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EXHIBIT 10.50(d)
===================================================================================================================

                             PARTICIPATION AGREEMENT

                    (ATLANTIC COAST AIRLINES TRUST NO. _____)

                         Dated as of September 30, 1997

                                      among

                            ATLANTIC COAST AIRLINES,
                      Lessee and Initial Owner Participant

                       STATE STREET BANK AND TRUST COMPANY
                      OF CONNECTICUT, NATIONAL ASSOCIATION,
               not in its individual capacity (except as otherwise
               expressly set forth herein) but solely as trustee,
                                  Owner Trustee

                      THE FIRST NATIONAL BANK OF MARYLAND,
               not in its individual capacity (except as otherwise
               expressly set forth herein) but solely as trustee,
                                Indenture Trustee

                      THE FIRST NATIONAL BANK OF MARYLAND,
                              Pass-Through Trustee

                                       and

                       THE FIRST NATIONAL BANK OF MARYLAND
                               Subordination Agent

================================================================================

                        LEVERAGED LEASE OF ONE CANADAIR REGIONAL JET SERIES 200 ER AIRCRAFT
                    SERIAL NO. _____, REGISTRATION NO. _____

===================================================================================================================



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                                TABLE OF CONTENTS

                                                                                                               Page

Initial Recitals..................................................................................................1

ARTICLE 1  DEFINITIONS............................................................................................3


ARTICLE 2  ISSUANCE OF PASS-THROUGH CERTIFICATES; ISSUANCE AND PURCHASE OF CERTIFICATES...........................3

Section 2.01. Transfer of Funds...................................................................................3
Section 2.02.  Certificates.......................................................................................4
Section 2.03. Amendments on Delivery or Transfer Date.............................................................5

ARTICLE 3  PARTICIPATION IN INVESTMENT ON DELIVERY DATE; DELIVERY OF AIRCRAFT.....................................6

Section 3.01. Lessee's Notice of Delivery Date....................................................................6
Section 3.02. Commitments to Participate in Purchase Price........................................................6
Section 3.03.  Reserved...........................................................................................8
Section 3.04.  Reserved...........................................................................................8
Section 3.05. Postponement of Delivery Date.......................................................................8
Section 3.06. Closing.............................................................................................9

ARTICLE 4  CONDITIONS PRECEDENT...................................................................................9

Section 4.01. Conditions Precedent (Certificate Closing Date).....................................................9
Section 4.02. Conditions Precedent (Delivery Date)...............................................................16
Section 4.03. Opinion of Special Aviation Counsel Upon Registration..............................................24

ARTICLE 5  CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS..........................................................24

Section 5.01. Conditions Precedent to Lessee's Obligations.......................................................24

ARTICLE 6  LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS....................................................24

Section 6.01. Lessee's Representations and Warranties............................................................24
Section 6.02. Offering by Lessee.................................................................................29
Section 6.03. Certain Covenants of Lessee........................................................................30
Section 6.04. Survival of Representations and Warranties.........................................................36

ARTICLE 7  OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS..............................................36

Section 7.01.  Reserved..........................................................................................36
Section 7.02.  Citizenship.......................................................................................36
Section 7.03.  Concerning Assignment of Interests of Owner Participant...........................................37
Section 7.04. Representations, Covenants and Warranties of      and the Owner Trustee............................37
Section 7.05. Representations, Warranties and Covenants of the Indenture Trustee.................................39
Section 7.06. Indenture Trustee's Notice of Default..............................................................41
Section 7.07. Releases from Indenture............................................................................41
Section 7.08. Covenant of Quiet Enjoyment........................................................................41
Section 7.09.  Pass-Through Trustee's Representations and Warranties.............................................41
Section 7.10. Survival of Representations, Warranties and Covenants..............................................42
Section 7.11. Lessee's Assumption of the Certificates............................................................42
Section 7.12.  Indebtedness of Owner Trustee.....................................................................44
Section 7.13.  Compliance with Trust Agreement, Etc..............................................................44
Section 7.14. Subordination Agent's Representations, Warranties and Covenants....................................45

ARTICLE 8  TAXES.................................................................................................47

Section 8.01.  Lessee's Obligation to Pay Taxes..................................................................47
Section 8.02. After-Tax Basis....................................................................................51
Section 8.03. Time of Payment....................................................................................52
Section 8.04. Contests...........................................................................................52
Section 8.05.  Refunds...........................................................................................54
Section 8.06. Lessee's Reports...................................................................................55
Section 8.07.  Survival of Obligations...........................................................................55
Section 8.08. Payment of Taxes...................................................................................56
Section 8.09.  Reimbursements by Indemnitees Generally...........................................................56
Section 8.10.  Special Indemnity.................................................................................56
Section 8.11.  Verification......................................................................................56

ARTICLE 9  GENERAL INDEMNITY.....................................................................................56

Section 9.01. Generally..........................................................................................56
Section 9.02.  After-Tax Basis...................................................................................60
Section 9.03. Subrogation........................................................................................60
Section 9.04. Notice and Payment.................................................................................60
Section 9.05. Refunds............................................................................................61
Section 9.06. Defense of Claims..................................................................................61
Section 9.07. Survival of Obligations............................................................................62
Section 9.08. Effect of Other Indemnities........................................................................62
Section 9.09. Interest...........................................................................................62
Section 9.10. Special Indemnity..................................................................................62

ARTICLE 10  TRANSACTION COSTS....................................................................................63

Section 10.01. Transaction Costs and Other Costs.................................................................63

ARTICLE 11  SUCCESSOR OWNER TRUSTEE..............................................................................65

Section 11.01. Appointment of Successor Owner Trustee............................................................65

ARTICLE 12  LIABILITIES AND INTERESTS OF THE OWNER PARTICIPANT AND HOLDERS.......................................66

Section 12.01. Liabilities of the Owner Participant..............................................................66
Section 12.02. Interest of Holders of Certificates...............................................................67

ARTICLE 13  OTHER DOCUMENTS......................................................................................67

Section 13.01. Consent of Lessee to Other Documents..............................................................67
Section 13.02. Further Assurances................................................................................67
Section 13.03.  Pass-Through Trustee's and Subordination Agent's Acknowledgment..................................67

ARTICLE 14  NOTICES..............................................................................................68

Section 14.01. Notices...........................................................................................68

ARTICLE 15  REFINANCING/REOPTIMIZATION...........................................................................69

Section 15.01. Refinancing.......................................................................................69
Section 15.02.  Reoptimization...................................................................................72

ARTICLE 16 CONFIDENTIALITY.......................................................................................73

Section 16.01. Confidentiality...................................................................................73

ARTICLE 17  MISCELLANEOUS........................................................................................74

Section 17.01.  Reserved.........................................................................................74
Section 17.02. Collateral Account................................................................................74
Section 17.03. Counterparts......................................................................................75
Section 17.04. No Oral Modifications.............................................................................75
Section 17.05. Captions..........................................................................................75
Section 17.06. Successors and Assigns............................................................................76
Section 17.07. Concerning the Owner Trustee, Indenture Trustee and the Pass-Through Trustee......................76
Section 17.08. Severability......................................................................................76
Section 17.09. Public Release of Information.....................................................................76
Section 17.10. Certain Limitations on Reorganization.............................................................77
Section 17.11. GOVERNING LAW.....................................................................................77
Section 17.12. Section 1110 Compliance...........................................................................77
Section 17.13. Reliance of Liquidity Providers...................................................................77



SCHEDULE I                          Definitions
SCHEDULE II                         Certificate Information
SCHEDULE III                        Debt Portion
SCHEDULE IV                         Mandatory Economic Terms
SCHEDULE V                          Mandatory Document Terms
EXHIBIT A(1)(a)                     Opinion of Lessee's Counsel (Certificate Closing Date)
EXHIBIT A(1)(b)                     Opinion of Lessee's Special Counsel (Certificate Closing Date)
EXHIBIT A(2)(a)                     [Reserved]
EXHIBIT A(2)(b)                     [Reserved]
EXHIBIT A(3)                        Opinion of Indenture Trustee's Special Counsel
EXHIBIT A(4)(a)                     Opinion of Owner Trustee's Special Counsel (Certificate Closing Date)
EXHIBIT A(5)                        Opinion of Pass-Through Trustee's and Subordination Agent's Special Counsel
EXHIBIT A(6)(A)                     Opinion of Liquidity Provider's Counsel
EXHIBIT A(6)(b)                     Opinion of Liquidity of Provider's Special Counsel
EXHIBIT A(7)                        [Reserved]
EXHIBIT A(8)                        [Reserved]
EXHIBIT B                           Lease Agreement
EXHIBIT C                           Trust Indenture and Security Agreement
EXHIBIT D                           Trust Agreement
EXHIBIT E                           Purchase Agreement Assignment with PAA Consent
EXHIBIT F                           Engine Warranty Assignment with Engine Manufacturer's Consent




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                             PARTICIPATION AGREEMENT
                   (ATLANTIC COAST AIRLINES TRUST NO. ______)


         PARTICIPATION  AGREEMENT  (ATLANTIC  TRUST AIRLINES TRUST NO.  _______)
dated as of September 30, 1997 (this "Agreement") among ATLANTIC COAST AIRLINES,
a California  corporation  (herein,  together with its  successors and permitted
assigns,  the "Lessee" and the "Initial Owner  Participant"),  STATE STREET BANK
AND TRUST  COMPANY OF  CONNECTICUT,  NATIONAL  ASSOCIATION,  a national  banking
association,  not in its  individual  capacity,  except as  otherwise  expressly
stated herein, but solely as owner trustee under the Trust Agreement referred to
below (in such capacity as trustee,  together with its  successors and permitted
assigns,  the "Owner Trustee"),  THE FIRST NATIONAL BANK OF MARYLAND, a national
banking  association,  not in  its  individual  capacity,  except  as  otherwise
expressly  stated  herein,  but solely as indenture  trustee under the Indenture
referred to below (in such capacity as trustee, together with its successors and
permitted  assigns,  the  "Indenture  Trustee"),  THE  FIRST  NATIONAL  BANK  OF
MARYLAND, a national banking association, not in its individual capacity, except
as otherwise expressly stated herein, but solely as pass-through trustee of four
separate  Pass-Through  Trusts (in such  capacity as trustee,  together with its
successors and permitted  assigns,  the "Pass-Through  Trustee"),  and THE FIRST
NATIONAL BANK OF MARYLAND, a national banking association, not in its individual
capacity,   except  as  otherwise   expressly  stated  herein,   but  solely  as
subordination  agent (in such capacity as trustee,  together with its successors
and permitted assigns, the "Subordination Agent").

                                                    W I T N E S S E T H:

         WHEREAS,  capitalized  terms  used  herein  shall  have the  respective
meanings set forth or referred to in Article 1 hereof.

         WHEREAS,  the Initial  Owner  Participant  has  entered  into the Trust
Agreement with the Owner Trustee in its individual  capacity,  substantially  in
the form of  Exhibit D  hereto,  pursuant  to which  Trust  Agreement  the Owner
Trustee agrees,  among other things, to hold the Lessor's Estate for the benefit
of the Initial Owner  Participant on the terms specified in the Trust Agreement,
subject to the Lien of the Indenture.

         WHEREAS,  on the  Pass-Through  Closing  Date, a closing  occurred with
respect to the offering of Pass-Through Certificates issued by each Pass-Through
Trust, an allocable amount of the proceeds of which offering will be used by the
Pass-Through   Trustee  to  purchase  for  each  such  Pass-Through   Trust  the
Certificates of the Series and Maturity applicable thereto.

         WHEREAS,  as of September 26, 1997, the Owner Trustee and the Indenture
Trustee  have  entered into the  Indenture  for the benefit of the  Pass-Through
Trustee,  pursuant to which the Owner Trustee is issuing the Certificates to the
Subordination  Agent on behalf of the  Pass-Through  Trustee as  evidence of the
loans made by the  Pass-Through  Trustee to the Owner  Trustee,  the proceeds of
which loans will be  deposited by the  Indenture  Trustee on behalf of the Owner
Trustee in the Collateral Account.

         WHEREAS,  on the  Pass-Through  Closing Date, (i) ING Bank N.V. entered
into three revolving credit agreements (each, a "Liquidity  Facility"),  one for
the  benefit  of  the  holders  of  Pass-Through  Certificates  of  each  of the
Pass-Through Trusts for the Series A Certificates, the Series B Certificates and
the  Series C  Certificates,  with the  Subordination  Agent,  as agent  for the
Pass-Through  Trustee on behalf of each such  Pass-Through  Trust;  and (ii) the
Pass-Through  Trustees,  each  Liquidity  Provider and the  Subordination  Agent
entered into the Intercreditor Agreement.

         WHEREAS,  the  Certificates  will be held  by the  Subordination  Agent
pursuant to the  Intercreditor  Agreement on behalf of the Pass-Through  Trustee
for each of the Pass-Through Trusts.

         WHEREAS,  prior to the Delivery Date, the Certificates  will be secured
by the Liquid Collateral.

         WHEREAS,  pursuant  to the  terms of the  Trust  Agreement,  the  Owner
Trustee will be authorized and directed by the Initial Owner Participant:

                  (a)      on the Delivery Date, to purchase the Aircraft from the Seller;

                  (b) on the  Delivery  Date,  to execute  and deliver the Lease
         substantially  in the form of  Exhibit  B  hereto,  pursuant  to which,
         subject to the terms and conditions  set forth in the Lease,  the Owner
         Trustee  agrees to lease to the Lessee,  and the Lessee agrees to lease
         from the Owner Trustee,  the Aircraft on the Delivery Date,  such lease
         to be effected by the  execution and delivery on the Delivery Date of a
         Lease Supplement,  in the form of Exhibit A to the Lease,  covering the
         Aircraft and incorporating by reference all of the terms of the Lease;

                  (c) to execute and deliver the Indenture, substantially in the
         form of Exhibit C hereto,  for the benefit of the Holders  from time to
         time of the  Certificates,  pursuant to which the Owner Trustee agrees,
         among  other  things,  (A) to  deposit,  mortgage  and pledge  with the
         Indenture  Trustee,  as part of the Trust Indenture Estate,  all of the
         Lessor's  Estate  but not  Excepted  Payments,  (B) on the  Certificate
         Closing Date, to issue Certificates substantially in the form set forth
         in Exhibit B to the  Indenture,  the proceeds of the sale of which will
         be held by the Indenture  Trustee on behalf of the Owner Trustee in the
         Collateral  Account until released in accordance  with the terms hereof
         and of the  Indenture,  and (C) on the  Delivery  Date,  to execute and
         deliver the Indenture Supplement,  substantially in the form of Exhibit
         A to  the  Indenture,  covering  the  Aircraft  and  supplementing  the
         Indenture; and

                  (d) on the  Delivery  Date,  to execute  and  deliver  (i) the
         Purchase Agreement Assignment,  whereby the Lessee assigns to the Owner
         Trustee the right to purchase the Aircraft  from the Seller and certain
         of the Lessee's  rights and interests  under the Purchase  Agreement to
         the extent that the same relate to the  Aircraft  (except to the extent
         reserved  in  the  Purchase  Agreement   Assignment),   which  Purchase
         Agreement  Assignment is to include as an annex a PAA Consent  executed
         by the Manufacturer,  and (ii) the Engine Warranty  Assignment pursuant
         to which  the  Lessee  assigns  to the  Owner  Trustee  certain  of the
         Lessee's  rights under the General Terms  Agreement with respect to the
         Engines, which Engine Warranty Assignment is to include as an annex the
         Engine Manufacturer's Consent executed by the Engine Manufacturer,  the
         Purchase Agreement  Assignment,  and PAA Consent to be substantially in
         the form of Exhibit E hereto and the Engine Warranty Assignment and the
         Engine  Manufacturer's  Consent  to be in  substantially  the  form  of
         Exhibit F hereto, in each case, as amended or modified on or before the
         Delivery Date in accordance with the terms hereof.

         WHEREAS,  on the Delivery Date pursuant to and subject to the terms and
conditions  of  this  Agreement,  the  Purchase  Agreement  Assignment,  the PAA
Consent, the Engine Warranty Assignment,  the Engine Manufacturer's Consent, the
FAA  Bill of Sale,  and the  Warranty  Bill of  Sale,  the  Owner  Trustee  will
purchase,  and  receive  title to,  the  Aircraft  from the Seller and lease the
Aircraft to the Lessee pursuant to the Lease.

         NOW,  THEREFORE,  in consideration of the mutual covenants contained in
this  Agreement and other good and valuable  consideration,  receipt of which is
hereby acknowledged, the parties hereto agree as follows:



                                    ARTICLE 1

                                   DEFINITIONS

         Unless  otherwise  specifically  provided  herein,  the definitions set
forth in  Schedule I hereto are  incorporated  herein for all  purposes  of this
Agreement  and shall be equally  applicable  to both the singular and the plural
forms of the terms so defined.



                                    ARTICLE 2

                     ISSUANCE OF PASS-THROUGH CERTIFICATES;
                      ISSUANCE AND PURCHASE OF CERTIFICATES

         Section 2.01.  Transfer of Funds.

         (a) On the  Pass-Through  Closing Date: (i) the Lessee shall direct the
Placement  Agent to  execute  a wire  transfer  or  intra-bank  transfer  to the
Pass-Through Trustee in the amount of the total proceeds payable pursuant to the
Placement Agreement with respect to the Pass-Through Certificates,  and (ii) the
Pass-Through  Trustee  shall  deliver  the  Pass-Through   Certificates  to  the
Placement Agent upon receipt by the Pass-Through Trustee of such proceeds.

         (b) Subject to the  satisfaction  or waiver of the conditions set forth
herein, on the Certificate  Closing Date, on behalf of each Pass-Through  Trust,
from an allocable amount of the proceeds of the sale of the related Pass-Through
Certificates, the Pass-Through Trustee shall purchase the Certificates specified
for such Pass-Through Trust on Schedule II hereto. For each Pass-Through  Trust,
the  Pass-Through  Trustee shall pay an amount equal to the principal  amount of
Certificates of the Series and Maturity that relates to such Pass-Through Trust,
which amounts in the aggregate shall equal the aggregate principal amount of the
Certificates as specified in Section 2.04 of the Indenture. The aggregate amount
payable by the  Pass-Through  Trustee  pursuant to this Section 2.01(b) shall be
payable by wire  transfer or  intra-bank  transfer to the  Indenture  Trustee on
behalf of the Owner Trustee.

         (c) On the  Certificate  Closing Date, the Indenture  Trustee shall, on
behalf of the Owner Trustee,  deposit, by wire transfer or intra-bank  transfer,
the amounts  received by it pursuant to Section 2.01(b) hereof in the Collateral
Account pursuant to the Indenture.

         (d) On or before the Certificate Closing Date, the parties hereto shall
execute and deliver, to the extent they are parties thereto,  and consent to the
execution  and  delivery of (if they are not  parties  thereto),  the  Indenture
(other than the Indenture Supplement), and the other documents listed in Section
4.01(d) hereof, and the Owner Trustee shall execute and deliver to the Indenture
Trustee for  authentication,  and the Indenture  Trustee shall  authenticate and
deliver to the  Subordination  Agent on behalf of the  Pass-Through  Trustee for
each of the  Pass-Through  Trusts,  upon the request of the Owner  Trustee,  the
Certificates as provided in Section 2.02 hereof.

         (e)      The Closings shall take place at the offices of Shearman & Sterling,  599 Lexington  Avenue,  New
York, NY 10022.

         Section 2.02.  Certificates.  (a) Subject to the satisfaction or waiver
of the conditions set forth herein, on the Certificate Closing Date, the Initial
Owner  Participant will instruct the Owner Trustee to execute and deliver to the
Indenture  Trustee,  and the Indenture  Trustee shall  authenticate and deliver,
upon the request of the Owner Trustee,  to the Subordination  Agent on behalf of
the Pass-Through  Trustee for each of the Pass-Through  Trusts, the Certificates
specified for such Pass-Through Trust on Schedule II hereto,  which (i) shall be
issued in the principal amount and in the Series and Maturity set forth for such
Certificate in Schedule II hereto, (ii) shall bear interest at the interest rate
set forth for such  Certificate in Schedule II hereto,  (iii) shall be issued in
such form and on such terms as are  specified  in the  Indenture,  (iv) shall be
dated and authenticated on the Certificate  Closing Date and shall bear interest
from the Certificate Closing Date and (v) shall be registered in the name of the
Subordination Agent on behalf of the Pass-Through  Trustee for such Pass-Through
Trust.

         (b) Transfer of Beneficial Interest. If on a date prior to the Delivery
Date,  the Lessee shall have  identified one or more Owner  Participants  ready,
willing  and able to  acquire  the  Beneficial  Interest  of the  Initial  Owner
Participant in consideration for such Owner Participant's or Owner Participants'
agreement to participate  in the Lessor's  payment of the Purchase Price for the
Aircraft on the Delivery Date as provided in Section 3.02(a) hereof, the Initial
Owner  Participant  shall  transfer  its  Beneficial   Interest  to  such  Owner
Participant or Owner  Participants  on such date (the "Transfer  Date").  On the
Delivery  Date (or if  earlier  the  Transfer  Date),  the  document  amendments
contemplated  by Section 2.03 hereof  (subject to the  limitations  set forth in
such Section) shall be effected and such amended documents delivered.



         Section 2.03.  Amendments on Delivery or Transfer  Date.  (a) Amendment
and  Restatement  of Certain  Documents.  Upon any transfer by the initial Owner
Participant of its Beneficial  Interest on the Delivery Date (as contemplated by
Section 3.02(a) hereof (or, if earlier,  the Transfer Date),  the parties hereto
shall enter into amendments and restatements of the Trust Agreement,  the Lease,
the  Indenture and this  Agreement,  which  amendments  and  restatements  shall
reflect  such  changes as shall have been  requested  by the Owner  Participant,
agreed to by the Lessee and, if modified in any  material  respect,  as to which
Rating Agency  Confirmation  shall have been obtained from each Rating Agency by
the Lessee (to be  delivered  by the  Lessee to the Pass  Through  Trustee on or
before the Delivery Date or the Transfer  Date,  as the case may be);  provided,
however,  that in any event such amended and restated  documents  shall not vary
the Mandatory Economic Terms and shall contain the Mandatory Document Terms.

         The Lessee agrees to furnish to each Liquidity  Provider and to Coudert
Brothers (the initial Liquidity  Provider's special New York counsel) at its New
York office,  attention:  David  Schmidt,  as soon as  practicable  prior to the
estimated Delivery Date (or, if earlier,  the estimated Transfer Date), true and
complete  copies  of  drafts  of any such  amended  and  restated  Participation
Agreement,  amended and  restated  Lease  Agreement  and  amended  and  restated
Indenture.  The Lessee further agrees to furnish to each Liquidity  Provider and
to  the  counsel  identified  in the  preceding  sentence  (i)  each  and  every
subsequent  draft of such  documents and (ii)  promptly  following the execution
thereof, true and complete copies of such documents.

         (b) Amendments to Certain Schedules. The schedule of principal payments
on the  Certificates  set  forth in  Section  6.06 of the  Indenture  and in the
Certificate on the Certificate  Closing Date have been calculated  based in part
upon a hypothetical  owner's economic return and certain  assumptions  regarding
the Delivery  Date,  Transaction  Costs,  tax law,  Basic Term and certain other
items (the  "Assumptions").  If the  Initial  Owner  Participant  transfers  its
Beneficial  Interest to one or more Owner  Participants on the Delivery Date (as
contemplated  by Section  3.02(a)  hereof (or, if earlier,  the Transfer  Date),
then,  no  later  than  20  days  following  the  Delivery  Date  (the  "Initial
Reoptimization  Date"),  the Owner  Trustee may elect to amend such  schedule of
principal  payments to reflect the actual Owner's or Owners' Economic Return and
any changes to the Assumptions,  subject to the restrictions set forth below. On
the  Initial  Reoptimization  Date  the  Owner  Trustee  shall  deliver  and the
Subordination  Agent on behalf of the Pass Through  Trustee of each Pass Through
Trust  shall  accept  delivery  of an  amended  Schedule  I to each  Certificate
containing such changed principal installments.

         The  Owner  Trustee  will  give not less  than 10 days'  notice  of the
Initial  Reoptimization  Date. Any amendments to the Indenture and such Schedule
shall not vary the Mandatory  Economic  Terms and on the Initial  Reoptimization
Date the Lessee shall deliver a certificate to the Pass Through  Trustee and the
Liquidity  Providers  signed by the Vice  President  and  Treasurer or any other
authorized  officer of the Lessee  certifying  to such  effect.  If the  Initial
Reoptimization  Date occurs later than the Delivery Date, the Lessee shall cause
any required filing and recording of the affected documents with the Aeronautics
Authority to be effected on the Initial Reoptimization Date.

                                    ARTICLE 3

                  PARTICIPATION IN INVESTMENT ON DELIVERY DATE;
                              DELIVERY OF AIRCRAFT

         Section 3.01.  Lessee's  Notice of Delivery  Date. The Lessee agrees to
give the Owner  Participant,  the  Indenture  Trustee,  the Owner  Trustee,  the
Pass-Through  Trustee and the Liquidity  Providers at least three Business Days'
written or facsimile  notice prior to the Delivery  Date (which  notice shall be
effective only if received not later than 12:00 noon (New York City time) on the
date that is at least three  Business  Days prior to the Delivery  Date),  which
Delivery  Notice shall specify the amount of the Purchase  Price,  the amount of
the Owner Participant's Commitment,  the Debt Portion, the Delivery Date for the
Aircraft, the serial number of the Airframe and each Engine, and the Aeronautics
Authority registration number for the Aircraft.

         Section  3.02.  Commitments  to  Participate  in  Purchase  Price.  (a)
Participation  in Purchase  Price.  Subject to the terms and  conditions of this
Agreement,  on the  Delivery  Date,  (i) subject to the proviso to this  Section
3.02(a), the Indenture Trustee agrees to release the Debt Portion or such lesser
amount as may then be held in the  Collateral  Account  together with the Lessee
Shortfall (as defined in clause (iii)  below),  if any, to the Owner Trustee for
application  to the Purchase  Price as provided  below,  (ii) unless  previously
transferred  on the  Transfer  Date,  the Initial  Owner  Participant  agrees to
transfer its Beneficial  Interest to the Owner  Participant in consideration for
the Owner  Participant's  participation  in the Lessor's payment of the Purchase
Price through an investment in the beneficial  ownership of the Lessor's  Estate
in an amount equal to the Purchase  Price minus the Debt Portion,  (iii) subject
to the  proviso  to  this  Section  3.02(a),  the  Lessee  agrees  to pay to the
Indenture  Trustee the excess,  if any, of (I) the Debt  Portion  over (II) such
amount as may then be held in the Collateral Account (the "Lessee Shortfall") as
provided in Section 17.02(a) hereof, and (iv) the Seller shall sell the Aircraft
to the Owner Trustee and the Owner Trustee shall  immediately  thereafter  lease
the  Aircraft to the Lessee  pursuant  to the Lease.  In  consideration  for the
assignment  to the Owner  Trustee by the  Lessee  under the  Purchase  Agreement
Assignment of the Lessee's  right to purchase the Aircraft,  the transfer by the
Initial Owner  Participant to the Owner  Participant of its Beneficial  Interest
and the transfer of title to the Aircraft from the Seller to the Owner  Trustee,
the  following  cash  payments  will be made by  wire  transfer  of  immediately
available funds on the Delivery Date: (A) by the Owner Trustee to the Seller, an
amount equal to the  remaining  balance due to the Seller for the  Aircraft,  as
evidenced  by the  Invoice,  (B) by the Owner  Trustee to the Lessee,  an amount
equal to the  Purchase  Price minus the cash  payment to the Seller  pursuant to
clause  (A)  above  and (C) by the  Indenture  Trustee,  on  behalf of the Owner
Trustee,  to the  Lessee  the  excess of any  amounts as may then be held in the
Collateral Account over the Debt Portion.

         (b)      Reserved.

         (c) No Obligation to Increase Commitments; Delayed Delivery. (i) If the
Indenture Trustee shall default in its obligation to make the amount of its Debt
Portion  available   pursuant  hereto,  the  Owner  Participant  shall  have  no
obligation to make any portion of such Debt Portion available or to increase the
amount of its  Commitment,  but the obligations of the Owner  Participant  shall
remain subject to the terms and conditions of this Agreement.

         (ii) Subject to the  provisions of Section 3.05 hereof,  if the closing
of the transactions contemplated by the Operative Agreements shall not have been
consummated by 2:00 p.m. (New York City time),  or such earlier time as directed
by the Lessee,  on the Scheduled  Delivery  Date,  the Owner Trustee  shall,  if
instructed  in writing by the  Lessee,  at the  expense of the  Lessee,  use its
reasonable  best  efforts  to cause the  Owner  Participant's  Commitment  to be
invested and reinvested to the extent  practicable at the direction  received by
it from the Lessee  (with a copy to the Owner  Participant),  at the risk of the
Lessee, in Permitted  Investments  consisting of either commercial paper or time
deposits;  provided,  however,  that in the absence of instructions by 2:00 p.m.
(New York City time) the Owner Trustee shall use its  reasonable  [best] efforts
to cause such amount or the proceeds  thereof to be invested and  reinvested  to
the extent  practicable in overnight  Eurodollar time deposits.  Earnings on any
such investments shall be applied to the Lessee's payment  obligations,  if any,
to such Owner  Participant  pursuant to the last two  paragraphs of this Section
3.02, and the balance, if any, of such earnings remaining after such application
shall be paid in accordance with the Lessee's written instructions.

         If for any reason (i) the  Operative  Agreements  shall not be executed
and delivered by the respective parties thereto and/or the delayed Delivery Date
shall not occur  (whether by reason of a failure to meet a  condition  precedent
thereto  set  forth in  Article 4 hereof or  otherwise)  on or before  the third
Business Day after the  Scheduled  Delivery Date (or earlier if requested by the
Owner  Participant)  or, if earlier,  the Cut-Off  Date,  or (ii) the Lessee has
notified the Owner Trustee (with a copy to the Owner  Participant) prior to 2:00
p.m. (New York City time) on any date after the Scheduled  Delivery Date that it
does not intend to go forward to close the transactions  contemplated hereby for
such Delivery Date, the Owner  Participant  may cancel any funding  arrangements
made to fund  its  Commitment  on the  Scheduled  Delivery  Date  but the  Owner
Participant's  Commitment  hereunder  with respect to the Aircraft  shall not be
terminated  thereby  until the Cut-off Date,  whereupon the Owner  Participant's
Commitment  hereunder  shall  terminate.  On such  third  Business  Day (or such
earlier  date)  or the  Cut-Off  Date,  as the  case  may  be,  or the  earliest
practicable Business Day thereafter,  the Owner Trustee shall return the amounts
held  by  it  hereunder  on  behalf  of  the  Owner  Participant  to  the  Owner
Participant, provided that the Owner Trustee shall have had a reasonable time to
liquidate any Permitted Investments it has been authorized to invest in pursuant
to the preceding  paragraph and to obtain the proceeds therefrom in funds of the
type originally received, and the Lessee shall pay interest on such funds to the
Owner  Participant at the Debt Rate,  such interest to be payable for the period
from and including such  Scheduled  Delivery Date to but excluding the date such
funds are returned to the Owner Participant in accordance with the terms hereof;
provided that if any such funds are returned to the Owner Participant after 2:00
p.m.  (New York City  time) on any such  date,  such  funds  shall be deemed for
purposes of this paragraph to have been returned on the next succeeding Business
Day.

         The Lessee  shall  reimburse  the Owner  Trustee on demand for any loss
incurred  by the Owner  Trustee  as a result of the  investment  of funds by the
Owner Trustee in accordance with the terms of this Section 3.02(c). Further, the
Lessee shall  indemnify  the Owner Trustee and hold it harmless from and against
any cost or expense the Owner Trustee may incur as a result of any investment of
funds or  transfer  of funds  referred  to herein in  accordance  with the terms
hereof.  The Owner  Trustee shall not be liable for failure to invest such funds
except  as  otherwise  provided  herein  or for  any  losses  incurred  on  such
investments  except for any losses  arising out of its own gross  negligence  or
willful misconduct.

         Section 3.03.  Reserved.

         Section 3.04.  Reserved.

         Section  3.05.   Postponement   of  Delivery  Date.  (a)  If  no  Owner
Participant  has committed to participate in the  transactions  contemplated  to
occur on the Scheduled  Delivery Date or if an Owner  Participant  shall for any
reason fail or refuse to make the full amount of its Commitment available on the
Scheduled Delivery Date in accordance with the terms of Section 3.02 hereof, the
Owner Trustee will promptly give each party confirmed  facsimile  notice thereof
and the Lessee shall  postpone  the  Delivery  Date to a date not later than the
Cut-off Date. If no Owner  Participant  has committed to participate or an Owner
Participant  shall for any reason  fail or refuse to make the full amount of its
Commitment available in accordance with the terms of Section 3.02 hereof on such
postponed Delivery Date (in which event the Owner Participant's  interest in the
Lessor's  Estate shall be  automatically  reconveyed to the Lessee),  the Lessee
shall endeavor during such period to identify another equity investor to whom it
can assign its Beneficial Interest. If the Lessee identifies an equity investor,
the Lessee shall assign its interest in the Lessor's  Estate as provided  above.
In case of any such conveyance (or any conveyance by the Lessee to another owner
participant on or prior to the Cut-Off Date) (but subject to the satisfaction of
the conditions  precedent specified herein), the Indenture Trustee shall release
the Debt  Portion or such  lesser  amount as may then be held in the  Collateral
Account for  application  to the payments  contemplated  in the last sentence of
Section 3.02(a)  hereof.  If no such equity investor is identified or if for any
reason other than the failure of the Seller to deliver the Aircraft,  the Lessee
does not enter into the Lease and the Lease Supplement with the Owner Trustee on
or  prior to the  Cut-Off  Date,  the  Lessee,  the  Indenture  Trustee  and the
Pass-Through  Trustee  agree that the Lessee  shall  purchase  the  Aircraft and
assume all the  obligations  of the Owner  Trustee under the  Certificates  upon
satisfaction of the  requirements set forth in Sections 4.02 and 7.11(b) (to the
extent applicable) hereof, and as otherwise necessary to reflect a full recourse
secured aircraft financing of the Lessee.

         (b)  Release of  Obligations.  If (i) the Seller  fails to deliver  the
Aircraft on or prior to the Cut-Off  Date or (ii) the Lessee does not enter into
the Lease and the Lease Supplement and the conditions to the Lessee's assumption
of the  Certificates  pursuant to Section  3.05(a) have not been satisfied on or
prior to the Cut-Off  Date,  then,  in such event,  the Owner  Trustee shall not
purchase  the  Aircraft  from  the  Seller,  and the  parties  to the  Operative
Agreements  shall have no further  obligations or  liabilities  under any of the
Operative  Agreements with respect to the Aircraft,  including the obligation of
the Owner  Participant to participate in the payment of the Purchase Price,  and
such documents  shall terminate and have no further force or effect with respect
to the  Aircraft;  provided,  that the Lessee shall  provide,  no later than the
Cut-Off Date, notice of prepayment to the Indenture Trustee and the Certificates
shall be prepaid on the 15th day  following  the  Cut-Off  Date as  provided  in
Section  6.02(a)(vi) of the Indenture and Section  17.02(c)  hereof and provided
further,  that  (i) the  Lessee's  obligation  to pay any  Transaction  Costs as
provided in Section 3.04 hereof (to the extent such section is  applicable)  and
to indemnify such parties to the extent provided in such documents, shall not be
diminished  or modified in any  respect  and (ii) the  obligations  of the Owner
Trustee,  the Indenture Trustee and the Lessee to return funds and pay interest,
costs,  expenses and other amounts  thereon or in respect thereof as provided in
Section 3.02 hereof shall continue.

         (c) Optional  Postponement.  Without limiting the provisions of Section
3.02(c) hereof,  the Scheduled  Delivery Date may be postponed from time to time
(but in no event shall the Delivery Date be later than the Cut-Off Date) for any
reason,  other than pursuant to Section 3.05(a) hereof,  if the Lessee gives the
Owner Participant,  the Indenture Trustee,  the Owner Trustee,  the Pass-Through
Trustee and the Liquidity  Providers  confirmed  facsimile  notice (or telephone
notice followed by written  confirmation) of such postponement and notice of the
date to which the Delivery Date has been postponed,  such notice of postponement
to be  received  by each party no later than 11:00 a.m.  (New York City time) on
the Business Day preceding the Scheduled Delivery Date.

         Section  3.06.  Closing.  The closing  with respect to the purchase and
lease of the  Aircraft on the  Delivery  Date shall take place at the offices of
Troutman Sanders LLP, 600 Peachtree Street, N.E., Atlanta, Georgia 30308 or such
other place as the Lessee, the Owner Participant and the Indenture Trustee shall
mutually agree.



                                    ARTICLE 4

                              CONDITIONS PRECEDENT

         Section 4.01.  Conditions  Precedent  (Certificate  Closing Date).  The
obligations of the Owner Trustee, the Lessee, the Initial Owner Participant, the
Indenture  Trustee,  the  Subordination  Agent and the  Pass-Through  Trustee on
behalf  of  each   Pass-Through   Trust  to  participate  in  the   transactions
contemplated  hereby  on  the  Certificate  Closing  Date  are  subject  to  the
fulfillment  to the  reasonable  satisfaction  of such  party (or waiver by such
party), prior to or on the Certificate Closing Date, of the following conditions
precedent  (it  being  understood  that  receipt  by  the  Lessee  of any of the
following documents shall not be a condition precedent to the obligations of any
party):

                  (a) Certificates.  (i) On the Certificate  Closing Date, there
         shall have been duly issued and  delivered by the Owner  Trustee to the
         Subordination  Agent on behalf  of the  Pass-Through  Trustee  for each
         Pass-Through   Trust,   against   payment   therefor,   a  Certificate,
         substantially in the form set forth in Exhibit B to the Indenture, duly
         authenticated, dated the Certificate Closing Date and registered in the
         name of the Subordination  Agent, in the principal amounts,  Series and
         Maturity,  bearing  the  interest  rate and  otherwise  as  provided in
         Section  2.04 of the  Indenture,  and (ii) on the  Certificate  Closing
         Date, the "Certificates" (as defined in each of the Related Indentures)
         have been duly issued and delivered by the "Owner  Trustee" (as defined
         in each of the Related Indentures) to the Subordination Agent on behalf
         of the Pass-Through Trustee for each Pass-Through Trust.

                  (b) Legal Investment. On the Certificate Closing Date, no fact
         or  condition  shall exist under  applicable  laws or  regulations,  or
         interpretations   of  any  such  laws  or   regulations  by  applicable
         regulatory  authorities,  which,  in the  opinion  of the  Pass-Through
         Trustee, the Subordination Agent, or the Indenture Trustee,  would make
         it illegal for the Initial  Owner  Participant,  the Lessee,  the Owner
         Trustee,  the  Pass-Through  Trustee,  the  Subordination  Agent or the
         Indenture Trustee,  and no change in circumstances  shall have occurred
         which would otherwise make it illegal or otherwise in  contravention of
         guidance  issued  by  regulatory  authorities  for  the  Initial  Owner
         Participant,  the Lessee, the Owner Trustee, the Pass-Through  Trustee,
         the Subordination Agent or the Indenture Trustee, to participate in the
         transactions to be consummated on the Certificate  Closing Date; and no
         action or proceeding shall have been instituted nor shall  governmental
         action before any court, governmental authority or agency be threatened
         which  in the  opinion  of  counsel  for  the  Indenture  Trustee,  the
         Subordination Agent or the Pass-Through  Trustee is not frivolous,  nor
         shall any order have been issued or proposed to be issued by any court,
         or  governmental  authority or agency,  as of the  Certificate  Closing
         Date, to set aside, restrain, enjoin or prevent the consummation of any
         of the  transactions  contemplated  by this  Agreement or by any of the
         other Operative Agreements.

                  (c)  Placement   Agent.   The   Placement   Agent  shall  have
         transferred  the funds  specified  in  Section  2.01(a)  hereof and all
         conditions with respect thereto shall have been satisfied or waived.

                  (d)  Documents.  This  Agreement and the  following  documents
         shall  have  been  duly  authorized,  executed  and  delivered  by  the
         respective  party  or  parties   thereto,   shall  each  be  reasonably
         satisfactory  in form and substance to the Lessee,  the Owner  Trustee,
         the Indenture Trustee,  the Pass-Through  Trustee (each acting directly
         or by  authorization  to its special counsel) and shall each be in full
         force and effect; there shall not have occurred any default thereunder,
         or any event  which  with the lapse of time or the  giving of notice or
         both would be a default thereunder, and copies executed or certified as
         requested by the Lessee, the Owner Trustee,  the Indenture Trustee, the
         Pass-Through Trustee or the Subordination Agent, as the case may be, of
         such documents  shall have been delivered to the Lessee,  the Indenture
         Trustee,  the Pass-Through  Trustee,  the  Subordination  Agent and the
         Owner Trustee (provided,  that the sole  chattel-paper  original of the
         Lease shall be delivered to the Indenture Trustee):

                   (i)     the Indenture;

                  (ii)     the Trust Agreement;

                  (iii)    the ACA Guaranty;

                  (iv)     the Intercreditor Agreement;

                  (v)      the Liquidity  Facility for each of the  Pass-Through
                           Trusts  for the Series A  Certificates,  the Series B
                           Certificates and the Series C Certificates.

                  (e)  Approvals.  All approvals and consents of any trustees or
         holders of any  indebtedness  or obligations of the Lessee or ACA Inc.,
         which in the opinion of the Owner Participant, the Pass-Through Trustee
         or  the  Indenture   Trustee  are  required  in  connection   with  any
         transaction  contemplated  by this  Agreement,  shall  have  been  duly
         obtained.

                  (f)  Financing  Statements.  Uniform  Commercial  Code ("UCC")
         financing  statements  covering all the security  interests  (and other
         interests) intended to be created by or pursuant to the Granting Clause
         of the  Indenture  shall have been  executed and delivered by the Owner
         Trustee, as debtor, and by the Indenture Trustee, as secured party, for
         and on behalf of the Holders, for filing in Connecticut,  and all other
         actions shall have been taken which, in the opinion of the Pass-Through
         Trustee and the Placement  Agent,  are necessary to perfect and protect
         such security interests and other interests.

                  (g)  Corporate  Documents.  Except  when  such  Person  is the
         delivering  party,  the Owner Trustee,  the Pass-Through  Trustee,  the
         Lessee and the Indenture  Trustee (acting  directly or by authorization
         to its counsel) shall have received the following, in each case in form
         and substance reasonably satisfactory to it:

                           (i) a copy of the  certificate of  incorporation  and
                  by-laws  of  the  Lessee,  certified  by the  Secretary  or an
                  Assistant  Secretary  of the  Lessee  and ACA  Inc.  as of the
                  Certificate  Closing Date, and a copy of a resolution  adopted
                  by the board of directors of the Lessee,  certified as such as
                  of the Certificate Closing Date by such Secretary or Assistant
                  Secretary,  duly  authorizing  the lease by the  Lessee of the
                  Aircraft and the  execution,  delivery and  performance by the
                  Lessee of this Agreement,  the Indenture, a lease with respect
                  to the Aircraft,  the Pass-Through  Agreement,  and agreements
                  related thereto to which the Lessee is or is to be a party and
                  each other document to be executed and delivered by the Lessee
                  in connection with the transactions  contemplated hereby and a
                  copy of the resolutions of the board of directors of ACA Inc.,
                  certified  as such as of the  Certificate  Closing Date by the
                  Secretary or an Assistant Secretary, authorizing the execution
                  and  delivery  by ACA Inc. of the ACA  Guaranty  and the other
                  Operative  Agreements to which ACA Inc. is or is to be a party
                  and each other  document to be executed  and  delivered by ACA
                  Inc. in connection with the transactions contemplated hereby;

                           (ii) a copy  of the  articles  of  incorporation  and
                  by-laws and other instruments of the Owner Trustee,  certified
                  by the  Secretary  or an  Assistant  Secretary  of  the  Owner
                  Trustee  as of the  Certificate  Closing  Date (or other  like
                  instruments  satisfactory  to the Lessee and the Initial Owner
                  Participant) and evidence authorizing the execution,  delivery
                  and  performance  by  the  Owner  Trustee  in  its  individual
                  capacity  or as Owner  Trustee,  as the  case may be,  of this
                  Agreement, the Trust Agreement and each of the other Operative
                  Agreements to which it is or is to be a party,  whether in its
                  individual  capacity  or as  Owner  Trustee,  and  each  other
                  document to be executed and  delivered by the Owner Trustee in
                  connection with the transactions contemplated hereby;

                           (iii)  a copy  of the  articles  of  association  and
                  by-laws  and  other  instruments  of  the  Indenture  Trustee,
                  certified by the  Secretary  or an Assistant  Secretary of the
                  Indenture Trustee as of the Certificate Closing Date (or other
                  like  instruments  satisfactory  to the Lessee and the Initial
                  Owner  Participant)  and evidence  authorizing  the execution,
                  delivery and  performance by the Indenture  Trustee of each of
                  this Agreement,  the Indenture and each of the other Operative
                  Agreements to which it is or is to be a party,  and each other
                  document to be executed and delivered by the Indenture Trustee
                  in connection with the transactions contemplated hereby;

                           (iv)  a copy  of  the  articles  of  association  and
                  by-laws and other  instruments  of the  Pass-Through  Trustee,
                  certified by the  Secretary  or an Assistant  Secretary of the
                  Pass-Through  Trustee as of the  Certificate  Closing Date (or
                  other  like  instruments  satisfactory  to the  Lessee and the
                  Initial  Owner  Participant)  and  evidence   authorizing  the
                  execution,   delivery  and  performance  by  the  Pass-Through
                  Trustee of this Agreement,  the  Pass-Through  Agreement,  and
                  each of the other Operative Agreements to which it is or is to
                  be a  party,  and  each  other  document  to be  executed  and
                  delivered by the  Pass-Through  Trustee in connection with the
                  transactions contemplated hereby;

                           (v) a copy of the articles of association and by-laws
                  and other instruments of the Subordination Agent, certified by
                  the Secretary or an Assistant  Secretary of the  Subordination
                  Agent  as of the  Certificate  Closing  Date  (or  other  like
                  instruments  satisfactory  to the Lessee and the Initial Owner
                  Participant) and evidence authorizing the execution,  delivery
                  and performance by the Subordination  Agent of this Agreement,
                  the  Intercreditor  Agreement and each of the other  Operative
                  Agreements to which it is or is to be a party,  and each other
                  document to be executed  and  delivered  by the  Subordination
                  Agent in connection with the transactions contemplated hereby;
                  and

                           (vi) such other documents,  evidences, materials, and
                  information with respect to the Lessee, the Owner Trustee, the
                  Indenture Trustee, and the Pass-Through Trustee as the Initial
                  Owner  Participant,  the Indenture Trustee or the Pass-Through
                  Trustee  may  reasonably  request  in order to  establish  the
                  consummation   of  the   transactions   contemplated  by  this
                  Agreement.

                  (h)  Officer's  Certificate  of  Lessee  and ACA  Inc.  On the
         Certificate  Closing Date, the following  statements shall be true, and
         the Owner Trustee,  the Pass-Through  Trustee,  the Liquidity Providers
         and the Indenture  Trustee  shall have  received a  certificate  of the
         Lessee  and of ACA Inc.  signed  on its  respective  behalf by the Vice
         President  and  Treasurer or any other duly  authorized  officer of the
         Lessee or ACA Inc., as applicable,  dated the Certificate Closing Date,
         stating that:

                           (i) the  representations and warranties of the Lessee
                  and ACA Inc.,  as the case may be,  contained in the Operative
                  Agreements  to  which  it is a  party  and in any  certificate
                  delivered  pursuant  hereto or thereto are true and correct on
                  and as of the  Certificate  Closing Date as though made on and
                  as  of  such   date   (except   to  the   extent   that   such
                  representations  and  warranties  relate  solely to an earlier
                  date,  in which case such  certificate  shall  state that such
                  representations and warranties were true and correct on and as
                  of such earlier date);

                           (ii) except as  disclosed in the  Offering  Memo,  no
                  materially  adverse  change  has  occurred  in  the  financial
                  condition,  business or  operations  of the Lessee or ACA Inc.
                  from that shown in the unaudited  financial  statements of the
                  Lessee  and ACA Inc.  as of July 31,  1997,  and  nothing  has
                  occurred   which  will,  in  the  judgment  of  such  officer,
                  materially  adversely  affect the ability of the Lessee or ACA
                  Inc.,  as the case may be,  to  carry  on its  business  or to
                  perform its  obligations  under this  Agreement and each other
                  Operative Agreement to which it is or is to be a party; and

                           (iii) no event has  occurred  and is  continuing,  or
                  would result from the purchase,  sale,  mortgage,  or lease of
                  the  Aircraft,  which  constitutes  an Event of Loss (or event
                  which with the passage of time would  become an Event of Loss)
                  with respect to the Airframe or any Engine, or a Default under
                  the Lease.

                  (i)      Reserved.

                  (j) Other Officer's  Certificates.  On the Certificate Closing
         Date,  the  following  statements  shall be true,  and the Lessee,  the
         Pass-Through  Trustee, the Liquidity Providers,  the Owner Trustee, the
         Subordination  Agent and the  Indenture  Trustee  shall have received a
         certificate  from each of SSB and the Owner Trustee (in the case of the
         Lessee,  the  Pass-Through  Trustee,  the  Subordination  Agent and the
         Indenture Trustee),  FNBM and the Indenture Trustee (in the case of the
         Lessee, the Pass-Through Trustee, the Subordination Agent and the Owner
         Trustee), FNBM and the Pass-Through Trustee (in the case of the Lessee,
         the Indenture Trustee,  the Subordination Agent and the Owner Trustee),
         and FNBM and the  Subordination  Agent (in the case of the Lessee,  the
         Pass-Through  Trustee,  the Indenture  Trustee and the Owner  Trustee),
         signed by a duly  authorized  officer  of SSB and  FNBM,  respectively,
         dated the Certificate Closing Date, stating with respect to SSB and the
         Owner  Trustee,  with respect to FNBM and the Indenture  Trustee,  with
         respect to FNBM and the Pass-Through  Trustee,  or with respect to FNBM
         and the Subordination Agent, as the case may be, that:

                           (i) the  representations and warranties of SSB in its
                  individual  capacity  and as  Owner  Trustee,  of  FNBM in its
                  individual  capacity and as Indenture Trustee,  of FNBM in its
                  individual capacity and as Pass-Through Trustee, or of FNBM in
                  its individual  capacity and as Subordination  Agent contained
                  in this  Agreement,  the Lease,  the Trust  Agreement  and the
                  Indenture and in any certificate  delivered pursuant hereto or
                  thereto  are true  and  correct  on and as of the  Certificate
                  Closing  Date as though made on and as of such date (except to
                  the extent that such  representations  and  warranties  relate
                  solely to an  earlier  date,  in which  case such  certificate
                  shall state that such representations and warranties were true
                  and correct on and as of such earlier date);

                           (ii) to the  best of its  knowledge,  no  Default  or
                  Indenture  Default exists due to any action or omission on the
                  part of SSB in its individual capacity or as Owner Trustee, of
                  FNBM in its individual  capacity or as Indenture  Trustee,  of
                  FNBM in its individual capacity or as Pass-Through Trustee, or
                  of FNBM in its individual capacity or as Subordination  Agent;
                  and

                           (iii) there are no Lessor's Liens attributable to the
                  Owner Trustee or SSB and no Indenture Trustee's Liens.

                  (k) Legal Opinions. The Placement Agent, the Lessee, the Owner
         Trustee,  the  Pass-Through  Trustee and the Indenture  Trustee (acting
         directly  or by  authorization  to  its  special  counsel)  shall  have
         received from the following  counsel their respective legal opinions in
         each case reasonably  satisfactory to the Placement  Agent, the Lessee,
         the Owner Trustee,  the Pass-Through  Trustee or the Indenture Trustee,
         as the case may be, as to scope and substance  (and covering such other
         matters  as  the  recipient  may  reasonably  request)  and  dated  the
         Certificate Closing Date:

                           (i) Richard J.  Kennedy,  Vice  President and General
                  Counsel  of the  Lessee  and ACA Inc.,  in the form of Exhibit
                  A(l)(a)(i)  hereto and addressed to the Placement  Agent,  the
                  Owner  Trustee,  the  Pass-Through   Trustee,  each  Liquidity
                  Provider and the Indenture Trustee;

                           (ii) Ober, Kaler,  Grimes & Shriver,  special counsel
                  for the Indenture Trustee,  in the form of Exhibit A(3) hereto
                  and addressed to the Placement Agent,  the Indenture  Trustee,
                  the Owner Trustee,  the Pass-Through  Trustee,  each Liquidity
                  Provider and the Lessee;

                           (iii) Bingham,  Dana & Gould LLP, special counsel for
                  the Owner Trustee,  in the form of Exhibit  A(4)(a)(i)  hereto
                  and addressed to the Placement Agent,  the Indenture  Trustee,
                  the Owner Trustee,  the Pass-Through  Trustee,  each Liquidity
                  Provider and the Lessee;

                           (iv) Troutman  Sanders LLP,  special  leasing counsel
                  for  the  Lessee,  and of  Gibson,  Dunn &  Crutcher,  special
                  securities  counsel to the  Lessee,  in the forms  attached as
                  Exhibit  A(l)(b)(i)  hereto  and  addressed  to the  Placement
                  Agent,  the  Indenture   Trustee,   the  Owner  Trustee,   the
                  Pass-Through Trustee, each Liquidity Provider and the Lessee;

                           (v) Ober, Kaler, Grimes & Shriver special counsel for
                  the Pass-Through  Trustee and the Subordination  Agent, in the
                  form of Exhibit A(5) hereto  addressed to the Placement Agent,
                  the Indenture  Trustee,  the Owner Trustee,  the  Pass-Through
                  Trustee, each Liquidity Provider and the Lessee; and

                           (vi)  Clifford  Chance,  special Dutch counsel to ING
                  Bank N.V. in the form of Exhibit A(6)(a)  hereto,  and Coudert
                  Brothers,  special counsel for the Liquidity Providers, in the
                  form  of  Exhibit  A(6)(b)  hereto,   each  addressed  to  the
                  Pass-Through  Trustee, the Subordination Agent, each Liquidity
                  Provider and the Lessee.

                  (l)      No Indenture Default.  No Indenture Default exists.

                  (m) No Lease Default or Event of Loss. No Default exists,  and
         no Event of  Loss,  or event  which  with  the  passage  of time  would
         constitute an Event of Loss, shall exist.

                  (n) Other Agreements.  The Lessee and the Pass-Through Trustee
         shall have entered into the Pass-Through  Agreement,  all conditions to
         the  effectiveness of each thereof shall have been satisfied or waived,
         and the Pass-Through  Certificates  shall have been issued.  The Lessee
         and  the  Placement   Agent  shall  have  entered  into  the  Placement
         Agreement,  all conditions to the effectiveness thereof shall have been
         satisfied or waived, and the Pass-Through  Certificates shall have been
         delivered  pursuant to the Placement  Agreement.  All conditions to the
         effectiveness  of each Liquidity  Facility shall have been satisfied or
         waived.

                  (o)  Payment  of  Taxes.   (A)  All  taxes,   fees,   charges,
         assessments,   costs  and  other  expenses  then  due  and  payable  in
         connection  with the execution,  delivery,  recording and filing of all
         financing  statements  referred to in subparagraph  (f) of this Section
         4.01, or in connection with the issuance of the Certificates shall have
         been duly  paid or caused to be paid in full;  and (B) all sales or use
         taxes  and  duties  related  to the  consummation  of the  transactions
         contemplated  by the Operative  Agreements on the  Certificate  Closing
         Date which are then due and payable shall have been duly paid in full.

                  (p) Governmental  Compliance.  All appropriate action required
         to have  been  taken  by the  FAA,  the  SEC,  or any  governmental  or
         political agency,  subdivision or instrumentality of the United States,
         prior  to  the   Certificate   Closing  Date  in  connection  with  the
         transactions  contemplated by this Agreement shall have been taken, and
         all orders, permits, waivers, authorizations,  exemptions and approvals
         (collectively  "permits") of such entities  required to be in effect on
         the  Certificate  Closing  Date in  connection  with  the  transactions
         contemplated  by this  Agreement  shall have been issued,  and all such
         permits  shall be in full force and effect on the  Certificate  Closing
         Date.

                  (q)  Section  131.3 of the New York State  Banking Law Filing.
         SSB shall have delivered  evidence of its filing made with the New York
         Superintendent  of Banking  pursuant  to Section  131.3 of the New York
         State Banking Law.

                  (r) Letter of  Credit.  The Lessee  shall have  delivered  the
         Letter  of Credit  to the  Indenture  Trustee  in  connection  with the
         obligations  of the Lessee  pursuant  to the first  sentence of Section
         17.02(h) hereof.

         Section 4.02. Conditions Precedent (Delivery Date). Subject to the last
paragraph of this Section 4.02, the obligations of the Owner Trustee,  the Owner
Participant, the Indenture Trustee, the Subordination Agent and the Pass-Through
Trustee on behalf of each Pass-Through  Trust to participate in the transactions
contemplated  hereby on the Delivery Date are subject to the  fulfillment to the
reasonable  satisfaction of each party (or waiver by such party), prior to or on
the Delivery Date, of the following  conditions  precedent (it being  understood
that  receipt by the  Lessee of any of the  following  documents  shall not be a
condition precedent to the obligation of any party):

                  (a)  Notice,  Etc.  Each party  hereto  shall have  received a
         Delivery Notice pursuant to Section 3.01 hereof at least three Business
         Days prior to the Delivery Date.

                  (b) Legal Investment.  No change shall have occurred after the
         Certificate Closing Date (or, in the case of the Owner Participant, the
         Transfer Date) and on or prior to the Delivery Date in applicable  laws
         or regulations,  or  interpretations of any such laws or regulations by
         applicable regulatory  authorities,  which, in the opinion of the Owner
         Participant,  the Pass-Through Trustee, the Subordination Agent, or the
         Indenture Trustee, would make it illegal for the Owner Participant, the
         Lessee, the Owner Trustee, the Pass-Through  Trustee, the Subordination
         Agent or the Indenture  Trustee,  and no change in circumstances  shall
         have  occurred  which would  otherwise  make it illegal or otherwise in
         contravention  of guidance  issued by  regulatory  authorities  for the
         Owner  Participant,  the Lessee,  the Owner Trustee,  the  Pass-Through
         Trustee,   the  Subordination   Agent  or  the  Indenture  Trustee,  to
         participate in the transactions to be consummated on the Delivery Date;
         and no action  or  proceeding  shall  have  been  instituted  nor shall
         governmental action before any court,  governmental authority or agency
         be   threatened   which  in  the  opinion  of  counsel  for  the  Owner
         Participant,  the Indenture  Trustee,  the  Subordination  Agent or the
         Pass-Through  Trustee is not  frivolous,  nor shall any order have been
         issued or proposed to be issued by any court, or governmental authority
         or agency, as of the Delivery Date, to set aside,  restrain,  enjoin or
         prevent the  consummation  of any of the  transactions  contemplated by
         this Agreement or by any of the other Operative Agreements.

