  Rent  expressly
payable to a Person  other than  Lessor,  to the Person  that shall be  entitled
thereto, to such account in the United States as such Person specifies from time
to time to Lessee at least 10 Business Days before such payment of Rent is due.

         (b) Except as otherwise expressly provided herein, whenever any payment
of Rent shall be due on a day that is not a Business  Day, such payment shall be
made on the next day that is a Business  Day,  and,  if such  payment is made on
such next Business  Day, no interest  shall accrue on the amount of such payment
during such extension.

         (c) All  computations of interest under this Lease shall be made on the
basis of a year of 360 days composed of twelve 30-day months.

     4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS

         4.1               DISCLAIMER OF WARRANTIES

     LESSOR  LEASES AND LESSEE  TAKES THE  AIRCRAFT  "AS-IS,  WHERE-IS."  LESSEE
ACKNOWLEDGES   AND  AGREES  THAT,  AS  BETWEEN   LESSEE  AND  LESSOR  AND  OWNER
PARTICIPANT,  (A) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF, AND
(B) NEITHER LESSOR NOR OWNER PARTICIPANT  MAKES, HAS MADE, OR SHALL BE DEEMED TO
HAVE  MADE,  AND  EACH  WILL  BE  DEEMED  TO  HAVE  EXPRESSLY  DISCLAIMED,   ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:

     (1)   THE   AIRWORTHINESS,    VALUE,    CONDITION,    DESIGN,    OPERATION,
MERCHANTABILITY,  OR  FITNESS  FOR  USE OR FOR  ANY  PARTICULAR  PURPOSE  OF THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;

     (2)  THE  QUALITY  OF THE  MATERIAL  OR  WORKMANSHIP  WITH  RESPECT  TO THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;

     (3) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME,  ANY ENGINE,
OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;

     (4) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, OR COPYRIGHT,
OR THE LIKE; OR

     (5) THE ABSENCE OF  OBLIGATIONS  BASED ON STRICT  LIABILITY IN TORT, OR ANY
OTHER  IMPLIED  REPRESENTATION  OR  WARRANTY  WHATSOEVER  WITH  RESPECT  TO  THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF.

         4.2               CERTAIN AGREEMENTS OF LESSOR

         Unless an Event of Default  exists,  Lessor agrees to make available to
Lessee such  rights as Lessor may have under any  warranty  with  respect to the
Aircraft  made,  or  made   available,   by  Airframe   Manufacturer  or  Engine
Manufacturer,  or any of their  subcontractors or suppliers,  pursuant to and in
accordance with the terms of the Purchase Agreement Assignment.

     4.3 QUIET ENJOYMENT

         So long as no Event of Default exists,  Lessor shall not interfere with
Lessee's rights  hereunder to continued  possession,  use, and operation of, and
quiet enjoyment of, the Aircraft during the Term.

     4.4 INVESTMENT OF FUNDS HELD AS SECURITY

     4.4.1 INVESTMENT

         Any money required to be paid to or retained by Lessor that is required
to be paid to Lessee or applied as provided  herein shall,  until paid to Lessee
as  provided  herein or applied as provided  herein,  be invested by Lessor from
time to time as directed in writing by Lessee (or, if Lessee does not so direct,
by or as directed  by Lessor in its sole  discretion)  and at Lessee's  risk and
expense in Cash Equivalents so long as such Cash Equivalents specified by Lessee
or Lessor (as  applicable)  can be acquired by Lessor using its reasonable  best
efforts.

     4.4.2 PAYMENT OF GAIN OR LOSS

         Any net gain (including  interest  received)  realized as the result of
investments  pursuant  to ss.  4.4.1  (net of any fees,  commissions,  and other
reasonable  expenses  incurred in connection with such investment) shall be held
and applied in the same manner as the principal amount is to be held and applied
hereunder. Lessee will promptly pay to Lessor, on demand, the amount of any loss
realized  as  the  result  of any  such  investment  (together  with  any  fees,
commissions,  and other  reasonable  expenses  incurred in connection  with such
investment),  such  amount  so  paid  to  be  held  and  applied  by  Lessor  as
contemplated in ss. 4.4.1.

     4.4.3 LIMITATION OF LIABILITY

         All  investments  under  this ss.  4.4  shall be at  Lessee's  risk and
expense,  and  Lessor  shall  not be  liable  for any  loss  resulting  from any
investment  made  under  this  ss.  4.4  other  than by  reason  of its  willful
misconduct or gross negligence.  Any such investment may be sold (without regard
to its maturity) by Lessor without instructions  whenever such sale is necessary
to make a distribution required by this Lease.

     4.5 TITLE TRANSFERS BY LESSOR

         If Lessor  shall be  required to transfer  title to the  Aircraft,  the
Airframe,  or any Engine to Lessee or any other  Person  pursuant to this Lease,
then  (a)  Lessor  shall  (1)  transfer  to  Lessee  or such  other  Person  (as
applicable)  all of Lessor's  right,  title and interest in and to the Aircraft,
the Airframe, or such Engine (as applicable), free and clear of all Lessor Liens
attributable to Lessor, FSB, or Owner Participant,  (2) assign to Lessee or such
other Person (as applicable),  if and to the extent permitted under the Purchase
Agreement,  all warranties of Airframe Manufacturer and Engine Manufacturer with
respect to the Aircraft,  the Airframe, or such Engine, and (3) assign to Lessee
or such  other  Person (as  applicable),  if and to the  extent  permitted,  all
claims,  if any, for damage to the Aircraft,  the Airframe,  or such Engine,  in
each  case  free  of  Lessor  Liens  attributable  to  Lessor,   FSB,  or  Owner
Participant,  and without recourse or warranty of any kind whatsoever (except as
to the  transfer  described  in clause  (1) above and as to the  absence of such
Lessor  Liens),  and (b) Lessor shall  promptly  deliver to Lessee or such other
Person (as applicable), a bill of sale and agreements of assignment,  evidencing
such transfer and  assignment,  and such other  instruments of transfer,  all in
form and substance  reasonably  satisfactory to Lessee (or such other Person, as
applicable),  as Lessee (or such other Person,  as  applicable)  may  reasonably
request and furnish to Lessor.

     4.6 LESSOR'S INTEREST IN CERTAIN ENGINES

         Lessor  hereby  agrees  for the  benefit  of each  lessor,  conditional
seller, or secured party of any engine (other than an Engine) leased, purchased,
or owned by Lessee or any Permitted  Sublessee  subject to a lease,  conditional
sale,  or other  security  agreement  that Lessor will not acquire or claim,  as
against such lessor,  conditional seller, or secured party, any right, title, or
interest in such engine as the result of the  installation of such engine on the
Airframe  at any time while such  engine is subject to such  lease,  conditional
sale, or other security agreement and owned by such lessor or conditional seller
or subject to a security interest in favor of such secured party.

     4.7  LEASE  FOR U.S.  FEDERAL  INCOME  TAX LAW  PURPOSES;  SECTION  1110 OF
BANKRUPTCY CODE

     (a) Lessee and Lessor  agree that this Lease is, and shall be treated as, a
lease for U.S. federal income tax purposes of the Aircraft,  Airframe,  Engines,
and Parts.

     (b) Lessee and Lessor  intend that Lessor shall be entitled to the benefits
of Section 1110 with respect to the right to take  possession  of the  Aircraft,
Airframe, Engines, and Parts as provided in this Lease.

     5. RETURN OF AIRCRAFT

     5.1 COMPLIANCE WITH ANNEX B

         Lessee  shall  comply  with each of the  provisions  of Annex B,  which
provisions  are hereby  incorporated  by this  reference as if set forth in full
herein.

     5.2 PARKING AND RELATED MATTERS

         If Lessor  gives  written  notice to Lessee,  not less than 10 days nor
more  than  120 days  before  the end of the  Term,  requesting  parking  of the
Aircraft upon its return  hereunder,  Lessee will assist Lessor in procuring (or
cause Lessor to be provided  with) outdoor  parking  facilities for the Aircraft
for a storage  period up to 30 days,  starting on the date of such  return,  and
upon  Lessor's  request to Lessee  made at least 10 days  before the end of such
initial  30-day  period,   for  an  additional  90-day  period  commencing  upon
expiration of such initial period, at such storage facility in the 48 contiguous
states of the United States as Lessee selects. Such storage shall be at Lessor's
risk, and Lessor shall pay all applicable storage fees, except that Lessee shall
pay the parking fees for the initial 30-day  storage  period;  PROVIDED  FURTHER
that  Lessee's  obligation  to provide  parking  shall be  subject  to  Lessor's
entering into an agreement with the storage facility,  before the storage period
begins, providing that Lessor shall bear all maintenance charges and other costs
incurred, and that Lessee's obligations hereunder will be solely for the payment
of parking fees for the initial 30-day period  pursuant to the terms of this ss.
5.2. Unless Lessor and Lessee otherwise agree, the location of such parking will
also constitute the return location for the Aircraft.

     5.3 RETURN OF OTHER ENGINES

         If any Engine  owned by Lessor is not  installed on the Airframe at the
time of return  hereunder,  Lessee shall return the  Airframe  hereunder  with a
Replacement  Engine meeting the  requirements of, and in accordance with, ss. 10
and Annex B. Thereupon,  Lessor will transfer to Lessee the Engine  constituting
part of such  Aircraft  but not  installed  on such  Airframe at the time of the
return of the Airframe.

     5.4 FUEL

         Upon the return of the  Airframe  upon any  termination  of this Lease,
Lessor shall pay Lessee,  as  compensation  for any fuel or oil contained in the
fuel or oil tanks of such  Airframe,  the value of such fuel or oil at the price
paid by Lessee for such fuel or oil. However,  if the Aircraft is being returned
in  connection  with the exercise of remedies  pursuant to ss. 15,  Lessor shall
have no  obligation  to make such payment to Lessee until Lessor shall have been
paid all amounts due to it pursuant to ss. 15.

     6. LIENS

         Lessee shall not,  directly or indirectly,  create,  incur,  assume, or
suffer to exist any Lien on or with respect to the Aircraft,  the Airframe,  any
Engine, or any Part, title to any of the foregoing,  or any interest therein, or
Lessee's rights in and to this Lease or any Permitted  Sublease,  except (a) the
rights of Lessor, Owner Participant,  and Lessee under the Operative Agreements,
and of any Permitted Sublessee under any Permitted  Sublease;  (b) Lessor Liens;
(c) the  rights  of  others  under  agreements  or  arrangements  to the  extent
permitted  by ss. 7.2,  ss. 7.3, or Annex C; (d) Liens for Taxes  either not yet
due or being  contested in good faith by  appropriate  proceedings if such Liens
and such  proceedings  do not involve  more than a DE MINIMIS  risk of the sale,
forfeiture,  or loss of the Aircraft,  the Airframe, any Engine, or the interest
of  Owner  Participant   therein;  (e)  materialmen's,   mechanics',   workers',
repairers',  employees',  or other like Liens arising in the ordinary  course of
business for amounts the payment of which either is not yet  delinquent for more
than 60 days or is being contested in good faith by appropriate proceedings,  if
such Liens and such  proceedings  do not involve any more than a DE MINIMIS risk
of the sale,  forfeiture,  or loss of the Aircraft, the Airframe, any Engine, or
the interest of Owner Participant therein; (f) Liens arising out of any judgment
or award  against  Lessee,  if,  within 60 days  after the entry  thereof,  that
judgment or award is discharged or vacated,  or has its execution stayed pending
appeal,  or is  discharged,  vacated,  or  reversed  within  60 days  after  the
expiration  of such stay,  and if during any such 60-day period there is not, or
any such judgment or award does not involve,  more than a DE MINIMIS risk of the
sale,  forfeiture,  or loss of the Aircraft,  the Airframe,  any Engine,  or the
interest of Owner  Participant  therein;  and (g) any other Lien with respect to
which Lessee or any Permitted  Sublessee  provides a bond, cash  collateral,  or
other  security  adequate  in the  reasonable  opinion of Lessor.  Lessee  shall
promptly  take or cause to be taken  such  action  as may be  necessary  duly to
discharge (by bonding or otherwise)  any Lien not excepted  above that arises in
respect of the Aircraft, the Airframe, any Engine, or any Part during the Term.

     7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING

     7.1 REGISTRATION AND OPERATION

     7.1.1 REGISTRATION AND RECORDATION

         Subject  to  Lessor's  and Owner  Participant's  compliance  with their
obligations under ss. 13 of the Participation Agreement,  Lessee shall cause the
Aircraft to be, and at all times during the Term to remain, duly registered with
the FAA under the Transportation  Code or with such other country of registry as
shall be permitted  under ss. 7.1.2  hereof,  in the name of Lessor as owner and
lessor  (except to the extent that such  registration  under the  Transportation
Code is prevented or lost because of Lessor's or Owner Participant's  failure to
comply with the citizenship  requirements for registration of the Aircraft under
the Transportation Code). Lessor shall execute and deliver all such documents as
Lessee  or any  Permitted  Sublessee  reasonably  requests  for the  purpose  of
effecting  and  continuing  such  registration.  Each of the  registrations  and
recordations  referenced in this ss. 7.1.1 will be at Lessee's cost and expense,
except as otherwise provided in this Lease.

     7.1.2 REREGISTRATION

         After the Tax Attribute  Period (or before such date,  provided  Lessee
pre-pays on a lump-sum basis any liability due under the Tax Indemnity Agreement
as a result of such registration on the assumption that such registration  would
continue for the  remainder of the term of the Permitted  Sublease  described in
ss. 7.6.11(a)(3) of the Participation  Agreement, if no Special Default or Event
of Default exists,  Lessee may, by written notice to Lessor (with a copy of such
notice to Owner  Participant),  request to change the country of registration of
the  Aircraft.  Any  such  change  in  registration  shall be  effected  only in
compliance  with,  and subject to all of the conditions set forth in, ss. 7.6.11
of the Participation Agreement.

     7.1.3 MARKINGS

         If permitted by  applicable  Law, on or reasonably  promptly  after the
Delivery  Date,  Lessee  will cause to be affixed  to,  and  maintained  in, the
cockpit of the Airframe and on each  Engine,  in each case in a clearly  visible
location,  a placard of a reasonable size and shape bearing the legend set forth
in Schedule 6. Such placards may be removed  temporarily,  if necessary,  in the
course of maintenance of the Airframe or Engines. If any such placard is damaged
or becomes illegible,  Lessee shall promptly replace it with a placard complying
with the requirements of this ss. 7.1.3.

     7.1.4 COMPLIANCE WITH LAWS

         Lessee  shall not,  and shall not allow any other  Person to,  operate,
use, maintain, service, repair, overhaul, improve, or modify the Aircraft (a) in
violation of any Law binding on or applicable to the Aircraft,  the Airframe, or
any Engine, or (b) in violation of any airworthiness  certificate,  license,  or
registration of any Government Entity relating to the Aircraft, the Airframe, or
any Engine,  except (1) immaterial or  non-recurring  violations with respect to
which corrective  measures are taken promptly by Lessee or a Permitted Sublessee
(as  applicable)  upon  discovery  thereof,  and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement  relating to any such certificate,  license, or registration in good
faith in any  reasonable  manner  which does not involve  more than a DE MINIMIS
risk of the sale, forfeiture,  or loss of the Aircraft, the Airframe, any Engine
or the interest of Owner Participant  therein, any risk of criminal liability or
of material civil penalty against Lessor or Owner Participant.

     7.1.5 OPERATION

         Lessee  agrees  not to  operate,  use,  or  locate  the  Aircraft,  the
Airframe,  or any Engine, or allow the Aircraft,  the Airframe, or any Engine to
be operated,  used,  or located,  (a) in any area  excluded from coverage by any
insurance  required by the terms of ss. 11,  except in the case of a requisition
by the U.S.  Government where the U.S.  Government provides an indemnity in lieu
of such insurance, or insurance from the U.S. Government, covering such area, in
accordance  with ss. 11.3, or (b) in any recognized  area of hostilities  unless
fully  covered in accordance  with Annex D by war-risk  insurance as required by
the terms of ss. 11 (including ss. 11.3), unless in any case referred to in this
ss. 7.1.5 the Aircraft is only  temporarily  operated,  used, or located in such
area as a result of an emergency,  equipment  malfunction,  navigational  error,
hijacking, weather condition, or other similar unforeseen circumstances, so long
as Lessee diligently and in good faith proceeds to remove the Aircraft from such
area.

     7.2 POSSESSION

         Lessee will not,  without the prior written consent of Lessor and Owner
Participant,   sublease  or  otherwise  in  any  manner  deliver,  transfer,  or
relinquish  possession of the Aircraft,  the Airframe, or any Engine, or install
any Engine, or permit any Engine to be installed, on any airframe other than the
Airframe;  PROVIDED,  that,  subject to the  provisions of ss. 7.3,  Lessee may,
without such prior written consent:

     7.2.1 INTERCHANGE AND POOLING

         Subject or permit any  Permitted  Sublessee to subject (a) the Airframe
         to  normal   interchange   agreements   (provided  that  (1)  any  such
         interchange  agreement does not contemplate that Lessee (or a Permitted
         Sublessee) will be out of possession of the Airframe for more than five
         consecutive  days at a time  (absent  weather,  maintenance,  or  other
         exigencies),  and (2) the  party  to such  interchange  agreement  is a
         Permitted  Air Carrier,  not in  bankruptcy,  organized  and having its
         principal  place of business in a country with which the United  States
         then maintains  normal  diplomatic  relations and which  recognizes and
         gives  effect to the  rights,  title,  and  interests  of Lessor in the
         Airframe), or (b) any Engine (but only if such Engine is then installed
         upon  an  aircraft)  to  normal   interchange   agreements  or  pooling
         agreements or  arrangements,  in each case  customary in the commercial
         airline industry and entered into by Lessee or such Permitted Sublessee
         in the  ordinary  course  of  business;  PROVIDED,  that  (1)  no  such
         agreement or  arrangement  shall require any transfer of Lessor's title
         to the Airframe or such Engine,  and (2) if Lessor's  title to any such
         Engine  is   nevertheless   divested   under  any  such   agreement  or
         arrangement, then such Engine shall be deemed to have suffered an Event
         of  Loss as of the  date  of such  divestiture,  and  Lessee  shall  be
         required to replace such Engine with a Replacement  Engine  meeting the
         requirements of, and in accordance with, ss. 10.

     7.2.2 TESTING AND SERVICE

         Deliver or permit any Permitted  Sublessee to deliver possession of the
         Aircraft, the Airframe, any Engine, or any Part (a) to the manufacturer
         thereof  or to  any  third-party  maintenance  provider,  for  testing,
         service,  repair,  maintenance,  or  overhaul  work  on  the  Aircraft,
         Airframe,  any  Engine,  or any Part,  or, to the  extent  required  or
         permitted by the terms of Annex C, for alterations or  modifications in
         or additions to the Aircraft,  the Airframe,  or any Engine,  or (b) to
         any Person for the purpose of transport to a Person  referred to in the
         preceding clause (a).

     7.2.3 TRANSFER TO U.S. GOVERNMENT

         Transfer or permit any  Permitted  Sublessee to transfer  possession of
         the  Aircraft,  the  Airframe,  or any  Engine  to the U.S.  Government
         pursuant to CRAF or  otherwise,  in which event Lessee  shall  promptly
         notify Lessor in writing of any such  transfer of  possession  (and, in
         the case of any transfer pursuant to CRAF, in such  notification  shall
         identify by name, address, and telephone numbers the Contracting Office
         Representative(s) for the Military Airlift Command of the United States
         Air Force to whom notices must be given and to whom  requests or claims
         must be made to the extent applicable under CRAF).

     7.2.4 INSTALLATION OF ENGINES ON OWNED AIRCRAFT

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe owned by Lessee or such Permitted  Sublessee free and clear of
         all Liens except (a)  Permitted  Liens,  (b) Liens that do not apply to
         the  Engines,  and  (c)  the  rights  of  third  parties  under  normal
         interchange  or  pooling   agreements  and  arrangements  of  the  type
         permitted under ss. 7.2.1.

     7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe leased to Lessee or such Permitted Sublessee,  or purchased or
         owned by Lessee  or such  Permitted  Sublessee  subject  to a  security
         agreement,  conditional sale, or other secured  financing  arrangement,
         but only if (a) such airframe is free and clear of all Liens except (1)
         the  rights  of  the  parties  to  such  lease  or  secured   financing
         arrangement,  covering  such  airframe,  and  (2)  Liens  of  the  type
         permitted by clauses (a) and (b) of ss.  7.2.4,  and (b) Lessee or such
         Permitted  Sublessee has received from the lessor,  secured  party,  or
         conditional  seller,  in respect of such airframe,  a written agreement
         (which may be a copy of the lease, security agreement, conditional sale
         agreement,  or other agreement  covering such  airframe),  whereby such
         Person  agrees that it will not acquire or claim any right,  title,  or
         interest in, or Lien on, such Engine by reason of the  installation  of
         such  Engine on such  airframe at any time while such Engine is subject
         to this Lease or is owned by Lessor.

     7.2.6 INSTALLATIONS OF ENGINES ON FINANCED AIRCRAFT

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe owned by Lessee or such Permitted Sublessee,  leased to Lessee
         or such  Permitted  Sublessee,  or purchased or owned by Lessee or such
         Permitted  Sublessee  subject to a conditional  sale or other  security
         agreement  under  circumstances  where  neither ss. 7.2.4 nor ss. 7.2.5
         applies;  PROVIDED, that any such installation shall be deemed an Event
         of Loss with respect to such  Engine,  and Lessee shall comply with ss.
         10.2 in respect  thereof.  Until ss. 10.2 has been fully complied with,
         Lessor's  interest  in such  Engine  shall  continue  in full force and
         effect.

                           7.2.7            SUBLEASING

     With respect to the Aircraft,  the Airframe,  or any Engine,  if no Special
Default or Event of Default exists, enter into a sublease with any Permitted Air
Carrier, but only if:

     (a)  Lessee  provides  written  notice  to  Lessor  (with a copy  to  Owner
Participant) (such notice in the event of a sublease to a U.S. Air Carrier to be
given  promptly  after  entering into any such  sublease,  and, in the case of a
sublease to any other  Permitted  Air  Carrier,  10 Business  Days in advance of
entering into such sublease);

     (b) at the time that Lessee enters into such  sublease,  such Permitted Air
Carrier  shall  not be  subject  to  any  bankruptcy,  insolvency,  liquidation,
reorganization,   dissolution,   or  similar  proceeding,  and  shall  not  have
substantially all of its property in the possession of any liquidator,  trustee,
receiver, or similar Person;

     (c) any such  sublease (1) shall not extend  beyond the  expiration  of the
Base Term or any  Renewal  Term then in effect or  irrevocably  committed  to by
Lessee,  or contain a purchase  option,  unless  expressly  subject to  Lessee's
exercise of its renewal or purchase  options in accordance with the terms of ss.
17,  and in any event  subject  to the  requirements  of clause  (4) of this ss.
7.2.7(c),  (2) shall not  contain  any  purchase  option  exercisable  at a date
earlier than such date permitted  under ss. 17.3, (3) shall  explicitly  require
that  sublessee or sublessor  (or both with  specified  allocations)  will fully
comply with the Lease's  maintenance,  operation,  possession,  inspection,  and
insurance  requirements,  and (4) shall be expressly  subject and subordinate to
all the  terms of this  Lease  and to  Lessor's  rights,  powers,  and  remedies
hereunder,  including Lessor's rights under ss. 15 to repossess the Aircraft and
to terminate such sublease if an Event of Default exists;

     (d) in connection with a sublease to a Permitted  Foreign Air Carrier,  (1)
the United States maintains diplomatic relations with the country of domicile of
such Permitted Foreign Air Carrier, and (2) Lessee furnishes to Lessor and Owner
Participant a favorable  opinion of counsel,  reasonably  satisfactory to Lessor
and Owner  Participant,  located in the country of  domicile  of such  Permitted
Foreign Air Carrier,  that (aa) the terms of such sublease are legal, valid, and
binding  obligations of the parties thereto,  enforceable under the laws of such
jurisdiction,  (bb) it is not  necessary  for  Owner  Participant  or  Lessor to
register  or qualify to do  business  in such  jurisdiction,  if not  already so
registered or  qualified,  as a result of the proposed  sublease,  (cc) Lessor's
title to,  the  Aircraft,  Airframe,  and  Engines  will be  recognized  in such
jurisdiction,  (dd) the  Laws of such  jurisdiction  of  domicile  require  fair
compensation  by the  government  of such  jurisdiction,  payable  in a currency
freely  convertible  into  Dollars,  for the  loss  of  title  to the  Aircraft,
Airframe,  or Engines in the event of the requisition by such government of such
title (unless Lessee provides  insurance in the amounts required with respect to
hull insurance  under ss. 11 covering the  requisition of title to the Aircraft,
Airframe,  or  Engines by the  government  of such  jurisdiction  so long as the
Aircraft,  Airframe,  or  Engines  are  subject  to such  sublease),  (ee)  such
Permitted Air Carrier's agreement that its rights under the sublease are subject
and  subordinate  to all the terms of this  Lease is  enforceable  against  such
Permitted Air Carrier under  applicable Law, and (ff) such sublease will subject
Lessor and Owner  Participant  to no greater tort  liability  than in the United
States of America, OR, if such sublease will subject Lessor or Owner Participant
to greater  tort  liability  than in the United  States of  America,  Lessee (or
Permitted  Sublessee) has provided  insurance to insure against such  additional
liability;

     (e) Lessee furnishes to Lessor and Owner  Participant  evidence  reasonably
satisfactory to Lessor that the insurance required byss. 11 remains in effect;

     (f) all necessary documents are duly filed, registered, or recorded in such
public  offices as are required  fully to preserve  the title of Lessor,  in the
Aircraft, Airframe, and Engines;

     (g) Lessee shall  reimburse  Lessor and Owner  Participant for all of their
reasonable  out-of-pocket  fees  and  expenses  (including  reasonable  fees and
disbursements of counsel) incurred in connection with any such sublease;

     (h) no such sublease  shall be made to a "tax exempt  entity" as defined in
ss. 168(h)(2) of the Code, including a Permitted Foreign Air Carrier, before the
end of the Tax Attribute  Period unless Lessee  prepays on a lump-sum  basis any
liability  due under the Tax  Indemnity  Agreement as a result of such  sublease
based upon the assumption  that such sublease were to continue for the remainder
of the term of such sublease;

     (i) no such  sublease  will  adversely  affect  Lessor's  protection  under
Section 1110;

     (j) no such  sublease  shall permit the Permitted  Sublessee  thereunder to
sub-sublease  or transfer the Airframe or any Engine,  except for transfers by a
Permitted sublessee  permitted by the foregoing  provisions of this ss. 7.2, and
except that a Permitted  Sublessee who is a manufacturer may sub-sublease to any
Person to whom a sublease  would be permitted  under this ss.  7.2.7;  PROVIDED,
that (1) such  sub-sublease  shall  not  permit  any  sub-sub-subleasing  of the
Aircraft,  the Airframe,  or any Engine, and (2) such sub-sublease must meet the
requirement of a Permitted Sublease;

     (k) if the term of such  Sublease  is greater  than one year,  Lessee  will
assign such Sublease to Lessor as security for Lessee's obligations hereunder.

     7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER RELINQUISHMENT OF POSSESSION

         Notwithstanding anything to the contrary in ss. 7.2:

         (a) The rights of any Person who receives possession of the Aircraft in
accordance  with ss. 7.2 shall be subject  and  subordinate  to all the terms of
this Lease, and to Lessor's rights,  powers, and remedies  hereunder,  including
(1) Lessor's  right to repossess  the Aircraft  pursuant to ss. 15, (2) Lessor's
right  to  terminate   and  avoid  such   sublease,   delivery,   transfer,   or
relinquishment of possession if an Event of Default exists, and (3) the right to
require such Person to deliver the Aircraft,  Airframe, and Engines forthwith if
an Event of Default exists.

         (b) Lessee shall remain  primarily liable hereunder for the performance
of all the terms of this Lease to the same  extent as if such  transfer  had not
occurred,  and no transfer of  possession of the  Aircraft,  the  Airframe,  any
Engine,  or any Part shall in any way  discharge  or  diminish  any of  Lessee's
obligations to Lessor hereunder or under any other Operative Agreement.

         (c) Lessee  shall  ensure  that no  sublease,  delivery,  transfer,  or
relinquishment   permitted   under  ss.  7.2  shall  affect  the  United  States
registration of the Aircraft, unless also made in accordance with the provisions
of ss. 7.1.2.

         (d) Any event  that  constitutes  or would,  with the  passage of time,
constitute an Event of Loss under clause (3),  (4), or (5) of the  definition of
such  term  (as set  forth  in  Annex A) shall  not be  deemed  to  violate  the
provisions of ss. 7.2.

         (e)  No  Wet  Lease  shall   constitute   a  delivery,   transfer,   or
relinquishment of possession for purposes of ss. 7.2, nor shall it be prohibited
by the terms hereof.

     8.   MAINTENANCE;   REPLACEMENT   AND   POOLING   OF  PARTS;   ALTERATIONS,
MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS

     8.1   MAINTENANCE;   REPLACEMENT   AND   POOLING  OF  PARTS;   ALTERATIONS,
MODIFICATIONS, AND ADDITIONS

         At all times during the Term,  Lessee shall comply with (or cause to be
complied  with) each of the  provisions of Annex C, which  provisions are hereby
incorporated by this reference as if set forth in full herein.

         8.2               INFORMATION, CERTIFICATES, NOTICES, AND REPORTS

                           8.2.1            FINANCIAL INFORMATION

         Lessee will furnish to Lessor and Owner Participant:

                  (a)  within 90 days  after the end of each of the first  three
         fiscal quarters in each fiscal year of Lessee,  a consolidated  balance
         sheet  of  Lessee  and  Guarantor  as of the end of such  quarter,  and
         related  statements of income and cash flows for the period  commencing
         at the end of the previous  fiscal year and ending with the end of such
         quarter,   setting  forth  in  each  case  in   comparative   form  the
         corresponding  figures for the  corresponding  period in the  preceding
         fiscal year,  prepared in accordance  with GAAP;  PROVIDED,  that while
         Lessee or Guarantor  is subject to the  reporting  requirements  of the
         Securities  Exchange  Act of 1934,  a copy of Lessee's  or  Guarantor's
         report on Form 10-Q for such fiscal quarter  (excluding  exhibits) will
         satisfy this clause (a).

                  (b)  within  120 days  after  the end of each  fiscal  year of
         Lessee, a consolidated  balance sheet of Lessee and Guarantor as of the
         end of such fiscal year and related statements of income and cash flows
         of Lessee and Guarantor for such fiscal year, in comparative  form with
         the preceding fiscal year,  prepared in accordance with GAAP,  together
         with a report of Lessee's and Guarantor's  independent certified public
         accountants  with respect to their audit of such financial  statements;
         PROVIDED,  that while Lessee or  Guarantor is subject to the  reporting
         requirements of the Securities Exchange Act of 1934, a copy of Lessee's
         or  Guarantor's  report on Form 10-K for such  fiscal  year  (excluding
         exhibits) will satisfy this clause (b).

                           8.2.2            ANNUAL CERTIFICATE

         Within 120 days after the close of each fiscal  year of Lessee,  Lessee
shall deliver to Lessor and Owner Participant an Officer's Certificate of Lessee
to the effect that such officer is familiar with or has reviewed or caused to be
reviewed  the  relevant  terms of this  Lease  and the  other  Lessee  Operative
Agreements, and that such officer does not have knowledge of the existence as at
the date of such  certificate  of any  Event of  Default  (or,  if any  Event of
Default  exists,  specifying the nature and period of existence  thereof and the
action Lessee has taken or is taking or proposes to take with respect thereto).