                  (c) Documents.  The documents  referred to in Section  4.01(d)
         hereof  shall  each be in  full  force  and  effect  and the  following
         documents  shall have been duly  authorized,  executed and delivered by
         the  respective  party or parties  thereto,  shall  each be  reasonably
         satisfactory  in form and substance to the Lessee,  the Owner  Trustee,
         the Indenture  Trustee,  the Pass-Through  Trustee,  the  Subordination
         Agent  and  the  Owner   Participant   (each  acting   directly  or  by
         authorization  to its special  counsel) and shall each be in full force
         and effect;  there shall not have occurred any default  thereunder,  or
         any event  which with the lapse of time or the giving of notice or both
         would be a default  thereunder,  and copies  executed or  certified  as
         requested by the Lessee, the Owner Trustee,  the Indenture Trustee, the
         Pass-Through  Trustee or the Owner Participant,  as the case may be, of
         such documents shall have been delivered to the Owner Participant,  the
         Lessee, the Indenture Trustee,  the Pass-Through  Trustee and the Owner
         Trustee (provided,  that the sole  chattel-paper  original of the Lease
         (whether  delivered on the Transfer Date or the Delivery  Date) and the
         Lease Supplement shall be delivered to the Indenture Trustee):

                  (i)      this Agreement, as amended and restated as of the Delivery Date;

                  (ii)     the Lease;

                  (iii) the Trust  Agreement,  as amended and restated as of the
Delivery Date;

                  (iv)     the Indenture, as amended and restated as of the Delivery Date;

                  (v)      the Lease Supplement covering the Aircraft, dated the Delivery Date;

                  (vi)     the Indenture Supplement covering the Aircraft, dated the Delivery Date;

                  (vii)    in the case of the Owner  Participant  only,  the Tax
                           Indemnity Agreement (unless delivered on the Transfer
                           Date);

                  (viii)   the Invoice;

                            the FAA Bill of Sale and the Warranty Bill of Sale;

                            the Purchase Agreement Assignment;

                  (xi)     the PAA Consent;

                            the Engine Warranty Assignment;

                            the Engine Manufacturer's Consent;

                            in the case of the Owner Participant only, the RVG;

                            in the case of the Owner Participant only, the Deficiency Agreement;

                            the Owner Participant Guaranty, if any; and

                  (xvii)   the Old Lease Termination;

         unless,  in the case of each of the  documents  listed in  clauses  (i)
         through  (iv) above they shall have been amended and restated as of and
         delivered on the Transfer Date.

                  (d) Legal  Opinions.  The  Owner  Participant,  the  Placement
         Agent, the Lessee, the Owner Trustee,  the Pass-Through Trustee and the
         Indenture  Trustee (acting  directly or by authorization to its special
         counsel)   shall  have  received  from  the  following   counsel  their
         respective  legal opinions in each case reasonably  satisfactory to the
         Owner Participant,  the Placement Agent, the Lessee, the Owner Trustee,
         the Pass-Through  Trustee or the Indenture Trustee, as the case may be,
         as to scope and  substance  (and  covering  such  other  matters as the
         recipient may reasonably request) and dated the Delivery Date:

                           (i)      Richard J. Kennedy,  Vice  President and General  Counsel of the Lessee and ACA
                  Inc.,  addressed  to  the  Placement  Agent,  the  Owner  Participant,  the  Owner  Trustee,  the
                  Pass-Through Trustee, each Liquidity Provider and the Indenture Trustee;

                           (ii) special leasing counsel for the Lessee addressed
                  to the Placement Agent, the Owner  Participant,  the Indenture
                  Trustee,  the Owner Trustee,  the Pass-Through  Trustee,  each
                  Liquidity Provider and the Lessee;

                           (iii) special counsel for the Owner Trustee addressed
                  to the Placement Agent, the Owner  Participant,  the Indenture
                  Trustee,  the Owner Trustee,  the Pass-Through  Trustee,  each
                  Liquidity Provider and the Lessee;

                           (iv) special aviation counsel,  in customary form and
                  addressed to the Placement Agent, the Owner  Participant,  the
                  Indenture  Trustee,   the  Owner  Trustee,   the  Pass-Through
                  Trustee, each Liquidity Provider and the Lessee;

                                             special  counsel  for  the  Manufacturer  addressed  to the  Placement
                  Agent,  the Owner  Participant,  the  Indenture  Trustee,  the Owner  Trustee,  the  Pass-Through
                  Trustee, each Liquidity Provider and the Lessee;

                                             counsel  for  the  Engine  Manufacturer  addressed  to  the  Placement
                  Agent,  the Owner  Participant,  the  Indenture  Trustee,  the Owner  Trustee,  the  Pass-through
                  Trustee, each Liquidity Provider and the Lessee;

                           (vii) in the case of the Owner  Participant only, tax
                  counsel  to the  Owner  Participant,  addressed  to the  Owner
                  Participant, with respect to tax matters;

                           (viii) special counsel for the Manufacturer addressed
to the Owner Participant;

                           (ix) special  counsel for SDIQ addressed to the Owner
                  Participant and the Owner Trustee; and

                           (x) special counsel for the Owner Participant and the
                  Owner Participant Guarantor, if any, and the General Counsel's
                  Office of the Owner Participant and the Owner Participant,  if
                  any,  addressed to the Placement Agent, the Owner Participant,
                  the Indenture  Trustee,  the Owner Trustee , the  Pass-Through
                  Trustee, each Liquidity Provider and the Lessee.

         (e) Title,  Airworthiness and  Registration.  On the Delivery Date, the
following  statements  shall be true, and the Owner  Participant,  the Indenture
Trustee,  the  Pass-Through  Trustee and the Owner  Trustee  shall have received
evidence from the Lessee reasonably  satisfactory to the Owner Participant,  the
Indenture Trustee,  the Pass-Through Trustee and the Owner Trustee to the effect
that:

                           (i) the Owner Trustee has good and  marketable  title
                  (subject to filing and  recording of the FAA Bill of Sale with
                  the Aeronautics Authority) to the Aircraft,  free and clear of
                  Liens,  except the rights of the Owner  Trustee and the Lessee
                  under the Lease, the rights of the Indenture Trustee under the
                  Indenture (including the Indenture Supplement), the beneficial
                  interest  of  the  Owner  Participant  created  by  the  Trust
                  Agreement, and the interest of the Certificate Holders created
                  by the Indenture, which evidence shall include the FAA Bill of
                  Sale and the Warranty Bill of Sale;

                           (ii) the Aircraft has been duly  certificated  by the
                  Aeronautics Authority as to type and airworthiness;

                           (iii) the Old Lease Termination (if applicable and if
                  the Old Lease was filed of record with the FAA),  the FAA Bill
                  of Sale, the amended and restated  Lease  (including the Lease
                  Supplement), the amended and restated Indenture (including the
                  Indenture  Supplement),  and the  amended and  restated  Trust
                  Agreement shall have been duly filed for recordation (or shall
                  be in the process of being so duly filed for recordation) with
                  the FAA pursuant to the Transportation Code; and

                           (iv)  application to the FAA for  registration of the
                  Aircraft in the name of the Owner Trustee shall have been duly
                  filed and the Lessee shall have permanent authority to operate
                  the Aircraft.

                  (f) Financing Statements. (i) a form UCC-3 financing statement
         to amend and restate each  financing  statement  referred to in Section
         4.01(f)  hereof  shall have been  executed  and  delivered by the Owner
         Trustee, as debtor, and by the Indenture Trustee, as secured party, and
         a form UCC-1 financing  statement  covering all the security  interests
         (and other interests)  created by or pursuant to the Granting Clause of
         the  Indenture  shall have been  executed  and  delivered  by the Owner
         Trustee, as debtor, and by the Indenture Trustee, as secured party, for
         and on behalf of the Holders,  and (ii) a UCC notice filing  describing
         the Lease as a lease  shall have been  executed  and  delivered  by the
         Owner Trustee, as lessor, and the Lessee, as lessee (which filing shall
         name the  Indenture  Trustee as  assignee  of the Owner  Trustee),  for
         filing in Virginia.

                  (g) Payments.  The Owner Participant shall have made available
         its   Commitment  to  the  Owner   Trustee,   and  the  other  payments
         contemplated  by Section  3.02 hereof shall have been made and interest
         accrued on the Certificates  prior to (but excluding) the Delivery Date
         shall have been paid on or before the Delivery Date in accordance  with
         Section 17.02 hereof.

                  (h) Report of Aircraft  Expert.  The Owner  Participant  shall
         have received a report  prepared by BK Associates,  Inc.,  addressed to
         the Owner  Participant (with an abbreviated  report to the Lessee),  in
         form and substance reasonably  satisfactory to the Owner Participant to
         the effect that, on the Delivery Date:

                           (i)  (A)  the  estimated  fair  market  value  of the
                  Aircraft net of any cost to the Owner Participant or the Owner
                  Trustee of return at the end of the Basic Term and any Renewal
                  Term (determined  without including in such value any increase
                  or decrease for  inflation  or  deflation  during the Term) is
                  equal to or greater than 20% of the Purchase  Price and (B) at
                  least 20% of the useful  economic life of the Aircraft will be
                  remaining at the end of the Basic Term and any Renewal Term;

                           (ii)     the  estimated  useful life of the  Aircraft is at least 125% of the Basic Term
                  and any Renewal Term;

                           (iii) the Purchase  Price is no greater than the fair
                  market value of the Aircraft on the Delivery Date;

                           (iv) on the  Delivery  Date,  the  Aircraft  will not
                  require any modifications,  improvements or additions in order
                  to be  rendered  complete  for  its  intended  purpose  by the
                  Lessee;

                           (v)  the  amount  payable  by  the  Lessee  upon  the
                  exercise of its purchase option  pursuant to Section  16(a)(1)
                  of the Lease equals or exceeds the  currently  estimated  Fair
                  Market Value of the Aircraft on such date (taking into account
                  inflation or deflation to such date); and

                           (vi)     the Aircraft is not limited use property.

                  (i) Insurance. Each of the Indenture Trustee, the Pass-Through
         Trustee,  the  Owner  Trustee  and the  Owner  Participant  shall  have
         received such evidence as it reasonably deems  appropriate,  including,
         without limitation,  an independent insurance broker's report, together
         with  certificates of insurance from such broker, in form and substance
         reasonably  satisfactory  to the Indenture  Trustee,  the  Pass-Through
         Trustee, the Owner Trustee and the Owner Participant, to establish that
         the insurance required by Section 12 of the Lease is in effect.

                  (j)  Payment  of  Taxes.   (A)  All  taxes,   fees,   charges,
         assessments,   costs  and  other  expenses  then  due  and  payable  in
         connection  with the execution,  delivery,  recording and filing of all
         financing  statements and the documents and instruments  referred to in
         subparagraphs  (e) and (f) of this Section 4.02, or in connection  with
         the purchase of the Aircraft by the Owner Trustee and the making by the
         Owner Participant of its equity investment shall have been duly paid or
         caused to be paid in full;  and (B) all  sales or use taxes and  duties
         related to the  consummation  of the  transactions  contemplated by the
         Operative  Agreements  on the  Delivery  Date  which  are  then due and
         payable shall have been duly paid in full.

                  (k)      No Indenture Default.  No Indenture Default exists.

                  (l) No Lease Default or Event of Loss. No Default exists,  and
         no Event of  Loss,  or event  which  with  the  passage  of time  would
         constitute an Event of Loss, shall exist.

                  (m) Governmental  Compliance.  All appropriate action required
         to have  been  taken  by the  FAA,  the  SEC,  or any  governmental  or
         political agency,  subdivision or instrumentality of the United States,
         prior  to  the  Delivery  Date  in  connection  with  the  transactions
         contemplated by this Agreement  shall have been taken,  and all orders,
         permits,    waivers,    authorizations,    exemptions   and   approvals
         (collectively  "permits") of such entities  required to be in effect on
         the Delivery Date in connection with the  transactions  contemplated by
         this Agreement shall have been issued, and all such permits shall be in
         full force and effect on the Delivery Date.

                  (n)  Officer's  Certificate  of  Lessee  and ACA  Inc.  On the
         Delivery  Date, the following  statements  shall be true, and the Owner
         Participant,  the  Owner  Trustee,  the  Pass-Through  Trustee  and the
         Indenture  Trustee shall have received a certificate  of the Lessee and
         of ACA Inc.,  signed on its respective behalf by the Vice President and
         Treasurer  or any other  duly  authorized  officer of the Lessee or ACA
         Inc., as applicable, dated the Delivery Date, stating that:

                           (i) the  representations and warranties of the Lessee
                  or ACA Inc.,  as the case may be,  contained in the  Operative
                  Agreements to which it is a party (excluding the Tax Indemnity
                  Agreement) and in any certificate delivered pursuant hereto or
                  thereto are true and correct on and as of the Delivery Date as
                  though made on and as of such date  (except to the extent that
                  such  representations  and  warranties  relate  solely  to  an
                  earlier date, in which case such certificate  shall state that
                  such  representations  and warranties were true and correct on
                  and as of such earlier date);

                           (ii) except as  disclosed in the  Offering  Memo,  no
                  materially  adverse  change  has  occurred  in  the  financial
                  condition,  business,  or operations of the Lessee or ACA Inc.
                  from that shown in the unaudited  financial  statements of the
                  Lessee  and ACA Inc.  as of July 31,  1997,  and  nothing  has
                  occurred  which  will,  in the  reasonable  judgment  of  such
                  officer, materially adversely affect the ability of the Lessee
                  or ACA Inc.,  as the case may be, to carry on its  business or
                  to perform its obligations under this Agreement and each other
                  Operative Agreement to which it is or is to be a party; and

                           (iii) no event has  occurred  and is  continuing,  or
                  would result from the purchase,  sale,  mortgage,  or lease of
                  the  Aircraft,  which  constitutes  an Event of Loss (or event
                  which with the passage of time would  become an Event of Loss)
                  with respect to the Airframe or any Engine, or a Default under
                  the Lease.

                  (o) Officer's  Certificate of Owner  Participant and any Owner
         Participant  Guarantor.  On the Delivery Date, the following statements
         shall be true,  and the Lessee,  the  Pass-Through  Trustee,  the Owner
         Trustee and the  Indenture  Trustee  shall have  received a certificate
         from the Owner Participant, signed by a duly authorized officer of (aa)
         the Owner Participant dated the Delivery Date, stating that:

                           (i) the  representations  and warranties of the Owner
                  Participant  contained in this Agreement,  the Trust Agreement
                  and any other Operative Agreement (excluding the Tax Indemnity
                  Agreement)  to  which  it is a  party  and in any  certificate
                  delivered pursuant hereto or thereto,  are true and correct on
                  and as of the  Delivery  Date as though made on and as of such
                  date  (except  to the  extent  that such  representations  and
                  warranties  relate  solely to an earlier  date,  in which case
                  such  certificate  shall state that such  representations  and
                  warranties  were true and  correct  on and as of such  earlier
                  date);

                           (ii)     no Lessor's Liens attributable to the Owner Participant exist; and

                           (iii) no event has occurred and is  continuing  which
                  constitutes  or,  with  notice or lapse of time or both  would
                  constitute,  an  Indenture  Event  of  Default  other  than an
                  Indenture  Event of Default  attributable  to a Lease Event of
                  Default.

         and (bb) from the Owner Participant Guarantor, if any, signed by a duly
         authorized  officer  of such  Owner  Participant  Guarantor  dated  the
         Certificate   Closing  Date,  stating  that  the   representations  and
         warranties of such Owner Participant  Guarantor  contained in its Owner
         Participant  Guaranty and in any  certificate  delivered at the closing
         pursuant  thereto  are true and  correct  on and as of the  Certificate
         Closing  Date as  though  made on and as of such  date  (except  to the
         extent that such  representations  and  warranties  relate solely to an
         earlier  date,  in which case such  certificate  shall  state that such
         representations  and warranties were true and correct on and as of such
         earlier date).

                  (p) Other  Officer's  Certificates.  On the Delivery Date, the
         following  statements  shall be true,  and the Owner  Participant,  the
         Lessee, the Pass-Through  Trustee, the Owner Trustee, the Subordination
         Agent and the Indenture  Trustee shall have received a certificate from
         each of SSB and the  Owner  Trustee  (in the  case of the  Lessee,  the
         Pass-Through  Trustee,  the Owner Participant,  the Subordination Agent
         and the Indenture Trustee), FNBM and the Indenture Trustee (in the case
         of the Lessee, the Pass-Through  Trustee,  the Owner  Participant,  the
         Subordination  Agent and the Owner Trustee),  FNBM and the Pass-Through
         Trustee (in the case of the Lessee,  the Indenture  Trustee,  the Owner
         Participant,  the Subordination Agent and the Owner Trustee),  and FNBM
         and the Subordination  Agent (in the case of the Lessee,  the Indenture
         Trustee, the Owner Participant,  the Pass-Through Trustee and the Owner
         Trustee),  signed  by  a  duly  authorized  officer  of  SS  and  FNBM,
         respectively,  dated the Delivery Date, stating with respect to SSB and
         the Owner Trustee, with respect to FNBM and the Indenture Trustee, with
         respect to FNBM and the Pass-Through  Trustee,  or with respect to FNBM
         and the Subordination Agent, as the case may be, that:

                           (i) the  representations and warranties of SSB in its
                  individual  capacity  and as  Owner  Trustee,  of  FNBM in its
                  individual  capacity and as Indenture Trustee,  of FNBM in its
                  individual capacity and as Pass-Through Trustee, or of FNBM in
                  its individual  capacity and as Subordination  Agent contained
                  in this  Agreement,  the Lease,  the Trust  Agreement  and the
                  Indenture and in any certificate  delivered pursuant hereto or
                  thereto are true and correct on and as of the Delivery Date as
                  though made on and as of such date  (except to the extent that
                  such  representations  and  warranties  relate  solely  to  an
                  earlier date, in which case such certificate  shall state that
                  such  representations  and warranties were true and correct on
                  and as of such earlier date);

                           (ii) to the  best of its  knowledge,  no  Default  or
                  Indenture  Default exists due to any action or omission on the
                  part of SSB in its individual capacity or as Owner Trustee, of
                  FNBM in its individual  capacity or as Indenture  Trustee,  of
                  FNBM in its individual capacity or as Pass-Through Trustee, or
                  of FNBM in its individual capacity or as Subordination  Agent;
                  and

                           (iii) there are no Lessor's Liens attributable to the
                  Owner  Trustee  or  SSB  and  no  Indenture   Trustee's  Liens
                  affecting the Trust Indenture Estate or the Lessor's Estate or
                  any part thereof.

                  (q) Release of Debt Portion.  The Indenture Trustee shall have
         released the Debt  Portion  from (or such lesser  amount as may then be
         held in) the Collateral Account.

                  (r)  Officer's   Certificate  of  Lessee  Regarding  Mandatory
         Economic Terms and Mandatory  Document  Terms. On the Delivery Date, or
         if earlier,  the  Transfer  Date,  in  connection  with the  amendments
         contemplated  by Sections  2.03 and 2.04 hereof,  the Lessee shall have
         delivered a certificate to the  Pass-Through  Trustee and the Liquidity
         Providers  signed by the Vice President and Treasurer or any other duly
         authorized  officer  of the  Lessee  stating  that  (i)  the  Operative
         Agreements  which are amended and restated as of the  Delivery  Date or
         the  Transfer  Date,  as the  case may be,  do not  vary the  Mandatory
         Economic  Terms and contain the Mandatory  Document  Terms and (ii) any
         substantive  modification of such documents from those in effect on the
         Certificate  Closing Date does not materially and adversely  affect the
         Holders of Pass-Through  Certificates  and each Liquidity  Provider and
         such certification shall be true and correct.

Notwithstanding anything else to the contrary in this Section 4.02, it shall not
be a condition  precedent  to the  obligations  of the  Indenture  Trustee,  the
Pass-Through  Trustee or the Subordination  Agent that the conditions in Section
4.02(n) and (o) be satisfied if the Lessee certifies that the failure to fulfill
such condition precedent is not reasonably likely to materially adversely affect
the holders of  Pass-Through  Certificates  and,  in the event of such  failure,
there has been delivered to the Indenture Trustee written confirmation from both
Moody's and S&P of the rating on any class of Pass-Through Certificates.

         Section 4.03.  Opinion of Special Aviation  Counsel Upon  Registration.
Promptly  upon the  registration  of the  Aircraft  and the  filing  and,  where
appropriate,  recordation  pursuant to the Transportation Code, of the Old Lease
Termination (if the Old Lease was filed of record with the FAA), the FAA Bill of
Sale, the Trust Agreement,  the Lease (including the Lease Supplement),  and the
Indenture (including the Indenture  Supplement),  the Lessee shall cause Special
Aviation  Counsel to deliver to the Owner  Participant,  the  Lessee,  the Owner
Trustee, the Pass-Through Trustee and the Indenture Trustee an opinion as to (i)
the due registration of the Aircraft in the name of the Owner Trustee,  (ii) the
due recording pursuant to the  Transportation  Code of the Old Lease Termination
if the Old Lease was filed of record  with the FAA),  the FAA Bill of Sale,  the
amended and restated Trust Agreement,  the amended and restated Lease (including
the Lease Supplement),  and the Indenture (including the Indenture  Supplement),
and (iii),  subject to  customary  qualifications,  the lack of any  intervening
documents with respect to the Aircraft.



                                    ARTICLE 5

                  CONDITIONS PRECEDENT TO LESSEE'S OBLIGATIONS

         Section  5.01.  Conditions  Precedent  to  Lessee's  Obligations.   The
Lessee's  obligation to participate in the transactions  contemplated  hereby on
the Certificate  Closing Date is subject to the conditions  that, prior to or on
the  Certificate  Closing Date, the Lessee shall have received the  certificates
and other documents which are referred to in, or the opinions to be addressed to
it under, as the case may be, paragraphs (d), (g)(ii)-(v),  (j), (k)(ii)-(vi) of
Section  4.01  hereof and the  Placement  Agent  shall have made  available  the
amounts  required  to be paid by it  pursuant to Section  2.01  hereof,  and the
Lessee's  obligation to participate in the transactions  contemplated  hereby on
the  Delivery  Date,  is  subject  to the  conditions  that,  on or prior to the
Delivery Date,  the Lessee shall have received the documents  which are referred
to in,  or the  opinions  to be  addressed  to it  under,  as the  case  may be,
paragraphs (c) and (d)(ii)-(vi) of Section 4.02 hereof and the Indenture Trustee
shall have  released the Debt Portion from (or such lesser amount as may then be
held in) the Collateral Account.



                                    ARTICLE 6

               LESSEE'S REPRESENTATIONS, WARRANTIES AND COVENANTS

         Section  6.01.  Lessee's  Representations  and  Warranties.  The Lessee
represents  and  warrants to the Owner  Participant,  the Owner  Trustee (in its
individual  capacity and as Owner  Trustee),  the  Pass-Through  Trustee (in its
individual capacity and as Pass-Through  Trustee),  the Liquidity Provider,  and
the  Indenture  Trustee (in its  individual  capacity and as Indenture  Trustee)
that, on the date hereof and as of the Certificate Closing Date and the Delivery
Date (unless any such representation is specifically made as of one date):

                  (a) the Lessee is a  corporation  duly  organized  and validly
         existing and is in good standing under the laws of California,  has its
         principal place of business and chief  executive  office (as such terms
         are used in  Article  9 of the  Uniform  Commercial  Code)  in  Dulles,
         Virginia, and is duly qualified to do business as a foreign corporation
         and is in good standing in each jurisdiction where the failure to be so
         qualified or in good standing would have a materially adverse effect on
         its  business or would  impair its  ability to perform its  obligations
         under the Operative Agreements;

                  (b) the Lessee has full  power,  authority  and legal right to
         conduct its business and  operations as currently  conducted and to own
         or hold under  lease its  Properties  and to enter into and perform its
         obligations  under this Agreement,  the other  Operative  Agreements to
         which  it  is a  party,  the  Pass-Through  Agreement  and  the  Series
         Supplements (the "Lessee Documents");

                  (c) the Lessee is an "air  carrier"  within the meaning of the
         Transportation  Code  and  a  holder  of a  certificate  under  Section
         41102(a)  of the  Transportation  Code  and a  "citizen  of the  United
         States"   within   the   meaning  of   Section   40102(a)(15)   of  the
         Transportation  Code  holding an "air  carrier  operating  certificate"
         issued  under  Chapter  447 of the  Transportation  Code  for  aircraft
         capable of carrying ten or more  individuals or 6,000 pounds or more of
         cargo, and each such certificate is in full force and effect;

                  (d)  the  Lessee   possesses   all   necessary   certificates,
         franchises,  licenses,  permits,  rights and  concessions  and consents
         (collectively  "permits")  which are  material to the  operation of the
         routes flown by it and the conduct of its business  and  operations  as
         currently conducted and each such permit is in full force and effect;

                  (e) the  execution,  delivery  and  performance  of the Lessee
         Documents  by the Lessee  have been duly  authorized  by all  necessary
         corporate  action  on the part of the  Lessee  and do not  require  any
         stockholder  approval,  or approval or consent of any trustee or holder
         of any  indebtedness  or  obligations  of the  Lessee,  and  each  such
         document has been duly  executed and delivered or, in the case of those
         Lessee  Documents   constituting  Operative  Agreements  identified  in
         Section  4.02(c)  hereof,  will on the  Delivery  Date be executed  and
         delivered by the Lessee and  constitutes  (or will  constitute,  as the
         case may be) the legal,  valid and  binding  obligations  of the Lessee
         enforceable  against it in accordance  with the terms thereof except as
         such enforceability may be limited by bankruptcy,  insolvency, or other
         similar laws or by general equitable principles;

                  (f) no  authorization,  consent or approval of or other action
         by, and no notice to or filing with, any United States federal or state
         governmental   authority  or  regulatory   body  is  required  for  the
         execution,  delivery  or  performance  by  the  Lessee  of  the  Lessee
         Documents or for the use and  maintenance  of the  Aircraft  except for
         such  registrations,  applications  and  recordings  referred to in the
         opinions  of Special  Aviation  Counsel  delivered  or to be  delivered
         pursuant  to  Sections  4.02(d)(vi)  and 4.03 hereof and except for the
         filings  referred to in Sections  4.01(f)  and 4.02(f)  hereof,  all of
         which  shall be in full force and  effect on and as of the  Certificate
         Closing Date or the Delivery Date, or as contemplated by such Sections;

                  (g) neither the  execution,  delivery  or  performance  by the
         Lessee  of the  Lessee  Documents  nor  compliance  with the  terms and
         provisions  hereof  or  thereof,  conflicts  or will  conflict  with or
         results or will  result in a breach or  violation  of any of the terms,
         conditions  or provisions  of, or will require any consent  (other than
         the PAA  Consent  and the Engine  Manufacturer's  Consent)  or approval
         under,  any  law,  governmental  rule  or  regulation  or  the  charter
         documents,  as amended,  or bylaws,  as  amended,  of the Lessee or any
         order,  writ,  injunction  or  decree  of  any  court  or  governmental
         authority against the Lessee or by which it or any of its Properties is
         bound or any  indenture,  mortgage or contract  or other  agreement  or
         instrument  to which the Lessee is a party or by which it or any of its
         Properties  is  bound,  or  constitutes  or will  constitute  a default
         thereunder or results or will result in the imposition of any Lien upon
         any of its Properties;

                  (h) there are no pending or, to the  knowledge  of the Lessee,
         threatened actions,  suits,  investigations or proceedings  (whether or
         not  purportedly  on behalf of the  Lessee)  against or  affecting  the
         Lessee or any of its Property before or by any court or  administrative
         agency (A) which involve the Aircraft or (B) which (except as disclosed
         in the Offering  Memo),  if adversely  determined,  may  reasonably  be
         expected  to  have  a  materially   adverse   effect  on  the  Lessee's
         consolidated  financial condition,  business, or operations,  or (C) if
         adversely determined,  would materially adversely affect the ability of
         the Lessee to perform its obligations under the Lessee Documents;

                  (i) the  Lessee  has filed or caused to be filed all  federal,
         state and material local and non-U.S. tax returns which are required to
         be filed and has paid or  caused  to be paid all taxes  shown to be due
         and  payable  pursuant to such  returns or  pursuant to any  assessment
         received by the Lessee (other than  assessments the payment of which is
         being contested in good faith by the Lessee by appropriate  proceedings
         that do not involve any material  risk of sale,  forfeiture  or loss of
         the Aircraft or any part  thereof),  and the Lessee has no knowledge of
         any related  actual or proposed  deficiency  or  additional  assessment
         which either in any case or in the aggregate would materially adversely
         affect the Lessee's consolidated financial condition;

                  (j) except  for (A) the  registration  in the Owner  Trustee's
         name  of  the  Aircraft  pursuant  to  the  Transportation  Code  to be
         accomplished  by filing with the FAA, of the Old Lease  Termination (if
         the Old Lease was filed of record  with the FAA,  the FAA Bill of Sale,
         the Trust Agreement, the Affidavits and the Application, (B) the filing
         with and,  where  appropriate,  recordation  by the FAA pursuant to the
         Transportation   Code  of  the  Indenture   (including   the  Indenture
         Supplement),  and the Lease (including the Lease  Supplement),  (C) the
         filing of the financing  statements referred to in Sections 4.01(f) and
         4.02(f) hereof, and (D)(x) on the Certificate  Closing Date, the taking
         of  possession by the Indenture  Trustee of the Liquid  Collateral  and
         maintaining possession by the Indenture Trustee thereof as contemplated
         in Section 2.14(a) of the Indenture,  and (y) on the Delivery Date, the
         taking  of  possession  by  the  Indenture   Trustee  of  the  original
         counterpart of the Lease (including the Lease  Supplement),  no further
         action, including any filing or recording of any document, is necessary
         or advisable in order (i) to establish the Owner Trustee's title to and
         interest in the Aircraft and the Lessor's  Estate as against the Lessee
         and any third parties,  or (ii) to perfect the first security  interest
         in and  mortgage  Lien on the  Trust  Indenture  Estate in favor of the
         Indenture Trustee;

                  (k) on the Delivery  Date, the Owner Trustee has received good
         and  marketable  title to the  Aircraft,  free and clear of all  Liens,
         except  Permitted  Liens except the rights of the Owner Trustee and the
         Lessee  under  the  Lease  and the  Lease  Supplement,  the Lien of the
         Indenture,  the  rights  of  the  Owner  Participant  under  the  Trust
         Agreement and the rights of the  Indenture  Trustee under the Indenture
         and other Permitted Liens not filed of record;

                  (l)      with respect to ERISA:

                           (i) none of the Pension  Plans (as defined at the end
                  of this  Section  6.01(l)) nor their  related  trusts has been
                  terminated  in a  distress  termination  pursuant  to  Section
                  4041(c)  of  ERISA  or  by  the   Pension   Benefit   Guaranty
                  Corporation   (together   with   any   successor   agency   or
                  instrumentality  thereto, the "PBGC") pursuant to Section 4042
                  of ERISA,  nor has any action been taken so to  terminate  any
                  Pension Plan or related trust,  and neither the Lessee nor any
                  ERISA  Affiliate  (as  defined  at  the  end of  this  Section
                  6.01(l)) has incurred or could reasonably be expected to incur
                  any  material  liability  with respect to a Pension Plan under
                  Section 4062, 4063, 4064 or 4069 of ERISA;

                           (ii) there have been no "reportable  events" (as such
                  term is defined in Section  4043(b) of ERISA) with  respect to
                  any Pension Plan which have  resulted or could  reasonably  be
                  expected to result in any material  liability of the Lessee or
                  any ERISA Affiliate;

                           (iii) no  "accumulated  funding  deficiency" (as such
                  term is defined in Section  302 of ERISA or Section 412 of the
                  Code) exists with respect to any Pension Plan,  whether or not
                  waived,  nor has any request for a waiver under Section 412(d)
                  of the Code been,  or is  reasonably  likely to be, filed with
                  respect to any of the Pension Plans;

                           (iv) neither the Lessee nor any ERISA  Affiliate  has
                  failed to make any contribution or payment to any Pension Plan
                  which has resulted or could  reasonably  be expected to result
                  in the  imposition of a Lien under Section  302(f) of ERISA or
                  Section 412(n) of the Code;

                           (v)  all  Pension  Plans  are  in  compliance  in all
                  material respects with all applicable  provisions of ERISA and
                  the Code;

                           (vi) neither the Lessee nor any ERISA  Affiliate  has
                  incurred  or  is  reasonably  likely  to  incur  any  material
                  withdrawal liability pursuant to Section 4201 or 4204 of ERISA
                  or any material liability under Section 515 of ERISA;

                           (vii) to the best of the Lessee's knowledge,  neither
                  the  Lessee  nor  any  ERISA   Affiliate   has  engaged  in  a
                  "prohibited  transaction"  (within the meaning of Section 4975
                  of the Code or Section 406 of ERISA) which could reasonably be
                  expected  to  subject  the Lessee to the tax or  penalties  on
                  prohibited transactions imposed by Section 4975 of the Code or
                  Section 502 of ERISA; and

                           (viii)  assuming  the  truth  of the  representations
                  contained in Section 7.09 hereof and  compliance  with Section
                  10.06 of the  Indenture,  the  execution  and delivery of this
                  Agreement  and  the  other   Operative   Agreements   and  the
                  consummation  of  the  transactions  contemplated  hereby  and
                  thereby will not involve any  transaction  which is prohibited
                  by  Section  406 of ERISA or in  connection  with  which a tax
                  could be imposed pursuant to Section 4975 of the Code. No part
                  of the funds to be used by the Lessee in  satisfaction  of its
                  obligations under this Agreement or any other of the Operative
                  Agreements  to which  the  Lessee  is a party or to which  the
                  Lessee is bound are the assets of any  employee  benefit  plan
                  subject  to Title I of  ERISA,  or any  individual  retirement
                  account or an employee benefit plan subject to Section 4975 of
                  the Code;

         as used in this  Section  6.01(l),  the term  "Pension  Plan"  means an
         employee  pension  benefit  plan as defined  in  Section  3(2) of ERISA
         (other than a multiemployer  plan as defined in Section 4001 (a) (3) of
         ERISA)  which is covered by Title IV of ERISA or subject to the minimum
         funding   standards  under  Section  412  of  the  Code  and  which  is
         maintained,  or contributed  to, by the Lessee or any ERISA  Affiliate,
         and the term "ERISA Affiliate" means any entity which together with the
         Lessee would be treated as a single employer under Section 414(b), (c),
         (m) or (o) of the Code;

                  (m)      the Lessee is a Citizen of the United States;

                  (n) except for the filings  referred  to in Sections  4.01(f),
         4.02(e) and 4.02(f)  hereof,  no  governmental  approval of any kind is
         required  of the  Owner  Participant  or for  the  Owner  Participant's
         execution  of or  performance  under this  Agreement  or any  agreement
         contemplated  hereby  by  reason  of any  fact or  circumstance  of the
         Lessee, the nature of the Aircraft, or the Lessee's proposed operations
         or use of the Aircraft;

                  (o) on the Delivery  Date,  all premiums which have become due
         with respect to the insurance  required to be provided by the Lessee on
         or prior to the Delivery  Date under  Section 12 of the Lease have been
         paid by the Lessee;

                  (p) on the Delivery Date, all sales,  use, transfer or similar
         taxes  relating to the sale of the  Aircraft by the Seller to the Owner
         Trustee which are then or were theretofore due shall have been paid;

                  (q) the Lessee is not in default under any  mortgage,  deed of
         trust,  indenture,  lease or other instrument or agreement to which the
         Lessee is a party or by which it or any of its Properties or assets may
         be bound,  or in  violation of any  applicable  law,  which  default or
         violation  would  have a  materially  adverse  effect on the  financial
         condition,  business  or  operations  of the  Lessee or its  ability to
         perform any of its obligations under the Lessee Documents;

                  (r) no  Default  exists and no Event of Loss,  or event  which
         with the passage of time would constitute an Event of Loss, exists;

                  (s) on  the  Delivery  Date,  the  Aircraft  will  be in  such
         condition  so  as to  enable  the  airworthiness  certificate  of  such
         Aircraft to be in good  standing  under the  Transportation  Code;  the
         Aircraft  will have been  duly  certificated  by the FAA as to type and
         airworthiness;  there will be in effect with  respect to the Aircraft a
         current and valid airworthiness  certificate issued by the FAA pursuant
         to the  Transportation  Code;  and there is no fact known to the Lessee
         which materially adversely affects the value,  utility,  useful life or
         condition of the Aircraft;

                  (t) on the Certificate Closing Date and the Delivery Date, the
         Lessee  shall  not be in  default  in the  performance  of any  term or
         condition of the Purchase Agreement,  and the aggregate amount of loans
         shall not exceed the Debt Portion;

                  (u) neither the Lessee nor any  subsidiary of the Lessee is an
         "investment company" or a company "controlled by an investment company"
         within the meaning of the Investment Company Act of 1940, as amended;

                  (v) on the Delivery Date, the Aircraft will, upon delivery, be
         fully  equipped to operate in  commercial  service and will comply with
         all governmental requirements governing such service;

                  (w) there are no broker's  or  underwriter's  fees  payable on
         behalf of the Lessee in connection with the  transactions  contemplated
         in the Operative Agreements other than those of the Placement Agent and
         Babcock & Brown, Inc. referred to in Article 10 hereof; and

                  (x)  interest  accrued  on  the  Certificates  prior  to  (but
         excluding)  the  Delivery  Date  shall  have been paid on or before the
         Delivery  Date in accordance  with Section 17.02 hereof,  together with
         all other amounts  owing by the Lessee or ACA Inc.  under the Indenture
         or any  other  Operative  Agreement,  to the  Holders  or the  relevant
         Indemnitee, as the case may be, on or prior to such date.

         Section  6.02.  Offering  by  Lessee.  (a) The  Lessee  represents  and
warrants that it has  authorized no one to act on its behalf in connection  with
the offer or sale of any interest in the Lessor's  Estate or the Trust Agreement
other  than   Babcock  &  Brown,   Inc.   Neither  the  Lessee  nor,   based  on
representations  of  Babcock & Brown,  Inc.,  anyone  acting on its  behalf  has
directly or indirectly  offered any interest in the Lessor's Estate or the Trust
Agreement, or similar interests,  for sale to, or solicited any offer to acquire
any of the same from, no more than 80 other  accredited  investors (as such term
is defined in  Regulation D  promulgated  under the  Securities  Act of 1933, as
amended).
         (b) The Lessee represents and warrants that it has authorized no one to
act on its behalf in  connection  with the offer or sale of any  interest in the
Certificates or the Pass-Through Certificates other than the Placement Agent.

         Section 6.03.  Certain  Covenants of Lessee.  The Lessee  covenants and
agrees with the Owner  Participant,  the Owner  Trustee (in its  individual  and
trust  capacities),  the  Pass-Through  Trustee  (in its  individual  and  trust
capacities) and the Indenture  Trustee (in its individual and trust  capacities)
as follows:

                  (a) The Lessee will cause to be done,  executed,  acknowledged
         and  delivered at the Lessee's  cost and expense all such further acts,
         conveyances and assurances as the Owner Trustee, the Indenture Trustee,
         the  Pass-Through  Trustee or the Owner  Participant  shall  reasonably
         require for  accomplishing  the purposes of the  Operative  Agreements.
         Without  limiting the  generality of this Section  6.03(a),  the Lessee
         will  promptly  take,  or cause to be taken,  at the Lessee's  cost and
         expense,   such  action  with   respect  to  the   recording,   filing,
         re-recording and re-filing of the Indenture  (including each supplement
         thereto),  the  Lease  (including  each  supplement  thereto),  and any
         financing  statements or other  instruments as may be necessary,  or as
         reasonably  requested  by the  Indenture  Trustee and  appropriate,  to
         maintain the  perfection  of the first  security  interest and the Lien
         created by the Indenture, and the Owner Trustee's title to and interest
         in the Aircraft and the Lessor's Estate,  as against the Lessee and any
         third parties, or if the Lessee cannot take, or cause to be taken, such
         action,  will furnish to the  Indenture  Trustee and the Owner  Trustee
         timely  notice of the  necessity  of such  action,  together  with such
         instruments,  in execution  form, and such other  information as may be
         required to enable  either of them to take such action at the  Lessee's
         cost and expense in a timely manner.

                  (b) From and after the Delivery  Date,  the Lessee shall cause
         the  Aircraft  to be duly  registered,  and at all times to remain duly
         registered,  in the name of the Owner Trustee  (provided that the Owner
         Trustee and the Owner  Participant  shall be and remain Citizens of the
         United States), under the Transportation Code, and shall furnish to the
         Owner Trustee such  information  as may be required to enable the Owner
         Trustee to make application for such registration;  provided,  however,
         that the Lessee may, at any time after the end of the  Recovery  Period
         (or before that date if the Lessee  prepays in a lump sum any indemnity
         required under the Tax Indemnity  Agreement as a result of such foreign
         registration)  cause the  Aircraft  to be  appropriately  re-registered
         under the laws of a country with which at the time of such registration
         the United States maintains normal  diplomatic  relations and is listed
         on Exhibit E-1 to the Lease; provided that

                  (i)      at the time of  re-registration,  no Specified Default exists or would occur as a result
         of such re-registration,

                  (ii) the Lessee shall pay all fees and expenses (including the
         reasonable fees and expenses of local counsel in such country) relating
         to such re-registration,

                  (iii) the Lessee shall, at its cost, cause the interest of the
         Owner  Trustee as owner of the  Aircraft and the  Indenture  Trustee as
         mortgagee  thereof to be duly  registered or recorded under the laws of
         such country and at all times  thereafter to remain so duly  registered
         or  recorded  unless  and until the  registration  of the  Aircraft  is
         changed as provided herein, and shall cause to be done at all times all
         other acts including the filing, recording and delivery of any document
         or instrument  and the payment of any sum necessary or, by reference to
         prudent  industry  practice  in such  country,  advisable  in  order to
         create,  preserve and protect such interest in the Aircraft  (including
         the first  priority duly perfected Lien under the Indenture) as against
         the Lessee or any third parties in such  jurisdiction,  and the laws of
         such  country  would give  effect to the Owner  Trustee's  title to the
         Aircraft and the Indenture Trustee's Lien thereon  substantially to the
         same effect as in the United States,

                  (iv) the  obligations of the Lessee and each other party under
         the  Operative  Documents  (and  of the  Sublessee,  if  any,  under  a
         Sublease) shall remain or be, as the case may be, legal, valid, binding
         and enforceable in such country and in the United States,

                  (v) The Lessee  shall ensure that all  insurance  provided for
         herein  shall be in full force and effect prior to, at the time of, and
         after such change in registration and the Owner Participant,  the Owner
         Trustee,  and the Indenture  Trustee  shall  receive a  certificate  of
         Lessee's insurance broker to such effect,

                  (vi) any  possessory  rights  in favor of the  Lessee  (or any
         Sublessee)   or  any  third  party,   including   any   government   or
         instrumentality  thereof, taken as whole, are not more restrictive than
         existing in the United States  (other than  immaterial  differences  in
         procedures  of  enforcement),  which would,  upon  bankruptcy  or other
         default by the Lessee (or any  Sublessee)  prevent or delay  beyond the
         recovery  time under the  then-existing  laws of the United  States the
         return of the Aircraft to the Owner Trustee in accordance with and when
         permitted  by the terms of the  Lease  upon the  exercise  by the Owner
         Trust or the Indenture Trustee of its remedies thereunder, and there is
         no adverse effect under the laws of such country of  re-registration to
         the enforceability (other than immaterial  differences in procedures of
         enforcement)  of the material  rights and remedies of the Owner Trustee
         and the  Indenture  Trustee  provided  for  herein  and under the other
         Operative  Agreements  (it being  understood  that,  in the  absence of
         restrictions similar to those imposed under Sections 362 and 363 of the
         Bankruptcy  Code,  rights and remedies similar to those available under
         Section 1110 of the Bankruptcy Code are not required),

                  (vii)  the  Owner  Participant,  the  Owner  Trustee,  and the
         Indenture Trustee shall have received evidence reasonably  satisfactory
         to them  that  such  country  imposes  aircraft  maintenance  standards
         approved by, or at least as stringent as those  approved by, the FAA or
         the central civil  aviation  authority of the United  Kingdom,  France,
         Germany or Canada,

                  (viii)   it  shall  not  be   necessary   by  reason  of  such
         re-registration  or for purposes of enforcing remedies contained in the
         Lease or the Indenture or the related  Sublease for the Owner  Trustee,
         the Indenture  Trustee or the Owner  Participant to register or qualify
         to do business in such country,

                  (ix) no Liens (except  Permitted  Liens) shall arise by reason
         of such  re-registration,  and the Indenture  shall continue as a first
         priority Lien on the collateral thereunder,

                  (x) none of the Owner Trustee,  the Indenture  Trustee and the
         Owner  Participant  shall be subjected to any adverse tax  consequences
         for which the  Lessee is not  required  to and does not then  indemnify
         such Person in a manner  [reasonably]  satisfactory to such Person as a
         result of such  re-registration and, if an additional indemnity is then
         provided  by the Lessee as the result of such  re-registration  and the
         Owner  Trustee,   the  Indenture   Trustee  or  the  Owner  Participant
         reasonably  deems itself insecure with respect to such  indemnity,  the
         Lessee shall have provided  security or collateral  for said  indemnity
         which is reasonably satisfactory to such Person,

                  (xi) in such country,  there is no tort  liability  imposed on
         passive  lessors other than tort liability which might be imposed under
         the  prevailing  rule among the states of the United States of America,
         unless  insurance  reasonably  satisfactory  to the  Owner  Participant
         covering  such risk is  provided  by the Lessee or a  Sublessee  at its
         expense,

                  (xii) any export  licenses and  certificate of  deregistration
         required in connection with any  repossession or return of the Aircraft
         will be readily  obtainable in the normal course without material delay
         or material  burden on the Owner Trustee or the Indenture  Trustee,  it
         being agreed that the Lessee shall be responsible for the cost thereof,

                  (xiii) the laws of such country  require fair  compensation by
         the government of such country payable in currency  freely  convertible
         into Dollars for the loss of use of the Aircraft  (unless the Lessee or
         a Sublessee shall have provided  insurance  reasonably  satisfactory to
         the Owner  Participant  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), and

                  (xiv)  the  Owner  Participant,  the  Owner  Trustee,  and the
         Indenture  Trustee  shall have  received  opinions  in scope,  form and
         substance  reasonably  satisfactory to them, of counsel,  expert in the
         laws of the United States and such country,  to the effect set forth in
         clauses (iii), (iv), (vi), (viii), (ix), (x), (xii), (xiii) and, if the
         insurance  described  in such clause is not provided by the Lessee or a
         Sublessee,  clause (xi) and to such further effect with respect to such
         other  matters  as the Owner  Participant,  the Owner  Trustee,  or the
         Indenture Trustee may reasonably request.

         Lessee agrees to pay on an After-Tax Basis all reasonable out-of-pocket
         costs and expenses (including,  without limitation,  reasonable counsel
         fees and  disbursements) of the Owner  Participant,  the Owner Trustee,
         and the  Indenture  Trustee  in  connection  with  any  re-registration
         pursuant to this Section.

                  At any time and from time to time  during the Term,  the Owner
         Participant  may  request in writing to the  Lessee,  or the Lessee may
         request in writing to the Owner  Participant,  that  Exhibit E-1 to the
         Lease be amended to delete, or in the case of a request from the Lessee
         be amended to add, one or more  countries on such Exhibit and specified
         in such request, such request to be based upon the reasonable belief by
         the Owner  Participant that changes have occurred after the date hereof
         regarding each such country that could  adversely  affect its interests
         in the  Operative  Documents  or the  Aircraft,  if the  Aircraft  were
         registered  in such  country,  or in the  case of a  request  from  the
         Lessee,  based upon the reasonable  belief of the Lessee that each such
         country   would   adequately   protect  the   interests  of  the  Owner
         Participant,  the  Owner  Trustee,  and the  Indenture  Trustee  in the
         Operative  Documents and the Aircraft  (including,  without limitation,
         having the  characteristics  of and meeting the requirements  specified
         above with respect to the  countries  listed on such  Exhibit),  if the
         Aircraft  were to be registered  in such  country.  Promptly  after the
         receipt of such  request  (and in any event  within ten  Business  Days
         thereof),  the  Lessee  shall  consult  in good  faith  with the  Owner
         Participant as to whether each such country should be so deleted, or as
         to whether such country  should be added,  as the case may be, and each
         party hereto  agrees not to  unreasonably  withhold its consent to such
         request.  In the event that the Lessee and the Owner  Participant shall
         agree as to the deletion or addition of any such country,  such Exhibit
         shall be deemed amended to reflect such agreement (such agreement to be
         so  evidenced  by  a  writing  signed  by  the  Lessee  and  the  Owner
         Participant,  but without the requirement of any action or signature by
         any other Person; otherwise, such Exhibit shall not be so amended.

                  (c) The Lessee shall promptly file any reports,  or furnish to
         the Owner Trustee and the Owner  Participant such information as may be
         required to enable the Owner Trustee and the Owner  Participant  timely
         to file any reports  required  to be filed by the Owner  Trustee as the
         Lessor and the Owner  Participant under the Lease with any governmental
         authority.

                  (d) The Lessee  will  cause the  Special  Aviation  Counsel to
         file, and where appropriate record, on the Delivery Date, the Old Lease
         Termination  (if the Old Lease was filed of record  with the FAA),  the
         FAA Bill of Sale, the Lease (including the Lease Supplement), the Trust
         Agreement, and the Indenture (including the Indenture Supplement).  The
         following documents shall be filed and, where appropriate,  recorded on
         the Delivery Date with the Aeronautics Authority in the following order
         of priority:  first,  the Old Lease  Termination  (if the Old Lease was
         filed of record with the FAA), second, the FAA Bill of Sale, third, the
         Application,  with the Trust Agreement and the Affidavits,  fourth, the
         Indenture with the Indenture  Supplement  attached thereto,  and fifth,
         the Lease with the Lease Supplement,  the Indenture,  and the Indenture
         Supplement attached thereto. So long as the Aircraft remains subject to
         the Lien of the Indenture,  the Lessee will cause the Special  Aviation
         Counsel,  or other  counsel  reasonably  satisfactory  to the Indenture
         Trustee,  to deliver to the  Indenture  Trustee an annual legal opinion
         regarding the continuing perfection of the Lien under the Indenture.

                  (e) The  Lessee  shall at all  times  maintain  its  corporate
         existence  except as permitted by Section 6.03(f) hereof and all of its
         rights,  privileges and  franchises  necessary in the normal conduct of
         its business,  except for any corporate  right,  privilege or franchise
         (i)  that  it  determines,  in  its  reasonable,  good  faith  business
         judgment,  is no longer  necessary  or  desirable in the conduct of its
         business  and  (ii) the loss of  which  will not  materially  adversely
         affect or diminish the rights of the Holders or the Owner Participant.

                  (f)  Neither  the  Lessee  nor ACA Inc.  shall  enter into any
         merger with or into or consolidation  with, or sell, convey,  transfer,
         lease or otherwise dispose of in one or a series of transactions all or
         substantially  all of its assets as an entirety  to any Person,  unless
         the  surviving  corporation  or  Person  which  acquires  by  purchase,
         conveyance, transfer or lease all or substantially all of the assets of
         the Lessee as an entirety (i) is a domestic  corporation  organized and
         existing under the laws of the United States or any State of the United
         States (ii) is a Citizen of the United States,  (iii) is a Section 1110
         Person, (iv) if not the Lessee or ACA Inc., executes a duly authorized,
         legal,   valid,   binding,   and  enforceable   agreement,   reasonably
         satisfactory   in  form  and  substance  to  Owner  Trustee  and  Owner
         Participant,  containing an effective assumption of all of the Lessee's
         or ACA Inc.'s, as applicable, obligations hereunder and under the other
         Operative  Agreements,  and each other document  contemplated hereby or
         thereby and delivers  such  instrument to the  Indenture  Trustee,  the
         Owner  Participant and the Owner Trustee,  (v) provides an opinion from
         outside counsel  delivered to the Owner Trustee,  the Indenture Trustee
         and  the  Owner   Participant,   which   counsel  shall  be  reasonably
         satisfactory  to the Owner  Participant  and the Indenture  Trustee and
         which opinion shall be reasonably satisfactory to the Owner Participant
         and the Indenture Trustee, and an officer's  certificate,  each stating
         that such merger, consolidation,  conveyance,  transfer, lease or other
         disposition  and the instrument  noted in clause (iv) above comply with
         this  Section  6.03(f),  that  such  instrument  is a legal,  valid and
         binding  obligation  of, and is enforceable  against,  such survivor or
         Person, and that all conditions  precedent herein provided for relating
         to such  transaction  have been complied with, (vi)  immediately  after
         such merger,  consolidation  or conveyance,  transfer or lease,  as the
         case may be,  the  surviving  company  (or  Person  which  acquires  by
         conveyance, transfer or lease the assets of the Lessee) has a net worth
         not less  than the  lesser  of (A) the net  worth of the  Lessee on the
         Delivery  Date and (B) 75% of the net worth of the  Lessee  immediately
         prior to such merger, consolidation, conveyance, transfer or lease; and
         (vii) such  survivor or Person makes such filings and  recordings  with
         the FAA as are required pursuant to part A of subtitle VII or Title 49,
         United States Code to evidence such merger or  consolidation;  provided
         that no such merger,  consolidation  or  conveyance,  transfer or lease
         shall  be  permitted  if,  immediately  after  giving  effect  to  such
         consolidation,  merger, purchase, conveyance,  transfer, lease or other
         disposition, no Event of Default shall have occurred and be continuing.

                  Upon any consolidation or merger, or any conveyance,  transfer
         or lease of all or  substantially  all of the  assets of the Lessee and
         the  satisfaction of the conditions  specified in this Section 6.03(f),
         the successor  corporation  formed by such  consolidation or into which
         the Lessee is merged or the Person to which such  conveyance,  transfer
         or lease is made shall  succeed  to, and be  substituted  for,  and may
         exercise  every right and power of, the Lessee under this Agreement and
         the Lease and each other  Operative  Agreement  and any other  document
         contemplated hereby and thereby to which the Lessee is a party with the
         same  effect as if such  successor  corporation  had been  named as the
         Lessee herein and therein. No such conveyance, transfer or lease of all
         or  substantially  all of the assets of the Lessee as an entirety shall
         have the effect of releasing  the Lessee or any  successor  corporation
         which shall  theretofore have become the Lessee hereunder in the manner
         prescribed  in this  Section  6.03(f) from its  liability  hereunder or
         under the other Operative  Agreements.  Nothing  contained herein shall
         permit any lease, sublease, or other arrangement for the use, operation
         or possession of the Aircraft  except in compliance with the applicable
         provisions of the Lease.

                  (g) The Lessee  agrees to give  prompt  written  notice to the
         Owner  Participant,  the Owner Trustee and the Indenture Trustee of any
         change in the  address of its chief  executive  office (as such term is
         used in Section 9-103(3) of the Virginia Uniform Commercial Code) or of
         any change in its corporate name.

                  (h) The Lessee agrees to furnish to the Owner  Participant and
the Indenture Trustee:

                           (A) as soon as available, but in any event within 120
                  days  after  the  end of  each  fiscal  year  of ACA  Inc.,  a
                  consolidated  balance sheet as of the end of such fiscal year,
                  and the  related  consolidated  statements  of income,  common
                  stockholders' equity,  retained earnings and cash flows of ACA
                  Inc. for the fiscal year then ended as prepared and  certified
                  by  ACA  Inc.'s  independent   certified  public  accountants,
                  including  their  certificate  and  accompanying  comments and
                  opinion;

                           (B) within 60 days after the end of the first, second
                  and third quarterly  accounting periods in each fiscal year of
                  ACA Inc., a consolidated balance sheet of ACA Inc. prepared by
                  it as of  the  close  of the  accounting  period  then  ended,
                  together with the related  consolidated  statements of income,
                  retained  earnings and cash flows for such  accounting  period
                  certified by the chief accounting  officer or a financial vice
                  president of ACA Inc.;

                           (C) promptly upon their general transmission,  copies
                  of all reports  and  statements  furnished  by ACA Inc. to its
                  stockholders;

                           (D) promptly after filing with the SEC, copies of ACA
                  Inc.'s annual reports on form 10-K,  quarterly reports on form
                  10-Q,  and,  if  requested,   any  registration  statement  or
                  prospectus  filed by ACA Inc. with any securities  exchange or
                  the SEC;

                           (E)  promptly  upon  (and in any  event  within  five
                  Business  Days  after) any  officer  of the  Lessee  obtaining
                  knowledge of any condition or event which constitutes an Event
                  of Default, an officer's certificate specifying the nature and
                  period of  existence  thereof  and what  action the Lessee has
                  taken or is taking or proposes to take with  respect  thereto;
                  and

                           (F)  from  time  to  time,   such   other   financial
                  information  as  the  Lessor,  the  Owner  Participant  or the
                  Indenture Trustee may reasonably request.

         Concurrently with the delivery of the financial  statements referred to
in  clause  (A)  above,  the  Lessee  shall  deliver  to the  Lessor,  the Owner
Participant, the Indenture Trustee and the Pass-Through Trustee a certificate of
the Lessee, signed by any one of the President, the Chief Financial Officer, the
General  Counsel,  the  Treasurer  or the  principal  accounting  officer of the
Lessee,  stating that the signer, or an employee  reporting to same, is familiar
with the  relevant  terms of this  Agreement  and the Lease and the  signer  has
reviewed,  or has caused to be made under such Person's supervision a review, of
the activities of the Lessee and that, to the best of his or her  knowledge,  no
Default exists, or if a Default does exist,  specifying the nature thereof,  the
period of existence thereof, and what action the Lessee has taken or proposes to
take with respect thereto.

         Section  6.04.   Survival  of  Representations   and  Warranties.   The
representations  and warranties of the Lessee provided in Sections 6.01 and 6.02
hereof  and in  any  other  Operative  Agreement  and  the  representations  and
warranties  of ACA  Inc.  provided  in  Section  6.04  hereof  and is any  other
Operative Agreement shall survive the Closings hereunder and the delivery of the
Aircraft and the expiration or other termination of this Agreement and the other
Operative Agreements.



                                    ARTICLE 7

            OTHER PARTIES' REPRESENTATIONS, WARRANTIES AND COVENANTS

         Section 7.01.  Reserved.

         Section 7.02.  Citizenship.  (a) Generally.  The Owner Trustee,  in its
individual  capacity and as trustee,  represents  and warrants that it is and on
the Delivery Date will be a Citizen of the United  States.  If the Owner Trustee
in its individual capacity does not comply with the requirements of this Section
7.02,  the Owner Trustee and the Indenture  Trustee hereby agree that no Default
shall  be  deemed  to  exist  due to  non-compliance  by  the  Lessee  with  the
registration  requirements in the Lease or in Section 6.03(b) hereof  occasioned
by such the noncompliance of the or the Owner Trustee.

         (b) Owner  Trustee.  The Owner  Trustee,  in its  individual  capacity,
covenants that if at any time on or after the Delivery Date it shall have actual
knowledge  that it has  ceased to be a Citizen  of the  United  States,  it will
resign  immediately  as the Owner Trustee if such  citizenship  is necessary for
registration   of  the   Aircraft  in  the  Owner   Trustee's   name  under  the
Transportation  Code as in effect at such time (such  necessity to be determined
without regard to any provision of law that permits the U.S. registration of the
Aircraft by  restricting  where it is based or used) or, if it is not  necessary
for such  registration,  if the Owner  Trustee  is  informed  in  writing by the
Lessee,  the Indenture Trustee or any Owner Participant that such lack of United
States  citizenship  would have any adverse effect on the Lessee,  the Indenture
Trustee,  the  Holders  or any  Owner  Participant.  The Owner  Trustee,  in its
individual capacity, further covenants that if at any time it appears reasonably
probable  that it will  cease to be a  Citizen  of the  United  States  based on
information  that is (i) known to a Responsible  Officer or (ii) generally known
to the public,  it will promptly so notify,  to the extent permitted by law, all
parties to this Agreement.

         Section 7.03.  Concerning Assignment of Interests of Owner Participant.
In connection  with the transfer by an Owner  Participant to a transferee  Owner
Participant,  the Owner Trustee,  the Lessee and the Indenture  Trustee shall be
entitled to receive an opinion or opinions of counsel reasonably satisfactory to
each of them to the effect that the  obligations  of such  transferee  under the
Operative  Agreements are legal,  valid,  binding and  enforceable in accordance
with their terms, subject to customary  exceptions,  and that such transfer will
not be required to be registered under applicable securities laws.