                           8.2.3            INFORMATION FOR FILINGS

         Lessee  shall  promptly  furnish to Owner  Participant  or Lessor  such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's  possession,  or reasonably
available to or  obtainable  by Lessee or such  Permitted  Sublessee,  as may be
required to enable Lessor to file in a timely manner any reports  required to be
filed by it as lessor under the Lease or to enable Owner  Participant to file in
a timely manner any reports required to be filed by it as the beneficiary of the
Trust  Estate,  in either case,  with any  Government  Entity  because of, or in
connection  with,  the interest of Owner  Participant or Lessor in the Aircraft,
this Lease, or any other part of the Trust Estate;  PROVIDED, that, with respect
to any such information which Lessee reasonably deems commercially  sensitive or
confidential,  Owner Participant or Lessor (as applicable) shall afford Lessee a
reasonable  opportunity (to the extent  reasonably  obtainable) to seek from any
such Government Entity a waiver of the obligation of Owner Participant or Lessor
to file any such information, or shall consent to the filing of such information
directly by Lessee in lieu of filing by Owner Participant or Lessor,  and if any
such waiver or consent is  evidenced  to the  reasonable  satisfaction  of Owner
Participant  or Lessor (as  applicable),  then  Lessee  shall not be required to
furnish such information to Owner Participant or Lessor.

                           8.2.4            OTHER INFORMATION

         Lessee shall provide to Owner  Participant from time to time such other
information  or data as Owner  Participant  reasonably  requests  concerning the
Aircraft,   Lessee's   financial   condition,   or  otherwise  relating  to  the
transactions or matters contemplated in the Operative  Agreements,  in each case
to the extent  within  Lessee's  or any  Permitted  Sublessee's  possession,  or
reasonably available to or obtainable by Lessee or such Permitted Sublessee.

                   9. VOLUNTARY TERMINATION UPON OBSOLESCENCE

         9.1               RIGHT OF TERMINATION

         (a)  Provided  there is then no Special  Default  or Event of  Default,
Lessee  shall have the right at its option to  terminate  this Lease  during the
Base  Term,  effective  only on a  Termination  Date  occurring  on or after the
seventh anniversary of the Delivery Date, if:

                  (1) Lessee makes a good faith  determination that the Aircraft
         either  has become  economically  obsolete  or is  surplus to  Lessee's
         requirements,  and  Lessee's  Chief  Financial  Officer or Treasurer so
         certifies in writing to Lessor; and

                  (2) Lessee provides Lessor (with a copy to Owner  Participant)
         with written notice of Lessee's exercise of such termination option not
         less than 180 days and not more than 360 days  before  the  Termination
         Date specified in such notice.

         (b) Lessor shall notify Lessee of Lessor's  intention to sell or retain
the  Aircraft,  as  provided  in this ss. 9, not less than 120 days  before  the
Termination Date specified in the written notice pursuant to ss. 9.1(a)(2).  Any
failure by Lessor to give such notice of its  election  shall be deemed to be an
election to sell the Aircraft, as provided in this ss. 9.

         (c) In the event of any  termination  pursuant  to this ss.  9,  Lessee
shall not acquire  additional  737-800  aircraft during the 24 months  following
such  termination,  except to  replace  any lost or  damaged  aircraft  or under
short-term  operating leases, and Lessee shall notify Lessor in the event Lessee
plans to enter into such an operating lease to discuss the possible  re-lease of
the Aircraft from Lessor to Lessee under such short-term operating lease.

         9.2               ELECTION BY LESSOR TO SELL

                           9.2.1            BIDS; CLOSING OF SALE

         Unless  Lessor has notified  Lessee of Lessor's  election to retain the
Aircraft,  Lessee, as agent for Lessor,  shall, until the date ten Business Days
before the Termination Date, use commercially  reasonable efforts to obtain bids
for a cash  purchase  of the  Aircraft,  and Lessor may, if it desires to do so,
also  seek to obtain  such  bids.  If  Lessee  receives  any bid,  Lessee  shall
promptly,  and in any event at least ten  Business  Days before the  Termination
Date,  certify  to Lessor in writing  the amount and terms of such bid,  and the
name and  address of the Person  (who  shall not be Lessee or any  Affiliate  of
Lessee or any Person with whom Lessee or any such  Affiliate has an  arrangement
for the future use of the Aircraft by Lessee or any such  Affiliate)  submitting
such bid. If Lessor  receives  any bid on or before the date ten  Business  Days
before the Termination Date, Lessor shall, at least ten Business Days before the
Termination Date, certify to Lessee in writing the amount and terms of such bid,
and the name and address of the Person submitting such bid.

                           9.2.2            CLOSING OF SALE

         (a) On the  Termination  Date (1) Lessee shall deliver the Airframe and
Engines or engines  constituting part of the Aircraft to the bidder (if any) who
shall have  submitted  the highest  cash bid on or before the date ten  Business
Days before such  Termination  Date, in the same manner as if delivery were made
to Lessor  pursuant to ss. 5 and Annex B and in full  compliance  with the terms
thereof,  and shall duly  transfer to Lessor title to any such engines not owned
by Lessor, all in accordance with the terms of ss. 5 and Annex B, and (2) Lessor
shall  simultaneously  therewith transfer the Airframe and Engines or engines to
such bidder,  in the manner described in ss. 4.5, against cash paid to Lessor in
the  amount  of such  highest  bid and in the  manner  and in  funds of the type
specified in ss. 3.3.

         (b) All proceeds of any sale described in ss. 9.2.2(a) shall be paid to
and  retained  by Lessor  and,  on such  Termination  Date,  and as a  condition
precedent  to such sale and the  delivery of the Aircraft and Engines or engines
to such bidder,  Lessee  shall pay to Lessor,  in the manner and in funds of the
type specified in ss. 3.3:

     (1) all unpaid  Basic Rent due at any time  before such  Termination  Date;
plus

     (2) the excess (if any) of the Termination Value for the Aircraft, computed
as of such Termination Date, over the proceeds of such sale; plus

     (3) as provided in ss.  3.2.2,  interest  on the amounts  specified  in the
foregoing  clause (1) at the Past-Due  Rate from and including the date on which
any such amount was due to the date of payment of such amount in full.

         As a further  condition  precedent  to such sale and  delivery,  Lessee
shall pay all Supplemental  Rent due by Lessee to Lessor,  or Owner  Participant
under this Lease  (including (aa) all interest charges provided for hereunder or
under any other Lessee  Operative  Agreement with respect to the late payment of
any   amounts  so  payable,   (bb)  all   reasonable   and   previously-invoiced
out-of-pocket  fees and  expenses  (including  reasonable  fees and  expenses of
counsel, but excluding brokerage  commissions payable to any Person not retained
by Lessee) incurred by Lessor and Owner Participant in connection with such sale
and  the  related  termination  of this  Lease),  (cc)  all  previously-invoiced
commissions  payable to any Person  retained by Lessee in  connection  with such
sale,  and (dd) all sales,  transfer,  or similar Taxes then due with respect to
such sale).  To the extent not invoiced or due on the Termination  Date,  Lessee
shall pay in due course the obligations described in the foregoing clauses (cc),
(dd), and (ee).

         (c) Upon and  subject  to any such  sale and  receipt  of  proceeds  by
Lessor, and full and final payment of all amounts described in ss. 9.2.2(b), and
compliance by Lessee with all the other provisions of this ss. 9.2,

                  (1) Lessor will  transfer to Lessee,  in  accordance  with ss.
         4.5, any Engines  constituting  part of the Aircraft but which were not
         then installed on the Airframe and sold therewith; and

                  (2) the  obligation  of Lessee to pay Basic Rent,  on or after
         the Payment Date with reference to which Termination Value is computed,
         shall  cease,  and the Term shall end  effective as of the date of such
         sale.

         (d) A sale of the Aircraft  pursuant to this ss. 9.2.2 shall take place
only on a Termination  Date.  Subject to ss. 9.3, if no sale shall have occurred
on or as of the proposed  Termination  Date,  this Lease shall  continue in full
force and effect, and all of Lessee's obligations shall continue,  including its
obligation  to pay Rent,  in each case, as if the notice under ss. 9.1 shall not
have been given and,  subject to ss.  9.2.3(a),  Lessee may give another  notice
pursuant to ss. 9.1.

         (e) Lessor shall be under no duty to solicit  bids, to inquire into the
efforts of Lessee to obtain bids,  or otherwise to take any action in connection
with any such sale other than to transfer to the purchaser  named in the highest
bid  referred  to  above  (or to such  purchaser  and,  in the  case of  Engines
described  in ss.  9.2.2(c),  to Lessee)  the  Airframe  and  Engines or engines
against receipt of the payments described in ss. 9.2.2(b)

                           9.2.3            WITHDRAWAL OF NOTICE OF TERMINATION

         (a) So long as Lessor has not elected to retain the  Aircraft  pursuant
to ss. 9.1, Lessee may withdraw any notice given pursuant to ss. 9.1 at any time
on or before the date five Business Days before the proposed  Termination  Date,
whereupon this Lease shall continue in full force and effect and all of Lessee's
obligations  shall continue,  including its obligation to pay Rent, in each case
as if the  notice  under ss. 9.1 were not  given,  and  Lessee may give  another
notice pursuant to ss. 9.1; PROVIDED,  that Lessee shall not be entitled to give
more than three termination notices pursuant to ss. 9.1 during the Term.

         (b)  Lessee  shall  pay,  on  an  after-tax   basis,   all   reasonable
out-of-pocket  fees  and  expenses  of  Lessor  (including  reasonable  fees and
expenses of counsel)  and Owner  Participant  in  connection  with any notice of
termination  withdrawn by Lessee or in connection with any notice of termination
pursuant to which a sale of the Aircraft fails to occur.

         9.3               RETENTION OF AIRCRAFT BY LESSOR

     (a) If Lessor elects to retain the Aircraft in accordance  withss.  9.1, on
the Termination Date:

     (1) Lessee shall  deliver the Airframe and Engines or engines  constituting
part  of the  Aircraft  to  Lessor  pursuant  to ss.  5 and  Annex B and in full
compliance  with the terms  thereof,  and shall duly transfer to Lessor title to
any such engines not owned by Lessor,  all in accordance with the terms of ss. 5
and Annex B;

     (2)  Lessee  shall pay to  Lessor,  in the  manner and in funds of the type
specified inss. 3.3:

     (aa) all unpaid  Basic Rent due at any time before such  Termination  Date;
plus

     (bb) as provided in ss.  3.2.2,  interest on the amounts  specified  in the
foregoing  clause (aa) at the Past-Due Rate from and including the date on which
any such amount was due to the date of payment of such amount in full; and

                  (4)  Lessee  shall  also  pay all  Supplemental  Rent  due and
         payable  by Lessee to Lessor or Owner  Participant  under  this  Lease,
         including  all interest  charges  provided  for  hereunder or under any
         other Lessee  Operative  Agreement  with respect to the late payment of
         any  amounts so  payable,  and the  reasonable  out-of-pocket  fees and
         expenses  incurred by Lessor and Owner  Participant in connection  with
         such  termination  and  delivery of the  Airframe and Engine or engines
         (excluding  brokerage  commissions and similar  expenses payable to any
         Person(s) not retained by Lessee).

         (b) Upon full and final payment to Lessor and Owner  Participant of the
amounts  described in ss.  9.3(a)(1),  and (3) and (4), and compliance by Lessee
with all the applicable provisions of ss. 9.3(a)(2),

                  (1) Lessor will  transfer to Lessee,  in  accordance  with ss.
         4.5, any Engines  constituting  part of the Aircraft but which were not
         then installed on the Airframe and sold therewith; and

                  (2) Lessee's  obligation to pay Basic Rent otherwise due on or
         after the Termination  Date shall cease,  and the Term for the Aircraft
         shall end effective as of such Termination Date.

                    10. LOSS, DESTRUCTION, REQUISITION, ETC.

         10.1              EVENT OF LOSS TO THE AIRCRAFT

                           10.1.1           NOTICE AND ELECTION

         (a) If an Event of Loss to the Airframe  (and any  Engine(s)  installed
thereon)  occurs,  Lessee shall  promptly (and in any event within 15 days after
such  occurrence)  notify  Lessor and Owner  Participant  of such Event of Loss.
Within 60 days after such  occurrence,  Lessee shall give to Lessor (with a copy
to Owner  Participant)  written  notice of Lessee's  election to make payment in
respect of such Event of Loss,  as  provided  in ss.  10.1.2,  or to replace the
Airframe and any such Engine(s) as provided in ss. 10.1.3.

         (b)  Lessee's  failure to give the notice of election  described in ss.
10.1.1(a)  shall be  deemed to be an  election  of the  option  set forth in ss.
10.1.2. In addition,  Lessee shall not be entitled to elect the option set forth
in ss. 10.1.3 if, at the time Lessor  receives such notice from Lessee or on the
replacement date, a Special Default or an Event of Default exists.

         (c) For purposes of ss. 10.1.2,  an Event of Loss to the Airframe shall
be deemed to constitute  an Event of Loss to the  Aircraft.  For purposes of ss.
10.1.3, any Engine not actually suffering an Event of Loss shall not be required
to be replaced.

     10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE

         (a) If Lessee elects, in accordance with ss. 10.1.1, to make payment in
respect of any such Event of Loss,  then Lessee  shall pay, in the manner and in
funds of the type specified in ss. 3.3, the following amounts:

                  (1) on the date (the "LOSS PAYMENT  DATE") that is the earlier
         of (x) the  Stipulated  Loss Value Date  first  following  the 75th day
         following the date of the occurrence of such Event of Loss, and (y) the
         Stipulated  Loss Value Date first  following  the fourth  Business  Day
         following  the receipt of the  insurance  proceeds with respect to such
         occurrence  (but in any event  not  earlier  than the date of  Lessee's
         election  under ss.  10.1.1 to make  payment  under  this ss.  10.1.2),
         Lessee shall pay to Lessor:

     (aa) all unpaid  Basic Rent due at any time before the Loss  Payment  Date;
plus

     [(bb) all Basic Rent due on the Loss Payment Date; plus]

     (cc) the Stipulated  Loss Value  computed as of the  Stipulated  Loss Value
Date  immediately  preceding the Loss Payment Date (or, if the Loss Payment Date
is a Stipulated Loss Value Date, the Loss Payment Date), plus

     (dd) if the Loss  Payment  Date is not a  Stipulated  Loss Value  Date,  an
additional  amount  equal to  interest,  at the rate per annum  equal to the SLV
Rate, on the amount of the excess  referred to in clause (cc) above for each day
from and including the  Stipulated  Loss Value Date referred to in clause [(cc)]
to but excluding the Loss Payment Date; plus

     (ee) as provided in ss.  3.2.2,  interest  on the amount  specified  in the
foregoing  clause (aa) at the Past-Due Rate from and including the date on which
any such amount was due to the date of payment of such amount in full; and

                  (2) on or before the date  required for payment of the amounts
         specified in clause  10.1.2(a)(1),  Lessee shall also pay to Lessor and
         Owner Participant all other amounts due and payable by Lessee to Lessor
         and Owner Participant under this Lease, the Participation Agreement, or
         any other Lessee  Operative  Agreement and, on an after-tax  basis, all
         out-of-pocket fees and expenses (including reasonable fees and expenses
         of counsel) incurred by Lessor and each Owner Participant in connection
         with such Event of Loss.

         (b) Upon payment in full of all amounts  described in the foregoing ss.
10.1.2(a)(1),  (1) Lessee's  liability for use of the Aircraft and obligation to
pay Basic Rent hereunder with respect to the Aircraft shall  terminate,  (2) the
Term for the Aircraft  shall end,  and (3) Lessor will  transfer the Aircraft to
Lessee,  as-is and where-is,  and subject to any insurer's  salvage rights,  but
otherwise in the manner described in ss. 4.5.

                           10.1.3           REPLACEMENT OF AIRFRAME AND ENGINES

         (a) If Lessee elects,  in accordance  with ss.  10.1.1,  to replace the
Airframe and any Engine(s)  suffering the Event of Loss,  then Lessee shall,  as
promptly as possible  and in any event within 120 days after the  occurrence  of
such Event of Loss, convey or cause to be conveyed to Lessor, in compliance with
ss. 10.3 and as replacement for the Airframe and any such Engine(s),  title to a
Replacement Airframe (which shall comply with ss. 10.1.3(b)),  and for each such
Engine a Replacement Engine, in each case free and clear of all Liens other than
Permitted Liens (PROVIDED,  that if such conveyance  occurs after the end of the
Term,  Lessee  shall pay rent for the  Aircraft  from the end of the Term  until
return  thereof  pursuant  to ss. 5 at a daily rate equal to the  average  daily
Basic Rent or Renewal Rent, as applicable,  over the Base Term or  then-expiring
Renewal Term, as applicable).  If Lessee makes such election, but for any reason
does not effect such replacement  within such time period and in compliance with
the  requirements  set forth in ss.  10.3,  then Lessee  shall be deemed to have
initially  made the election set forth in ss. 10.1.2 with the effect that Lessee
shall pay,  in the manner and in funds of the type  specified  in ss.  3.3,  the
amounts required under, and in accordance with, ss. 10.1.2 (except that the time
period for payment  referenced in ss.  10.1.2(a)(1)  shall,  for the purposes of
this ss.  10.1.3(a),  in all cases be on the  Stipulated  Loss  Value Date first
following the 120th day  following  the date of the  occurrence of such Event of
Loss).

         (b) Any such Replacement Airframe shall be an airframe  manufactured by
the Airframe  Manufacturer that is the same model as the Airframe to be replaced
thereby, or an improved model, and that has a current value,  estimated residual
value,  utility,  and remaining economic useful life (without regard to hours or
cycles remaining until the next regular  maintenance check,  provided no Special
Default or Event of Default  then  exists) at least equal to the  Airframe to be
replaced thereby  (assuming that such Airframe had been maintained in accordance
with this Lease), immediately prior to such Event of Loss and that has a year of
manufacture  no  earlier  than that of the  Airframe  to be  replaced.  Any such
Replacement  Engine shall meet the requirements of, and be conveyed by Lessee to
Lessor in accordance with, ss. 10.2 (other than the notice requirement set forth
in ss. 10.2.1).

         10.2              EVENT OF LOSS TO AN ENGINE; ENGINE EXCHANGES

                           10.2.1           NOTICE

         If an Event of Loss to an Engine occurs under circumstances in which no
Event of Loss to the Airframe  occurs,  Lessee shall  promptly (and in any event
within 15 days after such occurrence) notify Lessor of such Event of Loss.

                           10.2.2           REPLACEMENT OF ENGINE

         Lessee  shall,  promptly  and in any  event  within  60 days  after the
occurrence of such Event of Loss,  convey or cause to be conveyed to Lessor,  in
compliance with ss. 10.3 and as replacement for the Engine with respect to which
any Event of Loss occurred, title to a Replacement Engine, free and clear of all
Liens other than Permitted  Liens.  Such  Replacement  Engine shall be an engine
manufactured by Engine  Manufacturer  that is the same model as the Engine to be
replaced  thereby,  or an improved model,  and that is suitable for installation
and use on the Airframe, and that has a current value, estimated residual value,
utility,  and remaining economic useful life (without regard to hours and cycles
remaining until  overhaul,  provided no Special Default or Event of Default then
exists) at least equal to the Engine to be replaced thereby  (assuming that such
Engine had been  maintained in accordance with the Lease)  immediately  prior to
such Event of Loss.

                           10.2.3           ENGINE EXCHANGE

         Upon not less than five Business  Days' prior written  notice to Lessor
(with a copy to  Owner  Participant),  Lessee  may  replace  any  Engine  leased
hereunder with another engine (the "EXCHANGED  Engine") meeting the requirements
of ss.  10.2.2.  Such  Exchanged  Engine  shall be deemed  to be a  "Replacement
Engine", and Lessor and Lessee shall comply with the provisions of ss. 10.3 with
regard to the Exchanged Engine and the Engine so replaced.

         10.3              CONDITIONS TO ANY REPLACEMENT

                           10.3.1           DOCUMENTS

         Before  or at the  time  of  conveyance  of  title  to any  Replacement
Airframe  or  Replacement  Engine  to  Lessor,  Lessee  shall  take  each of the
following actions:

         (a) furnish Lessor with a full warranty (as to title) bill of sale duly
conveying to Lessor such Replacement Airframe or Replacement Engine, in form and
substance  reasonably  satisfactory to Lessor and Owner  Participant,  and cause
such  Replacement  Airframe to be duly registered in the name of Lessor pursuant
to the Transportation Code (or such other applicable Law of a jurisdiction other
than the United States where the Aircraft is  registered in accordance  with ss.
7.1.2);

         (b) cause (1) a supplement to this Lease,  subjecting such  Replacement
Airframe or  Replacement  Engine to this Lease,  duly executed by Lessee,  to be
delivered to Lessor for  execution,  and, upon such  execution,  to be filed for
recordation  with the FAA  pursuant  to the  Transportation  Code (or such other
applicable Law of a jurisdiction other than the United States where the Aircraft
is registered in accordance with ss. 7.1.2),  and (2) such Financing  Statements
and other filings,  as Owner Participant  reasonably  request,  duly executed by
Lessee and (to the extent  applicable)  Lessor  (and  Lessor  shall  execute and
deliver the same),  to be filed in such  locations as any such party  reasonably
requests;

         (c) furnish such evidence of compliance  with the insurance  provisions
of ss. 11 with respect to such  Replacement  Airframe or  Replacement  Engine as
Owner Participant reasonably requests;

         (d) furnish an opinion or opinions  of Lessee's  counsel  (which may be
Lessee's legal  department)  reasonably  satisfactory  to Owner  Participant and
addressed  to Lessor  and Owner  Participant  to the  effect  that (1) such full
warranty  bill of sale  referred to in ss.  10.3.1(a)  constitutes  an effective
instrument  for  the  conveyance  of  title  to  the  Replacement   Airframe  or
Replacement  Engine,  and (2) in the  case  of a  Replacement  Airframe  or of a
Replacement  Engine  substituted  under ss. 10.2.3 in the absence of an Event of
Loss,  (aa) Lessor will be entitled to the benefits of Section 1110 with respect
to the  Replacement  Airframe,  and  (bb)  as to the  U.S.  federal  income  tax
consequences to Owner Participant of the replacement;

         (e) furnish an opinion of  Lessee's  aviation  law  counsel  reasonably
satisfactory to Owner  Participant and addressed to Lessor and Owner Participant
as to the due registration of any such  Replacement  Airframe and the due filing
for  recordation  of  each  supplement  to  this  Lease  with  respect  to  such
Replacement  Airframe or Replacement  Engine under the  Transportation  Code (or
such other  applicable Law of a jurisdiction  other than the United States where
the Aircraft is registered in accordance with ss. 7.1.2);

         (f) with respect to the  replacement  of the Airframe and any Engine(s)
installed  thereon  at the  time of the  Event of Loss,  if  requested  by Owner
Participant and at Lessee's  expense,  furnish a certified report of a qualified
independent aircraft appraiser,  such report and such appraiser to be reasonably
satisfactory to Owner Participant, certifying that such Replacement Airframe and
any such Replacement Engine complies with the current value,  estimated residual
value, utility, and remaining economic useful life requirements set forth in ss.
10.1.3(b); and

         (g) take such other  actions and furnish  such other  certificates  and
documents as Lessor or Owner  Participant  may reasonably  request in order that
such Replacement  Airframe or Replacement  Engine be duly and properly titled in
Lessor, leased hereunder and subjected to the Lien of the Trust Indenture to the
same extent as initially required under the Operative Agreements with respect to
the Airframe or Engine so replaced.

         Lessor  and  Lessee  understand  and agree  that if, at the time of any
replacement of the Airframe or any Engine(s) as contemplated in this ss. 10, the
Airframe was registered in a jurisdiction other than the United States, then the
requirements  set forth above in this ss. 10.3.1 relating to compliance with the
requirements of the  Transportation  Code or the FAA shall be deemed to refer to
the  comparable  applicable  Law of, and the Aviation  Authority  of, such other
jurisdiction.

                           10.3.2           OTHER OBLIGATIONS

         (a)  Lessor  and  Lessee  agree  that,  when and after any  Replacement
Airframe  becomes the  Airframe  hereunder,  and when and after any  Replacement
Engine becomes an Engine  hereunder,  this Lease shall continue to be, and shall
be treated as, a lease for U.S.  federal income tax purposes of such Replacement
Airframe and such Replacement Engine. Without limiting the foregoing, Lessee and
Lessor intend that Lessor shall,  in all events,  be entitled to the benefits of
Section 1110 with respect to any Replacement Airframe or Replacement Engine, and
Lessee  and  Lessor  shall  cooperate  and take  such  action  as the  other may
reasonably  request  so as to  ensure  that  Lessor  shall be  entitled  to such
benefits.

         (b) No Event of Loss to an Engine, or to an Airframe,  shall result in,
or  otherwise  allow or permit  (other than as provided in ss.  10.1.2(b)),  any
reduction,  deferral,  discharge, or other change in the timing or amount of any
Rent payable by Lessee  hereunder,  and (subject to such ss.  10.1.2(b))  Lessee
shall pay all such Rent and other  amounts as though  such Event of Loss had not
occurred.

         10.4              CONVEYANCE TO LESSEE

         Upon compliance by Lessee with the applicable  terms of ss.ss.  10.1.3,
10.2, and 10.3.1,  Lessor will transfer to Lessee the Airframe or Engine(s),  as
applicable,  with respect to which such Event of Loss  occurred,  in  accordance
with ss. 4.5.

         10.5              APPLICATION OF PAYMENTS

         Any amounts, other than insurance proceeds in respect of damage or loss
not  constituting an Event of Loss (the  application of which is provided for in
ss. 11), received at any time by Lessor, Lessee, or any Permitted Sublessee from
any  Government  Entity or any other Person in respect of any Event of Loss will
be paid over to Lessor to be held in  accordance  with ss.  4.5 and  applied  as
follows:

                           10.5.1           REPLACEMENT OF AIRFRAME AND ENGINES

         If such  amounts  are  received  with  respect to the  Airframe  or any
Engine(s)  installed  thereon at the time of such Event of Loss,  upon  Lessee's
compliance with the applicable  terms of ss. 10.1.3 with respect to the Event of
Loss for which such amounts are  received,  such amounts  shall  (subject to ss.
10.9) be paid over to, or retained by, Lessee.

                           10.5.2           LOSS OF ENGINE

         If such amounts are received  with respect to an Engine  (other than an
Engine  installed on the Airframe  when the Airframe  suffers an Event of Loss),
upon Lessee's compliance with the applicable terms of ss. 10.2.2 with respect to
the Event of Loss for which  such  amounts  are  received,  such  amounts  shall
(subject to ss. 10.9) be paid over to, or retained by, Lessee.

                           10.5.3           PAYMENT OF LOSS

         If such amounts are received,  in whole or in part, with respect to the
Airframe,  and Lessee makes, has made or is deemed to have made the election set
forth in ss. 10.1.2, such amounts shall be applied as follows:

     (a) FIRST,  if the sum  described  in ss.  10.1.2 has not then been paid in
full by Lessee,  such amounts shall be paid to Lessor to the extent necessary to
pay in full such sum; and

     (b) SECOND,  the remainder,  if any, shall (subject toss.  10.9) be paid to
Lessee.

         10.6              REQUISITION OF AIRCRAFT FOR USE

         If any Government  Entity  requisitions the use of the Airframe and the
Engines or engines installed thereon, and if the requisition does not constitute
an Event of Loss, Lessee shall promptly notify Lessor of such  requisition,  and
all of Lessee's  obligations  under this Lease shall continue to the same extent
as if such  requisition  had not occurred;  PROVIDED,  that, if the Airframe and
Engines or engines installed thereon are not returned to Lessor by Lessee at the
end of the Term or within 30 days  thereafter,  then  Lessee  shall be deemed to
have made the election set forth in ss. 10.1.2 with the effect that Lessee shall
be  obligated to pay the  Stipulated  Loss Value and all other  amounts  payable
pursuant to ss.  10.1.2 with  respect to the Aircraft as if an Event of Loss had
occurred as of the end of the Term. If such  requisition  does not constitute an
Event of Loss, Lessee shall be obligated to return the Airframe and Engine(s) or
engine(s) to Lessor  pursuant  to, and in all other  respects to comply with the
provisions of, ss. 5 promptly upon their return by such Government  Entity,  and
Lessee  shall  pay (or cause to be paid) to  Lessor  upon such  return an amount
equal to the average daily Basic Rent payable by Lessee during the Term for each
day after the end of the Term to but excluding  the day of such return,  up to a
maximum of 30 days,  which  payment  may be made from any  payments  received by
Lessor  or  Lessee  from  any  Government  Entity  for the  use of the  Aircraft
(notwithstanding any language to the contrary contained in ss. 10.8).

         10.7              REQUISITION OF AN ENGINE FOR USE

         If any Government  Entity  requisitions  for use any Engine but not the
Airframe,  Lessee will replace  such Engine by  complying  with ss. 10.2 and ss.
10.3 to the same  extent as if an Event of Loss with  respect to that Engine had
occurred,  and any  payments  received by Lessor or Lessee from such  Government
Entity with respect to such requisition  shall be paid or retained in accordance
with ss. 10.5.2.

         10.8              APPLICATION OF PAYMENTS

         All payments received by Lessor or Lessee, or any Permitted  Sublessee,
from  any  Government  Entity  for  the use of the  Airframe  and  Engine(s)  or
engine(s)  installed  thereon during the Term shall be paid over to, or retained
by,  Lessee,  and all payments  received by Lessor or Lessee from any Government
Entity for the use of the Airframe and Engine(s) or engine(s)  installed thereon
after the Term shall be paid over to, or retained by, Lessor; PROVIDED, that, if
such  requisition  constitutes an Event of Loss, then all such payments shall be
paid over to Lessor and held as provided in ss. 10.5.

         10.9              APPLICATION OF PAYMENTS DURING DEFAULT

         Any amount  described in this ss. 10 that is payable or creditable  to,
or  retainable  by,  Lessee  shall not be paid or credited  to, or retained  by,
Lessee  if a Special  Default  or Event of  Default  exists  when such  payment,
credit, or retention would otherwise occur, but shall instead be held by or paid
over to Lessor as security  for  Lessee's  obligations  under this Lease and the
other Lessee  Operative  Agreements,  and shall be invested  pursuant to ss. 4.4
hereof,  unless and until such  amount is applied,  at the option of Lessor,  or
upon Lessee's written request to Lessor,  from time to time during the existence
of an Event of Default, to Lessee's obligations under this Lease as and when due
(any  such  application  shall  be made to such  Lessee  obligations  as  Lessor
determines in its sole discretion).  If and when no Special Default and no Event
of  Default  exists,  such  amount  shall be paid to  Lessee to the  extent  not
previously applied in accordance with this ss. 10.9.

                                  11. INSURANCE

         11.1              LESSEE'S OBLIGATION TO INSURE

         Lessee  shall comply with,  or cause to be complied  with,  each of the
provisions  of  Annex  D,  which  provisions  are  hereby  incorporated  by this
reference as if set forth in full herein.

         11.2              INSURANCE FOR OWN ACCOUNT

         Nothing in ss. 11 shall limit or prohibit  (a) Lessee from  maintaining
the policies of insurance  required  under Annex D with higher limits than those
specified  in  Annex  D, or (b)  Lessor  or  Owner  Participant  from  obtaining
insurance  for its own account (and any  proceeds  payable  under such  separate
insurance  shall  be  payable  as  provided  in the  policy  relating  thereto);
PROVIDED,  that no insurance may be obtained or  maintained  that would limit or
otherwise adversely affect the coverage of or increase the cost of any insurance
required  to be  obtained or  maintained  by Lessee  pursuant to this ss. 11 and
Annex D.

         11.3              INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE

         During the period of any Government Entity's requisition for use of the
Aircraft or any Engine,  Lessor,  and Owner Participant shall accept, in lieu of
insurance  against any risk with respect to the  Aircraft  described in Annex D,
indemnification  from, or insurance  provided by, the U.S.  Government,  or upon
Owner Participant's written consent,  other Government Entity, against such risk
in an amount that,  when added to the amount of insurance  (including  permitted
self-insurance),  if any,  against  such  risk  that  Lessee  (or any  Permitted
Sublessee) may continue to maintain,  in accordance with this ss. 11, during the
period of such  requisition,  shall be at least equal to the amount of insurance
against such risk otherwise required by this ss. 11.

         11.4              APPLICATION OF INSURANCE PROCEEDS

         As between  Lessor and Lessee,  all  insurance  proceeds  received as a
result of the occurrence of an Event of Loss to the Aircraft or any Engine under
policies  required to be  maintained  by Lessee  pursuant to this ss. 11 will be
applied in accordance  with ss. 10.5.  All proceeds of insurance  required to be
maintained by Lessee, in accordance with ss. 11 and ss. B of Annex D, in respect
of any  property  damage  or  loss  not  constituting  an  Event  of Loss to the
Aircraft,  the  Airframe,  or any Engine will be applied to pay (or to reimburse
Lessee) for repairs or for replacement property  incorporated in accordance with
ss. 8.1,  and any  balance  remaining  after such  repairs or  replacement  with
respect to such damage or loss shall be paid over to, or retained by, Lessee.

         11.5              APPLICATION OF PAYMENTS DURING DEFAULT

         Any amount  described in this ss. 11 that is payable or creditable  to,
or  retainable  by,  Lessee  shall not be paid or credited  to, or retained  by,
Lessee  if a Special  Default  or Event of  Default  exists  when such  payment,
credit, or retention would otherwise occur, but shall instead be held by or paid
over to Lessor as security for Lessee's  obligations under this Lease, and shall
be invested  pursuant  to ss. 4.4 unless and until such  amount is  applied,  at
Lessor's option,  or upon Lessee's written request to Lessor,  from time to time
during the existence of an Event of Default, to Lessee's  obligations under this
Lease  and the  other  Lessee  Operative  Agreements  as and when due (any  such
application to be made to such obligations of Lessee as Lessor determines in its
sole  discretion).  If and when no Special  Default and Event of Default exists,
such  amount  shall be paid to Lessee to the  extent not  previously  applied in
accordance with this ss. 11.5.

                                 12. INSPECTION

         (a) At  all  reasonable  times  Lessor,  Owner  Participant,  or  their
authorized  representatives  (the "INSPECTING  PARTIES") may (not more than once
every 12 months by each such Person, unless an Event of Default exists or during
the last 12 months of the Base Term and any Renewal Term,  then such  inspection
right shall not be so limited) inspect the Aircraft and the Aircraft  Documents,
and any such  Inspecting  Party may make copies of the  Aircraft  Documents  not
reasonably deemed confidential by Lessee or a Permitted Sublessee.

         (b) Any  inspection  of the  Aircraft  hereunder  shall be limited to a
visual,  walk-around inspection that may include going on board the Aircraft and
visually examining the contents of any open panels, bays, or other components of
the  Airframe  or Engines,  but shall not  include  the opening of any  unopened
panels, bays, or other components of the Aircraft,  and no such inspection shall
interfere with Lessee's or any Permitted Sublessee's maintenance or operation of
the Aircraft, the Airframe, or any Engine.

         (c) Lessor and Owner  Participant  shall not have any duty or liability
to make,  or any duty or  liability  by reason of not  making,  any such  visit,
inspection or survey.

         (d) Each  Inspecting  Party shall bear its own  expenses in  connection
with any such  inspection  (including  the cost of any copies made in accordance
with ss. 12(a)), except following an Event of Default, in which case Lessee will
bear the costs of inspection and pay the same on demand.

         (e) Upon Lessor's  request,  during the last 12 months of the Base Term
and any Renewal Term, Lessee will give 10 Business Days' prior written notice to
Lessor and Owner Participant of any scheduled  maintenance checks,  inspections,
surveys,  or  repair  visits.  During  such  period,  Owner  Participant  or its
representative  may attend  any and all such  maintenance  checks,  inspections,
surveys, or repair visits.

                 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE

         13.1              IN GENERAL

         This Lease and the other  Lessee  Operative  Agreements  shall bind and
benefit Lessor and Lessee and their successors and permitted assigns.  Except as
otherwise  expressly  permitted  by the terms of the  Lease or any other  Lessee
Operative Agreement, Lessee will not, without the prior written consent of Owner
Participant, assign any of its rights under this Lease.

         13.2              MERGER OF LESSEE

                           13.2.1           IN GENERAL

     Lessee  shall not  consolidate  with or merge into any other  Person  under
circumstances  in which  Lessee is not the  surviving  corporation,  or  convey,
transfer,  or lease in one or more  transactions all or substantially all of its
assets to any other Person, unless:

     (a) such Person is organized, existing, and in good standing under the Laws
of the United States,  any state of the United States, or the District Columbia,
and,  upon  consummation  of such  transaction,  such Person will be a U.S.  Air
Carrier;

     (b) such Person  executes  and delivers to Lessor and Owner  Participant  a
duly authorized,  legal, valid, binding, and enforceable  agreement,  reasonably
satisfactory in form and substance to Owner Participant, containing an effective
assumption by such Person of the due and punctual  performance and observance of
each covenant, agreement, and condition in the Lessee Operative Agreements to be
performed or observed by Lessee;

     (c) such Person makes such filings and recordings  with the FAA pursuant to
the Transportation  Code as shall be necessary to evidence such consolidation or
merger;

     (d) Lessee  furnishes  Lessor and Owner  Participant  an opinion of counsel
reasonably   satisfactory   to  Owner   Participant  to  the  effect  that  such
consolidation  or merger has satisfied at the closing of such  consolidation  or
merger items (a), (b) and (c) above;

     (e) immediately  after giving effect to such  consolidation  or merger,  no
Special Default or Event of Default exists;

         (f) unless Owner  Participant  otherwise  consents,  immediately  after
giving effect to such consolidation or merger,  such Person will have a tangible
net worth of at least  the  lesser of (i) 100% of  Lessee's  tangible  net worth
immediately prior to such  consolidation or merger, and (ii) the greater of (aa)
the tangible net worth of Lessee as of March 31, 2000,  and (bb) 65% of Lessee's
tangible net worth immediately prior to such consolidation or merger; and

         (g) upon such consolidation or merger becoming  effective,  Lessor will
enjoy the same  degree of  protection  under  Section  1110 with  respect to the
Aircraft as Lessor enjoyed prior to such merger.

                           13.2.2           EFFECT OF MERGER

         Upon any such  consolidation  or merger of Lessee with or into,  or the
conveyance,  transfer,  or lease by  Lessee of all or  substantially  all of its
assets to, any Person in accordance with this ss. 13.2, such Person will succeed
to, and be  substituted  for, and may exercise  every right and power of, Lessee
under the Lessee Operative Agreements with the same effect as if such Person had
been named as  "Lessee"  therein.  No such  consolidation,  merger,  conveyance,
transfer, or lease shall have the effect of releasing Lessee or such Person from
any of Lessee's obligations,  liabilities,  covenants, or undertakings under the
Lessee Operative Agreements.

         13.3              SUCCESSOR OWNER TRUSTEE

         If any successor is appointed to serve as Owner Trustee pursuant to the
terms of the  Participation  Agreement and the Trust  Agreement,  such successor
shall,  upon  written  notice by such  successor  to Lessee,  succeed to all the
rights,  powers,  and  title of  Lessor  hereunder,  and  shall be  deemed to be
"Lessor"  and the owner of the Aircraft and the other assets of the Trust Estate
for all purposes hereof,  without the need for any consent or approval by Lessee
and without in any way altering the terms of this Lease or Lessee's  obligations
hereunder.  An appointment and designation of a successor as Owner Trustee shall
not exhaust the right to appoint and designate further  successors or additional
trustees as Owner Trustees pursuant to the Participation Agreement and the Trust
Agreement,  and such  right may be  exercised  repeatedly  as long as this Lease
shall be in effect.

                              14. EVENTS OF DEFAULT

         The  existence  of any  one or  more  of the  following  circumstances,
conditions,  acts,  or events,  for any reason  whatsoever  and whether any such
circumstance,  condition,  act, or event is  voluntary or  involuntary  or comes
about or is effected by  operation of Law or pursuant to or in  compliance  with
any judgment, decree, order, rule, or regulation of any Government Entity, shall
constitute an Event of Default so long as it shall not have been remedied:

         14.1              PAYMENTS

         Lessee fails to pay any amount of Basic Rent, Stipulated Loss Value, or
Termination  Value  within five  Business  Days after it becomes  due; or Lessee
fails  to pay any  Supplemental  Rent  (other  than  Stipulated  Loss  Value  or
Termination Value) when due and such failure continues for a period in excess of
ten Business  Days from and after the date of any written  notice to Lessee from
Lessor of the failure to make such payment when due.

         14.2              INSURANCE

         Lessee  fails to  carry  and  maintain,  or  cause  to be  carried  and
maintained,  insurance on and in respect of the Aircraft in accordance  with the
provisions of ss. 11.

         14.3              OTHER COVENANTS

         Lessee  fails to  observe  or  perform  (or  cause to be  observed  and
performed) in any material respect any other covenant,  agreement, or obligation
of  Lessee  in any  Lessee  Operative  Agreement,  and  such  failure  continues
unremedied  for a period of 30 days from and  after the date of  written  notice
thereof to Lessee (or the  Guarantor,  as the case may be) from  Lessor or Owner
Participant,  unless such  failure is capable of being  corrected  and Lessee is
diligently  proceeding  to  correct  such  failure,  and such  failure  poses no
imminent  and  material  risk  of  Lessor  or  Owner  Participant  losing  their
respective  interests in the Aircraft,  in which case there shall be no Event of
Default unless and until such failure  continues  unremedied for a period of 270
days after  receipt of such  notice;  PROVIDED,  that in all events  Lessee must
remedy  such  failures  within  90  days of  Lessee's  obtaining  access  to the
Aircraft.

         14.4              REPRESENTATIONS AND WARRANTIES

         Any  representation  or warranty made by Lessee in any Lessee Operative
Agreement  (other  than  Lessee's  representations  and  warranties  in the  Tax
Indemnity  Agreement)  (a)  proves to have  been  untrue  or  inaccurate  in any
material  respect as of the date made,  (b) is material at the time in question,
and  (c)  remains  uncured  (to  the  extent  of  the  adverse  impact  of  such
incorrectness  on the interest of Owner  Participant  or Lessor) for a period in
excess of 30 days from and after the date of written  notice thereof from Lessor
or Owner Participant to Lessee (or Guarantor, as the case may be); provided that
clause (c) above will not apply to Lessee's  representations as to the financial
condition of Lessee.

         14.5              BANKRUPTCY AND INSOLVENCY

         (a) Lessee or Guarantor consents to the appointment of or the taking of
possession by a receiver,  trustee,  or liquidator of itself or of substantially
all of its property,  or Lessee or Guarantor  admits in writing its inability to
pay its debts generally as they come due, or does not pay its debts generally as
they become due or makes a general  assignment for the benefit of creditors,  or
Lessee or  Guarantor  files a voluntary  petition in  bankruptcy  or a voluntary
petition or an answer seeking  reorganization,  liquidation or other relief in a
case under any bankruptcy  Laws or other  insolvency  Laws (as in effect at such
time), or Lessee or Guarantor  seeks relief by voluntary  petition,  answer,  or
consent  under the  provisions  of any other  bankruptcy  or other  similar  Law
providing for the  reorganization or winding-up of corporations (as in effect at
such time); or

         (b) an order,  judgment, or decree is entered by any court of competent
jurisdiction  appointing,  without Lessee's or Guarantor's  consent, a receiver,
trustee,  or  liquidator of Lessee or Guarantor or of  substantially  all of the
property of Lessee or Guarantor, or substantially all of Lessee's or Guarantor's
property is sequestered,  and any such order, judgment, or decree of appointment
or sequestration  remains in force  undismissed,  unstayed,  and unvacated for a
period of 90 days after the date of entry thereof; or

         (c) a  petition  against  Lessee  or  Guarantor  in a  case  under  any
bankruptcy  Laws or other  insolvency  Laws (as in effect at such time) is filed
and not  withdrawn  or  dismissed  within 90 days  thereafter,  or if, under the
provisions of any Law providing for reorganization or winding-up of corporations
that applies to Lessee or Guarantor, any court of competent jurisdiction assumes
jurisdiction, custody, or control of Lessee or Guarantor or of substantially all
of its  property,  and such  jurisdiction,  custody or control  remains in force
unrelinquished, unstayed, and unterminated for a period of 90 days.

         14.6     REPUDIATION OR INVALIDITY OF GUARANTEE

         Either (a) Guarantor  repudiates its obligations,  in whole or in part,
under  the  Guarantee;  or (b) the  Guarantee  ceases to be in full  effect,  is
determined to be invalid, or becomes unenforceable for any reason.

                            15. REMEDIES AND WAIVERS

         15.1              REMEDIES

         If any Event of Default  exists,  Lessor  may, at its option and at any
time and from time to time,  exercise any one or more of the following  remedies
as Lessor in its sole discretion shall elect:

                           15.1.1           RETURN AND REPOSSESSION

         Lessor may cause  Lessee,  upon  giving  written  notice to Lessee,  to
return promptly,  and Lessee shall return promptly,  the Airframe and Engines as
Lessor  shall so  demand,  to Lessor or its order in the  manner  and  condition
required by, and otherwise in accordance  with,  all the provisions of ss. 5, as
if the Airframe or Engine were being  returned at the end of the Term or Lessor,
at its option,  may enter upon the premises where the Airframe or any Engine, or
any Part  thereof,  is located and take  immediate  possession of and remove the
same by summary  proceedings  or otherwise,  all without  liability  accruing to
Lessor for or by reason of such entry or taking of  possession,  whether for the
restoration of damage to property caused by such taking or otherwise.

                           15.1.2           SALE AND USE

         Lessor may sell the  Airframe or any Engine at public or private  sale,
at  such  time(s)  and  place(s),   and  to  such  Person(s)   (including  Owner
Participant),  as Lessor  determines;  or Lessor may otherwise dispose of, hold,
use,  operate,  lease to others,  or keep idle the  Airframe or any  Engine,  as
Lessor,  in its sole  discretion,  shall  determine,  all free and  clear of any
rights of Lessee and without any duty to account to Lessee with  respect to such
action  or  inaction  or for  any  proceeds  with  respect  thereto,  except  as
hereinafter  set  forth in this ss.  15,  and  except  to the  extent  that such
proceeds  would  constitute,  under  applicable  Law, a  mitigation  of Lessor's
damages suffered or incurred as a result of the subject Event of Default. Lessor
shall give to Lessee at least 15 days'  prior  written  notice of the date fixed
for any  public  sale of the  Airframe  or any Engine or of the date on or after
which will occur the execution of any contract providing for any private sale.

                           15.1.3           CERTAIN LIQUIDATED DAMAGES

         Whether or not Lessor shall have exercised,  or shall thereafter at any
time exercise,  any of its rights under ss. 15.1.1 or ss. 15.1.2 with respect to
the Airframe or any Engine,  or any Part thereof,  Lessor,  by written notice to
Lessee specifying a payment date (which shall be the first Stipulated Loss Value
Date occurring not less than 10 days after the date of such notice),  may demand
that  Lessee to pay to Lessor,  and Lessee  shall pay to Lessor,  on the payment
date so  specified  and in the manner and in funds of the type  specified in ss.
3.3, as  liquidated  damages for loss of a bargain and not as a penalty (in lieu
of the Basic Rent (as  applicable)  for the  Aircraft  in respect of all periods
commencing  on or after the date  specified  for  payment in such  notice),  the
following amounts:

     (a) all unpaid Basic Rent due at any time before the Stipulated  Loss Value
Date specified in such notice; plus

     (b)  whichever of the  following  amounts  Lessor,  in its sole  discretion
specifies in such notice:

                  (1) an  amount  equal to the  excess  (if any) of the  present
         value,  computed as of the Stipulated Loss Value Date specified in such
         notice,  discounted  to such  date  at a rate  equal  to the  SLV  Rate
         compounded   quarterly,   of  all   unpaid   Basic   Rent   during  the
         then-remaining  portion  of the Base  Term (or,  if a Renewal  Term has
         commenced,  of all unpaid  Basic Rent during the  remaining  portion of
         such  Renewal  Term) over the Fair Market  Rental Value of the Aircraft
         for the  remainder  of the Term,  after  discounting  such Fair  Market
         Rental  Value to  present  value (at a rate per annum  equal to the SLV
         Rate,  compounded  quarterly)  as of the  Stipulated  Loss  Value  Date
         specified in such notice, or

                  (2) an amount  equal to the excess (if any) of the  Stipulated
         Loss Value for the Aircraft,  computed as of the Stipulated  Loss Value
         Date specified in such notice,  over the Fair Market Sales Value of the
         Aircraft,  as of the  Stipulated  Loss  Value  Date  specified  in such
         notice; plus

         (c) interest on the amounts  specified in the  foregoing  clause (a) at
the Past-Due  Rate from and  including the date on which any such amount was due
to the date of payment of such amount; plus

         (d) interest on the amount  specified in the foregoing clause (b)(1) or
(b)(2),  according to Lessor's election, at the Past-Due Rate from and including
the  Stipulated  Loss Value Date specified in such notice to the date of payment
of such amount.

                           15.1.4           LIQUIDATED DAMAGES UPON SALE

         If,  pursuant  to ss.  15.1.2 or  applicable  Law,  Lessor has sold the
Airframe or any Engine,  then, in lieu of exercising its rights under ss. 15.1.3
with  respect to the  Aircraft,  the  Airframe,  or any Engine (as  applicable),
Lessor may, if Lessor so elects,  upon giving written  notice to Lessee,  demand
that  Lessee to pay to Lessor,  and Lessee  shall pay to Lessor,  on the date of
such sale and in the manner and in funds of the type  specified  in ss.  3.3, as
liquidated  damages  for loss of a bargain  and not as a penalty (in lieu of the
Basic Rent for the Aircraft in respect of all periods commencing on or after the
date of such sale), the following amounts:

     (a) all unpaid Basic Rent due at any time before the Stipulated  Loss Value
Date on or immediately preceding the date of such sale; plus

     (b) an amount equal to the excess, if any, of (1) the Stipulated Loss Value
of the Aircraft,  computed as of the  Stipulated  Loss Value Date referred to in
the foregoing clause (a), over (2) the proceeds of such sale; plus

     (c) if the date of such sale is not a Stipulated Loss Value Date, an amount
equal to interest, at the rate per annum equal to the SLV Rate, on the amount of
Stipulated Loss Value referred to in clause (b)(1) above, from and including the
Stipulated  Loss Value Date referred to in the foregoing  clause (a) to the date
of such sale; plus

     (d) all brokerage  and other  out-of-pocket  fees and expenses  incurred by
Lessor and Owner Participant in connection with such sale; plus

     (e) interest on the amounts  specified in the  foregoing  clause (a) at the
Past-Due  Rate from and  including  the date on which any such amount was due to
the date of payment of such amount; plus

     (f) interest on the sum of the amounts  specified in the foregoing  clauses
(b), (d) and (e) at the Past-Due  Rate from and  including the date of such sale
to the date of payment of such amounts.

                           15.1.5           RESCISSION

         Lessor may (a) at its option, rescind or terminate this Lease as to the
Aircraft,  the Airframe, or any Engine, or any Part thereof, or (b) exercise any
other  right or  remedy  that may be  available  to it under  applicable  Law or
proceed by  appropriate  court  action to enforce the terms hereof or to recover
damages for the breach hereof.

                           15.1.6           OTHER REMEDIES

         In addition to the  foregoing  remedies  (but  without  duplication  of
amounts  otherwise  paid under this ss. 15),  Lessee shall be liable for any and
all unpaid Rent due  hereunder  before,  during,  or after  (except as otherwise
provided  herein) the  exercise  of any of the  foregoing  remedies  and for all
reasonable  attorneys'  fees and other  costs and  expenses  of Lessor and Owner
Participant,  including interest on overdue Rent at the rate as herein provided,
incurred by reason of the  existence  of any Event of Default or the exercise of
Lessor's  remedies  with respect  thereto,  including all  reasonable  costs and
expenses incurred in connection with the return of the Airframe or any Engine in
accordance  with the terms of ss. 5, or in placing the Airframe or any Engine in
the condition and airworthiness required by ss. 5.

         15.2              LIMITATIONS UNDER CRAF

         Notwithstanding  the provisions of ss. 15.1, during any period that the
Aircraft,  the Airframe, or any Engine is subject to CRAF in accordance with the
provisions  of ss. 7.2.3 and in the  possession of the U.S.  Government,  Lessor
shall not, as a result of any Event of Default,  exercise its remedies hereunder
in such manner as to limit  Lessee's  control under this Lease (or any Permitted
Sublessee's control under any Permitted Sublease) of the Aircraft, the Airframe,
or such Engine,  unless  Lessor gives at least 30 days' (or such other period as
may then apply under CRAF) written notice of default  hereunder by registered or
certified  mail to  Lessee  (and  any  Permitted  Sublessee)  with a copy to the
Contracting  Officer  Representative or Representatives for the Military Airlift
Command of the United  States Air Force to whom  notices must be given under the
contract governing Lessee's (or any Permitted Sublessee's) participation in CRAF
with respect to the Aircraft, the Airframe, or any Engine.

         15.3              RIGHT TO PERFORM FOR LESSEE

         If Lessee (a) fails to make any payment of Rent  required to be made by
it  hereunder  or (b)  fails to  perform  or comply  with any of its  agreements
contained  herein and such failure  under this clause (b) continues for a period
of 30 days after the  earlier  of Lessor or Owner  Participant,  giving  written
notice  thereof to  Lessee,  or (c) fails to  maintain  the  insurance  required
hereunder  and such failure  under this clause (c)  continues  for 10 days after
such notice,  then Lessor or Owner  Participant  may (but shall not be obligated
to) make such payment or perform or comply with such  agreement,  and the amount
of such  payment and the amount of the  expenses of Lessor or Owner  Participant
incurred in  connection  with such payment or the  performance  of or compliance
with such  agreement (as  applicable),  together  with  interest  thereon at the
Past-Due Rate, shall be deemed  Supplemental Rent, payable by Lessee upon demand
by Lessor or Owner Participant,  whichever is entitled thereto. No such payment,
performance,  or  compliance  shall be deemed to waive any Default or  otherwise
relieve Lessee of its obligations with respect thereto.

     15.4 DETERMINATION OF FAIR MARKET RENTAL VALUE AND FAIR MARKET SALES VALUE

         For the  purpose of this ss. 15, the Fair  Market  Rental  Value or the
Fair Market Sales Value of the Aircraft,  the  Airframe,  or any Engine shall be
determined  on an "as is, where is" basis and shall take into account  customary
brokerage and other  out-of-pocket  fees and expenses which  typically  would be
incurred in connection with a re-lease or sale of such an aircraft, airframe, or
engine. Any such determination shall be made by an Appraiser selected by Lessor,
and the  costs  and  expenses  associated  therewith  shall be borne by  Lessee;
PROVIDED, that, if Lessor does not obtain possession of the Aircraft pursuant to
this ss. 15, an Appraiser  shall not be appointed,  and Fair Market Rental Value
and Fair Market Sales Value for purposes of this ss. 15 shall be zero.

         15.5              REMEDIES CUMULATIVE

         Nothing  contained in this Lease shall be construed to limit in any way
any right,  power,  remedy,  or privilege of Lessor hereunder or under any other
Operative  Agreement or now or hereafter existing at law or in equity.  Each and
every  right,  power,  remedy,  and  privilege  hereby given to, or retained by,
Lessor in this Lease  shall be in  addition  to and not in  limitation  of every
other right, power,  remedy, and privilege given under the Operative  Agreements
or now or hereafter existing at law or in equity.  Each and every right,  power,
remedy,  and  privilege  of Lessor  under  this  Lease  and any other  Operative
Agreement may be exercised from time to time or simultaneously  and as often and
in such order as may be deemed  expedient by Lessor.  All such  rights,  powers,
remedies, and privileges shall be cumulative and not mutually exclusive, and the
exercise of one shall not be deemed a waiver of the right to exercise any other.
Lessee hereby waives to the extent  permitted by applicable  Law any right which
it may have to require Lessor to choose or elect remedies.

                         16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.

         (a)  Lessee's  obligation  to pay all Rent payable  hereunder  shall be
absolute  and  unconditional,  and  shall  not  be  affected  by  any  event  or
circumstance,  including: (1) any setoff, counterclaim,  recoupment, defense, or
other right that Lessee may have against Lessor, Owner Participant, or any other
Person for any reason  whatsoever;  (2) any defect in the title,  airworthiness,
condition, design, operation, or fitness for use of, or any damage to or loss or
destruction of, the Aircraft,  the Airframe,  or any Engine, or any interruption
or  cessation  in the  use or  possession  thereof  by  Lessee  for  any  reason
whatsoever;  (3)  any  insolvency,   bankruptcy,   reorganization,   or  similar
proceedings  by or  against  Lessee  or  any  other  Person;  or (4)  any  other
circumstance,  happening, or event whatsoever,  whether or not similar to any of
the foregoing.

         (b) If for any reason  whatsoever  this Lease  shall be  terminated  in
whole  or in  part by  operation  of law or  otherwise  except  as  specifically
provided herein,  Lessee  nonetheless agrees to pay an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms  hereof had this Lease not been  terminated  in whole or in part.
Lessee hereby  waives,  to the extent  permitted by applicable  Law, any and all
rights that it may now have or that at any time  hereafter may be conferred upon
it, by statute or otherwise,  to  terminate,  cancel,  quit,  or surrender  this
Lease, except in accordance with the express terms hereof.

         (c)  Nothing  set forth in this ss. 16 shall be  construed  to prohibit
Lessee  from  separately  pursuing  any claim that it may have from time to time
against  Lessor or any other Person with  respect to any matter  (other than the
absolute and unconditional nature of Lessee's obligations hereunder to pay Rent,
and other than the matters specified in paragraphs (a) and (b) above).

                        17. RENEWAL AND PURCHASE OPTIONS

         17.1              NOTICES GENERALLY

         (a) Unless otherwise  provided by this ss. 17, at least 270 days and no
more than 365 days  before the  Scheduled  Expiration  Date for the Base Term or
then-current  Renewal Term,  Lessee may provide  irrevocable  written  notice to
Lessor  (a  "PRELIMINARY  NOTICE"),   with  a  copy  of  such  notice  to  Owner
Participant,  that Lessee  intends to exercise  the option  either to extend the
leasing of the Aircraft  for a Renewal Term  pursuant to ss. 17.2 or to purchase
the Aircraft on the Scheduled Expiration Date pursuant to ss. 17.3.

         (b) If Lessee gives a Preliminary  Notice,  then Lessee shall provide a
further notice, at least 30 days before the following Scheduled Expiration Date,
specifying  which  option it intends  to elect,  pursuant  to ss.  17.2.1 or ss.
17.3.1 (as applicable).  If Lessee fails to give such further notice at least 30
days before  such  Scheduled  Expiration  Date,  Lessee  shall be deemed to have
elected its option to purchase the Aircraft pursuant to ss. 17.3.1.

         17.2              RENEWAL OPTIONS

                           17.2.1           RENEWAL NOTICE

         (a) If Lessee has given a Preliminary Notice, as specified in ss. 17.1,
and subject to the terms and  conditions  of this ss. 17.2,  Lessee may exercise
its option to extend the leasing of the Aircraft  hereunder  until the following
Scheduled Expiration Date, on the same terms (except as contemplated by this ss.
17) as in the Lessee  Operative  Agreements  with  respect to the Base Term,  by
delivering a notice (a "RENEWAL  NOTICE") to Lessor not less than 30 days before
the Scheduled Expiration Date.

     (b) Notwithstanding anything to the contrary in any Operative Agreement:

                  (1) No  Preliminary  Notice or Renewal Notice shall be binding
         on Lessor  or oblige  Lessor to  extend  the  leasing  of the  Aircraft
         hereunder for a Renewal Term if any Special Default or Event of Default
         exists on and as of the date that such  Renewal  Term  would  otherwise
         commence.

                  (2) A Renewal  Notice  shall be  revocable  by Lessee until 10
         Business Days after the Renewal Rent is  determined in accordance  with
         ss.  17.2.2,  and unless  revoked by written notice by Lessee to Lessor
         shall   thereafter   become   irrevocable   and  shall   constitute  an
         unconditional  obligation  of  Lessee  to  extend  the  leasing  of the
         Aircraft  hereunder  for the Renewal Term to which such Renewal  Notice
         relates.  If Lessee revokes a Renewal Notice as indicated above, Lessee
         will be deemed to have  irrevocably  elected its option to purchase the
         Aircraft pursuant to ss. 17.3.1.

                  (3) Lessee shall not be entitled to give any Renewal Notice if
         it (aa) has not  delivered  a  Preliminary  Notice to Lessor,  (bb) has
         delivered a Purchase Notice to Lessor, or (cc) has previously delivered
         four Renewal Notices to Lessor.

                           17.2.2           RENEWAL RENT

         (a)  During  each  Renewal  Term,  Lessee  shall  pay to Lessor on each
Payment Date,  in the manner and in the funds of the type  specified in ss. 3.3,
Renewal Rent in arrears.

         (b) The Renewal Rent payable by Lessee on each Payment Date during each
Renewal Term shall be the Fixed Rate (or, if less, the Applicable  Percentage of
the Fair  Market  Rental  Value).  Any such Fair  Market  Rental  Value shall be
determined  not more than 120 days and not less than 100 days  before  the first
day of such Renewal Term by mutual agreement of Lessor and Lessee or, if they do
not agree, by an appraisal in accordance with ss. 17.4.

     17.2.3 STIPULATED LOSS AND TERMINATION VALUES

         (a) For any Renewal Term,  Stipulated  Loss Value Dates and Termination
Value Dates shall be extended  throughout such Renewal Term on the same days and
for the same months as during the Base Term.

         (b)  Stipulated  Loss  Value and  Termination  Value  amounts  that are
payable  during any such Renewal Term shall be  determined at the same time that
the  Renewal  Rent  for  such  Renewal  Term is  determined  under  ss.  17.2.2.
Stipulated Loss Values and  Termination  Values for any such Renewal Term shall,
commencing  on the first day of such Renewal  Term,  be equal to the Fair Market
Sales Value of the Aircraft on such day, and shall decline  ratably on a monthly
basis to the salvage  value of the Aircraft as of the last day of its  remaining
useful life.

         (c) For purposes of calculating  Stipulated  Loss Value and Termination
Value  amounts  applicable  during any Renewal  Term,  the  "salvage  value" and
"useful life" shall be determined by mutual agreement of Lessor and Lessee,  or,
if they do not agree, by an appraisal in accordance with ss. 17.4.

         17.3              PURCHASE OPTIONS

                           17.3.1           PURCHASE NOTICE

     (a) Provided that at the time of such election no Special  Default or Event
of Default exists,  Lessee may,  subject to ss. 17.1 and this ss. 17.3, elect to
purchase the  Aircraft:  (1) on the EBO Date as shown on Schedule 5 at the price
indicated  thereon;  (2) on any Purchase  Date, at a purchase price equal to the
Fair Market Sales Value of the Aircraft computed as of the Purchase Date; or (3)
(aa) on any  Payment  Date  occurring  after  the  Tax  Attribute  Period,  if a
Burdensome  Indemnity  Payment not waived by Owner  Participant shall become due
and owing,  if Lessee did not cause such indemnity with the intent of permitting
such purchase and if such purchase  would  eliminate  such indemnity on a future
basis,  or (bb) on any Payment Date after the EBO Date,  if Lessee has committed
to (but not  commenced) a  Significant  Expenditure,  then (whether as to clause
(aa) or (bb)) at a purchase  price  equal to the  greater of (x) the Fair Market
Sales Value of the Aircraft  computed as of such Payment Date (not including any
portion of the Fair  Market  Sales  Value of the  Aircraft  attributable  to any
Significant Expenditure) and (y) the Termination Value for the Aircraft computed
as of such Payment Date.

     (b) Lessee may exercise such option to purchase the  Aircraft,  by delivery
of a  written  notice  (a  "PURCHASE  NOTICE")  to  Lessor  (with a copy of such
Purchase Notice to Owner Participant) not less than 60 days and no more than 365
days before the EBO Date (for a purchase under ss. 17.3.1(a)(1)),  not less than
30 days and no more than 365 days before the Purchase Date (for a purchase under
ss.  17.3.1(a)(2)),  and not less than 120 days and no more than 365 days before
the Payment Date specified in such Purchase Notice (for a voluntary  termination
purchase under ss. 17.3.1(a)(3)).