         Section 7.04. Representations,  Covenants and Warranties of SSB and the
Owner Trustee. (a) In addition to and without limiting its other representations
and warranties  provided for in this Article 7, SSB represents and warrants,  in
its individual  capacity with respect to items (i), (ii),  (iii)(A),  (iv), (v),
(vi),  and (vii) below,  and as the Owner Trustee with respect to items (iii)(B)
and (iv) on the  date  hereof  and as of the  Certificate  Closing  Date and the
Delivery Date that:

                  (i) it is a national  banking  association  duly organized and
         validly  existing in good standing  under the laws of the United States
         of America with its  principal  place of business  and chief  executive
         office (as such terms are used in Article 9 of the  Uniform  Commercial
         Code) in  Hartford,  Connecticut,  and has  full  corporate  power  and
         authority,  in its individual capacity or (assuming the Trust Agreement
         has  been  duly  authorized,   executed  and  delivered  by  the  Owner
         Participant) as the Owner Trustee,  as the case may be, to carry on its
         business as now  conducted,  and to execute,  deliver and perform  this
         Agreement  and the  Operative  Agreements  to which it is or is to be a
         party;

                  (ii) the execution, delivery and performance by SSB, either in
         its individual capacity or as the Owner Trustee, as the case may be, of
         this Agreement and the Operative  Agreements to which it is or is to be
         party have been duly  authorized by all necessary  corporate  action on
         its part, and do not contravene its articles of association or by-laws;
         each of this Agreement and the other  Operative  Agreements to which it
         is or is to be a party  has been  duly  authorized,  and has been  duly
         executed  and  delivered  or, in the case of the  Operative  Agreements
         identified in Section 4.02(c) hereof, will on the Delivery Date be duly
         executed and delivered by SSB, either in its individual  capacity or as
         the Owner  Trustee,  as the case may be, and neither the  execution and
         delivery  thereof nor SSB  performance of or compliance with any of the
         terms and  provisions  thereof will violate any federal or  Connecticut
         law or regulation governing SSB's banking or trust powers,

                  (iii) (A) assuming due  authorization,  execution and delivery
         by each other party thereto,  each of the Operative Agreements to which
         it is or is to be party when duly executed and  delivered  will, to the
         extent  each such  document  is entered  into by SSB in its  individual
         capacity,  constitute the legal, valid and binding obligation of SSB in
         its  individual  capacity  enforceable  against it in such  capacity in
         accordance with its respective terms, except as such enforceability may
         be limited by bankruptcy,  insolvency,  reorganization or other similar
         laws or equitable principles of general application to or affecting the
         enforcement of creditors' rights (regardless of whether  enforceability
         is considered in a proceeding in equity or at law), and the performance
         by SSB in its individual capacity of any of its obligations  thereunder
         does not  contravene any lease,  regulation or contractual  restriction
         binding on SSB in its individual capacity;

                  (B) assuming due authorization, execution and delivery by each
         other party thereto, each of the Operative Agreements to which it is or
         is to be party when duly  executed and  delivered  will,  to the extent
         each such  document is entered  into by the Owner  Trustee in its trust
         capacity,  constitute  the legal,  valid and binding  obligation of the
         Owner  Trustee  enforceable  against it in such  capacity in accordance
         with its respective terms, except as such enforceability may be limited
         by  bankruptcy,  insolvency,  reorganization  or other  similar laws or
         general equitable principles,  and the performance by the Owner Trustee
         of any of its  obligations  thereunder  does not  contravene any lease,
         regulation or contractual restriction binding on the Owner Trustee;

                  (iv) there are no  pending  or, to its  knowledge,  threatened
         actions or proceedings  against SSB before any court or  administrative
         agency  which  would  materially  adversely  affect the ability of SSB,
         either in its individual  capacity or as the Owner Trustee, as the case
         may be, to perform its  obligations  under the Operative  Agreements to
         which it is or is to be party;

                  (v) it shall give the Lessee,  the  Indenture  Trustee and the
         Owner  Participant  at least 30 days' prior written notice in the event
         of any change in its chief executive office or name;

                  (vi) neither the  execution  and delivery by it, either in its
         individual capacity or as the Owner Trustee, as the case may be, of any
         of  the  Operative  Agreements  to  which  it is  or is to be a  party,
         requires  on the part of SSB in its  individual  capacity or any of its
         Affiliates  the  consent or approval of or the giving of notice to, the
         registration with, or the taking of any other action in respect of, any
         federal or Connecticut  governmental  authority or agency governing its
         banking or trust powers; and

                  (vii) on the  Certificate  Closing Date, the proceeds  arising
         from  the  issuance  and  sale  of the  Certificates  shall  be free of
         Lessor's Liens  attributable  to SSB in its individual  capacity and on
         the Delivery Date the Owner Trustee shall be holding  whatever title to
         the Aircraft as was conveyed to it by the Seller, the Aircraft shall be
         free of Lessor's Liens attributable to SSB in its individual  capacity,
         and SSB in its individual capacity is a Citizen of the United States.

                  (b) Lessor's Liens. SSB, in its individual  capacity,  further
         represents,  warrants and  covenants  that there are no Lessor's  Liens
         attributable  to it in its individual  capacity and that there will not
         be any such  Lessor's  Liens  on the  Certificate  Closing  Date or the
         Delivery  Date. The Owner Trustee,  in its trust  capacity,  and at the
         cost and  expense of the  Lessee,  covenants  that it will in its trust
         capacity promptly, and in any event within 30 days after the same shall
         first  become  known to it,  take such  action as may be  necessary  to
         discharge  duly any  Lessor's  Liens  attributable  to it in its  trust
         capacity. SSB, in its individual capacity, covenants and agrees that it
         will at its own expense  take such action as may be  necessary  to duly
         discharge  and satisfy in full,  promptly,  and in any event  within 30
         days after the same shall first become known to it, any Lessor's  Liens
         attributable  to it in its  individual  capacity which may arise at any
         time after the date of this Agreement.

                  (c)  Indemnity  for  Lessor's  Liens.  SSB, in its  individual
         capacity,  agrees  to  indemnify  and hold  harmless  the  Lessee,  the
         Indenture Trustee,  the Owner Participant and the Pass-Through  Trustee
         and the Owner  Trustee  from and  against  any loss,  cost,  expense or
         damage which may be suffered by the Lessee, the Indenture Trustee,  the
         Owner Participant,  the Pass-Through  Trustee or the Owner Trustee as a
         result of the failure of SSB to  discharge  and  satisfy  any  Lessor's
         Liens  attributable to it in its individual  capacity,  as described in
         Section 7.04(b) hereof.

                  (d)  Securities  Act.  None of SSB,  the Owner  Trustee or any
         Person  authorized  by either of them to act on its behalf has directly
         or indirectly  offered or sold or will directly or indirectly  offer or
         sell any interest in the Lessor's  Estate,  or in any similar  security
         relating to the  Lessor's  Estate,  or in any  security the offering of
         which for purposes of the Securities Act of 1933, as amended,  would be
         deemed  to be  part  of  the  same  offering  as  the  offering  of the
         aforementioned  securities to, or solicited any offer to acquire any of
         the same from, any Person.

                  (e) Actions With Respect to Lessor's Estate, Etc. Neither SSB,
         in its individual capacity,  nor the Owner Trustee will take any action
         to subject the Lessor's  Estate or the trust  established  by the Trust
         Agreement,  as debtor, to the reorganization or liquidation  provisions
         of the Bankruptcy Code or any other applicable bankruptcy or insolvency
         statute.

                  (f) Actions With Respect to Lease.  The Owner Trustee will not
         assign any of its rights  under the Lease  without  the  consent of the
         Owner Participant,  which consent will not be unreasonably  withheld or
         delayed.

         Section 7.05.  Representations,  Warranties  and Covenants of the Indenture  Trustee.  (a)  The  Indenture
Trustee in its individual  capacity  represents on the date hereof and as of the  Certificate  Closing Date and the
Delivery Date as follows:

                  (i) it is a national  banking  association  duly organized and
         validly  existing in good standing  under the laws of the United States
         of America  and has the power and  authority  to enter into and perform
         its  obligations  under the  Indenture,  this  Agreement  and the other
         Operative  Agreements  to which it is a party and to  authenticate  the
         Certificates to be delivered on the Certificate Closing Date;

                  (ii) the Indenture and this Agreement and the other  Operative
         Agreements to which it is or is to be a party,  and the  authentication
         of the  Certificates to be delivered on the  Certificate  Closing Date,
         have been duly  authorized  by all  necessary  corporate  action on its
         part,   and  neither  the  execution  and  delivery   thereof  nor  its
         performance of any of the terms and provisions thereof will violate any
         federal or Maryland law or regulation  relating to its banking or trust
         powers or  contravene  or result in any  breach of, or  constitute  any
         default under, its articles of association or by-laws;

                  (iii) each of the Indenture and this Agreement,  and the other
         Operative  Agreements to which it is or is to be a party, has been duly
         executed  and  delivered  or, in the case of the  Operative  Agreements
         identified  in Section  4.02(c)  hereof,  will on the Delivery  Date be
         executed and delivered by it and,  assuming that each such agreement is
         the legal, valid and binding obligation of each other party thereto, is
         (or  will  be,  as the  case may be),  the  legal,  valid  and  binding
         obligation of the Indenture Trustee,  enforceable against the Indenture
         Trustee in accordance with its terms except as such  enforceability may
         be limited by bankruptcy,  insolvency,  reorganization or other similar
         laws or equitable principles of general application to or affecting the
         enforcement of creditors ' rights (regardless of whether enforceability
         is considered in a proceeding in equity or at law);

                  (iv) neither the execution and delivery by it of the Indenture
         and this Agreement and the other Operative Agreements to which it is or
         is to be a party,  nor the performance by it of any of the transactions
         contemplated  hereby or thereby,  requires  the consent or approval of,
         the giving of notice to, the  registration  with,  or the taking of any
         other action in respect of, any Federal or state governmental authority
         or agency governing its banking and trust powers; and

                  (v) on the  Certificate  Closing Date,  the Indenture  Trustee
         holds the Liquid  Collateral  on behalf of the Owner Trustee and on the
         Delivery   Date,   the   Indenture   Trustee  will  hold  the  original
         counterparts of the Lease and the Lease Supplement.

         (b) Indenture Trustee's Liens. The Indenture Trustee, in its individual
capacity, further represents, warrants and covenants that there are no Indenture
Trustee's  Liens  attributable  to it in its individual  capacity and that there
will not be any Indenture Trustee's Liens on the Certificate Closing Date or, as
at and following the Delivery Date, the Aircraft.  The Indenture Trustee, in its
individual  capacity,  covenants and agrees that it will at its own expense take
such action as may be necessary to duly discharge and satisfy in full, promptly,
and in any event within 30 days,  after the same shall first become known to it,
any Indenture Trustee's Liens.

         (c) Indemnity for Indenture  Trustee's Liens. The Indenture Trustee, in
its individual  capacity,  agrees to indemnify and hold harmless the Lessee, the
Owner  Participant,  the Owner  Trustee and the  Pass-Through  Trustee  from and
against any loss,  cost,  expense or damage which may be suffered by the Lessee,
the  Indenture  Trustee,  the  Owner  Participant,  the  Owner  Trustee  or  the
Pass-Through  Trustee  as a result of the  failure of the  Indenture  Trustee to
discharge and satisfy any Indenture  Trustee's  Liens  attributable to it in its
individual capacity, as described in Section 7.05(b) hereof.

         Section  7.06.  Indenture  Trustee's  Notice of Default.  The Indenture
Trustee agrees to give the Owner  Participant  notice of any Default or Event of
Default  promptly upon a Responsible  Officer of the  Indenture  Trustee  having
actual knowledge thereof.

         Section 7.07. Releases from Indenture.  The Indenture Trustee covenants
and agrees, for the benefit of the Lessee and the Owner Participant,  to execute
and deliver the  instruments of release from the Lien of the Indenture  which it
is required to execute and deliver in accordance  with the provisions of Article
XIV of the Indenture,  and the Owner Participant  agrees, for the benefit of the
Lessee,  to cause the Owner Trustee to request the Indenture  Trustee to execute
and deliver such  instruments  of release upon written notice from the Lessee to
make such request.

         Section  7.08.   Covenant  of  Quiet  Enjoyment.   Each  of  the  Owner
Participant,  the  Indenture  Trustee,  the  Pass-Through  Trustee and the Owner
Trustee  covenants  and agrees as to itself  only  that,  so long as no Event of
Default  under the Lease  has  occurred  and is  continuing,  neither  the Owner
Participant  (or the Owner Trustee,  the  Pass-Through  Trustee or the Indenture
Trustee,  as the case may be) nor any Person lawfully claiming through the Owner
Participant  (or the Owner Trustee,  the  Pass-Through  Trustee or the Indenture
Trustee,  as the case may be) shall interfere with the Lessee's right quietly to
enjoy the Aircraft during the Term without hindrance or disturbance by the Owner
Participant  (or the Owner Trustee,  the  Pass-Through  Trustee or the Indenture
Trustee, as the case may be).

         Section 7.09.  Pass-Through  Trustee's  Representations and Warranties.
The  Pass-Through  Trustee,  in its individual  capacity (except with respect to
clause (iii) below),  represents  and warrants as of the date hereof  (except as
otherwise  provided),  as of the  Pass-Through  Closing  Date,  the  Certificate
Closing Date and the Delivery Date that:

                  (i) it is a national  banking  association  duly organized and
         validly  existing in good standing  under the laws of the United States
         of America  and has the power and  authority  to enter into and perform
         its  obligations   under  the   Pass-Through   Agreement,   the  Series
         Supplements,  the  Intercreditor  Agreement  and this  Agreement and to
         execute and authenticate the Pass-Through  Certificates to be delivered
         on the Pass-Through Closing Date;

                  (ii)  the   execution,   delivery  and   performance  of  this
         Agreement,  the Pass-Through  Agreement and the Series  Supplements and
         the performance of its obligations  hereunder and thereunder (including
         the execution and authentication of the Pass-Through Certificates to be
         delivered on the Pass-Through  Closing Date) have been fully authorized
         by  all  necessary  corporate  action  on its  part,  and  neither  the
         execution and delivery  thereof nor its performance of any of the terms
         and  provisions  thereof  will  violate any federal or Maryland  law or
         regulation  relating to its banking or trust  powers or  contravene  or
         result in any breach of, or  constitute  any default under its articles
         of association, or bylaws or the provisions of any indenture, mortgage,
         contract  or other  agreement  to which it is a party or by which it or
         its properties may be bound or affected; and

                  (iii) each of this  Agreement and the  Pass-Through  Agreement
         has  been,  and  as  of  the  Pass-Through   Closing  Date  the  Series
         Supplements  will  be,  duly  executed  and  delivered  by it  (in  its
         individual and trust capacities) and, assuming that each such agreement
         is the legal, valid and binding obligation of each other party thereto,
         is or will  be,  as the case  may be,  the  legal,  valid  and  binding
         obligation of the  Pass-Through  Trustee (in its  individual  and trust
         capacities), enforceable in accordance with its respective terms except
         as limited by bankruptcy,  insolvency,  moratorium,  reorganization  or
         other similar laws or equitable principles of general application to or
         affecting the enforcement of creditors' rights generally (regardless of
         whether such  enforceability is considered in a proceeding in equity or
         at law).

         Section 7.10.  Survival of  Representations,  Warranties and Covenants.
The  representations,  warranties  and covenants of the Owner  Participant,  the
Owner Trustee (in its individual or trust capacity),  the  Pass-Through  Trustee
(in its individual or trust capacity),  the Indenture Trustee (in its individual
or trust  capacity)  and the  Subordination  Agent (in its  individual  or trust
capacity) provided for in this Article 7, and their respective obligations under
any and all of them,  shall survive the  Closings,  the delivery of the Aircraft
and the  expiration  or  other  termination  of this  Agreement,  and the  other
Operative Agreements.

         Section 7.11. Lessee's  Assumption of the Certificates.  (a) Subject to
compliance  by the  Lessee  with  all of its  obligations  under  the  Operative
Agreements,  each of the Owner  Participant,  the Owner  Trustee,  the Indenture
Trustee,  the Pass Through  Trustee and the Lessee  covenants and agrees that if
the  Lessee  elects  to  purchase  the  Aircraft  pursuant  to the  terms of the
Operative Agreements,  if no Event of Default shall exist, then, upon compliance
with the applicable  provisions of the Operative  Agreements,  the Owner Trustee
will  transfer to the  Lessee,  without  recourse or warranty  (except as to the
absence of Lessor's Liens  attributable to the Owner Trustee) but subject to the
Lien of the Indenture,  all of the Owner Trustee's right,  title and interest in
and to the Aircraft, and if the Lessee, in connection with such purchase, elects
to assume the obligations of the Owner Trustee to the Indenture  Trustee and the
Holders under the Indenture,  the Certificates,  and hereunder,  then the Lessee
shall so notify the  Indenture  Trustee (such notice to be given at least 30 and
not more than 60 days prior to the effective date of such assumption),  and each
of the parties shall execute and deliver  appropriate  documentation  permitting
the  Lessee to assume  such  obligations  on the basis of full  recourse  to the
Lessee,  maintaining for the benefit of the Holders the security interest in the
Aircraft  created by the Indenture,  and upon  compliance with the provisions of
this Section 7.11 releasing the Owner Participant and the Owner Trustee from all
obligations in respect of the Certificates,  the Indenture,  this Agreement, and
the other Operative  Agreements,  except any obligations  relating to the period
prior  to such  assumption  and take all such  other  actions,  at the  Lessee's
expense, as are reasonably necessary to permit such assumption by the Lessee.

         (b)      In connection with such assumption:

                  (i) the Lessee  shall  execute and deliver an  instrument  (A)
         pursuant to which the Lessee  irrevocably and  unconditionally  assumes
         and undertakes,  with full recourse to the Lessee, to pay, satisfy, and
         discharge  when  and  as  due  (at  the  stated  maturity  thereof,  by
         acceleration  or otherwise) the principal of,  Make-Whole  Premium,  if
         any, interest, and all other sums owing on all Outstanding Certificates
         (or on the Lessee's  substituted  obligations) in accordance with their
         terms,  and  punctually to perform and observe all of the covenants and
         obligations  hereunder and under the Indenture and the Certificates (as
         the same may be  amended  in  connection  with such  assumption)  to be
         performed  or observed  by the Owner  Trustee,  and (B) which  contains
         amendments  to the  Indenture,  in form  and  substance  as  reasonably
         satisfactory to the Indenture  Trustee,  that incorporate  therein such
         provisions  from the Lease and this  Agreement  as may be  appropriate,
         including,   without  limitation,   events  of  default   substantially
         identical  in scope  and  effect  to those  set  forth in the Lease and
         covenants  substantially  identical  to the  covenants  of  the  Lessee
         hereunder and under the Lease;

                  (ii)  the  instrument  referred  to in  paragraph  (i) of this
         Section  7.11(b),  any Uniform  Commercial  Code  financing  statements
         relating thereto,  and any other documents which shall be necessary (or
         reasonably  requested  by  the  Indenture  Trustee)  to  establish  the
         Lessee's  title to and  interest  in the  Aircraft  or to  reflect  the
         substitution  of the Lessee for the Owner  Trustee  under the Operative
         Agreements or to continue the  perfection of the security  interests in
         the Aircraft and the other, rights, Property, and interests included in
         the Trust  Indenture  Estate  for the  benefit of the  Holders  (or the
         Lessee's substituted  obligations) shall be filed in such form, manner,
         and  places as are  necessary  or,  in the  reasonable  opinion  of the
         Indenture Trustee, advisable for such purpose;

                  (iii) the  Indenture  Trustee shall have received an insurance
         report dated the effective  date of such  assumption of an  independent
         insurance  broker  and  certificates  of  insurance,  each in form  and
         substance  satisfactory  to  the  Indenture  Trustee,  as  to  the  due
         compliance as of the effective date of such  assumption  with the terms
         of Article 1 3 of the Lease (as it relates  to the  Indenture  Trustee)
         relating to the insurance with respect to the Aircraft;

                  (iv) the Indenture  Trustee shall have received  evidence that
         as of  the  effectiveness  of  the  assignment  on  the  date  of  such
         assumption  the  Aircraft is free and clear of all Liens other than the
         Lien of the Indenture and other Permitted Liens;

                  (v) the  Indenture  Trustee  shall have received a certificate
         from the  Lessee  that no Event of Default  exists as of the  effective
         date of such assumption;

                  (vi) the  Indenture  Trustee shall have received a guaranty of
         the Certificates substantially in the form of the ACA Guaranty; and

                  (vii) the  Indenture  Trustee  shall  have  received  (A) from
         counsel  for the Lessee  (who may be the  Lessee's  General  Counsel) a
         legal opinion, in form and substance as reasonably  satisfactory to the
         Indenture Trustee: (w) with respect to the compliance of the assumption
         contemplated  hereby with the terms hereof, (x) with respect to the due
         authorization, execution, delivery, validity, and enforceability of the
         instrument  referred to in paragraph (i) of this Section  7.11(b),  (y)
         with respect to the  continued  perfection  of the first and prior Lien
         and security interest in the Aircraft for the benefit of the Holders of
         the Certificates (or the Lessee's substituted  obligations) referred to
         in paragraph (ii) of this Section 7.11(b),  and (z) with respect to the
         continued   availability  of  the  benefits  of  Section  1110  of  the
         Bankruptcy Code to the Indenture Trustee for the benefit of the Holders
         with respect to the Aircraft  after giving  effect to such  assumption,
         (B) from counsel to the Indenture Trustee and Special Aviation Counsel,
         a legal opinion comparable to the respective  opinions delivered on the
         Certificate Closing Date or the Delivery Date, as the case may be, with
         such changes therein as may be appropriate in light of such assumption,
         and (C) in the case of each  opinion  described  in  clause  (A) or (B)
         above,  covering such additional matters as the Indenture Trustee shall
         reasonably request.

         (c) The Lessee shall pay all reasonable expenses (including  reasonable
fees and expenses of counsel) of the Indenture Trustee,  the Owner Trustee,  the
Pass Through  Trustee,  each  Liquidity  Provider and the Owner  Participant  in
connection with such assumption.

         Section 7.12.  Indebtedness of Owner Trustee.  So long as the Indenture
is in effect, the Owner Trustee, not in its individual  capacity,  but solely as
trustee under the Trust Agreement, shall not incur any indebtedness for borrowed
money  except  as  expressly  contemplated  herein  or in  any  other  Operative
Agreement  (excluding  the Tax Indemnity  Agreement) and shall not engage in any
business or other activity other than the transactions contemplated herein or in
any other Operative  Agreement  (excluding the Tax Indemnity  Agreement) and all
necessary or appropriate activity related thereto.

         Section  7.13.  Compliance  with  Trust  Agreement,  Etc..  Each of the
Initial Owner  Participant,  SSB, and the Owner Trustee  agrees with the Lessee,
the Indenture Trustee, the Liquidity Providers and the Pass-Through Trustee that
so long as the Lien of the Indenture  shall be in effect it will (i) comply with
all of the  terms of the  Trust  Agreement  applicable  to it in its  respective
capacity,  the  noncompliance  with which would materially  adversely affect any
such party and (ii) not take any  action,  or cause any  action to be taken,  to
amend,  modify or  supplement  any other  provision of the Trust  Agreement in a
manner that would  materially  adversely affect any such party without the prior
written consent of such party. The Owner Trustee confirms for the benefit of the
Lessee,  the Indenture  Trustee,  the Liquidity  Providers and the  Pass-Through
Trustee  that it will  comply  with the  provisions  of  Article  2 of the Trust
Agreement. Notwithstanding anything else to the contrary in the Trust Agreement,
so long as the Lease remains in effect, the Initial Owner Participant agrees not
to  terminate  or revoke the trust  created by the Trust  Agreement  without the
consent  of the  Lessee.  If and so long as the  Indenture  shall  not have been
discharged the consent of the Indenture  Trustee shall also be required prior to
any  termination  or  revocation  of  such  trust  and in  addition,  the  Owner
Participant will, at the Lessee's expense, promptly and duly execute and deliver
to the  Indenture  Trustee such  documents  and  assurances  including,  without
limitation,  conveyances,  financing statements and continuation statements with
respect to financing  statements  and take such further  action as the Indenture
Trustee may from time to time reasonably  request in order to protect the rights
and remedies created or intended to be created in favor of the Indenture Trustee
under the Indenture and to create for the benefit of the  Certificate  Holders a
valid  first  priority  Lien with  respect  to, and a first and prior  perfected
security interest in, the Trust Indenture Estate.

         Section 7.14. Subordination Agent's Representations,  Warranties and Covenants.  (a)  Representations and
Warranties.  The  Subordination  Agent  represents  and  warrants  as of  the  date  hereof  (except  as  otherwise
provided), the Pass-Through Closing Date, the Certificate Closing Date, and the Delivery Date, that:

                  (i) it is a national  banking  association  duly organized and
         validly  existing in good standing  under the laws of the United States
         of America and has the corporate  power and authority to enter into and
         perform its obligations under this Agreement,  the Liquidity Facilities
         and the Intercreditor Agreement;

                  (ii)  the   execution,   delivery  and   performance  of  this
         Agreement,  each of the  Liquidity  Facilities  and  the  Intercreditor
         Agreement  and  the  performance  of  its  obligations   hereunder  and
         thereunder  have been  fully  authorized  by all  necessary,  corporate
         action on its part, and, neither the execution and delivery thereof nor
         its performance of any of the terms and provisions thereof will violate
         any federal or Maryland  law or  regulation  relating to its banking or
         trust powers or  contravene  or result in any breach of, or  constitute
         any  default  under  its  articles  of  association,  or  bylaws or the
         provisions of any indenture,  mortgage,  contract or other agreement to
         which it is a party or by  which it or its  properties  may be bound or
         affected;

                  (iii) each of this Agreement, the Liquidity Facilities and the
         Intercreditor Agreement has been duly executed and delivered by it and,
         assuming  that each such  agreement  is the  legal,  valid and  binding
         obligation of each other party thereto,  is or will be, as the case may
         be, the legal, valid and binding obligation of the Subordination Agent,
         enforceable in accordance  with its respective  terms except as limited
         by bankruptcy, insolvency, moratorium,  reorganization or other similar
         laws or equitable principles of general application to or affecting the
         enforcement of creditors' rights generally  (regardless of whether such
         enforceability is considered in a proceeding in equity or at law);

                  (iv)  there are no Taxes  payable by the  Subordination  Agent
         imposed by the State of Maryland or any political subdivision or taxing
         authority  thereof  in  connection  with the  execution,  delivery  and
         performance by the  Subordination  Agent of this Agreement,  any of the
         Liquidity  Facilities  or  the  Intercreditor   Agreement  (other  than
         franchise  or  other  taxes  based  on  or  measured  by  any  fees  or
         compensation  received by the Subordination Agent for services rendered
         in connection with the transactions  contemplated by the  Intercreditor
         Agreement or any of the Liquidity  Facilities),  and there are no Taxes
         payable by the Subordination  Agent imposed by the State of Maryland or
         any political  subdivision  thereof in connection with the acquisition,
         possession  or  ownership  by  the  Subordination  Agent  of any of the
         Certificates  other than  franchise or other taxes based on or measured
         by any fees or  compensation  received by the  Subordination  Agent for
         services  rendered in connection with the transactions  contemplated by
         the Intercreditor Agreement or any of the Liquidity Facilities);

                  (v) there are no pending or threatened  actions or proceedings
         against  the  Subordination  Agent  before any court or  administrative
         agency which individually or in the aggregate,  if determined adversely
         to  it,  would   materially   adversely   affect  the  ability  of  the
         Subordination  Agent to perform its  obligations  under this Agreement,
         the Intercreditor Agreement or any Liquidity Facility;

                  (vi) the  Subordination  Agent has not directly or  indirectly
         offered any  Certificate  for sale to any Person or solicited any offer
         to acquire any Certificates from any Person,  nor has the Subordination
         Agent  authorized  anyone  to act on its  behalf to offer  directly  or
         indirectly any  Certificate  for sale to any Person,  or to solicit any
         offer to acquire any Certificate from any Person; and the Subordination
         Agent is not in default under any Liquidity Facility; and

                  (vii) the  Subordination  Agent is not directly or  indirectly
         controlling,  controlled  by or under  common  control  with the  Owner
         Participant, the Owner Trustee, any Underwriter or the Lessee.

         (b)  Covenants.  (i) The  Subordination  Agent  agrees not to amend any
Liquidity  Facility  without  the  consent of the Lessee (so long as no Event of
Default  shall have  occurred and be  continuing)  and of the Owner  Participant
(such consents not to be unreasonably withheld or delayed).

         (ii) In connection  with the deposit in the applicable  Cash Account of
amounts drawn  pursuant to any Downgrade  Drawing or  Non-Extension  Drawing (as
defined in the Liquidity Facility) under a Liquidity Facility, the Subordination
Agent  agrees,  so long as no  Event  of  Default  shall  have  occurred  and be
continuing,  to pay to the Lessee promptly  following each Regular  Distribution
Date any  Investment  Earnings on the amount so  deposited  which  remain  after
application  of  such  Investment  Earnings  pursuant  to  Section  2.06 of such
Liquidity  Facility to the  interest  payable on such  Downgrade  Drawing  under
Section 3.07 of such Liquidity Facility.  Capitalized terms used in this Section
shall have the meanings specified in the Intercreditor Agreement.



                                    ARTICLE 8

                                      TAXES

         Section 8.01.  Lessee's  Obligation to Pay Taxes.  (a)  Generally.  The
Lessee  agrees  promptly  to pay  when  due,  and to  indemnify  and  hold  each
Indemnitee harmless from all license, recording,  documentary,  registration and
other fees and all taxes (including, without limitation, income, gross receipts,
sales, rental, use, value added, property (tangible and intangible), ad valorem,
excise and stamp  taxes),  fees,  levies,  imposts,  recording  duties,  duties,
charges, assessments or withholdings of any nature whatsoever, together with any
assessments,   penalties,   fines,   additions   to  tax  or  interest   thereon
(individually,  a "Tax," and collectively  called  "Taxes"),  however imposed or
asserted  (whether imposed upon any Indemnitee,  the Lessee,  all or any part of
the Aircraft, Airframe, any Engine or any Part or the Lessor's Estate, the Trust
Indenture  Estate,  Rent, the  Certificates or otherwise upon or with respect to
any  Operative  Agreement,  any payments  thereunder  or otherwise in connection
therewith), by any Federal, state or local government or taxing authority in the
United States,  or by any government or taxing authority of a foreign country or
of any political  subdivision or taxing  authority  thereof or by a territory or
possession of the United States or an international taxing authority relating to
or measured by:

                  (i)  the  construction,  mortgaging,  financing,  refinancing,
         purchase,  acceptance,  rejection,  delivery,  nondelivery,  transport,
         location,  ownership,  registration,  reregistration,   deregistration,
         insuring, assembly, possession, repossession,  operation, use, non-use,
         condition, maintenance, repair, improvement,  conversion, sale, return,
         abandonment,    preparation,    installation,    storage,   redelivery,
         replacement,   manufacture,   leasing,   subleasing,    sub-subleasing,
         modification,  alteration, rebuilding,  importation, transfer of title,
         transfer  of   registration,   exportation  or  other   application  or
         disposition of, or the imposition of any Lien (or the incurrence of any
         liability to refund or pay over any amount as a result of any Lien) on,
         the  Aircraft,  the  Airframe,  any Engine or any Part or any  interest
         therein;

                  (ii)     amounts payable under the Operative Agreements;

                  (iii) the Property,  or the income or other proceeds  received
         with  respect  to  the  Property   attributable  to  the   transactions
         contemplated  by the  Operative  Agreements,  held by the Owner Trustee
         under the Trust Agreement or after an Event of Default under the Lease,
         or by the Indenture Trustee under the Indenture;

                  (iv)  otherwise with respect to any Operative  Agreement,  any
         interest  therein  or by reason  of the  transactions  described  in or
         contemplated by the Operative Agreements;

                  (v)      the principal or interest or other amounts payable with respect to the Certificates;

                  (vi) the Pass-Through  Certificates or the Certificates or the
         issuance, sale, acquisition,  reoptimization, or refinancing thereof or
         the  beneficial  interests in the Trust  Estate or the Trust  Indenture
         Estate  or the  creation  thereof  under  the  Trust  Agreement  or the
         Indenture,  or the security interest created or perfected thereby or by
         any filing thereof;

                  (vii) any assumption by the Lessee pursuant to Section 7.11 of
this Agreement;

                  (viii)   the Aircraft, the Airframe, any Engine or any Part; or

                  (ix) the  rentals  (including  Basic  Rent,  Renewal  Rent and
         Supplemental  Rent),  receipts or earnings  arising from the  Operative
         Agreements.

         (b)      Exceptions.  The  indemnity  provided  for in  Section  8.01 (a) shall  not  extend to any of the
                  ----------
following:

                  (i) With respect to an Indemnitee,  Taxes,  whether imposed by
         withholding  or otherwise,  based upon,  measured by or with respect to
         the net or gross  income,  items of tax  preference  or minimum  tax or
         excess  profits,  receipts,  capital,  franchise,  net worth  (whether,
         denominated income,  excise, capital stock, or doing business taxes) or
         other  similarly-based  taxes  (other  than  sales,  use,  value-added,
         transfer,  rental,  ad  valorem,  stamp,  property,  or similar  taxes)
         ("Income Taxes") imposed by the United States or by any state, local or
         foreign jurisdiction in which such Indemnitee is subject to tax without
         regard to the  transactions  contemplated  by the Operative  Agreement,
         provided,  however,  that this  clause (i) shall not  exclude  from the
         indemnity  described in Section  8.01(a) above any such Income Taxes to
         the extent  such taxes are  imposed  by any  jurisdiction  in which the
         Indemnitee  would not be subject to such taxes of such type but for, or
         would be subject to such taxes of such type  solely as a result of, (x)
         the  operation,  registration,   location,  presence,  or  use  of  the
         Aircraft,   Airframe,   any  Engine  or  any  Part  thereof,   in  such
         jurisdiction or (y) the place of  incorporation  or principal office or
         the activities of the Lessee or any Affiliate  thereof or any sublessee
         in such  jurisdiction  (it being understood that (A) any such indemnity
         would be  payable  only to the extent of the net harm  incurred  by the
         Indemnitee from such Income Taxes,  taking into account any incremental
         current Tax benefit in another tax jurisdiction  resulting from payment
         of  such   Income   Taxes   and  (B)  this   sentence   would   require
         indemnification  in a  jurisdiction  in which the Indemnitee is already
         subject to an Income Tax (an  "Existing  Income  Tax") only if an event
         set forth in Clause (x) or (y) of this sentence  causes the  Indemnitee
         to be  subject  to an Income Tax in that  jurisdiction  (a "New  Income
         Tax") other than an Existing  Income Tax, and such New Income Tax would
         have been imposed even if the activities  contemplated by the Operative
         Agreements  were the  Indemnitee's  sole  nexus  to the  jurisdiction);
         provided,  further,  that  the  provisions  of  this  paragraph  (b)(i)
         relating to Income Taxes shall not exclude from the indemnity described
         in Section  8.01(a)  hereof any Income Taxes for which the Lessee would
         be required to indemnify an  Indemnitee  (x) so that any payment  under
         the Operative Agreements, otherwise required to be made on an After-Tax
         Basis,  is made on an  After-Tax  Basis  or (y)  pursuant  to the  last
         sentence of Section 8.02, 8.05, 9.02 or 9.05 of this Agreement;

                  (ii)     Taxes on items of tax preference or any minimum tax or alternative minimum tax;

                  (iii) Taxes imposed with respect to any period after the later
         of (A) the discharge in full of the Lessee's obligation, if any, to pay
         Stipulated Loss Value or Termination Value under and in accordance with
         the Lease,  and (B) the earliest of (x) the  expiration  of the Term of
         the Lease and return of the  Aircraft in  accordance  with Section 5 of
         the Lease,  (y) the  termination  of the Lease in  accordance  with the
         applicable  provisions  of the Lease  and  return  of the  Aircraft  in
         accordance  with the  Lease,  or (z) the  termination  of the  Lease in
         accordance with the applicable provisions of the Lease and the transfer
         of all right, title and interest in the Aircraft to the Lessee pursuant
         to its exercise of any of its purchase  options set forth in Section 16
         of the Lease,  provided  that this  exclusion  (iii) shall not apply in
         respect of any  payment  made after the dates set forth in clauses  (A)
         and (B) above if such  payment is made with respect to any period prior
         to such return or transfer,  or Taxes  incurred in connection  with the
         exercise of any remedies  pursuant to Section 15 of the Lease following
         the occurrence of an Event of Default;

                  (iv) As to the Owner Trustee,  Taxes imposed against the Owner
         Trustee upon or with  respect to any fees for services  rendered in its
         capacity  as Owner  Trustee  under  the Trust  Agreement  or, as to the
         Indenture Trustee,  Taxes imposed against the Indenture Trustee upon or
         with respect to any fees  received by it for  services  rendered in its
         capacity as Indenture Trustee under the Indenture;

                  (v) With respect to any  Indemnitee,  Taxes resulting from the
         willful  misconduct or gross  negligence of any Indemnitee  (other than
         gross  negligence or willful  misconduct not actually  committed by but
         instead  imputed  to any  Indemnitee  by  reason  of such  Indemnitee's
         participation  in  the  transactions   contemplated  by  the  Operative
         Agreements)  or the  breach by any  Indemnitee  of any  representation,
         warranty or  covenant  contained  in the  Operative  Agreements  or any
         document  delivered in connection  therewith (unless  attributable to a
         breach of representation, warranty or covenant of the Lessee);

                  (vi)  Taxes   imposed  on  the  Owner  Trustee  or  the  Owner
         Participant or any successor,  assign or Affiliate thereof which became
         payable  by  reason  of  any  voluntary  or  involuntary   transfer  or
         disposition  by  such  Indemnitee  subsequent  to  the  Delivery  Date,
         including  revocation  of the Trust,  of any interest in some or all of
         the Aircraft, Airframe, Engines or Parts thereof or its interest in the
         Lessor's  Estate  (not  including  any  transfers  of any  Certificates
         pursuant to Section  15.01 (a) hereof) or a  disposition  in connection
         with a bankruptcy or similar proceedings involving either the Lessor or
         the Owner  Participant  or a transfer or disposition of shares or other
         interests in the Owner Trustee or the Owner  Participant  or a transfer
         or disposition of shares or other interests in the Owner Trustee or the
         Owner  Participant  other  than (A)  transfers  resulting  from a loss,
         substitution or modification of the Aircraft,  Engines or any Part, (B)
         any transfer of the  Aircraft,  Engines or any Part (in each case other
         than at Fair Market Value) to the Lessee, (C) transfers pursuant to the
         Lessor's  exercise  of remedies in  accordance  with  Section 15 of the
         Lease or (D) a transfer pursuant to the Lessee's exercise of its rights
         under  Section  3(g) of the Lease;  the parties  agree to  cooperate to
         minimize any such Taxes covered by this provision;

                  (vii) Taxes subject to  indemnification by the Lessee pursuant
to the Tax Indemnity Agreement;

                  (viii)  Taxes   imposed  on  a  successor,   assign  or  other
         transferee  of any  interest  of  any  Indemnitee  (including,  without
         limitation,  a transferee  which is a new lending office of an original
         Indemnitee)  to the extent that such Taxes would not have been  imposed
         on the  original  Indemnitee  or exceed  the amount of Taxes that would
         have been imposed and would have been indemnifiable pursuant to Section
         8.01(a)  hereof had there not been a  succession,  assignment  or other
         transfer  by such  original  Indemnitee  of any such  interest  of such
         Indemnitee  in the  Aircraft or any Part,  any interest in or under any
         Operative  Agreement,  or any proceeds thereunder,  provided,  however,
         that the  exclusion  provided by this clause  (viii) shall not apply in
         the case of a succession,  transfer or disposition  (A) pursuant to the
         exercise of  remedies  under  Section 15 of the Lease,  (B) which is an
         actual or deemed  transfer  pursuant  to  Section  7.11  hereof or as a
         consequence of a Refinancing  under Section 15.01 hereof, or any actual
         or deemed transfer of a Certificate that as part of a Refinancing under
         Section  15.01 hereof is not retired,  but only to the extent the Taxes
         attributable  to such  transfer  exceed  the amount of Taxes that would
         have been  imposed  on such  transferor  if the debt had  instead  been
         retired,  (C) to the extent  necessary to make payments with respect to
         such Taxes on an After-Tax  Basis,  or (D) to the extent such Taxes are
         directly   attributable   to  the   failure   of  the  Lessee  to  take
         administrative  actions  as have  been  reasonably  requested  of it in
         writing in a timely  manner and which will result in no after-tax  cost
         or expense to the Lessee;

                  (ix)  Taxes  imposed by any  jurisdiction  that would not have
         been imposed on the Owner Trustee or the Owner  Participant but for the
         activities or the status of the Owner Trustee or the Owner  Participant
         in such jurisdiction unrelated to the transactions  contemplated by the
         Operative Agreements;

                  (x)      Any Taxes which have been included in the Purchase Price;

                  (xi) Any Taxes  which  would not have been  imposed  but for a
         Lessor's Lien or an Indenture Trustee's Lien;

                  (xii) Any Taxes imposed on the Owner Participant arising under
         or in connection with any prohibited transaction, within the meaning of
         Section  406 of ERISA or Section  4975(c)(1)  of the Code  ("Prohibited
         Transaction"); and

                  (xiii)  Taxes  that  would not have been  imposed  but for the
         existence or status of any trust used to hold title to the Aircraft.

         (c)  Withholding.  The  Pass-Through  Trustee shall  withhold any Taxes
required to be withheld on payments to any holder of a Pass-Through  Certificate
who is a  Non-U.S.  Person  except  to  the  extent  that  such  a  holder  of a
Pass-Through  Certificate  has furnished  evidence to the  Pass-Through  Trustee
sufficient  under  applicable  law to  entitle  such  holder  of a  Pass-Through
Certificate  to any exemption  from or reduction in the rate of  withholding  on
interest  claimed by such holder of a  Pass-Through  Certificate.  The Indenture
Trustee  shall  withhold  any Taxes  required to be withheld on any payment to a
Holder  pursuant to Section 5.09 of the Indenture.  If the Indenture  Trustee or
the  Pass-Through  Trustee  fails to withhold a Tax required to be withheld with
respect  to  any  Holder  of a  Certificate  or  any  holder  of a  Pass-Through
Certificate or any claim is otherwise asserted by a taxing authority against the
Owner  Trustee or Owner  Participant  for any  withholding  tax, the Lessee will
indemnify the Owner  Trustee and the Owner  Participant  (without  regard to the
exclusions set forth in Section  8.01(b)  hereof) on an After-Tax  Basis against
any such Taxes  required to be withheld  and any  interest  and  penalties  with
respect  thereto,  along with any other costs (including  reasonable  attorney's
fees) incurred in connection with any such claim.  The Indenture  Trustee or the
Pass-Through  Trustee,  as the  case may be,  in its  individual  capacity  (and
without  recourse to the Trust  Indenture  Estate),  shall  indemnify the Lessee
(without  regard to the  exclusions set forth in Section  8.01(b)  hereof) on an
After-Tax  Basis for any  payment  the Lessee  shall have made  pursuant  to the
preceding sentence.

         Section  8.02.  After-Tax  Basis.  The amount which the Lessee shall be
required to pay with respect to any Tax  indemnified  against under Section 8.01
shall be an amount sufficient to restore the Indemnitee,  on an After-Tax Basis,
to the  same  position  such  party  would  have  been in had  such Tax not been
incurred,  provided that the calculation of any additional  amounts owing to any
Indemnitee  as a result of the Lessee's  obligation to indemnify on an After-Tax
Basis  shall be made  without  regard to the  exclusions  set  forth in  Section
8.01(b). If any Indemnitee realizes a Tax benefit (whether by credit,  deduction
or  otherwise),  or would have realized such a benefit if properly  claimed,  by
reason of the payment of any Tax paid or indemnified against by the Lessee, such
Indemnitee shall promptly pay to the Lessee,  to the extent such Tax benefit was
not previously taken into account in computing such payment,  but not before the
Lessee  shall  have made all  payments  then due to such  Indemnitee  under this
Agreement,  the Tax Indemnity  Agreement and any other Operative  Agreement,  an
amount equal to the lesser of (x) the sum of such tax benefit plus any other tax
benefit  realized by such  Indemnitee  that would not have been realized but for
any payment made by such  Indemnitee  pursuant to this  sentence and not already
paid to the Lessee,  and (y) the amount of the payment  made under  Section 8.01
hereof and this Section 8.02 by the Lessee to such Indemnitee plus the amount of
any other payments by the Lessee to such Indemnitee  theretofore  required to be
made under this Section 8.02 and Sections  8.01 and 8.05 hereof (and the excess,
if any, of the Tax benefit over the applicable amount described in clause (x) or
clause (y) above  shall be carried  forward  and applied to reduce pro tanto any
subsequent  obligations  of the  Lessee  to make  payments  to  such  Indemnitee
pursuant to Section 8.01 hereof);  provided,  however,  that notwithstanding the
foregoing  portions of this sentence,  such Indemnitee shall not be obligated to
make any payment to the Lessee  pursuant to this sentence as long as an Event of
Default shall have occurred and be continuing  under the Lease. The Lessee shall
reimburse  on an After-Tax  Basis such  Indemnitee  (subject to Section  8.01(b)
hereof) for any payment of a tax benefit pursuant to the preceding  sentence (or
a tax benefit otherwise taken into account in calculating the Lessee's indemnity
obligation  hereunder)  to the  extent  that such tax  benefit  is  subsequently
disallowed or reduced.

         In determining the order in which any Indemnitee  utilizes  withholding
or other  foreign  taxes as a credit  against such  Indemnitee's  United  States
income taxes,  such Indemnitee shall be deemed to utilize (i) first, all foreign
taxes other than those described in clause (ii) below; provided, that such other
foreign  taxes  which  are  carried  back  to  the  taxable  year  for  which  a
determination  is being  made  shall be  deemed  utilized  after  foreign  taxes
described in clause (ii) below,  and (ii) then, on a pro rata basis, all foreign
taxes  with   respect  to  which  such   Indemnitee   is   entitled   to  obtain
indemnification pursuant to an indemnification provision contained in any lease,
loan  agreement,  or other  financing  document  (including  this  Participation
Agreement) that is similar to the indemnification provision in this Article 8.

         Notwithstanding  the  preceding  paragraph,  if  foreign  taxes  of  an
Indemnitee  have been  indemnified  hereunder and all such  indemnified  foreign
taxes have not been used to produce a credit  against such  Indemnitee's  United
States income taxes  resulting in the  realization  of a tax benefit paid to the
Lessee in  accordance  with the first  paragraph  of this  Section  8.02,  a tax
benefit will be deemed to be attributable to such  indemnified  foreign taxes to
the extent that an item of income derived from the transactions  contemplated in
the Operative  Agreements is allocable to sources  outside the United States and
such allocation  results in an increase in the amount of foreign tax credit such
Indemnitee is entitled to use in any taxable year over the amount of foreign tax
credit such  Indemnitee  would have been entitled to use if such foreign  source
allocation had not occurred.

         Section  8.03.  Time of Payment.  Any amount  payable to an  Indemnitee
pursuant to this  Article 8 shall be paid  promptly,  but in any event within 30
days after receipt of a written demand therefor from such Indemnitee accompanied
by a  written  statement  describing  in  reasonable  detail  the basis for such
indemnity  and the  computation  of the amount so payable,  provided that in the
case of amounts which are being  contested by the Lessee in good faith or by the
Indemnitee in either case pursuant to Section 8.04 hereof,  such amount shall be
payable within 30 days after the time such contest is finally resolved.

         Section  8.04.  Contests.  If a  written  claim  is  made  against  any
Indemnitee for Taxes with respect to which the Lessee is liable for a payment or
indemnity hereunder,  such Indemnitee shall promptly (but in any event within 30
days of receipt  thereof)  give the  Lessee  notice in writing of such claim and
shall  furnish the Lessee with copies of any written  requests  for  information
sent to such  Indemnitee  (and not the Lessee) from any taxing  authority to the
extent  relating to such Taxes with  respect to which the Lessee may be required
to  indemnify  hereunder  and with  respect  to which it would be  necessary  or
beneficial to have information provided by the Lessee;  provided,  however, that
the failure of an  Indemnitee to give such notice or furnish such copy shall not
terminate any of the rights of such Indemnitee  under this Article 8, except (a)
to the  extent  that the  Lessee's  contest  rights  have  been  materially  and
adversely  impaired by the failure to provide  such notice or copy or (b) to the
extent that such  failure  results in the  imposition  of, or an increase in the
amount of, any penalties,  interest or additions to Tax related to the Tax which
is the  subject of such claim or  proceeding.  The Lessee  may,  at its  option,
contest  in its own name or, if  required  by law,  require  the  Indemnitee  to
contest in good faith, with due diligence and at the Lessee's expense, if timely
requested in writing by the Lessee,  the  validity,  applicability  or amount of
such Taxes by:

                           (i)   resisting   payment   thereof   if  lawful  and
                  practicable  or not paying the same  except  under  protest if
                  protest  is  necessary  and  proper  in  each  case so long as
                  non-payment  will not result in a  material  risk of the sale,
                  forfeiture  or loss of, or the creation of a Lien other than a
                  Permitted Lien on the Aircraft,  Airframe or any Engine or any
                  risk of criminal liability; or

                           (ii) if the payment be made, using reasonable efforts
                  to obtain a refund thereof in appropriate  administrative  and
                  judicial proceedings.

Notwithstanding the foregoing,  the Lessee shall not be permitted or entitled to
contest any such Tax in its own name unless the Tax is  reflected in a report or
a return of the Lessee or raised in an audit or other  proceeding  of the Lessee
and the Lessee is allowed to directly  contest such Tax under  applicable law of
the  taxing  jurisdiction  provided,  that if the Lessee is so  permitted  under
applicable  law to  contest a Tax  asserted  against  the Lessee and the same or
similar Tax is also asserted against the Indemnitee, each of the Lessee and such
Indemnitee  shall  conduct  its  contest in its own name and the Lessee and such
Indemnitee will cooperate in a reasonable  manner with respect to the respective
contests of such Tax.

         If the  Indemnitee,  after  reasonable  discussion  with the Lessee and
consideration  in good  faith of any  suggestion  made by the  Lessee  as to the
method of pursuing such contest,  elects to conduct the contest, such Indemnitee
shall  control the contest  and shall  determine  the manner in which to contest
such Taxes and shall periodically or upon the Lessee's request advise the Lessee
of the progress of such contest;  provided,  however, that the Lessee shall have
the right to be  consulted  in good faith with  respect to any contest of claims
subject  to  indemnification  hereunder,  including  governmental  and  judicial
conferences  and the right to be consulted in good faith  regarding the relevant
portions of all related  submissions  to any  governmental  or other  authority,
provided, however, that the Lessee shall be permitted to participate in any such
contest  only (x) with respect to issues that can be separated on audit from any
Taxes  for  which  the  Lessee  is not  required  to  indemnify  the  Indemnitee
hereunder, and (y) if the Indemnitee shall have determined that in its judgment,
exercised in its sole discretion,  neither such participation nor the separation
of issues will adversely  affect the Indemnitee.  Notwithstanding  the foregoing
provisions  of  this  paragraph,  if the  Lessee  acknowledges  in  writing  its
liability to the  Indemnitee  hereunder with respect to the Taxes subject to the
contest if the contest is resolved  adversely,  the Lessee  shall  control  such
contest.  If the Lessee  satisfies the conditions  imposed on it in this Section
8.04 and an Indemnitee  nevertheless  fails to contest and refuses to permit the
Lessee to contest under and as and to the extent  required by this Section 8.04,
then the Lessee shall not be obligated to  indemnify  such  Indemnitee  for such
claim or for any  other  claim  for  which a  successful  contest  is  adversely
affected  because  of such  failure  to  contest  or to  permit a  contest.  The
Indemnitee  will not  settle a contest  that  results  in a final  determination
without  consent  of the  Lessee,  unless  the  Indemnitee  waives  its right to
indemnification  with respect to such contest and any related contest.  Any such
settlement,  concession,  or compromise without the prior written consent of the
Lessee shall constitute a waiver of such Indemnitee's  rights to indemnification
hereunder  with respect to such claim and any other claim for which a successful
contest  is  adversely  affected  because  of such  settlement,  concession,  or
compromise.  Notwithstanding  the preceding sentences of this Section 8.04, such
Indemnitee  shall not be  required  to take or  continue  any action  unless the
Lessee shall have (i) agreed in writing to pay and shall pay the Indemnitee on a
current  basis  and on an  After-Tax  Basis  all  reasonable  fees and  expenses
(including   reasonable  attorneys'  fees  and  accountants'  fees)  which  such
Indemnitee  may incur as a result of  contesting  such Taxes,  and (ii) made all
payments and indemnities  (other than contested  payments and indemnities)  then
due to the  Indemnitee  hereunder  or with  respect  to any of the  transactions
contemplated  by or under  the  Operative  Agreements.  In no event  shall  such
Indemnitee  be required or the Lessee be permitted  to contest  pursuant to this
Section  8.04 the  imposition  of any Tax for which the Lessee is  obligated  to
indemnify  any  Indemnitee  hereunder  unless  (i) such  Indemnitee  shall  have
received,  at the Lessee's  expense,  an opinion of tax counsel  selected by the
Lessee,  such counsel to be  reasonably  satisfactory  to the  Indemnitee  ("Tax
Counsel"),  to the effect that there  exists a reasonable  basis for  contesting
such claim, (ii) such contest will not result in any material risk of loss, sale
or forfeiture of, or the creation of a Lien (other than Permitted Liens) on, the
Aircraft  or any part  thereof  or  interest  thereon  or in a risk of  criminal
liability,  or adversely affect the Trust Indenture Estate, (iii) if a Specified
Default  exists,  the Lessee shall have  provided  security for its  obligations
hereunder reasonably satisfactory to the Indemnitee,  (iv) if such contest shall
be conducted in a manner requiring  payment of the claim in advance,  the Lessee
shall have advanced  sufficient  funds,  on an interest free basis,  to make the
payment required,  and agreed to indemnify the Indemnitee against any additional
net adverse tax  consequences  on an After-Tax  Basis to such Indemnitee of such
advance,  and  (v) the  issue  shall  not be the  same  as an  issue  previously
contested  hereunder and decided  adversely,  unless the  Indemnitee  shall have
received at the Lessee's sole expense, a written opinion,  in form and substance
reasonably  satisfactory to such  Indemnitee,  of Tax Counsel to the effect that
the applicable circumstances or law has changed and that in light thereof, there
is substantial authority for contesting such claim; provided,  that in the event
that such  Indemnitee  is not required  under this  paragraph to contest any Tax
liability  for which the Lessee is obligated to indemnify  any  Indemnitee,  the
Lessee may contest such Tax liability in the name of the Lessee, if permitted by
law.  The Lessee may appeal or require  the  Indemnitee  to appeal any  judicial
decision  provided the foregoing  requirements  of this Section 8.04 are met and
the Indemnitee shall have received,  at the Lessee's expense,  an opinion of Tax
Counsel, to the effect that there is substantial authority for such appeal.

         Nothing  contained in this Section 8.04 shall require any Indemnitee to
contest or continue to contest,  or permit Lessee to contest, a claim which such
Indemnitee would otherwise be required to contest pursuant to this Section 8.04,
if such  Indemnitee  shall  waive  payment  by Lessee of any  amount  that might
otherwise  be payable by Lessee  under this  Article 8 in  connection  with such
claim.

         Section  8.05.  Refunds.  Upon receipt by an Indemnitee of a refund (or
would have received such a refund but for offset by matters not indemnifiable by
the Lessee  under  Section  8.01(a))  of all or any part of any Taxes  which the
Lessee  shall have paid for such  Indemnitee  or for which the Lessee shall have
reimbursed  or  indemnified  such  Indemnitee,  and  provided  that no Specified
Default exists (but if a Specified Default does exist, payment shall not be made
to the Lessee until no Specified  Default exists),  such Indemnitee shall pay to
the Lessee an amount  equal to the amount of such  refund or offset less (x) any
expenses not previously reimbursed, (y) all payments then due to such Indemnitee
under  this  Article 8, and (z) Taxes  imposed  with  respect to the  accrual or
receipt thereof,  including interest received attributable thereto, plus any tax
benefit  realized  by  such  Indemnitee  as a  result  of any  payment  by  such
Indemnitee made pursuant to this sentence;  provided,  however, that such amount
shall not be  payable  (a) before  such time as the  Lessee  shall have made all
payments  or  indemnities  then due and  payable to such  Indemnitee  under this
Article 8 and (b) to the extent that the amount of such payment would exceed (i)
the amount of all prior  payments by the Lessee to such  Indemnitee  pursuant to
this Article 8 less (ii) the amount of all prior payments by such  Indemnitee to
the Lessee pursuant to this Article 8.

         Any subsequent loss of such refund or tax benefit shall be treated as a
Tax subject to  indemnification  under the  provisions of this Article 8 (in the
case of any such tax benefit, subject to Section 8.01 (b) hereof).

         Section  8.06.  Lessee's  Reports.  In case any  report  or  return  is
required to be made with respect to any Taxes against which the Lessee is or may
be  obligated  to  indemnify  the  Indemnitees  under this Article 8, the Lessee
shall,  to the  extent it has  knowledge  thereof,  make such  report or return,
except for any such report or return that the Indemnitee has notified the Lessee
that it  intends  to file,  in such  manner  as will show the  ownership  of the
Aircraft in the Owner Trustee and shall send a copy of the  applicable  portions
of such report or return to the  Indemnitee and the Owner Trustee or will notify
the Indemnitee of such requirement and make such report or return in such manner
as shall be satisfactory  to such  Indemnitee and the Owner Trustee.  The Lessee
will provide such information  within the possession or control of the Lessee as
the Indemnitee  may reasonably  require from the Lessee to enable the Indemnitee
to  fulfill  its  tax  filing  requirements  with  respect  to the  transactions
contemplated by the Operative  Agreements (without duplication of any comparable
requirements of the Tax Indemnity  Agreement) and any audit information  request
arising  from any such filing.  The  Indemnitee  will  provide such  information
within its possession or control as the Lessee may reasonably  require from such
Indemnitee  to enable  the Lessee to fulfill  its tax filing  requirements  with
respect to the  transactions  contemplated  by the Operative  Agreements and any
audit  information  request arising from such filing;  provided that in no event
shall any  Indemnitee be required to provide copies of any of its tax returns or
other confidential information. The Lessee shall hold the Indemnitee harmless on
an  After-Tax  Basis from and  against  any  liabilities,  including  penalties,
additions  to  tax,  fines  and  interest,  imposed  upon  or  incurred  by such
Indemnitee  to  the  extent  directly   attributable  to  any  insufficiency  or
inaccuracy  in any  return,  statement,  or  report  prepared  by the  Lessee or
information  supplied by the Lessee,  or directly  attributable  to the Lessee's
failure  to  supply  information  within  its  possession  or  control  to  such
Indemnitee  as  required  by this  Section  8.06.  If an  Indemnitee  makes  any
representation  regarding  the value of the  Aircraft or any part thereof to any
taxing  authority  without the Lessee's  prior  written  consent as to the value
represented (which consent shall not be unreasonably withheld),  that Indemnitee
shall be  responsible  for any Tax to the  extent  that it would  not have  been
payable if the value used were a value reasonably proposed by the Lessee.

         Section 8.07. Survival of Obligations. The representations, warranties,
indemnities  and agreements of the Lessee provided for in this Article 8 and the
Lessee's  obligations  under any and all of them, in each case,  with respect to
events or periods  prior to the  expiration  or  termination  of the Lease shall
survive the expiration or other termination of the Operative Agreements.

         Section  8.08.  Payment of Taxes.  With  respect  to any Tax  otherwise
indemnifiable hereunder by the Lessee and applicable to the Aircraft,  Airframe,
any Engine or Parts, to the extent permitted by the applicable  federal,  state,
local or foreign  law,  the Lessee  shall pay such tax  directly to the relevant
Taxing  authority and file any returns or reports  required with respect thereto
to the extent legally entitled to do so in its own name; provided, however, that
the Lessee shall not make any statements or take any action which would indicate
that the Lessee or any Person other than the Owner Trustee or Owner  Participant
is the owner of the  Aircraft,  the  Airframe,  any  Engine or any Part or which
would otherwise be inconsistent with the terms of the Lease or the Tax Indemnity
Agreement  and the  position  thereunder  of the  Owner  Trustee  and the  Owner
Participant.  Copies of such  returns or  reports,  together  with  evidence  of
payment  of any tax due,  shall be sent by the  Lessee to the Owner  Participant
within 30 days after the date of each payment by the Lessee of any Tax.