     (c) Notwithstanding anything to the contrary in any Operative Agreement:

                  (1) Any  Purchase  Notice  delivered  or  deemed  to have been
         delivered pursuant to ss.  17.3.1(a)(1) or (2) shall be irrevocable and
         shall constitute an unconditional  obligation of Lessee to purchase the
         Aircraft  under  this  ss.  17.3;  and any  Purchase  Notice  delivered
         pursuant to ss. 17.3.1(a)(3), shall be revocable until 10 Business Days
         after the  determination  of the Fair Market Sales Value in  accordance
         with ss.  17.3.2,  and unless so revoked by written notice by Lessee to
         Lessor  (with a copy to  Owner  Participant)  shall  thereafter  become
         irrevocable and shall constitute an unconditional  obligation of Lessee
         to purchase the Aircraft under this ss. 17.3.

     (2) Lessee  shall not be entitled to give any Purchase  Notice  pursuant to
ss. 17.3.1(a)(2) if it has not delivered a Preliminary Notice.

     17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE

         The Fair Market Sales Value of the  Aircraft  shall be  determined  not
more than 120 days and not less than 100 days  before  the  applicable  Purchase
Date or Payment Date by mutual agreement of Lessor and Lessee, or, if they shall
be unable to agree, by an appraisal in accordance with ss. 17.4.

                           17.3.3   PAYMENTS BY LESSEE

     (a) If Lessee elects to purchase the Aircraft pursuant to clause (1) of ss.
17.3.1(a),  then on the EBO Date  Lessee  shall  pay to  Lessor  in  immediately
available funds:

     (1) all unpaid Basic Rent due before the EBO Date; plus

     (2) the EBO Price; plus

     (3) all Supplemental  Rent then due, and any sales or transfer tax then due
in connection with such purchase.

     (b) If Lessee elects to purchase the Aircraft pursuant to clause (2) of ss.
17.3.1(a),  then on the  applicable  Purchase Date Lessee shall pay to Lessor in
immediately available funds:

     (1) all unpaid Basic Rent due on or before such Purchase Date; plus

     (2) the applicable purchase price for the Aircraft; plus

     (3) all Supplemental  Rent then due, and any sales or transfer tax then due
in connection with such purchase.

     (c) If Lessee elects to purchase the Aircraft pursuant to clause (3) of ss.
17.3.1(a),  then on the Payment  Date on which  Lessee  elects to  purchase  the
Aircraft, Lessee shall pay to Lessor in immediately available funds:

     (1) all unpaid Basic Rent due on or before such Payment Date; plus

     (2) the purchase price of the Aircraft pursuant to such clause (3); plus

     (3) all Supplemental  Rent then due, and any sales or transfer tax then due
in connection with such purchase.

                           17.3.4           TITLE

         Upon full and final  payment  by  Lessee of (a) the  applicable  amount
payable under ss. 17.3.3,  (b) on an after-tax basis, all out-of-pocket fees and
expenses (including  reasonable fees and expenses of counsel) incurred by Lessor
and Owner  Participant  in connection  with such purchase and invoiced to Lessee
prior  thereto,  and (c) all other  amounts then due and payable by Lessee under
the Operative  Agreements,  Lessor will transfer to Lessee title to the Aircraft
in accordance with ss. 4.5.

                           17.3.5           INSTALLMENT EBO PURCHASE

         Lessee and Lessor  acknowledge that at Lessee's  election the EBO Price
may be payable in  installments  as  provided  in  Schedule 5. Lessor and Lessee
agree  that  if  Lessee  elects  to  purchase  the  Aircraft   pursuant  to  ss.
17.3.1(a)(1) and elects to pay the EBO Price in  installments,  Lessee agrees to
provide security to Lessor to secure the unpaid balance of the EBO Price,  which
security  shall  be  required  to be in an  amount  and  otherwise  in form  and
substance  reasonably  satisfactory to Lessor and Owner Participant.  Subject to
the foregoing,  upon payment of the initial  installment of the EBO Price as set
forth in Schedule 5 together with all amounts  otherwise payable pursuant to ss.
17.3.3(a)  and ss.  17.3.4,  Lessor  will  transfer  title  to the  Aircraft  in
accordance with ss. 4.5.

         17.4              APPRAISALS

         Whenever  Fair Market  Rental  Value or Fair Market  Sales Value of the
Aircraft is required to be determined by an appraisal  under this ss. 17, Lessee
and Lessor  shall  appoint a  mutually-satisfactory  Appraiser  to conduct  such
appraisal.  If Lessee and Lessor  fail to agree upon a  satisfactory  Appraiser,
then each shall promptly appoint a separate Appraiser, and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor does not so appoint an
Appraiser,  the determination of the single Appraiser  appointed shall be final.
If two Appraisers  are appointed and within seven days after the  appointment of
the latter of such two Appraisers,  they do not agree upon such amount, such two
Appraisers  shall,  within eight days after such latter  appointment,  appoint a
third Appraiser,  and such amount shall be determined by such three  Appraisers,
who shall  make their  separate  appraisals  within  seven  days  following  the
appointment  of the third  Appraiser,  and any  determination  so made  shall be
conclusive  and binding  upon Lessor and Lessee.  If no such third  Appraiser is
appointed within such eight-day period, either Lessor or Lessee may apply to the
American  Arbitration  Association  to make such  appointment,  and both parties
shall be bound by such appointment.  The foregoing  appraisal procedure shall in
any event be  completed no less than 125 days before the end of the Base Term or
any Renewal Term (unless such procedure is undertaken in connection  with ss. 15
or ss.  17.3.1(a),  in  which  case it shall be  completed  promptly).  If three
Appraisers are appointed and the difference  between the determination  which is
further from the middle  determination and the middle determination is more than
125%  of  the  difference  between  the  middle   determination  and  the  third
determination,  then such further determination shall be excluded, the remaining
two  determinations  shall be  averaged,  and such  average  shall be final  and
binding   upon  Lessor  and  Lessee.   Otherwise,   the  average  of  all  three
determinations  shall be final and binding upon Lessor and Lessee.  The fees and
expenses of all such  Appraisers  and such  appraisal  procedure  shall be borne
equally by Lessee and Lessor.

                                18. MISCELLANEOUS

         18.1              AMENDMENTS

         No  provision  of this  Lease  may be  amended,  supplemented,  waived,
modified,  discharged,  terminated,  or otherwise varied orally,  but only by an
instrument in writing that  specifically  identifies the provision of this Lease
that it purports to amend, supplement,  waive, modify, discharge,  terminate, or
otherwise  vary and is  signed  by  Lessor  and  Lessee.  Each  such  amendment,
supplement, waiver, modification,  discharge,  termination, or variance shall be
effective only in the specific  instance and for the specific  purpose for which
it is given.  No provision of this Lease shall be varied or contradicted by oral
communication,  course of dealing or performance,  or other manner not set forth
in an  agreement,  document,  or  instrument in writing and signed by Lessor and
Lessee.

         18.2              SEVERABILITY

         If  any   provision   hereof  shall  be  held  invalid,   illegal,   or
unenforceable in any respect in any jurisdiction,  then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such  jurisdiction,  and (b) such invalidity,  illegality,  or  unenforceability
shall not affect the validity,  legality, or enforceability of such provision in
any other jurisdiction.  If, however,  any Law pursuant to which such provisions
are held invalid,  illegal,  or unenforceable  may be waived,  Lessor and Lessee
hereby waive such Law to the full extent  permitted,  to the end that this Lease
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.

         18.3              THIRD-PARTY BENEFICIARY

         This Lease is not  intended  to  provide,  and shall not  provide,  any
Person not a party hereto (other than Owner Participant and the Persons referred
to in ss. 4.6) with any rights of any nature  whatsoever  against  either of the
parties hereto,  and no Person not a party hereto (other than Owner  Participant
and the  Persons  referred  to in ss.  4.6)  shall  have any  right,  power,  or
privilege in respect of this Lease, or have any benefit or interest  arising out
of this Lease.

         18.4              REPRODUCTION OF DOCUMENTS

         This Lease (including all annexes,  schedules, and exhibits hereto) and
all  agreements,  instruments,  and  documents  relating  hereto,  including (a)
consents,  waivers,  and modifications  that may hereafter be executed,  and (b)
financial  statements,   certificates,   and  other  information  previously  or
hereafter  furnished to any party hereto, may be reproduced by such party by any
photographic,  photostatic,  microfilm,  micro-card,  miniature photographic, or
other  similar  process,  and such party may destroy any  original  documents so
reproduced.  Any  such  reproduction  shall be  admissible  in  evidence  as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such  reproduction  was made by such
party in the regular course of business),  and any  enlargement,  facsimile,  or
further reproduction of such reproduction likewise is admissible in evidence.

         18.5              COUNTERPARTS

         This Lease and any amendments, waivers, consents, or supplements hereto
may be executed in any number of counterparts (or upon separate  signature pages
bound together into one or more counterparts),  each fully-executed set of which
when  so  executed  shall  be  deemed  to be  an  original,  and  all  of  which
counterparts,  taken together, shall constitute one and the same instrument. The
single fully-executed  original of this Lease marked "Original" on the signature
page  hereof  is  the  original  for  chattel  paper  purposes,  and  all  other
counterparts   are   duplicates  for  chattel  paper  purposes  and  are  marked
"duplicate" on the signature page hereof. No security interest in this Lease may
be perfected by the possession of any counterpart other than the "Original".

         18.6              NOTICES

         Unless otherwise  expressly permitted by the terms hereof, all notices,
requests,  demands,  authorizations,  directions,  consents,  waivers, and other
communications  required or permitted  to be made,  given,  furnished,  or filed
hereunder shall be made, given, furnished, or filed, and shall become effective,
in the manner prescribed in ss. 15.7 of the Participation Agreement.

         18.7              GOVERNING LAW

         THIS LEASE  SHALL IN ALL  RESPECTS  BE GOVERNED  BY, AND  CONSTRUED  IN
ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK,  INCLUDING  ALL MATTERS OF
CONSTRUCTION,  VALIDITY,  AND PERFORMANCE.  THIS LEASE IS BEING DELIVERED IN THE
STATE OF NEW YORK.

         18.8              NO WAIVER

         No failure on the part of Lessor to exercise, and no delay by Lessor in
exercising,  any of its rights, powers, remedies, or privileges under this Lease
or  provided  at Law,  in  equity  or  otherwise  shall  impair,  prejudice,  or
constitute  a waiver  of any such  right,  power,  remedy,  or  privilege  or be
construed  as a waiver  of any  breach  hereof  or  default  hereunder  or as an
acquiescence  therein,  nor shall any  single or  partial  exercise  of any such
right,  power,  remedy,  or  privilege  preclude  any other or further  exercise
thereof  by Lessor  or the  exercise  of any  other  right,  power,  remedy,  or
privilege by Lessor. No notice to or demand on Lessee in any case shall,  unless
otherwise  required  under this  Lease,  entitle  Lessee to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of Lessor to any other or  further  action in any  circumstances  without
notice or demand.

         18.9              ENTIRE AGREEMENT

         This Lease, together with the other Operative Agreements,  on and as of
the date hereof  constitute  the entire  agreement  of the  parties  hereto with
respect to the subject matter hereof and thereof,  and all prior  understandings
or agreements,  whether written or oral, between the parties hereto with respect
to such subject matter are hereby superseded in their entirety.

                           [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]





<PAGE>




         IN  WITNESS  WHEREOF,  Lessor  and  Lessee  have  executed  this  Lease
Agreement N___AT.



                                    FIRST SECURITY BANK, NATIONAL
                                    ASSOCIATION,   NOT  IN  ITS
                                    INDIVIDUAL CAPACITY, EXCEPT
                                    AS    EXPRESSLY    PROVIDED
                                    HEREIN,   BUT   SOLELY   AS
                                    TRUSTEE   UNDER  THE  TRUST
                                    AGREEMENT, as Lessor



                                    By:
                                        ----------------------------------------
                                          Name:
                                          Title:



                                    AMERICAN TRANS AIR, INC., as Lessee



                                       By:

                                                           Name:
                                                           Title:



   [This is the ORIGINAL counterpart of the Lease for chattel paper purposes]

                                                       [or]

            [This                is a DUPLICATE executed counterpart, and is NOT
                                 the  original  counterpart,  of the Lease,  for
                                 chattel paper purposes.]





<PAGE>






                              AIRCRAFT DESCRIPTION



The Aircraft is a Boeing model 737-800  aircraft,  consisting of (1) an airframe
bearing FAA registration no. N___AT and  manufacturer's  serial no.  __________,
(2) two CFM  International  model CFM56-7 engines (each of which has 750 or more
rated takeoff horsepower or its equivalent),  bearing manufacturer's serial nos.
__________  and  __________,   and  (3)  all  appliances,   parts,  instruments,
appurtenances,   accessories,  furnishings,  and  other  equipment  or  property
incorporated in such airframe and engines.





<PAGE>






                       RETURN ACCEPTANCE SUPPLEMENT N___AT



         This Supplement,  dated __________, ____, is entered into between First
Security Bank, National Association, a national banking association,  not in its
individual  capacity but solely as Owner Trustee under Trust  Agreement  N___AT,
dated as of  __________________,  ____, with the Owner Participant named therein
(such Owner Trustee, in its capacity as trustee, being referred to as "LESSOR"),
and American Trans Air, Inc. ("LESSEE"), an Indiana corporation.

         Lessor  and  Lessee  have  entered  into Lease  Agreement  N___AT  (the
"LEASE"),  dated as of  [_____________,  ____],  relating  to the  Boeing  model
737-800  aircraft  described  below.  Terms  defined  in the Lease have the same
meanings when used in this Supplement.

         Lessor and Lessee hereby agree as follows:

         1. Lessor and Lessee are executing this Return Acceptance Supplement to
confirm that,  on the date hereof,  Lessee  returned the following  Airframe and
Engines to Lessor:

     Airframe:   U.S.   registration  no.  N___AT;   manufacturer's  serial  no.
__________; and

     Engines: two CFM International engines,  bearing manufacturer's serial nos.
__________  and  __________.  2.  This  Return  Acceptance  Supplement  is being
delivered in _____________________.

     3.  Lessor and Lessee  agree that the Lease is  terminated,  except for the
provisions thereof that expressly survive termination.



<PAGE>



         IN WITNESS  WHEREOF,  Lessor  and  Lessee  have  executed  this  Return
Acceptance Supplement N___AT.



                   FIRST SECURITY BANK, NATIONAL
                   ASSOCIATION,   NOT  IN  ITS
                   INDIVIDUAL CAPACITY, EXCEPT
                   AS    EXPRESSLY    PROVIDED
                   HEREIN,   BUT   SOLELY   AS
                   TRUSTEE   UNDER  THE  TRUST
                   AGREEMENT, as Lessor



                   By:
                       --------------------------------------------------------
                         Name:
                         Title:



                   AMERICAN TRANS AIR, INC., as Lessee



                   By:
                       --------------------------------------------------------
                         Name:
                         Title:







<PAGE>






                                  CERTAIN TERMS



      DEFINED TERM                                            DEFINITION

Commencement Date                        __________, 200_

Fixed Rate                               $__________ per quarterly Payment Date
                                         [60% OF AVERAGE BASIC RENT DURING THE
                                         BASE TERM]

Minimum Liability Insurance Amount       (CONFIDENTIAL MATERIAL OMITTED)

Past-Due Rate                            (CONFIDENTIAL MATERIAL OMITTED)

Scheduled Expiration Date
                                         (a)   for   the
                                         Base Term,  the
                                         20th
                                         anniversary  of
                                         the    Delivery
                                         Date,  and  (b)
                                         for  a  Renewal
                                         Term,  the  day
                                         before      the
                                         first
                                         anniversary  of
                                         the  first  day
                                         of that Renewal
                                         Term

Similar Aircraft                         Boeing model 737-800 aircraft
                                         (other than the Aircraft)

SLV Rate                                 ___________% per annum

Threshold Amount                         (CONFIDENTIAL MATERIAL OMITTED)



<PAGE>






                               BASIC RENT PAYMENTS



                                                 PERCENTAGE OF
                PAYMENT DATE                     LESSOR'S COST




<PAGE>





                             BASIC RENT ALLOCATIONS


         FROM (BUT                                              ALLOCATION OF
      NOT INCLUDING)             THROUGH                          BASIC RENT



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





<PAGE>







                              STIPULATED LOSS VALUE



     STIPULATED       STIPULATED       PREPAID BASIC            DEFERRED BASIC
   LOSS VALUE DATE    LOSS VALUE        RENT AMOUNT              RENT AMOUNT





<PAGE>




                                TERMINATION VALUE




   TERMINATION      TERMINATION VALUE        PREPAID BASIC        DEFERRED BASIC
   VALUE DATE                                 RENT AMOUNT           RENT AMOUNT





<PAGE>



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


                               EBO PRICE SCHEDULE





                           Unadjusted                              Adjusted EBO
                            EBO Price       Rent Adjustment            Amount
                         (Percentage of    (Percentage of         (Percentage of
           EBO Date      Lessor's Cost)    Lessor's Cost)         Lessor's Cost)










<PAGE>







                               PERMITTED COUNTRIES





<PAGE>




Argentina*

Australia

Austria

Bahamas

Belgium

Bermuda

Brazil*

Canada

Chile*

Denmark

Ecuador*

Egypt*

Finland

France

Germany

Greece*

Hungary*

Iceland

India*

Indonesia*

Ireland

Italy**

Jamaica*

Japan

Liechtenstein*

Luxembourg

Malaysia*

Malta*

Mexico**

Monaco

Morocco*

Netherlands

New Zealand

Norway

Paraguay*

Peoples Republic of China*

Philippines*

Portugal

Republic of China (Taiwan)*

Singapore*

South Africa*

South Korea*

Spain

Sweden

Switzerland

Thailand*

United Kingdom

Uruguay*

Venezuela*

United States of America

*SUBLEASING AND  RE-REGISTRATION  PERMITTED ONLY WITH OWNER  PARTICIPANT'S PRIOR
  WRITTEN CONSENT,  WHICH CONSENT OWNER PARTICIPANT MAY WITHHOLD IN ITS SOLE AND
  ABSOLUTE DISCRETION.

**APPROVED FOR SUBLEASING BUT LESSEE MAY NOT RE-REGISTER IN SUCH COUNTRY WITHOUT
  OWNER PARTICIPANT'S PRIOR WRITTEN CONSENT, WHICH CONSENT OWNER PARTICIPANT MAY
  WITHHOLD IN ITS SOLE AND ABSOLUTE DISCRETION..



<PAGE>






                                    PLACARDS



                                   Leased from
                   First Security Bank, National Association,
                                as owner trustee

<PAGE>







                                     ANNEX B

                                RETURN CONDITIONS

         This Annex B shall apply to the return of the  Aircraft by or on behalf
of Lessee  under the Lease,  whether at a Scheduled  Expiration  Date,  upon the
exercise  of  Lessee's  rights  under ss. 9 of the Lease,  upon the  exercise of
Lessor's remedies following the occurrence of an Event of Default, or otherwise.
However,  this  Annex B shall not apply (1) if an Event of Loss to the  Aircraft
occurs (unless the Aircraft is replaced  under ss. 10.1.3 of the Lease),  or (2)
if Lessee buys the Aircraft in accordance with ss. 17 of the Lease.

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized  as in Annex A, have the same  meanings  when  used in this  "Return
Conditions"   Annex.   Annex  A  also  contains  rules  of  usage  that  control
construction in this "Return Conditions" Annex.

(CONFIDENTIAL MATERIAL OMITTED)





<PAGE>







                                     ANNEX C

                                   MAINTENANCE

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized   as  in  Annex  A,  have  the  same  meanings  when  used  in  this
"Maintenance"  Annex.  Annex  A  also  contains  rules  of  usage  that  control
construction in this "Maintenance" Annex.

         A.       MAINTENANCE.
                  -----------

         Lessee shall maintain,  service,  repair, and overhaul the Aircraft (or
cause the Aircraft to be  maintained,  serviced,  repaired,  and  overhauled) in
accordance  with  (1)  maintenance   standards  required  by,  or  substantially
equivalent to those required by, the FAA or the central civil aviation authority
of Canada, Japan, and the JAA for the Aircraft (the "MAINTENANCE  PROGRAM"),  so
as (aa) to keep  the  Aircraft  in as good  operating  condition  as  originally
delivered  hereunder,  ordinary  wear  and tear  excepted,  and (bb) to keep the
Aircraft  in  such  operating  condition  as  may be  necessary  to  enable  the
applicable airworthiness certificate for the Aircraft to be maintained under the
regulations of the FAA or other Aviation Authority then having jurisdiction over
the  operation  of the  Aircraft,  other than  during (x)  temporary  periods of
storage  in  accordance  with  applicable   regulations,   (y)  maintenance  and
modification  permitted  hereunder,  and (z) periods  when the FAA or such other
Aviation  Authority has revoked or suspended the airworthiness  certificates for
Similar Aircraft;  and (2) except during periods when a Permitted Sublease is in
effect,  the same  standards as Lessee uses with respect to similar  aircraft of
similar  size in its fleet  operated  by Lessee in  similar  circumstances  and,
during any period in which a Permitted Sublease is in effect, the same standards
used by the Permitted Sublessee with respect to similar aircraft of similar size
in its fleet and operated by the Permitted  Sublessee in similar  circumstances.
Lessee  further  agrees that the Aircraft will be  maintained,  used,  serviced,
repaired,  overhauled,  or inspected in  compliance  with  applicable  Laws with
respect  to  the  maintenance  of  the  Aircraft  and in  compliance  with  each
applicable airworthiness certificate,  license, and registration relating to the
Aircraft  issued by the  Aviation  Authority,  other than minor or  nonrecurring
violations  with respect to which  corrective  measures are taken upon discovery
thereof and except to the extent Lessee or Permitted  Sublessee is contesting in
good faith the validity or application  of any such Law or requirement  relating
to any such certificate, license, or registration in any reasonable manner which
does not create a material  risk of sale,  loss,  or forfeiture of the Aircraft,
the Airframe,  or any Engine or the interest of Owner  Participant  therein or a
material risk of criminal  liability or material civil penalty against Lessor or
Owner Participant. Lessee shall cause the Aircraft Documents to be maintained in
English and  promptly  furnish  Lessor and Owner  Participant  with  information
necessary for filing with applicable governmental aviation authorities.

         B.       REPLACEMENT OF PARTS.
                  --------------------

         Except as otherwise  provided herein,  Lessee will promptly replace (or
cause to be  replaced)  all  Parts  that are from time to time  incorporated  or
installed  in or attached  to the  Aircraft,  and that  become  worn out,  lost,
stolen, destroyed,  seized,  confiscated,  damaged beyond repair, or permanently
rendered unfit for use for any reason whatsoever. In addition, Lessee may remove
(or  permit to be  removed)  any Parts in the  ordinary  course of  maintenance,
service,  repair,  overhaul, or testing, whether or not such Parts are worn out,
lost,  stolen,  destroyed,  seized,  confiscated,   damaged  beyond  repair,  or
permanently rendered unfit for use; PROVIDED, that, except as otherwise provided
herein,  Lessee will replace or cause the  replacement of such Parts as promptly
as  practicable.  All  replacement  Parts  shall be free and clear of all Liens,
except for Permitted Liens and pooling  arrangements to the extent  permitted by
ss. C below and shall be in good operating  condition and (except in the case of
replacement  property  installed on the basis of operational  exigencies) have a
value and  utility  not less than the value and  utility  of the Parts  replaced
(assuming such replaced Parts were in the condition  required under this Lease).
Except as  otherwise  provided  herein,  all Parts at any time  removed from the
Aircraft  shall remain the property of Lessor,  no matter where  located,  until
they are  replaced  by Parts  that have been  incorporated  or  installed  in or
attached to the Aircraft and that meet the  requirements  for replacement  Parts
specified  above. As soon as a replacement  Part is incorporated or installed in
or attached to the Aircraft as above provided, without further act, (1) title to
the  replaced  Part shall vest in Lessee (or if a Permitted  Sublease is then in
effect,  in the Permitted  Sublessee) free and clear of all Lessor Liens and all
rights  of  Lessor,  and the  replaced  Part  shall no  longer  be deemed a Part
hereunder, (2) title to such replacement Part shall vest in Lessor, subject only
to Permitted  Liens and pooling  arrangements  to the extent  permitted by ss. C
below and except in the case of replacement property temporarily installed on an
emergency  basis,  and (3) such  replacement  Part shall become  subject to this
Lease and be deemed part of the Aircraft for all purposes  hereof and thereof to
the same extent as the Parts originally incorporated or installed in or attached
to such Aircraft.

         C.       POOLING OF PARTS.
                  ----------------

         Any Part  removed  from the  Aircraft  may be  subjected by Lessee or a
Permitted  Sublessee to a normal  pooling  arrangement  customary in the airline
industry and entered  into in the ordinary  course of business of Lessee or such
Permitted  Sublessee,  so long as a Part  replacing  such  removed Part shall be
incorporated  or installed in or attached to the Aircraft in accordance with ss.
B of this Annex C as promptly as  practicable  after the removal of such removed
Part. In addition,  any  replacement  Part when  incorporated or installed in or
attached  to the  Aircraft  may be owned by any third  party  subject  to such a
normal  pooling  arrangement,  so long as  Lessee  or  Permitted  Sublessee,  as
promptly  thereafter  as  reasonably  possible,  either (1) causes title to such
replacement  Part to vest in Lessor in  accordance  with ss. B of this  Annex C,
free and clear of all Liens (except Permitted Liens), or (2) replaces (or causes
to be replaced)  such  replacement  Part by  incorporating  or  installing in or
attaching  to the  Aircraft  a  further  replacement  Part  owned by Lessee or a
Permitted  Sublessee free and clear of all Liens (except Permitted Liens) and by
causing title to such further  replacement  Part to vest in Lessor in accordance
with ss. B of this Annex C.

         D.       ALTERATIONS, MODIFICATIONS, AND ADDITIONS.
                  -----------------------------------------

         Lessee  shall  make  (or  cause  to  be  made)  such   alterations  and
modifications  in and  additions to the Aircraft as may be required from time to
time to meet the  applicable  standards of the FAA or other  Aviation  Authority
having  jurisdiction  over the  operation  of the  Aircraft,  to the extent made
mandatory in respect of the  Aircraft (a  "MANDATORY  MODIFICATION");  PROVIDED,
that Lessee or any  Permitted  Sublessee  may, in good faith and by  appropriate
procedure,  contest the validity or application of any law, rule, regulation, or
order in any  reasonable  manner which does not have more than a DE MINIMIS risk
of adversely  affecting  Lessor's  interest in the Aircraft and does not involve
more than a DE MINIMIS risk of sale, forfeiture,  or loss of the Aircraft or the
interest of Owner Participant  therein,  more than a DE MINIMIS risk of material
civil  penalty,  or any risk of criminal  liability  being  imposed on Lessor or
Owner  Participant.  In  addition,  Lessee  may make or  permit  to be made such
alterations  and  modifications  in and  additions  to  the  Aircraft  (each  an
"OPTIONAL MODIFICATION") as Lessee or any Permitted Sublessee deems desirable in
the proper  conduct of its  business,  including  removal of Parts which  Lessee
deems are obsolete or no longer  suitable or appropriate for use in the Aircraft
(PROVIDED, that Lessee's right to remove obsolete Parts will be limited to Parts
having an  aggregate  original  cost not  exceeding  1% of Lessor's  Cost of the
Aircraft  with Lessor having the right to request such parts be shipped to Owner
Participant upon removal at Lessee's  expense;  PROVIDED,  that no such Optional
Modification shall (1) diminish the fair market value, estimated residual value,
utility,  or economic  useful life of the  Aircraft or any Engine below its fair
market  value,  estimated  residual  value,  utility,  or  economic  useful life
immediately  before such  Optional  Modification  (assuming the Aircraft or such
Engine  was in the  condition  required  by the Lease  immediately  before  such
Optional  Modification),  (2) cause the Aircraft to cease to have the applicable
standard airworthiness certificate, or (3) cause the Aircraft to become "limited
use  property"  within the  meaning of Rev.  Proc.  79-48.  Except as  otherwise
provided  herein,  title to all Parts  (other than  Removable  Parts (as defined
below))  incorporated  or installed in or attached to the Aircraft as the result
of such Optional  Modification  shall,  without  further act, vest in Lessor and
become subject to this Lease.  Notwithstanding  anything to the contrary in this
ss. D, Lessee or a Permitted  Sublessee may, at any time during the Term, remove
any Part (such Part being referred to herein as a "REMOVABLE PART") if (aa) such
Part is in addition to, and not in replacement of or substitution  for, any Part
originally  incorporated or installed in or attached to the Aircraft at the time
of delivery  thereof to Lessee or any Part in  replacement  of, or  substitution
for,  any such  Part,  (bb)  such Part is not  required  to be  incorporated  or
installed in or attached to the Aircraft  pursuant to the terms of ss. A of this
Annex C or the  first  sentence  of this ss. D or  pursuant  to the terms of any
insurance  policies  required to be carried hereunder or any applicable law, and
(cc)  such Part can be  removed  from the  Airframe  or  Engine  without  in any
material respect  diminishing the fair market value,  estimated  residual value,
utility,  or  remaining  economic  useful life that the Airframe or Engine would
have had at the time of removal had such  removal not  occurred,  assuming  that
such  Airframe  or  Engine  was in  the  condition  and  repair  required  to be
maintained by the terms hereof and such Removable Part had not been incorporated
or installed in or attached to the Aircraft.  Removable Parts may be leased from
or financed by third  parties  other than Lessor.  Title to any  Removable  Part
shall not vest in Lessor;  except that any Part not removed before the return to
Lessor  hereunder  of the  Airframe  or  Engine  on  which  it is  incorporated,
installed, or attached shall become the property of Lessor.

         E.       RECORDS.
                  -------

         Lessee  shall  maintain  (or  cause  to  be  maintained)  all  Aircraft
Documents. All Aircraft Documents that are specific to the Aircraft shall be the
property  of Lessor,  but shall  become the  property  of Lessee  upon  Lessee's
purchase  of the  Aircraft  pursuant  to the  terms  of this  Lease  or upon the
occurrence of an Event of Loss and Lessee's compliance with ss. 10.





<PAGE>






                                     ANNEX D

                                    INSURANCE

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized as in Annex A, have the same meanings when used in this  "Insurance"
Annex.  Annex A also contains rules of usage that control  construction  in this
"Insurance" Annex.

A.       LIABILITY INSURANCE

         1. Except as provided in ss. A2 below, Lessee will carry or cause to be
carried  at  all  times,   at  no  expense  to  Lessor  or  Owner   Participant,
comprehensive  airline legal liability (including passenger liability,  property
damage, and contractual  liability insurance) with respect to the Aircraft which
is (a) in an amount not less than the greater of (x) the amount of comprehensive
airline legal liability insurance from time to time applicable to aircraft owned
or leased  and  operated  by Lessee of the same type and  operating  on  similar
routes as the  Aircraft,  and (y) the  Minimum  Liability  Insurance  Amount per
occurrence;  (b) of the type and  covering  the same  risks as from time to time
applicable to aircraft,  operated by Lessee and similarly-situated  carriers, of
the same type as the  Aircraft;  and (c)  maintained  in effect with insurers of
internationally recognized responsibility in the international aviation industry
(such insurers being referred to herein as "APPROVED INSURERS").

         2.  During any  period  that the  Aircraft  is on the ground and not in
operation,  Lessee may carry or cause to be  carried,  in lieu of the  insurance
required by ss. A1 above,  insurance otherwise conforming with the provisions of
ss. A1 except that (a) the  amounts of coverage  shall not be required to exceed
the amounts of public  liability and property damage insurance from time to time
applicable  to  aircraft  owned or  operated  by  Lessee of the same type as the
Aircraft which are on the ground and not in operation,  and (b) the scope of the
risks  covered and the type of insurance  shall be the same as from time to time
shall be  applicable  to  aircraft  owned or operated by Lessee of the same type
which are on the ground and not in operation.

B.       HULL INSURANCE

         1. Except as provided in ss. B2 below, Lessee will carry or cause to be
carried  at all  times,  at no  expense  to  Lessor or Owner  Participant,  with
Approved Insurers  "all-risk" ground and flight aircraft hull insurance covering
the Aircraft  (including  the Engines when they are installed on the Airframe or
any  other  airframe)  which is of the type as from time to time  applicable  to
aircraft  operated  by  Lessee of the same  type as the  Aircraft  for an amount
denominated in United States Dollars not less than the Stipulated  Loss Value of
the Aircraft

         Any  policies  of  insurance  carried  in  accordance  with this ss. B1
covering the Aircraft and any policies taken out in  substitution or replacement
for any such policies  shall  provide that (a) in the event of a loss  involving
proceeds in excess of the Threshold Amount, the proceeds in respect of such loss
up to an amount equal to the  Stipulated  Loss Value for the  Aircraft  shall be
payable  to  Lessor,  except  in the case of a loss  with  respect  to an Engine
installed on an airframe  other than the Airframe,  in which case Lessee (or any
Permitted  Sublessee)  shall  endeavor to arrange  for any payment of  insurance
proceeds in respect of such loss to be held for the  account of Lessor,  whether
such payment is made to Lessee (or any  Permitted  Sublessee) or any third party
[and, if or Lessor receives such a payment otherwise than in respect of an Event
of Loss, then, upon receipt of evidence  reasonably  satisfactory to Lessor that
the damage giving rise to such payment has been repaired or that such payment is
then required to pay for repairs then being made, Lessor shall pay the amount of
such  payment to Lessee or its  order],  and (b) the  entire  amount of any loss
involving proceeds of the Threshold Amount or less or the amount of any proceeds
of any loss in excess of the  Stipulated  Loss Value for the  Aircraft  shall be
paid to Lessee or its order  unless an Event of Default  exists and the insurers
have been notified  thereof by Lessor.  In the case of a loss with respect to an
engine (other than an Engine)  installed on the Airframe,  Lessor shall hold any
payment to it of any insurance  proceeds for that loss for the account of Lessee
or any other third party who is entitled to receive such proceeds.

         2.  During any  period  that the  Aircraft  is on the ground and not in
operation,  Lessee may carry or cause to be  carried,  in lieu of the  insurance
required by ss. B1 above,  insurance otherwise conforming with the provisions of
ss. B1,  except that the scope of the risks and the type of  insurance  shall be
the same as from time to time applicable to aircraft owned by Lessee of the same
type similarly on the ground and not in operation,  PROVIDED,  that Lessee shall
maintain  insurance  against risk of loss or damage to the Aircraft in an amount
equal to the Stipulated  Loss Value of the Aircraft  during such period that the
Aircraft is on the ground and not in operation.

C.       WAR-RISK, HIJACKING, AND ALLIED PERILS INSURANCE

         If Lessee (or any Permitted  Sublessee) operates or proposes to operate
the  Aircraft,  the  Airframe,  or any  Engine  (1) in any  area  of  recognized
hostilities,  or (2) on  international  routes  and  Lessee  (or such  Permitted
Sublessee) maintains war-risk,  hijacking,  or allied perils insurance for other
aircraft that it operates on such routes or in such areas, Lessee shall maintain
or cause to be maintained  war-risk,  hijacking,  and allied perils insurance of
substantially  the same type carried by similar  United  States  commercial  air
carriers  operating the same or comparable  models of aircraft on similar routes
or in such  areas,  and in no event in an amount less than the  Stipulated  Loss
Value.

D.       GENERAL PROVISIONS

         Any policies of insurance  carried in accordance  with ss.ss. A, B, and
C, including any policies  taken out in  substitution  or  replacement  for such
policies:

     (1) shall name Lessor and Owner  Participant  (and in respect of  liability
insurances,  to the extent they are available  without  unreimbursed  additional
cost to Lessee, each of their respective successors, assigns, directors, agents,
officers, and employees) as additional insureds (the "ADDITIONAL INSUREDS"),  as
their interests may appear;

     (2)  shall  apply  worldwide  and  have  no  territorial   restrictions  or
limitations  (except  only in the  case of war,  hijacking,  and  allied  perils
insurance  required  under  ss.  C,  which  shall  apply to the  fullest  extent
available in the international insurance market);

     (3) shall  provide  that,  in respect of the  interests  of the  Additional
Insureds in such policies, the insurance shall not be invalidated or impaired by
any act or omission  (including  misrepresentation  and nondisclosure) by Lessee
(or any  Permitted  Sublessee)  or any other Person  (including  use for illegal
purposes  of the  Aircraft  or any  Engine),  and shall  insure  the  Additional
Insureds regardless of any breach or violation of any representation,  warranty,
declaration,  term,  or condition  contained in such  policies by Lessee (or any
Permitted Sublessee);

     (4) shall  provide  that,  if the insurers  cancel such  insurance  for any
reason whatsoever, or if it is allowed to lapse for nonpayment of premium, or if
any  material  change  is made in the  insurance  which  adversely  affects  the
interest of any of the Additional Insureds, such cancellation,  lapse, or change
shall not be effective as to the Additional  Insureds for 30 days (seven days in
the case of war risk,  hijacking,  and allied perils insurance) after receipt by
the Additional Insureds of written notice by such insurers of such cancellation,
lapse or change,  PROVIDED,  that if any notice  period  specified  above is not
reasonably obtainable, such policies shall provide for as long a period of prior
notice as shall then be reasonably obtainable;

     (5) shall waive any rights of recourse,  subrogation, setoff (including for
unpaid  premiums),  recoupment,  counterclaim,  or other  deduction,  whether by
attachment or otherwise, against each Additional Insured;

     (6) shall be primary without right of contribution from any other insurance
that may be available to any Additional Insured;

     (7) shall provide that all of the liability  insurance  provisions thereof,
except the limits of  liability,  shall operate in all respects as if a separate
policy had been issued covering each party insured thereunder;

     (8) shall provide that none of the Additional  Insureds shall be liable for
any insurance premium; and

     (9)  shall  contain  a 50/50  Clause  per  Lloyd's  Aviation  Underwriters'
Association Standard Policy Form AVS 103;

     PROVIDED,  that any such  endorsements may be subject to any limitations on
endorsements  generally  prevailing in the airline insurance  marketplace at the
time (E.G., AVN67B).

E.       REPORTS AND CERTIFICATES; OTHER INFORMATION

         On or before the  Delivery  Date and on or before each  renewal date of
the insurance  policies required  hereunder (and no less often than on an annual
basis),  Lessee  will  furnish  or cause to be  furnished  to  Lessor  and Owner
Participant insurance certificates describing in reasonable detail the insurance
maintained hereunder and a report, signed by Lessee's or a Permitted Sublessee's
regular  independent  insurance  broker (the  "INSURANCE  BROKER"),  stating the
opinion of such  Insurance  Broker that (1) all premiums for the insurance  then
due have been paid, and (2) such insurance complies with the terms of this Annex
D. To the extent that such agreement is reasonably obtainable,  Lessee will also
cause the Insurance  Broker to agree to notify Lessor and Owner  Participant  in
writing of any  default in the  payment of any  premium  and of any other act or
omission on the part of Lessee of which the  Insurance  Broker has knowledge and
which  might  invalidate  or  render  unenforceable,  in whole  or in part,  any
insurance on the Aircraft or Engines or cause the cancellation or termination of
such insurance,  and to notify Lessor and Owner  Participant in writing at least
30 days (seven days for war-risk  and allied  perils  coverage,  or such shorter
period therefor as may be available in the  international  insurance  market, as
applicable) before the cancellation,  lapse, or materially adverse change of any
insurance maintained pursuant to this Annex D.

F.       RIGHT TO PAY PREMIUMS

         Each  Additional  Insured shall have the rights but not the obligations
of an additional named insured.  No Additional Insured shall have any obligation
to pay any premium,  commission,  assessment,  or call due on any such insurance
(including  reinsurance).   Notwithstanding  the  foregoing,  in  the  event  of
cancellation of any required insurance due to the nonpayment of premium, each of
Lessor and Owner Participant  shall have the option, in its sole discretion,  to
pay any  such  premium  and to  maintain  such  coverage,  as  Lessor  or  Owner
Participant may require,  until the scheduled expiry date of such insurance and,
in such event, Lessee shall, upon demand,  reimburse Lessor or Owner Participant
for amounts that they so pay.

G.       DEDUCTIBLES; SELF-INSURANCE

         Lessee  may  self-insure  by way  of  deductible,  premium  adjustment,
franchise  provisions,  or  otherwise  (including,  with  respect  to  insurance
maintained  pursuant to ss. B, insuring for a maximum  amount which is less than
the  Stipulated  Loss Value of the Aircraft)  the  insurance  covering the risks
required  to be  insured  against  pursuant  to ss. 11 and this  Annex D under a
program  applicable to all aircraft in Lessee's fleet,  but in no case shall the
aggregate  amount of  self-insurance  (including any  applicable  deductible) in
regard to ss. 11 and this Annex D during any policy  year,  with  respect to the
Aircraft,  exceed (CONFIDENTIAL MATERIAL OMITTED). In addition,  Lessee (and any
Permitted   Sublessee)  may  self-insure  to  the  extent  that  any  applicable
deductible per aircraft that does not exceed  industry  standards for major U.S.
airlines.




                                     ANNEX A


                                   DEFINITIONS

                               GENERAL PROVISIONS

     (a) In each Operative  Agreement,  unless otherwise expressly  provided,  a
reference to:

     (1) each of "Lessee", "Lessor", "Loan Participant", "Owner Trustee", "Owner
Participant",  "Mortgagee",  "Note  Holder",  and any other Person  includes any
successor in interest to it and any permitted  transferee,  permitted purchaser,
or permitted assignee of it;

     (2) any agreement or other  document  (including  any annex,  schedule,  or
exhibit  thereto,  or any other part thereof)  includes that  agreement or other
document as amended,  supplemented,  or otherwise  modified and any agreement or
other document entered into in substitution or replacement therefor from time to
time, and in each case in accordance  with its terms and in accordance  with the
Operative Agreements;

     (3) any  provision  of any Law  includes  any such  provision  as  amended,
modified, supplemented,  substituted, reissued, or reenacted before the Delivery
Date, and thereafter from time to time;

     (4) "Agreement", "this Agreement",  "hereby", "herein", "hereto", "hereof",
"hereunder",  and words of similar import, when used in any Operative Agreement,
refer to such Operative Agreement as a whole and not to any particular provision
of such Operative Agreement;

     (5)  "including",  "include",  and terms or phrases of similar import means
"including [etc.], without limitation";

     (6) "or" is conjunctive and not disjunctive; and

     (7) a reference to a "section" or "ss.",  an  "Exhibit",  an "Annex",  or a
"Schedule" in any Operative  Agreement,  or in any annex thereto, is a reference
to a section  of, or an exhibit,  an annex,  or a schedule  to,  such  Operative
Agreement or such annex, respectively.

     (b) Each  exhibit,  annex,  and  schedule to each  Operative  Agreement  is
incorporated in, and is a part of, such Operative Agreement.

     (c) Unless otherwise defined or specified in any Operative  Agreement,  all
accounting  terms therein shall be construed and all  accounting  determinations
thereunder shall be made in accordance with GAAP.

     (d) Headings used in any Operative  Agreement are for convenience only, and
shall not in any way affect the construction of, or be taken into  consideration
in interpreting, such Operative Agreement.

     (e) For  purposes of each  Operative  Agreement,  the  existence of a Lease
Event of Default,  Lease Default,  or Special Default referred to in ss. 14.5 of
the Lease shall not  prohibit  Lessee from taking any action or  exercising  any
right that is  conditioned on the  non-existence  of any Lease Event of Default,
Lease Default, or Special Default if such Lease Event of Default, Lease Default,
or Special  Default  consists of the institution of  reorganization  proceedings
with respect to Lessee under Chapter 11 of the Bankruptcy  Code, and the trustee
or  debtor-in-possession  in such  proceedings  (1) has  agreed to  perform  its
obligations  under the  Lease  with the  approval  of the  applicable  court and
thereafter  continues to perform such  obligations  in  accordance  with Section
1110,  or (2) has assumed the Lease with the approval of the relevant  court and
thereafter continues to perform its obligations under the Lease.

DEFINED TERMS

            ACTUAL  KNOWLEDGE:  (a) as it applies to Owner Trustee or Mortgagee,
actual  knowledge of a responsible  officer in the Corporate Trust Department or
the  Corporate  Trust  Office,  respectively,  and (b) as it  applies  to  Owner
Participant  or Lessee,  actual  knowledge  of a Vice  President  or more senior
officer of Owner Participant or Lessee  (respectively),  or any other officer of
Owner  Participant  or  Lessee  (respectively)  having  responsibility  for  the
Transactions;  PROVIDED, that each of Lessee, Owner Participant,  Owner Trustee,
and  Mortgagee  shall be deemed to have "Actual  Knowledge"  of any matter as to
which it has received notice from Lessee,  Owner  Participant,  any Note Holder,
Owner Trustee,  or Mortgagee,  given  pursuant to ss. 15.7 of the  Participation
Agreement.

            ADDITIONAL INSURED: defined inss. D of Annex D to the Lease.

            AFFILIATE  of any Person:  any other Person  directly or  indirectly
controlling,  controlled  by, or under  common  control  with such  Person.  For
purposes of this definition,  "control" means the power, directly or indirectly,
to direct or cause the direction of the  management and policies of such Person,
whether through the ownership of voting securities,  by contract,  or otherwise,
and  "controlling",  "controlled  by",  and  "under  common  control  with" have
correlative meanings, PROVIDED, that neither Owner Participant nor the Mortgagee
will be deemed to be an "Affiliate" of Lessor or Owner Trustee (and vice versa),
and  none  of  Owner  Trustee  or  Owner  Participant  will be  deemed  to be an
"Affiliate" of the Mortgagee (and vice versa).

     AIRCRAFT: the Airframe and Engines.

     AIRCRAFT  BILL OF  SALE:  a  warranty  bill of sale  granting  title to the
Aircraft,  which  bill of sale  Seller is to  deliver  to Owner  Trustee  on the
Delivery Date.

     AIRCRAFT  DESCRIPTION  EXHIBIT:  Exhibit A to the Lease or Exhibit A to the
Mortgage.

     AIRCRAFT  DOCUMENTS:  all technical data,  manuals,  and log books, and all
inspection,  modification,  and  overhaul  records  and other  service,  repair,
maintenance,  and technical  records that the relevant Aviation  Authority,  the
Lease,  or the  Maintenance  Program  requires be maintained with respect to the
Aircraft,   including  all  required   additions,   renewals,   revisions,   and
replacements  of any  such  materials,  in each  case in  whatever  form  and by
whatever means or medium (including  microfiche,  microfilm,  paper, or computer
disk)  such  materials  are  maintained  or  retained  by or on behalf of Lessee
(PROVIDED, that all such materials shall be maintained in the English language).

     AIRFRAME:  (1) the aircraft (excluding Engines or engines from time to time
installed  thereon)  manufactured  by Airframe  Manufacturer  and  identified by
Airframe  Manufacturer's  model number,  United States registration  number, and
Airframe  Manufacturer's  serial  number set forth in the  Aircraft  Description
Exhibit, or (2) any Replacement  Airframe,  including in either case any and all
Parts  incorporated or installed in or attached or appurtenant to such airframe,
and any and all Parts  removed  from such  airframe,  unless title to such Parts
does not vest in Lessor in  accordance  with ss.  8.1 and Annex C of the  Lease.
Upon  substitution  of a Replacement  Airframe under and in accordance  with the
Lease, such Replacement  Airframe shall become subject to the Lease and shall be
the  "Airframe" for all purposes of the Operative  Agreements,  and the replaced
Airframe  shall  cease to be  subject  to the Lease  and  shall  cease to be the
"Airframe".

     AIRFRAME MANUFACTURER: The Boeing Company, a Delaware corporation.

     ALLOCATED  EETC EXPENSES  means the Pro Rata Portion of the specified  fees
and expenses of each of the following  incurred in connection  with the issuance
of the Pass-Through Certificates on the Issuance Date: (i) the placement fee and
reimbursed expenses of ____________________ and the other institutions,  if any,
acting as initial purchasers of the Pass-Through Certificates,  (ii) the upfront
fee and reimbursed  expenses of Wilmington Trust Company,  as the  Subordination
Agent, the Pass-Through  Trustees,  and the Paying Agents, (iii) the upfront fee
and reimbursed expenses of First Security Bank, National Association,  as Escrow
Agent, (iv) the upfront fee of ____________________,  as the Depository, (v) the
upfront fee of  ____________________,  as the Liquidity Provider,  (vi) the fees
and expenses of ____________________,  special counsel to the initial purchasers
and the  Liquidity  Provider,  (vii) the fees and  expenses of  Richards  Layton
Finger,  special  counsel  to the  Pass-Through  Trustees,  Paying  Agents,  and
Subordination Agent, [and the fees and expenses of ____________________, special
counsel to Policy Provider,] (ix) the fees and expenses of Troutman Sanders LLP,
special counsel to Lessee, (x) the fees and expenses of Cravath, Swaine & Moore,
securities counsel to Lessee,  (xi) the fees of the appraisers  utilized for the
Offering  Memorandum,  (xiii)  the fees of the  appraisers  utilized  by  Policy
Provider,  (xiv) the fees and expenses of Moody's  Investors  Service,  Inc. and
Standard & Poor's Rating  Services,  (xv) the fees and expenses of Ernst & Young
LLP, and (xvi) the initial  quarterly  premium due to Policy  Provider under the
Policy Provider Agreement. As used in this definition,  "Pro Rata Portion" means
one-[tenth].

     AMORTIZATION  AMOUNT for any Equipment  Note,  as of any Payment Date:  the
amount  determined by multiplying the percentage set forth opposite such Payment
Date on the Amortization Schedule by the Original Amount of such Equipment Note.

     AMORTIZATION  SCHEDULE for an Equipment Note: the amortization schedule for
that Equipment Note delivered pursuant toss. 2.02 of the Mortgage.

     APPLICABLE   PERCENTAGE:   means  (A)  for  the  [first  one-year   Renewal
Term][first two one-year Renewal Terms], (1) 100% if, at the time that the first
Renewal  Term  begins,  Lessee  provides  Owner  Participant  with an opinion of
counsel reasonably  satisfactory to Owner Participant to the effect that, due to
a Change in Tax Law or  clarification  of law, if the Applicable  Percentage had
been 100% on the Closing  Date no Renewal  Term would have been  included in the
Lease Term under Code ss. 467 and the Treasury  Regulations  thereunder  and (2)
otherwise, 105%; and (B) for any subsequent Renewal Term, 100%.

     APPRAISER:  a  firm  of  internationally-recognized,  independent  aircraft
appraisers.

     AVERAGE LIFE DATE for any Equipment  Note:  the date which follows the time
of  determination  by a period equal to the Remaining  Weighted  Average Life of
such Equipment Note. The "REMAINING  WEIGHTED AVERAGE LIFE" (calculated in days)
for any Equipment Note on a given date is (1) the sum of (a) each then-remaining
scheduled  payment of principal of such Equipment Note,  TIMES (b) the number of
days from and  including  such  determination  date to but excluding the date on
which such payment of  principal  is  scheduled  to be made,  DIVIDED BY (2) the
then-outstanding principal amount of such Equipment Note.

     AVIATION  AUTHORITY:  the FAA or, if the  Aircraft is  registered  with any
other Government Entity under and in accordance withss. 7.1.2 of the Lease, such
other Government Entity.

     BANKRUPTCY  CODE: the United States  Bankruptcy  Code, 11 U.S.C.ss.  101 ET
SEQ.

     BASE TERM: the period beginning on and including the Commencement  Date and
ending on the Scheduled Expiration Date therefor,  or such earlier date on which
the Term terminates in accordance with the provisions of the Lease.

     BASIC RENT: the rent (including,  to the extent  applicable,  Renewal Rent)
payable or allocable,  as applicable,  for the Aircraft pursuant to ss. 3.2.1(a)
of the Lease.

     BENEFICIAL  OWNER of an  Equipment  Note: a Person who, by reason of direct
ownership,  contract, share ownership, or otherwise, has the right to receive or
participate  in  receiving,  directly  or  indirectly,  payments  of  principal,
interest, or Make-Whole Amount for that Equipment Note; PROVIDED,  that a Person
shall not be a Beneficial  Owner of an  Equipment  Note solely  because  another
Person in whom such a Person owns common stock or other equity  securities  is a
registered  holder or Beneficial Owner of such Equipment Note unless such Person
is an Affiliate of such other Person.

     BILLS OF SALE: the FAA Bill of Sale and the Aircraft Bill of Sale.

     BURDENSOME  INDEMNITY  PAYMENT:  an indemnity  payment  pursuant to the Tax
Indemnity  Agreement or ss. 9 of the  Participation  Agreement which would cause
the  aggregate  net present  value of all losses paid or payable by Lessee as of
the  determination  date,   discounted  quarterly  at  the  Debt  Rate,  to  the
determination date, to exceed 2.5% of Lessor's Cost.

     BUSINESS DAY: any day other than a Saturday,  Sunday, or other day on which
commercial  banks are  authorized  or required by law to close in New York,  NY,
Indianapolis,  IN,  Wilmington,  DE, or Salt Lake  City,  UT, or, so long as any
Equipment  Note remains  outstanding,  the city and state in which the Mortgagee
maintains its Corporate Trust Office or receives and disburses funds.

     CASH  EQUIVALENTS:  the following  securities (which shall mature within 90
days of the  date of  purchase  thereof):  (1)  direct  obligations  of the U.S.
Government;  (2)  obligations  fully  guaranteed  by the  U.S.  Government;  (3)
certificates of deposit issued by, or bankers'  acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee, or any bank, trust company,
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained  earnings of at least  $500,000,000  and having a rate of "C" or better
from the Thomson BankWatch Service;  or (4) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
or Moody's at least equal to A1 or P1, respectively.

     CITIZEN  OF  THE  UNITED  STATES:   defined  inss.   40102(a)(15)   of  the
Transportation Code and in the FARs.

     CLOSING: the closing of the transactions  contemplated by the Participation
Agreement on the Delivery Date.

     CODE:  the  Internal  Revenue  Code of 1986;  PROVIDED,  that  when used in
relation  to a  Plan,  "Code"  shall  be  interpreted  in  accordance  with  the
regulations and rulings issued thereunder.

     COLLATERAL:  the property in which a security  interest is created in favor
of the Loan Trustee under the "Granting Clause" of the Mortgage.

     COMMENCEMENT DATE: defined in Schedule 1 to the Lease.

     COMMITMENT  for  any   Participant:   that   Participant's   commitment  to
participate  in the payment of Lessor's  Cost, as reflected in Schedule 2 of the
Participation Agreement.

     COMMITMENT  TERMINATION  DATE:  defined in Schedule 3 to the  Participation
Agreement.

     CONSENT AND AGREEMENT: Manufacturer Consent and Agreement N___AT, dated the
Delivery Date, of Airframe Manufacturer.

     CONTINUOUS STAY PERIOD: defined inss. 4.04(a) of the Mortgage.

     CORPORATE  TRUST  DEPARTMENT or TRUST  OFFICE:  Owner  Trustee's  principal
corporate trust office, located from time to time at Owner Trustee's address for
notices under the Participation  Agreement,  or such other office at which Owner
Trustee's corporate trust business shall be administered and which Owner Trustee
specifies by notice in writing to Lessee, Mortgagee, and each Note Holder.

     CORPORATE  TRUST  OFFICE:   Mortgagee's   principal   office,   located  at
Mortgagee's address for notices under the Participation Agreement, or such other
office at which  Mortgagee's  corporate trust business shall be administered and
which  Mortgagee  specifies by notice in writing to Lessee,  Owner Trustee,  and
each Note Holder.

     CRAF:  the Civil  Reserve  Air Fleet  Program  established  pursuant  to 10
U.S.C.ss. 9511 - 13, or any similar substitute program.

     DEBT: any liability for borrowed money, or any liability for the payment of
money  in  connection  with any  letter  of  credit  transaction,  or any  other
liabilities evidenced or to be evidenced by bonds,  debentures,  notes, or other
similar instruments.

     DEBT RATE: (1) for any Series, the rate as defined in the Mortgage, and (2)
for any other purpose, with respect to any period, the weighted average interest
rate per annum  during such period  borne by the  outstanding  Equipment  Notes,
excluding any interest  payable at the Past-Due Rate (or, if no Equipment  Notes
are outstanding, such weighted average interest rate on the Delivery Date).

     DELAYED   DELIVERY   DATE:  a  delayed   Delivery  Date  notified  to  each
Participant,  Owner Trustee and  Mortgagee by Lessee  pursuant to ss. 4.3 of the
Participation Agreement, which delayed Delivery Date shall be a Business Day not
later than the Commitment Termination Date.

     DELIVERY  DATE:  __________,  200_ (which is the date when the  Aircraft is
delivered  to and  accepted  by Lessee  under  the  Lease  and when the  Closing
occurs).

     DOLLARS,  UNITED STATES  DOLLARS,  or $: the lawful  currency of the United
States.

     DOT:  the  Department  of  Transportation  of  the  United  States,  or any
Government   Entity   succeeding  to  the   functions  of  such   Department  of
Transportation.

     EBO DATE: as specified in Schedule 5 to the Lease.

     EBO PRICE:  as specified in Schedule 5 to the Lease,  as adjusted  pursuant
toss. 3.2.1 of the Lease.

     ELIGIBLE  ACCOUNT:   an  account   established  by  and  with  an  Eligible
Institution at Mortgagee's  request,  which institution agrees, for all purposes
of the UCC  (including  UCC  Article  8),  that  (1)  such  account  shall  be a
"securities account" (as defined in UCC ss. 8-501), (2) all property (other than
cash)  credited  to such  account  shall be treated as a  "financial  asset" (as
defined in UCC ss.  8-102(9)),  (3) Mortgagee shall be the "entitlement  holder"
(as defined in UCC ss.  8-102(7)) of such  account,  (4) it will comply with all
entitlement  orders  issued by  Mortgagee  to the  exclusion of Lessee and Owner
Trustee,  and (5) the  "securities  intermediary  jurisdiction"  (under  UCC ss.
8-110(e)) shall be the state of New York.

     ELIGIBLE  INSTITUTION:  the corporate  trust  department of (1)  Wilmington
Trust Company, acting solely in its capacity as a "securities  intermediary" (as
defined in UCC ss. 8-102(14)),  or (2) a depository  institution organized under
the laws of the United States of America or any one of the states thereof or the
District  of  Columbia  (or any U.S.  branch  of a  foreign  bank),  which has a
long-term  unsecured  debt rating from Moody's and Standard & Poor's of at least
A-3 or its equivalent.

     ENFORCEMENT DATE: defined inss. 4.03 of the Mortgage.

     ENGINE:  (1) each of the engines  manufactured by Engine  Manufacturer  and
identified  by Engine  Manufacturer's  model  number and  Engine  Manufacturer's
serial number in the Aircraft  Description  Exhibit and originally  installed on
the Airframe on delivery  thereof  pursuant to the Lease, or (2) any Replacement
Engine,  in any case whether or not from time to time  installed on the Airframe
or installed on any other airframe or aircraft,  including (for both clauses (1)
and  (2))  any and  all  Parts  incorporated  or  installed  in or  attached  or
appurtenant  to such  engine,  and any and all Parts  removed  from such engine,
unless  title to such Parts does not vest in Lessor in  accordance  with ss. 8.1
and Annex C of the Lease. Upon substitution of a Replacement Engine under and in
accordance with the Lease,  such Replacement  Engine shall become subject to the
Lease and shall be an "Engine" for all purposes of the Operative Agreements, and
the replaced Engine shall cease to be subject to the Lease and shall cease to be
an "Engine".

     ENGINE MANUFACTURER: CFM International.

     [ENGINE  MANUFACTURER  WARRANTY  AGREEMENT:  Engine  Manufacturer  Warranty
Agreement  N___AT,  dated the Delivery Date,  among Engine  Manufacturer,  Owner
Trustee and Lessee.]

     EQUIPMENT  NOTE:  any equipment  note issued under the Mortgage in the form
specified in ss. 2.01 and Exhibit B thereof (as such form may be varied pursuant
to the terms of the  Mortgage),  or any Equipment Note issued under the Mortgage
in exchange for or replacement of any Equipment Note.

     EQUIPMENT NOTE REGISTER: defined inss. 2.08 of the Mortgage.

     ERISA: the Employee Retirement Income Security Act of 1974.

     ESCROW AGENT: ________________________________________.

     ESCROW AGREEMENT: each of the two Escrow and Paying Agent Agreements, among
Escrow  Agent,  Paying Agent,  certain  initial  purchasers of the  Pass-Through
Certificates named therein,  and one of the Pass-Through  Trustees,  dated as of
the Issuance  Date,  each of which  relates to one of the  Pass-Through  Trusts,
PROVIDED,  that,  for  purposes  of any  obligation  of  Lessee,  no  amendment,
modification,  or supplement to, or  substitution  or  replacement  of, any such
Escrow Agreement shall be effective unless Lessee consents to it.

     EVENT OF LOSS with respect to the Aircraft,  the  Airframe,  or any Engine:
any of the following circumstances,  conditions,  or events with respect to such
property, which shall have occurred for any reason whatsoever:

     (1) the  destruction  of such  property,  damage  to such  property  beyond
economic repair, or rendition of such property  permanently unfit for normal use
by Lessee;

     (2) the actual or constructive  total loss of such property,  or any damage
to such property, or requisition of title or use of such property, which results
in an insurance settlement with respect to such property on the basis of a total
loss or constructive or compromised total loss;

     (3)  any  theft,  hijacking,  or  disappearance  of  such  property  for 90
consecutive days or more or, if earlier,  the fifth day following the end of the
Term;

     (4)  any  seizure,  condemnation,   confiscation,  taking,  or  requisition
(including loss of title) of such property by any Government Entity or purported
Government  Entity (other than a requisition of use by the U.S.  Government) for
180 consecutive days or, if earlier, at the end of the Term;

     (5) any seizure, condemnation,  confiscation, taking, or requisition of use
of such property by the U.S.  Government that continues until the 30th day after
the last day of the  Term;  and (6) as a result  of any law,  rule,  regulation,
order, or other action by the Aviation  Authority or by any Government Entity of
the government of registry of the Aircraft or by any Government Entity otherwise
having  jurisdiction  over the operation or use of the Aircraft,  the use of the
Aircraft,  the Airframe, or any Engine in the normal course of Lessee's business
of passenger air  transportation is prohibited for 180 consecutive days, unless,
before  the  expiration  of  such  180-day  period,  Lessee  undertakes  and  is
diligently  carrying  forward such steps as are necessary or desirable to permit
the  normal  use of such  property  by  Lessee,  but in any event if such use is
prohibited for a continuous period of 360 days, PROVIDED,  that such prohibition
shall not create an Event of Loss if such prohibition  applies to other B737-800
aircraft  (or CFM 56-7  engines)  in Lessee's  fleet and also  applies to Boeing
737-800  aircraft  (or CFM 56-7  engines)  not owned or  operated by Lessee and,
before the expiration of such 360-day period,  Lessee conforms at least one unit
of such  property  in its  fleet  to the  requirements  of any such  law,  rule,
regulation, order, or other action, begins regular commercial use of the same in
such jurisdiction,  and is diligently  carrying forward,  in a manner which does
not  discriminate  against such property in so conforming  such property,  steps
which are  necessary  or  desirable  to permit the normal use of the Aircraft by
Lessee,  but in any event if such use is prohibited  for a continuous  period of
540 days or such use is prohibited at the expiration of the Term.

     EXCESS AMOUNT: defined inss. 2.03(b) of the Mortgage.