         Section 8.09.  Reimbursements by Indemnitees  Generally.  To the extent
the Lessee is required to pay or withhold  any Tax imposed on or with respect to
an  Indemnitee  in respect of the  transactions  contemplated  by the  Operative
Agreements,  which Tax is not otherwise the  responsibility  of the Lessee under
the Operative Agreements, or any other written agreements between the Lessee and
such Indemnitee,  then such Indemnitee shall pay to the Lessee within 30 days of
the Lessee's  demand therefor an amount which equals the amount actually paid by
the Lessee with respect to such Taxes.

         Section  8.10.  Special  Indemnity.  Notwithstanding  anything  in this
Article 8 to the contrary,  the Lessee shall hold the Owner Participant harmless
on an After-Tax  Basis from any Taxes or losses  arising  from or in  connection
with the transactions  contemplated by Section 17.02 hereof (provided, that this
Section 8.10 shall not require any indemnification for any Loss of Tax Benefits,
as defined in the Tax Indemnity Agreement).

         . At the Lessee's request, the accuracy of any calculation of amount(s)
payable  pursuant  to this  Article 8 shall be verified  by  independent  public
accountants selected by the applicable Indemnitee and reasonably satisfactory to
the Lessee, and such verification  shall bind the applicable  Indemnitee and the
Lessee.  In order,  and to the  extent  necessary,  to enable  such  independent
accountants  to verify  such  amounts,  such  Indemnitee  shall  provide to such
independent  accountants (for their  confidential use and not to be disclosed to
the Lessee or any other person) all  information  reasonably  necessary for such
verification.  Verification  shall be at the expense of the Lessee,  unless such
verification  results in an adjustment in the Lessee's  favor of $10,000 or more
of the amount of the payment as computed by such  Indemnitee,  in which case the
verification shall be at the expense of the Indemnitee.

                                    ARTICLE 9

                                GENERAL INDEMNITY

         Section  9.01.  Generally.  (a) The  Lessee  agrees to  indemnify  each
Indemnitee  against and agrees to protect,  defend,  save and keep harmless each
Indemnitee  against and in respect of, and will pay on an After-Tax Basis,  from
any  and all  liabilities,  obligations,  losses,  damages,  penalties,  claims,
actions,  suits,  costs,   disbursements  and  expenses,  demands  or  judgments
(including  legal  fees and  expenses  and all costs and  expenses  relating  to
amendments,  supplements,  adjustments, consents, refinancings and waivers under
the Operative  Agreements  except as otherwise  provided in Section  10.01(c)(i)
hereof)  of every  kind and  nature,  including  without  limitation  Make-Whole
Premium (other than any Make-Whole  Premium  payable as a result of an Indenture
Event of Default  that is not a Lease Event of  Default),  and  whether  arising
before,  on, or after the Certificate  Closing Date,  (whether or not any of the
transactions contemplated by this Agreement are consummated)  (individually,  an
"Expense,"  collectively,  "Expenses"),  which may be imposed  on,  incurred  or
suffered by or asserted against any Indemnitee, in any way relating to, based on
or arising out of or in connection  with,  in each case directly or  indirectly,
any one or more of the following:

                  (i) any  Operative  Agreement,  any  document  entered into in
         connection   therewith,   any  sublease  or  transfer,   or  any  other
         transaction contemplated hereby or thereby;

                  (ii) the operation,  possession,  use,  non-use,  maintenance,
         storage, overhaul, delivery,  non-delivery,  control, repair or testing
         of  the  Aircraft,  Airframe,  or any  Engine  or any  engine  used  in
         connection  with the Airframe,  or any Part thereof by the Lessee,  any
         sublessee  or  any  other  Person  whatsoever,   whether  or  not  such
         operation,  possession, use, non-use,  maintenance,  storage, overhaul,
         delivery,  non-delivery,  control,  repair or testing is in  compliance
         with the terms of the Lease, including, without limitation,  claims for
         death,  personal injury or property damage or other loss or harm to any
         Person  whatsoever,  including,  without  limitation,  any  passengers,
         shippers  or other  Persons  wherever  located,  and  claims or penalty
         relating  to  any  laws,  rules  or  regulations,   including,  without
         limitation,  environmental  control, noise and pollution laws, rules or
         regulation;

                  (iii)  the  manufacture,   design,  sale,  return,   purchase,
         acceptance,  rejection,  delivery,  non-delivery,   condition,  repair,
         modification,  servicing,  rebuilding,   airworthiness,   registration,
         reregistration,  deregistration,  ownership, financing, import, export,
         performance,     non-performance,     lease,    sublease,     transfer,
         merchantability,   fitness  for  use,   alteration,   substitution   or
         replacement of any Airframe,  Engine,  or Part or other transfer of use
         or possession,  or other disposition of the Aircraft, the Airframe, any
         Engine or any Part  including,  without  limitation,  latent  and other
         defects,  whether or not discoverable,  strict tort liability,  and any
         claims for patent, trademark or copyright infringement;

                  (iv) any breach of or failure  to perform or  observe,  or any
         other non-compliance  with, any condition,  covenant or agreement to be
         performed,  or  other  obligations  of  the  Lessee  under  any  of the
         Operative Agreements or any Pass-Through  Agreement,  or the falsity or
         inaccuracy  of any  representation  or warranty of the Lessee in any of
         the Operative  Agreements  or any  Pass-Through  Agreement  (other than
         representations and warranties in the Tax Indemnity Agreement);

                  (v)      the Collateral Account and the Liquid Collateral;

                  (vi) the enforcement of the terms of the Operative  Agreements
         and the administration of the Trust Indenture Estate; and

                  (vii) the offer,  issuance,  sale,  resale or  delivery of any
         Certificate  or  any  Pass-Through  Certificate,  or any  refunding  or
         refinancing  thereof,  or interest in the Lessor's  Estate or the Trust
         Agreement or any similar  interest or in any way relating to or arising
         out of the Trust  Agreement and the Lessor's  Estate,  the Indenture or
         the Trust Indenture Estate (including,  without  limitation,  any claim
         arising out of the Securities  Act of 1933, as amended,  the Securities
         Exchange  Act of 1934,  as  amended,  or any other  federal or state or
         foreign  statute,  law or  regulation,  or at common  law or  otherwise
         relating to securities), or the action or inaction of the Owner Trustee
         or Indenture  Trustee as trustees,  in the manner  contemplated by this
         Agreement,  the  Indenture,  the  Indenture  Supplement  or  the  Trust
         Agreement  and in the case of the Owner  Participant,  its  obligations
         arising under Section 6.01 of the Trust Agreement.

The foregoing  indemnity by the Lessee is intended to include and cover,  but is
not limited to, any Expense to which the  Indemnitees may be subject as a result
of their  respective  ownership  or leasing of any interest in or holding of any
Lien on the Aircraft,  Airframe,  any Engine or Part during the Term, whether or
not in the Lessee's  possession or control,  insofar as such Expense  relates to
any activity or event whatsoever  involving such item while it is under lease to
the Lessee (or after termination of the Lease in connection with the exercise of
remedies  thereunder  to the extent  that such  Expense is  attributable  to the
transactions  contemplated  hereby and by the other Operative  Agreements),  and
such Expense does not fall within any of the  exceptions  listed in Section 9.01
(b) hereof.

         (b)      Exceptions.  The  indemnity  provided  for in Section 9.01 (a) shall not extend to any Expense of
                  ----------
any Indemnitee to the extent it:

                  (i) results from the willful misconduct or gross negligence of
         any  Indemnitee  (other  than gross  negligence  or willful  misconduct
         imputed to such person by reason of its interest in the Aircraft or any
         transaction documents);

                  (ii) is  attributable  to  acts  or  events  (other  than  the
         performance by Lessee of its  obligations  pursuant to the terms of the
         transaction documents) which occur after the Aircraft is no longer part
         of the  Lessor's  Estate  or,  if the  Aircraft  remains  a part of the
         Lessor's Estate,  after the expiration of the Term (unless the Aircraft
         is being  returned at such time, in which case after return of physical
         possession;  provided that if the Lease has been terminated pursuant to
         Section 15 thereof,  the indemnity  provided in Section  9.01(a) hereof
         shall survive for so long as Lessor or the  Indenture  Trustee shall be
         exercising  remedies under such Section 15), or to acts or events which
         occur  after  return of  possession  of the  Aircraft  by the Lessee in
         accordance  with the  provisions of the Lease (subject to the foregoing
         proviso if the Lessor has  terminated  the Lease pursuant to Section 15
         of the Lease);

                  (iii) is a Tax or loss of a Tax  benefit,  whether  or not the
         Lessee is required to indemnify  therefor  pursuant to Article 8 hereof
         or pursuant to the Tax Indemnity Agreement;

                  (iv) is a cost or expense required to be paid by an Indemnitee
         or its permitted  transferees  (and not by the Lessee) pursuant to this
         Agreement or any other Operative  Agreement and for which the Lessee is
         not  otherwise  obligated to  reimburse  such  Indemnitee,  directly or
         indirectly  pursuant  to the  terms  of this  Agreement  or such  other
         Operative Agreement;

                  (v) results from the incorrectness or breach by any Indemnitee
         of its  representations  or  warranties,  under  any  of the  Operative
         Agreements;

                  (vi) results from the failure by any Indemnitee to perform its
         obligations under any of the Operative Agreements;

                  (vii) is, in the case of the Owner Participant, Lessor's Liens
         to the extent attributable to the Owner Participant; in the case of the
         Owner Trustee,  Lessor's Liens to the extent  attributable to the Owner
         Trustee;  in the case of SSB, Lessor's Liens to the extent attributable
         to SSB; and in the case of the Indenture Trustee,  Indenture  Trustee's
         Liens;

                  (viii) is, in the case of the Owner  Participant  or the Owner
         Trustee, attributable to the offer or sale by such Indemnitee after the
         Certificate Closing Date of any interest in the Aircraft,  the Lessor's
         Estate or the Trust  Agreement or any similar  interest  (including  an
         offer or sale resulting from  bankruptcy or other  proceedings  for the
         relief of debtors in which such  Indemnitee  is the debtor),  unless in
         each case such offer or sale shall occur (x)  pursuant to the  exercise
         of remedies under Section 15 of the Lease or (y) in connection with the
         Lessee's exercise of its early termination option under Section 3(g) of
         the Lease or its purchase  options  under Section 16 of the Lease or in
         connection with Section 11 of the Lease;

                  (ix) is an Expense  arising  under or in  connection  with any
         prohibited  transaction,  within the meaning of Section 406 of ERISA or
         Section 4975(c)(1) of the Code ("Prohibited Transaction");

                  (x)  results  from  any  amendment  to any  of  the  Operative
         Agreements  which is not  requested  by the Lessee and is not  required
         pursuant to the terms of any of the Operative Agreements;

                  (xi) results from the exercise by any  Indemnitee of any right
         to inspect  the  Aircraft  except with  respect to any such  inspection
         conducted while an Event of Default is continuing; and

                  (xii)  constitutes  the  loss  of  future  profits  or  losses
         attributable  to the Owner  Participant's  and/or  the Owner  Trustee's
         overhead.

         Section  9.02.  After-Tax  Basis.  The amount which the Lessee shall be
required to pay with respect to any Expense  indemnified  against  under Section
9.01 shall be an amount  sufficient to restore the  Indemnitee,  on an After-Tax
Basis,  to the same  position such party would have been in had such Expense not
been  incurred.  If any  Indemnitee  realizes a Tax benefit  (whether by credit,
deduction  or  otherwise),  or would have  realized  such a benefit if  properly
claimed, by reason of the payment of such Expense paid or indemnified against by
the Lessee which was not considered in the computation thereof,  such Indemnitee
shall promptly pay to the Lessee,  but not before the Lessee shall have made all
payments theretofore due such Indemnitee under this Agreement, the Tax Indemnity
Agreement and any other  Operative  Agreement,  an amount equal to the lesser of
(x) the sum of such Tax benefit plus any other permanent Tax benefit realized by
such Indemnitee as the result of any payment made by such Indemnitee pursuant to
this sentence and (y) the amount of the payment  pursuant to Section 9.01 by the
Lessee to such Indemnitee plus the amount of any other payments by the Lessee to
such Indemnitee  theretofore  made pursuant to this Section 9.02 less the amount
of any payments by such  Indemnitee to the Lessee  theretofore  made pursuant to
this  Section  9.02  (and  the  excess,  if any,  of the Tax  benefit  over  the
applicable  amount  described in clause (x) or clause (y) above shall be carried
forward and applied to reduce pro tanto any subsequent obligations of the Lessee
to make payments to such  Indemnitee  pursuant to this Section  9.02),  it being
intended that no Indemnitee  should  realize a net Tax benefit  pursuant to this
Section 9.02 unless the Lessee shall first have been made whole for any payments
by it to such Indemnitee pursuant to this Section 9.02; provided,  however, that
notwithstanding  the foregoing portions of this sentence,  such Indemnitee shall
not be obligated to make any payment to the Lessee  pursuant to this sentence so
long as a Specified Default exists. Any Taxes that are imposed on any Indemnitee
as a result of the  disallowance or reduction of such Tax benefit referred to in
the  next  preceding  sentence  in a  taxable  year  subsequent  to the  year of
allowance and  utilization by such  Indemnitee  (including the expiration of any
tax credit  carryovers or carrybacks of such Indemnitee that would not otherwise
have expired) shall be indemnifiable  pursuant to the provisions of Section 8.01
hereof without regard to Section 8.01 (b) hereof.

         Section  9.03.  Subrogation.  Upon the payment in full of any indemnity
pursuant to this Article 9 by the Lessee (but not earlier),  the Lessee shall be
subrogated to any right of the Indemnitee in respect of the matter against which
such indemnity has been made.

         Section 9.04. Notice and Payment.  Each Indemnitee and the Lessee shall
give prompt written notice one to the other of any liability of which such party
has  received  notice  for which the  Lessee  is, or may be,  liable  under this
Article  9;  provided,  however,  that  failure  to give such  notice  shall not
terminate  any of the rights of the  Indemnitees  under this  Article 9,  except
(with  respect to such  Indemnitee)  to the extent that such  failure  adversely
affects any  applicable  defense or  counterclaim,  or otherwise  increases  the
amount the Lessee  would have been liable for in the absence of such  failure to
provide such notice. Unless otherwise provided in the Operative Agreements,  any
amount payable to an Indemnitee  pursuant to this Article 9 shall be paid within
30 days  after  receipt  of a  written  demand  therefor  from  such  Indemnitee
accompanied by a written statement describing in reasonable detail the basis for
such indemnity and the computation of the amount so payable.

         Section 9.05. Refunds. If any Indemnitee shall obtain a recovery of all
or any part of any amount which the Lessee shall have paid to such Indemnitee or
for which the Lessee shall have reimbursed such Indemnitee under this Article 9,
and provided that no Specified  Default exists (but if a Specified  Default does
exist,  payment  shall  not be made to the  Lessee  until no  Specified  Default
exists),  such  Indemnitee  shall  pay to the  Lessee  the  amount  of any  such
recovery,  including interest received with respect to the recovery,  net of any
Taxes paid or payable as a result of the receipt of the recovery  and  interest,
plus any net additional tax benefits realized by the Indemnitee as the result of
any payment made  pursuant to this sentence less  reasonable  costs  incurred by
such Indemnitee and not indemnified by the Lessee; provided,  however, that such
amount  shall not be payable (a) before such time as the Lessee  shall have made
all payments or indemnities  then due and payable to such Indemnitee  under this
Article 9, or (b) to the extent that the amount of such payment would exceed the
amount of all prior payments by the Lessee to such  Indemnitee  pursuant to this
Article  9, less the  amount of all prior  payments  by such  Indemnitee  to the
Lessee  pursuant to this Article 9. Any subsequent  loss of such recovery or tax
benefit shall be subject to  indemnification  under Article 8 or this Article 9,
as the case may be, subject to Section 8.01 (b) hereof.

         Section 9.06.  Defense of Claims. The Lessee or its insurers shall have
the right  (in each such case at the  Lessee's  sole  expense)  to  investigate,
defend (and  control the defense  of) any such claim  covered by  insurance  for
which  indemnification  is sought pursuant to this Article 9 (in the case of any
such  defense  by the  Lessee,  but  not the  Lessee's  insurers,  with  counsel
reasonably  satisfactory to the relevant  Indemnitee) and each Indemnitee  shall
cooperate with the Lessee or its insurers with respect thereto,  provided, that,
without  limiting the right of the  Lessee's  insurers to assume and control the
defense of, or to compromise,  any such claim,  the Lessee shall not be entitled
to assume and control the defense of or compromise any such claim (A) during the
continuance  of any Event of Default  arising  under Section 14(a) of the Lease,
(B) if such Indemnitee  reasonably objects to such control on the ground that an
actual or potential material conflict of interest exists making it advisable (on
the basis of  prevailing  standards  of  professional  responsibility)  for such
Indemnitee  to be  represented  by separate  counsel or on the grounds that such
proceeding  involves  the  potential  imposition  of criminal  liability on such
Indemnitee  or (C) such  proceeding  will involve any material risk of the sale,
forfeiture or loss of, or the creation of any Lien (other than Permitted  Liens)
on the  Aircraft or the Trust  Estate  (unless the Lessee  posts a bond or other
security  reasonably  acceptable  in form and substance to such  Indemnitee)  or
involve any material risk of civil  liability to such Indemnitee for which it is
not indemnified  hereunder and, in any such case, the relevant  Indemnitee will,
in good faith, undertake the defense of such claim at the expense of the Lessee.
Subject to the immediately foregoing sentence,  where the Lessee or the insurers
under a policy of insurance maintained by the Lessee undertake the defense of an
Indemnitee with respect to such a claim, no additional legal fees or expenses of
such  Indemnitee  in  connection  with  the  defense  of  such  claim  shall  be
indemnified  hereunder  unless the fees or expenses were incurred at the written
request of the Lessee or such  insurers or as the result of the  prohibition  of
the  dual  representation  of  Lessee  and the  relevant  Indemnitee  under  the
applicable  rules of legal ethics.  Subject to the  requirement of any policy of
insurance  applicable  to a claim,  an  Indemnitee  may  participate  at its own
expense at any  judicial  proceeding  controlled  by the Lessee or its  insurers
pursuant  to  the  preceding  provisions,   to  the  extent  that  such  party's
participation  does not, in the opinion of the independent  counsel appointed by
the Lessee or its  insurers to conduct  such  proceedings,  interfere  with such
control;   and  such  participation   shall  not  constitute  a  waiver  of  the
indemnification  provided in this Section 9.06.  No Indemnitee  shall enter into
any settlement or other  compromise  with respect to any claim described in this
Section 9.06 without the prior written  consent of the Lessee (except during the
continuance  of an Event of Default  arising  under Section 14(a) of the Lease),
which  consent  shall not be  unreasonably  withheld  or  delayed,  unless  such
Indemnitee  waives its right to be indemnified under this Article 9 with respect
to such claim.  The Lessee  shall not enter into any  settlement  or  compromise
which the Lessee has not agreed to discharge or with respect to which the Lessee
has not agreed to indemnify such Indemnitee to such Indemnitee's satisfaction or
which admits any criminal  violation,  gross negligence or willful misconduct on
the part of any Indemnitee without the prior written consent of such Indemnitee.

         Section 9.07. Survival of Obligations. The representations, warranties,
indemnities  and agreements of the Lessee provided for in this Article 9 and the
Lessee's  obligations  under any and all of them shall survive the expiration or
other  termination of this  Agreement,  the Tax Indemnity  Agreement,  the Trust
Agreement, the Indenture,  the Purchase Agreement Assignment,  the Lease and the
other Operative  Agreements but, as to such indemnities  after the expiration or
other  termination  of the Lease,  only with  respect  to  losses,  liabilities,
obligations,  damages,  penalties,  claims,  actions, suits, costs, Expenses and
disbursements  caused by events  occurring or existing prior to such termination
or expiration or incurred in the process of (i) the return or disposition of the
Aircraft under Section 5 or Section 15 of the Lease,  or (ii) the termination of
the Lease or the Indenture or, if later, the return of the Aircraft.

         Section 9.08.  Effect of Other  Indemnities.  The Lessee's  obligations
under the indemnities provided for in this Agreement shall be those of a primary
obligor  whether or not the Person  indemnified  shall also be indemnified  with
respect to the same matter  under the terms of this  Agreement,  the Lease,  the
Indenture,  the Trust  Agreement,  or any other document or instrument,  and the
Person seeking indemnification from the Lessee pursuant to any provision of this
Agreement  may proceed  directly  against the Lessee  without  first  seeking to
enforce any other right of indemnification.

         Section  9.09.  Interest.  The Lessee  will pay to each  Indemnitee  on
demand,  to the extent  permitted by applicable  law,  interest on any amount of
indemnity  not paid when due  pursuant to this Article 9 until the same shall be
paid, at the Past Due Rate.

         Section  9.10.  Special  Indemnity.  Notwithstanding  anything  in this
Article 9 to the contrary,  the Lessee shall hold the Owner Participant harmless
on an After-Tax  Basis from any losses  arising from or in  connection  with the
transactions contemplated by Section 17.02 hereof.



                                   ARTICLE 10

                                TRANSACTION COSTS

         Section  10.01.  Transaction  Costs and Other  Costs.  (a)  Transaction
Costs.  Except as otherwise  provided in any  amendment to this  Agreement,  the
Lessee (or the Owner  Participant  following  a transfer  of the  Initial  Owner
Participant's  Beneficial  Interest)  shall pay (or  reimburse the Lessee if the
Lessee  shall have  previously  made such  payment) all fees and expenses of the
following  persons  relating to the  offering of the  Pass-Through  Certificates
contemplated  by  the  Placement  Agreement  and  related  to  the  transactions
contemplated  hereby on the Certificate  Closing Date and the Delivery Date: (i)
the fees and  expenses  of  counsel  for any Owner  Participant  (including  any
special  Canadian  counsel);  (ii)  the  fees and  expenses  of the  transaction
documentation  counsel  for the Lessee and counsel  for the Owner  Trustee,  the
Indenture Trustee, the Manufacturer,  SDIQ, the Seller, the Subordination Agent,
the Pass-Through Trustee, each Liquidity Provider and the Placement Agent (other
than those fees,  expenses  and  disbursements  payable by the  Placement  Agent
pursuant to the  Placement  Agreement);  (iii) the fees and  expenses of Special
Aviation Counsel; (iv) any initial fees and expenses of the Pass-Through Trustee
and each Liquidity Provider and the fees and expenses of the Owner Trustee,  the
Subordination Agent and the Indenture Trustee; (v) any compensation, commissions
and  discounts  payable  to  the  Placement  Agent  pursuant  to  the  Placement
Agreement;  (vi)  the  fees,  if any,  incurred  in  printing  the  Pass-Through
Certificates;  (vii) the fees and expenses  incurred in connection with printing
any  offering  memorandum  for the  offering of the  Pass-Through  Certificates;
(viii) the fees and expenses of BDO Seidman  LLP;  (ix) the fees and expenses of
Moody's and S&P;  (x) the fees and  expenses  (including  computer  time-sharing
charges) of Babcock & Brown, Inc.; (xi) the reasonable out-of-pocket expenses of
the Owner  Participant,  including,  without  limitation,  any  amounts  paid in
connection with any appraisal report prepared for the Owner  Participant;  (xii)
reimbursement to the Owner  Participant,  any Owner Participant  Guarantor,  the
Owner Trustee,  the Indenture Trustee,  the Subordination  Agent, each Liquidity
Provider  and the  Pass-Through  Trustee  for any and  all  fees,  expenses  and
disbursements  of the  character  referred  to above or  otherwise  incurred  in
connection with the negotiation, preparation, execution and delivery, filing and
recording of the Operative  Agreements and the documents  contemplated  thereby,
including,  without  limitation,  travel expenses and disbursements  which shall
have been paid by such party;  (xiii) printing and duplicating  expenses and all
fees, Taxes and other charges payable in connection with the recording or filing
on or before the Delivery Date of the  instruments  described in this Agreement;
(xiv) initial fees,  initial  expenses,  initial  disbursements  and the initial
costs of distributing the Certificates  (but not the continuing fees,  expenses,
disbursements  and costs of  distribution) of SSB, as lessor under the Lease and
as  Owner   Trustee   under  the  Trust   Agreement  and  with  respect  to  the
administration of the Lease and the Lessor's Estate, of the Indenture Trustee as
trustee  under the  Indenture  with respect to the  administration  of the Trust
Indenture Estate and of the  Subordination  Agent acting under the Intercreditor
Agreement;  and (xv) any other  amounts  approved  by the  Lessee  and the Owner
Participant. The fees and expenses described in clauses (ii) through (x) of this
paragraph shall be allocable to the Owner  Participant  under this Agreement (1)
to the extent incurred  specifically with respect to the Owner Participant,  and
(2) to the extent such fees and expenses  are incurred but are not  specifically
attributable  to the Owner  Participant,  in the  proportion  that the principal
amount  of the  Certificates  bears  to the  total  amount  of the  Pass-Through
Certificates.

         The Owner  Participant,  the Owner  Trustee and the Lessee  acknowledge
that the  indicative  percentages  for Basic  Rent,  Stipulated  Loss  Value and
Termination Value and the indicative EBO Price to be set forth in the Lease have
been prepared  assuming the aggregate  amount  payable by the Owner  Participant
pursuant  to the  preceding  paragraph  is  2.9%  of  the  Purchase  Price  (the
"Estimated Expense Amount").

         (b)   Continuing   Expenses.   The   continuing   fees,   expenses  and
disbursements  (including  reasonable  counsel fees and  expenses) of the entity
acting as Owner  Trustee,  as lessor under the Lease and as Owner  Trustee under
the Trust  Agreement  with  respect to the  administration  of the Lease and the
Lessor's Estate and the continuing fees,  expenses and disbursements  (including
reasonable   counsel  fees  and  expenses  and  initial  fees  relating  to  the
establishment of any replacement  trustee) of the Indenture Trustee,  as trustee
under the Indenture with respect to the  administration  of the Trust  Indenture
Estate, the continuing fees,  expenses and disbursements  (including  reasonable
counsel fees and initial fees  relating to the  establishment  of a  replacement
trustee)  of the  Pass-Through  Trustee  and  the  Subordination  Agent  and the
continuing fees, expenses and disbursements  (including  reasonable counsel fees
and  initial  fees  relating to the  establishment  of a  replacement  liquidity
provider) of the Liquidity Providers under each Liquidity Facility shall be paid
as Supplemental  Rent by the Lessee,  including  without  limitation any amounts
payable to the  Indenture  Trustee or on account of  requests  by the  Indenture
Trustee for indemnification under Article XI of the Indenture.

         (c) Amendments,  Supplements and Appraisal.  Without  limitation of the
foregoing, the Lessee agrees:

                  (i) to pay as  Supplemental  Rent to the  Owner  Trustee,  the
         Owner  Participant,  any Owner  Participant  Guarantor,  the  Indenture
         Trustee,  the  Subordination  Agent,  the  Liquidity  Providers and the
         Pass-Through Trustee all costs and expenses (including reasonable legal
         fees and expenses)  incurred by any of them in connection  with (a) any
         Default  and  any  enforcement  or  collection   proceedings  resulting
         therefrom,  or (b) the  enforcement  of the  obligations  of the Lessee
         hereunder or under the other Operative Agreements,  including,  without
         limitation,   the  entering  into  or  giving  or  withholding  of  any
         amendments  or  supplements  or waivers  or  consents  (whether  or not
         consummated),  including without limitation, any amendment, supplement,
         waiver or consent resulting from any work-out, restructuring or similar
         proceeding  relating to the performance or nonperformance by the Lessee
         of its obligations under the Operative Agreements or (c) any amendment,
         supplement,  waiver or consent (whether or not entered into) under this
         Agreement,  the  Lease,  the  Indenture,  the  Certificates,   the  Tax
         Indemnity  Agreement,  the Purchase  Agreement  Assignment or any other
         Operative Agreement or document or instrument delivered pursuant to any
         of them, which amendment,  supplement, waiver or consent is required by
         any  provision of any Operative  Agreement  (including  any  adjustment
         pursuant to Section 3(d) of the Lease) or is requested by the Lessee or
         necessitated  by  the  action  or  inaction  of the  Lessee;  provided,
         however,  that the Lessee shall not be responsible for fees or expenses
         incurred in connection with the offer,  sale or other transfer (whether
         pursuant  to  Section   7.03(d)  hereof  or  otherwise)  by  the  Owner
         Participant,  the Owner Trustee,  the Indemnitee Trustee, or any Holder
         after the Certificate Closing Date of any interest in the Aircraft, the
         Lessor's Estate, the Beneficial  Interest or the Trust Agreement or any
         similar  interest  (and the offeror,  seller,  or  transferor  shall be
         responsible for all such fees and expenses), unless such offer, sale or
         transfer  shall occur (A)  pursuant to the  exercise of remedies  under
         Section 15 of the Lease,  or (B) in connection  with the termination of
         the Lease or action or  direction  of the  Lessee  pursuant  to Section
         3(g), 11, or 16 of the Lease; and

                  (ii) to pay  one-half of the fees,  costs and  expenses of all
         appraisers involved in an independent  appraisal of the Aircraft to the
         extent required under Section 16 of the Lease; provided that the Lessee
         shall pay all such fees, costs, and expenses of any appraisal conducted
         pursuant to Section 15 of the Lease.



                                   ARTICLE 11

                             SUCCESSOR OWNER TRUSTEE

         Section 11.01.  Appointment of Successor Owner Trustee. (a) Resignation
and Removal.  The Owner Trustee or any successor Owner Trustee may resign or may
be removed by the applicable  Owner  Participant,  and a successor Owner Trustee
may be appointed and a Person may become Owner Trustee under the Trust Agreement
only in accordance  with the  provisions of Section 3.11 of the Trust  Agreement
and the provisions of paragraphs (b) and (c) of this Section 11.01.

         (b)  Conditions  to  Appointment.  The  appointment  in any manner of a
successor Owner Trustee pursuant to Section 3.11 of the Trust Agreement shall be
subject to the following conditions:

                  (i)      such successor Owner Trustee shall be a Citizen of the United States;

                  (ii) such  successor  Owner Trustee shall be a bank or a trust
         company having combined  capital,  surplus and undivided  profits of at
         least  $100,000,000  or a bank or trust company  fully  guaranteed by a
         direct or indirect  parent thereof having a combined  capital,  surplus
         and undivided profits of at least $100,000,000;

                  (iii) such appointment shall not violate any provisions of the
         Transportation  Code  or  any  applicable  rule  or  regulation  of the
         applicable regulatory agency or body of any other jurisdiction in which
         the  Aircraft may then be  registered  or create a  relationship  which
         would be in violation of the Transportation Code or any applicable rule
         or regulation of the applicable  regulatory agency or body of any other
         jurisdiction in which the Aircraft may then be registered;

                  (iv)  such  successor   Owner  Trustee  shall  enter  into  an
         agreement or agreements,  in form and substance reasonably satisfactory
         to the Lessee, the Owner Participant,  the Pass-Through Trustee and the
         Indenture Trustee whereby such successor Owner Trustee confirms that it
         shall be deemed a party to this  Agreement,  the Trust  Agreement,  the
         Lease, the Lease Supplement,  the Purchase Agreement  Assignment,  [the
         Engine Warranty  Assignment],  the Indenture,  the Indenture Supplement
         and any other Operative Agreement to which the Owner Trustee is a party
         and agrees to be bound by all the terms of such documents applicable to
         the  Owner  Trustee  and  makes  the   representations  and  warranties
         contained  in  Section  7.04  hereof   (except  that  it  may  be  duly
         incorporated,  validly  existing and in good standing under the laws of
         the United States of America or any State thereof); and

                  (v) all  filings  of Uniform  Commercial  Code  financing  and
         continuation statements,  filings in accordance with the Transportation
         Code and amendments thereto shall be made and all further actions taken
         in connection  with such  appointment as may be necessary in connection
         with  maintaining the validity,  perfection and priority of the Lien of
         the Indenture and the valid and continued  registration of the Aircraft
         in accordance with the Transportation Code.

         (c) Appointment.  For so long as the Aircraft remains  registered under
the  Transportation  Code, the Owner  Participant  agrees to appoint  promptly a
successor Owner Trustee meeting the  requirements of Section 11.01 (b) hereof in
the event the Owner Participant has knowledge that the Owner Trustee at any time
shall not be a Citizen of the United States.



                                   ARTICLE 12

                        LIABILITIES AND INTERESTS OF THE
                          OWNER PARTICIPANT AND HOLDERS

         Section  12.01.   Liabilities  of  the  Owner  Participant.   No  Owner
Participant  shall  have any  obligation  or duty to the Lessee or to any Holder
with respect to the  transactions  contemplated by this Agreement,  except those
obligations or duties expressly set forth in this Agreement,  the Indenture, the
Trust Agreement,  the Tax Indemnity Agreement,  the Lease or any other Operative
Agreement  to which the Owner  Participant  is a party and no Owner  Participant
shall be liable  for the  performance  by any other  party  hereto of such other
party's obligations or duties hereunder.  Under no circumstances shall the Owner
Participant as such be liable to the Lessee,  nor shall the Owner Participant be
liable to any Holder, in each case for any action or inaction on the part of the
Owner Trustee or the Indenture  Trustee in connection with this  Agreement,  the
Indenture,  the Lease, the Trust Agreement,  the Purchase Agreement  Assignment,
any other Operative Agreement, the ownership of the Aircraft, the administration
of the Lessor's  Estate or the Trust Indenture  Estate or otherwise,  whether or
not such  action  or  inaction  is  caused by the  willful  misconduct  or gross
negligence of the Owner Trustee or the Indenture  Trustee,  except to the extent
of any action or inaction taken pursuant to the Owner  Participant's  directions
or instructions.

         Section  12.02.  Interest  of  Holders of  Certificates.  A Holder of a
Certificate  shall have no further  interest in, or other right with respect to,
the  Trust  Indenture  Estate  when and if the  principal  and  interest  on all
Certificates held by such Holder and all other sums payable to such Holder under
this Agreement,  under the Indenture and under such Certificates shall have been
paid in full.



                                   ARTICLE 13

                                 OTHER DOCUMENTS

         Section 13.01. Consent of Lessee to Other Documents.  The Lessee hereby
consents in all respects to the  execution  and delivery of the  Indenture,  the
Trust Agreement,  the  Intercreditor  Agreement and the Liquidity  Facilities as
initially  executed  and to all of the terms of such  documents,  and the Lessee
acknowledges  receipt of an executed  counterpart  of such  documents;  it being
agreed that such consent shall not be construed to require the Lessee's  consent
to any future  supplement to, or amendment,  waiver or modification of the terms
of the Indenture,  the Intercreditor Agreement or the Liquidity Facilities,  the
Trust Agreement or the Certificates, in each case as originally executed, except
that prior to the occurrence and continuance of an Event of Default,  no section
of the  Indenture,  the Trust  Agreement,  the  Intercreditor  Agreement  or the
Liquidity Facilities,  in each case as originally executed,  shall be amended or
modified in any manner materially adverse to the Lessee without its consent.

         Section 13.02.  Further  Assurances.  The Lessee hereby confirms to the
Owner  Participant its covenants set forth in and  obligations  under the Lease.
The Lessee agrees that, except as otherwise provided in the Indenture, the Owner
Trustee may not enter into any amendment, modification or supplement of, or give
any waiver or consent  with  respect  to, or approve  any matter or  document as
being  satisfactory  under the Lease  without the prior consent of the Indenture
Trustee and the Owner Participant and that, except as otherwise  provided in the
Indenture,  upon an Indenture Event of Default, the Indenture Trustee may act as
the Lessor  under the Lease to the  exclusion of the Owner  Trustee.  The Lessee
further agrees to deliver to the Indenture  Trustee and the Owner  Participant a
copy of each notice, statement,  request, report or other communication given or
required to be given to the Owner Trustee under the Lease.

         Section  13.03.   Pass-Through   Trustee's  and  Subordination  Agent's
Acknowledgment.  The  Pass-Through  Trustee and the  Subordination  Agent hereby
acknowledge  and  agree to be bound by all of the terms  and  conditions  of the
Indenture,  including  without  limitation,  Section 8.01 thereof  regarding the
rights  of  the  Owner  Participant  to  purchase  the  Certificates  under  the
circumstances specified therein.



                                   ARTICLE 14

                                     NOTICES

         Section 14.01.  Notices. All notices,  demands,  declarations and other
communications  required  by this  Agreement  shall be in  writing  and shall be
deemed received (a) if given by telecopier, when transmitted and the appropriate
telephonic  confirmation  received if  transmitted  on a Business Day and during
normal  business hours of the recipient,  and otherwise on the next Business Day
following  transmission,  or (b) if  given by  certified  mail,  return  receipt
requested,  by courier service,  or by any other  commercially  customary means,
when received or personally delivered, addressed:

                  (a) if to the Lessee, to its office at 515A Shaw Road, Dulles,
         Virginia 20166, Attention:  General Counsel,  telephone (703) 925-6000,
         facsimile (703) 925-6294;  or to such other address as the Lessee shall
         from time to time  designate  in writing to the Lessor,  the  Indenture
         Trustee and any Owner Participant;

                  (b) if to the  Lessor or the Owner  Trustee,  to its office at
         225 Asylum Street  (Goodwin  Square),  Hartford,  CT 06103,  Attention:
         Corporate Trust  Department,  telephone (860) 244-1822  facsimile (860)
         244-1889;  or to such other  address  as the Lessor  shall from time to
         time designate in writing to the Lessee and the Indenture Trustee, with
         a copy to the Owner Participant;

                  (c) if to the Indenture  Trustee,  the Subordination  Agent or
         the  Pass-Through  Trustee,  to its office at 25 South Charles  Street,
         Baltimore, MD 21201, Attention:  Corporate Trust Department,  telephone
         (410) 244-4626,  facsimile (410) 244-4236;  or to such other address as
         the Indenture Trustee or the Pass-Through  Trustee, as the case may be,
         shall from time to time designate in writing to the Lessor,  the Lessee
         and the Owner Participant; and

                  (d) if to the  Liquidity  Provider,  to its office at ING Bank
         N.V., Department of Bankgarantie  Zaken-Jurisdische  Zaken, Amsterdamse
         Poort, Bijlmer plein 888, 1102 MG Amsterdam, The Netherlands, telephone
         011-31-20-652-3260,  facsimile  011-31-20-652-3235,  with a copy to ING
         Lease  (Ireland)  B.V.  48 St.  Stephen's  Green,  Dublin  2,  Ireland,
         telephone 011-353-1-662-2211,  facsimile 011-353-1-662-2240; or to such
         other address as a Liquidity Provider shall from time to time designate
         in writing to the Lessor, the Lessee and the Indenture Trustee.



                                   ARTICLE 15

                           REFINANCING/REOPTIMIZATION

         Section 15.01. Refinancing.  (a) Subject to the terms and conditions of
this Section 15.01,  the Lessee may request an Owner  Participant to participate
in one  refinancing in whole but not in part, of the  Certificates  prior to the
end of the  Basic  Term (a  "Refinancing").  Such  Refinancing  may be placed in
either the private or public  markets and shall be  denominated in United States
dollars and shall be on terms reasonably  satisfactory to the Owner Participant.
The Owner Participant will agree to negotiate promptly in good faith to conclude
an agreement with the Lessee as to the terms of any such Refinancing transaction
(including  the  terms  of  any  debt  to be  issued  in  connection  with  such
refinancing  and the  documentation  to be  executed in  connection  therewith).
Without the prior written consent of the Owner  Participant,  the prospectus and
other  offering  materials  relating to any  Refinancing in the form of a public
offering  shall not  identify  the Owner  Participant  and shall not include any
financial  statements  of the Owner  Participant  or any Affiliate  thereof.  In
connection  with any such  Refinancing  in the  form of a public  offering,  the
Lessee shall indemnify the Owner Participant in a manner  satisfactory to it for
any liabilities under federal,  state or foreign  securities laws resulting from
such offering.  The aggregate principal amount of the new Certificates issued in
connection  with any  Refinancing  shall be the same as the aggregate  principal
amount outstanding on the Certificates being refinanced.

         (b)  Notwithstanding  anything  herein to the contrary,  no Refinancing
will be permitted unless the Owner  Participant and the Indenture  Trustee shall
have  received at least 15 days' prior written  notice of the scheduled  closing
date of such Refinancing and the Owner Participant shall have been provided such
longer period as it shall have required for a reasonable  opportunity  to review
the relevant  documentation  and the Owner  Participant shall have determined in
good  faith  that  neither  it nor the Owner  Trustee  shall  suffer any loss or
expense or bear any increased risk as a result of such  Refinancing  (including,
without limitation, any risk with respect to taxes or other adverse consequences
to the Owner Participant  including the application of Revenue  Procedures 75-21
and  75-28  and  Section  467 of the Code) for which it has not been or will not
have been indemnified by the Lessee in a manner  reasonably  satisfactory to the
Owner Participant and, if an additional indemnity is then provided by the Lessee
as the result of such  Refinancing  and the Owner  Participant  or the Indenture
Trustee  reasonably  deems itself insecure with respect to such  indemnity,  the
Lessee shall have provided  security or collateral for such  indemnity  which is
reasonably satisfactory to such Person nor would such transaction materially and
adversely affect the rights and obligations of Owner Participant.

         Prior to the  consummation of any Refinancing  pursuant to this Section
15.01, the Owner  Participant and the Lessee shall agree upon a schedule setting
forth each  installment of Basic Rent and setting forth  Stipulated  Loss Values
and  Termination  Values  payable  pursuant  to the  Lease  as a  result  of the
Refinancing  in accordance  with Section 3(d) of the Lease,  and  thereafter the
amounts set forth in such  schedule  shall become the amounts  payable under the
Lease.  Upon the consummation of the  Refinancing,  the evidence of indebtedness
issued  pursuant  to the  Refinancing  shall be  considered  "Certificates"  for
purposes of this Agreement, the Lease and the Indenture.

         (c) Notwithstanding the foregoing,  the Owner Participant shall have no
obligation to proceed with any  Refinancing  transaction as contemplated by this
Section  15.01  unless the Lessee  indemnifies  the Owner  Trustee and the Owner
Participant by agreement in form and substance satisfactory to each of them, for
any  liability,  obligation  (other than the  obligation  to pay  principal  and
interest in respect of the refinanced indebtedness), cost or expense (including,
without limitation,  reasonable  attorneys' fees and Make-Whole Premium or other
amounts due under the  Indenture),  including  any adverse tax  consequences  or
impact,  related to or arising out of any such  Refinancing  transaction and, if
the Owner  Participant  reasonably  deems itself  insecure  with respect to such
indemnity,  the Lessee  shall have  provided  security  or  collateral  for such
indemnity which is reasonably satisfactory to the Owner Participant.

         (d) Without the prior written consent of the Owner  Participant,  which
consent may be withheld in its sole discretion,  no such  refinancing  shall (1)
cause the aggregate  principal  amount of the indebtedness to be substituted for
the  Certificates  to  exceed  the  aggregate   principal  amount  of  the  then
outstanding   Certificates,   (2)  cause  the  weighted  average  life  of  such
indebtedness  to be  different  by more than  three  months  than the  remaining
weighted  average life of the then  outstanding  Certificates,  or (3) cause the
date of maturity of such  indebtedness  to be later than the date of maturity of
the Certificates being refinanced.

         (e) Each  party  agrees  to take or cause  to be  taken  all  requested
action,  including,  without  limitation,  the  execution  and  delivery  of any
documents  and  instruments,   including,  without  limitation,   amendments  or
supplements  to the Lease,  which may be  reasonably  necessary  or desirable to
effect  such  Refinancing,  including,  in the  case of the  Owner  Participant,
direction  to  the  Owner  Trustee  by  the  Owner  Participant  to  prepay  the
Certificates then outstanding; provided, however, that such Refinancing shall be
subject to the satisfaction of each of the following conditions:

                  (i) Payment of principal, accrued interest, Make-Whole Premium
         and  breakage  costs,  if any,  and all other sums due and owing on the
         Certificates payable under the Indenture;

                  (ii)  Payment in full of all other  amounts then due and owing
         by the Lessee under this Agreement, the Indenture, the Lease, the Trust
         Agreement,  and the Certificates  then outstanding shall have been made
         by the Lessee;

                  (iii) Such party shall have  received such opinions of counsel
         (including,  without  limitation,  an  opinion  received  by the  Owner
         Participant from independent tax counsel reasonably satisfactory to the
         Lessee  that such  Refinancing  shall not  result  in any  adverse  tax
         consequences  to such Owner  Participant,  unless the Lessee shall have
         agreed  to  provide  an   indemnity  in  respect   thereof   reasonably
         satisfactory   in  form  and  substance  to  the  Owner   Participant),
         certificates and other documents as it may reasonably request,  each in
         form and substance reasonably satisfactory to such party;

                  (iv) All  authorizations,  approvals and consents which in the
         reasonable  judgment of the Owner  Participant  are  necessary for such
         Refinancing shall have been obtained;

                  (v) The Lessee shall have provided or agreed to provide to the
         Owner  Participant,  as Supplemental  Rent under the Lease,  sufficient
         funds to pay any  breakage  costs,  Make-Whole  Premium  and any  other
         amounts due under the Indenture;

                  (vi) The  satisfaction  or waiver by each other  party to this
         Agreement of the  conditions  set forth in this  Section  15.01 to such
         party's obligations under this Section 15.01;

                  (vii)  No  Specified   Default  shall  exist  or  would  occur
         immediately after giving effect to such Refinancing;

                  (viii) In the event the Lessee shall not prohibit the purchase
         of the  Refinancing  loan  certificates  by, or with the  assets of, an
         employee  benefit plan,  as defined in Section 3(3) of ERISA,  which is
         subject to Title I of ERISA or a plan or individual retirement account,
         which is  subject  to Section  4975(c)  of the Code,  (individually  or
         collectively, an "ERISA Plan"), the Lessee will permit the placement of
         the Refinancing loan certificates with an ERISA Plan only if either (A)
         if such placement is in the form of pass-through certificates, the sole
         underwriter or the manager or co-manager of the underwriting  syndicate
         or the selling or  placement  agent of such  pass-through  certificates
         represents to the Lessee that it has a prohibited transaction exemption
         from  the  U.S.  Department  of  Labor  with  respect  to  Pass-Through
         certificates  (such as Prohibited  Transaction  Exemption  89-88 or any
         other  comparable  exemption) or (B) purchasers of the Refinancing loan
         certificates  (or if the Refinancing  involves the issuance and sale of
         pass-through    certificates,    purchasers   of   such    pass-through
         certificates)  provide a representation  (which may be in the form of a
         deemed  representation)   regarding  their  source  of  funds  used  in
         acquiring  the  Refinancing  loan  certificates  (or such  pass-through
         certificates,  as the case may be) and,  if such  purchasers  represent
         that they are using funds of an ERISA Plan in acquiring the Refinancing
         loan certificates (or such pass-through  certificates,  as the case may
         be), such purchasers further represent that (1) either they are relying
         on a prohibited transaction exemption from the U.S. Department of Labor
         with  respect to their  purchase  and holding of the  Refinancing  loan
         certificates (or such  pass-through  certificates,  as the case may be)
         and they provide  representations  regarding  the  satisfaction  of the
         relevant  conditions  of such an  exemption  or (2) their  purchase and
         holding of the  Refinancing  loan  certificates  (or such  pass-through
         certificates,  as the case may be) will  not  constitute  a  non-exempt
         prohibited  transaction  under  Section 406 of ERISA or Section 4975 of
         the Code. The reliance on any such exemption will not be conditional on
         the Owner Participant's representation concerning its party in interest
         or other status with respect to ERISA Plans; and

                  (ix) The Lessee  shall pay all costs and  expenses  (including
         legal  fees)  incurred  in  connection  with any  proposed  or actually
         consummated Refinancing.

 . (a) Upon the Lessee's  request,  at the Lessee's  expense,  and subject to the
conditions in Section 15.02(c),  the Owner Trustee,  any Owner Participant,  the
Lessee and the Indenture  Trustee will  cooperate  with each other to reoptimize
(but not more than twice) the unpaid  principal of the outstanding  Certificates
and the  amortization  schedule  therefor in connection  with any adjustments to
Basic Rent, EBO Price, EBO Date,  Stipulated Loss Values, and Termination Values
pursuant  to  ss.  3(d)  of  the  Lease  as a  result  of a  Refinancing  of the
Certificates in accordance with Section 15.01 hereof, provided that, in any such
reoptimization,  (1) the outstanding  principal amount of the Certificates shall
not be  increased,  (2) the  final  maturity  of the  Certificates  shall not be
extended,  (3) the average life to maturity of the  Certificates  shall not vary
from the average life to maturity of the initial Certificates by more than three
months,  (4) any installment of principal of the  Certificates  will not vary by
more than 5% from such  installment in the initial Loan  Certificate,  (5) there
shall be no change in the Debt Portion,  (6) the adjusted Stipulated Loss Values
and Termination Values shall not exceed the original  Stipulated Loss Values and
Termination  Values under the Lease (as adjusted in accordance  with clauses (1)
and (2) of ss.  3(d) of the  Lease),  and (7) any change to the EBO Price or EBO
Date must be  supported  by an appraisal  reasonably  satisfactory  to the Owner
Participant.  As promptly  as  practicable  following  such  request,  the Owner
Participant  shall deliver to the Lessee,  the Owner Trustee,  and the Indenture
Trustee, a certificate of an authorized  representative of the Owner Participant
(the "Reoptimization  Certificate") setting forth (x) the amortization schedules
which,  taking into account the  requirements  of ss. 3(d) and (e) of the Lease,
would  result in the  lowest  Net  Present  Value of Rents,  and the  lowest net
present  value (to the  Lessee)  of Basic Rent over the Basic  Term,  discounted
semi-annually at the Debt Rate, and (y) the corresponding changes in Basic Rent,
EBO Price, EBO Date, Stipulated Loss Values, and Termination Values, computed in
a manner consistent with ss. 3(d) of the Lease. Upon the Lessee's  acceptance of
the  adjustments   set  forth  in  the   Reoptimization   Certificate,   or  the
redetermination  thereof pursuant to the verification  procedures in ss. 3(d) of
the Lease,  and subject to compliance in full with the  conditions  set forth in
Section  15.02(c),  the  Owner  Participant  shall  (aa)  deliver  a copy of the
Reoptimization  Certificate to the Owner Trustee, and the Indenture Trustee, and
(bb) cause the Owner Trustee (xx) to execute and deliver amendments to the Lease
and Indenture  setting forth the adjustments (the date of such amendment,  being
the  "Reoptimization  Date"),  and (yy) to issue or  exchange  new  Certificates
containing the revised  amortization  thereof for the outstanding  Certificates.
The Lessee shall give to the Owner  Participant  at least 30 days' prior written
notice of the Lessee's intent to effect a reoptimization  hereunder. Such notice
shall be revocable,  and need not specify any  particular  date as of which such
reoptimization shall be effected.

         (b)  Adjustments to  Refinancing  Certificates.  On the  Reoptimization
Date,  subject to the satisfaction on or before the  Reoptimization  Date of the
conditions  set forth in  Section  15.02(c),  the Owner  Trustee  will issue and
deliver  and the  Indenture  Trustee  will  authenticate,  and each  holder of a
Refinancing  Certificate will accept delivery of, a new Refinancing  Certificate
or Refinancing Certificates (in replacement of each Refinancing Certificate then
held by such holder, which Refinancing  Certificates shall be surrendered to the
Indenture   Trustee  for   cancellation)   containing  such  changed   principal
installments (expressed as a percentage of the original principal amount of such
Refinancing   Certificate)  as  shall  have  been   recalculated  by  the  Owner
Participant, but in the same principal amount as, and containing terms identical
to, except as otherwise contemplated by Section 15.02(d) hereof, the Refinancing
Certificates originally issued in connection with the Operative Agreements.

         (c)  Conditions.  Any  such  reoptimization  shall  be  subject  to the
satisfaction of the following conditions:

                  (1)      no Specified Default shall exist;

                  (2) appropriate  agreements,  amendments,  or supplements,  in
         form and substance  reasonably  satisfactory  to the Lessee,  the Owner
         Participant,  the Owner Trustee,  and the Indenture  Trustee,  shall be
         executed and delivered;

                  (3) Basic Rent, EBO Price, EBO Date,  Termination  Values, and
         Stipulated  Loss Values  shall,  subject to ss.  3(e) of the Lease,  be
         adjusted in the manner set forth in ss. 3(d) of the Lease;

                  (4) all  necessary  authorization,  approvals,  consents,  and
         recordings  (including any recordings or filings with the FAA) shall be
         obtained or accomplished; and

                  (5) neither the Owner  Participant  nor the Owner  Trustee nor
         the  Indenture  Trustee shall suffer any loss or expense or adverse tax
         or other consequences  (including with respect to matters arising under
         ERISA and any adverse tax  consequences  resulting from the application
         of  Revenue  Procedure  75-21 or  75-28  or Code  ss.  467) or bear any
         increased risk  (including,  with respect to the Owner  Participant and
         the  Owner  Trustee,  any  material  risk  of a  change  in  accounting
         treatment  of the Lease) as a result of such  reoptimization  for which
         the  Lessee  has  not  agreed  to  indemnify  in  a  manner  reasonably
         satisfactory  to such Person,  and, in connection  with the  foregoing,
         (aa) the Owner  Participant  shall be  entitled  to  receive an opinion
         (reasonably satisfactory to the Owner Participant) of counsel (selected
         by the Owner Participant and reasonably  satisfactory to the Lessee) of
         any   adverse   tax  or  other   consequences   resulting   from   such
         reoptimization,  and (bb) the Owner  Participant  shall be  entitled to
         receive an opinion of the  accounting  firm regularly used by the Owner
         Participant of any material risk of a change in accounting treatment of
         the Lease resulting from such reoptimization.



                                   ARTICLE 16

                                 CONFIDENTIALITY

         Section 16.01. Confidentiality.  Each party hereto agrees (on behalf of
itself and each of its Affiliates,  agents, directors,  officers,  employees and
representatives)  to  use  reasonable  precautions  to  keep  confidential,   in
accordance with its customary procedures for handling  confidential  information
of this  nature,  the  Operative  Agreements  other  than the  Lease,  the Lease
Supplement,  the Indenture, the Indenture Supplement,  and FAA Bill of Sale (the
"Confidential Documents") and any non-public information supplied to it pursuant
to this Agreement which is identified by the Person  supplying the same as being
confidential  at the time the same is  delivered  to such party,  provided  that
nothing herein shall limit the disclosure of any such  Confidential  Document or
any such information (i) to the extent required by statute,  rule, regulation or
judicial process,  (ii) to counsel for any of the parties hereto,  (iii) to bank
examiners or similar regulatory  authorities,  auditors or accountants,  (iv) in
connection with any litigation to which any one or more of the parties hereto is
a  party  relating  to the  transactions  contemplated  hereby  or by any of the
Operative  Agreements,  (v) to an Affiliate of the parties  hereto,  (vi) to any
assignee  or  participant  (or  prospective  assignee or  participant)  or other
transferee so long as such assignee or participant (or  prospective  assignee or
participant) or other  transferee  first executes and delivers to the respective
party  making such  assignment  or  participation  an agreement in writing to be
bound by the  provisions of this Section 16.01 or (vii) in the case of the Owner
Participant  or the Owner Trustee (in its  individual or trust  capacity) to the
Owner Trustee (in its individual or trust capacity) or to the Owner Participant,
as the case may be.



                                   ARTICLE 17

                                  MISCELLANEOUS

         Section 17.01.  Reserved.

         Section  17.02.  Collateral  Account.  (a) The Indenture  Trustee shall
notify the Owner Trustee and the Lessee of any losses  incurred on the Specified
Investments in the Collateral Account promptly upon the realization  thereof, as
well as any fees,  commissions and other costs,  Taxes (other than income taxes)
and expenses,  if any,  incurred by the Indenture Trustee in connection with its
administration of the Collateral Account (collectively, "Losses"). Promptly upon
receipt of such notification but, in any event, no later than the earlier of the
Delivery Date (or, if later,  the last day of any investment  period referred to
in Section  2.14(b) of the Indenture  during which the Delivery Date occurs) and
the 15th day after the  Cut-Off  Date,  the  Lessee  shall pay to the  Indenture
Trustee,  on  behalf of the  Owner  Trustee,  for  deposit  into the  Collateral
Account,  an amount  equal to such Losses (net of any  investment  earnings  not
previously applied pursuant to this Section 17.02).

         (b) The Lessee shall pay to the Indenture  Trustee (or will provide for
payment thereof pursuant to a permitted  drawing by the Indenture  Trustee under
the Letter of Credit),  on behalf of the Owner  Trustee (A) on each Payment Date
prior to the Delivery Date an amount equal to the  aggregate  amount of interest
accrued on the Certificates from (and including) the Certificate Closing Date or
previous Payment Date, as the case may be, to, but excluding,  such Payment Date
(net of any investment earnings in the Collateral Account not previously applied
pursuant to this Section 17.02) and (B) on the Delivery Date,  interest  accrued
on the  Certificates  from and including the last Payment Date (or, if none, the
Certificate  Closing  Date),  to, but  excluding,  the Delivery Date (net of any
investment earnings in the Collateral Account not previously applied pursuant to
this Section  17.02) (and the  Indenture  Trustee shall provide the Lessee prior
written  notice of any such amount due from the Lessee on any such  Payment Date
or the Delivery Date). In addition, the Lessee will pay to the Indenture Trustee
on behalf of the Owner Trustee all amounts owed by the Owner Trustee pursuant to
clause (b) of the last paragraph of Section 2.04 of the Indenture.

         (c) If the Aircraft has not been  purchased by the Owner  Trustee on or
before the Cut-Off Date and the Certificates have not been assumed by the Lessee
in  accordance  with Section  3.05(a)  hereof,  the Lessee  agrees to pay to the
Indenture Trustee, on behalf of the Owner Trustee, on the 15th day following the
Cut-Off Date the excess, if any, of the amounts payable under Section 6.02(b)(1)
of the Indenture  over the amounts  released from the  Collateral  Account under
Section 2.16 of the Indenture.

         (d) All amounts  payable by the Lessee  pursuant to this Section  17.02
shall be paid to the  Indenture  Trustee  at its  principal  office  at 25 South
Charles  Street,   Baltimore,   Maryland  21201,   Attention:   Corporate  Trust
Department,  or as the Indenture  Trustee may otherwise direct within the United
States, by wire transfer of immediately available funds in U.S. Dollars no later
than 10:30 a.m., New York City time, on the due date of such payment.

         Section  17.03.  Counterparts.  This  Agreement  may be executed by the
parties in separate  counterparts,  each of which when so executed and delivered
shall be an original,  but all such counterparts  shall together  constitute but
one and the same instrument.

         Section 17.04. No Oral Modifications. Neither this Agreement nor any of
its terms may be terminated,  amended, supplemented,  waived or modified orally,
but only by an  instrument  in  writing  signed by the party  against  which the
enforcement of the termination, amendment, supplement, waiver or modification is
sought.  No  such  written  termination,   amendment,   supplement,   waiver  or
modification  shall be effective  unless a signed copy shall have been delivered
to and executed by the Owner Trustee and the Indenture  Trustee.  A copy of each
such termination,  amendment,  supplement,  waiver or modification shall also be
delivered to each other party to this Agreement.

         The consent of each of the Pass-Through  Trustee and the  Subordination
Agent,  in its capacity as a party to this Agreement and not as a Holder,  shall
not be required to modify,  amend or  supplement  this  Agreement or to give any
consent, waiver,  authorization or approval with respect to this Agreement under
the  circumstances  in which the consent of the  Indenture  Trustee would not be
required  for such  modification,  amendment,  supplement,  consent,  waiver  or
approval in accordance with Section 8.01(b) of the Indenture,  provided that the
Pass-Through  Trustee  shall be  entitled  to receive an Opinion of Counsel  (as
defined in the Pass-Through  Agreement)  necessary,  in its sole discretion,  to
establish that the Indenture  Trustee's consent would not be required under such
circumstances.

         Section 17.05. Captions. The table of contents preceding this Agreement
and the headings of the various  Articles and Sections of this Agreement are for
convenience of reference only and shall not modify,  define, expand or limit any
of the terms or provisions of this Agreement.