     EXCLUDED  PAYMENTS:  (1) indemnity payments paid or payable by Lessee to or
in  respect of Owner  Participant  or FSB,  their  Affiliates,  successors,  and
permitted assigns, and their directors, officers, employees, and agents pursuant
to ss. 9 of the Participation  Agreement,  or any corresponding payments payable
as Supplemental Rent under the Lease, (2) proceeds of public liability insurance
paid or payable as a result of insurance  claims made,  or losses  suffered,  by
Owner  Participant or FSB (or the other Persons  specified in clause (1)),  that
are payable directly to Owner  Participant or FSB (or any such other Person) for
its own  account,  (3)  proceeds of  insurance  maintained  with  respect to the
Aircraft by Owner  Participant  or any Affiliate  thereof for its own account or
benefit (whether directly or through Owner Trustee) and permitted under ss. 11.2
of the Lease,  (4) all  payments  required  to be made  under the Tax  Indemnity
Agreement by Lessee,  (5) any Transaction  Expenses paid or payable by Lessee to
Owner Trustee (to the extent for its sole benefit) or Owner Participant pursuant
to the Lease or the  Participation  Agreement,  (6) any amount  payable to Owner
Participant  by any  transferee  as the  purchase  price of Owner  Participant's
interest in the Trust  Estate,  (7) any interest  that pursuant to the Operative
Agreements  may  from  time to time  accrue  in  respect  of any of the  amounts
described in clauses (1) through (6) above,  (8) all payments  made by Guarantor
in respect of any of the foregoing,  (9) any right to enforce the payment of any
amount  described  in clauses (1) through (8) above  (PROVIDED,  that the rights
referred to in this clause (9) shall not  include the  exercise of any  remedies
provided for in the Lease, other than the right to sue for specific  performance
of any covenant to make such payment or to sue for damages for the breach of any
such  covenant),  and (10) any right to exercise  any election or option or make
any  decision  or  determination,  or to give or receive  any  notice,  consent,
waiver, or approval, or to take any other action in respect of, but in each case
only to the extent relating to, any Excluded Payments.

     EXPENSES:   any  and  all  liabilities,   obligations,   losses,   damages,
settlements,  penalties,  claims,  actions,  suits, costs,  demands,  judgments,
expenses,  and  disbursements  (including  reasonable fees,  disbursements,  and
reasonable  out of pocket  costs and  expenses  of legal  counsel,  accountants,
appraisers, inspectors, or other professionals, and costs of investigation).

     FAA:  the Federal  Aviation  Administration  of the United  States,  or any
Government   Entity  succeeding  to  the  functions  of  such  Federal  Aviation
Administration.

     FAA BILL OF SALE: a bill of sale for the Aircraft on AC Form 8050-2 (or any
other  FAA-approved  form),  delivered to Owner  Trustee on the Delivery Date by
Seller.

     FAA COUNSEL: Crowe & Dunlevy.

     FAA-FILED DOCUMENTS:  the Lease, the Mortgage, the Trust Agreement, the FAA
Bill of Sale, and an application  for  registration of the Aircraft with the FAA
in Owner Trustee's name.

     FARS: the Federal Aviation  Regulations  issued or promulgated  pursuant to
the Transportation Code from time to time.

     FAIR MARKET RENTAL  VALUE:  the fair market rental value in Dollars for the
Aircraft that would apply in an arm's-length transaction between an informed and
willing lessee under no compulsion to lease,  and an informed and willing lessor
under no  compulsion  to lease,  for the  applicable  period,  assuming that (1)
except as provided in ss. 15.4 of the Lease, the Aircraft has been maintained in
accordance with, and is in the condition  required by, the Lease, (2) rent would
be paid  quarterly,  and (3) except as provided  in ss.  15.4 of the Lease,  the
Aircraft would be leased during any such period on the same terms and conditions
(except for Basic Rent amount) as during the Base Term.

     FAIR MARKET  SALES  VALUE:  the fair market  sales value in Dollars for the
Aircraft that would apply in an arm's-length transaction between an informed and
willing  buyer under no  compulsion  to buy, and an informed and willing  seller
under no compulsion  to sell, in a transaction  that would close on or about the
relevant time of determination, assuming that (1) except as provided in ss. 15.4
of the Lease, the Aircraft has been maintained in accordance with the Lease, and
is in the  condition  required  by the  Lease,  and  (2)  the  Aircraft  will be
delivered to such informed and willing buyer in the return condition required by
the Lease.

     FINANCING  STATEMENTS:  UCC-1 (and,  where  appropriate,  UCC-3)  financing
statements (1) covering the  Collateral,  by Owner Trustee,  as debtor,  showing
Mortgagee as secured party, for filing in Utah and each other jurisdiction where
(in  Mortgagee's  opinion)  filing  is  necessary  to  perfect  its  Lien on the
Collateral, and (2) covering the Aircraft, as a precautionary matter, by Lessee,
as lessee,  showing  Owner  Trustee as lessor and Mortgagee as assignee of Owner
Trustee,  for filing in  Indiana  and each  other  jurisdiction  where (in Owner
Trustee's or Mortgagee's opinion) filing is reasonably desirable.

     FIXED RATE: defined in Schedule 1 to the Lease.

     FSB:  First  Security  Bank,  National  Association,   a  national  banking
association,  not in its capacity as trustee under the Trust  Agreement,  but in
its individual capacity.

     GAAP:  generally  accepted  accounting  principles  as  set  forth  in  the
statements of financial  accounting standards issued by the Financial Accounting
Standards Board of the American  Institute of Certified Public  Accountants,  as
varied by any applicable financial accounting rules or regulations issued by the
SEC, and applied on a basis consistent with prior periods except as disclosed in
the pertinent Person's financial statements.

     GOVERNMENT  ENTITY:  (1)  any  federal,  state,   provincial,   or  similar
government,  and any  body,  board,  department,  commission,  court,  tribunal,
authority,  agency, or other instrumentality of any such government or otherwise
exercising any executive, legislative,  judicial,  administrative, or regulatory
functions  of  such  government,  or (2)  any  other  government  entity  having
jurisdiction  over  any  matter  contemplated  by the  Operative  Agreements  or
relating to the  observance  or  performance  of the  obligations  of any of the
parties to the Operative Agreements.

     GTA: the General  Terms  Agreement,  as defined in the  Purchase  Agreement
Assignment.

     GUARANTEE:  Guarantee N___AT,  dated the Delivery Date, issued by Guarantor
in favor of Owner Trustee, FSB, Mortgagee, WTC, and each Participant.

     GUARANTOR: AmTran, Inc., an Indiana corporation.

     INDEMNITEE:  (1) FSB and Owner  Trustee,  (2) WTC and  Mortgagee,  (3) each
separate or additional  trustee appointed pursuant to the Trust Agreement or the
Mortgage,  (4) each  Participant,  (5) the Trust Estate and the Collateral,  (6)
each  Affiliate  of the Persons  described  in clauses (1) through  (4), (7) the
directors,  officers,  employees, and agents of each of the Persons described in
clauses  (1) through (4) and in clause (6),  (8) the  successors  and  permitted
assigns of the Persons  described in clauses (1) through (4), and in clauses (6)
and (7), and (9) the Pass-Through  Indemnitees;  provided, that the Pass-Through
Indemnitees  are Indemnitees  only for purposes of ss. 9.1 of the  Participation
Agreement.  If any Indemnitee is Airframe Manufacturer or Engine Manufacturer or
any  subcontractor  or  supplier  of either  thereof,  such  Person  shall be an
Indemnitee only in its capacity as Owner Participant,  Loan Participant, or Note
Holder.

     INTERCREDITOR AGREEMENT: the Intercreditor Agreement among the Pass-Through
Trustees,  each Liquidity Provider,  Policy Provider,  and Subordination  Agent,
dated as of the Issuance Date, PROVIDED, that, for purposes of any obligation of
Lessee,  no  amendment,  modification,  or  supplement  to, or  substitution  or
replacement of, such  Intercreditor  Agreement shall be effective  unless Lessee
consents to it.

     IRS: the Internal  Revenue Service of the United States,  or any Government
Entity succeeding to the functions of such Internal Revenue Service.

     ISSUANCE DATE: __________, 200_.

     JAA: the Joint Aviation Authority of the European Union.

     LAW: (1) any constitution, treaty, statute, law, decree, regulation, order,
rule,  or  directive  of  any  Government   Entity,  and  (2)  any  judicial  or
administrative  interpretation  or application of, or decision under, any of the
foregoing.

     LEASE or LEASE AGREEMENT:  Lease Agreement N___AT, dated the Delivery Date,
between Owner Trustee and Lessee.

     LEASE DEFAULT:  (1) any condition,  circumstance,  act, or event that, with
the giving of notice or the lapse of time,  would  constitute  a Lease  Event of
Default, or (2) any Lease Event of Default.

     LEASE EVENT OF DEFAULT:  any one or more of the conditions,  circumstances,
acts, or events set forth inss. 14 of the Lease.

     LESSEE: American Trans Air, Inc., an Indiana corporation.

     LESSEE ADVISOR:  Capstar Partners,  LLC, in its capacity as special advisor
to Lessee.

     LESSEE OPERATIVE AGREEMENTS:  the Participation  Agreement,  the Lease, the
Tax  Indemnity  Agreement,  the  Purchase  Agreement  Assignment  [, the  Engine
Manufacturer  Warranty  Agreement,] and each other agreement  between Lessee and
any other party to the  Participation  Agreement,  relating to the Transactions,
delivered on the Delivery Date.

     LESSEE PERSON: Lessee, any sublessee, assignee, successor, or other user or
Person in possession of the Aircraft, the Airframe, or an Engine with or without
color of right,  or any  Affiliate of any of the  foregoing  (excluding  any Tax
Indemnitee or any related Tax  Indemnitee  with respect  thereto,  or any Person
using or claiming any rights with respect to the Aircraft,  the Airframe,  or an
Engine directly by or through any of the Persons in this  parenthetical  phrase,
but not excluding any Person  claiming  directly or indirectly  through or under
the Lease).

     LESSEE'S ADVISOR(S): defined in Schedule 3 to the Participation Agreement.

     LESSOR: Owner Trustee in its capacity as lessor under the Lease.

     LESSOR LIEN,  with respect to any Person,  on any property  (including  the
Trust  Estate,  the  Collateral,  the Aircraft,  Airframe,  Engines,  Parts,  or
Aircraft Documents) or any payments:  any Lien on such property or payments that
results  from (1)  claims  against  such  Person  (if such  Person is a trustee,
whether in its individual  capacity or in its capacity as a trustee) not related
to any of the Transactions, (2) acts or omissions of such Person (if such Person
is a  trustee,  whether  in its  individual  capacity  or in its  capacity  as a
trustee) in violation of its obligations under any of the terms of the Operative
Agreements,  or not related to the  Transactions,  (3) Taxes against such Person
(if such  Person is a trustee,  whether  in its  individual  capacity  or in its
capacity as a trustee) or any of its  Affiliates  that Lessee is not required to
indemnify under the Participation  Agreement,  or (4) claims against such Person
arising out of its transfer of all or part of its interest in the Aircraft,  the
Trust Estate, or the Operative Agreements, other than a Transfer required by the
terms of the Operative  Agreements or  attributable  to the existence of a Lease
Event of Default.

     LESSOR'S  COST:  the amount paid by Owner Trustee to Seller to purchase the
Aircraft  pursuant to the Purchase  Agreement  Assignment and the  Participation
Agreement,  as designated  by Dollar  amount in Schedule 3 to the  Participation
Agreement.

     LIEN: any mortgage,  pledge, lien, charge,  claim,  encumbrance,  lease, or
security interest affecting the title to or any interest in property.

     LIQUIDITY FACILITIES:  the two Revolving Credit Agreements (consisting of a
separate Revolving Credit Agreement with Liquidity Provider with respect to each
Pass-Through  Trust) between  Subordination  Agent,  as borrower,  and Liquidity
Provider,  each dated as of the Issuance Date,  PROVIDED,  that, for purposes of
any  obligation of Lessee,  no  amendment,  modification,  or supplement  to, or
substitution or replacement  of, any such Liquidity  Facility shall be effective
unless Lessee consents to it.

     LIQUIDITY  PROVIDER:  ______________,  as "Class G Liquidity  Provider" and
"Class C Liquidity  Provider"  (as such terms are  defined in the  Intercreditor
Agreement), or any Replacement Liquidity Provider.

     LOAN TRUSTEE: Wilmington Trust Company, a Delaware banking corporation, not
in its individual capacity but solely as loan trustee under the Mortgage.

     LOAN PARTICIPANT: a Note Holder.

     LOSS PAYMENT DATE: defined inss. 10.1.2(a)(1) of the Lease.

     MAINTENANCE PROGRAM: defined in Annex C to the Lease.

     MAJORITY  IN  INTEREST  OF  NOTE  HOLDERS  as  of  a  particular   date  of
determination:  the  holders  of a  majority  in unpaid  Original  Amount of all
Equipment Notes  outstanding as of such date (excluding any Equipment Notes held
by Owner  Trustee,  Lessee,  or Owner  Participant  or any Affiliate of any such
party or any interests of Owner Trustee or Owner  Participant  therein by reason
of subrogation  pursuant to ss. 4.03 of the Mortgage (unless all Equipment Notes
then outstanding are held by Owner Trustee,  Lessee,  Owner Participant,  or any
Affiliate of any  thereof));  PROVIDED,  that for the purposes of directing  any
action,  casting  any vote,  or  giving  any  consent,  waiver,  or  instruction
hereunder,  any Note Holder may (in its sole discretion) allocate any fractional
portion  of the  principal  amount of its  Equipment  Note(s)  in favor of or in
opposition to any such action, vote, consent, waiver, or instruction.

     MAKE-WHOLE  AMOUNT  with  respect  to any  Equipment  Note:  an amount  (as
determined by an independent  investment bank of national standing) equal to the
excess, if any, of (a) the present value of the remaining  scheduled payments of
principal  and  interest  to  maturity  of  such  Equipment  Note,  computed  by
discounting  such payments on a quarterly basis on each Payment Date (assuming a
360-day  year of twelve  30-day  months),  using a  discount  rate  equal to the
Treasury Yield, over (b) the outstanding principal amount of such Equipment Note
plus  accrued  interest  to  the  determination   date.  For  purposes  of  this
definition,  "TREASURY YIELD" means, at the determination date for any Equipment
Note,  the  interest  rate  (expressed  as a decimal  and, in the case of United
States Treasury bills,  converted to a bond equivalent  yield)  determined to be
the per annum rate equal to the  quarterly  yield to maturity for United  States
Treasury securities maturing on the Average Life Date of such Equipment Note and
trading  in  the  public   securities   markets  either  (1)  as  determined  by
interpolation  between the most-recent  weekly average yield to maturity for two
series of United States Treasury  securities,  trading in the public  securities
markets,  (aa) one  maturing as close as  possible  to, but  earlier  than,  the
Average Life Date of such  Equipment  Note, and (bb) the other maturing as close
as possible to, but later than, the Average Life Date of such Equipment Note, in
each case as published in the most-recent H.15(519),  or (2) if a weekly average
yield to maturity for United States Treasury  securities maturing on the Average
Life Date of such Equipment Note is reported on the most-recent H.15(519),  such
weekly  average  yield to maturity as  published in such  H.15(519)  "H.15(519)"
means the  weekly  statistical  release  designated  as such,  or any  successor
publication,  published by the Board of Governors of the Federal Reserve System.
The  determination  date for a Make-Whole Amount shall be the third Business Day
before  the  applicable   payment  or  redemption  date,  and  the  "MOST-RECENT
H.15(519)"  means the  H.15(519)  published  before the close of business on the
third Business Day before the applicable payment or redemption date.

     MATERIALLY ADVERSE CHANGE with respect to any Person: any event, condition,
or  circumstance  that  materially  adversely  affects such  Person's  business,
prospects,  or consolidated  financial  condition,  or its ability to observe or
perform  its  obligations,  liabilities,  and  agreements  under  the  Operative
Agreements.

     MINIMUM LIABILITY INSURANCE AMOUNT: defined in Schedule 1 to the Lease.

     MOODY'S: Moody's Investors Service, Inc.

     MORTGAGE:  Trust  Indenture and Mortgage  N___AT,  dated the Delivery Date,
between Owner Trustee and Mortgagee.

     MORTGAGE AGREEMENTS:  the Participation  Agreement, the Lease, the Purchase
Agreement,  the Purchase Agreement  Assignment,  the Consent and Agreement,  the
Engine  Manufacturer  Warranty  Agreement,  the  Bills  of Sale,  and any  other
contract,  agreement,  or instrument from time to time assigned or pledged under
the Mortgage.

     MORTGAGE DEFAULT: (1) any condition, circumstance, act, or event that, with
the giving of notice or the lapse of time,  would constitute a Mortgage Event of
Default, or (2) any Mortgage Event of Default.

     MORTGAGE   EVENT  OF   DEFAULT:   any  one  or  more  of  the   conditions,
circumstances, acts, or events set forth inss. 4.02 of the Mortgage.

     MORTGAGE INDEMNITEE: (1) WTC and Mortgagee, (2) each separate or additional
trustee appointed  pursuant to the Mortgage,  (3) Subordination  Agent, (4) each
Liquidity  Provider,  (5) Policy Provider,  (6) each Pass-Through  Trustee,  (7)
Paying Agent,  (8) Escrow Agent, (9) each Loan  Participant,  (10) each of their
respective  successors and assigns,  and (11) each of the  directors,  officers,
employees, and agents of such Persons .

     MORTGAGED PROPERTY: defined inss. 3.03 of the Mortgage.

     MORTGAGEE: Wilmington Trust Company, a Delaware banking corporation, not in
its individual capacity but solely as loan trustee under the Mortgage.

     MORTGAGEE AGREEMENTS:  the Participation  Agreement, the Mortgage, and each
other  agreement  between  Mortgagee  and any other  party to the  Participation
Agreement, relating to the Transactions, delivered on the Delivery Date.

     MORTGAGEE EVENT: (1) in the event of a reorganization  proceeding involving
Lessee  under  Chapter  11 of the  Bankruptcy  Code,  (a)  the  trustee  in such
proceeding or Lessee does not assume or agree to perform its  obligations  under
the Lease,  as contemplated  under Section 1110,  during the 60-day period under
ss.  1110(a)(1)(A)  of the  Bankruptcy  Code (or such longer period as may apply
under ss. 1110(b) of the Bankruptcy  Code), or (b) at any time after agreeing to
perform or assuming such  obligations,  such trustee or Lessee ceases to perform
such  obligations  with the result that the  Continuous  Stay Period comes to an
end, or (2) either the  Equipment  Notes become due and payable  pursuant to ss.
4.04(b) of the  Mortgage,  or Mortgagee  takes action or notifies  Owner Trustee
that it  intends  to take  action  to  foreclose  the  Lien of the  Mortgage  or
otherwise commence the exercise of any significant remedy in accordance with ss.
4.04(a) of the Mortgage.

     NET ECONOMIC RETURN:  Owner  Participant's net after-tax book yield,  using
the "multiple  investment  sinking  fund" method of analysis,  and aggregate and
present  value  (discounted  at 6% per  annum) of the net  after-tax  cash flow,
computed  both  through the EBO Date  (assuming  Lessee's  exercise of the early
buy-out option in ss. 17.3.1(a)(1) of the Lease) and through the end of the Base
Term, and computed on the basis of the same  methodology  and assumptions as the
initial  Owner   Participant  used  in  determining   Basic  Rent  payments  and
allocations,   Stipulated  Loss  Value   percentages,   and  Termination   Value
percentages,  as of the  Delivery  Date,  as such  assumptions  are adjusted for
events that have been the basis for  adjustments  to Basic Rent  pursuant to ss.
3.2.1(b) of the Lease or events  giving rise to indemnity  payments  pursuant to
ss. 5 of the Tax Indemnity Agreement;  PROVIDED, that, even if the initial Owner
Participant  transfers its interest,  Net Economic Return shall be calculated as
if the initial Owner  Participant had retained its interest;  PROVIDED  FURTHER,
that,  notwithstanding  the preceding proviso,  solely for purposes of ss. 11 of
the  Participation  Agreement  and  calculating  any  adjustments  to Basic Rent
payments and  allocations,  Stipulated Loss Values,  EBO Price,  and Termination
Values in  connection  with a  refunding  pursuant to such ss. 11 at a time when
Owner  Participant is a transferee (other than an Affiliate of the initial Owner
Participant), the after-tax yield (but not the after-tax cash flow) component of
Net Economic  Return shall be  calculated  on the basis of the  methodology  and
assumptions  used by the  transferee  Owner  Participant  as of the date when it
acquires its interest.

     NET  PRESENT  VALUE  OF  RENTS:  the  present  value,  as of  the  date  of
determination,  discounted at 10% per annum, compounded quarterly to the date of
determination,  of all unpaid  Basic  Rent  payments  during the  then-remaining
portion of the Base Term, expressed as a percentage of Lessor's Cost.

     NET WORTH for any  Person:  the excess of its total  assets  over its total
liabilities.

     NEW DEBT: debt securities in an aggregate principal amount specified in the
Re-Funding   Information,   with  such  principal   amount  not  to  exceed  the
then-outstanding  principal balance due under the then-existing  Equipment Notes
being re-funded.

     NON-U.S.  PERSON: any Person,  other than a United States person as defined
in Codess. 7701(a)(30).

     NOTE HOLDER: a registered holder of one or more Equipment Notes.

     NOTE  PURCHASE  AGREEMENT:  the Note  Purchase  Agreement,  dated as of the
Issuance  Date,  among American Trans Air,  Inc.,  Subordination  Agent,  Escrow
Agent,  Paying Agent, and  Pass-Through  Trustee under each  Pass-Through  Trust
Agreement, providing for the issuance and sale of Equipment Notes.

     OFFICER'S  CERTIFICATE  of any  party  to the  Participation  Agreement:  a
certificate signed by the Chairman, the President, any Vice President (including
those with varying ranks such as  Executive,  Senior,  Assistant,  or Staff Vice
President), the Treasurer, or the Secretary of such party.

     OPERATIVE AGREEMENTS: the Participation Agreement, the Trust Agreement, the
Purchase Agreement  Assignment,  the Guarantee,  the Consent and Agreement,  the
Engine Manufacturer  Warranty Agreement,  the Lease, the Mortgage,  the Bills of
Sale, the Tax Indemnity Agreement, and the Equipment Notes.

     OPERATIVE  INDENTURE:  an indenture  under which notes have been issued and
purchased by the Pass-Through Trustees pursuant to the Note Purchase Agreement.

     OP JURISDICTION: defined in Schedule 3 to the Participation Agreement.

     ORIGINAL AMOUNT of an Equipment Note: the stated original  principal amount
of such Equipment Note and, with respect to all Equipment  Notes,  the aggregate
stated original principal amounts of all such equipment notes.

     OWNER  PARTICIPANT:  the Person  executing the  Participation  Agreement as
"Owner  Participant";  except that,  after an Owner  Participant  Transfers  its
interest to a  successor  Owner  Participant,  such  transferor  shall not be an
"Owner  Participant"  (except  as  provided  in ss.  10.2  of the  Participation
Agreement) and the successor Owner Participant shall be the "Owner Participant".

     OWNER  PARTICIPANT  AGREEMENTS:   the  Participation   Agreement,  the  Tax
Indemnity Agreement,  the Trust Agreement and each other agreement between Owner
Participant and any other party to the Participation  Agreement  relating to the
Transactions, delivered on the Delivery Date.

     OWNER PARTICIPANT'S  PERCENTAGE:  the percentage of Lessor's Cost allocated
to Owner Participant in Schedule 2 to the Participation Agreement.

     OWNER  TRUSTEE:  First  Security  Bank,  National  Association,  a national
banking  association,  not in  its  individual  capacity,  except  as  expressly
provided in any Operative Agreement, but solely as Owner Trustee under the Trust
Agreement.

     OWNER TRUSTEE AGREEMENTS: the Participation Agreement, the Lease, the Trust
Agreement, the Mortgage, the Equipment Notes, the Purchase Agreement Assignment,
[the Engine Manufacturer  Warranty  Agreement,] and each other agreement between
Owner Trustee and any other party to the  Participation  Agreement,  relating to
the Transactions, delivered on the Delivery Date.

     PARTICIPANT: Owner Participant or a Loan Participant.

     PARTICIPATION AGREEMENT: Participation Agreement N___AT, dated the Delivery
Date, among Lessee,  Owner Participant,  Owner Trustee,  Pass-Through  Trustees,
Subordination Agent, and Mortgagee.

     PARTS:  all  appliances,  parts,  components,  instruments,  appurtenances,
accessories,  furnishings,  seats, and other equipment of whatever nature (other
than (1)  Engines or  engines,  and (2) any items  leased by Lessee from a third
party other than  Lessor)  from time to time  installed  or  incorporated  in or
attached or appurtenant to the Airframe or any Engine.

     PASS-THROUGH  AGREEMENTS:  the  Pass-Through  Trust  Agreements,  the  Note
Purchase  Agreement,  the  Deposit  Agreements,   the  Escrow  Agreements,   the
Intercreditor  Agreement,  the Policy and the Policy  Provider  Agreements,  the
Liquidity Facilities,  and the Fee Letters referred to in ss. 2.3 of each of the
Liquidity Facilities,  PROVIDED, that no amendment,  modification, or supplement
to, or  substitution  or replacement  of, any such Fee Letter shall be effective
for purposes of any obligation of Lessee, unless Lessee consents to it.

     PASS-THROUGH  CERTIFICATES:  the  pass-through  certificates  issued by the
Pass-Through  Trusts  (including any  pass-through  certificates  for which such
pass-through certificates may be exchanged).

     PASS-THROUGH  INDEMNITEES:  (1) Subordination  Agent,  Paying Agent, Escrow
Agent, Liquidity Provider,  Policy Provider, and Pass-Through Trustees, (2) each
Affiliate of a Person  described in the preceding clause (1), (3) the directors,
officers, employees, and agents of the Persons described in clauses (1) and (2),
and (4) the successors and permitted assigns of the Persons described in clauses
(1), (2), and (3).

     PASS-THROUGH  TRUST: each of the two separate  pass-through  trusts created
under the Pass-Through Trust Agreements.

     PASS-THROUGH TRUST AGREEMENT:  each of the two separate  pass-through trust
agreements,  dated  as of  the  Issuance  Date,  by  and  between  Lessee  and a
Pass-Through Trustee.

     PASS-THROUGH   TRUSTEE:   Wilmington  Trust  Company,  a  Delaware  banking
corporation,  not in its  individual  capacity  but  solely in its  capacity  as
trustee under each Pass-Through Trust Agreement.

     PASS-THROUGH   TRUSTEE  AGREEMENTS:   the  Participation   Agreement,   the
Pass-Through  Trust  Agreements,   the  Note  Purchase  Agreement,  the  Deposit
Agreements, the Escrow Agreements, and the Intercreditor Agreement.

     PAST-DUE RATE: defined in Schedule 1 to the Lease.

     PAYING AGENT:  Wilmington Trust Company,  as Paying Agent under each of the
Escrow Agreements.

     PAYMENT DATE:  each  __________,  __________,  __________,  and  __________
during  the  Term,  commencing  with the  first  such  date to occur  after  the
Commencement Date.

     PAYMENT  PERIOD:  each  of  the  consecutive  quarterly  periods  (or  such
applicable  shorter period  beginning on the Delivery Date or the first day of a
Renewal  Term)  during  the Term and  ending on a Payment  Date,  the first such
period commencing on and including the Delivery Date.

     PERMITTED AIR CARRIER:  (1) any  manufacturer  of  commercial  airframes or
commercial aircraft engines, or any Affiliate thereof, (2) any Permitted Foreign
Air Carrier, (3) any Person approved in writing by Owner Participant, or (4) any
U.S. Air Carrier.

     PERMITTED COUNTRY:  any country listed on Schedule 5 to the Lease,  subject
to the notes set forth on such Schedule.

     PERMITTED  FOREIGN AIR CARRIER:  any air carrier that (1) has its principal
executive  offices in a  Permitted  Country,  and (2) is  authorized  to conduct
commercial  airline  operations  and to  operate  jet  aircraft  similar  to the
Aircraft under the applicable Laws of such Permitted Country.

     PERMITTED  INSTITUTION:   any  bank,  trust  company,   insurance  company,
financial institution,  or corporation or limited liability company (other than,
without  Lessee's  consent,  a  commercial  air carrier,  a commercial  aircraft
operator,  a freight forwarder,  an airframe  manufacturer  (other than Airframe
Manufacturer) or aircraft engine manufacturer (other than Engine  Manufacturer),
or an Affiliate of any of the foregoing),  in each case with a combined  capital
and surplus or net worth of at least $50,000,000.

     PERMITTED  LIEN:  any Lien  described in clauses (a) through (g) ofss. 6 of
the Lease.

     PERMITTED SUBLEASE: a sublease permitted underss. 7.2.7 of the Lease.

     PERMITTED SUBLESSEE: the sublessee under a Permitted Sublease.

     PERSON  or  PERSON:  an  individual,  firm,  business,  partnership,  joint
venture,   trust,  trustee,   Government  Entity,   organization,   association,
corporation,   limited  liability  company,   government  agency,   governmental
committee,  governmental  department,  governmental authority, and other body or
organization,  corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.

     PLAN: any employee benefit plan within the meaning of ERISAss. 3(3), or any
plan within the meaning of Codess. 4975(e)(1).

     POLICY: defined inss. 1.1 of the Intercreditor Agreement.

     POLICY PROVIDER: [AIG].

     POLICY  PROVIDER   AGREEMENT:   defined  inss.  1.1  of  the  Intercreditor
Agreement.

     PRELIMINARY NOTICE: defined inss. 17.1 of the Lease.

     PTT PERCENTAGE with respect to each Pass-Through Trustee: the percentage of
Lessor's  Cost  allocated  to such  Pass-Through  Trustee  in  Schedule 2 to the
Participation Agreement.

     PURCHASE AGREEMENT:  shall mean Purchase Agreement No. _____ by and between
Lessee and the Airframe  Manufacturer,  dated as of __________,  2000, including
the exhibits and letter  agreements  appended thereto and  incorporated  therein
(except Letter Agreement Nos. __________, __________, and ----------).

     PURCHASE  AGREEMENT  ASSIGNMENT:  Purchase  Agreement and Engine Warranties
Assignment N___AT, dated the Delivery Date, between Lessee and Owner Trustee.

     PURCHASE DATE: the last Business Day of the Base Term or a Renewal Term, as
specified in any Purchase Notice.

     PURCHASE NOTICE: defined inss. 17.3.1 of the Lease.

     QIB: defined inss. 2.08 of the Mortgage.

     RE-FUNDING  CERTIFICATE:  a certificate of an authorized  representative of
Owner  Participant  delivered  pursuant  to  ss.  11.1.1  of  the  Participation
Agreement,  setting  forth  (1)  the  Re-Funding  Date  and  (2)  the  following
information,  subject  to  the  limitations  in  ss.  11  of  the  Participation
Agreement: (a) the principal amount of debt to be issued by Owner Trustee on the
Re-Funding  Date  which  amount  cannot  exceed the  outstanding  balance of the
existing Debt and (b) the proposed revised  schedules of Basic Rent payments and
allocations,  Stipulated Loss Value percentages,  Termination Value percentages,
the EBO Price, and the proposed Amortization Schedules, calculated in accordance
with ss. 3.2.1 of the Lease.

     RE-FUNDING DATE: the proposed date on which the outstanding Equipment Notes
will  be  redeemed  and  refinanced  pursuant  to ss.  11 of  the  Participation
Agreement.

     RE-FUNDING  INFORMATION:  the  information  set  forth  in  the  Re-Funding
Certificate  (other than the Re-Funding  Date),  as revised by any  verification
procedures demanded by Lessee pursuant to ss. 3.2.1(d) of the Lease.

     REGISTRATION  RIGHTS  AGREEMENT:   the  Exchange  and  Registration  Rights
Agreement dated the Issuance Date by and among  Guarantor,  Lessee,  and certain
initial  purchasers of the Pass-Through  Certificates  named therein,  providing
for, among other things,  the exchange  offer with respect to such  Pass-Through
Certificates to be registered under the Securities Act or the shelf registration
of such Pass-Through Certificates for a period specified therein.

     REMOVABLE PARTS: defined inss. D of Annex C to the Lease.

     RENEWAL NOTICE: defined inss. 17.2.1 of the Lease.

     RENEWAL  RENT:  the  basic  rent  payable  for a Renewal  Term,  determined
pursuant toss. 17.2.2 of the Lease.

     RENEWAL TERM: a one-year term for which the Lease is extended by Lessee (if
applicable) pursuant toss. 17 of the Lease.

     RENT: Basic Rent and Supplemental Rent.

     REPLACEMENT  AIRFRAME:  an airframe  substituted for the Airframe  pursuant
toss. 10 of the Lease.