         Section  17.06.  Successors  and Assigns.  The terms of this  Agreement
shall be binding  upon,  and shall  inure to the  benefit of, the Lessee and its
successors and permitted assigns, the Subordination Agent and its successors and
permitted  assigns,  including without  limitation each Holder of a Certificate,
the Owner  Participant  and its  successors  and  permitted  assigns,  the Owner
Trustee and its  successors as Owner Trustee (and any  additional  owner trustee
appointed) under the Trust Agreement,  the Indenture  Trustee and its successors
as Indenture Trustee (and any additional  indenture trustee appointed) under the
Indenture  and the  Pass-Through  Trustee  and its  successors  as  Pass-Through
Trustee (and any additional Pass-Through trustee appointed).

         Section 17.07. Concerning the Owner Trustee,  Indenture Trustee and the
Pass-Through  Trustee.  Each of SSB and FNBM is  entering  into  this  Agreement
solely in its capacities (except to the extent otherwise  expressly  indicated),
in the case of SSB, not in its  individual  capacity but solely as Owner Trustee
under the Trust Agreement,  in the case of FNBM, not in its individual  capacity
but solely as Indenture Trustee under the Indenture and as Pass-Through  Trustee
under the Pass-Through Agreement,  and except as otherwise expressly provided in
this Agreement or in the Lease, the Indenture, the Pass-Through Agreement or the
Trust  Agreement,  neither  SSB nor FNBM  shall be  personally  liable for or on
account of its statements, representations, warranties, covenants or obligations
under this Agreement;  provided,  however, that each of SSB and FNBM accepts the
benefits  running to it under this  Agreement,  and each agrees that  (except as
otherwise  expressly provided in this Agreement or any other Operative Agreement
to which it is a party) it shall be liable in its  individual  capacity  for (a)
its own gross  negligence  or willful  misconduct  (whether  in its  capacity as
trustee or in its individual  capacity),  (b) any breach of representations  and
warranties or any breach of covenants made in its individual  capacity  pursuant
to or in connection  with this  Agreement or the other  Operative  Agreements to
which it is a party,  (c) any breach,  in the case of the Owner Trustee,  of its
covenants contained in Sections 3.05 and 3.08 of the Indenture,  (d) the failure
to use ordinary care in receiving,  handling and  disbursing  funds,  (e) in the
case of the Owner Trustee,  Lessor's Liens  attributable to it in its individual
capacity,  (f) in the case of the Indenture Trustee,  Indenture Trustee's Liens,
and (g) taxes,  fees or other charges on, or based on, or measured by, any fees,
commissions or compensation  received by it in connection with the  transactions
contemplated by the Operative Agreements.

         Section 17.08.  Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating   the   remaining   provisions,   and  any  such   prohibition   or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

         Section  17.09.  Public Release of  Information.  Subject to applicable
legal requirements (including, without limitation, securities laws requirements,
other regulatory requirements and other legally compelled disclosures),  so long
as there  shall not have  occurred  an Event of  Default or  Indenture  Event of
Default,  each party to this Agreement  shall in each instance  obtain the prior
written approval of each other party to this Agreement concerning the exact text
and timing of news  releases,  articles  and other  information  releases to the
public media  concerning  any  Operative  Agreements [; provided that the Lessee
may,  without the prior written  approval of each other party hereto,  make such
disclosures and announcements concerning its fleet constitution as are customary
in  the  airline  industry  so  long  as  no  such  disclosure  or  announcement
specifically identifies any other party hereby by name without the prior written
consent of such party].

         Section 17.10.  Certain  Limitations on  Reorganization.  The Indenture
Trustee  and the  Pass-Through  Trustee  agree  that,  if (i) the Owner  Trustee
becomes or all or any part of the  Lessor's  Estate or the trust  created by the
Trust Agreement becomes the property of, a debtor subject to the  reorganization
provisions  of  the  Bankruptcy  Code  or any  other  applicable  bankruptcy  or
insolvency statutes,  (ii) pursuant to any such reorganization  provisions,  the
Owner  Participant is held to have recourse  liability to the debtor,  the Owner
Trustee or the trustee of the debtor  directly or  indirectly  on account of any
amount payable as Make-Whole Premium, principal or interest on the Certificates,
or any other amount payable on any Certificate that is provided in the Operative
Agreements to be  nonrecourse to the Owner  Participant  and (iii) the Indenture
Trustee actually  receives any Recourse Amount which reflects any payment by the
Owner  Participant  on account of (ii) above,  then the Indenture  Trustee shall
promptly refund to the Owner  Participant such Recourse Amount.  For purposes of
this Section 17.10,  "Recourse  Amount" means the amount by which the portion of
such payment by the Owner  Participant  on account of clause (ii) above received
by the  Indenture  Trustee  exceeds the amount which would have been received by
the Indenture  Trustee if the Owner  Participant  had not become  subject to the
recourse liability referred to in (ii) above.  Nothing contained in this Section
shall prevent the Indenture  Trustee from  enforcing any  individual  obligation
(and  retaining  the  proceeds  thereof)  of the Owner  Participant  under  this
Agreement  or, any other  Operative  Agreement  to the extent  herein or therein
provided,  for which the Owner  Participant has expressly agreed by the terms of
this Agreement to accept individual responsibility.

         Section 17.11.  GOVERNING LAW. THIS AGREEMENT IS BEING DELIVERED IN THE
SATE OF NEW YORK,  AND 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,  WITHOUT GIVING EFFECT TO PRINCIPLES OF
CONFLICTS OF LAWS.

         Section 17.12.  Section 1110 Compliance.  The parties hereto agree that
the transactions contemplated by the Operative Agreements are expressly intended
to be,  shall be, and should be  construed  so as to be entitled to the benefits
and protection of Section 1110 of the Bankruptcy Code.

         Section  17.13.  Reliance of Liquidity  Providers.  Each of the parties
hereto agrees and  acknowledges  that each  Liquidity  Provider shall be a third
party beneficiary of each of the  representations  and warranties made herein by
such party (and of each  covenant  herein  made by such party to each  Liquidity
Provider),  and that each Liquidity  Provider may rely on such  representations,
warranties  and  covenants  to  the  same  extent  as if  such  representations,
warranties  and covenants  were made to such Liquidity  Provider  directly.  The
terms of this Agreement  shall inure to the benefit of each Liquidity  Provider,
their respective successors and permitted assigns.


<PAGE>


         IN  WITNESS  WHEREOF,   the  parties  have  caused  this  Participation
Agreement to be executed by their respective,  duly authorized officers and this
Participation Agreement shall be effective this __ day of September, 1997.

                                                              Lessee:

                                                              ATLANTIC COAST AIRLINES


                                                              By:
                                                                   Name:
                                                                   Title:


                                                              By:
                                                                   Name:
                                                                   Title:



                                                              Initial Owner Participant:

                                                              ATLANTIC COAST AIRLINES


                                                              By:
                                                                   Name:
                                                                   Title:


                                                              By:
                                                                   Name:
                                                                   Title:





<PAGE>


                                                              Owner Trustee:

                                                              STATE  STREET BANK
                                                              AND TRUST  COMPANY
                                                              OF    CONNECTICUT,
                                                              NATIONAL
                                                              ASSOCIATION not in
                                                              its     individual
                                                              capacity,   except
                                                              as       otherwise
                                                              expressly provided
                                                              herein  but solely
                                                              as Owner Trustee


                                                              By:
                                                                   Name:
                                                                   Title:


                                                              Indenture Trustee:

                                                              THE FIRST NATIONAL
                                                              BANK OF  MARYLAND,
                                                              not     in     its
                                                              individual
                                                              capacity except as
                                                              otherwise
                                                              expressly provided
                                                              herein, but solely
                                                              as       Indenture
                                                              Trustee


                                                              By:                                                ,
                                                                   Name:
                                                                   Title:


                                                              Pass-Through Trustee:

                                                              THE FIRST NATIONAL
                                                              BANK OF  MARYLAND,
                                                              not     in     its
                                                              individual
                                                              capacity except as
                                                              otherwise
                                                              expressly provided
                                                              herein, but solely
                                                              as    Pass-Through
                                                              Trustee


                                                              By:
                                                                   Name:
                                                                   Title:




<PAGE>


                                                              Subordination Agent:

                                                              THE FIRST NATIONAL
                                                              BANK OF  MARYLAND,
                                                              not     in     its
                                                              individual
                                                              capacity except as
                                                              otherwise
                                                              expressly provided
                                                              herein, but solely
                                                              as   Subordination
                                                              Agent


                                                              By:
                                                                   Name:
                                                                   Title:


<PAGE>





                                   SCHEDULE II

                             CERTIFICATE INFORMATION




1        Atlantic Coast Airlines 1997-1 Pass-Through Trust Class A Atlantic Coast Airlines Trust No. _____
                                                                   ---------------------------------------

         Interest Rate:
         Maturity:
         Principal Amount:


2.       Atlantic Coast Airlines 1997-1 Pass-Through Trust Class B Atlantic Coast Airlines Trust No._____

         Interest Rate:
         Maturity:
         Principal Amount:


3.       Atlantic Coast Airlines 1997-1 Pass-Through Trust Class C Atlantic Coast Airlines Trust No. _____

         Interest Rate:
         Maturity:
         Principal Amount:

4.       Atlantic Coast Airlines 1997-1 Pass-Through Trust Class D Atlantic Coast Airlines Trust No. _____

         Interest Rate:
         Maturity:
         Principal Amount:





<PAGE>





                                  SCHEDULE III

                                  DEBT PORTION


Debt Portion




<PAGE>



                                                        SCHEDULE IV

                                                  MANDATORY ECONOMIC TERMS



         Any  amendment  and  restatement  of  the  Operative  Documents  on the
Delivery Date or, if earlier, the Transfer Date shall require that:

         (i)      with  respect  to each  series  of  Certificates  issued  with
                  respect to the Aircraft the schedule of principal payments may
                  be changed but:

                  (a)      the final maturity may not be extended beyond January
                           1, 2014,  for the Series A  Certificates,  January 1,
                           2011, for the Series B Certificates, January 1, 2007,
                           for the Series C  Certificates,  and January 1, 2000,
                           for the Series D Certificates;

                  (b)      the average  life of any series of  Certificates  may
                           not be so great as to cause the  average  life of the
                           corresponding  Class of Pass-Through  Certificates to
                           be more  than  10.2  years  in the  case  of  Class A
                           Pass-Through  Certificates,  8.3 years in the case of
                           Class B Pass-Through  Certificates,  5.6 years in the
                           case of the Class C Pass-Through Certificates and 1.0
                           years   in  the   case  of   Class   D   Pass-Through
                           Certificates  (but in each case may be  decreased  by
                           any amount);

                  (c)      the interest rate and the January 1 and July 1 payment dates may not be changed; and

                  (d)      the  loan  to  aircraft  value  ratio  on any  July 1
                           Distribution  Date (as  defined  in the  Pass-Through
                           Agreement)  shall not exceed 35.0% in the case of the
                           Series  A  Certificates,  50.0%  in the  case  of the
                           Series  B  Certificates,  65.0%  in the  case  of the
                           Series C  Certificates  and  70.0% in the case of the
                           Series D Certificates.

         (ii)     Basic  Rent,  Stipulated  Loss Values and  Termination  Values
                  under the Lease must be  sufficient  to pay  amounts  due with
                  respect to the Certificates;

         (iii)    the amounts payable under the all-risk aircraft hull insurance
                  maintained  with respect to the Aircraft must be sufficient to
                  pay  the   Stipulated   Loss  Value,   subject  to  rights  of
                  self-insurance; and

         (iv)     (a)      the Past Due Rate in the Indenture and the Lease;

                  (b)      the Make-Whole Premium payable under the Indenture;

                  (c)      the  provisions  relating to the  prepayment  and  purchase of the  Certificates  in the
                           Indenture;

                  (d)      the minimum liability insurance amount on the Aircraft in the Lease; and

                  (e)      the   indemnification   of  the  Indenture   Trustee,
                           Subordination     Agent,     Liquidity     Providers,
                           Pass-Through  Trustee and Holders of the Certificates
                           with respect to certain taxes and expenses;

         in each  case,  must be  provided  as set  forth  in the  Participation
         Agreement,  Lease and Indenture, as the case may be as in effect on the
         Certificate Closing Date.



<PAGE>





                                                         SCHEDULE V

                                                  MANDATORY DOCUMENT TERMS



         Any  amendment  and  restatement  of the  Operative  Agreements  on the
Delivery Date or, if earlier, the Transfer Date:

         1.       May not modify in any  material  adverse  respect the Granting
                  Clause of the  Indenture  so as to  deprive  the  Holders of a
                  first priority  security  interest in and mortgage lien on the
                  Aircraft and the Lease or to eliminate any of the  obligations
                  secured  thereby or otherwise  modify in any material  adverse
                  respect  as  regards  the   interests  of  the  Holders,   the
                  Subordination  Agent, the Liquidity Providers or the Indenture
                  Trustee  the  provisions  of  Article  II, V, or VI or Section
                  7.01, 7.02, 7.10, 7.11, 9.08, 13.01,  13.02, 13.07 or 15.04 or
                  Article VIII of the Indenture;

         2.       May not modify in any material  adverse respect as regards the
                  interests  of  the  Holders,   the  Subordination  Agent,  the
                  Liquidity Providers or the Indenture Trustee the provisions of
                  Section 3(e), 3(f), 4, 7, 11(a)(i)(dd),  12(c)(1),  the second
                  sentence of 23(f) or 26 of the Lease or  otherwise  modify the
                  terms of the Lease so as to deprive the  Indenture  Trustee of
                  rights expressly granted to the "Indenture Trustee" therein;

         3.       May not modify in any material  adverse  respect as regards the  interests  of the  Holders,  the
                  Subordination  Agent, the Liquidity  Providers or the Indenture Trustee the provisions of Section
                  4.02(e),  4.02(f),  17.02,  17.11,  17.12  or  17.13  of the  Participation  Agreement  or of the
                  provisions of Section 4.01(k) of the  Participation  Agreement so as to eliminate the requirement
                  to  deliver  to the  Indenture  Trustee  the  legal  opinions  to be  provided  to  such  Persons
                  thereunder  (recognizing  that the  lawyers  rendering  such  opinions  may be changed) or of the
                  provisions  of  Section  6.03(b) of the  Participation  Agreement  as  regards  the rights of the
                  Indenture  Trustee  thereunder or otherwise  modify the terms of the  Participation  Agreement to
                  deprive  the  Subordination  Agent,  the  Liquidity  Providers  or the  Indenture  Trustee of any
                  indemnity or right of reimbursement in its favor for Expenses or Taxes.

         4.       May not modify in any material  adverse respect as regards the
                  interests of the holders of the Pass Through Certificates, the
                  Subordination  Agent, the Liquidity Providers or the Indenture
                  Trustee,   the   definition   of   "Make-Whole   Premium"   or
                  "Supplemental   Rent"  in  Schedule  I  to  the  Participation
                  Agreement; and

         5.       Shall  contain  representations  and  warranties  of the Owner
                  Participant  substantially  similar  to  those  set  forth  on
                  Exhibit A attached hereto.

         Notwithstanding the foregoing,  any such Mandatory Document Term may be
modified to correct or supplement any such  provision  which may be defective or
to cure any  ambiguity  or correct any  mistake,  provided  that any such action
shall  not  materially  adversely  affect  the  interests  of the  Holders,  the
Subordination  Agent,  the Liquidity  Providers,  the  Indenture  Trustee or the
holders of the Pass Through Certificates.





<PAGE>


                                                  EXHIBIT A TO SCHEDULE V

         Section ___.  Representations,  Warranties  and  Covenants of Owner  Participant.  (a)  Representations,
Warranties and Covenants.  In addition to and without limiting its other  representations  and warranties  provided
for in this Article __, the Owner Participant represents and warrants that:

                  (i) it is a corporation duly incorporated and validly existing
         in good standing  under the laws of the State of __________  and it has
         full corporate power, authority and legal right to carry on its present
         business and  operations,  to own or lease its  Properties and to enter
         into and to carry out the transactions  contemplated by this Agreement,
         the  Tax  Indemnity  Agreement,  the  Trust  Agreement  and  the  other
         Operative Agreements to which it is party;

                  (ii) the  execution,  delivery and  performance  by it of this
         Agreement, the Tax Indemnity Agreement, and the Trust Agreement and the
         other  Operative  Agreements  to  which  it is  party  have  been  duly
         authorized by all necessary  corporate action on its part and, assuming
         the accuracy of the Lessee's representations in Section 6.01(n) hereof,
         do not require any governmental  approvals that would be required to be
         obtained by the Owner Participant;

                  (iii) based on the  representations,  warranties and covenants
         contained  in  Sections   6.01(l)(viii),   6.02  and  7.09  hereof  and
         compliance with Section 10.06 of the Indenture,  neither the execution,
         delivery  or  performance  by the Owner  Participant  of the  Operative
         Agreements  to which it is  party,  nor  compliance  with the terms and
         provisions  hereof  or  thereof,  conflicts  or will  conflict  with or
         results or will  result in a breach or  violation  of any of the terms,
         conditions  or  provisions  of, or will require any consent or approval
         under any law,  governmental rule or regulation applicable to the Owner
         Participant  or the  charter  documents,  as  amended,  or  bylaws,  as
         amended,  of the Owner  Participant or any order,  writ,  injunction or
         decree  of any  court  or  governmental  authority  against  the  Owner
         Participant  or by  which it or any of its  Properties  is bound or any
         indenture,  mortgage or contract or other  agreement or  instrument  to
         which  the  Owner  Participant  is a party or by which it or any of its
         Properties  is  bound,  or  constitutes  or will  constitute  a default
         thereunder or results or will result in the imposition of any Lien upon
         any of its Properties;

                  (iv) the  Operative  Agreements to which it is party have been
         or on the Certificate  Closing Date will be duly executed and delivered
         by the Owner  Participant and constitute or on the Certificate  Closing
         Date will  constitute  the legal,  valid and binding  obligation of the
         Owner Participant enforceable against it in accordance with their terms
         except as such enforceability may be limited by bankruptcy, insolvency,
         or other similar laws or general equitable principles;

                  (v) it is not in default  under any  mortgage,  deed of trust,
         indenture,  lease or other  instrument  or agreement to which the Owner
         Participant  is a party or by which it or any of its  Properties may be
         bound,  or in  violation  of  any  applicable  law,  which  default  or
         violation  would  have a  material  adverse  effect  on  the  financial
         condition,  business  or  operations  of the  Owner  Participant  or an
         adverse  effect on the ability of the Owner  Participant to perform its
         obligations under this Agreement and the other Operative  Agreements to
         which it is or is to be a party;

                  (vi) there are no pending  or, to the  knowledge  of the Owner
         Participant,  threatened actions, suits,  investigations or proceedings
         against the Owner Participant before any court,  administrative  agency
         or tribunal  which are  expected  to  materially  adversely  affect the
         ability of the Owner  Participant to perform its obligations under this
         Agreement and the other Operative Agreements to which it is or is to be
         a party and the Owner  Participant  knows of no pending  or  threatened
         actions  or  proceedings  before any  court,  administrative  agency or
         tribunal involving it in connection with the transactions  contemplated
         by the Operative Agreements;

                  (vii)  neither  the  execution  and  delivery  by it  of  this
         Agreement or the other Operative  Agreements to which it is a party nor
         the performance of its obligations hereunder or thereunder requires the
         consent or  approval  of or the  giving of notice to, the  registration
         with, or the taking of any other action in respect of, any governmental
         authority  or agency  that would be required to be obtained or taken by
         the  Owner  Participant   except  for  filings   contemplated  by  this
         Agreement;

                  (viii)  no part of the funds to be used by it to  acquire  the
         interests to be acquired by the Owner  Participant under this Agreement
         constitutes  assets  (within  the  meaning of ERISA and any  applicable
         rules and  regulations) of any employee benefit plan subject to Title I
         of  ERISA or any  applicable  regulation  thereunder  or of any plan or
         individual retirement account subject to Section 4975 of the Code; and

                  (ix) it is a "U.S.  Person" as defined in Section  7701(a)(30)
         of the Code and is not a tax resident of another country.

                  Notwithstanding  the foregoing or anything  else  contained in
         this  Agreement,  the  Owner  Participant  makes no  representation  or
         warranty in this Agreement  with respect to laws,  rules or regulations
         relating to aviation or to the nature or use of the equipment  owned by
         the Owner Trustee,  including,  without limitation,  the airworthiness,
         value,   condition,    workmanship,   design,   patent   or   trademark
         infringement,  operation,  merchantability  or  fitness  for use of the
         Aircraft,  other than such laws,  rules or regulations  relating to the
         citizenship  requirements  of the Owner  Participant  under  applicable
         aviation law.

         (b) Lessor's Liens. The Owner Participant further represents,  warrants
and  covenants  that  there  are no  Lessor's  Liens  attributable  to it (or an
Affiliate  thereof) and that there will not be any Lessor's Lien attributable to
it (or an  Affiliate  thereof)  on  the  Certificate  Closing  Date.  The  Owner
Participant  agrees with and for the benefit of the Lessee,  the Owner  Trustee,
the Indenture  Trustee and the Pass-Through  Trustee that the Owner  Participant
will, at its own cost and expense,  take such action as may be necessary to duly
discharge  and satisfy in full,  promptly  after the same first becomes known to
the  Owner   Participant,   any  Lessor's   Lien   attributable   to  the  Owner
Participant(or  an  Affiliate  thereof),   provided,  however,  that  the  Owner
Participant  shall not be required to discharge or satisfy  such  Lessor's  Lien
which  is  being  contested  by the  Owner  Participant  in  good  faith  and by
appropriate  proceedings so long as such proceedings do not involve any material
risk of the sale,  forfeiture or loss of the Aircraft or the Lessor's  Estate or
the  Trust  Indenture  Estate  or any  interest  in  any  thereof  or  otherwise
materially  adversely  affect  the  validity  or  priority  of the  Lien  of the
Indenture.

         (c) Reimbursement. Without limiting any other rights the parties hereto
may have as a result of any breach by the Owner  Participant of its  obligations
in Section ____(b) hereof,  the Owner Participant agrees to reimburse each other
party hereto for all  reasonable  legal fees and expenses of counsel that may be
incurred by any such party as a result of the  failure of the Owner  Participant
to discharge and satisfy any such Lessor's Lien in accordance  with the terms of
Section ____(b) hereof.

         (d) Assignment of Interests of Owner Participant. At any time after the
Delivery Date and subject to Section  _____(f) and the  conditions  set forth in
this Section  ____(d),  the Owner  Participant  may assign,  convey or otherwise
transfer to a single institutional  investor or an Affiliate of an institutional
investor all (but not less than all) of the Beneficial  Interest,  provided that
it gives the Lessee and the  Indenture  Trustee at least 10 days' notice of such
assignment, conveyance or other transfer and provided that the Owner Participant
and any Owner  Participant  Guarantor shall remain liable for all obligations of
the Owner Participant under the Trust Agreement and the Operative  Agreements to
which the Owner  Participant  is a party to the extent  (but only to the extent)
relating to the period on or before the date of such  transfer and provided that
the transferee agrees by a written instrument substantially in the form attached
hereto  as  Exhibit  F-1 to assume  liability  for all  obligations  as an Owner
Participant  under the Trust  Agreement  and the other  Operative  Agreements to
which such Owner Participant is a party relating to the period after the date of
transfer.  Any such  transferee  shall (a) be (i) a bank,  savings  institution,
finance company, leasing company or trust company,  national banking association
acting for its own account or in a fiduciary  capacity as trustee or agent under
any pension,  retirement,  profit  sharing or similar  trust or fund,  insurance
company,  fraternal  benefit  society or corporation  acting for its own account
having a combined capital and surplus (or, if applicable, consolidated net worth
or its equivalent) of not less than $50,000,000, (ii) a subsidiary of any Person
described  in  clause  (i)  where  such  Person  provides  (A)  support  for the
obligations assumed by such transferee subsidiary reasonably satisfactory to the
Lessee,  the Owner  Trustee and the  Indenture  Trustee or (B) an  unconditional
guaranty  substantially  in the form of  Exhibit  F-2  attached  hereto  of such
transferee subsidiary's  obligations,  or (iii) an Affiliate of the transferring
Owner Participant,  so long as such Affiliate has a combined capital and surplus
(or, if applicable,  consolidated  net worth or its equivalent) of not less than
$50,000,000,  (b) be legally capable of binding itself to the obligations of the
Owner  Participant  and shall  expressly  agree to assume all obligations of the
Owner  Participant  under the Trust Agreement and this Agreement and (c) provide
representations,  warranties,  and  covenants  substantially  similar  to  those
contained  in  Sections  7.02(a),  7.03(a) and 7.03(f)  hereof;  provided  that,
without  the prior  written  consent of the  Lessee  (unless an Event of Default
described in ss. 14(a),  (b), (f), (g), (h), or (i) of the Lease is continuing),
such transferee shall not be an airline or other aircraft operator or competitor
of the Lessee or an Affiliate of any thereof;  and provided further that neither
such transferee nor any Affiliate thereof shall (x) be a party to any litigation
or  arbitration  (whether  as  plaintiff  or  defendant)  with the Lessee or any
Affiliate of the Lessee or (y) be attempting a hostile takeover of the Lessee or
any Affiliate of the Lessee. In the event of any such assignment,  conveyance or
transfer,  the transferee  shall become a party to the Trust Agreement and shall
agree to be bound by all the terms of and will undertake all of the  obligations
of the  Owner  Participant  contained  in the  Trust  Agreement  and  the  other
Operative  Agreements  in the manner set forth in the form  attached  as Exhibit
F-1. A transferee  hereunder shall be (i) a "U.S.  Person" as defined in Section
7701(a)(30) of the Code (or any successor provision thereto) and such transferee
shall be  personally  liable for any debt service to the extent that its receipt
of rentals is reduced by reason of any  withholding  Taxes that result from such
transferee's failure to be such a "U.S. Person" and (ii) a Citizen of the United
States or has  established  a voting trust,  voting powers or other  arrangement
reasonably  satisfactory to the Indenture  Trustee,  the Owner Trustee,  and the
Lessee to permit the Owner  Trustee to be the  registered  owner of the Aircraft
under the  Transportation  Code.  A  transferee  hereunder  shall not be, and in
acquiring  the  Beneficial  Interest  shall not use the assets  of, an  employee
benefit plan subject to Title I of ERISA or an individual  retirement account or
a plan  subject  to  Section  4975  of  the  Code.  Assuming  the  truth  of the
representations  made in Sections  6.01(l) and 7.06 hereof and  compliance  with
Section 10.06 of the Indenture, no such assignment, conveyance or transfer shall
violate any provision of law or regulation or create a relationship  which would
be in  violation  thereof.  The  Owner  Trustee  shall  not be on  notice  of or
otherwise bound by any such assignment,  conveyance or transfer unless and until
it shall  have  received  an  executed  counterpart  of the  instrument  of such
assignment,  conveyance  or  transfer.  Upon any such  disposition  by the Owner
Participant to a transferee as above  provided,  the transferee  shall be deemed
the  "Owner  Participant"  or  "Trustor"  for  all  purposes  of  the  Operative
Agreements, and shall be deemed to have made all the payments previously made by
its transferor and to have acquired the same interest in the Lessor's  Estate as
theretofore  held by its  transferor;  and each reference  therein to the "Owner
Participant"  or  "Trustor"  shall  thereafter  be  deemed a  reference  to such
transferee.  No assignment,  conveyance or transfer by the Owner  Participant of
the Beneficial Interest shall increase the amount of the liability of the Lessee
under Article 8 hereof or under the Tax Indemnity  Agreement  over the amount of
liability  the Lessee would have  incurred had such  assignment,  conveyance  or
transfer not  occurred.  Notwithstanding  the other  provisions  of this Section
___(d),  the right of the Owner  Participant  to assign,  convey or transfer the
Beneficial  Interest  shall be  subject  to the right of the Lessee to match any
bona fide offer (other than by an Affiliate of the Owner Participant to purchase
the Beneficial  Interest).  The Lessee agrees that it will reasonably  cooperate
with the Owner Participant in effecting an assignment of the Owner Participant's
interests  including,  without  limitation,  providing  letters to any successor
Owner  Participant  permitting such successor  Owner  Participant to rely on any
opinions  provided by the Lessee on the  Delivery  Date.  The Owner  Participant
shall pay all costs  (including the Lessee's  costs) in connection with any such
assignment,  conveyance  or transfer  (other than an  assignment,  conveyance or
transfer  which occurs  pursuant to the exercise of remedies under Section 15 of
the Lease while an Event of Default is continuing).

         (e) Actions with Respect to Lessor's Estate, Etc. The Owner Participant
agrees  that it will not take any action to subject the  Lessor's  Estate or the
trust established by the Trust Agreement,  as debtor,  to the  reorganization or
liquidation provisions of the Bankruptcy Code or any other applicable bankruptcy
or insolvency statute.

         (f) ERISA. The Owner Participant agrees and covenants that it will take
no action with respect to its  participation  in the  transactions  contemplated
hereby  and  by  the  other   Operative   Agreements   which  would  cause  such
participation to be a "Prohibited Transaction" within the meaning of Section 406
of ERISA or Section 4975 of the Code or any  applicable  regulations  under such
sections.

         (g) Citizenship.  The Owner Participant agrees,  solely for the benefit
of the Lessee,  the Pass-Through  Trustee,  the Indenture  Trustee and the Owner
Trustee,  that if at any time on or after the Delivery Date when the Aircraft is
registered or the Lessee  proposes to register the Aircraft in the United States
(i) either the Owner  Participant  shall cease to be, or an event which has been
publicly disclosed has occurred of which the Owner Participant has knowledge and
which will cause the Owner  Participant  to cease to be, a Citizen of the United
States,  and (ii) the Aircraft shall or would  therefore  become  ineligible for
registration in the name of the Owner Trustee under the Transportation  Code and
regulations  then  applicable  thereunder  (such  eligibility  to be  determined
without regard to any provision of law that permits the U.S. registration of the
Aircraft by restricting  where it is based or used),  then the Owner Participant
shall give notice  thereof to the Lessee,  the Owner  Trustee and the  Indenture
Trustee  and  shall  (at  its own  expense  and  without  any  reimbursement  or
indemnification  from the Lessee)  promptly  effect (x) effect a voting trust or
other similar  arrangement,  (y) transfer in  accordance  with the terms of this
Agreement and the Trust  Agreement all its rights,  title and interest in and to
such Trust  Agreement,  the Lessor's Estate and this Agreement,  or (z) take any
other alternative action that would prevent any  deregistration,  or maintain or
permit the United  States  registration,  of the  Aircraft  (determined  without
regard  to any  provision  of law  that  permits  the U.S.  registration  of the
Aircraft by restricting  where it is based or used). It is agreed that the Owner
Participant  shall be liable to pay promptly on request (A) to each of the other
parties hereto any actual damages (but not  consequential  damages)  suffered by
any such other party to the extent the same shall result from the representation
and warranty of the Owner  Participant in the first sentence of Section  7.02(a)
hereof proving to be untrue as of the Delivery Date; and (B) to the Lessee,  the
Indenture Trustee and the Pass-Through Trustee for any damages actually (but not
consequentially)   incurred  by  the  Lessee,  the  Indenture  Trustee  and  the
Pass-Through  Trustee as a result of the Owner  Participant's  failure to comply
with its  obligations  pursuant to the first  sentence of this Section  7.02(c);
provided, that, the foregoing shall not restrict the Pass-Through Trustee or the
Indenture  Trustee  from  asserting  against the Owner  Participant  any damages
actually  incurred by the holders of any Pass-Through  Certificates.  Each party
hereto  agrees,  upon  the  request  and  at  the  sole  expense  of  the  Owner
Participant,  to cooperate  with the Owner  Participant  in  complying  with its
obligations  under the provisions of the first sentence of this Section 7.02(c),
but  without any  obligation  on the part of such other party to take any action
believed  by it in good  faith to be  unreasonably  burdensome  to such party or
materially adverse to its business interests.



<PAGE>


Certain of the  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, The First  National  Bank of Maryland,  as Indenture  Trustee  under a Trust
Indenture and Security Agreement.  This Lease has been executed in counterparts;
see ss. 23(e) for  information  concerning  the rights of holders of the various
counterparts.


===================================================================================================================



                                 LEASE AGREEMENT
                     (Atlantic Coast Airlines Trust No. ___)


                                         dated as of                 , 199_


                                     between




                       STATE STREET BANK AND TRUST COMPANY
                      OF CONNECTICUT, NATIONAL ASSOCIATION,
                            as Owner Trustee, Lessor


                                       and

                            ATLANTIC COAST AIRLINES,
                                     Lessee





                One Canadair Regional Jet Series 200 ER Aircraft


===================================================================================================================




<PAGE>


iii
EX10_50D.DOC 0108996.01

                                TABLE OF CONTENTS

                                                                                                               Page


1. Definitions; Usage.............................................................................................1

(a) Definitions...................................................................................................1
(b) Usage.........................................................................................................1

2. Agreement to Lease Aircraft; Delivery..........................................................................1

(a) Agreement to Lease............................................................................................1
(b) Delivery......................................................................................................1

3. Term and Rent; Voluntary Termination; Renewal..................................................................1

(a) Term..........................................................................................................1
(b) Basic Rent....................................................................................................1
(c) Supplemental Rent.............................................................................................1
(d) Adjustments to Basic Rent, EBO, SLV, and TV After the Delivery Date...........................................2
(e) Minimum Rent..................................................................................................2
(f) Payment.......................................................................................................3
(g) Voluntary Termination.........................................................................................3
(h) Renewal Option................................................................................................5
(i) Termination with Respect to Engines...........................................................................5

4. Net Lease......................................................................................................5


5. Return of Aircraft.............................................................................................6


6. Lessor Disclaimer..............................................................................................6


7. Ownership by Lessor............................................................................................7


8. Liens..........................................................................................................7


   9. Registration; Maintenance; Records; Compliance and Use; Replacement Parts; Improvements; Pooling of Parts;
Insignia..........................................................................................................7

(a) Registration..................................................................................................7
(b) Maintenance; Records..........................................................................................7
(c) Compliance and Use............................................................................................8
(d) Replacement of Parts..........................................................................................8
(e) Improvements..................................................................................................9
(f) Pooling of Parts.............................................................................................10
(g) Insignia.....................................................................................................10

10. Inspection...................................................................................................10


11. Loss or Destruction; Requisition of Use......................................................................11

(a) Event of Loss to the Airframe................................................................................11
(b) Event of Loss to an Engine...................................................................................13
(c) Risk of Loss; No Release of Obligations......................................................................13
(d) Requisition of Use...........................................................................................13
(e) Application of Proceeds for Events of Loss...................................................................14
(f) Payments During Default......................................................................................14

12. Insurance....................................................................................................15

(a) Liability Insurance..........................................................................................15
(b) Casualty Insurance...........................................................................................15
(c) Endorsements.................................................................................................15
(d) Reports, etc.................................................................................................16
(e) Other Insurance..............................................................................................16
(f) Indemnification by United States Government..................................................................16

13. Subleasing; Possession.......................................................................................16

(a) Subleasing, Pooling, etc.....................................................................................16
(b) Security Assignment of Subleases.............................................................................18
(c) Lessor Waiver................................................................................................18

14. Events of Default............................................................................................19


15. Remedies.....................................................................................................20

(a) Generally....................................................................................................20
(b) Expenses.....................................................................................................21
(c) Lessee Waiver................................................................................................21
(d) Remedies Cumulative..........................................................................................21

16. Purchase Options.............................................................................................21

(a) Options......................................................................................................21
(b) Purchase.....................................................................................................22

17. Notices......................................................................................................22


18. Successors, Assigns, and Indemnified Parties.................................................................23


19. Lessor's Right to Perform for Lessee.........................................................................23


20. Further Assurances...........................................................................................23


21. Successor Trustee and Rights of Trustee as Lessor............................................................23


22. Capacity of Lessor...........................................................................................24


23. Amendments and Miscellaneous.................................................................................24

(a) Amendments...................................................................................................24
(b) Survival of Agreements.......................................................................................24
(c) Severability.................................................................................................24
(d) Entire Agreement.............................................................................................24
(e) Counterparts.................................................................................................24
(f) Governing Law................................................................................................24
(g) Headings.....................................................................................................24

24. Performance by Sublessee.....................................................................................25


25. Quiet Enjoyment..............................................................................................25


26. Security For Lessor's Obligations............................................................................25


27. Submission to Jurisdiction; Venue............................................................................25



Schedule I        -        Definitions

Exhibit A         -        Lease Supplement
Exhibit B         -        Financial Terms
Exhibit C         -        Stipulated Loss Values
Exhibit D         -        Termination Values
Exhibit E         -        Lists of Countries
Exhibit F         -        Return Conditions


<PAGE>


                                                         25


                                 LEASE AGREEMENT
                     (Atlantic Coast Airlines Trust No. ___)


         This Lease Agreement (Atlantic Coast Airlines Trust No. ___) is entered
into as of  ___________,  199_  by  State  Street  Bank  and  Trust  Company  of
Connecticut,  National Association,  a national banking association,  not in its
individual  capacity,  except as expressly set forth herein, but solely as owner
trustee under the Trust  Agreement as defined in ss. 1(a) of this Agreement (the
"Lessor"), and Atlantic Coast Airlines, a California corporation (the "Lessee").

 .        1.       Definitions; Usage

 . Unless the context otherwise requires, the capitalized terms herein shall have
the  meanings  given in  Schedule I hereto,  for all  purposes of this Lease and
shall be equally  applicable  to both the singular and plural forms of the terms
defined.

 . Unless the context otherwise  requires,  any agreement or instrument  referred to herein, or the term "Agreement"
or "Lease",  means such agreement or instrument as from time to time  supplemented and amended.  "Including"  means
"including  but not  limited  to".  "Or"  means one or more,  or all,  of the  alternatives  listed  or  described.
"Herein", "hereof",  "hereunder",  etc. mean in, of, under, etc. this Agreement (and not merely in, of, under, etc.
the section or provision  where the reference  appears).  References to sections,  exhibits,  and the like refer to
those in or attached to this Agreement unless otherwise specified.

 .        2.       Agreement to Lease Aircraft; Delivery

 .  Subject  to  satisfaction  or  waiver  of the  conditions  set  forth  in the
Participation  Agreement, on the Delivery Date the Lessor hereby agrees to lease
the Aircraft to the Lessee hereunder,  and the Lessee hereby agrees to lease the
Aircraft from the Lessor hereunder,  such lease to be evidenced by the execution
by the Lessor and the Lessee of a Lease Supplement.

 . The Lessor hereby  authorizes one or more persons  designated by the Lessee as
the  authorized  representative  or  representatives  of the  Lessor  to  accept
delivery of the Aircraft.  By executing and delivering  Lease  Supplement No. 1,
Lessee  confirms to Lessor  that  Lessee has, on behalf of the Lessor,  duly and
irrevocably accepted delivery of the Aircraft from the Seller in accordance with
Lessee's normal practices under the Purchase  Agreement for all purposes of this
Agreement.

 .        3.       Term and Rent; Voluntary Termination; Renewal

 . The basic term of this Lease (the "Basic Term") shall commence on the Delivery
Date and end on the Expiration Date unless this Lease is terminated  earlier, or
cancelled, in accordance with its terms.

 . The Lessee  shall pay to the  Lessor,  as Basic Rent for the  Aircraft on each
Rent Payment Date during the Basic Term, an amount for that Rent Payment Date as
set forth in Exhibit B and  allocated to the Payment  Period ending on such Rent
Payment Date, if designated as a payment in arrears, or allocated to the Payment
Period  commencing  on such Rent Payment  Date,  if  designated  as a payment in
advance,  in each case as specified in Exhibit B, as such amount may be adjusted
pursuant to ss. 3(d) hereof.

 . The Lessee shall pay or cause to be paid to the Lessor,  or to whomever  shall
be  entitled  to it, any and all  Supplemental  Rent  promptly as the same shall
become  due.  The  Lessee  will also pay to  Lessor,  on  demand,  to the extent
permitted by applicable law,  interest  (computed on the basis of a 360-day year
of twelve  30-day  months)  at the Past Due Rate on any  payment  of Rent to the
extent  not paid  when due,  for any  period  during  which it is  overdue.  The
expiration  or other  termination  of the Lessee's  obligation to pay Basic Rent
shall not limit or modify the Lessee's obligations to pay Supplemental Rent.

 . If (1) prior to the first Rent Payment Date, the aggregate of all  Transaction
Costs  shall be other  than as shown on  Exhibit B  (unless,  if such  aggregate
exceeds  the  amount  shown on  Exhibit  B, the  Lessee  elects  (with the Owner
Participant's  consent)  to pay such  excess  directly,  in which case the Owner
Participant  shall  identify  those  transaction  costs payable  directly by the
Lessee) or (2) a Refinancing of the  Certificates is effected in accordance with
ss.  15 of  the  Participation  Agreement,  then  the  amounts  of  Basic  Rent,
Stipulated Loss Value,  and Termination  Value,  the EBO Price and the EBO Date,
shall be  appropriately  adjusted upwards or downwards by such amount or amounts
as will (aa) cause the Owner's  Economic  Return through the EBO Date as well as
the end of the Basic Term to be at least  equal to the Owner's  Economic  Return
computed using the same assumptions  (other than the changed  assumptions giving
rise to the  adjustment in question),  constraints  (including tax and appraisal
constraints,  taking  into  account the law (with  respect to Code ss. 467,  any
proposed regulation issued thereunder or administrative  interpretation thereof)
applicable at the time of adjustment),  and  methodology  originally used by the
Owner Participant in computing Basic Rent,  Stipulated Loss Values,  Termination
Values,  and the EBO Price, and (bb) to the extent consistent with the preceding
clause (aa),  minimize the Net Present Value of Rents to the Lessee.  Stipulated
Loss  Values,  Termination  Values,  and the EBO Price also shall be adjusted to
reflect any loss,  recapture,  or  unavailability  of Assumed Tax  Benefits  (as
defined in the Tax Indemnity Agreement).

         Any such adjustment of Basic Rent, EBO Price, EBO Date, Stipulated Loss
Values,  or  Termination  Values shall be  determined in good faith by the Owner
Participant,  subject to verification on a confidential  basis by the Lessee and
Babcock & Brown,  Inc., or such other financial advisor chosen by the Lessee and
shall be effective as soon as possible.  Such  adjustment  shall be evidenced by
the  execution  and delivery by the Lessor and the Lessee of a lease  amendment,
but failure to execute and deliver such an amendment  shall not prevent or delay
the  effectiveness  of the adjustment  required by the preceding  paragraph.  If
requested by the Lessee,  any  computation  of the amount  payable by the Lessee
under this ss. 3(d) shall be provided by the Owner  Participant to the Lessee in
a notice setting forth in reasonable detail the computations and methods used in
computing such amount (not including confidential  methodology and assumptions).
Within 30 days  following  the Lessee's  receipt of such notice,  the Lessee may
request that a "Big 6" (or successor)  accounting firm or nationally  recognized
lease   advisory  firm  selected  by  the  Owner   Participant   and  reasonably
satisfactory  to  the  Lessee  (the  "Verifying   Firm"),   verify  whether  the
calculations  submitted  by the  Owner  Participant  are  based  on the  correct
assumptions and are mathematically  correct. The Verifying Firm shall enter into
a confidentiality  agreement reasonably  acceptable to the Owner Participant and
shall  be  requested  to make  its  determination  within  30  days.  The  Owner
Participant shall provide to the Verifying Firm, on a confidential basis, within
three days of its  appointment,  all the  information  within the  possession or
control of the Owner  Participant and reasonably  necessary for the verification
of  the  Owner  Participant's   calculation   (including  any  and  all  related
confidential  methodology  and  assumptions);  provided that the Verifying  Firm
shall  not  release  such  confidential  methodology  or  assumptions  or  other
confidential  information  except  as  and  to  the  extent  permitted  in  such
confidentiality   agreement.   If  the  Verifying  Firm   determines  that  such
computations  are  inaccurate  or  based  on  incorrect  assumptions,  then  the
Verifying  Firm  shall   determine  what  it  believes  to  be  the  appropriate
computations.  The Verifying  Firm shall make  available  for  inspection by the
Lessee and the Lessor such Verifying Firm's working papers and shall discuss the
verification   with  the  Lessor.   In  the  absence  of  manifest  error,  such
verification  shall be final and  binding on the parties  hereto.  The costs and
expenses of such  verification  shall be paid by the Lessee unless, as result of
such verification,  the Owner Participant's computation of the Net Present Value
of Rents or the EBO  Price is  adjusted  by more  than  $10,000  in favor of the
Lessee (in which case the Owner  Participant shall pay such costs and expenses).
The Lessor and the Lessee  shall  execute and deliver an amendment to this Lease
to reflect each such adjustment under this ss. 3(d).

 .  Notwithstanding  any other  provisions  of the  Operative  Agreements  to the
contrary,  both before and after giving effect to any adjustment  referred to in
this ss. 3, under any  circumstances and in any event, (1) Stipulated Loss Value
and Termination  Value,  and the EBO Price,  on any date,  shall be an amount at
least  sufficient  to pay in full on that date the  aggregate  unpaid  principal
amount  of the  Certificates  then  scheduled  to be  outstanding,  as  adjusted
pursuant  to ss. 15 of the  Participation  Agreement,  and  accrued  and  unpaid
interest  (assuming  interest has been timely paid) and any  Make-Whole  Premium
thereon,  and (2) Basic Rent  payable on any Rent  Payment  Date shall  (without
giving  effect  to  any  acceleration  of the  Certificates  as a  result  of an
Indenture Event of Default) at least equal the aggregate amount of principal and
interest  scheduled  to be paid on the  Certificates  outstanding  on such  Rent
Payment Date, as adjusted pursuant to ss. 15 of the Participation Agreement.

 . All payments of Rent hereunder  shall be made in immediately  available  funds
and in U.S.  dollars no later than 12:00 noon,  New York City time,  on the date
payable hereunder. So long as any Certificate is outstanding, all Rent due or to
become  due  hereunder  (other  than  Excepted  Payments)  shall  be paid to the
Indenture  Trustee  in  accordance  with the  payment  instruction  set forth in
Schedule  II to the  Participation  Agreement  or at such  other  address in the
United States or to such other Person as the  Indenture  Trustee shall direct by
written  notice to the Lessee.  All Excepted  Payments  and, upon payment of all
outstanding Certificates,  all payments of Rent thereafter made hereunder, shall
be paid to the  Lessor  or,  in the case of any  payment  of  Supplemental  Rent
expressly  payable to a Person  other than  Lessor,  to such  other  Person,  as
appropriate,  in accordance with the payment  instructions set forth in Schedule
II to the  Participation  Agreement or at such other  address or to such further
Person as the Lessor or such other Person shall direct by written  notice to the
Lessee,  except that all indemnity payments under any Operative  Agreement shall
be paid to the  appropriate  Indemnitee at its payment  address set forth in the
Participation  Agreement or as otherwise  directed by such Indemnitee by written
notice to the  Lessee.  If any date on which any Rent  becomes  payable is not a
Business Day, then the applicable payment of Rent shall be made on the following
Business Day without  additional  interest or penalty  (provided that payment is
made on such following Business Day).

 . So long as no Specified  Default  shall have occurred and be  continuing,  the
Lessee shall have the right at its option (not  exercisable  more than twice) to
terminate  this  Lease,  on any Rent  Payment  Date  occurring  after  the fifth
anniversary of the Delivery Date (a "Termination  Date"),  on at least 120 days'
prior written notice given by the Lessee to the Lessor, provided that the Lessor
has received a  certificate  from the  president or chairman of the board of the
Lessee  certifying  that the  Aircraft  is  obsolete,  surplus  to the  Lessee's
business,  or to be disposed of as part of a program of jet fleet  renewal  that
has been  implemented for valid business  reasons and not with a  discriminatory
purpose of terminating only the Aircraft and aircraft under Related Leases. That
notice shall  specify the Payment Date on which the Lessee  intends to terminate
this Lease in accordance  with this ss. 3(g). The Lessee shall have the right to
revoke its notice of termination  (but not more than twice) not less than 5 days
prior to the Termination Date so specified.

         Until the 60th day before the proposed Termination Date, the Lessor may
notify the Lessee that the Lessor  elects to take  possession of the Aircraft on
the Termination  Date instead of receiving any payment of Termination  Value. In
that event,  the Lessee shall have no  obligation  to obtain bids under this ss.
3(g).

         Commencing  on the date the Lessee gives such notice,  the Lessee (or a
Person  authorized  by  the  Lessee,  acting  as  agent  for  the  Lessor  for a
commercially reasonable commission) shall use commercially reasonable efforts to
obtain the  highest bid for the cash  purchase of the  Aircraft on or before the
Termination  Date. The Lessee shall have no liability to the Lessor or any other
Person for failure to obtain the best price for the  Aircraft,  shall act in its
sole  discretion,  and shall be under no duty to solicit bids publicly or in any
particular  market.  The  Manufacturer  or  an  Affiliate  thereof,   the  Owner
Participant, and any Person contacted by the Lessor or the Owner Participant may
submit a bid. The Lessee  shall  certify to the Lessor in writing the amount and
terms of each bid submitted to the Lessee, and the name and address of the party
or parties  submitting  such bid.  Neither the Lessee nor any  Affiliate  of the
Lessee may (directly or through any agreement  with any other Person  concerning
the  purchase or use of the  Aircraft by the Lessee) bid for or buy the Aircraft
under this ss. 3(g).

         If the Lessor  exercises its option to take  possession of the Aircraft
as provided  above,  then,  provided  the Lessee does not  exercise its right to
revoke its notice of termination,  on the Termination Date, (x) the Lessor shall
pay the then-unpaid  principal amount of all Certificates then outstanding,  and
all interest thereon; and (y) the Lessee shall pay any Make-Whole Premium on the
Certificates,  and shall  deliver  the  Aircraft to or at the  direction  of the
Lessor in the same manner and  condition as if delivery  were made to the Lessor
pursuant  to ss. 5 and shall pay to the  Lessor  (A) any  unpaid  Basic  Rent in
respect of Rent Payment Dates occurring  before the  Termination  Date (less, if
the  Termination  Date is not a Rent Payment Date, the pro rata portion of Basic
Rent payable in advance in respect of the period  commencing on the  Termination
Date and  ending on the next Rent  Payment  Date),  plus (B)  either  (i) if the
Termination  Date is a Rent Payment Date,  that portion of Basic Rent payable in
arrears on such Rent Payment Date, or (ii) if the Termination Date is not a Rent
Payment Date,  that pro rata portion of Basic Rent payable in arrears due on the
following  Rent  Payment  Date in respect of the period  commencing  on the Rent
Payment  Date  immediately  preceding  the  Termination  Date and  ending on the
Termination  Date,  plus (C) any unpaid  Supplemental  Rent due on or before the
Termination Date, whereupon the Term shall terminate as of the Termination Date,
and the Lessee's  obligation to pay all installments of Basic Rent due after the
Termination  Date shall  terminate.  If the Lessor elects to retain the Aircraft
pursuant to this ss. 3(g), the Lessee shall deliver the Airframe and the Engines
(provided  that  the  Airframe  may  be  delivered  with  engines   meeting  the
requirements set forth herein for Replacement  Engines in lieu of the Engines so
long as the  aggregate  number of Engines and engines being  delivered  with the
Airframe  equals two) to the Lessor in the same manner as if delivery  were made
to the Lessor  pursuant to ss. 5 hereof,  and shall duly  transfer to the Lessor
right,  title and interest to any such  engines not owned by the Lessor,  all in
accordance  with ss. 5. Upon  delivery of the Airframe and Engines or engines to
the Lessor and payment by the Lessee of any  amounts  required to be paid by the
Lessee  pursuant  to this ss.  3(g),  the Lessor  will  transfer  to the Lessee,
without recourse or warranty  (except as to the absence of Lessor's Liens),  all
of the  Lessor's  right,  title and  interest in and to any  Engines  which were
replaced by engines  pursuant to this ss. 3(g),  and shall deliver to the Lessee
such  instrument as the Lessor shall have  received from the Indenture  Trustee,
releasing such Engines from the Lien of the Indenture.

         If the Lessor does not  exercise its option to take  possession  of the
Aircraft,  then, on the Termination Date, the Lessor shall sell the Aircraft for
immediately  available funds to the purchaser named in the highest bid certified
to it by the Lessee,  "as is, where is" and without recourse or warranty (except
as to the absence of  Lessor's  Liens) and subject to the payment of all amounts
due under this ss.  3(g).  The total sales price  realized at such sale shall be
retained by the Lessor or its assignee  and, in addition,  on or before the date
of such sale,  the Lessee shall pay to the Lessor the sum of (1) the amount,  if
any, by which (aa) the Termination Value (including any Make-Whole  Premium with
respect to the Certificates),  computed as of the Termination Date, exceeds (bb)
the  sales  price  of the  Aircraft  sold  by the  Lessor  less  all  reasonable
out-of-pocket  expenses  incurred  by the  Lessor and the Owner  Participant  in
connection  with such sale and any sales  taxes or similar  transfer  taxes (and
without  deducting any sales  commissions  or marketing  expenses for brokers or
agents  engaged by the Lessor  unless  engaged by the Lessee or a  Sublessee  on
behalf of, and with the consent of, the  Lessor),  (2) any unpaid Basic Rent due
before the Termination Date (less, if the Termination Date is not a Rent Payment
Date,  the pro rata  portion of Basic Rent  payable in advance in respect of the
period  commencing on the  Termination  Date and ending on the next Rent Payment
Date),  plus (3) either (i) if the Termination Date is a Rent Payment Date, that
portion of Basic Rent payable in arrears on such Rent Payment  Date,  or (ii) if
the  Termination  Date is not a Rent Payment Date, the pro rata portion of Basic
Rent payable in arrears due on the following Rent Payment Date in respect of the
period commencing on the Rent Payment Date immediately preceding the Termination
Date and ending on the Termination  Date, plus (4) unpaid  Supplemental Rent due
on or before the Termination Date.  Except as provided in the next paragraph,  a
sale of the  Aircraft  pursuant  to this ss.  3(g)  shall  take  place only on a
Termination Date.

         If the  Lessee  revokes  its  notice of intent to  terminate  (any such
notice of  revocation  to be effective  only if given at least 5 days before the
Termination  Date), or if no sale occurs or the Lessor  retention fails to occur
on or before the  Termination  Date, (x) the Lessee shall  reimburse the Lessor,
the Owner  Participant,  and the Indenture Trustee for any reasonable costs that
such Person incurs in  connection  with the proposed  termination,  and (y) this
Lease shall  continue in full force and  effect,  and the Lessee  shall have the
right to reinstate the termination  procedure  described in this ss. 3(g). If no
sale has occurred on the  Termination  Date because the proposed buyer failed to
purchase on that date,  a sale to that buyer may be  consummated  within 30 days
thereafter,  and the Lessee  shall be liable for Basic Rent  during  that period
equal to the daily  equivalent  (per day) of the  average  Basic Rent during the
Basic Term. Neither the Lessor nor the Owner Participant shall be under any duty
to solicit  bids,  to inquire into the efforts of the Lessee to obtain bids,  or
otherwise to take action in connection  with any sale pursuant to this ss. 3(g),
other than the Lessor's duty to transfer to the  purchaser  named in the highest
bid certified by the Lessee to the Lessor,  "as is, where is",  without recourse
or warranty,  express or implied  (except as to the absence of Lessor's  Liens),
all right,  title,  and interest in and to the Aircraft  against  receipt of the
payment  provided  in  this  ss.  3(g).  Effective  on full  payment  of all the
foregoing  amounts in  connection  with the sale or retention of the Aircraft by
the Lessor  under this ss.  3(g),  the Term shall  terminate,  and the  Lessee's
obligation  to pay all  installments  of Basic Rent due after such  payment date
shall  terminate,  whereupon  the  Lessee  shall  deliver  the  Aircraft  to the
purchaser or (in the case of a Lessor retention) to the Lessor.

 . Subject to the conditions set forth below in this ss. 3(h), the Lessee, at its
option,  may renew this Lease for one or more successive  one-year renewal terms
(each a "Renewal Term") not to exceed six years in the aggregate, with each such
Renewal Term to commence upon the expiration of the Basic Term or  then-expiring
Renewal  Term,  as the case may be. This renewal  right shall be exercised  upon
irrevocable  written  notice  from the  Lessee  to the  Lessor  of the  Lessee's
election  so to renew this Lease  given not less than 180 days before the end of
the Basic Term or any Renewal  Term.  If the Lessee fails to exercise any option
to extend the term of this Lease for any  Renewal  Term in  accordance  with the
provisions  of this  paragraph,  all of the  Lessee's  rights to extend the term
hereof for such Renewal Term and any subsequent Renewal Term shall expire.

         All  provisions  of this Lease shall apply  during each  Renewal  Term,
except that (1) the Lessee shall pay to the Lessor for each  semi-annual  period
during the Renewal Term, on the applicable Rent Payment Date during that Renewal
Term,  an amount equal to (i) with respect to the first two such Renewal  Terms,
the lower of (x) $66,000 per month ($396,000 for such semi-annual period and (y)
the Fair Market  Rental of the Aircraft for such period and (ii) with respect to
each other such Renewal  Term,  the Fair Market  Rental of the Aircraft for such
period  (provided  that, if prior to the  commencement of the third such Renewal
Period  the  Lessee  provides  to the  Lessor  a  "20-20"  appraisal  reasonably
acceptable to the Lessor,  the holder of fixed rate renewals  shall be increased
to the number  supported  by such  appraisal;  provided  further  that the total
number of renewal  periods  shall not exceed six in total),  and (2)  Stipulated
Loss Value and Termination  Value for the Aircraft shall be equal to such Values
as of the last day of the Basic Term.

         The Lessee's  right to renew this Lease pursuant to this ss. 3(h) shall
be subject to the following conditions:  (i) no Specified Default shall exist on
the date of the Lessee's  notice of renewal or the date of  commencement  of the
Renewal Term; and (ii) the Lessee shall have caused to be delivered to the Owner
Participant a residual value  agreement which is either (a) a renewal of the RVG
or (b) a residual value agreement that is substantially  identical to the RVG or
otherwise  fully  acceptable to the Owner  Participant  from or guaranteed by an
institution rated "A" or better by S&P or Moody's,  and which (as to clauses (a)
and (b)) is in an amount which protects the Owner's  Economic Return through the
end of the applicable  Renewal Term and providing  residual value  protection as
provided in Exhibit B hereto.

 . On any date  selected  by the Lessee,  the Lessee  shall have the right at its
option at any time during the Term, if no Specified  Default exists, on at least
five Business Days' prior written notice to the Lessor,  to terminate this Lease
with respect to any Engine by replacing such Engine,  effective the  termination
date, by complying with the terms of ss. 11(b) to the same extent as if an Event
of Loss had occurred to such Engine.  Such  termination  and  replacement  shall
occur  simultaneously.  Upon the Lessee's  compliance with its obligations under
the  previous  sentence,  the Lessor  will  transfer  to the Lessee (or a Person
designated  by the Lessee) the Engine so  terminated,  "as is, where is" without
recourse or warranty,  express or implied  (except as to the absence of Lessor's
Liens),  each  such  Engine  shall no  longer  be an  "Engine,"  and  each  such
Replacement Engine substituted therefor shall become an Engine. The Lessee shall
be responsible for any sales taxes or similar transfer taxes resulting from such
replacement.