     REPLACEMENT  ENGINE:  an engine  substituted  for an Engine pursuant to the
Lease.

     REPLACEMENT LIQUIDITY PROVIDER: defined in the Intercreditor Agreement.

     RETURN ACCEPTANCE SUPPLEMENT:  a Return Acceptance Supplement,  dated as of
the date the  Aircraft  is  returned to Lessor  pursuant  toss.  5 of the Lease,
entered into by Lessor and Lessee, substantially in the form of Exhibit B to the
Lease.

     SCHEDULED DELIVERY DATE: the expected Delivery Date that Lessee
notifies to each Participant,  Owner Trustee,  and Mortgagee pursuant to ss. 4.1
of the Participation Agreement,  which must be a Business Day not later than the
Commitment Termination Date.

     SCHEDULED EXPIRATION DATE: defined in Schedule 1 to the Lease.

     SEC: the  Securities and Exchange  Commission of the United States,  or any
Government  Entity  succeeding to the functions of the  Securities  and Exchange
Commission.

     SECTION 1110: Bankruptcy Codess. 1110.

     SECTION 1110 PERIOD: defined inss. 4.04(a) of the Mortgage.

     SECURED OBLIGATIONS: defined inss. 2.06 of the Mortgage.

     SECURITIES ACT: the Securities Act of 1933.

     SECURITY: a "security" as defined inss. 2(1) of the Securities Act.

     SELLER: _______________ [Lessee] [Airframe Manufacturer] [other].

     SENIOR HOLDER: defined inss. 2.16(c) of the Mortgage.

     SERIES: Series G or Series C.

     SERIES C or SERIES C EQUIPMENT  NOTES:  Equipment  Notes  issued  under the
Mortgage and  designated as "Series C"  thereunder,  in the Original  Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series C".

     SERIES G or SERIES G EQUIPMENT  NOTES:  Equipment  Notes  issued  under the
Mortgage and  designated as "Series G"  thereunder,  in the Original  Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series G".

     SIGNIFICANT   EXPENDITURE:   expenditures   in  excess  of  $5,000,000  for
non-severable   improvements  to  the  Aircraft  which   constitute   "Mandatory
Modifications" as defined inss. D of Annex C to the Lease.

     SIMILAR AIRCRAFT: defined in Schedule 1 to the Lease.

     SLV RATE: defined in Schedule 1 to the Lease.

     SPECIAL  DEFAULT:  (1)  Lessee's  failure to pay any amount of Basic  Rent,
Stipulated Loss Value,  or Termination  Value when due, or (2) any Lease Default
referred to inss. 14.5 of the Lease.

     STANDARD & POOR'S: Standard & Poor's Ratings Services.

     STIPULATED LOSS VALUE for the Aircraft:  (1) during the Base Term, Lessor's
Cost  multiplied by the  percentage in Schedule 3 to the Lease (as adjusted from
time to time in  accordance  with ss.  3.2.1  of the  Lease)  for the  pertinent
Stipulated  Loss  Value  Date,  and (2)  during  any  Renewal  Term,  the amount
determined pursuant to ss. 17.2.3 of the Lease.  Notwithstanding anything to the
contrary in any  Operative  Agreement,  Stipulated  Loss Value  shall  always be
sufficient to pay in full, as of the date of payment  thereof  (assuming  timely
payment of the Equipment Notes before such date), the unpaid principal amount of
all  Equipment  Notes  outstanding  as of such date,  together  with accrued and
unpaid  interest on all Equipment  Notes as of such date (without  regard to any
interest  accrued on the Equipment  Notes at a rate exceeding the Debt Rate). If
the event giving rise to an obligation to pay any  Stipulated  Loss Value occurs
and the  actual  date that the loss of tax  benefits  resulting  from such event
shall be earlier  or later than the date  assumed  in  calculating  the  federal
income tax consequences  reflected in the applicable Stipulated Loss Value, such
Stipulated Loss Value shall be  appropriately  adjusted  upwards or downwards to
reflect the actual date of such loss.

     STIPULATED  LOSS VALUE DATE for any month:  the day in that month specified
in Schedule 3 to the Lease or, if that day is not a Business  Day, the following
Business Day.

     SUBORDINATION AGENT: Wilmington Trust Company, as subordination agent under
the Intercreditor Agreement.

     SUBORDINATION AGENT AGREEMENTS:  the Participation Agreement, the Liquidity
Facilities, and the Intercreditor Agreement.

     SUPPLEMENTAL  RENT:  without  duplication,  (1) all  Expenses,  Transaction
Expenses,  and all other  amounts,  liabilities,  indemnities,  and  obligations
(other than Basic Rent, but including any Make-Whole Amount) that Lessee assumes
or  becomes  obligated  to pay or  agrees  to pay  under  any  Lessee  Operative
Agreement to or on behalf of Lessor or any other  Person,  including  Stipulated
Loss  Value,  Termination  Value,  and  indemnity  payments  under  ss. 9 of the
Participation  Agreement,  but  excluding  any  amount  as to  which  Lessee  is
obligated to pay a pro rata share pursuant to clause (5) of this definition, (2)
(a) to the extent not  payable  (whether  or not in fact paid) under ss. 6(a) or
ss. 6(b), as applicable, of the Note Purchase Agreement (as originally in effect
or amended with Owner Participant's  consent), the fees payable to (x) Liquidity
Provider under ss. 2.3 of each Liquidity Facility,  multiplied by a fraction the
numerator of which is the then-outstanding aggregate principal amount of all the
series of Equipment Notes, and the denominator of which is the  then-outstanding
aggregate  principal  amount of all  "Series G  Equipment  Notes" and  "Series C
Equipment Notes" (each as defined in the Note Purchase Agreement) and (y) Policy
Provider under ss.  3.02(d)(i) of the Policy Provider  Agreement and the related
Policy Fee Letter (as defined in the Policy Provider Agreement)  multiplied by a
fraction  the  numerator  of  which  shall  be  the  then-outstanding  aggregate
principal  amount of the Series G Equipment  Notes and the  denominator of which
shall be the then  outstanding  aggregate  principal  amount  of all  "Series  G
Equipment Notes" (as defined in the Note Purchase Agreement); (b) (x) the amount
equal to interest on any  Downgrade  Advance  (other than any Applied  Downgrade
Advance)  payable  under ss. 3.7 of each  Liquidity  Facility  minus  Investment
Earnings from such Downgrade  Advance,  multiplied by (y) the fraction specified
in the  foregoing  clause  (a)(x);  (c) (x) the amount  equal to interest on any
Non-Extension  Advance (other than any Applied  Non-Extension  Advance)  payable
under ss. 3.7 of each  Liquidity  Facility  minus  Investment  Earnings  on such
Non-Extension  Advance  multiplied by (y) the fraction specified in the forgoing
clause (a)(x); (d) if any payment default exists with respect to interest on any
series  of  Equipment  Notes,  (x) an amount  equal to  interest  on any  Unpaid
Advance,  Applied Downgrade Advance,  or Applied  Non-Extension  Advance payable
under ss.  3.7 of each  Liquidity  Facility  (or if Policy  Provider  has made a
payment in respect of such Advance to the Liquidity  Provider or, in the case of
the Series G Equipment  Notes, if Policy Provider has made a payment  equivalent
to such an Advance,  as would have been payable  under ss. 3.7 of the  Liquidity
Facility in respect of the Class G Certificates had such Advance been made) plus
any interest at the Past-Due Rate actually payable (whether or not in fact paid)
in respect of the overdue  scheduled  interest on the Equipment Notes in respect
of  which  such  Unpaid  Advance,   Applied   Downgrade   Advance,   or  Applied
Non-Extension  Advance was made by the applicable Liquidity Provider (or, in the
case of the Series G Equipment  Notes, an equivalent  payment was made by Policy
Provider)  multiplied by (y) a fraction the numerator of which is the sum of all
then-overdue  interest on the Equipment Notes (other than interest  becoming due
and payable solely as a result of acceleration of any Equipment Notes),  and the
denominator  of  which  shall  be the sum of all  then-overdue  interest  on all
"Series G Equipment  Notes" and "Series C Equipment  Notes"  (each as defined in
the Note  Purchase  Agreement)  (other than  interest  becoming  due and payable
solely as a result  of  acceleration  of any such  "Equipment  Notes");  and (e)
Lessor's  pro rata share of any other  amounts  owed to  Liquidity  Provider  by
Subordination  Agent as  borrower  under each  Liquidity  Facility  (other  than
amounts  due  as  repayment  of  advances  thereunder  or as  interest  on  such
advances), except to the extent payable pursuant to clause (a), (b), (c), or (d)
above,  (3) Lessor's pro rata share of all  compensation  and  reimbursement  of
expenses,  disbursements,  and advances  payable  under the  Pass-Through  Trust
Agreements, (4) Lessor's pro rata share of all compensation and reimbursement of
expenses and disbursements  (including  payments of indemnities)  payable either
(a) to  Subordination  Agent  under the  Intercreditor  Agreement,  except  with
respect to any income or  franchise  taxes  incurred by  Subordination  Agent in
connection with the transactions contemplated by the Intercreditor Agreement, or
(b) by Lessee to  Policy  Provider  under the  Policy  Provider  Agreement,  (5)
Lessor's  pro  rata  share  of  any  amount  payable  under  ss.  9.1  (and,  if
attributable   thereto,   ss.  9.5)  of  the  Participation   Agreement  to  any
Pass-Through  Indemnitee to the extent such amount  relates to, results from, or
arises  out of or in  connection  with (a) the  Pass-Through  Agreements  or the
enforcement of any of the terms of any of the Pass-Through  Agreements,  (b) the
offer,  sale,  or  delivery of the  Pass-Through  Certificates  or any  interest
therein or  represented  thereby,  or (c) any breach of or failure to perform or
observe,  or any other  noncompliance  with,  any covenant or agreement or other
obligation to be performed by Lessee under any  Pass-Through  Agreement,  or the
falsity  of any  representation  or  warranty  of  Lessee  in  any  Pass-Through
Agreement,  and (6) if Lessee requests any amendment to any Operative  Agreement
or  Pass-Through  Agreement,  Lessor's pro rata share of all reasonable fees and
expenses  (including  fees and  disbursements  of counsel) of Escrow  Agents and
Paying Agents in connection therewith payable by Pass-Through Trustees under the
Escrow Agreements. As used herein, (1) "LESSOR'S PRO RATA SHARE" means as of any
time a  fraction,  the  numerator  of  which is the  then-outstanding  principal
balance  of  Equipment  Notes,  and the  denominator  of which is the  aggregate
then-outstanding  principal  balance of all "Equipment Notes" (as each such term
is  defined  in each of the  Operative  Indentures),  "(2)  "Policy"  means  the
Certificate  Guaranty  Insurance  Policy  (including  the  endorsement  attached
thereto and  constituting a part thereof) issued by Policy Provider  pursuant to
the Policy Provider  Agreement,  and (3) "Policy  Provider  Agreement" means the
Insurance and  Indemnity  Agreement  dated as of the Policy  issuance date among
Lessee,   Subordination  Agent,  and  Policy  Provider.  For  purposes  of  this
definition,  "Applied Downgrade Advance", "Applied Non-Extension Advance", "Cash
Collateral   Account",   "Downgrade  Advance",   "Final  Advance",   "Investment
Earnings",  "Non-Extension Advance", and "Unpaid Advance" have the same meanings
as in each Liquidity Facility.

     TAX ATTRIBUTE  PERIOD:  the period from the Delivery Date through  December
31, 20__ [DELIVERY  DATE YEAR PLUS SEVEN] or such longer period of  depreciation
as may be allowable by reason of an indemnifiable  event under the Tax Indemnity
Agreement;

     TAX INDEMNITEE:  (1) FSB and Owner Trustee, (2) WTC and Mortgagee, (3) each
separate or additional  trustee appointed pursuant to the Trust Agreement or the
Mortgage,  (4) each  Participant,  (5) the Trust Estate and the Collateral,  (6)
Policy Provider,  and (7) the successors,  assigns, and agents of the foregoing.
For purposes of this definition,  the term "Owner Participant" shall include any
member of an  affiliated  group  (within the meaning of Code ss.  1504) of which
Owner Participant is a member at the pertinent time, if consolidated,  joint, or
combined  returns are filed for such  affiliated  group for federal,  state,  or
local income tax purposes.

     TAX INDEMNITY AGREEMENT: Tax Indemnity Agreement N___AT, dated the Delivery
Date, between Lessee and Owner Participant.

     TAXES:  all  fees  (including  license,   recording,   documentation,   and
registration fees), taxes, including income, gross receipt franchise sales, use,
rental, turnover,  business,  occupational,  excise,  value-added,  tangible and
intangible  property  and  stamp  taxes,  levies,   imposts,   duties,  charges,
assessments,  or  withholdings  of any nature  whatsoever  imposed by any Taxing
Authority,  and any penalties,  additions to tax, fines, or interest  thereon or
additions thereto.

     TAXING AUTHORITY:  any federal,  state, or local government or other taxing
authority in the United  States or its  possessions,  any foreign  government or
political  subdivision or taxing authority  thereof,  any  international  taxing
authority,  or any  territory  or  possession  of the  United  States  or taxing
authority thereof.

     TERM: the term,  commencing on the Delivery Date, for which the Aircraft is
leased  pursuant  to ss. 3 of the  Lease,  consisting  of the Base  Term and any
Renewal  Term(s);  PROVIDED,  that,  if at the  scheduled  end of the  Term  the
Aircraft or Airframe is being used,  or was within the previous six months being
used, by the U.S. Government pursuant to CRAF, the Term shall be deemed extended
for the period  necessary  to  accommodate  usage of the  Aircraft  or  Airframe
pursuant to CRAF plus six months  thereafter,  and Lessee  shall be obligated to
pay Basic Rent for any such  extension  period at a quarterly  rate equal to the
average of the Basic Rent paid  during the Base Term or the  applicable  Renewal
Term (whichever ended immediately before such extension).

     TERMINATION DATE: any Payment Date occurring after the seventh  anniversary
of the Delivery Date on which the Lease  terminates in accordance  withss.  9 of
the Lease.

     TERMINATION  VALUE  for  the  Aircraft:  Lessor's  Cost  multiplied  by the
percentage  in  Schedule  4 to the  Lease  (as  adjusted  from  time  to time in
accordance  with ss.  3.2.1 of the Lease) for the  pertinent  Termination  Value
Date.  Notwithstanding  anything  to the  contrary in any  Operative  Agreement,
Termination  Value shall always be  sufficient to pay in full, as of the date of
payment  thereof  (assuming  timely  payment of the Equipment  Notes before such
date), the unpaid principal amount of all Equipment Notes outstanding as of such
date,  together with accrued and unpaid  interest on all such Equipment Notes as
of such date (without regard to any interest accrued on the Equipment Notes at a
rate exceeding the Debt Rate).  If the event giving rise to an obligation to pay
any  Termination  Value occurs and the actual date that the loss of tax benefits
resulting  from such event  shall be  earlier or later than the date  assumed in
calculating  the federal  income tax  consequences  reflected in the  applicable
Termination  Value,  such  Termination  Value  shall be  appropriately  adjusted
upwards or downwards to reflect the actual date of such loss.

     TERMINATION  VALUE DATE for any month:  the day in such month  specified in
Schedule 4 to the Lease or, if such day is not a  Business  Day,  the  following
Business Day.

     THRESHOLD AMOUNT: defined in Schedule 1 to the Lease.

     TRANSACTION EXPENSES:  (1) the reasonable and actual fees and disbursements
incurred in  connection  with the  negotiation,  execution,  and delivery of the
Operative  Agreements  of (a)  Richards,  Layton & Finger,  special  counsel for
Mortgagee,  such  information to be furnished by Mortgagee,  (b) Ray,  Quinney &
Nebeker,  special  counsel for Owner  Trustee  under the Trust  Agreement,  such
information to be furnished by Owner Trustee, (c) FAA Counsel,  such information
to be furnished by Lessee,  (d) Dewey  Ballantine LLP,  special counsel to Owner
Participant  (as defined in  Schedule 3 to the  Participation  Agreement),  such
information  to be furnished  by Owner  Participant,  (e)  ____________________,
special counsel to the Loan  Participants,  such  information to be furnished by
Lessee, (f) Troutman Sanders LLP, special counsel to Lessee, such information to
be furnished by Lessee, and (g) Lessee Advisor, such information to be furnished
by Lessee, (2) all fees, taxes, and other charges payable in connection with the
recording or filing of instruments and financing statements, such information to
be  furnished  by  Lessee,  (3)  the  initial  fee  and  reasonable  and  actual
disbursements of Owner Trustee under the Trust Agreement, such information to be
furnished  by Owner  Trustee,  (4) the  initial  fee and  reasonable  and actual
disbursements of Mortgagee under the Mortgage,  such information to be furnished
by Mortgagee,  (5) the fee of the Appraiser with respect to the appraisal of the
Aircraft  referred  to in ss.  5.1.2(l)  of the  Participation  Agreement,  such
information to be furnished by Owner  Participant,  and (6) the equity placement
fee and reasonable disbursements of Lessee's Advisor(s),  such information to be
furnished by Lessee, and the Allocated EETC Expenses.

     TRANSACTIONS: the transactions contemplated by the Operative Agreements.

     TRANSFER: the transfer, sale, assignment, or other conveyance of all or any
interest in any property, right, or interest.

     TRANSFEREE:  a  Person  to whom  Owner  Participant,  Owner  Trustee,  Loan
Participant,  or Note Holder  purports or intends to Transfer  any or all of its
right,  title,  or interest in the Trust Estate or in its Equipment Note and the
Collateral,  as described  in ss.  10.1.1(a),  ss.  10.1.2,  or ss.  10.1.3 (but
excluding  participants in any  participation  referred to in ss. 10.1.3) of the
Participation Agreement.

     TRANSPORTATION CODE: subtitle VII of title 49, United States Code.

     TRUST: the trust created by the Trust Agreement.

     TRUST AGREEMENT:  Trust Agreement  N___AT,  dated as of __________ 1, 200_,
between Owner Participant and FSB.

     TRUST ESTATE: all Owner Trustee's estate, right, title, and interest in and
to the Aircraft, the Lease, the Purchase Agreement, [and the Engine Manufacturer
Warranty  Agreement,]  including all Basic Rent and Supplemental Rent (including
insurance proceeds and requisition, indemnity, or other payments of any kind for
of with respect to the Aircraft), but excluding any Excluded Payment.

     UCC:  the  Uniform   Commercial   Code  as  in  effect  in  any  applicable
jurisdiction.

     UNITED  STATES or U.S.:  the United States of America;  PROVIDED,  that for
geographic  purposes,  "United  States"  means the 50 states and the District of
Columbia of the United States of America.

     U.S.  AIR  CARRIER:  any United  States air carrier who is a Citizen of the
United  States  holding  an air  carrier  operating  certificate  issued  by the
Secretary of Transportation  pursuant to chapter 447 of the Transportation  Code
for aircraft  capable of carrying 10 or more  individuals or 6000 pounds or more
of cargo, and as to whom there is in force an air carrier operating  certificate
issued  pursuant  to FAR Part  121,  or who may  operate  as an air  carrier  by
certification or otherwise under any successor or substitute provisions therefor
or in the absence thereof.

     U.S.  GOVERNMENT:  the  federal  government  of the United  States,  or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.

     U.S. PERSON: any Person described in Codess. 7701(a)(30).

     WEIGHTED  AVERAGE LIFE TO MATURITY with respect to any  specified  Debt, at
the time of the determination  thereof: the number of years obtained by dividing
the Remaining Dollar Years of such Debt by the then-outstanding principal amount
of such  Debt.  "REMAINING  DOLLAR  YEARS"  means  the  amount  obtained  by (1)
multiplying the amount of each then-remaining  principal payment on such Debt by
the number of years  (calculated  at the nearest  one-twelfth)  that will elapse
between the date of  determination  of the Weighted  Average Life to Maturity of
such Debt and the date of that required  payment,  and (2) totaling the products
obtained in clause (1).

     WET LEASE: any arrangement  whereby Lessee or a Permitted  Sublessee agrees
to furnish the Aircraft,  the Airframe,  or any Engine to a third party pursuant
to which the Aircraft,  Airframe,  or Engine is at all times in the  operational
control of Lessee or a Permitted Sublessee,  PROVIDED, that Lessee's obligations
under the Lease shall continue in full force and effect notwithstanding any such
arrangement.

     WTC:  Wilmington Trust Company,  Delaware banking  corporation,  not in its
capacity as Mortgagee under the Mortgage, but in its individual capacity.





                                     ANNEX A


                                   DEFINITIONS

GENERAL PROVISIONS

     (a) In each Operative  Agreement,  unless otherwise expressly  provided,  a
reference to:

     (1) each of "Lessee",  "Lessor", "Owner Trustee", "Owner Participant",  and
any other  Person  includes any  successor  in interest to it and any  permitted
transferee, permitted purchaser, or permitted assignee of it;

     (2) any agreement or other  document  (including  any annex,  schedule,  or
exhibit  thereto,  or any other part thereof)  includes that  agreement or other
document as amended,  supplemented,  or otherwise  modified and any agreement or
other document entered into in substitution or replacement therefor from time to
time, and in each case in accordance  with its terms and in accordance  with the
Operative Agreements;

     (3) any  provision  of any Law  includes  any such  provision  as  amended,
modified, supplemented,  substituted, reissued, or reenacted before the Delivery
Date, and thereafter from time to time;

     (4) "Agreement", "this Agreement",  "hereby", "herein", "hereto", "hereof",
"hereunder",  and words of similar import, when used in any Operative Agreement,
refer to such Operative Agreement as a whole and not to any particular provision
of such Operative Agreement;

     (5)  "including",  "include",  and terms or phrases of similar import means
"including [etc.], without limitation";

     (6) "or" is conjunctive and not disjunctive; and

     (7) a reference to a "section" or "ss.",  an  "Exhibit",  an "Annex",  or a
"Schedule" in any Operative  Agreement,  or in any annex thereto, is a reference
to a section  of, or an exhibit,  an annex,  or a schedule  to,  such  Operative
Agreement or such annex, respectively.

     (b) Each  exhibit,  annex,  and  schedule to each  Operative  Agreement  is
incorporated in, and is a part of, such Operative Agreement.

     (c) Unless otherwise defined or specified in any Operative  Agreement,  all
accounting  terms therein shall be construed and all  accounting  determinations
thereunder shall be made in accordance with GAAP.

     (d) Headings used in any Operative  Agreement are for convenience only, and
shall not in any way affect the construction of, or be taken into  consideration
in interpreting, such Operative Agreement.

     (e) For purposes of each Operative Agreement,  the existence of an Event of
Default,  Default, or Special Default referred to in ss. 14.5 of the Lease shall
not  prohibit  Lessee  from  taking any action or  exercising  any right that is
conditioned on the  non-existence of any Event of Default,  Default,  or Special
Default if such Event of Default,  Default,  or Special Default  consists of the
institution of  reorganization  proceedings with respect to Lessee under Chapter
11 of the  Bankruptcy  Code,  and the  trustee or  debtor-in-possession  in such
proceedings (1) has agreed to perform its  obligations  under the Lease with the
approval  of the  applicable  court and  thereafter  continues  to perform  such
obligations  in accordance  with Section 1110, or (2) has assumed the Lease with
the  approval of the  relevant  court and  thereafter  continues  to perform its
obligations under the Lease.

DEFINED TERMS

            ACTUAL  KNOWLEDGE:  (a)  as it  applies  to  Owner  Trustee,  actual
knowledge  of  a  responsible   officer  in  the  Corporate  Trust   Department,
respectively,  and (b) as it applies  to Owner  Participant  or  Lessee,  actual
knowledge of a Vice  President or more senior  officer of Owner  Participant  or
Lessee  (respectively),  or any other  officer  of Owner  Participant  or Lessee
(respectively) having responsibility for the Transactions;  PROVIDED,  that each
of Lessee, Owner Participant, and Owner Trustee, shall be deemed to have "Actual
Knowledge" of any matter as to which it has received  notice from Lessee,  Owner
Participant,  or Owner Trustee,  given pursuant to ss. 15.7 of the Participation
Agreement.

            ADDITIONAL INSURED: defined inss. D of Annex D to the Lease.

     AFFILIATE  of  any  Person:   any  other  Person   directly  or  indirectly
controlling,  controlled  by, or under  common  control  with such  Person.  For
purposes of this definition,  "control" means the power, directly or indirectly,
to direct or cause the direction of the  management and policies of such Person,
whether through the ownership of voting securities,  by contract,  or otherwise,
and  "controlling",  "controlled  by",  and  "under  common  control  with" have
correlative meanings,  PROVIDED, that Owner Participant will not be deemed to be
an "Affiliate" of Lessor or Owner Trustee (and vice versa).

     AIRCRAFT: the Airframe and Engines.

     AIRCRAFT  BILL OF  SALE:  a  warranty  bill of sale  granting  title to the
Aircraft,  which  bill of sale  Seller is to  deliver  to Owner  Trustee  on the
Delivery Date.

            AIRCRAFT DESCRIPTION EXHIBIT: Exhibit A to the Lease.

     AIRCRAFT  DOCUMENTS:  all technical data,  manuals,  and log books, and all
inspection,  modification,  and  overhaul  records  and other  service,  repair,
maintenance,  and technical  records that the relevant Aviation  Authority,  the
Lease,  or the  Maintenance  Program  requires be maintained with respect to the
Aircraft,   including  all  required   additions,   renewals,   revisions,   and
replacements  of any  such  materials,  in each  case in  whatever  form  and by
whatever means or medium (including  microfiche,  microfilm,  paper, or computer
disk)  such  materials  are  maintained  or  retained  by or on behalf of Lessee
(PROVIDED, that all such materials shall be maintained in the English language).

     AIRFRAME:  (1) the aircraft (excluding Engines or engines from time to time
installed  thereon)  manufactured  by Airframe  Manufacturer  and  identified by
Airframe  Manufacturer's  model number,  United States registration  number, and
Airframe  Manufacturer's  serial  number set forth in the  Aircraft  Description
Exhibit, or (2) any Replacement  Airframe,  including in either case any and all
Parts  incorporated or installed in or attached or appurtenant to such airframe,
and any and all Parts  removed  from such  airframe,  unless title to such Parts
does not vest in Lessor in  accordance  with ss.  8.1 and Annex C of the  Lease.
Upon  substitution  of a Replacement  Airframe under and in accordance  with the
Lease, such Replacement  Airframe shall become subject to the Lease and shall be
the  "Airframe" for all purposes of the Operative  Agreements,  and the replaced
Airframe  shall  cease to be  subject  to the Lease  and  shall  cease to be the
"Airframe".

     AIRFRAME MANUFACTURER: The Boeing Company, a Delaware corporation.

     APPLICABLE   PERCENTAGE:   means  (A)  for  the  [first  one-year   Renewal
Term][first two one-year Renewal Terms], (1) 100% if, at the time that the first
Renewal  Term  begins,  Lessee  provides  Owner  Participant  with an opinion of
counsel reasonably  satisfactory to Owner Participant to the effect that, due to
a Change in Tax Law or  clarification  of law, if the Applicable  Percentage had
been 100% on the Closing  Date no Renewal  Term would have been  included in the
Lease Term under Code ss. 467 and the Treasury  Regulations  thereunder  and (2)
otherwise, 105%; and (B) for any subsequent Renewal Term, 100%.

     APPRAISER:  a  firm  of  internationally-recognized,  independent  aircraft
appraisers.

     AVIATION  AUTHORITY:  the FAA or, if the  Aircraft is  registered  with any
other Government Entity under and in accordance withss. 7.1.2 of the Lease, such
other Government Entity.

     BANKRUPTCY  CODE: the United States  Bankruptcy  Code, 11 U.S.C.ss.  101 ET
SEQ.

     BASE TERM: the period beginning on and including the Commencement  Date and
ending on the Scheduled Expiration Date therefor,  or such earlier date on which
the Term terminates in accordance with the provisions of the Lease.

     BASIC RENT: the rent (including,  to the extent  applicable,  Renewal Rent)
payable or allocable,  as applicable,  for the Aircraft pursuant to ss. 3.2.1(a)
of the Lease.

     BILLS OF SALE: the FAA Bill of Sale and the Aircraft Bill of Sale.

     BURDENSOME  INDEMNITY  PAYMENT:  an indemnity  payment  pursuant to the Tax
Indemnity  Agreement or ss. 9 of the  Participation  Agreement which would cause
the  aggregate  net present  value of all losses paid or payable by Lessee as of
the  determination  date,   discounted   quarterly  at  the  SLV  Rate,  to  the
determination date, to exceed 2.5% of Lessor's Cost.

     BUSINESS DAY: any day other than a Saturday,  Sunday, or other day on which
commercial  banks are  authorized  or required by law to close in New York,  NY,
Indianapolis, IN, or Salt Lake City, UT.

     CASH  EQUIVALENTS:  the following  securities (which shall mature within 90
days of the  date of  purchase  thereof):  (1)  direct  obligations  of the U.S.
Government;  (2)  obligations  fully  guaranteed  by the  U.S.  Government;  (3)
certificates of deposit issued by, or bankers'  acceptances of, or time deposits
or a deposit  account  with,  Owner  Trustee,  or any bank,  trust  company,  or
national  banking  association  incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained  earnings of at least  $500,000,000  and having a rate of "C" or better
from the Thomson BankWatch Service;  or (4) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
or Moody's at least equal to A1 or P1, respectively.

     CITIZEN  OF  THE  UNITED  STATES:   defined  inss.   40102(a)(15)   of  the
Transportation Code and in the FARs.

     CLOSING: the closing of the transactions  contemplated by the Participation
Agreement on the Delivery Date.

     CODE:  the  Internal  Revenue  Code of 1986;  PROVIDED,  that  when used in
relation  to a  Plan,  "Code"  shall  be  interpreted  in  accordance  with  the
regulations and rulings issued thereunder.

     COMMENCEMENT DATE: defined in Schedule 1 to the Lease.

     COMMITMENT: Owner Participant's commitment to participate in the payment of
Lessor's Cost, as reflected in Schedule 2 of the Participation Agreement.

     COMMITMENT  TERMINATION  DATE:  defined in Schedule 3 to the  Participation
Agreement.

     CONSENT AND AGREEMENT: Manufacturer Consent and Agreement N___AT, dated the
Delivery Date, of Airframe Manufacturer.

     CORPORATE  TRUST  DEPARTMENT or TRUST  OFFICE:  Owner  Trustee's  principal
corporate trust office, located from time to time at Owner Trustee's address for
notices under the Participation  Agreement,  or such other office at which Owner
Trustee's corporate trust business shall be administered and which Owner Trustee
specifies by notice in writing to Lessee.

     CRAF:  the Civil  Reserve  Air Fleet  Program  established  pursuant  to 10
U.S.C.ss. 9511 - 13, or any similar substitute program.

     DEBT: any liability for borrowed money, or any liability for the payment of
money  in  connection  with any  letter  of  credit  transaction,  or any  other
liabilities evidenced or to be evidenced by bonds,  debentures,  notes, or other
similar instruments.

     DELAYED DELIVERY DATE: a delayed Delivery Date notified to each Participant
and Owner Trustee by Lessee pursuant to ss. 4.3 of the Participation  Agreement,
which  delayed  Delivery  Date  shall  be a  Business  Day not  later  than  the
Commitment Termination Date.

     DELIVERY  DATE:  __________,  200_ (which is the date when the  Aircraft is
delivered  to and  accepted  by Lessee  under  the  Lease  and when the  Closing
occurs).

     DOLLARS,  UNITED STATES  DOLLARS,  or $: the lawful  currency of the United
States.

     DOT:  the  Department  of  Transportation  of  the  United  States,  or any
Government   Entity   succeeding  to  the   functions  of  such   Department  of
Transportation.

     EBO DATE: as specified in Schedule 5 to the Lease.

     EBO PRICE:  as specified in Schedule 5 to the Lease,  as adjusted  pursuant
toss. 3.2.1 of the Lease.