 . This Lease is a net lease,  and the Lessee's  obligation  to pay all costs and
expenses  of  every   character,   whether  seen  or  unforeseen,   ordinary  or
extraordinary,  or structural  or  nonstructural,  in  connection  with the use,
operation,  maintenance,  repair and  reconstruction  of the  Airframe  and each
Engine  by the  Lessee  and the  Lessee's  obligation  to pay all  Rent  payable
hereunder,  and the rights of the Lessor in and to such Rent,  shall be absolute
and  unconditional  and  shall  not  be  subject  to any  abatement,  reduction,
suspension,  deferment,  set-off,  or recoupment  ("Abatements")  for any reason
whatsoever,  including  Abatements  due to any  present or future  claims of the
Lessee against the Lessor or any other Indemnitee under this Lease or otherwise,
or against any other Person for whatever reason.  Except as otherwise  expressly
provided  herein,  this Lease shall not terminate,  nor shall the obligations of
the Lessee be affected, by reason of (a) any defect in or damage to, or any loss
or  destruction  of, the  Aircraft  or any part  thereof,  (b) any defect in the
title, airworthiness, condition, design, merchantability,  operation, or fitness
for use of the Aircraft or any interest  therein,  (c) the interference with the
use thereof by any Person, (d) the invalidity or unenforceability or lack of due
authorization of this Lease, any other Operative Agreement, or any instrument or
document  executed  in  connection  herewith,  (e) any  insolvency,  bankruptcy,
reorganization, or similar proceeding by or against the Lessee or any Sublessee,
or (f) any other cause, whether similar or dissimilar to the foregoing,  and, to
the extent  permitted  thereby,  any present or future law or  regulation to the
contrary  notwithstanding,  it being the express intention of the Lessor and the
Lessee  that all Basic  Rent  payable  by the  Lessee  hereunder  shall be,  and
continue to be,  payable in all events  unless the  obligation to pay that Basic
Rent is terminated  pursuant to the express provisions of this Lease. If for any
reason  whatsoever  this Lease is terminated in whole or in part by operation of
law or otherwise, except as specifically provided herein, the Lessee nonetheless
agrees,  to the extent  permitted  by law, to pay to the Lessor or to the Person
entitled  thereto an amount  equal to each  Basic 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. To the extent  permitted
by  applicable  law, the Lessee hereby waives 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. Each payment of Basic Rent made by the
Lessee shall be final,  and the Lessee shall not seek to recover all or any part
of such  payment  for any reason  whatsoever,  except for any  payments  made in
error.  Notwithstanding  the foregoing,  the Lessee may assert any claims it may
have against any Person in an independent proceeding.

 . Unless the Aircraft is purchased pursuant to ss. 3(g) or 16, at the expiration
of the Term or upon  termination  of this Lease  pursuant to ss. 3(g) or 15, the
Lessee,  at its own risk and expense,  shall  return the Aircraft in  accordance
with Exhibit F.

 . The Lessor's  warranties  in the  Participation  Agreement  are in lieu of all
other  warranties  of the Lessor with  respect to the  Aircraft,  and the Lessor
shall not be deemed to have  modified in any respect  the  Lessee's  obligations
pursuant to ss. 4, which  obligations  are  absolute and  unconditional.  LESSOR
LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS,  WHERE-IS." LESSEE ACKNOWLEDGES AND
AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR,  THE INDENTURE TRUSTEE AND THE
OWNER PARTICIPANT (i) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF,
(ii) THE AIRFRAME AND ENGINES ARE OF A DESIGN, CAPACITY AND MANUFACTURE SELECTED
BY AND  ACCEPTABLE  TO LESSEE,  (iii) LESSEE IS SATISFIED  THAT THE AIRFRAME AND
EACH ENGINE ARE SUITABLE FOR THEIR RESPECTIVE  PURPOSES AND (iv) NONE OF LESSOR,
THE INDENTURE  TRUSTEE,  OR THE 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:

         (v) THE AIRWORTHINESS, VALUE, CONDITION, DESIGN, OPERATION, ANY IMPLIED
         WARRANTY OF  MERCHANTABILITY  OR FITNESS FOR USE OR FOR ANY  PARTICULAR
         PURPOSE OF THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF;

         (w)      THE QUALITY OF THE MATERIAL OR WORKMANSHIP  WITH RESPECT TO THE AIRFRAME,  ANY ENGINE OR ANY PART
         THEREOF;

         (x)      THE  ABSENCE  OF LATENT OR ANY OTHER  DEFECT IN THE  AIRFRAME,  ANY  ENGINEOR  ANY PART  THEREOF,
         WHETHER OR NOT DISCOVERABLE;

         (y)      THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT OR THE LIKE; OR

         (z) THE ABSENCE OF  OBLIGATIONS  BASED ON STRICT  LIABILITY IN TORT, OR
         ANY OTHER  REPRESENTATION OR WARRANTY  WHATSOEVER,  EXPRESS OR IMPLIED,
         WITH RESPECT TO THE AIRFRAME, ANY ENGINE OR ANY PART THEREOF.

LESSEE FURTHER WAIVES, DISCLAIMS,  RELEASES AND RENOUNCES ANY LIABILITY,  RIGHT,
CLAIM,  REMEDY OR OBLIGATION WHETHER OR NOT ARISING FROM THE NEGLIGENCE (WHETHER
ACTIVE,  PASSIVE OR  IMPUTED)  OF  LESSOR,  THE  INDENTURE  TRUSTEE OR THE OWNER
PARTICIPANT, ARISING OUT OF OR ATTRIBUTABLE TO THE USE, OPERATION OR PERFORMANCE
OF THE AIRFRAME, ANY ENGINEOR ANY PART.

 . The  Aircraft  is and shall at all times  remain the  property  of the Lessor,
except as otherwise expressly provided in the Operative Agreements.

 . The Lessee shall not directly or indirectly create,  incur,  assume, or suffer
to exist any Lien on or with respect to the Lessor's Estate or this Lease or the
Aircraft,  the  Airframe  or any  Engine  or any  Part or title  thereto  or any
interest therein except:  (a) the rights of the Lessor,  the Owner  Participant,
the  Indenture  Trustee,  the  Holders,  and the Lessee as  contemplated  by the
Operative Agreements,  (b) the rights of others under agreements or arrangements
to the  extent  permitted  by ss.  9(f) and ss.  13,  (c)  Lessor's  Liens,  (d)
Indenture  Trustee's  Liens,  (e) Liens for  Taxes  either  not yet due or being
contested in good faith with due diligence  and by  appropriate  proceedings  so
long as there is no material risk of sale,  forfeiture,  loss, or loss of use of
any Item and so long as such contest does not extend beyond the end of the Term,
(f) inchoate materialmen's,  mechanics',  worker's,  repairer's,  employees', or
other like Liens arising in the ordinary  course of business and for amounts the
payment of which either is not yet due or is being  contested in good faith with
due diligence  and by  appropriate  proceedings  so long as there is no material
risk of sale, forfeiture,  loss, or loss of use of the Aircraft, the Airframe or
any Engine or any  interest  therein and so long as such contest does not extend
beyond the end of the Term,  (g) any Lien  arising out of any  judgment or award
with  respect to which at the time an appeal or  proceeding  for review is being
prosecuted in good faith by  appropriate  proceedings  diligently  conducted and
with respect to which there shall have been secured a stay of execution  pending
such appeal or  proceeding  for review and so long as such appeal or  proceeding
does not extend  beyond the end of the Term,  and (h) any Lien against which the
Lessee  causes to be  provided  a bond in such  amount  and under such terms and
conditions  as are  reasonably  satisfactory  to the  Lessor.  The  Lessee  will
promptly,  at its own  expense,  take or cause to be taken such action as may be
necessary to discharge any Lien which is not permitted by this ss. 8.

         9.       Registration;   Maintenance;  Records;  Compliance  and  Use;  Replacement  Parts;  Improvements;
 .ooling of Parts; Insignia

 . The Lessee shall, at its expense, cause the Aircraft to be duly registered, at
all  times  (except  as  provided  below  and  except  to the  extent  that such
registration  is prevented by the legal  status,  or an act or omission,  of the
Lessor,  the Owner Participant,  the Indenture Trustee,  or any Holder) from and
after the Delivery  Date,  in the United  States in the Lessor's name (except as
otherwise  required by the Transportation  Code) under the Transportation  Code,
shall not (except as provided below) register the Aircraft under the laws of any
jurisdiction  other than the United States,  and shall not cause the Aircraft to
be  ineligible  for  such  registration;  provided,  that  the  Lessee  may,  in
connection with any Sublease,  and in accordance with and subject to ss. 6.03(b)
of the  Participation  Agreement,  cause the Aircraft to be registered under the
laws of a foreign jurisdiction.

 . The  Lessee  shall  cause  each Item to be  maintained,  inspected,  serviced,
repaired,  overhauled, and tested (1) in accordance with an FAA-approved program
or (if the Aircraft has been re-registered in accordance with ss. 6.03(b) of the
Participation  Agreement)  a program of another  governmental  authority  having
jurisdiction (but in any event in accordance with maintenance standards at least
comparable  to  those   required  by  the  FAA  or  JAA  ("Minimum   Maintenance
Standards")),  (2) so as to keep each Item in as good operating  condition as it
was in when  delivered to the Lessee by the  Manufacturer,  reasonable  wear and
tear  excepted,  and so as to  enable  the  airworthiness  certificate  for  the
Aircraft to remain in good standing at all times, except when the FAA or (if the
Aircraft  has  been   re-registered  in  accordance  with  ss.  6.03(b)  of  the
Participation  Agreement) other applicable  aeronautical  authority  grounds all
Canadair  Regional Jet, 200 ER Series Aircraft,  (3) in the same manner and with
the same care as used by the Lessee (or a Permitted  Sublessee)  with respect to
similar aircraft and engines owned or leased and operated by the Lessee (or such
Permitted Sublessee), and (4) so as to comply with the applicable regulations of
the FAA or (if the  Aircraft  has  been  re-registered  in  accordance  with ss.
6.03(b) of the  Participation  Agreement)  other  governmental  authority having
jurisdiction   (but  in  any  event  in  accordance  with  Minimum   Maintenance
Standards),  except during a good-faith contest of the validity,  applicability,
or alleged  violation of the  pertinent  rule or  regulation  in any  reasonable
manner that does not involve any material  risk of sale,  forfeiture  or loss of
the  Aircraft or any Engine or the  interests  of the  Indenture  Trustee or the
Owner Participant  therein, and that does not involve any material risk of civil
liability  or any risk of  criminal  liability  against  Lessor,  the  Indenture
Trustee or the Owner Participant and which does not extend beyond the end of the
Term if the pendency of such contest would adversely  affect the Aircraft or the
remarketing  thereof in any material  respect;  provided,  that no contest shall
excuse the failure to maintain the airworthiness  certification for the Aircraft
in good standing without the Lessor's written consent, nor shall the pendency of
any contest  prevent a prohibition  of use from  becoming an Event of Loss.  The
Lessee shall maintain all logs,  manuals,  certificates,  data, and  inspection,
modification,  repair,  and overhaul  records  required by the FAA (or any other
governmental body having  jurisdiction) to be maintained in respect of each Item
(collectively,  the  "Manuals  and  Technical  Records"),  and such  Manuals and
Technical  Records shall be maintained in English (or be translated into English
on an  ongoing  basis) to the  extent  that they  would need to be in English in
order to place  the  Aircraft  on an  FAA-approved  maintenance  program.  Those
Manuals and Technical  Records which are specific to the Aircraft (but not those
Manuals and Technical  Records which are applicable to Canadair Regional Jet 200
ER series  aircraft in general)  shall, as between the Lessor and the Lessee and
all parties claiming through the Lessee, be the property of the Lessor but shall
become the  property of the Lessee upon  purchase by the Lessee of the  Aircraft
pursuant to the terms of this Lease or upon the  occurrence  of an Event of Loss
and the Lessee's compliance with ss. 11(a)(1).  The Lessee shall prepare for the
Lessor, and file, any reports required by any governmental authority as a result
of the Lessor's  ownership of the Aircraft  (and the Lessor shall furnish to the
Lessee and any Permitted  Sublessee all  reasonable  co-operation  in connection
therewith, at the Lessee's expense).

 . The Lessee shall not cause or permit the Aircraft to be maintained,  operated,
or used in violation of any law or any rule,  regulation,  treaty,  statute,  or
order of any government or governmental  authority  having  jurisdiction,  or in
violation of any airworthiness certificate, license, or registration relating to
the Aircraft issued by any such authority, except during a good-faith contest of
the validity, application, or alleged violation thereof in any reasonable manner
that does not  involve  any  material  risk of sale,  forfeiture  or loss of the
Aircraft or any Engine or the  interests of the  Indenture  Trustee or the Owner
Participant  therein  (excluding  any  interests  indemnified  for under the Tax
Indemnity  Agreement)  and that  does not  involve  any  material  risk of civil
liability or any risk of criminal  liability  against the Lessor,  the Indenture
Trustee,  or the Owner Participant,  and which does not extend beyond the end of
the Term if the pendency of such contest would adversely  affect the Aircraft or
the  remarketing  thereof  in any  material  respect.  If any  such  law,  rule,
regulation,  treaty,  statute,  order,  certificate,  license,  or  registration
requires  alteration  of the  Aircraft,  the  Lessee  shall  obtain  conformance
therewith  at no  expense  to the  Lessor  and shall  cause the  Aircraft  to be
maintained  in  proper  operating  condition  thereunder.  The  Lessee  and  any
Sublessee  shall have the right to  operate  the  Aircraft  or any Engine in any
geographical  area;  provided  that neither the Lessee nor any  Sublessee  shall
operate the  Aircraft or any Engine in any area  excluded  from  coverage by any
insurance  policy  required  by the terms of ss.  12,  unless the Lessee or such
Sublessee has obtained,  prior to such  operation in such area,  indemnification
from the Government,  or other  insurance,  against the risks and in the amounts
required by ss. 12 covering  such area or unless the  Aircraft or Engine is only
temporarily  located  in  such  area  as a  result  of  an  isolated  occurrence
attributable to a hijacking, medical emergency,  equipment malfunction,  weather
conditions, navigational error or other similar unforeseen circumstances and the
Lessee or Sublessee is using good faith efforts to remove the Aircraft or Engine
from such area.  Throughout the Term, as between the Lessee and the Lessor,  the
possession,  use,  and  maintenance  of the  Aircraft  shall  be at the risk and
expense of the Lessee. The Aircraft may not be operated, used, or located in any
declared  war zone or in any area  which  is an area of  recognized  hostilities
(except to leave such a zone or area).

 . Except as otherwise  provided in ss. 11(e),  the Lessee shall, at its own cost
and  expense,  promptly  replace all Parts (other than  Removable  Improvements)
which become worn out, lost, stolen,  destroyed,  seized,  confiscated,  damaged
beyond repair,  or permanently  rendered unfit for use for any reason whatsoever
(such substituted parts being "Replacement Parts"). In addition, in the ordinary
course of maintenance, overhaul, or testing, the Lessee may, at its own cost and
expense,  remove any Parts,  whether or not worn out, lost,  stolen,  destroyed,
seized,  confiscated,  damaged beyond repair, or permanently  rendered unfit for
use,  provided that such Parts (other than Removable  Improvements) are promptly
replaced.  All Replacement  Parts (other than Removable  Improvements)  shall be
free and clear of all Liens  (except  for  pooling  arrangements  to the  extent
permitted  by ss.  9(f) and  other  Permitted  Liens)  and  shall be in good and
operable  condition  and capable of performing  their  intended  purpose  within
manufacturer's specifications. All Parts at any time removed from any Item shall
remain the property of the Lessor, no matter where located, until they have been
replaced  by  Replacement  Parts which have been  incorporated  in such Item and
which meet the requirements for Replacement  Parts specified above.  Immediately
upon  the   incorporation   of  any  Replacement   Part  (other  than  Removable
Improvements) in such Item as above provided,  without further act, (1) title to
the removed  Part shall vest in the Lessee,  free and clear of all rights of the
Lessor, and such replaced Part shall no longer be a "Part" hereunder,  (2) title
to such  Replacement  Part shall vest in the Lessor,  subject  only to a pooling
arrangement to the extent  permitted by ss. 9(f), and (3) such  Replacement Part
shall  become  subject  to this Lease and shall be part of such Item to the same
extent as the removed Part.  Notwithstanding  the  foregoing,  the Lessee or any
Permitted  Sublessee  may remove,  and not replace,  up to $100,000 in aggregate
original cost (cumulative throughout the Term) of Parts that it reasonably deems
to be  obsolete,  the  removal  of which does not  materially  impair the value,
remaining useful life or utility of the Aircraft.

 . The Lessee shall  incorporate  in the Aircraft any  accessory,  equipment,  or
device, or make any improvement,  modification,  alteration, or addition thereto
(any such accessory, equipment, device, improvement,  modification,  alteration,
or addition being an  "Improvement"),  as is necessary from time to time to meet
the  requirements  of  the  FAA  or  any  other  governmental  authority  having
jurisdiction  over the Aircraft.  In addition,  the Lessee may from time to time
install  (or allow a Permitted  Sublessee  to install)  any  Improvement  as the
Lessee (or any Permitted Sublessee) deems desirable in the proper conduct of its
business,  provided that no such Improvement  diminishes the value,  utility, or
remaining useful life of any Item below the value, utility, and remaining useful
life that it would have had if that  Improvement had not been made. Title to all
Improvements  (other than Removable  Improvements)  shall,  without further act,
vest in the Lessor.

         Any  Improvement  that (1) is in addition to, and not in replacement of
or in  substitution  for, any Part  originally  incorporated  in any Item or any
Replacement  Part that replaced such an original Part, (2) is not required to be
incorporated  in any Item pursuant to the first  sentence of this ss. 9(e),  and
(3) can be removed  from such Item  without  impairing  the value,  utility,  or
remaining  useful  life  that  such  Item  would  have had at such time had such
Improvement  not been  made (a  "Removable  Improvement")  shall  not  become an
accession to that Item or be subject to the Lien of the Indenture.  At or before
the time that the  Aircraft is returned to the Lessor,  the Lessee may remove or
cause to be removed any  Removable  Improvement  and shall repair or cause to be
repaired any damage to the Aircraft  resulting from the  installation or removal
of such  Removable  Improvement  so as to  restore  the  Aircraft  to the value,
utility,  and remaining useful life that it would have had at such time had such
Removable  Improvement  not been made,  reasonable  wear and tear excepted.  Any
Removable  Improvement  not so removed before the time of return of the Aircraft
shall, at such time, become the property of the Lessor without further action by
the parties hereto.

         If any Removable  Improvement is owned by any third party or is subject
to a  conditional  sale  contract or other  security  interest,  then the Lessor
hereby agrees for the benefit of any such owner,  conditional vendor, or secured
party  that the  Lessor  will not  acquire  or claim,  as  against  such  owner,
conditional  vendor, or secured party, any right, title, or interest in any such
Removable  Improvement as the result of its installation on any Item;  provided,
that the Lessor's  agreement in this sentence shall be  ineffective  unless such
owner, conditional vendor, or secured party agrees in writing (a copy thereof to
be provided by the Lessee to the Lessor) and in a legally enforceable manner (a)
not to acquire or claim, as against the Lessor, any right, title, or interest in
any Item by reason of the  installation of such Removable  Improvement  thereon,
and (b) promptly,  after notice,  to remove such  Removable  Improvement  if the
Lessor declares this Lease to be in default.

 . Any Part  removed  from any Item as provided in ss. 9(d) may be subjected to a
normal pooling arrangement customary in the airline industry entered into in the
ordinary course of the Lessee's or a Permitted  Sublessee's  business,  provided
that (except for any removed Part that is a Removable Improvement) a Replacement
Part is incorporated in that Item in accordance with ss. 9(d) promptly after the
removal of the removed Part. In addition, any Replacement Part when incorporated
in an Item in  accordance  with ss. 9(d) may be owned by a Permitted Air Carrier
or a  lessor  to a  Permitted  Air  Carrier  subject  to such a  normal  pooling
arrangement,  provided  that (unless the  Replacement  Part replaces a Removable
Improvement) the Lessee,  promptly,  either (1) causes title to such Replacement
Part to vest in the  Lessor  in  accordance  with ss.  9(d) by  acquiring  title
thereto for the benefit of, and transferring  such title to, the Lessor free and
clear  of  all  Liens  (other  than  Permitted  Liens),  or  (2)  replaces  such
Replacement Part by incorporating in that Item a further  Replacement Part owned
by the Lessee free and clear of all Liens  (other than  Permitted  Liens) and by
causing  title  to such  further  Replacement  Part to  vest  in the  Lessor  in
accordance with ss. 9(d).

 .  The  Lessee  shall  (1)  cause  each  Item  to  be  kept  numbered  with  the
identification  or serial numbers  therefor as specified in the applicable Lease
Supplement,  and (2) before  locating  the  Airframe  or any Engine  outside the
United  States,  affix and  maintain in such  Airframe  adjacent to and not less
prominent than the airworthiness  certificate,  or on such Engine in a prominent
location, a nameplate or stencil bearing the following legend:

                  This [Aircraft]  [Engine] is subject to a security interest in
                  favor of The First National Bank of Maryland (as loan trustee)
                  and is leased  from  State  Street  Bank and Trust  Company of
                  Connecticut, National Association (as owner trustee).

and such other  markings as from time to time are  required by law or  otherwise
deemed necessary by the Lessor or the Indenture  Trustee in order to protect the
Lessor's title to the Aircraft,  the Lessor's  rights under this Lease,  and the
Indenture  Trustee's  rights  with  respect to the  Aircraft.  The Lessee  shall
promptly  replace any such  required  nameplate  marking which has been removed,
defaced, or destroyed.  Except as above provided,  the Lessee will not allow the
name of any  Person  to be  placed  on any  Item  as a  designation  that  might
reasonably be  interpreted  as a claim of ownership;  provided,  that nothing in
this ss.  9(g)  shall  prohibit  the Lessee (or any  Permitted  Sublessee)  from
placing appropriate  lettering,  painting,  or markings (including its customary
colors and insignia, or those of any code-sharing affiliate) on any Item.

 . At all reasonable times during the Term (but,  except when a Specified Default
is then  continuing,  and except during the last six months of the Term, no more
than once per year for the  Lessor  and the Owner  Participant  and no more than
once per year for the Indenture Trustee),  the Lessor, the Owner Participant and
the  Indenture  Trustee  (or not more  than two of their  agents  or  authorized
representatives)  may,  upon not less than five days' prior written  notice,  at
their own cost and expense, inspect the Aircraft, the Airframe or any Engine and
the Lessee's books and records  related  thereto;  provided,  that,  unless this
Lease has been  declared  to be in default in  accordance  with its terms,  such
inspection  shall be conducted  so as not to interfere  with the business of the
Lessee or the operation or maintenance by the Lessee (or a Permitted  Sublessee)
of any  aircraft  and,  as to  any  aircraft,  shall  be a  visual,  walk-around
inspection which may include going on board the aircraft,  and shall not include
opening any panels,  bays, or other apertures (but may include  inspecting those
that are open); provided further, that the costs of inspection shall be borne by
the  Lessee  (and  paid  promptly  upon  demand)  in the  case of an  inspection
conducted by such inspecting  party after the occurrence of a Specified  Default
which is then  continuing.  Promptly after the request of the Lessor,  the Owner
Participant,  or the Indenture  Trustee,  the Lessee or any Permitted  Sublessee
shall provide the Lessee's or such Permitted  Sublessee's  schedule for upcoming
heavy maintenance checks and shall use commercially reasonable efforts to permit
such inspections by the Lessor,  the Owner  Participant or the Indenture Trustee
during  such  maintenance  checks.  Upon the  request of the  Lessor,  the Owner
Participant,  or the Indenture Trustee, the Lessee shall confirm the location of
any Item and shall,  at any reasonable  time,  make any Item and all Manuals and
Technical  Records relative  thereto  available to such requesting party (or its
agents or authorized  representatives)  for inspection and copying.  The Lessor,
the Owner  Participant and the Indenture  Trustee shall have no duty to make any
such  inspection  nor shall the Lessor,  the Owner  Participant or the Indenture
Trustee  incur any  liability  or  obligation  by reason of not  making any such
inspection.  Upon the request of the  Lessor,  the Lessee  shall  provide to the
Lessor,  not more frequently than once per calendar month, a written report with
respect to the flight  hours and cycles of  operation  of the  Airframe and each
Engine  during the period  since the end of the period to which the most  recent
such report  related (or, if there has been no such previous  report,  since the
commencement  of the  Term)  through  the last day of the  calendar  month  most
recently ended prior to the date of the current report.

 .        11.      Loss or Destruction; Requisition of Use

 . If an Event of Loss occurs to the  Airframe,  the Lessee  shall within 15 days
after  such  occurrence  give to the Lessor and the  Indenture  Trustee  written
notice of such  Event of Loss  and,  within 60 days  after  such  Event of Loss,
written  notice of its election to perform one of the following two options (and
if the Lessee does not give the Lessor and the  Indenture  Trustee the notice of
such  election  within 60 days,  the Lessee  shall be deemed to have  elected to
perform the option set forth in clause (2) of this ss. 11(a)):

                  (1) If this  clause  (1) is  elected  and no Event of  Default
         shall have occurred and then be  continuing,  the Lessee shall,  within
         180 days following  such Event of Loss,  convey or cause to be conveyed
         to the Lessor,  as  replacement  for the Airframe,  good and marketable
         title to an airframe of the same make and the same or a later model and
         year of manufacture,  having at least the value, utility, and remaining
         useful  life,  and  being  in as good an  operating  condition,  as the
         Airframe  subject to such Event of Loss (assuming that the Airframe had
         been  maintained and was in the condition  required in accordance  with
         the terms of this Lease so as to enable the  airworthiness  certificate
         for the Aircraft to remain in good standing) and otherwise  meeting the
         requirements  set  forth  below (a  "Replacement  Airframe"),  good and
         marketable  title to the same  number  of  Replacement  Engines  as the
         Engines,  if any,  installed  on the  Airframe  when such Event of Loss
         occurred,  such Replacement Airframe and any such Replacement Engine(s)
         to be free and clear of all Liens (other than Permitted Liens). In such
         case,  the Lessee  shall  promptly,  at its  expense:  (aa) furnish the
         Lessor  with  bills  of  sale,   in  form  and   substance   reasonably
         satisfactory to the Lessor,  with respect to such Replacement  Airframe
         and  any  such  Replacement  Engine(s),  (bb)  cause  such  Replacement
         Airframe to be duly registered in the Lessor's name at the FAA (or such
         foreign   jurisdiction  as  is  permitted  by  ss.  9(a)),  (cc)  cause
         amendments and/or supplements  hereto and to the Indenture  (subjecting
         such Replacement  Airframe and any such Replacement Engines to the Lien
         of the Indenture), in form and substance reasonably satisfactory to the
         Lessor and the  Indenture  Trustee,  with  respect to such  Replacement
         Airframe and any such Replacement  Engine(s) to be duly executed by the
         appropriate   parties  and   recorded  at  the  FAA  (or  such  foreign
         jurisdiction),  (dd) furnish the Lessor and the Indenture  Trustee with
         evidence reasonably satisfactory to each of them of the value, utility,
         and  remaining  useful  life of,  and good title to,  such  Replacement
         Airframe and any such Replacement  Engine(s) (including an appraisal by
         a qualified independent appraiser reasonably  satisfactory to the Owner
         Participant  certifying  that such  Replacement  Airframe  has a value,
         utility and remaining  useful life at least equal to, and is in as good
         operating  condition as, the Airframe replaced,  assuming such Airframe
         was in the  condition  required by the terms of this Lease  immediately
         prior  to the  occurrence  of such  Event  of Loss  and  that  any such
         Replacement  Engine  satisfies  the  requirements  for  a  "Replacement
         Engine" as set forth in the definition thereof in Schedule I hereto, an
         opinion of counsel  addressed to the Lessor and the  Indenture  Trustee
         that such  Replacement  Airframe  and  Replacement  Engine(s)  shall be
         subject to the Lien of the Indenture,  and an opinion of counsel expert
         in FAA (or such foreign  jurisdiction) matters as to the absence of all
         Liens of record),  (ee)  furnish the Lessor and the  Indenture  Trustee
         with  evidence of compliance  with the  insurance  provisions of ss. 12
         with  respect to such  Replacement  Airframe  and any such  Replacement
         Engine(s)  as such party may  reasonably  request,  (ff)  assign to the
         Lessor  the  benefit  of all  assignable  manufacturer's  and  vendor's
         warranties  with  respect  to such  Replacement  Airframe  and any such
         Replacement Engines,  (gg) furnish the Lessor and the Indenture Trustee
         with a certificate of the Lessee  certifying  compliance  with this ss.
         11(a)(1) and to the effect that, upon consummation of such replacement,
         no Event of  Default  will  exist,  (hh)  furnish  the  Lessor  and the
         Indenture Trustee with an opinion of counsel  reasonably  acceptable to
         such party to the effect that, upon such conveyance, the Lessor's title
         to such Replacement  Airframe and any such Replacement  Engines will be
         free and  clear  of all  Liens of  record  at the FAA (or such  foreign
         jurisdiction)   and  that  such  Replacement   Airframe  and  any  such
         Replacement Engines will be leased hereunder and be subject to the Lien
         of the Indenture to the same extent as the Aircraft  replaced  thereby,
         (ii)  furnish the Lessor with all  documents,  certificates,  and other
         opinions necessary to enable the Lessor to comply with the requirements
         of ss. 9.08 of the  Indenture,  and (jj) take such other  action as the
         Lessor or the Indenture Trustee reasonably  requests in order that such
         Replacement  Airframe  and any such  Replacement  Engine(s) be properly
         titled in the  Lessor  free and clear of all  Liens  (except  Permitted
         Liens), leased hereunder, and subjected to the Lien of the Indenture to
         the same extent as the Airframe  and any  Engine(s)  replaced  thereby.
         Upon compliance by the Lessee with this ss. 11(a) (1), the Lessor shall
         transfer  to the  Lessee  or its  designee  (subject  to any  insurer's
         salvage  rights),  "as is,  where is",  without  recourse or  warranty,
         express or implied  (except as to the absence of Lessor's  Liens),  all
         right,  title,  and  interest  conveyed  to  the  Lessor  in and to the
         Airframe  and any  Engine(s)  with  respect to which such Event of Loss
         occurred,  together  with any insurance  proceeds  relating to property
         damage,  if any. In  connection  with such  transfer,  the Lessee shall
         prepare and the Lessor shall execute, all in recordable form, a bill of
         sale  evidencing  such  transfer,  a release  of the  Airframe  and any
         Engine(s)  to  which  such  Event  of Loss  occurred,  and  such  other
         documents as the Lessee reasonably  requests (all at the expense of the
         Lessee).  Any Engine not  installed on the Airframe  when such Event of
         Loss  occurred  shall  continue  to be the  property  of the Lessor and
         leased hereunder as part of the Aircraft.  Upon such replacement,  each
         such Replacement  Airframe and Replacement  Engine shall be deemed part
         of the property leased hereunder;  the Replacement Airframe shall be an
         "Airframe"  and each such  Replacement  Engine  shall be an "Engine" as
         defined  herein;  and each such  Replacement  Airframe and  Replacement
         Engine shall be deemed part of the  Aircraft.  An Event of Loss covered
         by this ss.  11(a)(1)  shall not  result in any  change in Basic  Rent,
         Stipulated Loss Value,  Termination Value,  Renewal Rent and EBO Price.
         The Lessee shall be responsible for any sales taxes or similar transfer
         taxes resulting from such replacement.

                  (2) If the  Lessee  does not  elect  (or is deemed to have not
         elected)  to  perform  clause (1) of this ss.  11(a),  or if the Lessee
         fails to perform its  obligations  under clause (1) of this ss.  11(a),
         the Lessee  shall pay or cause to be paid to the Lessor an amount equal
         to (v) the Stipulated Loss Value of the Aircraft,  determined as of the
         applicable date determined in accordance with the following sentence if
         such date is a  Stipulated  Loss  Value  Date or, if such date is not a
         Stipulated Loss Value Date,  determined as of the following  Stipulated
         Loss  Value  Date  (the  date as of  which  Stipulated  Loss  Value  is
         determined   as  provided   herein  being   referred  to  as  the  "SLV
         Determination   Date"),  plus  (w)  all  unpaid  Basic  Rent  (and,  if
         applicable, Renewal Rent) due prior to the SLV Determination Date, less
         (x) if such SLV Determination  Date is not a Rent Payment Date, the pro
         rata portion of Basic Rent (or, if  applicable,  Renewal  Rent) paid in
         advance on the most recent Rent  Payment  Date in respect of the period
         commencing  on the Loss Payment  Date (as defined  below) and ending on
         the next Rent Payment Date, plus (y) that portion of Basic Rent (or, if
         applicable,  Renewal Rent) payable in arrears on such SLV Determination
         Date,  or, if such SLV  Determination  Date is not a Rent Payment Date,
         the pro rata  portion of the Basic  Rent (or,  if  applicable,  Renewal
         Rent) payable in arrears on the following  Rent Payment Date in respect
         of the period commencing on the Rent Payment Date immediately preceding
         the SLV Determination  Date and ending on such SLV Determination  Date,
         plus (z) all other  amounts of  Supplemental  Rent due on or before the
         Loss Payment  Date and any  reasonable  expenses and costs  incurred in
         connection with such Event of Loss by the Lessor, the Owner Participant
         or the  Indenture  Trustee  (including  with  respect  to  the  related
         prepayment of the  Certificates).  Such amount shall be paid (including
         by application  of proceeds from insurance  carried under ss. 12(b)) on
         the  earlier of (x) the date within 180 days after the Event of Loss as
         designated by the Lessee, and (y) three Business Days following receipt
         of all proceeds  (or, if earlier,  proceeds in an amount at least equal
         to  Stipulated  Loss Value) of the  insurance  carried  under ss. 12(b)
         (provided,  that if the Lessee has not yet determined  whether to elect
         to perform the replacement  option  described in clause (1) of this ss.
         11(a),  then this clause (y) shall not require payment earlier than the
         Business  Day after  the  Lessee  makes (or is deemed to have  made) an
         election of clause (2) of this ss. 11(a)) (the applicable date on which
         Stipulated  Loss  Value is paid being  referred  to herein as the "Loss
         Payment Date").  Upon payment in full of such Stipulated Loss Value and
         all  such  other  amounts,  (aa)  the  Lessee's  obligation  to pay all
         succeeding  installments of Basic Rent, and the Term,  shall terminate,
         and (bb) the  Lessor  shall  transfer  to the  Lessee  or its  designee
         (subject to any insurer's  salvage  rights) "as is, where is",  without
         recourse or warranty,  express or implied  (except as to the absence of
         Lessor's Liens), all right,  title, and interest conveyed to the Lessor
         in and to the  Aircraft  (and in  connection  with such  transfer,  the
         Lessee shall  prepare and the Lessor shall  execute,  all in recordable
         form, a bill of sale  evidencing  such  transfer,  and a termination of
         this Lease,  and the Lessee  shall  prepare and the  Indenture  Trustee
         shall execute,  in recordable  form, an Indenture  release,  all at the
         Lessee's expense).  The Lessee shall be responsible for any sales taxes
         or similar transfer taxes resulting from such transfer.

 . If an Event of Loss occurs to any Engine under circumstances in which no Event
of Loss  occurs to the  Airframe,  the  Lessee  shall  notify the Lessor and the
Indenture  Trustee  thereof  within 30 days of obtaining  knowledge  thereof and
shall,  within 90 days after the date of occurrence of such Event of Loss,  duly
convey to the Lessor,  as  replacement  for such Engine,  title to a Replacement
Engine, free and clear of all Liens (other than Permitted Liens). At the time of
any such  conveyance,  the Lessee shall, at its expense:  (1) furnish the Lessor
with a bill of  sale,  in form  and  substance  reasonably  satisfactory  to the
Lessor,  for such Replacement  Engine,  (2) cause supplements  hereto and to the
Indenture  (subjecting such Replacement Engine(s) to the Lien of the Indenture),
in  form  and  substance  reasonably   satisfactory  to  the  Lessor,  for  such
Replacement  Engine to be duly executed by the appropriate  parties and recorded
at the FAA or as  appropriate  under the laws of the country of registry for the
Aircraft,  (3) execute  and, if  necessary,  file such  documents  as the Lessor
reasonably  requests to confirm the Lessor's  ownership  of, and title,  to such
Replacement  Engine,  (4) furnish the Lessor and the Indenture Trustee with such
evidence  of  compliance  with  the  insurance  provisions  of ss.  12 for  such
Replacement Engine as such party reasonably  requests,  (5) assign to the Lessor
the  benefit of all  assignable  manufacturer's  and  vendor's  warranties  with
respect  to  such  Replacement  Engine(s),  (6)  furnish  the  Lessor  with  all
documents,  certificates,  and opinions necessary to enable the Lessor to comply
with the  requirements of ss. 9.08 of the Indenture,  (7) upon request,  furnish
the  Lessor and the  Indenture  Trustee  with an  opinion of counsel  reasonably
acceptable  to each such party to the effect  that,  upon such  conveyance,  the
Lessor's title to such Replacement Engine will be free and clear of all Liens of
record at the FAA or in the country of registry  for the  Aircraft and that such
engine will be leased  hereunder  and be subject to the Lien of the Indenture to
the same extent as the Engine  replaced  thereby,  (8) furnish the Lessor with a
certificate  of the  Lessee  or any  Permitted  Sublessee  certifying  that such
Replacement  Engine has a value,  utility,  and  remaining  useful life at least
equal to, and is in as good  operating  condition as, the Engine so replaced (in
each case without  regard to the number of hours or cycles  remaining  until the
next  scheduled  maintenance  visit,  and  assuming  that such Engine was in the
condition and repair required by the terms hereof  immediately before such Event
of Loss),  (9)  furnish  the Lessor with a  certificate  of an aircraft  advisor
reasonably  satisfactory  to the Owner  Participant  (who  must be a  nationally
recognized aircraft authority) certifying that such Replacement Engine satisfies
the  requirements  for a  "Replacement  Engine"  as set forth in the  definition
thereof in Schedule I hereto,  (10) furnish the Lessor and the Indenture Trustee
with a  certificate  of the Lessee or any Permitted  Sublessee  certifying as to
compliance with this ss. 11(b), and (11) take such other action as the Lessor or
the Indenture Trustee reasonably  requests in order that such Replacement Engine
be properly  titled in the Lessor free and clear of all Liens (except  Permitted
Liens), leased hereunder, and subjected to the Lien of the Indenture to the same
extent as the Engine replaced thereby.

         Upon compliance by the Lessee with the terms of this ss. 11(b), (x) the
Lessor shall  transfer to the Lessee or its designee  (subject to any  insurer's
salvage rights),  "as is, where is",  without  recourse or warranty,  express or
implied  (except as to the absence of Lessor's  Liens),  all right,  title,  and
interest conveyed to the Lessor in and to the Engine to which such Event of Loss
occurred,  together with any insurance  proceeds relating to property damage, if
any,  and (y) the  Lessor  and the  Indenture  Trustee  shall  (at the  Lessee's
expense)  release such replaced  Engine from this Lease and the Indenture.  Each
such  Replacement  Engine  shall,  upon such  conveyance,  be deemed part of the
property leased hereunder,  shall be deemed an "Engine" and shall be deemed part
of the  Aircraft.  No  Event  of  Loss  to an  Engine  under  the  circumstances
contemplated  by the terms of this ss.  11(b) shall  result in any  reduction in
Basic  Rent.  The Lessee  shall be  responsible  for any sales  taxes or similar
transfer taxes resulting from any such replacement.

 . The  Lessee  hereby  assumes  and agrees to bear the risk of loss to each Item
and,  except as provided in ss. 11(a) and ss. 11(b),  shall not be released from
its obligations hereunder in the event of any damage to the Aircraft or any part
thereof or any Event of Loss relating thereto.

 . A  requisition  of use which  does not  constitute  an Event of Loss shall not
terminate this Lease,  and each and every  obligation of the Lessee with respect
thereto shall remain in force to the same extent as if such  requisition had not
occurred,  except to the extent that any failure or delay in the  performance of
such  obligations  (other  than any  obligations  for the  payment of money) are
prevented or delayed by such requisition of use. The Lessee shall be entitled to
all sums, attributable to the period the Item(s) involved is/are subject to this
Lease,  received by reason of any such requisition of use. All payments received
for the use of any Item  after the Term shall be paid over to, or  retained  by,
the  Lessor  in the same  manner  as Rent  under  ss.  3(f) (or paid  over to or
retained  by the Lessee if it  purchases  the  Aircraft in  accordance  with the
provisions  hereof).  The Lessee  shall  promptly  notify the Lessor of any such
requisition.

 . Any payments received at any time by the Indenture Trustee, the Lessor, or the
Lessee from any insurer  under  insurance  (other than  liability  insurance and
other than  insurance  carried by the Lessee  (or any  Permitted  Sublessee)  in
excess of the insurance  required to be maintained by the Lessee pursuant to ss.
12(b) or  insurance  maintained  by the  Lessor,  the Owner  Participant  or the
Indenture  Trustee  at  its  own  expense)  maintained  hereunder  or  from  any
governmental  authority or other Person with respect to an Event of Loss will be
applied as follows:

                  (1) if such  payments  are received as a result of an Event of
         Loss to the Airframe (and any Engine then installed  thereon),  and the
         Lessee does not make a replacement  pursuant to ss.  11(a)(1),  (aa) so
         much of such payments as shall not exceed the Stipulated Loss Value for
         the Aircraft  shall be applied in reduction of the Lessee's  obligation
         to pay such  Stipulated  Loss Value if not already paid, or, if already
         paid, shall be applied by the Lessor (or its assignee) to reimburse the
         Lessee or its designee for the payment of such  Stipulated  Loss Value,
         and (bb) the balance,  if any, of such  payments  remaining  thereafter
         shall be paid over to, or retained by, the Lessee;

                  (2) if such payments are received as the result of an Event of
         Loss  to  the  Airframe,  and  the  Lessee  has  made  or is  making  a
         replacement  thereof pursuant to ss.  11(a)(1),  such payments shall be
         paid over to, or  retained  by, the  Lessor in the same  manner as Rent
         under  ss.  3(f),  until the  Lessee  fully  performs  the terms of ss.
         11(a)(1),  after which such payments shall be paid over to, or retained
         by, the Lessee; and

                  (3) if such payments are received as the result of an Event of
         Loss to an Engine under the  circumstances  contemplated  by ss. 11(b),
         such payments  shall be paid over to, or retained by, the Lessor in the
         same manner as Rent under ss. 3(f), until the Lessee fully performs the
         terms of ss. 11(b) with respect to that Event of Loss, after which such
         payments shall be paid over to, or retained by, the Lessee.

         If (x) the Lessor and the Indenture  Trustee have received  notice from
the Lessee  pursuant to ss. 11(a) that, in connection with an Event of Loss, the
Lessee  elects to replace  the  Airframe,  or (y) an Event of Loss  occurs to an
Engine under the  circumstances  contemplated by ss. 11(b), or (z) the Lessor or
the Indenture  Trustee  receives any proceeds of insurance  maintained under ss.
12(b) pending  completion of repairs to an Item, then each of the Lessor and the
Indenture  Trustee shall use its reasonable  efforts to invest,  at the Lessee's
written request, direction, and risk, any payments that it receives with respect
to such  Item  from  any  insurer  under  insurance  required  to be  maintained
hereunder or from the Lessee or any Permitted Sublessee or from any governmental
authority or other party.  Any such  investments  shall be in obligations of the
type described in clause (a) of the definition of Permitted Investments,  except
to the extent that another  Permitted  Investment  is selected in writing by the
Lessee.  All  profits  and losses on such  investments  and any taxes in respect
thereof shall be for the account of the Lessee. In order to make the payments to
the  Lessee  provided  for in  clauses  (2) and (3) of this ss.  11(e) or in ss.
12(c),  the  Lessor  and the  Indenture  Trustee  are  authorized  to  sell  any
obligations  so purchased and shall not be required to make such payments to the
Lessee until the Lessor or the Indenture  Trustee (as the case may be) has had a
reasonable time to sell such obligations and to obtain the sale proceeds.

 . Any  amount  referred  to in this  ss.  11 or in ss.  12(b)  or (f)  which  is
otherwise  payable to the Lessee  shall not be paid to the Lessee if a Specified
Default  exists  at the time of  payment,  but  shall be paid to and held by the
Lessor as security for the Lessee's obligations  hereunder,  and at such time as
no Specified Default exists, such amount shall be paid to the Lessee.

 .        12.      Insurance

 .  The  Lessee  shall  maintain  in  effect,  at  all  times  during  the  Term,
comprehensive  aircraft and general  liability  insurance  (including  passenger
legal   liability   insurance   and   property   damage   insurance   (excluding
manufacturer's product liability insurance)) with respect to the Aircraft (1) in
amounts which are not less than the comprehensive aircraft and general liability
and property damage  insurance  applicable from time to time to similar aircraft
and engines which then comprise the Lessee's (or a  Sublessee's)  fleet on which
the  Lessee (or such  Sublessee)  carries  insurance,  but in no event less than
$200,000,000  combined single limit per  occurrence,  (2) of the types and which
cover risks of the kind  customarily  insured against by the Lessee with respect
to similar  aircraft and engines  which it  operates,  and (3)  maintained  with
independent insurers of favorably-recognized responsibility (or, as to a foreign
Sublessee,  recognized as  responsible  in the world  aviation  community).  The
insurance  required by this ss. 12(a) may be subject to  self-insurance on a per
occurrence or  fleet-wide  basis,  by way of  deductible  or premium  adjustment
provisions in insurance policies or otherwise,  in any amounts not to exceed the
greater of 5% of the net worth of ACA Inc. (based on the  most-recent  quarterly
financial statements of ACA Inc.) and $1,000,000.

         During any period that the  Aircraft is grounded  and not in  operation
for any reason,  the Lessee may modify the insurance  required by this ss. 12(a)
(i) to reduce the amounts of public  liability and property damage insurance and
(ii) to modify the scope of the risks covered and the type of insurance, in both
circumstances  to  conform to such  insurance  customary  in the  United  States
airlines industry for regional air carriers  similarly  situated with the Lessee
in respect of similar aircraft which are grounded, not in operation,  and stored
or  hangared,  except that the amounts of coverage and scope of risk covered and
the  type of  insurance  shall be the same as from  time to time  applicable  to
aircraft owned or leased by Lessee on the ground,  not in operation,  and stored
or hangared.

 . The Lessee  shall  maintain  or cause a  Permitted  Sublessee  to  maintain in
effect,  at all times  during the Term  (including  any period  during which the
Aircraft is grounded  for any  reason),  with  insurers of  favorably-recognized
responsibility (or, as to a foreign Sublessee,  recognized as responsible in the
world aviation  community),  all-risk  ground and flight aircraft hull insurance
covering  the  Airframe  and  all-risk  coverage for Engines and Parts while not
incorporated  in the  Airframe  or an  Engine,  in an  amount  which,  when paid
hereunder  for an Event of Loss to the Airframe and any  Engine(s) and engine(s)
then installed thereon,  will be not less than the Stipulated Loss Value for the
Aircraft  (computed for the following  Payment Date);  provided that neither the
Lessee nor any Permitted Sublessee shall be required to maintain all-risk flight
aircraft  hull  insurance  with  respect to any period in which the  Aircraft is
grounded  for any  reason  and  properly  stored or  hangared.  The  Lessee  may
self-insure,  by way of deductible or premium adjustment provisions in insurance
policies or otherwise,  the risks required to be insured  against under this ss.
12(b), in any amounts not to exceed the greater of (x) $1,000,000,  or (y) 5% of
the  net  worth  of ACA  Inc.  (based  on the  most-recent  quarterly  financial
statements  of ACA Inc.)  (or,  in either  case,  such  higher  amount as may be
approved by the Owner Participant). The Lessee shall maintain war risk insurance
(including  political  hijacking  and  governmental  confiscation  insurance) or
obtain  indemnification from the Government with respect to the Aircraft only if
and to the  extent  that  the  Aircraft  is  operated  in a war  zone or area of
recognized hostilities.

 . Any policies of insurance  carried in  accordance  with this ss. 12: (1) shall
include  the  Additional  Insureds  as  their  interests  appear  as  additional
insureds,  (2) with respect to insurance  carried in accordance  with ss. 12(b),
shall be payable to the  Indenture  Trustee so long as the Lien of the Indenture
shall not have  been  discharged,  and  thereafter  to the  Lessor,  and,  if no
Specified Default exists, shall be disbursed to the Lessee (or other appropriate
Person  specified by the Lessee) upon completion of repairs made to the Aircraft
so as to restore it to the  operating  condition  required  by ss. 9 or shall be
disbursed as otherwise required by this Lease; provided,  that unless the Lessor
or the  Indenture  Trustee has notified the  insurers  that a Specified  Default
exists,  insurance  proceeds not exceeding  $3,000,000 for any single occurrence
and not  involving an Event of Loss to the  Aircraft may be payable  directly to
the Lessee or any  Permitted  Sublessee,  (3) shall provide that if the insurers
cancel such  insurance  for any reason  whatever,  or any change  adverse to any
Additional  Insured is made in policy terms or  provisions,  or the insurance is
allowed  to lapse for  nonpayment  of  premium  or such  insurance  coverage  is
reduced,  such cancellation,  change, lapse, or reduction shall not be effective
as to any Additional Insured for 30 days (seven days, or such other period as is
then customary in the airline  insurance  industry,  in the case of any war risk
coverage)  after  such  Additional  Insured  receives  written  notice  of  such
cancellation, change, lapse, or reduction, (4) shall provide that, in respect of
the interest of each  Additional  Insured in such policies,  the insurance shall
not be  invalidated by any action or inaction of the Lessee,  any Sublessee,  or
any other Person  except such  Additional  Insured,  (5) shall  provide that the
insurers waive any rights of subrogation against the Additional Insureds, except
to the extent of any loss caused by the gross  negligence or willful  misconduct
of an Additional  Insured,  (6) shall provide that the Additional Insureds shall
have no obligation or liability for payment of any premiums, commissions, calls,
or assessments,  and (7) shall provide that all proceeds in excess of $3,000,000
shall be paid to the  Indenture  Trustee  so long as the  Lien of the  Indenture
shall not have been discharged, and thereafter to the Lessor, unless the insurer
has received notice that a Specified  Default exists, in which case all proceeds
shall be paid to the  Indenture  Trustee  so long as the  Lien of the  Indenture
shall not have been  discharged,  and  thereafter to the Lessor.  Each liability
policy  (x)  shall be  primary  without  right of  contribution  from any  other
insurance  which is  carried by the  Additional  Insureds,  (y) shall  expressly
provide  that all of the  provisions  thereof,  except the limits of  liability,
shall  operate in the same  manner as if there were a separate  policy  covering
each insured, and (z) shall provide that the insurers waive any right of setoff,
counterclaim,  or other deduction against the Additional Insureds. In connection
with any insurance proceeds payable to the Additional Insureds for the repair of
any Item, the Additional  Insureds shall respond as soon as possible to requests
of the Lessee to turn over such funds for the repair of such Item.  With respect
to any Item, any amount received by an Additional  Insured pursuant to insurance
carried under ss. 12 which exceeds such Item's Stipulated Loss Value on the date
such  payment  is  received  shall be  promptly  remitted  to the  Lessee or its
designee.

 . At least once each year  during  the Term,  the  Lessee  shall  furnish to the
Additional  Insureds a report signed by an independent  broker  certifying  that
policies  of  insurance  in the forms,  covering  the risks,  and in the amounts
required by this ss. 12 are in full force and effect and that, in the opinion of
such  broker,  the  insurance  then  carried  and  maintained  in respect of the
Aircraft  complies with the terms of this ss. 12, and including (i) confirmation
that the  insurance  has been  placed  with  insurers,  giving  the name of each
insurer,  the amount  for which it insures  (and any  portion  thereof  which is
subject to a deductible),  and the period of the policy,  and (ii)  confirmation
that all  premiums  due to the  insurers  have been  paid.  The  Lessee  (or any
Sublessee) shall instruct such firm to notify the Additional Insureds in writing
promptly  of any  defaults in the payment of any premium and of any other act or
omission  on the part of the  Lessee or any  Sublessee  or of any event of which
such broker has knowledge  which might  invalidate or render  unenforceable,  in
whole or in part, any insurance for the Airframe or any Engine.

 . If the Lessee fails to cause  insurance to be  maintained  as required by this
ss. 12, any Additional  Insured may, after giving  reasonable  advance notice to
the Lessee of such Additional  Insured's intent to do so, provide such insurance
and, in such event,  the Lessee shall,  upon demand,  reimburse such  Additional
Insured, as Supplemental Rent, for the cost thereof, without waiver of any other
rights such  Additional  Insured may have.  Nothing in this Lease shall prohibit
the Lessor,  the Owner  Participant  or the Indenture  Trustee from insuring the
Airframe or any Engine,  or its interest therein at its own expense in an amount
in excess of that required to be maintained hereunder, provided that such excess
insurance  in no way  increases  the  cost or  limits  the  availability  of any
insurance  required  to be  maintained  hereunder;  provided  further,  that any
insurance policies of the Lessor, the Owner Participant or the Indenture Trustee
insuring the Airframe or any Engine shall provide for a release to the Lessee of
any and all salvage rights in and to the Airframe or any Engine.

 . The  Lessor  (and the other  Additional  Insureds)  shall  accept,  in lieu of
insurance  against any risk with respect to any Item,  indemnification  from the
United States  government  against such risk in any amount which,  when added to
the amount of any insurance  against such risk  maintained by or for the benefit
of the Lessee (including permitted  deductibles and self-insurance) with respect
to any Item, shall be to the combined effect substantially the same as to amount
and risk (and in favor of the same parties) as insurance  otherwise  required by
this ss. 12.

 .        13.      Subleasing; Possession

 . The Lessee shall not, without the Lessor's prior written consent, sublease, or
sublet or otherwise relinquish  possession of the Aircraft,  the Airframe or any
Engine,  or permit any Engine to be  installed  on any  airframe  other than the
Airframe;  provided  that if no  Specified  Default  shall have  occurred and be
continuing at the time of  commencement of such sublease or subletting or at the
time of such relinquishment of possession or such installation, the Lessee (and,
except as otherwise  provided in this ss. 13(a) as to clause (6), any Sublessee)
may, without the Lessor's prior written consent:

                  (1)  subject  any  Engine to  normal  interchange  or  pooling
         arrangements  customary in the airline industry and entered into in the
         ordinary course of its business (and with any Permitted Air Carrier, in
         the case of interchange arrangements), provided that no transfer of the
         title of such Engine is required in  connection  therewith  (but if the
         Lessor's   title  to  any  such  Engine  is  divested  under  any  such
         arrangement, such divestiture shall be deemed to be an Event of Loss to
         such Engine and the Lessee  shall  comply with ss.  11(b) in respect of
         such deemed Event of Loss);

                  (2)  deliver   possession   of  any  Item  to  any   qualified
         organization  for  testing,   maintenance,  or  overhaul  work  or  for
         Improvements to the extent required or permitted by ss. 9(e);

                  (3) install any Engine on an airframe  owned by the Lessee (or
         such  Sublessee)  free and clear of all Liens,  except  (aa)  Permitted
         Liens,  (bb) Liens that do not apply to such  Engine,  (cc) the Lien of
         any  agreement  which  effectively  provides that such Engine shall not
         become subject to the Lien thereof, notwithstanding the installation of
         such  Engine on any  airframe  subject  to the Lien of such  agreement,
         unless and until the Lessee (or such  Sublessee)  becomes  the owner of
         such Engine, and (dd) those created by the rights of other air carriers
         under normal  interchange or pooling  agreements which are customary in
         the airline  industry  and do not require the transfer of title to such
         Engine;

                  (4) install any Engine on an airframe leased to the Lessee (or
         such Sublessee) or owned by the Lessee (or such Sublessee) subject to a
         conditional  sale or other security  agreement,  so long as such Engine
         does not become subject to a Lien (other than a Permitted Lien);

                  (5) install any Engine on an airframe  owned by the Lessee (or
         such Sublessee),  leased to the Lessee (or such Sublessee), or owned by
         the Lessee (or such Sublessee)  subject to a conditional  sale or other
         security  agreement  under  circumstances  where neither clause (3) nor
         clause (4) above  applies (but if the Lessor's  title to such Engine is
         divested in connection with such  installation,  such divestiture shall
         be deemed an Event of Loss to such Engine and the Lessee  shall  comply
         with ss. 11(b) in respect of such deemed Event of Loss,  the Lessor not
         intending  hereby to waive any right or  interest  it may have to or in
         such Engine under  applicable  law until  compliance by the Lessee with
         such ss. 11(b));

                  (6)      sublease any Item to any Permitted Sublessee; and

                  (7) subject any Item to (a)  contracts  with the United States
         of America or any  instrumentality  or agency  thereof,  (b) wet leases
         with third parties under which the Lessee has effective  control of the
         Aircraft in the ordinary  course of the Lessee's  business  which shall
         not be considered a transfer of possession hereunder, provided that the
         Lessee's  obligations under this Lease shall continue in full force and
         effect notwithstanding any such wet lease, or (c) the CRAF Program;

provided,  further,  that (aa) the rights of any transferee shall be effectively
subject and subordinate (and, in the case of a sublease, shall be made expressly
subject and  subordinate)  to all the terms of this Lease including the Lessor's
right to  repossession  pursuant to ss. 15 and to avoid such  sublease upon such
repossession,  (bb) the 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,  (cc) any such  Sublease  shall be for a period  or
periods not to exceed the Term unless the Lessee has  notified the Lessor of its
exercise of the purchase  option  pursuant to ss. 16, and (dd) no Sublessee  may
sub-sublease any Item,  except that a Permitted  Sublessee who is an airframe or
engine  manufacturer,  or Affiliate  thereof,  may sub-sublease to any Permitted
Sublessee to whom a sublease would be permitted  under this ss. 13(a).  Any such
Sublease will require  maintenance,  use, and operation  standards in accordance
with this Lease. The Lessee shall notify the Lessor and the Indenture Trustee of
any sublease  promptly  after entering into it, and shall provide the Lessor and
the  Indenture  Trustee  with a copy  of such  Sublease.  No  relinquishment  of
possession of any Item or Part shall in any way discharge or diminish any of the
Lessee's obligations.

  As  security  for the  Lessee's  due and  punctual  payment  of all  Rent  and
performance  of all of its other  covenants  and  obligations  in the  Operative
Documents,  the Lessee hereby grants to the Lessor a security interest in all of
the  Lessee's  right,  title,  and  interest  in and to each  Sublease,  and all
payments,  including  payments of rent,  insurance  proceeds  (other than public
liability  insurance  proceeds),   and  other  amounts  due  or  to  become  due
thereunder.  The Lessee shall enter into a "Sublease Assignment" with respect to
each  Sublease of the Airframe  having a term of one year or longer.  The Lessee
hereby (1)  acknowledges  and  consents to the  Lessor's  assignment  of all the
Lessor's right,  title,  and interest in and to the Lessee's right,  title,  and
interest in and to each Sublease,  and all payments,  including rent,  insurance
proceeds (other than public liability insurance proceeds), and other amounts due
or to become due  thereunder  (excluding  Excepted  Payments),  to the Indenture
Trustee under and pursuant to the Indenture,  and (2) acknowledges  that so long
as the Lien of the Indenture has not been discharged, all the Lessor's rights in
respect of such Sublease shall be exercisable as set forth in the Indenture.  In
furtherance  of the  provisions of this  paragraph,  the Lessee agrees that each
Sublease for more than one year of the  Airframe  (x) shall  contain a provision
substantially  to the effect  that the  Sublessee  agrees to pay all amounts due
under the Sublease to the  Indenture  Trustee (or to the Owner Trustee after the
Lien of the Indenture is discharged) after the Sublessee receives written notice
from the  Indenture  Trustee  or the Owner  Trustee  to such  effect  (until the
Sublessee receives written notice from the Indenture Trustee to contrary effect)
and stating that a Specified  Default  exists under the Lease,  and (y) shall be
accompanied by such Uniform  Commercial  Code financing  statements as shall, in
the Lessor's reasonable opinion, be required to perfect and protect the security
interests of the Lessor and the Indenture Trustee in such Sublease.

 . The Lessor  hereby  agrees for the benefit of each lessor or secured  party of
any engine leased to the Lessee or owned by the Lessee  subject to a conditional
sale or other security  agreement that the Lessor shall not acquire or claim, as
against  such  lessor 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 or  conditional  sale or other
security agreement and owned by such lessor or subject to a security interest in
favor of such secured party.

         (d) Civil Reserve Air Fleet Program. The other provisions of this Lease
to the  contrary  notwithstanding,  the Lessee may  transfer  possession  of the
Aircraft  or  any  Engine  to  the  United   States  of  America  or  any  other
instrumentality or agency thereof as part of the Civil Reserve Air Fleet Program
("CRAF  Program")  for a  period  not to  extend  beyond  the  end of the  Term;
provided,  that if, at any time  during the Term,  the  Aircraft  is called into
service by the  Government  pursuant to the CRAF  Program and is not returned or
released by the  Government on or before the last scheduled day of the Term, the
Term  shall  be  extended  automatically  for  up to an  additional  six  months
thereafter.  The Lessee will promptly  notify the Lessor in writing in the event
of the requisition for use of the Aircraft under CRAF Program  activation by the
Government  ("Civil  Reserve  Air  Fleet  Requisition").  All  of  the  Lessee's
obligations  under  this  Lease  will  continue  to the same  extent  as if such
requisition had not occurred.  If there is a requisition for use of the Aircraft
pursuant  to  the  CRAF  Program  or  CRAF  Program  activation,  there  may  be
substituted  for all or any part of the  insurance  required by ss. 12 insurance
provided  under 49  U.S.C.  ss.  44301 et seq.  or  Government  indemnification;
provided,  that the Lessee will remain  responsible for full compliance with all
the provisions of this Lease whether or not  Government  insurance or Government
indemnification satisfies the Lessee's obligations under this Lease. If there is
a  requisition  for use of the  Aircraft  pursuant  to the CRAF  Program or CRAF
Program activation,  there will be no limitation on the geographic area in which
the Aircraft may be operated. The Lessee hereby assigns to the Lessor all rights
to payment for the Aircraft by the  Government  under the CRAF Program to secure
all the Lessee's  obligations  to pay Rent and to perform its other  obligations
under the Operative  Agreements.  At such time as the Lessor is paid in full for
all amounts it is due and owed by the Lessee,  the  aforesaid  assignment  shall
terminate  without  further act of the parties and all such  amounts owed by the
Government  under the CRAF  Program to the Lessee but paid to the Lessor,  which
the Lessor has not  previously  applied to  compensate  itself for  amounts  due
hereunder from the Lessee, shall be paid to the Lessee.

 . Each of the following shall constitute an "Event of Default" (whether any such
event  shall  be  voluntary  or  involuntary  or come  about or be  effected  by
operation of law or pursuant to or in compliance  with any  judgment,  decree or
order of any court or any order,  rule or  regulation of any  administrative  or
governmental body) so long as it has not been remedied:

         (a) Basic  Rent.  The Lessee  fails to make any  payment of Basic Rent,
Renewal  Rent,  Stipulated  Loss  Value or  Termination  Value or a  payment  of
Supplemental  Rent  constituting any Make-Whole  Premium payable with respect to
any  Certificate  under the  terms of the  Indenture  when due and such  failure
continues for five Business Days after the due date.

         (b) Other Supplemental Rent. The Lessee fails to make any other payment
of Supplemental Rent (other than Stipulated Loss Value, Termination Value or any
Make-Whole  Premium payable with respect to any  Certificate  under the terms of
the Indenture)  when due and such failure  continues for ten Business Days after
the Lessee  receives  written  notice  thereof  (except that with respect to any
failure to pay Excepted Payments for such period,  such failure shall constitute
an Event of Default at the discretion of the Owner Participant).

         (c) Insurance.  The Lessee fails to cause insurance to be maintained in
accordance with ss. 12.

         (d)  Covenants.  The Lessee or ACA Inc. fails to perform or observe any
of the other  covenants to be performed or observed by it hereunder or under any
Operative  Agreement  and such failure  continues for at least 30 days after the
Lessee receives  written notice thereof,  unless such failure cannot be remedied
with diligent  effort during such 30-day period and the Lessee (i) determines in
good faith that such failure may be remedied with additional efforts and (ii) is
diligently  proceeding by appropriate  proceedings  to correct such failure,  in
which case such failure continues for such longer period (not exceeding 180 days
from the date of  notice)  as may be  necessary  to  remedy  such  failure  with
diligent effort of the Lessee.

         (e)  Representations.  Any  representation or warranty of the Lessee or
ACA Inc.  in any  Operative  Agreement  (excluding  those  in the Tax  Indemnity
Agreement) is incorrect in a material  respect when made,  remains material when
discovered,  and, if the effect of such  misrepresentation  is  curable,  is not
cured  within 30 days after the  Lessee's  receipt of  written  notice  from the
Lessor.

         (f)  Appointment of Receiver,  etc. The Lessee or ACA Inc.  consents to
the appointment of a receiver, trustee, or liquidator of itself or substantially
all of its property,  shall generally not pay its debts as they come due, admits
in writing its inability to pay its debts generally as they come due, or makes a
general assignment for the benefit of creditors.

         (g) Voluntary Bankruptcy. The Lessee or ACA, Inc. (1) files a voluntary
petition  in   bankruptcy  or  a  voluntary   petition  or  an  answer   seeking
reorganization, liquidation or other relief in a proceeding under any bankruptcy
laws or other  insolvency  laws,  as now or  hereafter  in effect,  or an answer
admitting  the material  allegations  of a petition  filed against the Lessee or
ACA,  Inc. in any such  proceeding,  or (2) by voluntary  petition,  answer,  or
consent,  the Lessee or ACA Inc.  seeks relief under the provisions of any other
existing  or  future   bankruptcy   or  other  similar  law  providing  for  the
reorganization  or  winding-up  of  corporations  or providing for an agreement,
composition, extension, or adjustment with its creditors.

         (h) Involuntary  Appointment.  An order, judgment, or decree is entered
in any proceeding by any court of competent jurisdiction appointing, without the
Lessee's or ACA Inc.'s consent, a receiver, trustee, or liquidator of the Lessee
or  ACA,  Inc.  or  of  substantially  all  of  its  property,  or  sequestering
substantially  all of the Lessee's or ACA, Inc.'s property,  and any such order,
judgment,  decree, or sequestration remains in force undismissed,  unstayed, and
unvacated for at least 90 days after the date of entry.

         (i) Involuntary Bankruptcy.  A petition against the Lessee or ACA, Inc.
in a proceeding  under  applicable  bankruptcy laws or other insolvency laws, as
now or hereafter in effect, is filed and is not withdrawn or dismissed within 90
days thereafter,  or, under any law providing for  reorganization or liquidation
of  corporations  which  shall  apply to the Lessee or ACA,  Inc.,  any court of
competent  jurisdiction assumes jurisdiction,  custody, or control of the Lessee
or ACA,  Inc. or of  substantially  all of its property  and such  jurisdiction,
custody, or control remains in force unrelinquished,  unstayed, and unterminated
for at least 90 days.

         (j) Air Carrier Status. The Lessee fails or ceases to be a Section 1110
Person.

         (k) ACA  Guaranty.  The ACA  Guaranty  ceases  to be in full  force and
effect, or ACA Inc.  repudiates the validity of the ACA Guaranty,  in each case,
at any time prior to the termination of such ACA Guaranty in accordance with its
terms.

 .        15.      Remedies

 . Upon the occurrence of (x) any Event of Default  specified in ss. 14(f),  (g),
(h),  or (i),  this Lease  shall be deemed to be in default  without  any act or
notice of any kind, all of which are hereby  waived,  and (y) any other Event of
Default,  so long as it continues,  the Lessor may, at its option,  declare this
Lease to be in default,  and in either case at any time  thereafter,  the Lessor
may  exercise  one or more of the  following  remedies as the Lessor in its sole
discretion shall lawfully elect:

                  (1) cancel (in the sense of UCC ss. 2A 505(1)),  terminate  or
         rescind  this  Lease or cause the  Lessee,  upon the  Lessor's  written
         demand and at the Lessee's  cost and expense,  to return  promptly (and
         the Lessee  thereupon shall return  promptly),  all or such part of the
         Aircraft  as the Lessor so  demands,  to the 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 Aircraft were being returned at the
         end of the Term, or if the Lessee does not so deliver such Item(s), the
         Lessor  may  enter  upon  the  premises  where  all or any  part of the
         Aircraft is located  and take  immediate  possession  of and remove the
         same  (together  with any engine  that is  installed  on the  Airframe,
         subject to the rights of any owner, lessor, lienor, or secured party of
         such engine) by summary proceedings or otherwise,  all without becoming
         liable  for or by reason  of such  entry or  taking  of  possession  or
         removal,  whether for the  restoration of damage to property  caused by
         such action or otherwise;

                  (2) with or without taking possession  thereof,  sell any Item
         at public or private sale,  free and clear of any rights of the Lessee,
         or otherwise dispose of, hold, use,  operate,  lease to others, or keep
         idle any Item as the Lessor, in its sole discretion, may determine, all
         free and clear of any rights or claims of the  Lessee or any  Sublessee
         and  without  any duty to account to the  Lessee  with  respect to such
         action or inaction or for any proceeds with respect thereto,  except as
         otherwise provided herein;

                  (3) whether or not the Lessor shall have  exercised,  or shall
         thereafter at any time exercise,  any of its rights under clause (1) or
         (2) above with respect to any Item,  the Lessor,  by written  notice to
         the Lessee specifying a payment date (the "Default Payment Date") which
         shall be the Stipulated Loss Value Date next occurring not less than 10
         days after the date of such notice,  may cause the Lessee to pay to the
         Lessor,  and the Lessee shall pay to the Lessor, on the Default Payment
         Date, as liquidated  damages for loss of a bargain and not as a penalty
         (in lieu of all Basic Rent  accruing  on or after the  Default  Payment
         Date),  any unpaid  Basic Rent due prior to the  Default  Payment  Date
         (together  with  interest  on such amount at the Past Due Rate from the
         Payment  Date as of which such Basic Rent was not paid until the actual
         date of payment of such amount) plus an amount equal to the excess,  if
         any, of (aa) the Basic Rent for the Aircraft  for the  remainder of the
         Basic  Term  or  then   effective   Renewal  Term   (disregarding   any
         cancellation  under this ss. 15) over (bb) the  aggregate  Fair  Market
         Rental of the Aircraft for such period,  after  discounting  such Basic
         Rent and Fair Market  Rental  semi-annually  to present value as of the
         Default Payment Date at the rate per annum equal to the Debt Rate;

                  (4) if the Lessor sells the Aircraft, the Lessor may elect, in
         lieu of  exercising  its rights under clause (3), to require the Lessee
         to pay to the  Lessor,  and the Lessee in such  event  shall pay to the
         Lessor,  on the date of such sale, as liquidated  damages for loss of a
         bargain and not as a penalty (in lieu of all Basic Rent accruing  after
         such sale  occurs),  any unpaid  Basic  Rent due before  such sale date
         less,  if such  sale  date is not a Rent  Payment  Date,  the pro  rata
         portion  of Basic  Rent  payable  in  advance  in respect of the period
         commencing  on the sale date and ending on the next Rent  Payment  Date
         (together  with  interest  on such amount at the Past Due Rate from the
         Payment  Date(s)  as of which  such  Basic  Rent was not paid until the
         actual  date  of  payment  of  such  amount)  plus  the  amount  of any
         deficiency  between the net  proceeds  of such sale and the  Stipulated
         Loss  Value of the  Aircraft  as of the date of such sale (or,  if such
         date is not a  Stipulated  Loss Value Date,  then the  Stipulated  Loss
         Value Date following the sale date,  which Stipulated Loss Value shall,
         if such sale date is a Rent Payment Date, include that portion of Basic
         Rent  payable in  arrears on such date,  and if such sale date is not a
         Rent Payment  Date,  include the pro rata portion of Basic Rent payable
         in  arrears  on the next Rent  Payment  Date in  respect  of the period
         commencing on the Rent Payment Date immediately preceding the sale date
         and  ending  on  such  sale  date),  together  with  interest  on  such
         Stipulated  Loss  Value at the Past Due Rate from the  Stipulated  Loss
         Value Date as of which such Stipulated  Loss Value is determined  until
         the date of actual payment of such amount;

                  (5) the Lessor  may  proceed by  appropriate  court  action or
         otherwise  to enforce  the terms  hereof or to recover  damages for the
         breach hereof, including payment of Basic Rent and Renewal Rent;

                  (6)      the Lessor may  exercise  any other  right or remedy  available  to it under  applicable
         laws; or

                  (7) the Lessor or any other  Indemnitee may enforce payment of
Supplemental Rent.

         In addition,  the Lessee shall be liable,  except as otherwise provided
above,  to the Lessor and any other  Indemnitee  for any and all unpaid Rent due
hereunder  before,  during,  and  after  the  exercise  of any of the  foregoing
remedies,  and for all  reasonable  legal  fees and  other  costs  and  expenses
incurred by reason of the  occurrence of any Event of Default or the exercise of
remedies with respect  thereto,  including any Make-Whole  Premium and including
all costs and  expenses  incurred  in  connection  with (xx) any  bankruptcy  or
insolvency proceeding,  (yy) any retaking of any Item, or the return of any Item
in  accordance  with the  terms  of ss.  5, or (zz) in  placing  any Item in the
condition and airworthiness required by ss. 5.

 . The Lessee shall be liable for all costs,  charges,  and  expenses,  including
reasonable  legal fees and  disbursements,  incurred  by the Lessor or any other
Indemnitee  by reason of the  occurrence of any Event of Default or the exercise
of remedies  with respect  thereto,  which  amounts  shall be  reimbursed  on an
After-Tax Basis.

 . To the extent  permitted by  applicable  law, the Lessee hereby waives any and
all rights that the Lessee may have under any bankruptcy, insolvency, or similar
laws, rules, or regulations to the continued  possession or use of the Aircraft,
or with respect to the payment of Rent therefor, or with respect to this Lease.

 . No remedy  referred to herein is intended to be  exclusive,  but each shall be
cumulative  and in  addition to any other  remedy  referred to in this ss. 15 or
otherwise  available  to the Lessor at law or in  equity.  No express or implied
waiver by the Lessor of any Default  shall in any way be, or be construed to be,
a waiver of any future or subsequent Default. The failure or delay of the Lessor
in exercising any rights  granted to it hereunder  shall not constitute a waiver
of any such right upon the continuation or recurrence of the underlying event or
circumstance,  and any single or partial exercise of any particular right by the
Lessor  shall not exhaust  that right or  constitute a waiver of any other right
provided herein.

 .        16.      Purchase Options

 . Provided that no Specified  Default  exists on the purchase  date,  the Lessee
shall  have the option to  purchase  the  Aircraft  (i) on the EBO Date shown on
Exhibit  B (the  "EBO  Date")  for the EBO  Price  shown on  Exhibit B (the "EBO
Price")  plus any  applicable  Make-Whole  Premium  owing  with  respect  to the
Certificates and, if such EBO Date is not a Rent Payment Date, less the pro rata
portion of Basic Rent (or Renewal  Rent,  as the case may be) payable in advance
in respect of the period  commencing on the EBO Date and ending on the next Rent
Payment Date,  and plus the pro rata portion of Basic Rent payable in arrears on
such next Rent  Payment  Date in respect of the  period  commencing  on the Rent
Payment Date immediately preceding the EBO Date and ending on such EBO Date (and
if such option is exercised,  any Basic Rent otherwise payable in advance on the
date of purchase shall not be due or payable); (ii) at the end of the Basic Term
or any Renewal Term, for the then-current Fair Market Value of the Aircraft; and
(iii) if a Materially Adverse Tax Event occurs with respect to the Aircraft, for
an amount equal to the  then-current  Fair Market Value of the Aircraft  (or, if
greater, the Termination Value thereof),  determined as of the date of purchase,
plus all accrued and unpaid  Rent with  respect to periods  prior to the date of
purchase,  less the pro rata portion of Basic Rent or Renewal  Rent, as the case
may be, paid in advance on the Rent Payment Date immediately  preceding the date
of purchase in respect of the period commencing on such purchase date and ending
on the next Rent Payment Date (including any applicable Make-Whole Premium owing
with  respect to the  Certificates),  but  excluding  any Basic Rent  payable in
advance on such payment date.

         The Lessee may elect to exercise any such purchase  option by providing
to the Lessor and the Indenture Trustee, in the case of the options described in
clauses (i) and (iii) above, not less than 30 days' prior written notice, in the
case of the option described in clause (ii) above, not less than 270 days' prior
written notice (which notice shall become  irrevocable 180 days prior to the end
of the  Basic  Term  or the  applicable  Renewal  Term,  as  applicable,  if not
previously  revoked,  and in the case of the option  described  in clause  (iii)
above,  not  less  than 90 days'  prior  written  notice.  Any  purchase  option
described in this ss. 16 may, at the  election of the Lessee,  be exercised by a
designee of the Lessee.

 . On the purchase date specified by the Lessee under ss. 16(a), the Lessee shall
purchase the Aircraft  from the Lessor and the Lessor shall sell the Aircraft to
the Lessee or its assignee or nominee,  on an "as is,  where is" basis,  without
representation  or  warranty,  express or implied  (except as to the  absence of
Lessor's Liens), for immediately available funds (U.S. dollars). Upon payment of
(1) such purchase price, and (2) all  Supplemental  Rent then due and owing, the
Lessor shall execute and deliver to the Lessee,  or to the Lessee's  assignee or
nominee,  a bill of sale,  without  representations  or  warranties,  express or
implied (except as to the absence of Lessor's Liens), for the Aircraft, together
with such other  documents as may be required to release the  Aircraft  from the
terms and scope of this  Lease and to  transfer  title  thereto to the Lessee or
such assignee or nominee, and the Indenture Trustee shall execute and deliver an
Indenture  release for the Aircraft,  all in such form as the Lessee  reasonably
requests and all at the Lessee's expense. If no purchase under this ss. 16 shall
have  occurred on the  applicable  purchase  date as the result of the  Lessee's
failure  to meet any  condition  to such  purchase  set  forth in any  Operative
Agreement,  this Lease  shall  continue in full force and effect as if no notice
had been given by the Lessee.

 . All notices or consents  under this Agreement  shall be in writing  (including
telecopies),  shall be in English,  shall be effective on delivery, and shall be
addressed as follows (or to such other address as an addressee  shall  designate
by notice to the other party):

                           (a) if to the Lessee:

                           Atlantic Coast Airlines
                           515A Shaw Road
                           Dulles, VA  20166
                           Attention:  General Counsel
                           Fax: (703) 925-6294

                           (b) if to the Lessor:

                           State Street Bank and Trust Company
                              of Connecticut, National Association
                           225 Asylum Street (Goodwin Square)
                           Hartford, CT  06103
                           Attn: Corporate Trust Department
                           Fax:  (860) 986-7920

                           (with copies to the Indenture  Trustee and to the Owner Participant at
                           its address specified in the Participation Agreement)

                           (c) if to the Indenture Trustee:

                           The First National Bank of Maryland
                           25 South Charles Street
                           Baltimore, MD  21201
                           Attn:  Corporate Trust Department
                           Fax:  (410) 244-4236

 .  This  Lease  shall  bind,  and  (subject  to  limitations  in  the  Operative
Agreements)  shall  benefit  and may be  enforced  by,  (a) the  Lessor  and its
successors  and  assigns,  and (b) the Lessee and its  successors  and  assigns.
Lessee will not, without the prior written consent of Lessor,  assign any of its
rights or obligations  hereunder or in the Aircraft except as otherwise provided
in the Operative Agreements. Lessor agrees that it will not assign or convey its
right, title and interest in or to this Lease or the Aircraft except as provided
in the Operative Agreements.

 . If the  Lessee  fails to make any  required  payment  of Rent or to perform or
comply  with  any of its  other  agreements  herein,  the  Lessor  or the  Owner
Participant may (but shall not be obligated to), after giving reasonable advance
notice to the  Lessee of the  Lessor's  intent to do so,  make such  payment  or
perform or comply with such agreement, and the amount of such payment and of the
Lessor's and the Owner Participant's  reasonable expenses incurred in connection
with such  payment or the  performance  of or  compliance  with such  agreement,
together with  interest  thereon at the Past Due Rate from (and  including)  the
date of making such payment or incurring such expenses to the date of payment by
the Lessee,  shall be Supplemental  Rent,  payable by the Lessee upon demand. No
such payment or performance by the Lessor or the Owner  Participant  shall waive
any Default or relieve the Lessee of its obligations hereunder.

 . On the Delivery  Date,  the Lessee will cause this Lease  (including the Lease
Supplement)  and the Indenture  (including the Indenture  Supplement) to be duly
filed and  recorded at the FAA. In addition,  the Lessee will  promptly and duly
execute and deliver to the Lessor such further documents and assurances and take
such further action as the Lessor from time to time reasonably requests in order
to carry out more  effectively  the  intent of this Lease and to  establish  and
protect  the rights and  remedies  created or intended to be created in favor of
the Lessor  hereunder,  including the execution and delivery of  supplements  or
amendments   hereto,  in  recordable  form,  and  the  recording  or  filing  of
counterparts   hereof  or  thereof,   in  accordance   with  the  laws  of  such
jurisdictions  the Lessor from time to time  reasonably  deems advisable and, if
requested by the Lessor,  the execution and delivery of terminations or releases
in connection with any transfer of any Item upon the termination, expiration, or
cancellation of this Lease in accordance with the terms hereof.

 . If any successor trustee for the Lessor is appointed  pursuant to the terms of
the Trust Agreement, such successor trustee shall, upon giving written notice to
the Lessee, succeed to all the rights, powers, and title of the Lessor hereunder
and shall be the Lessor and the owner of the Aircraft  for all purposes  hereof,
without  the  necessity  of any consent or approval by the Lessee and without in
any way altering the terms of this Lease or the Lessee's obligations  hereunder.
One such  appointment and  designation of a successor  trustee shall not exhaust
the right to appoint and designate  further  successor  trustees pursuant to the
Trust  Agreement,  but such right may be  exercised  repeatedly  so long as this
Lease is in effect.

 . State Street Bank and Trust Company of  Connecticut,  National  Association is
entering into this Lease solely as trustee under the Trust  Agreement and not in
its  individual  capacity,  and shall not be  personally  liable  for any of the
statements,  representations,  warranties,  agreements,  or  obligations  of the
Lessor  hereunder or for any loss with respect  thereto,  as to all of which the
Lessee  agrees to look solely to the Trust Estate;  provided,  that SSB shall be
liable  hereunder for its own gross  negligence  or willful  misconduct or for a
breach of its  representations  and warranties made in its individual  capacity,
and SSB accepts the benefits of the indemnification granted, and representations
and warranties made, to it hereunder.

 .        23.      Amendments and Miscellaneous

 . The terms of this Lease shall not be waived, modified, amended,  supplemented,
or terminated in any manner  whatsoever  except by written  instrument signed by
the Lessor and the Lessee.

 . Except as otherwise provided herein or therein,  all agreements,  indemnities,
representations,  and warranties in this Lease or the other Operative Agreements
shall  survive the  execution  and  delivery of this Lease and,  with respect to
events (or, in the case of Taxes, to periods of time) occurring during the Term,
or relating to a Default or exercise of  remedies  with  respect  thereto  which
extends beyond the Term, the expiration,  cancellation,  or other termination of
this Lease.

 . Any provision of this Lease that is or becomes  prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such  prohibition  or  unenforceability   without   invalidating  the  remaining
provisions  hereof,  and  any  such  prohibition  or   unenforceability  in  any
jurisdiction shall not invalidate or render  unenforceable such provision in any
other  jurisdiction.  To the extent  permitted by applicable law, the Lessee and
the Lessor hereby waive any provision of law which renders any provision  hereof
prohibited or unenforceable in any respect.

 . This Lease and the other Operative  Agreements  represent the entire agreement
of the parties hereto with respect to the subject  matter hereof,  and supersede
any and all prior  understandings.  This  Lease is an  agreement  of lease,  and
nothing  herein shall be construed as conveying to the Lessee any right,  title,
or interest in or to the Aircraft, except as lessee only.

 . This Lease  Agreement may be executed in any number of  counterparts , each of
which shall be an original (except that only the counterpart bearing the receipt
executed  by the  Indenture  Trustee  shall  be the  original  for  purposes  of
perfecting  a  security  interest  therein as chattel  paper  under the  Uniform
Commercial  Code),  but all of which taken together shall constitute one and the
same  instrument and any of the parties hereto may execute this Lease  Agreement
by  signing  any such  counterpart.  To the  extent  that this  Lease  Agreement
constitutes  chattel  paper (as such term is defined in the  Uniform  Commercial
Code as in effect in any applicable jurisdiction),  no security interest in this
Lease  Agreement  may be created  through  the  transfer  or  possession  of any
counterpart other than the original  chattel-paper  counterpart,  which shall be
the counterpart  containing the receipt executed by the Indenture Trustee on its
signature page.

 . THIS LEASE IS BEING  DELIVERED IN THE STATE OF NEW YORK, AND SHALL BE GOVERNED
BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (EXCLUDING
ANY  CONFLICTS-OF-LAWS  PRINCIPLE  THAT  WOULD  APPLY  THE  LAWS  OF  ANY  OTHER
JURISDICTION).

 .  The headings in this Lease are for convenience of reference only, and are not a substantive part of this Lease.

 .        24.      Performance by Sublessee

         Performance of any or all of the Lessee's  obligations under this Lease
by any Sublessee shall, for all purposes hereof,  constitute  performance by the
Lessee of such obligations to the extent of such performance;  provided that the
Lessee shall remain  primarily  liable  hereunder for the performance of all the
terms of this Lease to the same extent as if such sublease had not occurred.

         25.      Quiet Enjoyment.

         So long as no Event of Default shall have  occurred and be  continuing,
the Lessor  covenants  that  neither it nor any other Person  lawfully  claiming
through it shall interfere with the Lessee's or any Permitted  Sublessee's right
to possess and use the Aircraft or the  Lessee's  ability to exercise its rights
and  privileges  under this Lease without  hindrance or disturbance by it or any
such other Person.

         26.      Security For Lessor's Obligations.

         (a) Security for Lessor's  Obligations  to Holders.  In order to secure
the indebtedness  evidenced by the Certificates,  the Indenture provides for the
assignment  by the  Lessor to the  Indenture  Trustee  of this Lease and for the
creation of a first  mortgage  and security  interest in favor of the  Indenture
Trustee on the Aircraft. The Lessee consents to and acknowledges such assignment
(subject to the reservations  and conditions  therein set forth) and the receipt
of a copy of the Indenture.

         (b) Consent of Lessee to  Assignment  of Lease as Security.  The Lessee
hereby  acknowledges and consents to the Indenture  Trustee's rights pursuant to
the terms of the Indenture to receive  payments  (other than Excepted  Payments)
due under this Lease,  to transfer or assign  title to the  Aircraft  subject to
this Lease,  to make (jointly with the Lessor where  provided in the  Indenture)
all  waivers  and  agreements  except as  otherwise  provided  in the  Indenture
(including ss. 8.01 thereof), to give all notices, consents, and releases and to
take all action upon the  happening of an Event of Default  (except as otherwise
specifically  provided in the Indenture,  including ss. 8.01 thereof),  or to do
any and all other things  whatsoever  which the Lessor is or may become entitled
to do under this Lease (except as otherwise provided in the Indenture, including
ss.  8.01  thereof);  all or any of which  rights,  obligations,  benefits,  and
interests  may,  pursuant  to the  terms  of the  Indenture,  be  reassigned  or
retransferred by the Indenture Trustee at any time and from time to time (except
as otherwise provided in the Indenture);  provided,  that the Lessor,  except to
the  extent,  and for such  time as,  it is  unable  to do so by  virtue  of the
Indenture,  shall remain  liable for the  performance  of all the  covenants for
which it is obligated under this Lease notwithstanding such assignment.

 .        27.      Submission to Jurisdiction; Venue

         (a) EACH PARTY HERETO HEREBY  IRREVOCABLY  AGREES,  ACCEPTS AND SUBMITS
ITSELF TO THE  NON-EXCLUSIVE  JURISDICTION OF THE COURTSOF THE STATE OF NEW YORK
IN THE 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  THIS
AGREEMENT.

         (b)  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
THIS  AGREEMENT OR ANY OTHER  OPERATIVE  AGREEMENT  MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.

         (c) EACH PARTY HERETO  HEREBY  WAIVES ITS  RESPECTIVE  RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION  IN ANY  COURT IN ANY  JURISDICTION  BASED
UPON OR ARRISING OUT OF OR RELATING TO THIS AGREEMENT.




<PAGE>







         IN WITNESS  WHEREOF,  the Lessee  and the Lessor  have  executed  this  Lease  Agreement  (Atlantic  Coast
Airlines Trust No. ____).


                                                     ATLANTIC COAST AIRLINES, Lessee



                                                     By:

                                     Title:



                                                     By:

                                     Title:


                                                     STATE STREET BANK AND TRUST
                                                     COMPANY   OF   CONNECTICUT,
                                                     NATIONAL  ASSOCIATION  (not
                                                     in its individual  capacity
                                                     (except    as     expressly
                                                     otherwise  provided herein)
                                                     but    solely    as   owner
                                                     trustee), Lessor


                                                     By:

                                     Title:



               [This is the Original counterpart of the Lease Agreement for chattel paper purposes.]

                                      [or]

                   [This is a Duplicate executed counterpart of the Lease Agreement, and is not
                                     the original for chattel paper purposes.]




<PAGE>



                                                                                                          EXHIBIT A



                  LESSOR'S INTEREST UNDER THIS LEASE SUPPLEMENT
                        IS SUBJECT TO A SECURITY INTEREST

                             LEASE SUPPLEMENT NO. 1
                  (Atlantic Coast Airlines Trust No. ________)




                  This Lease Supplement No. 1 (Atlantic Coast Airlines Trust No.
_______),  dated ___________ __, ____, is entered into between State Street Bank
and Trust  Company of  Connecticut,  National  Association,  a national  banking
association,  not in its individual capacity,  but solely as Owner Trustee under
the Trust  Agreement  (Atlantic  Coast Airlines  Trust No.  _______) dated as of
September 1, 1997 (the  "Lessor"),  and Atlantic  Coast  Airlines,  a California
corporation (the "Lessee").

         Recitals:

         The Lessor and the Lessee have entered into a Lease Agreement (Atlantic
Coast Airlines Trust No.  ______),  dated as of __________,  199_ (the "Aircraft
Lease",  the  defined  terms in the  Aircraft  Lease  being  used in this  Lease
Supplement with the same meaning as in the Aircraft  Lease),  which provides for
the execution and delivery of a  supplement,  substantially  in the form of this
Lease  Supplement,  for the  purpose of  leasing  under the  Aircraft  Lease the
aircraft and engines  described below  ("Aircraft") as and when delivered by the
Lessor to the Lessee in accordance with the terms of the Aircraft Lease.

         The Aircraft Lease relates to the Aircraft.

         A counterpart  of the Aircraft  Lease is attached to and made a part of
this Lease Supplement, and this Lease Supplement, together with such attachment,
is being filed for recordation on this date with the FAA as one document.

         The Lessor and the Lessee agree as follows:

         1.  Delivered  Aircraft.  The Lessor hereby  delivers and leases to the
Lessee under the Lease, and the Lessee hereby accepts and leases from the Lessor
under the Lease,  the following  described  Canadair  Regional Jet, Series 200ER
Aircraft (the "Delivered Aircraft"),  which Delivered Aircraft as of the date of
this Lease Supplement consists of the following:

         (a)      Canadair  Regional Jet, Series 200ER Airframe;  U.S.  Registration  Number _____;  Manufacturer's
Serial No. ___; and

         (b) Two General Electric CF34-3B1 engines bearing manufacturer's serial
nos. _______ and ______ (each of which has 750 or more rated takeoff  horsepower
or the equivalent of such horsepower).

         2.       Delivery  Date.  The  Delivery  Date  of  the  Delivered  Aircraft  is the  date  of  this  Lease
Supplement.

         3. Lessor's Cost.  The Lessor's Cost of the Delivery  Aircraft shall be
the amount set forth in Exhibit B to the Lease.

         4. Term.  The Term for the  Delivered  Aircraft  shall  commence on the
Delivery Date, and shall terminate on ______, 201_, unless earlier terminated or
extended pursuant to the terms of the Lease.

         5.       Rent.  The  Lessee  hereby  confirms  its  obligation  to pay  Rent  for the  Delivered  Aircraft
throughout the Term thereof in accordance with the terms and provisions of the Lease.

         6.  Lessee's  Acceptance  of  Delivered  Aircraft.  The  Lessee  hereby
confirms  that the Lessee has accepted the  Delivered  Aircraft for all purposes
hereof  and of the  Lease.  Such  acceptance  by the  Lessee  shall  be  without
prejudice  to any rights of the Lessor or the Lessee  against  the  Seller,  the
Manufacturer,  the Engine  Manufacturer,  or any vendor of equipment included in
the Aircraft.

         7.  Incorporation  of Lease By  Reference.  All the  provisions  of the
Aircraft Lease are hereby  incorporated by reference in this Lease Supplement to
the same extent as if fully set forth in this Lease Supplement.

         8. Governing Law. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN THE STATE
OF NEW YORK, AND SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE  WITH THE LAWS
OF THE STATE OF NEW YORK (EXCLUDING ANY  CONFLICTS-OF-LAWS  PRINCIPLE THAT WOULD
APPLY THE LAWS OF ANY OTHER JURISDICTION).

         9. Agreement as Chattel Paper. To the extent that this Lease Supplement
constitutes  chattel  paper (as  defined in the  Uniform  Commercial  Code),  no
security  interest  in  this  Lease  Supplement  may be  perfected  through  the
possession of any counterpart other than the original chattel paper counterpart,
which shall be the counterpart marked "Original" in its signature page.

         10.  Counterparts.  This Lease Supplement may be executed in any number
of  counterparts,  each of which  shall be an  original  (except  that  only the
counterpart marked "Original" shall be the original for purposes of perfecting a
security  interest therein as chattel paper under the Uniform  Commercial Code),
but all of which taken together shall constitute one and the same instrument and
any of the parties hereto may execute this Lease  Supplement by signing any such
counterpart.


<PAGE>



         IN WITNESS WHEREOF, the Lessor and the Lessee have executed this Lease Supplement No. 1.


                                                     STATE  STREET  BANK AND  TRUST  COMPANY  OF  CONNECTICUT,
                                                     NATIONAL  ASSOCIATION,  not in its  individual  capacity,
                                                     but solely as Owner Trustee (Lessor)


                                                     By:

                                     Title:


                                                     ATLANTIC COAST AIRLINES (Lessee)


                                                     By:

                                     Title:


                                                     By:

                                     Title:





<PAGE>


24

                                                                                           Draft 6  -  Sept. 29 '97
                                                                                           ------------------------

                                   SCHEDULE I

                                   DEFINITIONS
                   (ATLANTIC COAST AIRLINES TRUST NO. ______)


GENERAL PROVISIONS

The following  terms shall have the  following  meanings for all purposes of the
Operative Agreements (other than the Pass Through Agreements,  the Intercreditor
Agreement,  and the Liquidity  Facilities)  referred to below,  unless otherwise
defined  in an  Operative  Agreement  or the  context  thereof  shall  otherwise
require. In the case of any conflict between the provisions of this Schedule and
the  provisions of any Operative  Agreement,  the  provisions of such  Operative
Agreement shall control the construction of such Operative Agreement.

Unless the context  otherwise  requires,  (i) references to agreements  shall be
deemed to mean such  agreements as amended and  supplemented  from time to time,
and (ii)  references  to parties to  agreements  shall be deemed to include  the
successors and permitted assigns of such parties.

DEFINED TERMS:

         Abatements: defined in ss. 4 of the Lease.

         ACA Guaranty:  the Guaranty,  dated as of the Certificate Closing Date, issued by ACA Inc. in favor of the
Lessor, the Indenture Trustee, and the Liquidity Providers, pertaining to the Aircraft.

         ACA Inc.: Atlantic Coast Airlines, Inc., a Delaware corporation.

         Additional   Insureds:   the  Lessor  (in  its   individual  and  trust
capacities), the Owner Participant, the Indenture Trustee (in its individual and
trust capacities),  each Liquidity  Provider,  and their successors and assigns,
and the  directors,  officers,  members,  employees,  and  agents of each of the
foregoing.

         Aeronautics  Authority:  as appropriate,  the Federal Aviation  Administration and/or the Administrator of
the Federal Aviation Administration,  or any Person, governmental department,  bureau, commission or agency located
in the United States succeeding to the functions, of the foregoing.

         Affidavits: the affidavits of citizenship of the Owner Trustee and the Owner Participant.

         Affiliate:  with respect to any Person,  any other  Person  directly or
indirectly  controlling  50% or more of any class of voting  securities  of such
Person or otherwise controlling, controlled by or under common control with such
Person. For the purposes of this definition,  "control"  (including  "controlled
by" and  "under  common  control  with")  shall  mean  the  power,  directly  or
indirectly,  to direct or cause the direction of the  management and policies of
such Person whether through the ownership of voting securities or by contract or
otherwise.  In no event  shall  the  Owner  Trustee  or the  Lessor be deemed an
Affiliate of the Owner Participant.

         After-Tax  Basis:  a basis such that any  payment to be  received  by a
Person shall be supplemented by a further payment to such Person so that the sum
of the two  payments,  after  deduction  of all Taxes  (taking  into account any
related  current  credits or deductions  actually  realized)  resulting from the
receipt  or  accrual  of such  payments,  shall be equal  to the  payment  to be
received.

         Air Carrier:  any U.S. Air Carrier and any 1'foreign air carrier" (as defined in the Transportation  Code)
as to which there is in force a permit granted under ss. 41302 of the Transportation Code.

         Aircraft: the Airframe and the two Engines.

         Airframe:  the Canadair  Regional Jet Series 200ER aircraft  (excluding
the Engines or engines from time to time installed  thereon) to be leased by the
Lessor to the Lessee  pursuant to the Lease and the Lease  Supplement and having
the United States FAA registration  number initially and  manufacturer's  serial
number  specified in the Lease  Supplement,  including  (i) all Parts in respect
thereof and (ii) any Replacement  Airframe  substituted pursuant to ss. 11(a)(1)
of the Lease.

         Application:  the  application  for  registration  of the  Aircraft  with the FAA in the name of the Owner
Trustee.

         Appraisal:  the report prepared by BK Associates,  Inc. and to be delivered to the Owner Participant (with
an abbreviated report to the Lessee) on the Delivery Date pursuant to ss. 4.02(h) of the Participation Agreement.

         Appraisal  Procedure:  a procedure  whereby an  independent  appraiser,
chosen by the Lessor from the three appraisers  selected by the Lessee as herein
provided  and  reasonably  acceptable  to the Lessor,  determines  the amount in
question.  The Lessee shall, within 15 days of a request by the Lessor,  provide
the Lessor with the names of three independent  appraisers.  If any appraiser so
nominated is not reasonably  acceptable to the Lessor, the Lessor shall promptly
notify the  Lessee,  and the Lessee  shall have five  Business  Days to nominate
another  appraiser  reasonably   acceptable  to  the  Lessor.   Within  15  days
thereafter,  the Lessor shall select and employ one of such  appraisers.  If the
Lessee or the Lessor fails to make its selection in a timely  manner,  the other
party may make such  selection and proceed with the  appraisal.  The decision of
the appraiser so appointed shall be given within 10 days after being  appointed.
Such appraiser's  decision shall be binding and conclusive on the Lessor and the
Lessee.  The  Lessee  and the Lessor  shall  each pay  one-half  of the fees and
expenses of such appraiser, provided that the Lessee shall pay all such fees and
expenses in the case of any appraisal pursuant to ss. 15 of the Lease.

         Average Life Date: for any  Certificate,  the date which follows the prepayment  date by a period equal to
the Remaining Weighted Average Life of such Certificate.

         Bankruptcy Code: Title 11 of the United States Code, as amended, and any successor thereto.

         Basic Rent:  the aggregate  periodic rent payable for the Aircraft  throughout  the Basic Term pursuant to
ss. 3(b) of the Lease, adjusted pursuant to ss.ss. 3(d) and 3(e) of the Lease.

         Basic Rent Rate: set forth in Exhibit D to the Lease.

         Basic Term:  the period  commencing at the beginning of the day on the Delivery Date and ending at the end
of the day on the  Expiration  Date,  or such  earlier  date on which the Lease  shall be  terminated  as  provided
therein.

         Beneficial  Interest:  the interest of the Owner  Participant  (or the Initial Owner  Participant,  as the
case may be) under the Trust Agreement.

         Business  Day:  any day  other  than a  Saturday  or  Sunday  on  which
commercial  banks are not  authorized  or  required  to close in New  York,  NY,
Washington, D.C. and the city in the United States in which the office or agency
is  maintained  by the Pass Through  Trustee for the payment of the Pass Through
Certificates, and after the Lien of the Indenture is discharged, Hartford, CT.

         Certificate  Closing  Date:  the date of the closing with respect to the purchase of  Certificates  by the
Pass-Through Trustee contemplated by ss. 2.01(b) of the Participation Agreement.

         Certificate Holder:  see "Holder".

         Certificates:  the Equipment Trust Certificates  (Atlantic Coast Airlines Trust No. _________),  issued by
the Owner  Trustee  pursuant  to the  Indenture  and any  certificate  issued in exchange  therefor or  replacement
thereof pursuant to the Indenture.

         Citizen  of the  United  States:  a citizen of the  United  States as  defined  in  ss. 40102(a)(15)  of the
Transportation  Code, or any analogous part of any successor or  substituted  legislation or regulation at the time
in effect.

         Class A Liquidity Provider has the meaning specified in ss. 1.01 of the
lntercreditor Agreement.

         Class B Liquidity Provider has the meaning specified in ss. 1.01 of the
lntercreditor Agreement.

         Class C Liquidity Provider has the meaning specified in ss. 1.01 of the
Intercreditor Agreement.

         Closings:  the closing with respect to the  acquisition of the Pass Through  Certificates by the Placement
Agent and the closing with respect to the acquisition of Certificates by the Pass Through Trustee.

         Code: the Internal  Revenue Code of 1986, as amended from time to time,
or any similar legislation of the United States enacted to supersede,  amend, or
supplement  such Code (and any  reference to a provision of the Code shall refer
to any successor provision(s), however designated).

         Collateral Account: the deposit account established and maintained pursuant to ss. 2.13 of the Indenture.

         Collateral Account Control  Agreement:  the Collateral Account Control Agreement dated as of September 30,
1997 among SSB, the Indenture Trustee, and the Owner Trustee.

         Commitment:  the amount of the Owner  Participant's  participation  in the Purchase  Price  required to be
made available or paid as provided in ss. 3.02 of the Participation Agreement.

         Corporate  Trust  Administration:  the Corporate  Trust  Administration
office of the Owner  Trustee  located at 225  Asylum  Street  (Goodwin  Square),
Hartford, CT 06103, Attention:  Corporation Trust Administration,  or such other
office  at  which  the  Owner  Trustee's   corporate  trust  business  shall  be
administered  which the Owner Trustee shall have  specified by notice in writing
to the Lessee, the Owner Participant and the Indenture Trustee.

         Corporate Trust  Department:  the Corporate Trust Department  office of
the Indenture Trustee located at 26 South Charles Street,  Baltimore,  MD 21201,
Attention:  Corporate  Trust  Department,  or such  other  office  at which  the
Indenture  Trustee's  corporate trust business shall be  administered  which the
Indenture  Trustee shall have specified by notice in writing to the Lessee,  the
Owner Participant and the Owner Trustee.
         CRAF Program has the meaning specified in ss. 13(d) of the Lease.
         Cut-Off Date: June 30, 1998.

         DOT: the U.S. Department of Transportation or any successor thereto.

         Debt Portion: the amount specified as such on Schedule III to the Participation Agreement.

         Debt  Rate.  the  weighted  average  (based on  Outstanding  principal  amount)  rate of  interest  on the
Certificates issued pursuant to the Indenture.

         Default:  (a) any event or  condition  which,  with the lapse of time or the  giving of  notice,  or both,
would constitute an Event of Default or (b) an Event of Default.

         Default Payment Date: defined in ss. 15(a)(3) of the Lease.

         Deficiency  Agreement.  The Deficiency  Agreement,  dated as of the Delivery  Date,  among SDIQ, the Owner
Participant, and the Owner Trustee, pertaining to the Aircraft.

         Delivery  Date:  the date on which the  Aircraft  is  delivered  and sold by the  Seller to the Lessor and
leased by the  Lessor to the  Lessee  under the Lease,  which  date  shall  also be the date of the  initial  Lease
Supplement.

         Delivery Notice:  notice of the Aircraft's  Delivery Date, given by the
Lessee as provided in ss. 3.01 of the Participation  Agreement and including any
notice with respect to a postponed Delivery Date given by the Lessee pursuant to
ss. 3.05(c) of the Participation Agreement.

         Downgrade  Drawing  has  the  meaning  specified  in  ss.  1.01  of the
Intercreditor Agreement.

         EBO: the early buy-out purchase option specified in ss. 16(a)(i) of the Lease.

         EBO Date has the meaning set forth in ss. 16(a) of the Lease.

         EBO Price has the meaning set forth in ss. 16(a) of the Lease.

         Eligible  Deposit  Account:  either (a) a  segregated  account  with an
Eligible  Institution or (b) a segregated trust account with the corporate trust
department of a depository  institution  with corporate  trust powers  organized
under the laws of the United  States or any state  thereof,  or the  District of
Columbia,  and whose  deposits  are  insured by the  Federal  Deposit  Insurance
Corporation,  provided  that such  institution  also has a combined  capital and
surplus of at least  $100,000,000  and a rating of A or better  from the Thomson
Bank Watch.

         Eligible Institution: a depository institution organized under the laws
of the  United  States or any one of the  states  thereof,  or the  District  of
Columbia,  or any domestic  branch of a foreign bank,  which in any such case at
all times (a) has either (x) a long-term  unsecured  debt rating of at least Aa2
by Moody's or (y) a short-term  certificate of deposit rating of P-1 by Moody's,
(b) has either (x) a long-term unsecured debt rating of a least AA by S&P or (y)
a short-term  certificate  of deposit rating of A-1+ by S&P, and (c) is a member
of the Federal Deposit Insurance Corporation.

         Engine:  each of the two General Electric  CF34-3-B1  engines listed by
its manufacturer's  serial number in the Lease Supplement and leased pursuant to
the  Lease,  whether  or not from  time to time  installed  on the  Airframe  or
installed on any other airframe or on any other  aircraft,  and any  Replacement
Engine which may from time to time be substituted  for an Engine pursuant to the
Lease, together with all Parts related thereto. Except as otherwise provided, at
such time as a  Replacement  Engine shall be so  substituted  and the Engine for
which the substitution is made shall be released from the Lien of the Indenture,
such  replaced  Engine shall cease to be an "Engine"  under the Lease.  The term
"Engines"  means, as of any date of  determination,  both Engines then leased to
the Lessee pursuant to the Lease.

         Engine Manufacturer: General Electric Company, a New York corporation.

         Engine  Manufacturer's  Consent: The General Electric Company Engine Consent and Agreement with respect to
the Engine Warranty Assignment, dated as of the Delivery Date, executed by the Engine Manufacturer.

         Engine Warranty  Assignment:  The Warranty  Assignment  (Atlantic Coast
Airlines  Trust No. __) dated as of the Delivery Date between the Lessor and the
Lessee with respect to the Engine  warranties under the GTA in substantially the
form of Exhibit F to the Participation Agreement, as such form may be amended on
or prior to the Delivery Date;  provided that no such amendment shall materially
adversely affect the interests of the Holders of the Certificates.

             ERISA: the Employee Retirement Income Security Act of 1974, as amended.

         Estimated  Expense Amount has the meaning  specified in ss. 10.01(a) of
the Participation Agreement.

         Event of Default: each of the events specified in ss. 14 of the Lease.

         Event  of  Loss:  any of  the  following  events  with  respect  to the
Aircraft, the Airframe or any Engine: (i) theft or disappearance for a period in
excess of 90 consecutive days; (ii)  destruction,  damage beyond economic repair
or rendition of such  property  permanently  unfit for normal use for any reason
whatsoever;  (iii) any event  which  results  in an  insurance  settlement  with
respect to such property on the basis of an actual,  constructive or compromised
total loss;  (iv)  condemnation,  confiscation  or seizure of, or requisition of
title to or use of such  property  by any  foreign  government  or any agency or
instrumentality  thereof,  for a period in excess of 180 consecutive days (or 30
consecutive days for the appropriation of title, or, in any of the cases in this
clause (iv),  such shorter  period ending on the  expiration  of the Term);  (v)
condemnation,  confiscation  or seizure of, or requisition of title to or use of
such property by the  Government for a period  extending  beyond the term of the
Lease (as the same may be extended pursuant to the terms thereof), provided that
no Event of Loss  shall be  deemed to have  occurred,  and the term of the Lease
shall be extended automatically for a period of six months in the event that the
Aircraft is requisitioned by the Government  pursuant to an activation under the
CRAF Program; and (vi) as a result of any law, rule, regulation,  order or other
action  by  the  Aeronautics   Authority  or  other   governmental  body  having
jurisdiction,  the use of the  Aircraft or Airframe in the normal  course of air
transportation of passengers shall have been prohibited by virtue of a condition
affecting all Canadair  Regional Jet Series 200ER aircraft equipped with engines
of the same make and model as the Engines for a period of 180  consecutive  days
(or beyond the end of the Term),  unless the Lessee,  prior to the expiration of
such 180-day  period,  shall be  diligently  carrying  forward all necessary and
desirable  steps to permit normal use of the Aircraft and shall within 12 months
have conformed at least one Canadair Regional Jet Series 200ER aircraft (but not
necessarily the Aircraft) to the requirements of any such law, rule, regulation,
order or action, and shall be diligently pursuing conformance of the Aircraft in
a  non-discriminatory  manner.  The date of such Event of Loss shall be (aa) the
91st  day  following  loss  of  such  property  or  its  use  due  to  theft  or
disappearance  (or  the  end of the  Term  if  earlier);  (bb)  the  date of any
destruction,  damage  beyond  economic  repair  or  rendition  of such  property
permanently  unfit for normal use; (cc) the date of any insurance  settlement on
the basis of an actual,  constructive or compromised  total loss; (dd) the 181st
day following condemnation,  confiscation, seizure or requisition of title to or
use of such  property by a foreign  government  referred to in clause (iv) above
(or the 31st day in the case of  appropriation  of title, or the end of the Term
if  earlier  than  such  181st or 31st  day);  (ee) the last day of the Term (as
automatically extended by six months in the case of an activation under the CRAF
Program) in the case of  requisition  of title to or use of such property by the
Government; and (ff) the last day of the applicable period referred to in clause
(vi) above (or if  earlier,  the end of the Term  without  the  Lessee's  having
conformed  at least one  Canadair  Regional  Jet Series  200ER  aircraft  to the
applicable requirements). An Event of Loss with respect to the Aircraft shall be
deemed  to have  occurred  if any  Event  of Loss  occurs  with  respect  to the
Airframe.

         Excepted Payments:  collectively, (i) indemnity, expense, reimbursement
or other  payments  paid or  payable  by the  Lessee  in  respect  of the  Owner
Participant,  the  Owner  Trustee  in its  individual  capacity  or any of their
respective  successors,   permitted  assigns,  directors,  officers,  employees,
servants and agents or Affiliates,  pursuant to the  Participation  Agreement or
any other Operative  Agreement or any indemnity  hereafter  granted to the Owner
Participant  or the Owner  Trustee in its  individual  capacity  pursuant to the
Lease  or  the  Participation  Agreement,  (ii)  proceeds  of  public  liability
insurance (or government indemnities in lieu thereof) in respect of the Aircraft
payable  as a result of  insurance  claims  paid for the  benefit  of, or losses
suffered  by, the Owner  Trustee or the  Indenture  Trustee in their  respective
individual  capacities  or  by  the  Owner  Participant,   or  their  respective
successors,  permitted  assigns  or  Affiliates,  (iii)  proceeds  of  insurance
maintained  with  respect  to the  Aircraft  by the Owner  Participant  (whether
directly or through the Owner  Trustee) or any Affiliate  thereof  maintained in
accordance  with ss.  12(e) of the  Lease but not  required  under ss. 12 of the
Lease, (iv) all right,  title and interest of the Owner Participant or the Owner
Trustee  in, to and under the Tax  Indemnity  Agreement,  including  payments of
Supplemental  Rent by the Lessee in respect of any amounts payable under the Tax
Indemnity  Agreement,  (v) any  purchase  price  paid or  payable  to the  Owner
Participant  for its interest in the Trust Estate pursuant to ss. 7.03(d) of the
Participation  Agreement,  (vi) any  Transaction  Costs  paid or  payable by the
Lessee to the Owner  Trustee  (to the extent for its sole  benefit) or the Owner
Participant pursuant to the Lease or the Participation Agreement, (vii) payments
under the RVG and/or the Deficiency Agreement, (viii) any payments in respect of
interest  to the extent  attributable  to  payments  referred  to in clauses (i)
through (vi) above, (ix) any amount payable under the ACA Guaranty in respect of
the foregoing, (x) any right to demand, collect or otherwise receive and enforce
the payment of any amount  described in clauses (i) through (v) and (vii) above,
and (xi) 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 specified in clauses (i) through (x) above.

         Expenses has the meaning  specified in ss. 9.01(a) of the Participation
Agreement.

         Expiration Date: _____________, 201__.

         FAA:  see "Federal Aviation Administration".

         FAA Bill of Sale:  the bill of sale for the Airframe on AC Form 8050-2,
or such other form as may be approved by the Aeronautics Authority,  executed by
the Seller in favor of the Owner Trustee and dated the Delivery Date.

         Fair  Market  Rental:   the  amount   obtainable  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,  in accordance
with a net lease on terms and conditions (except as to the amount of Basic Rent)
as provided in the Lease.  Such amount  shall be  determined  assuming  that the
Aircraft  is in the  condition  required by the Lease,  excluding  Airworthiness
Directives  that would not be  required  to be made until  after the  applicable
renewal  period  begins  (except  that a  determination  of Fair  Market  Rental
pursuant to ss. 15(a)(3) of the Lease shall be based on the actual  condition of
such property),  and assuming that all Removable Improvements have been removed.
If the Lessor and the Lessee do not agree upon Fair Market  Rental,  it shall be
determined in accordance with the Appraisal Procedure.

         Fair Market Value: the amount obtainable 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.  Such amount shall be determined
assuming that the Aircraft is in the condition required by the Lease,  excluding
Airworthiness  Directives  that would not be required to be made until after the
valuation date (except that a determination of Fair Market Value pursuant to ss.
15(a)(3) of the Lease shall be based on the actual  condition of such property),
and assuming that all Removable  Improvements  have been removed.  If the Lessor
and the Lessee do not agree upon Fair Market  Value,  it shall be  determined in
accordance with the Appraisal Procedure.

         Federal  Aviation  Administration:  the United States Federal  Aviation  Administration  and any successor
agency or agencies thereto.

         Final   Drawing  has  the  meaning   specified   in  ss.  1.01  of  the
lntercreditor Agreement.

         FNBM: The First National Bank of Maryland, a national banking association.

         Government:  the United  States of America or an agency or  instrumentality  thereof  the  obligations  of
which bear the full faith and credit of the United States of America.

         GTA: the General Terms Agreement dated as of October,  1996 between the
Engine  Manufacturer and the Lessee with respect to certain support services for
the Engines, as originally  executed or as modified,  amended or supplemented in
accordance  with the  terms  thereof,  but only  insofar  as the  General  Terms
Agreement  related to the Engines,  to the extent  assigned to the Owner Trustee
pursuant as the Engine Warranty Assignment.

         Holder or Holder  of a  Certificate:  as of any  particular  time,  the
Person in whose name a Certificate  shall be  registered  (but not including the
holder of any Pass Through Certificate).

         Improvement has the meaning set forth in ss. 9(e) of the Lease.

         incorporated in: incorporated or installed in, attached to, or otherwise made a part of.

         Indemnitee:  each of  SSB,  in its  individual  capacity  and as  Owner
Trustee and Lessor, the Subordination  Agent, in its individual  capacity and in
its  capacity  as  Subordination  Agent,  each  Liquidity  Provider,  the  Owner
Participant,  the Indenture Trustee,  in its individual capacity and as trustee,
any Owner Participant Guarantor,  and any successor (including any trustee which
may succeed to the Lessor's  interest  under the Lease) and  Affiliate,  and, in
each case, any assign, officer, director,  employee, agent and servant of any of
the foregoing,  the Lessor's Estate, and the Trust Indenture Estate. Neither the
Pass  Through  Trustee  nor any holder of a Pass  Through  Certificate  shall be
deemed to be an Indemnitee.

         Indenture:  the Trust Indenture and Security Agreement  (Atlantic Coast Airlines Trust No. ______),  dated
as of  September  26,  1997,  between  the Lessor and the  Indenture  Trustee,  as  supplemented  by the  Indenture
Supplement.

         Indenture  Default:  (a) any event or condition which,  with the lapse of time or the giving of notice, or
both, would constitute an Indenture Event of Default, or (b) any Indenture Event of Default.

         Indenture Documents has the meaning specified in the Granting Clause of
the Indenture.

         Indenture Event of Default: each of the events specified in ss. 7.01 of the Indenture.

         Indenture  Supplement:  Indenture  Supplement No. 1 (Atlantic  Coast Airlines Trust No. ____), to be dated
the Delivery Date, substantially in the form of Exhibit A to the Indenture.

         Indenture  Trustee:  The First  National  Bank of Maryland,  a national  banking  association,  not in its
individual capacity but solely as trustee under the Indenture.

         Indenture  Trustee's Liens: any Lien against, on or with respect to the
Aircraft,  any Engine,  the Lessor's Estate or the Trust Indenture Estate or any
part thereof resulting from (i) claims against the Indenture Trustee not related
to the administration of the Trust Indenture Estate or any transactions pursuant
to the Indenture or any document  included in the Trust Indenture  Estate,  (ii)
any act or  omission  of the  Indenture  Trustee  which  is not  related  to the
transactions  contemplated by the Operative Agreements or is in violation of any
of the terms of the Operative  Agreements,  or (iii) Taxes  imposed  against the
Indenture Trustee in its individual  capacity in respect of which the Lessee has
not  indemnified  (and is not obligated to indemnify)  the Indenture  Trustee in
such capacity.

         Independent   Investment  Banker:  an  independent  investment  banking
institution of national standing  appointed by the Lessee that is independent in
fact, does not have any direct  financial  interests,  or any material  indirect
financial  interest,  in the Lessee or any  Affiliate of the Lessee,  and is not
connected  with the  Lessee  or any  Affiliate  of the  Lessee,  as an  officer,
employee, promoter, underwriter, trustee, partner, director or Person performing
similar  functions;  provided,  that if the  Indenture  Trustee  shall  not have
received  written  notice of such an  appointment  at least 10 days prior to the
Prepayment Date,  "Independent Investment Banker" shall mean such an institution
appointed by the Indenture Trustee.

         Initial Owner Participant: Atlantic Coast Airlines, a California corporation.

         Initial Reoptimization Date: has the meaning specified in ss. 2.03(b) of the Participation Agreement.

         Intercreditor  Agreement:  the  Intercreditor  Agreement  dated as of September  25, 1997,  among the Pass
Through Trustees,  the Class A Liquidity Provider,  the Class B Liquidity Provider,  the Class C Liquidity Provider
and the Subordination Agent.

         Interest  Drawing  has  the  meaning  specified  in  ss.  1.01  of  the
lntercreditor Agreement.

         Invoice: the invoice for the Aircraft given by the Seller to the Lessor.

         Item or Item of Equipment: the Airframe or an Engine.

         JAA: the Joint Aviation Authority (or any successor thereto) of the European Union.

         Lease:  the Lease  Agreement  (Atlantic  Coast Airlines Trust No. ____)
dated  as of the  Delivery  Date,  entered  into by the  Lessor  and the  Lessee
concurrently  with the execution and delivery of the  Indenture  Supplement,  in
substantially the form of Exhibit B to the Participation Agreement, as such form
may be amended on or prior to the Delivery Date as provided in the Participation
Agreement,  including, without limitation,  supplementation by one or more Lease
Supplements entered into pursuant to the applicable provisions of the Lease.

         Lease  Supplement:.  Lease  Supplement No. 1 (Atlantic  Coast  Airlines  Trust No. ____),  to be dated the
Delivery Date, substantially in the form of Exhibit A to the Lease.

         Lease Term: the period commencing on the Delivery Date and ending at the end of the Basic Term.

         Lessee: Atlantic Coast Airlines, a California corporation.

         Lessee  Documents  has the  meaning  set  forth in ss.  6.01(b)  of the
Participation Agreement.

         Lessor:  State  Street Bank and Trust  Company,  a  Massachusetts  trust  company,  not in its  individual
capacity but solely as Owner Trustee under the Trust Agreement.

         Lessor's Cost: has the meaning set forth in Exhibit B of the Lease.