     ELIGIBLE  INSTITUTION:  the corporate  trust  department of (1)  Wilmington
Trust Company, acting solely in its capacity as a "securities  intermediary" (as
defined in UCC ss. 8-102(14)),  or (2) a depository  institution organized under
the laws of the United States of America or any one of the states thereof or the
District  of  Columbia  (or any U.S.  branch  of a  foreign  bank),  which has a
long-term  unsecured  debt rating from Moody's and Standard & Poor's of at least
A-3 or its equivalent.

     ENGINE:  (1) each of the engines  manufactured by Engine  Manufacturer  and
identified  by Engine  Manufacturer's  model  number and  Engine  Manufacturer's
serial number in the Aircraft  Description  Exhibit and originally  installed on
the Airframe on delivery  thereof  pursuant to the Lease, or (2) any Replacement
Engine,  in any case whether or not from time to time  installed on the Airframe
or installed on any other airframe or aircraft,  including (for both clauses (1)
and  (2))  any and  all  Parts  incorporated  or  installed  in or  attached  or
appurtenant  to such  engine,  and any and all Parts  removed  from such engine,
unless  title to such Parts does not vest in Lessor in  accordance  with ss. 8.1
and Annex C of the Lease. Upon substitution of a Replacement Engine under and in
accordance with the Lease,  such Replacement  Engine shall become subject to the
Lease and shall be an "Engine" for all purposes of the Operative Agreements, and
the replaced Engine shall cease to be subject to the Lease and shall cease to be
an "Engine".

     ENGINE MANUFACTURER: CFM International.

     [ENGINE  MANUFACTURER  WARRANTY  AGREEMENT:  Engine  Manufacturer  Warranty
Agreement  N___AT,  dated the Delivery Date,  among Engine  Manufacturer,  Owner
Trustee and Lessee.]

     ERISA: the Employee Retirement Income Security Act of 1974.

     EVENT OF LOSS with respect to the Aircraft,  the  Airframe,  or any Engine:
any of the following circumstances,  conditions,  or events with respect to such
property, which shall have occurred for any reason whatsoever:

     (1) the  destruction  of such  property,  damage  to such  property  beyond
economic repair, or rendition of such property  permanently unfit for normal use
by Lessee;

     (2) the actual or constructive  total loss of such property,  or any damage
to such property, or requisition of title or use of such property, which results
in an insurance settlement with respect to such property on the basis of a total
loss or constructive or compromised total loss;

     (3)  any  theft,  hijacking,  or  disappearance  of  such  property  for 90
consecutive days or more or, if earlier,  the fifth day following the end of the
Term;

     (4)  any  seizure,  condemnation,   confiscation,  taking,  or  requisition
(including loss of title) of such property by any Government Entity or purported
Government  Entity (other than a requisition of use by the U.S.  Government) for
180 consecutive days or, if earlier, at the end of the Term;

     (5) any seizure, condemnation,  confiscation, taking, or requisition of use
of such property by the U.S.  Government that continues until the 30th day after
the last day of the  Term;  and (6) as a result  of any law,  rule,  regulation,
order, or other action by the Aviation  Authority or by any Government Entity of
the government of registry of the Aircraft or by any Government Entity otherwise
having  jurisdiction  over the operation or use of the Aircraft,  the use of the
Aircraft,  the Airframe, or any Engine in the normal course of Lessee's business
of passenger air  transportation is prohibited for 180 consecutive days, unless,
before  the  expiration  of  such  180-day  period,  Lessee  undertakes  and  is
diligently  carrying  forward such steps as are necessary or desirable to permit
the  normal  use of such  property  by  Lessee,  but in any event if such use is
prohibited for a continuous period of 360 days, PROVIDED,  that such prohibition
shall not create an Event of Loss if such prohibition  applies to other B737-800
aircraft  (or CFM 56-7  engines)  in Lessee's  fleet and also  applies to Boeing
737-800  aircraft  (or CFM 56-7  engines)  not owned or  operated by Lessee and,
before the expiration of such 360-day period,  Lessee conforms at least one unit
of such  property  in its  fleet  to the  requirements  of any such  law,  rule,
regulation, order, or other action, begins regular commercial use of the same in
such jurisdiction,  and is diligently  carrying forward,  in a manner which does
not  discriminate  against such property in so conforming  such property,  steps
which are  necessary  or  desirable  to permit the normal use of the Aircraft by
Lessee,  but in any event if such use is prohibited  for a continuous  period of
540 days or such use is prohibited at the expiration of the Term.

     EXPENSES:   any  and  all  liabilities,   obligations,   losses,   damages,
settlements,  penalties,  claims,  actions,  suits, costs,  demands,  judgments,
expenses,  and  disbursements  (including  reasonable fees,  disbursements,  and
reasonable  out of pocket  costs and  expenses  of legal  counsel,  accountants,
appraisers, inspectors, or other professionals, and costs of investigation).

     FAA:  the Federal  Aviation  Administration  of the United  States,  or any
Government   Entity  succeeding  to  the  functions  of  such  Federal  Aviation
Administration.

     FAA BILL OF SALE: a bill of sale for the Aircraft on AC Form 8050-2 (or any
other  FAA-approved  form),  delivered to Owner  Trustee on the Delivery Date by
Seller.

     FAA COUNSEL: Crowe & Dunlevy.

     FAA-FILED DOCUMENTS:  the Lease, the Trust Agreement, the FAA Bill of Sale,
and an  application  for  registration  of the  Aircraft  with  the FAA in Owner
Trustee's name.

     FARS: the Federal Aviation  Regulations  issued or promulgated  pursuant to
the Transportation Code from time to time.

     FAIR MARKET RENTAL  VALUE:  the fair market rental value in Dollars for the
Aircraft that would apply in an arm's-length transaction between an informed and
willing lessee under no compulsion to lease,  and an informed and willing lessor
under no  compulsion  to lease,  for the  applicable  period,  assuming that (1)
except as provided in ss. 15.4 of the Lease, the Aircraft has been maintained in
accordance with, and is in the condition  required by, the Lease, (2) rent would
be paid  quarterly,  and (3) except as provided  in ss.  15.4 of the Lease,  the
Aircraft would be leased during any such period on the same terms and conditions
(except for Basic Rent amount) as during the Base Term.

     FAIR MARKET  SALES  VALUE:  the fair market  sales value in Dollars for the
Aircraft that would apply in an arm's-length transaction between an informed and
willing  buyer under no  compulsion  to buy, and an informed and willing  seller
under no compulsion  to sell, in a transaction  that would close on or about the
relevant time of determination, assuming that (1) except as provided in ss. 15.4
of the Lease, the Aircraft has been maintained in accordance with the Lease, and
is in the  condition  required  by the  Lease,  and  (2)  the  Aircraft  will be
delivered to such informed and willing buyer in the return condition required by
the Lease.

     FINANCING  STATEMENTS:  UCC-1 (and,  where  appropriate,  UCC-3)  financing
statements  covering the Aircraft,  as a  precautionary  matter,  by Lessee,  as
lessee,  showing Owner  Trustee as lessor,  for filing in Indiana and each other
jurisdiction where (in Owner Trustee's opinion) filing is reasonably desirable.

     FIXED RATE: defined in Schedule 1 to the Lease.

     FSB:  First  Security  Bank,  National  Association,   a  national  banking
association,  not in its capacity as trustee under the Trust  Agreement,  but in
its individual capacity.

     GAAP:  generally  accepted  accounting  principles  as  set  forth  in  the
statements of financial  accounting standards issued by the Financial Accounting
Standards Board of the American  Institute of Certified Public  Accountants,  as
varied by any applicable financial accounting rules or regulations issued by the
SEC, and applied on a basis consistent with prior periods except as disclosed in
the pertinent Person's financial statements.

     GOVERNMENT  ENTITY:  (1)  any  federal,  state,   provincial,   or  similar
government,  and any  body,  board,  department,  commission,  court,  tribunal,
authority,  agency, or other instrumentality of any such government or otherwise
exercising any executive, legislative,  judicial,  administrative, or regulatory
functions  of  such  government,  or (2)  any  other  government  entity  having
jurisdiction  over  any  matter  contemplated  by the  Operative  Agreements  or
relating to the  observance  or  performance  of the  obligations  of any of the
parties to the Operative Agreements.

     GTA: the General  Terms  Agreement,  as defined in the  Purchase  Agreement
Assignment.

     GUARANTEE:  Guarantee N___AT,  dated the Delivery Date, issued by Guarantor
in favor of Owner Trustee, FSB, and each Owner Participant.

     GUARANTOR: AmTran, Inc., an Indiana corporation.

     INDEMNITEE:  (1) FSB and Owner  Trustee,  (2) each  separate or  additional
trustee appointed  pursuant to the Trust Agreement,  (3) each Owner Participant,
(4) the Trust Estate, (5) each Affiliate of the Persons described in clauses (1)
through (3), (6) the directors,  officers,  employees, and agents of each of the
Persons  described  in  clauses  (1)  through  (3) and in clause (5) and (7) the
successors and permitted assigns of the Persons described in clauses (1) through
(3), and in clauses (5) and (6). If any Indemnitee is Airframe  Manufacturer  or
Engine  Manufacturer or any  subcontractor  or supplier of either thereof,  such
Person shall be an Indemnitee only in its capacity as Owner Participant.

     IRS: the Internal  Revenue Service of the United States,  or any Government
Entity succeeding to the functions of such Internal Revenue Service.

     JAA: the Joint Aviation Authority of the European Union.

     LAW: (1) any constitution, treaty, statute, law, decree, regulation, order,
rule,  or  directive  of  any  Government   Entity,  and  (2)  any  judicial  or
administrative  interpretation  or application of, or decision under, any of the
foregoing.

     LEASE or LEASE AGREEMENT:  Lease Agreement N___AT, dated the Delivery Date,
between Owner Trustee and Lessee.

     DEFAULT:  (1) any  condition,  circumstance,  act, or event that,  with the
giving of notice or the lapse of time, would constitute an Event of Default,  or
(2) any Event of Default.

     EVENT OF DEFAULT: any one or more of the conditions,  circumstances,  acts,
or events set forth inss. 14 of the Lease.

     LESSEE: American Trans Air, Inc., an Indiana corporation.

     LESSEE ADVISOR:  Capstar Partners,  LLC, in its capacity as special advisor
to Lessee.

     LESSEE OPERATIVE AGREEMENTS:  the Participation  Agreement,  the Lease, the
Tax  Indemnity  Agreement,  the  Purchase  Agreement  Assignment  [, the  Engine
Manufacturer  Warranty  Agreement,] and each other agreement  between Lessee and
any other party to the  Participation  Agreement,  relating to the Transactions,
delivered on the Delivery Date.

     LESSEE PERSON: Lessee, any sublessee, assignee, successor, or other user or
Person in possession of the Aircraft, the Airframe, or an Engine with or without
color of right,  or any  Affiliate of any of the  foregoing  (excluding  any Tax
Indemnitee or any related Tax  Indemnitee  with respect  thereto,  or any Person
using or claiming any rights with respect to the Aircraft,  the Airframe,  or an
Engine directly by or through any of the Persons in this  parenthetical  phrase,
but not excluding any Person  claiming  directly or indirectly  through or under
the Lease).

     LESSEE'S ADVISOR(S): defined in Schedule 3 to the Participation Agreement.

     LESSOR: Owner Trustee in its capacity as lessor under the Lease.

     LESSOR LIEN,  with respect to any Person,  on any property  (including  the
Trust Estate, the Aircraft,  Airframe, Engines, Parts, or Aircraft Documents) or
any payments: any Lien on such property or payments that results from (1) claims
against  such  Person (if such  Person is a trustee,  whether in its  individual
capacity  or  in  its  capacity  as  a  trustee)  not  related  to  any  of  the
Transactions, (2) acts or omissions of such Person (if such Person is a trustee,
whether in its individual capacity or in its capacity as a trustee) in violation
of its obligations  under any of the terms of the Operative  Agreements,  or not
related to the Transactions,  (3) Taxes against such Person (if such Person is a
trustee,  whether in its individual capacity or in its capacity as a trustee) or
any of its  Affiliates  that  Lessee  is not  required  to  indemnify  under the
Participation  Agreement,  or (4) claims  against such Person arising out of its
transfer of all or part of its interest in the Aircraft,  the Trust  Estate,  or
the  Operative  Agreements,  other than a Transfer  required by the terms of the
Operative Agreements or attributable to the existence of an Event of Default.

     LESSOR'S  COST:  the amount paid by Owner Trustee to Seller to purchase the
Aircraft  pursuant to the Purchase  Agreement  Assignment and the  Participation
Agreement,  as designated  by Dollar  amount in Schedule 3 to the  Participation
Agreement.

     LIEN: any mortgage,  pledge, lien, charge,  claim,  encumbrance,  lease, or
security interest affecting the title to or any interest in property.

     LOSS PAYMENT DATE: defined inss. 10.1.2(a)(1) of the Lease.

     MAINTENANCE PROGRAM: defined in Annex C to the Lease.

     MATERIALLY ADVERSE CHANGE with respect to any Person: any event, condition,
or  circumstance  that  materially  adversely  affects such  Person's  business,
prospects,  or consolidated  financial  condition,  or its ability to observe or
perform  its  obligations,  liabilities,  and  agreements  under  the  Operative
Agreements.

     MINIMUM LIABILITY INSURANCE AMOUNT: defined in Schedule 1 to the Lease.

            MOODY'S: Moody's Investors Service, Inc.

     NET ECONOMIC RETURN:  Owner  Participant's net after-tax book yield,  using
the "multiple  investment  sinking  fund" method of analysis,  and aggregate and
present  value  (discounted  at 6% per  annum) of the net  after-tax  cash flow,
computed  both  through the EBO Date  (assuming  Lessee's  exercise of the early
buy-out option in ss. 17.3.1(a)(1) of the Lease) and through the end of the Base
Term, and computed on the basis of the same  methodology  and assumptions as the
initial  Owner   Participant  used  in  determining   Basic  Rent  payments  and
allocations,   Stipulated  Loss  Value   percentages,   and  Termination   Value
percentages,  as of the  Delivery  Date,  as such  assumptions  are adjusted for
events that have been the basis for  adjustments  to Basic Rent  pursuant to ss.
3.2.1(b) of the Lease or events  giving rise to indemnity  payments  pursuant to
ss. 5 of the Tax Indemnity Agreement;  PROVIDED, that, even if the initial Owner
Participant  transfers its interest,  Net Economic Return shall be calculated as
if the initial Owner  Participant had retained its interest;  PROVIDED  FURTHER,
that,  notwithstanding  the preceding proviso,  solely for purposes of ss. 11 of
the  Participation  Agreement  and  calculating  any  adjustments  to Basic Rent
payments and  allocations,  Stipulated Loss Values,  EBO Price,  and Termination
Values in  connection  with a  refunding  pursuant to such ss. 11 at a time when
Owner  Participant is a transferee (other than an Affiliate of the initial Owner
Participant), the after-tax yield (but not the after-tax cash flow) component of
Net Economic  Return shall be  calculated  on the basis of the  methodology  and
assumptions  used by the  transferee  Owner  Participant  as of the date when it
acquires its interest.

     NET  PRESENT  VALUE  OF  RENTS:  the  present  value,  as of  the  date  of
determination,  discounted at 10% per annum, compounded quarterly to the date of
determination,  of all unpaid  Basic  Rent  payments  during the  then-remaining
portion of the Base Term, expressed as a percentage of Lessor's Cost.

     NET WORTH for any  Person:  the excess of its total  assets  over its total
liabilities.

     NON-U.S.  PERSON: any Person,  other than a United States person as defined
in Codess. 7701(a)(30).

     OFFICER'S  CERTIFICATE  of any  party  to the  Participation  Agreement:  a
certificate signed by the Chairman, the President, any Vice President (including
those with varying ranks such as  Executive,  Senior,  Assistant,  or Staff Vice
President), the Treasurer, or the Secretary of such party.

     OPERATIVE AGREEMENTS: the Participation Agreement, the Trust Agreement, the
Purchase Agreement  Assignment,  the Guarantee,  the Consent and Agreement,  the
Engine Manufacturer  Warranty  Agreement,  the Lease, the Bills of Sale, and the
Tax Indemnity Agreement.

     OP JURISDICTION: defined in Schedule 3 to the Participation Agreement.

     OWNER  PARTICIPANT:  the Person  executing the  Participation  Agreement as
"Owner  Participant";  except that,  after an Owner  Participant  Transfers  its
interest to a  successor  Owner  Participant,  such  transferor  shall not be an
"Owner  Participant"  (except  as  provided  in ss.  10.2  of the  Participation
Agreement) and the successor Owner Participant shall be the "Owner Participant".

     OWNER  PARTICIPANT  AGREEMENTS:   the  Participation   Agreement,  the  Tax
Indemnity Agreement,  the Trust Agreement and each other agreement between Owner
Participant and any other party to the Participation  Agreement  relating to the
Transactions, delivered on the Delivery Date.

     OWNER  TRUSTEE:  First  Security  Bank,  National  Association,  a national
banking  association,  not in  its  individual  capacity,  except  as  expressly
provided in any Operative Agreement, but solely as Owner Trustee under the Trust
Agreement.

     OWNER TRUSTEE AGREEMENTS: the Participation Agreement, the Lease, the Trust
Agreement, the Purchase Agreement Assignment,  [the Engine Manufacturer Warranty
Agreement,] and each other  agreement  between Owner Trustee and any other party
to the Participation Agreement,  relating to the Transactions,  delivered on the
Delivery Date.

     PARTICIPATION AGREEMENT: Participation Agreement N___AT, dated the Delivery
Date, among Lessee, Owner Participant, Owner Trustee, and FSB.

     PARTS:  all  appliances,  parts,  components,  instruments,  appurtenances,
accessories,  furnishings,  seats, and other equipment of whatever nature (other
than (1)  Engines or  engines,  and (2) any items  leased by Lessee from a third
party other than  Lessor)  from time to time  installed  or  incorporated  in or
attached or appurtenant to the Airframe or any Engine.

     PAST-DUE RATE: defined in Schedule 1 to the Lease.

     PAYMENT DATE:  each  __________,  __________,  __________,  and  __________
during  the  Term,  commencing  with the  first  such  date to occur  after  the
Commencement Date.

     PAYMENT  PERIOD:  each  of  the  consecutive  quarterly  periods  (or  such
applicable  shorter period  beginning on the Delivery Date or the first day of a
Renewal  Term)  during  the Term and  ending on a Payment  Date,  the first such
period commencing on and including the Delivery Date.

     PERMITTED AIR CARRIER:  (1) any  manufacturer  of  commercial  airframes or
commercial aircraft engines, or any Affiliate thereof, (2) any Permitted Foreign
Air Carrier, (3) any Person approved in writing by Owner Participant, or (4) any
U.S. Air Carrier.

     PERMITTED COUNTRY:  any country listed on Schedule 5 to the Lease,  subject
to the notes set forth on such Schedule.

     PERMITTED  FOREIGN AIR CARRIER:  any air carrier that (1) has its principal
executive  offices in a  Permitted  Country,  and (2) is  authorized  to conduct
commercial  airline  operations  and to  operate  jet  aircraft  similar  to the
Aircraft under the applicable Laws of such Permitted Country.

     PERMITTED  INSTITUTION:   any  bank,  trust  company,   insurance  company,
financial institution,  or corporation or limited liability company (other than,
without  Lessee's  consent,  a  commercial  air carrier,  a commercial  aircraft
operator,  a freight forwarder,  an airframe  manufacturer  (other than Airframe
Manufacturer) or aircraft engine manufacturer (other than Engine  Manufacturer),
or an Affiliate of any of the foregoing),  in each case with a combined  capital
and surplus or net worth of at least $50,000,000.

     PERMITTED  LIEN:  any Lien  described in clauses (a) through (g) ofss. 6 of
the Lease.

     PERMITTED SUBLEASE: a sublease permitted underss. 7.2.7 of the Lease.

     PERMITTED SUBLESSEE: the sublessee under a Permitted Sublease.

     PERSON  or  PERSON:  an  individual,  firm,  business,  partnership,  joint
venture,   trust,  trustee,   Government  Entity,   organization,   association,
corporation,   limited  liability  company,   government  agency,   governmental
committee,  governmental  department,  governmental authority, and other body or
organization,  corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.

     PLAN: any employee benefit plan within the meaning of ERISAss. 3(3), or any
plan within the meaning of Codess. 4975(e)(1).

     PRELIMINARY NOTICE: defined inss. 17.1 of the Lease.

     PURCHASE AGREEMENT:  shall mean Purchase Agreement No. _____ by and between
Lessee and the Airframe  Manufacturer,  dated as of __________,  2000, including
the exhibits and letter  agreements  appended thereto and  incorporated  therein
(except Letter Agreement Nos. __________, __________, and ----------).

     PURCHASE  AGREEMENT  ASSIGNMENT:  Purchase  Agreement and Engine Warranties
Assignment N___AT, dated the Delivery Date, between Lessee and Owner Trustee.

     PURCHASE DATE: the last Business Day of the Base Term or a Renewal Term, as
specified in any Purchase Notice.

     PURCHASE NOTICE: defined inss. 17.3.1 of the Lease.

     REMOVABLE PARTS: defined inss. D of Annex C to the Lease.

     RENEWAL NOTICE: defined inss. 17.2.1 of the Lease.

     RENEWAL  RENT:  the  basic  rent  payable  for a Renewal  Term,  determined
pursuant toss. 17.2.2 of the Lease.

     RENEWAL TERM: a one-year term for which the Lease is extended by Lessee (if
applicable) pursuant toss. 17 of the Lease.

     RENT: Basic Rent and Supplemental Rent.

     REPLACEMENT  AIRFRAME:  an airframe  substituted for the Airframe  pursuant
toss. 10 of the Lease.

     REPLACEMENT  ENGINE:  an engine  substituted  for an Engine pursuant to the
Lease.

     RETURN ACCEPTANCE SUPPLEMENT:  a Return Acceptance Supplement,  dated as of
the date the  Aircraft  is  returned to Lessor  pursuant  toss.  5 of the Lease,
entered into by Lessor and Lessee, substantially in the form of Exhibit B to the
Lease.

     SCHEDULED DELIVERY DATE: the expected Delivery Date that Lessee notifies to
each  Owner  Participant,   and  Owner  Trustee  pursuant  to  ss.  4.1  of  the
Participation  Agreement,  which  must be a  Business  Day not  later  than  the
Commitment Termination Date.

     SCHEDULED EXPIRATION DATE: defined in Schedule 1 to the Lease.

     SEC: the  Securities and Exchange  Commission of the United States,  or any
Government  Entity  succeeding to the functions of the  Securities  and Exchange
Commission.

     SECTION 1110: Bankruptcy Codess. 1110.

     SECURITIES ACT: the Securities Act of 1933.

     SECURITY: a "security" as defined inss. 2(1) of the Securities Act.

     SELLER: _______________ [Lessee] [Airframe Manufacturer] [other].

     SIGNIFICANT   EXPENDITURE:   expenditures   in  excess  of  $5,000,000  for
non-severable   improvements  to  the  Aircraft  which   constitute   "Mandatory
Modifications" as defined inss. D of Annex C to the Lease.

     SIMILAR AIRCRAFT: defined in Schedule 1 to the Lease.

     SLV RATE: defined in Schedule 1 to the Lease.

     SPECIAL  DEFAULT:  (1)  Lessee's  failure to pay any amount of Basic  Rent,
Stipulated  Loss  Value,  or  Termination  Value  when due,  or (2) any  Default
referred to inss. 14.5 of the Lease.

     STANDARD & POOR'S: Standard & Poor's Ratings Services.

     STIPULATED LOSS VALUE for the Aircraft:  (1) during the Base Term, Lessor's
Cost  multiplied by the  percentage in Schedule 3 to the Lease (as adjusted from
time to time in  accordance  with ss.  3.2.1  of the  Lease)  for the  pertinent
Stipulated  Loss  Value  Date,  and (2)  during  any  Renewal  Term,  the amount
determined  pursuant to ss. 17.2.3 of the Lease.  If the event giving rise to an
obligation to pay any Stipulated  Loss Value occurs and the actual date that the
loss of tax  benefits  resulting  from such event shall be earlier or later than
the date assumed in calculating the federal income tax consequences reflected in
the  applicable  Stipulated  Loss  Value,  such  Stipulated  Loss Value shall be
appropriately  adjusted  upwards or downwards to reflect the actual date of such
loss.

     STIPULATED  LOSS VALUE DATE for any month:  the day in that month specified
in Schedule 3 to the Lease or, if that day is not a Business  Day, the following
Business Day.

     SUPPLEMENTAL  RENT:  all  Expenses,  Transaction  Expenses,  and all  other
amounts, liabilities,  indemnities, and obligations (other than Basic Rent) that
Lessee  assumes  or becomes  obligated  to pay or agrees to pay under any Lessee
Operative  Agreement  to or on behalf of Lessor or any other  Person,  including
Stipulated Loss Value,  Termination Value, and indemnity payments under ss. 9 of
the Participation Agreement.

     TAX ATTRIBUTE  PERIOD:  the period from the Delivery Date through  December
31, 20__ [DELIVERY  DATE YEAR PLUS SEVEN] or such longer period of  depreciation
as may be allowable by reason of an indemnifiable  event under the Tax Indemnity
Agreement;

     TAX INDEMNITEE:  (1) FSB and Owner Trustee, (2) each separate or additional
trustee appointed  pursuant to the Trust Agreement,  (3) each Owner Participant,
(4) the  Trust  Estate,  and (5) the  successors,  assigns,  and  agents  of the
foregoing.  For purposes of this definition,  the term "Owner Participant" shall
include any member of an affiliated  group (within the meaning of Code ss. 1504)
of which Owner  Participant is a member at the pertinent time, if  consolidated,
joint,  or combined  returns are filed for such  affiliated  group for  federal,
state, or local income tax purposes.

     TAX INDEMNITY AGREEMENT: Tax Indemnity Agreement N___AT, dated the Delivery
Date, between Lessee and Owner Participant.

     TAXES:  all  fees  (including  license,   recording,   documentation,   and
registration fees), taxes, including income, gross receipt franchise sales, use,
rental, turnover,  business,  occupational,  excise,  value-added,  tangible and
intangible  property  and  stamp  taxes,  levies,   imposts,   duties,  charges,
assessments,  or  withholdings  of any nature  whatsoever  imposed by any Taxing
Authority,  and any penalties,  additions to tax, fines, or interest  thereon or
additions thereto.

     TAXING AUTHORITY:  any federal,  state, or local government or other taxing
authority in the United  States or its  possessions,  any foreign  government or
political  subdivision or taxing authority  thereof,  any  international  taxing
authority,  or any  territory  or  possession  of the  United  States  or taxing
authority thereof.

     TERM: the term,  commencing on the Delivery Date, for which the Aircraft is
leased  pursuant  to ss. 3 of the  Lease,  consisting  of the Base  Term and any
Renewal  Term(s);  PROVIDED,  that,  if at the  scheduled  end of the  Term  the
Aircraft or Airframe is being used,  or was within the previous six months being
used, by the U.S. Government pursuant to CRAF, the Term shall be deemed extended
for the period  necessary  to  accommodate  usage of the  Aircraft  or  Airframe
pursuant to CRAF plus six months  thereafter,  and Lessee  shall be obligated to
pay Basic Rent for any such  extension  period at a quarterly  rate equal to the
average of the Basic Rent paid  during the Base Term or the  applicable  Renewal
Term (whichever ended immediately before such extension).

     TERMINATION DATE: any Payment Date occurring after the seventh  anniversary
of the Delivery Date on which the Lease  terminates in accordance  withss.  9 of
the Lease.

     TERMINATION  VALUE  for  the  Aircraft:  Lessor's  Cost  multiplied  by the
percentage  in  Schedule  4 to the  Lease  (as  adjusted  from  time  to time in
accordance  with ss.  3.2.1 of the Lease) for the  pertinent  Termination  Value
Date.  If the event giving rise to an obligation  to pay any  Termination  Value
occurs and the actual  date that the loss of tax  benefits  resulting  from such
event shall be earlier or later than the date assumed in calculating the federal
income tax  consequences  reflected in the applicable  Termination  Value,  such
Termination  Value  shall be  appropriately  adjusted  upwards or  downwards  to
reflect the actual date of such loss.

     TERMINATION  VALUE DATE for any month:  the day in such month  specified in
Schedule 4 to the Lease or, if such day is not a  Business  Day,  the  following
Business Day.

     THRESHOLD AMOUNT: defined in Schedule 1 to the Lease.

     TRANSACTION EXPENSES:  (1) the reasonable and actual fees and disbursements
incurred in  connection  with the  negotiation,  execution,  and delivery of the
Operative  Agreements of (a) Ray,  Quinney & Nebeker,  special counsel for Owner
Trustee under the Trust  Agreement,  such  information  to be furnished by Owner
Trustee, (b) FAA Counsel,  such information to be furnished by Lessee, (c) Dewey
Ballantine LLP,  special counsel to Owner  Participant (as defined in Schedule 3
to the  Participation  Agreement),  such  information  to be  furnished by Owner
Participant,   (d)  Troutman  Sanders  LLP,  special  counsel  to  Lessee,  such
information to be furnished by Lessee, and (e) Lessee Advisor,  such information
to be furnished by Lessee,  (2) all fees,  taxes,  and other charges  payable in
connection with the recording or filing of instruments and financing statements,
such  information to be furnished by Lessee,  (3) the initial fee and reasonable
and  actual  disbursements  of Owner  Trustee  under the Trust  Agreement,  such
information to be furnished by Owner Trustee,  (4) the fee of the Appraiser with
respect to the  appraisal  of the  Aircraft  referred to in ss.  5.1.2(l) of the
Participation Agreement,  such information to be furnished by Owner Participant,
and (5) the  equity  placement  fee and  reasonable  disbursements  of  Lessee's
Advisor(s), such information to be furnished by Lessee.

     TRANSACTIONS: the transactions contemplated by the Operative Agreements.

     TRANSFER: the transfer, sale, assignment, or other conveyance of all or any
interest in any property, right, or interest.

     TRANSFEREE: a Person to whom Owner Participant or Owner Trustee purports or
intends to  Transfer  any or all of its right,  title,  or interest in the Trust
Estate, as described in ss. 10.1.1(a),  ss. 10.1.2, or ss. 10.1.3 (but excluding
participants   in  any   participation   referred  to  in  ss.  10.1.3)  of  the
Participation Agreement.

     TRANSPORTATION CODE: subtitle VII of title 49, United States Code.

     TRUST: the trust created by the Trust Agreement.

     TRUST AGREEMENT:  Trust Agreement  N___AT,  dated as of __________ 1, 200_,
between Owner Participant and FSB.

     TRUST ESTATE: all Owner Trustee's estate, right, title, and interest in and
to the Aircraft, the Lease, the Purchase Agreement, [and the Engine Manufacturer
Warranty  Agreement,]  including all Basic Rent and Supplemental Rent (including
insurance proceeds and requisition, indemnity, or other payments of any kind for
of with respect to the Aircraft), but excluding any Excluded Payment.

     UCC:  the  Uniform   Commercial   Code  as  in  effect  in  any  applicable
jurisdiction.

            UNITED STATES or U.S.: the United States of America;  PROVIDED, that
for geographic purposes, "United States" means the 50 states and the District of
Columbia of the United States of America.

     U.S.  AIR  CARRIER:  any United  States air carrier who is a Citizen of the
United  States  holding  an air  carrier  operating  certificate  issued  by the
Secretary of Transportation  pursuant to chapter 447 of the Transportation  Code
for aircraft  capable of carrying 10 or more  individuals or 6000 pounds or more
of cargo, and as to whom there is in force an air carrier operating  certificate
issued  pursuant  to FAR Part  121,  or who may  operate  as an air  carrier  by
certification or otherwise under any successor or substitute provisions therefor
or in the absence thereof.

     U.S.  GOVERNMENT:  the  federal  government  of the United  States,  or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.

     U.S. PERSON: any Person described in Codess. 7701(a)(30).

     WET LEASE: any arrangement  whereby Lessee or a Permitted  Sublessee agrees
to furnish the Aircraft,  the Airframe,  or any Engine to a third party pursuant
to which the Aircraft,  Airframe,  or Engine is at all times in the  operational
control of Lessee or a Permitted Sublessee,  PROVIDED, that Lessee's obligations
under the Lease shall continue in full force and effect notwithstanding any such
arrangement.