         Lessor's  Estate:  all estate,  right,  title and interest of the Owner
Trustee in and to the Collateral Account,  the Liquid Collateral,  the Aircraft,
the Lease,  any Lease  Supplement,  the FAA Bill of Sale,  the Warranty  Bill of
Sale,  the  Purchase  Agreement,  the  Purchase  Agreement  Assignment,  the PAA
Consent,  any warranty with respect to the Airframe and the Engines, all amounts
of Basic Rent and Supplemental  Rent,  including without  limitation,  insurance
proceeds  (other than  insurance  proceeds  payable to or for the benefit of the
Owner  Trustee  in  its  individual  capacity  or  the  Owner  Participant)  and
requisition,  indemnity or other payments of any kind for or with respect to the
Aircraft  (except  amounts  owing to the  Owner  Participant,  to the  Indenture
Trustee,  to the Owner Trustee in its  individual  capacity,  or to any of their
respective directors,  officers, employees and agents pursuant to Articles 8 and
9 of the Participation  Agreement),  and all other property of the Owner Trustee
purportedly  subjected  to the  Lien of the  Indenture  by the  Granting  Clause
thereof;  provided that in no event shall "Lessor's Estate" include any Excepted
Payment.

         Lessor's Liens: Liens against, on or with respect to the Aircraft,  any
Engine,  the Lessor's Estate or the Trust Indenture  Estate or any part thereof,
title thereto or any interest  therein arising as a result of (i) claims against
the  Lessor,  in its  individual  capacity  or as Owner  Trustee,  or the  Owner
Participant or any Affiliate of such Owner Participant, in each case not related
to the Operative Agreements or the transactions  contemplated thereby, (ii) acts
or omissions of the Lessor in its individual capacity or as Owner Trustee, or of
the  Owner   Participant  or  any  Affiliate  of  such  Owner   Participant  not
contemplated  or permitted  under the terms of the Operative  Agreements,  (iii)
Taxes or Expenses imposed against the Lessor,  in its individual  capacity or as
Owner Trustee,  Owner  Participant  or any Affiliate of such Owner  Participant,
Lessor's  Estate  or the trust  created  by the  Trust  Agreement  which are not
required to be indemnified  against by the Lessee pursuant to the  Participation
Agreement by reason of ss. 8.01(b) or 9.01(b) thereof and which are not required
to be indemnified against by the Lessee pursuant to the Tax Indemnity Agreement,
or (iv)  claims  against  the  Lessor,  in its  individual  capacity or as Owner
Trustee, or the Owner Participant arising from the transfer by the Lessor or the
Owner  Participant  of its  interests in the Aircraft or any Engine other than a
transfer of the Aircraft pursuant to ss. 3(g), 3(i), 11, 13(a), 15, or 16 of the
Lease and other than a transfer  pursuant to the  exercise of the  remedies  set
forth in ss. 15 of the Lease.

         Letter of  Credit:  the  Letter of Credit  issued by  CrestarBank  in favor of the  Indenture  Trustee  as
security for the obligations of the Lessee  pursuant to the first sentence of Section 7.02(b) of the  Participation
Agreement.

         Lien: any mortgage, pledge, lien, charge, encumbrance,  lease, security
interest  (including any conditional sale agreement,  equipment trust agreement,
or other title  retention  agreement),  statutory  right in rem, claim, or other
similar interest of any nature whatsoever.

         Liquid  Collateral:  all amounts and securities  deposited from time to
time in the Collateral Account and all the products,  investments,  earnings and
proceeds of the  foregoing,  including,  but not limited to, all proceeds of the
investment or conversion thereof, voluntary or involuntary, into cash, Specified
Investments or other property,  all rights to payment of any and every kind, and
other forms of obligations, and instruments and other property which at any time
constitute all or part or are included in the proceeds of any of the foregoing.

         Liquidity  Facility  has  the  meaning  specified  in ss.  1.01  of the
lntercreditor Agreement.

         Liquidity  Provider  has  the  meaning  specified  in ss.  1.01  of the
Intercreditor Agreement.

         Losses has the meaning  specified in ss. 17.02(a) of the  Participation
Agreement.

         Loss  Payment  Date has the meaning  specified  in ss.  11(a)(2) of the
Lease.

         Majority in Interest of Certificate Holders: as of a particular date of
determination,  the Holders of more than 50% of the aggregate  unpaid  principal
amount of all  Certificates  outstanding as of such date (excluding for purposes
of this definition any  Certificates  held by (i) the Owner Trustee or the Owner
Participant or any interests of the Owner  Participant  unless all  Certificates
then outstanding are held by the Owner  Participant,  (ii) the Lessee,  or (iii)
any Affiliate of any thereof).

         Make-Whole  Premium:  an amount determined as of the third Business Day
before the applicable  Prepayment Date (or date of purchase, as the case may be)
which an Independent  Investment Banker determines to be equal to the excess, if
any,  of (i) the  present  value of the  remaining  scheduled  payments  of such
principal amount or portion thereof and interest thereon to the Maturity of such
Certificate computed by discounting such payments on a semi-annual basis on each
Payment Date  (assuming a 360-day year  consisting of twelve 30-day months) at a
discount rate equal to the Treasury Yield,  all as determined by the Independent
Investment Banker over (ii) the outstanding principal amount of such Certificate
plus accrued interest.

         Mandatory Document Terms. The terms set forth on Schedule V to the Participation Agreement.

         Mandatory Economic Terms. The terms set forth on Schedule IV to the Participation Agreement.

         Manuals and Technical  Records has the meaning set forth in ss. 9(b) of
the Lease.

         Manufacturer: Bombardier Inc., a Canadian corporation.

         Materially  Adverse Tax Event: any event (other than excessive  foreign
usage of the  Aircraft)  that makes it more likely than not that the Lessee will
be required to indemnify  any  Indemnitee  for Taxes under any of the  Operative
Agreements or the Owner Participant under the Tax Indemnity Agreement,  or both,
provided that (i) the estimated  aggregate of such indemnity  payments (computed
as a hypothetical  adjustment of Basic Rent or, if applicable,  Renewal Rent and
disregarding  any  indemnity  payments  waived  by  such  Indemnitee)  over  the
then-remaining  Term is equal to at least 5% of Basic Rent (and, if  applicable,
Renewal Rent) payable over the remaining  Term, and (ii) future  payments of the
Taxes giving rise to the  indemnity or  indemnities  will not be required if the
Lessee purchases the Aircraft.

         Maturity:  with  respect  to any  Certificate,  the date on  which  the  final  principal  amount  of such
Certificate is scheduled to be due and payable.

         Minimum Maintenance  Standards has the meaning specified in ss. 9(b) of
the Lease.

         Moody's: Moody's Investors Service, Inc.

         Net Present Value of Rents:  the net present cost to the Lessee,  as of
the Delivery Date, of all Basic Rent payments through the EBO Date, plus the EBO
Price, discounted at the Debt Rate compounded semi-annually.

         Non-U.S. Person: any Person other than a U.S. Person.

         Obsolete Parts:  Parts which the Lessee in good faith  determines to be
obsolete or no longer  suitable or  appropriate  for use on the  Airframe or any
Engine and which the Lessee is authorized  to remove from the Aircraft,  and not
replace, pursuant to the last sentence of ss. 9(d) of the Lease.

         Offering  Memo:  the  Lessee's  September  19,  1997  Offering  Memorandum   concerning  the  Pass-Through
Certificates.

         Officer's  Certificate:  when delivered  pursuant to the Indenture,  a certificate signed by a Responsible
Officer of the Lessee or the Owner Trustee,  as the case may be, and delivered to the Indenture Trustee.  Each such
certificate shall include the statements provided for in ss. 15.07 of the Indenture.

         Old Lease:  the  ________,  1997  Aircraft  Interim  Lease  Agreement,  between the Seller and the Lessee,
concerning the Aircraft.

         Old Lease Termination:  the Lease Termination Agreement,  dated the date of the Lease Supplement,  between
the Seller and the Lessee, pertaining to the Old Lease.

         Operative Agreements: the Participation Agreement, the Trust Agreement,
the FAA Bill of Sale, the Warranty Bill of Sale, the ACA Guaranty,  the Purchase
Agreement,  the  Purchase  Agreement  Assignment,  the PAA  Consent,  the Engine
Warranty  Assignment,  the Lease  (including  the Lease  Supplement),  the Owner
Participant  Guaranty,  if any,  the  Certificates  outstanding  at the  time of
reference, the Indenture (including the Indenture Supplement), the Tax Indemnity
Agreement,  each Liquidity Facility, the Intercreditor Agreement, the Deficiency
Agreement, the RVG, the Collateral Account Control Agreement, and any Assignment
and Assumption Agreement.

         Opinion of Counsel: when delivered pursuant to the Indenture, a written
opinion of legal  counsel,  who in the case of counsel (a) for the Lessee may be
(i) the general counsel of the Lessee,  (ii) Troutman Sanders LLP or a successor
firm, or (iii) other  outside  counsel  designated by the Lessee and  reasonably
satisfactory  to the  Indenture  Trustee,  and (b) for the Owner  Trustee or the
Indenture   Trustee,   an  attorney  selected  by  such  Person  and  reasonably
satisfactory  to the Lessee  and, in the case of the Owner  Trustee,  reasonably
satisfactory to the Indenture Trustee.

         Outstanding:  when used with respect to Certificates,  as of the date of determination  and subject to the
provisions of ss. 10.04 of the Indenture,  all Certificates  theretofore  executed and delivered under the Indenture,
with the exception of the following:

                  (i) Certificates theretofore canceled by the Indenture Trustee
                  or  delivered  to  the  Indenture   Trustee  for  cancellation
                  pursuant to ss. 2.08 of the Indenture or otherwise;

                  (ii)  Certificates for which prepayment money in the necessary
                  amount  has been  theretofore  deposited  with  the  Indenture
                  Trustee in trust for the Holders of such Certificates pursuant
                  to  ss.  14.01  of  the  Indenture;  provided,  that  if  such
                  Certificates are to be prepaid,  notice of such prepayment has
                  been  duly  given  pursuant  to  the  Indenture  or  provision
                  therefor  satisfactory to the Indenture Trustee has been made;
                  and

                  (iii)  Certificates  in exchange for or in lieu of which other
                  Certificates  have been  executed  and  delivered  pursuant to
                  Article II of the Indenture.

         Owner  Participant:  the Person to whom on the  Delivery  Date (or,  if
earlier,  the Transfer  Date) the Initial Owner  Participant  shall transfer its
Beneficial Interest pursuant to Section 3.02 of the Participation  Agreement and
any successors thereto, and any Person to which the Owner Participant transfers,
in accordance  with the Trust  Agreement and the  Participation  Agreement,  its
right,  title and interest in and to the Operative  Agreements  and the Lessor's
Estate.

         Owner Participant Guarantor:  the provider of an Owner Participant Guaranty.

         Owner  Participant  Guaranty:  any  guaranty  delivered  in  compliance  with ss.__(d) of the  Participation
Agreement.

         Owner  Trustee:  State  Street Bank and Trust  Company of  Connecticut,
National  Association,  not in  its  individual  capacity  except  as  otherwise
expressly stated, but solely as trustee under the Trust Agreement.

         Owner Trustee Guarantor: the provider of an Owner Trustee Guaranty.

         Owner Trustee  Guaranty:  any guaranty  delivered in compliance with  ss. 11.01(b)(ii)  of the Participation
Agreement.

         Owner's  Economic  Return:  the  Owner  Participant's  anticipated  net
after-tax yield and aggregate  after-tax cash flow during the Basic Term,  using
the multiple  investment sinking fund method of analysis,  computed on the basis
of the same  methodology and  assumptions,  including tax  assumptions,  as were
utilized by the initial Owner  Participant  in  determining  the Basic Rent, EBO
Price, EBO Date,  Stipulated Loss Values and Termination Values, as the case may
be, as in effect on the date of execution of the Participation  Agreement by the
Owner Participant as such assumptions may be adjusted for events which have been
the basis of adjustments to Rent pursuant to ss. 3(d) of the Lease.

         PAA Consent:  the PAA Consent,  dated as of the Delivery Date, executed by the Manufacturer and pertaining
to the Aircraft.

         Participation  Agreement:  the Participation  Agreement (Atlantic Coast
Airlines Trust No. ____),  dated as of September 30, 1997, among the Lessee, the
Owner  Trustee not in its  individual  capacity  except as  otherwise  expressly
provided therein,  but solely as owner trustee,  the Initial Owner  Participant,
the  Indenture  Trustee  not in its  individual  capacity  except  as  otherwise
expressly provided therein,  but solely as indenture  trustee,  the Pass-Through
Trustee not in its individual  capacity except as otherwise  expressly  provided
therein,  but solely as Pass-Through  trustee and the Subordination Agent not in
its individual  capacity except as otherwise  expressly  provided  therein,  but
solely as subordination agent.

         Parts: all appliances, parts, components,  instruments,  appurtenances,
accessories,  furnishings  and other  equipment of whatever  nature  (other than
complete  Engines or engines) which may from time to time be incorporated in the
Airframe or any Engine or title to which remains  vested in the Lessor  pursuant
to ss. 9(d) of the Lease.

         Pass-Through  Agreement:  each of the four  Pass-Through  Trust Agreements dated as of September 25,  1997
among the Lessee, ACA Inc. and the Pass-Through Trustee.

         Pass-Through  Certificates:   any  of  the  Pass-Through  Certificates,
1997-1-A,   the   Pass-Through   Certificates,    1997-1-B,   the   Pass-Through
Certificates, 1997-1-C, or the Pass-Through Certificates, 1997-1-D, in each case
as issued by the related  Pass-Through  Trust; and  "Pass-Through  Certificates"
means all of the  Pass-Through  Certificates  issued by each of the Pass-Through
Trusts.

         Pass-Through  Closing Date:  the Business Day on which the sale of the  Pass-Through  Certificates  to the
Placement Agent pursuant to the Placement Agreement takes place.

         Pass-Through  Trust:.  the Atlantic Coast Airlines 1997-1  Pass-Through
Trust  Class A,  Atlantic  Coast  Airlines  1997-1  Pass-Through  Trust Class B,
Atlantic Coast Airlines  1997-1  Pass-Through  Trust Class C, and Atlantic Coast
Airlines 1997-1  Pass-Through Trust Class D, in each case formed pursuant to the
Pass-Through Agreement; and "Pass-Through Trusts" means all of such Pass-Through
Trusts.

         Pass-Through  Trustee:  The First National Bank of Maryland, a national
banking  association,  in  its  capacity  as  Pass-Through  Trustee  under  each
Pass-Through Agreement and each Pass-Through Trust.

         Past Due  Rate:  in  respect  of (a) any  amount  payable  to the Owner
Participant  or the Owner  Trustee a rate per annum  during the period  from and
including the due date to but excluding the date on which such amount is paid in
full equal to 2% plus the Debt Rate, and (b) any principal of or interest on any
Certificate or any other amount payable under the Indenture,  any Certificate or
any other Operative Agreement that is not paid when due (whether at Maturity, by
acceleration,  by optional or mandatory  prepayment or otherwise) to any Holder,
the Indenture Trustee or the Pass-Through  Trustee,  a rate per annum during the
period from and  including  the due date to but excluding the date on which such
amount is paid in full  equal to (i) in the case of any such  amount  payable to
the Holder of any  Certificate,  2% plus the interest  rate  applicable  to such
Certificate,  and (ii) in the case of any other  such  amount,  2% plus the Debt
Rate (but,  in each case,  in no event  greater than the maximum  interest  rate
permitted by applicable law).

         Payment Date: each January 1 and July 1, commencing on January 1, 1998.

         Permitted Air Carrier:  (1) any Section 1110 Person that is not subject
to bankruptcy or similar proceedings when the sublease begins, (2) after the end
of the Recovery Period (or before that date, if the Lessee prepays in a lump sum
any  indemnity  required  under  the Tax  Indemnity  Agreement  as a result of a
sublease to such  foreign  air  carrier),  any  foreign air carrier  that is not
subject to bankruptcy or similar  proceedings  when the sublease term begins and
that is principally  based in and a domiciliary of any foreign country listed on
Exhibit E-2 to the Lease,  except those that do not maintain  normal  diplomatic
relations  with the United States or with which it would  constitute a breach of
applicable laws for the Lessor, the Indenture Trustee,  or the Owner Participant
to  engage  directly  or  indirectly  in  business,  or (3) after the end of the
Recovery  Period (or before that date,  if the Lessee  prepays in a lump sum any
indemnity  required under the Tax Indemnity  Agreement as a result of a sublease
to such foreign carrier),  with the Owner  Participant's  prior written consent,
any foreign air carrier that is not principally  based in and a domiciliary of a
country listed on Exhibit E-2 to the Lease,  if at the time of such sublease the
Owner Participant receives an opinion satisfactory to the Owner Participant from
counsel satisfactory to the Owner Participant to the effect that there exists no
possessory  rights in favor of such sublessee under the laws of such sublessee's
country which would,  upon the bankruptcy of or other default by the Lessee (and
assuming that at such time the  sublessee is not insolvent or bankrupt)  prevent
the return of the Aircraft or part thereof to the Lessor in accordance  with and
when  permitted by the terms of the Lease upon the exercise by the Lessor of its
remedies thereunder, provided that at the time of the sublease the United States
maintains  diplomatic  relations  with the  country  in which such  foreign  air
carrier is based.

         Permitted  Investments:  (a) direct obligations of the United States of
America  or  any  agency  or  instrumentality  thereof,  (b)  obligations  fully
guaranteed  by the United  States of  America  or any agency or  instrumentality
thereof,  (c) certificates of deposit issued by, or bankers'  acceptances of, or
time deposits or a deposit  account with, any bank,  trust company,  or national
banking association  incorporated or doing business under the laws of the United
States of America or one of the states  thereof,  having a combined  capital and
surplus of at least  $100,000,000  and having a rating of "A" or better from the
Keefe Bank Watch Service, (d) commercial paper issued by companies in the United
States  which  directly  issue  their own  commercial  paper and which are doing
business  under the laws of the  United  States of  America or one of the states
thereof and in each case having a rating assigned to such commercial  paper by a
nationally  recognized rating organization in the United States of America equal
to the highest rating assigned by such  organization,  or (e) obligations of the
type described in clauses (a) through (d) above,  purchased from any bank, trust
company,  or banking  association  referred  to in clause (c) above  pursuant to
repurchase   agreements   obligating  such  bank,  trust  company,   or  banking
association to repurchase  any such  obligation not later than 30 days after the
purchase of any such obligation.  Unless  otherwise  specified in writing by the
Owner  Trustee,  all such Permitted  Investments  shall mature not later than 30
days from the date of purchase.

         Permitted Lien: a Lien permitted under ss. 8 of the Lease.

         Permitted  Sublessee:  any  Permitted  Air Carrier;  or any airframe or
engine manufacturer, or Affiliate of such a manufacturer,  which is domiciled in
the United States of America or, after the end of the Recovery Period (or before
that date, if the Lessee prepays in a lump sum any indemnity  required under the
Tax Indemnity Agreement as a result of a sublease to such foreign  manufacturer)
domiciled  in a country  listed on  Exhibit  E-2 to the  Lease,  or in any other
country to which the Owner  Participant  gives its prior written  consent (which
shall not be unreasonably withheld or delayed).

         Person:  any  individual,  sole  proprietorship,   partnership,   joint
venture, joint stock company, trust, unincorporated  organization,  association,
corporation,  institution,  entity or government (federal, state, local, foreign
or any agency, instrumentality, division or body thereof).

         Placement Agent: Morgan Stanley & Co. Incorporated.

         Placement  Agreement:  the Placement Agreement dated September 19, 1997 among the Lessee and the Placement
         --------------------
Agent.

         Prepayment  Date  has  the  meaning  specified  in ss.  6.02(b)  of the
Indenture.

         Prepayment  Price  has the  meaning  specified  in ss.  6.02(b)  of the
Indenture.

         Principal  Amount:  with  respect to a  Certificate  means the stated  original  principal  amount of such
Certificate and, with respect to all  Certificates,  means the aggregate stated original  principal  amounts of all
Certificates.

         Property:  any right or  interest  in or to property of any kind  whatsoever,  whether  real,  personal or
mixed and whether tangible or intangible.

         Purchase  Agreement:  the  Purchase  Agreement  (No.  RJ 350),  dated as of January 8, 1997,  between  the
Manufacturer  and the Lessee,  including all exhibits,  appendices  and letter  agreements,  but only to the extent
that  the  foregoing  relate  to the  Aircraft  and to the  extent  assigned  pursuant  to the  Purchase  Agreement
Assignment.

         Purchase  Agreement  Assignment:  the Purchase  Agreement  Assignment  (Atlantic  Coast Airlines Trust No.
__________),  dated as of the Delivery Date between the Lessor and the Lessee in substantially  the form of Exhibit
E of the Participation  Agreement,  as such form may be amended on or prior to the Delivery Date;  provided that no
such amendment shall materially adversely affect the interests of the Holders of the Certificates.

         Purchase Price: the Lessor's Cost as set forth on Exhibit B to the Lease.

         Rating Agencies:  collectively, at any time, each nationally recognized
rating  agency  which  shall  have  been  requested  to  rate  the  Pass-Through
Certificates and which shall then be rating the Pass-Through  Certificates.  The
initial Rating Agencies will be Moody's and S&P.

         Rating Agency  Confirmation:  with respect to any  Operative  Agreement
that is to be  modified  in any  material  respect on the  Delivery  Date or the
Transfer Date, if  applicable,  a written  confirmation  from each of the Rating
Agencies that the use of such Operative  Agreement with such modifications would
not  result in (i) a  reduction  of the  rating  for any  Class of Pass  Through
Certificates  below  the then  current  rating  for such  Class of Pass  Through
Certificates  or (ii) a withdrawal  or  suspension of the rating of any Class of
Pass Through Certificates.

         Record Date: with respect to Payment Dates under the Indenture  (except
a date for  payment of  defaulted  interest),  December 15 for January 1 Payment
Dates  and June 15 for  July 1  Payment  Dates,  whether  or not such  date is a
Business Day.

         Recourse  Amount  has  the  meaning  specified  in  ss.  17.10  of  the
Participation Agreement.

         Recovery Period:  the period prior to the end of the Owner  Participant's  taxable year which includes the
seventh anniversary of the Delivery Date.

         Refinancing:  a  non-recourse  loan to the  Lessor  arranged  pursuant  to  ss. 15.01  of the  Participation
Agreement.

         Register has the meaning set forth in ss. 3.02 of the Indenture.

         Registrar has the meaning set forth in ss. 3.02 of the Indenture.

         Regulation  D:  Regulation  D of the Board of  Governors of the Federal
Reserve System (or any successor),  as the same may be modified and supplemented
and in effect from time to time.

         Related Indentures:  collectively, (i) the Trust Indenture and Security
Agreement for each of Atlantic  Coast Airlines  Trust Nos.  _______,  _________,
________,  _________, and ________, each dated as of September 26, 1997, between
the Owner  Trustee  and the  Indenture  Trustee,  (ii) the Trust  Indenture  and
Security  Agreement  for each of  Atlantic  Coast  Airlines  Trust Nos.  N306UE,
N310UE,  N311UE,  and N314UE,  each dated as of September 26, 1997,  between the
Owner Trustee and the Indenture  Trustee,  each with respect to a Jetstream J-41
aircraft,  and (iii) the Trust  Indenture  and  Security  Agreement  dated as of
September 26, 1997 between Atlantic Coast Airlines and the Indenture Trustee.

         Related  Leases:  the other lease  agreements  between the Lessor (acting as Owner Trustee for the benefit
of the Owner Participant) and the Lessee, each with respect to a Canadair Regional Jet Series 200ER aircraft.

         Remaining  Weighted  Average  Life: on a given date with respect to any
Certificate  the number of days equal to the  quotient  obtained by dividing (i)
the sum of each of the products  obtained by multiplying  (a) the amount of each
then  remaining  scheduled  payment of principal of such  Certificate by (b) the
number of days from and  including  such  prepayment  date to but  excluding the
dates on which each such payment of  principal is scheduled to be made;  by (ii)
the then outstanding principal amount of such Certificate.

         Removable  Improvements  has the  meaning  set forth in ss. 9(e) of the
Lease.

         Renewal Rent: the amount  payable by the Lessee as rent in accordance  with ss. 3(h) of the Lease during any
Renewal Term.

         Renewal  Term:  one or more terms with respect to which the Lessee has  exercised  its option to renew the
Lease pursuant to ss. 3(h) thereof.

         Rent:  all payments  due from the Lessee under the Lease as Basic Rent,  Renewal  Rent,  and  Supplemental
Rent, collectively.

         Rent Payment Date: each Payment Date during the Term.

         Reoptimization  Date has the meaning  specified in ss.  15.02(a) of the
Participation Agreement.

         Replacement Aircraft: any aircraft substituted for the Aircraft pursuant to ss. 11(a)(1) of the Lease.

         Replacement Airframe: has the meaning set forth in ss. 11(a)(1) of the Lease.

         Replacement Engine: a General Electric CF34-3B1 engine (or an engine of
the same or  another  manufacturer)  of equal or greater  value,  airworthiness,
remaining  useful  life and  utility as the Engine  being  replaced  (determined
without regard to hours or cycles  remaining until the next scheduled  overhaul,
but  assuming  that the Engine  replaced  was in the  condition  required by the
Lease),  together with all Parts  relating to such engine,  which is substituted
for an Engine  pursuant to the terms of the Lease;  provided,  however,  that if
such  replacement  engine  is  not a  General  Electric  CF34-3B1  engine,  such
replacement  engine  must  then  be  commonly  used in the  commercial  aviation
industry on Canadair Regional Jet Series 200ER airframes;  and provided further,
that the  Engines  subject  to the Lease at any given  time shall be of the same
make and model.

         Replacement Parts has the meaning set forth in ss. 9(d) of the Lease.

         Responsible  Officer:  with  respect to the Owner  Trustee  (except for
purposes of the Trust  Agreement  in which case the  definition  of  Responsible
Officer  set forth in ss.  3.10 of the Trust  Agreement  is  applicable)  or the
Indenture  Trustee,  any officer in its Corporate Trust  Administration,  as the
case  may be,  designated  by such  Person  to  perform  obligations  under  the
Operative Agreements, and with respect to any other party, any corporate officer
of  a  party  who,  in  the  normal   performance  of  his  or  her  operational
responsibilities,  with respect to the subject matter of any covenant, agreement
or obligation  of such party  pursuant to any  Operative  Agreement,  would have
responsibility  for and  knowledge  of such matter and the  requirements  of any
Operative Agreement with respect thereto.

         RVG: the Residual  Agreement,  dated as of the Delivery  Date,  between the  Manufacturer  and the Lessor,
pertaining to the Aircraft.

         S&P: Standard & Poor's Ratings Group.

         Scheduled  Delivery  Date: the Delivery Date  specified in the Delivery  Notice  pursuant to ss. 3.01 of the
Participation Agreement.

         SDIQ: Societe de Developpment Industriel du Quebec, a Quebec corporation.

         SEC:  the  Securities  and  Exchange  Commission  of the  United  States  and any  successor  agencies  or
authorities.

         Section  1110  Person:  a Citizen of the United  States who is an air carrier  holding a valid air carrier
operating  certificate  issued  pursuant  to 49  U.S.C.  ch.  447  for  aircraft  capable  of  carrying  10 or more
individuals.

         Secured Obligations has the meaning specified in the Granting Clause of
the Indenture.

         Securities Act: the Securities Act of 1933, as amended.

         Seller: [Bombardier Capital Inc./First Security Bank, National Association] [the Manufacturer].

         Series  "A"  or  "Series  A  Certificates":   Certificates  issued  and
designated  as  "Series  A" under the  Indenture,  in the  Principal  Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series A".

         Series  "B"  or  "Series  B  Certificates":   Certificates  issued  and
designated  as  "Series  B" under the  Indenture,  in the  Principal  Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series B".

         Series  "C"  or  "Series  C  Certificates":   Certificates  issued  and
designated  as  "Series  C" under the  Indenture,  in the  Principal  Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series C".

         Series  "D"  or  "Series  D  Certificates":   Certificates  issued  and
designated  as  "Series  D" under the  Indenture,  in the  Principal  Amount and
maturities and bearing interest as specified in Exhibit B to the Indenture under
the heading "Series D".

         Sinking Fund Redemption  Date has the meaning  specified in ss. 6.06 of
the Indenture.

         Sinking Fund Redemption Price has the meaning  specified in ss. 6.06 of
the Indenture.

         SLV Determination Date has the meaning set forth in ss. 11(a)(2) of the
Lease.

         Special Aviation Counsel: Daugherty, Fowler & Peregrin.

         Specified  Default:  (a) an event or condition  described in ss. 14(a),  (b), (h), or (i) of the Lease that,
after the giving of notice or lapse of time,  or both,  would  mature into an Event of Default,  or (b) an Event of
Default.

         Specified  Investments:  (a) direct obligations of the United States of
America or  obligations  fully  guaranteed by the United States of America;  (b)
commercial  paper rated  A-1/P-1 by S&P and  Moody's,  respectively  or, if such
ratings are unavailable,  rated by any nationally recognized rating organization
in the  United  States  equal to the  highest  rating  assigned  by such  rating
organization;  (c)  investments  in  negotiable  certificates  of deposit,  time
deposits, banker's acceptances, commercial paper or other direct obligations of,
or obligations  guaranteed by,  commercial banks organized under the laws of the
United States or of any political  subdivision  thereof (or any U.S. branch of a
foreign bank) with issuer ratings of at least B/C by Thomson  Bankwatch,  having
maturities  no later than 90 days  following  the date of such  investment;  (d)
overnight federal funds  transactions with members of the Federal Reserve System
arranged by federal funds brokers; or (e) overnight  repurchase  agreements with
respect to the  securities  described  in clause (a) above  entered into with an
office of a bank or trust  company  which is  located  in the  United  States of
America or any bank or trust  company  which is organized  under the laws of the
United  States or any state  thereof  and has  capital,  surplus  and  undivided
profits aggregating at least $500 million.

         SSB:  State  Street  Bank and Trust  Company of  Connecticut,  National  Association,  a national  banking
association.

         Stipulated Loss Value:  (1) as of any Stipulated Loss Value Date during
the Basic Term, the amount determined as set forth in Exhibit C to the Lease for
that  Payment  Date,  and (2) during any Renewal  Term,  the amount for the date
involved, determined in accordance with ss. 3(h) of the Lease.

         Stipulated  Loss Value Date: for any month,  the day in such month specified in Exhibit C to the Lease or,
if such day is not a Business Day, the immediately succeeding Business Day.

         Sublease: any sublease agreement covering any Item(s) between the Lessee and a Permitted Sublessee.

         Sublessee: a Permitted Sublessee under a Sublease in effect at the time in question.

         Subordination  Agent:  The First National Bank of Maryland,  a national  banking  association,  not in its
individual capacity but solely as Subordination Agent.

         Supplemental  Rent:  (a)  all  amounts,  liabilities,  indemnities  and
obligations  (other than Basic Rent or Renewal Rent) which the Lessee assumes or
agrees  to pay  under the  Lease or under  the  Participation  Agreement  or Tax
Indemnity  Agreement or any other Operative  Agreement to the Lessor,  the Owner
Participant,  the Indenture  Trustee,  the  Subordination  Agent,  any Liquidity
Provider or others, including,  without limitation,  payments of Stipulated Loss
Value, EBO Price, and amounts  calculated by reference to Termination Value, any
amounts of  Make-Whole  Premium  payable  under the  Indenture  (other  than any
Make-Whole  Premium payable as a result of an Indenture Event of Default that is
not a Lessee  Event of Default,  and all  amounts  required to be paid by Lessee
under the agreements,  covenants,  and indemnities  contained in the Lease or in
the  Participation  Agreement  or the  Tax  Indemnity  Agreement  or  any  other
Operative  Agreement,  but excluding  Basic Rent and Renewal  Rent,  and (b) all
amounts that the Owner Trustee is obligated to pay in accordance with clause (b)
of the last paragraph of ss. 2.04 of the Indenture.

         Tax  or  Taxes  has  the  meaning  set  forth  in  ss.  8.01(a)  of the
Participation Agreement.

         Tax Indemnity  Agreement:  the Tax Indemnity Agreement  (Atlantic Coast Airlines Trust No. ______),  dated
as of the Delivery Date or the Transfer Date, between the Lessee and the Owner Participant.

         Term: the Basic Term of the lease for the Aircraft  under the Lease and, if renewed  pursuant to ss. 3(h) of
the Lease, each Renewal Term for the Aircraft for which the Lease is renewed.

         Termination  Date:  the date of  termination  of the Lease as  specified by the Lessee in its notice given
pursuant to ss. 3(g) thereof.

         Termination Value: as of any Payment Date, the amount determined as set
forth in Exhibit D to the Lease for that Payment  Date,  adjusted as required by
ss. 3(d) of the Lease.  Notwithstanding any other provisions of the Lease or the
Participation  Agreement  or the  Indenture,  each  Termination  Value  for  the
Aircraft shall be, under any circumstances and in any event, an amount, together
with Basic Rent due and owing through the date of payment of Termination  Value,
at least  sufficient  to pay in full as of such date of  payment  the  aggregate
unpaid principal amount of and accrued interest on the Certificates  outstanding
on such date of payment  (assuming  that  principal  and interest  payments with
respect to the Certificates have been paid when due).

         Termination  Value Date: for any month,  the day in such month  specified in Exhibit D to the Lease or, if
such day is not a Business Day, the immediately succeeding Business Day.

         Transaction Costs:  those costs and expenses set forth in ss. 10.01(a) of the Participation  Agreement to be
borne by the Owner Participant.

         Transfer Date: has the meaning set forth in Section 2.02(b) of the Participation Agreement.

         Transportation  Code: Title 49 of the United States Code, subtitle VII,
as amended and in effect on the date of the Lease or as subsequently amended, or
any successor or substituted  legislation at the time in effect and  applicable,
and the regulations promulgated pursuant thereto.

         Treasury  Yield:  at the  time of  determination  with  respect  to any
Certificate,  the interest rate (expressed as a semi-annual  equivalent and as a
decimal and, in the case of United States  Treasury  bills,  converted to a bond
equivalent  yield)  determined to be the per annum rate equal to the semi-annual
yield to maturity for United States Treasury  securities maturing on the Average
Life Date of such  Certificate  and  trading  in the public  securities  markets
either as determined  by  interpolation  between the most recent weekly  average
yield to maturity for two series of United States Treasury  securities,  trading
in public  securities  markets,  (i) one  maturing as close as possible  to, but
earlier  than,  the  Average  Life Date of such  Certificate  and (ii) the other
maturing as close as possible to, but later than,  the Average Life Date of such
Certificate,  in each case as  published in the most recent  H.15(519)  or, if a
weekly average yield to maturity for United States Treasury  securities maturing
on the Average Life Date of such Certificate is reported on the most recent H.15
(519),  such weekly  average  yield to maturity as published in such  H.15(919).
"H.15(519)"  means the weekly  statistical  release  designated  as such, or any
successor  publication,  published  by the  Board of  Governors  of the  Federal
Reserve System.  The date of determination  of a Make-Whole  Premium will be the
third Business Day prior to the applicable  prepayment date and the "most recent
H.15(519)"  means the H.15(519)  published prior to the close of business on the
third Business Day prior to the applicable prepayment date.

         Trust  Agreement:  the  Trust  Agreement  (Atlantic  Coast  Airlines  Trust No.  __________),  dated as of
September 1, 1997, between the Initial Owner Participant and the Owner Trustee in its individual capacity.

         Trust Estate: the Lessor's Estate.

         Trust Indenture Act: the Trust Indenture Act of 1939, as amended.

         Trust Indenture Estate:  all estate,  right,  title and interest of the
Indenture  Trustee  in  and  to  any of  the  property,  rights,  interests  and
privileges  granted to the Indenture  Trustee pursuant to the Granting Clause of
the Indenture,  other than Excepted Payments and any and all other rights of the
Owner Trustee or the Owner Participant  expressly  reserved to the Owner Trustee
or the Owner Participant pursuant to the Indenture.

         United States, U.S., or US: the United States of America.

         U.S. Person: a Person described in ss. 7701(a)(30) of the Code.

         Warranty  Bill of Sale:  the full  warranty  bill of sale  covering the
Aircraft (and  specifically  referring to each Engine) executed by the Seller as
owner of the Aircraft in favor of the Owner Trustee and to be dated the Delivery
Date.


<PAGE>


iv



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




                     TRUST INDENTURE AND SECURITY AGREEMENT

                    (Atlantic Coast Airlines Trust No. ____)

                         dated as of September 26, 1997


                                     between

                       STATE STREET BANK AND TRUST COMPANY
                      OF CONNECTICUT, NATIONAL ASSOCIATION,
             not in its individual capacity, but solely as trustee,
                                  Owner Trustee


                                       and

                      THE FIRST NATIONAL BANK OF MARYLAND,
             not in its individual capacity, but solely as trustee,
                                Indenture Trustee



                             COVERING ONE CANADAIR REGIONAL JET, SERIES 200ER AIRCRAFT
                  SERIAL NO. _____, REGISTRATION NO. __________




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




<PAGE>



iv

                                TABLE OF CONTENTS



                                                                                                               Page


Initial Recitals
Granting Clause

HABENDUM CLAUSE...................................................................................................5


ARTICLE I - DEFINITIONS...........................................................................................7

Section 1.01. Definitions.........................................................................................7

ARTICLE II - ISSUE, EXECUTION, FORM AND REGISTRATION OF CERTIFICATES; COLLATERAL ACCOUNT..........................7

Section 2.01. Authentication and Delivery of Certificates.........................................................7
Section 2.02. Execution of Certificates...........................................................................7
Section 2.03. Certificate of Authentication.......................................................................7
Section 2.04. Form and Terms of Certificates; Payments on Certificates............................................8
Section 2.05. Payments from Trust Indenture Estate Only..........................................................10
Section 2.06. Registration. Transfer and Exchange................................................................10
Section 2.07. Mutilated. Defaced, Destroyed, Lost and Stolen Certificates........................................11
Section 2.08. Cancellation of Certificates: Destruction Thereof..................................................12
Section 2.09. Temporary Certificates.............................................................................12
Section 2.10. Termination of Interest in Trust Indenture Estate..................................................13
Section 2.11. Certificates in Respect of Replacement Aircraft....................................................13
Section 2.12. Assumption of Obligations Under Certificates and Other Operative Agreements........................13
Section 2.13. Establishment of Collateral Account................................................................13
Section 2.14. Investment of Funds on Deposit in the Collateral Account...........................................14
Section 2.15. Release of Collateral Account on Delivery Date or Assumption of Certificates.......................14
Section 2.16. Cut-Off Date.......................................................................................15
Section 2.17. Subordination......................................................................................15
Section 2.18. Reoptimization.....................................................................................16

ARTICLE III - COVENANTS..........................................................................................16

Section 3.01. Payment of Principal. Make-Whole Premium and Interest..............................................16
Section 3.02. Offices for Payments, etc..........................................................................16
Section 3.03. Appointment to Fill a Vacancy in Office of Indenture Trustee.......................................16
Section 3.04. Paying Agents......................................................................................16
Section 3.05. Covenants of SSB and the Owner Trustee.............................................................17
Section 3.06. [Reserved].........................................................................................17
Section 3.07. Disposal of Trust Indenture Estate.................................................................18
Section 3.08. No Representations or Warranties as to Aircraft or Documents.......................................18
Section 3.09. Further Assurances: Financing Statements...........................................................18

ARTICLE IV - HOLDER LISTS........................................................................................18

Section 4.01. Holder Lists: Ownership of Certificates............................................................18

ARTICLE V - RECEIPT, DISTRIBUTION AND APPLICATION OF INCOME FROM THE TRUST INDENTURE ESTATE......................19

Section 5.01. Basic Rent Distribution............................................................................19
Section 5.02. Event of Loss and Replacement; Prepayment..........................................................20
Section 5.03. Payment After Indenture Event of Default. etc......................................................21
Section 5.04. Certain Payments...................................................................................23
Section 5.05. Other Payments.....................................................................................23
Section 5.06. Payments to Owner Trustee..........................................................................23
Section 5.07. Application of Payments............................................................................23
Section 5.08. Investment of Amounts Held by Indenture Trustee....................................................24
Section 5.09. Withholding Taxes..................................................................................25
Section 5.10. Letter of Credit...................................................................................25

ARTICLE VI - PREPAYMENT OF CERTIFICATES..........................................................................25

Section 6.01. No Prepayment Except as Specified..................................................................25
Section 6.02. Prepayment of Certificates.........................................................................25
Section 6.03. Notice of Prepayment to Holders....................................................................27
Section 6.04. Deposit of Prepayment Price and Sinking Fund Redemption Price......................................27
Section 6.05. Certificates Payable on Prepayment Date............................................................28
Section 6.06. Mandatory Sinking Fund Redemption..................................................................28

ARTICLE VI - INDENTURE EVENTS OF DEFAULT; REMEDIES OF INDENTURE TRUSTEE AND HOLDERS..............................28

Section 7.01. Indenture Event of Default.........................................................................28
Section 7.02. Remedies...........................................................................................30
Section 7.03. Return of Aircraft. etc............................................................................32
Section 7.04. Indenture Trustee May Prove Debt...................................................................34
Section 7.05. Remedies Cumulative................................................................................35
Section 7.06. Suits for Enforcement..............................................................................35
Section 7.07 Discontinuance of Proceedings.......................................................................36
Section 7.08. Limitations on Suits by Holders....................................................................36
Section 7.09. Unconditional Right of Holders to Payments on Certificates.........................................36
Section 7.10. Control by Holders.................................................................................36
Section 7.11. Waiver of Past Indenture Default...................................................................37
Section 7.12. Notice of Indenture Default........................................................................37

ARTICLE VIII  - RIGHTS OF THE OWNER TRUSTEE AND THE OWNER PARTICIPANT............................................38

Section 8.01. Certain Rights of Owner Trustee and Owner Participant..............................................38
Section 8.02. Owner Participant's Right to Prepay or Purchase the Certificates...................................40
Section 8.03. Certain Rights of Owner Participant................................................................41

ARTICLE IX - CONCERNING THE INDENTURE TRUSTEE....................................................................43

Section 9.01. Acceptance of Trusts...............................................................................43
Section 9.02 Duties Before;  and During, Existence of Indenture Event of Default.................................43
Section 9.03. Certain Rights of the Indenture Trustee............................................................44
Section 9.04. Indenture Trustee Not Responsible for Recitals, Certificates or Proceeds...........................45
Section 9.05. Indenture Trustee and Agents May Hold Certificates; Collections, etc...............................46
Section 9.06. Moneys Held by Indenture Trustee...................................................................46
Section 9.07. Right of Indenture Trustee to Rely on Officer's Certificate, etc...................................46
Section 9.08. Replacement Airframes and Replacement Engines......................................................46
Section 9.09 Indenture Supplement for Replacements...............................................................49
Section 9.10. Effect of Replacement..............................................................................49
Section 9.11. Compensation.......................................................................................49

ARTICLE X - CONCERNING THE HOLDERS...............................................................................49

Section 10.01. Evidence of Action Taken by Holders...............................................................49
Section 10.02. Proof of Execution of Instruments and of Holding of Certificates..................................50
Section 10.03. Holders to Be Treated as Owners...................................................................50
Section 10.04. Certificates Owned by Owner Trustee or Lessee Deemed Not Outstanding..............................50
Section 10.05. Right of Revocation of Action Taken...............................................................51
Section 10.06. ERISA.............................................................................................51

ARTICLE XI - INDEMNIFICATION OF INDENTURE TRUSTEE BY OWNER TRUSTEE...............................................51


ARTICLE XII - SUCCESSOR TRUSTEES.................................................................................52

Section 12.01. Notice of Successor Owner Trustee.................................................................52
Section 12.02. Resignation and Removal of Indenture Trustee: Appointment of Successor............................52
Section 12.03. Persons Eligible for Appointment as Indenture Trustee.............................................53
Section 12.04. Acceptance of Appointment by Successor Trustee....................................................54
Section 12.05. Merger, Consolidation or Succession to Business of Indenture Trustee..............................54
Section 12.06. Appointment of Separate Trustees..................................................................55

ARTICLE XIII -  SUPPLEMENTS AND AMENDMENTS TO THIS TRUST INDENTURE AND OTHER DOCUMENTS...........................56

Section 13.01. Supplemental Indentures Without Consent of Holders................................................56
Section 13.02. Supplemental Indentures With Consent of Holders...................................................58
Section 13.03. Effect of Supplemental Indenture..................................................................59
Section 13.04. Documents to Be Given to Indenture Trustee........................................................59
Section 13.05. Notation on Certificates in Respect of Supplemental Indentures....................................59
Section 13.06. No Request Necessary for Lease Supplement or Indenture Supplement.................................59
Section 13.07. Notices to Liquidity Providers....................................................................59

ARTICLE XIV - SATISFACTION AND DISCHARGE OF INDENTURE;UNCLAIMED MONEYS...........................................60

Section 14.01. Satisfaction and Discharge of Indenture: Termination of Indenture.................................60
Section 14.02. Application by Indenture Trustee of Funds Deposited for Payment of Certificates...................61
Section 14.03. Repayment of Moneys Held by Paying Agent..........................................................61
Section 14.04. Transfer of Unclaimed Money Held by Indenture Trustee and Paying Agent............................61

ARTICLE XV - MISCELLANEOUS.......................................................................................61

Section 15.01. Capacity in Which Acting..........................................................................61
Section 15.02. No Legal Title to Trust Indenture Estate in Holders...............................................61
Section 15.03. Sale of Trust Indenture Estate by Indenture Trustee is Binding....................................62
Section 15.04. Indenture Benefits Trustees, Participants, Lessee, and Liquidity Providers Only...................62
Section 15.05. No Action Contrary to Lessee's Rights Under the Lease.............................................62
Section 15.06. Notices...........................................................................................62
Section 15.07. Officer's Certificates and Opinions of Counsel....................................................62
Section 15.08. Severability......................................................................................63
Section 15.09. No Oral Modifications or Continuing Waivers.......................................................63
Section 15.10. Successors and Assigns............................................................................63
Section 15.11. Headings..........................................................................................63
Section 15.12. Normal Commercial Relations.......................................................................63
Section 15.13. Governing Law; Counterparts.......................................................................64




Exhibit A         --       Form of Indenture and Security Agreement Supplement
Exhibit B         --       Form of Certificate

Schedule I        --       Definitions

Schedule II       --       Amortization Schedule



<PAGE>



66



                     TRUST INDENTURE AND SECURITY AGREEMENT
                      (ATLANTIC COAST AIRLINES TRUST NO. )



               TRUST INDENTURE AND SECURITY  AGREEMENT  (ATLANTIC COAST AIRLINES
TRUST NO. _________) dated as of September 26, 1997 (the  "Indenture"),  between
STATE STREET BANK AND TRUST  COMPANY OF  CONNECTICUT,  NATIONAL  ASSOCIATION,  a
national  banking  association,  not  in  its  individual  capacity,  except  as
otherwise  specifically  set  forth  herein  (when  acting  in  such  individual
capacity,  "SSB"),  but solely as owner trustee (the "Owner  Trustee") under the
Trust Agreement,  as defined herein, and THE FIRST NATIONAL BANK OF MARYLAND,  a
national banking association (when acting in its individual  capacity,  "FNBM"),
as Indenture Trustee hereunder (the "Indenture Trustee").


    W I T N E S S E T H:


         WHEREAS,  capitalized  terms  used  herein  shall  have the  respective
meanings set forth or referred to in Article I hereof;

         WHEREAS,  the  Initial  Owner  Participant  and SSB have,  prior to the
execution  and  delivery  of this  Indenture,  entered  into a  Trust  Agreement
(Atlantic Coast Airlines Trust No.  ___________) dated as of September 26, 1997,
(as  amended or  otherwise  modified  from time to time in  accordance  with the
provisions thereof and of the Participation  Agreement,  the "Trust Agreement"),
whereby,  among other  things,  SSB has declared a certain trust for the use and
benefit of the Initial Owner Participant,  subject, however, to the Lien of this
Indenture  for the use and benefit of, and with the  priority of payment to, the
holders  of  the  Certificates  issued  hereunder,  and  the  Owner  Trustee  is
authorized and directed to execute and deliver this Indenture;

         WHEREAS,  the Owner  Trustee  desires by this  Indenture,  among  other
things (i) to provide for the issuance by the Owner Trustee of  Certificates  as
provided in the Participation Agreement, and (ii) to provide for the assignment,
mortgage and pledge by the Owner  Trustee to the Indenture  Trustee,  as part of
the Trust Indenture  Estate  hereunder of the Owner Trustee's  right,  title and
interest  in  the  Liquid  Collateral  and  after  the  Delivery  Date  for  the
assignment,  mortgage and pledge by the Owner Trustee to the Indenture  Trustee,
as part of the Trust Indenture Estate hereunder,  of among other things, certain
of the Owner Trustee's estate,  right, title and interest in and to the Aircraft
and the Indenture  Documents and certain  payments and other amounts (other than
Excepted Payments) received hereunder or thereunder in accordance with the terms
hereof, as security for, among other things, the Owner Trustee's  obligations to
the Certificate Holders and for the benefit and security of such Holders;

         WHEREAS,  all  things  have  been done to make the  Certificates,  when
executed  by  the  Owner  Trustee,  and  authenticated,   issued  and  delivered
hereunder, the valid obligations of the Owner Trustee; and

         WHEREAS, all things necessary to make this Indenture the valid, binding
and legal  obligation of the Owner Trustee,  enforceable in accordance  with its
terms, have been done and performed and have happened.

         NOW, THEREFORE, the parties agree as follows:


    GRANTING CLAUSE

         NOW,  THEREFORE,  in  consideration  of the mutual  promises  contained
herein and to secure (i) the prompt  payment of the principal of and  Make-Whole
Premium, if any, and interest on, and all other amounts due with respect to, all
the  Certificates  from time to time  outstanding  under this  Indenture and all
other amounts due hereunder and (ii) the performance and observance by the Owner
Trustee of all the agreements,  covenants and provisions in this  Indenture,  in
the Certificates,  in the Participation Agreement and in the Lease contained for
the benefit of the Holders of the  Certificates,  and the prompt  payment of any
and all amounts from time to time owing under the Participation Agreement by the
Owner Trustee, any Owner Participant or the Lessee to the Holders  (collectively
the  "Secured  Obligations")  and for the uses and  purposes  and subject to the
terms and provisions of this Indenture, and in consideration of the premises and
of the covenants in this Indenture and in the  Certificates  and of the purchase
of the  Certificates  by their  Holders,  and of the sum of $1 paid to the Owner
Trustee by the  Indenture  Trustee at or before the delivery of this  Indenture,
the receipt and sufficiency of which are hereby acknowledged,  the Owner Trustee
has  granted,  bargained,  sold,  assigned,  transferred,  conveyed,  mortgaged,
pledged,  granted a first priority security interest in and confirmed,  and does
hereby grant, bargain,  sell, assign,  transfer,  convey,  mortgage,  pledge and
grant a  first  priority  security  interest  in and  confirm  to the  Indenture
Trustee, its successors and assigns, in trust for the equal and ratable security
and  benefit  of the  Holders  from  time to time of the  Certificates,  a first
priority  security  interest in and first  mortgage  Lien on all estate,  right,
title and interest of the Owner Trustee in, to and under the following described
property,   rights  and   privileges   other  than  Excepted   Payments,   which
collectively,   excluding   Excepted   Payments  but   including   all  property
specifically subjected to the Lien of this Indenture by the terms hereof, by any
supplement  to  this  Indenture  (including  the  Indenture  Supplement)  or any
mortgage supplemental to this Indenture, are included within the Trust Indenture
Estate,  subject  always to the rights granted to the Owner Trustee or any Owner
Participant hereunder and to the other terms and conditions of this Indenture:

         (1) The  Airframe,  as described in the Indenture  Supplement,  and any
airframe  substituted in replacement  thereof pursuant to the provisions of this
Indenture;  the  Engines,  as the same are more  particularly  described  in the
Indenture  Supplement,  whether or not such  Engines  shall be  installed  in or
attached  to the  Airframe or any other  airframe,  and any  Replacement  Engine
therefor;  and all Parts in  respect of the  Airframe  and the  Engines  and all
records,  logs and other  documents at any time  maintained  with respect to the
foregoing property;

         (2) The Lease and all Rent thereunder,  including,  without limitation,
all  amounts of Basic  Rent and  Supplemental  Rent,  and  payments  of any kind
thereunder and including all rights of the Owner Trustee to execute any election
or option or to give or receive any notice, consent, waiver or approval under or
in respect of the Lease or to accept any  surrender  of the Aircraft or any part
thereof  as well as any  rights,  powers  or  remedies  on the part of the Owner
Trustee, whether arising under the Lease or by statute or at law or in equity or
otherwise arising out of any Event of Default;

         (3) The  Purchase  Agreement  (to the extent  assigned by the  Purchase
Agreement Assignment),  the Purchase Agreement Assignment,  the PAA Consent, the
Engine Manufacturer's  Consent, the FAA Bill of Sale, the Warranty Bill of Sale,
and the  Participation  Agreement (to the extent of amounts payable to the Owner
Trustee  thereunder)  (collectively,  and  together  with the  Lease,  the Trust
Agreement,  and the  Certificates,  the  "Indenture  Documents"),  including all
rights of the Owner  Trustee to  execute  any  election  or option or to give or
receive any notice,  consent,  waiver or approval  under or in respect of any of
the foregoing documents and instruments;

         (4) All the tolls, rents, issues, profits, products, revenues and other
income  (including  sales proceeds) of the property  subjected or required to be
subjected to the Lien of this Indenture, and all of the estate, right, title and
interest  of the  Owner  Trustee  in and to the  same  and  every  part  of said
property;

         (5) The Collateral Account,  the Liquid Collateral and all other moneys
and  securities  (including  Permitted  Investments)  now or  hereafter  paid or
deposited or required to be paid or deposited to or with the  Indenture  Trustee
by or for the account of the Owner Trustee pursuant to any term of any Operative
Agreement,  except the Tax Indemnity Agreement,  and held or required to be held
by the Indenture Trustee hereunder;

         (6) All  requisition  proceeds with respect to the Aircraft or any part
thereof (to the extent of the Owner Trustee's  interest  therein pursuant to the
terms of the Lease) and all  insurance  proceeds with respect to the Aircraft or
any part thereof from  insurance  required to be  maintained by the Lessee under
Section 12 of the Lease,  but excluding  any insurance  maintained by the Lessee
and not required under Section 12 of the Lease; and

         (7)      All proceeds of the foregoing.

         EXCLUDING,  HOWEVER,  from the foregoing grant of the Lien and security
interest of this Indenture and from the Trust Indenture Estate, (i) all Excepted
Payments,  including  without  limitation  all right,  title and interest of any
Owner  Participant  in, to and under the Tax Indemnity  Agreement and any moneys
due or to become due under the Tax Indemnity Agreement and all rights to collect
and enforce  Excepted  Payments  and (ii)  rights  granted to or retained by the
Owner  Trustee or any Owner  Participant  hereunder and SUBJECT TO the following
provisions:

         (a) (i) whether or not an Indenture Event of Default shall occur and be
continuing,  the  Owner  Trustee  and any Owner  Participant  shall at all times
retain the right,  to the  exclusion of the Indenture  Trustee:  (A) to Excepted
Payments and to commence an action at law to obtain or otherwise demand, sue for
or receive and enforce the payment of such  Excepted  Payments,  (B) to exercise
any  election  or option or make any  decision  or  determination  or to give or
receive any notice (including notice of Default), consent, waiver or approval in
respect of any such  Excepted  Payment,  (C) to adjust (and make any decision or
determination  or give any notice or consent with respect to) Basic Rent and the
percentages  relating to Stipulated Loss Value and Termination Value and the EBO
Price,  and the EBO Date,  as provided in Section  3(d) of the Lease and Section
15.01 of the Participation  Agreement, (D) to exercise any election or option to
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, Excepted Payments (except for, in respect of any
portion of Basic Rent constituting an Excepted Payment,  any action changing the
manner by which such Basic Rent is to be paid),  (E) to retain the rights of the
"Lessor" with respect to  solicitations  of bids, and the election to retain the
Aircraft  pursuant  to  Section  3(g) of the  Lease,  (F) to retain the right of
"Lessor" to determine  the Fair Market  Rental or Fair Market Value  pursuant to
the  respective  definitions  thereof,  (G) to exercise  all other rights of the
Lessor under  Sections 3(h) and 16 of the Lease with respect to the retention or
purchase  by the Lessee or the Lessor of the  Aircraft  or the  exercise  by the
Lessee of the  Lessee's  renewal or purchase  options,  (H) to retain all rights
with respect to insurance  maintained for its own account which Section 12(e) of
the Lease  specifically  confers  on the  "Owner  Participant",  (I) to  approve
appraisers,  lawyers and other professionals and receive notices,  certificates,
reports,  filings,  opinions and other  documents,  in each case with respect to
matters  relating to the Owner  Participant's  tax position,  (J) to approve any
accountants  to be used  in the  verification  of any  Rent  adjustment,  (K) to
exercise,  to the extent  necessary  to enable it to exercise  its rights  under
Section 8.03 hereof,  the rights of the "Lessor"  under Section 19 of the Lease,
and (L) to  consent  to  changes  to the list of  countries  on Exhibit E of the
Lease, and to Permitted Air Carriers and Permitted Sublessees;

         (ii)  whether or not an Indenture  Event of Default  shall occur and be
continuing,  the Owner  Trustee and the  Indenture  Trustee  shall each have the
rights separately but not to the exclusion of the other: (A) to receive from the
Lessee all notices, certificates,  reports, filings, opinions of counsel, copies
of all documents and all  information  which the Lessee is permitted or required
to give or furnish to the "Lessor" pursuant to the Lease or to the Owner Trustee
pursuant to any other Operative  Agreement,  (B) to exercise  inspection  rights
pursuant  to Section 10 of the Lease  (provided  that if an  Indenture  Event of
Default  shall be  continuing,  no  inspection  right of the Owner Trustee shall
interfere with the efforts of the Indenture  Trustee to exercise  remedies under
the Lease or this Indenture),  (C) to maintain  separate  insurance  pursuant to
Section  12(e) of the  Lease and to  retain  all  rights  with  respect  to such
insurance  maintained for its own account, and (D) to give any notice of default
under Section 14 of the Lease;

         (iii)  subject to the last  sentence of this clause (a), (A) so long as
no Indenture  Event of Default not  constituting  an Event of Default shall have
occurred  and be  continuing  (but  subject to the  provisions  of Section  8.01
hereof),  the Owner  Trustee  shall  retain the right,  to the  exclusion of the
Indenture Trustee (or, if an Indenture Event of Default that is also an Event of
Default shall have occurred and be  continuing,  acting  jointly with and not to
the exclusion of the Indenture Trustee),  to exercise all rights,  elections and
options  of the  Lessor in  connection  with the  return of the  Aircraft  under
Section 5 of the Lease (but not Section 15 thereof, it being understood that the
Indenture  Trustee shall have the exclusive right to exercise  remedies pursuant
to such Section 15,  including in respect of any related  return of the Aircraft
pursuant  to  Section  5 of the  Lease),  including  the  right  to  approve  as
satisfactory  any  accountants,  engineers,  appraisers  or  counsel  to  render
services for or issue appraisals, reports, certificates or opinions to the Owner
Trustee  and to  exercise  all  rights,  elections  and options of the Lessor in
connection with the return of the Aircraft pursuant to the express provisions of
the Operative  Agreements,  and (B) so long as no Indenture Event of Default not
constituting  an Event of Default  shall have  occurred and be  continuing  (but
subject to the  provisions  of Section 8.01  hereof),  the Owner  Trustee  shall
retain the right,  jointly with the  Indenture  Trustee  (agreement  of both not
being required), to further assurances and financial information from the Lessee
pursuant  to Section 20 of the Lease  (other than the right to receive any funds
to be delivered to the "Lessor"  under the Lease  (except funds  delivered  with
respect to Excepted Payments);

         (iv) subject to the last  sentence of this clause (a), at all times the
Owner  Trustee  shall have the right as Lessor,  but not to the exclusion of the
Indenture Trustee,  to seek specific  performance of the covenants of the Lessee
under the Lease relating to the protection, insurance,  maintenance,  possession
and use of the Aircraft; and

         (v) at all times the Owner Trustee and any Owner Participant shall have
the rights  granted to them  under  Articles  VI,  VIII and X and  Section  7.02
hereof.

         Notwithstanding the foregoing,  but subject always to the provisions of
Section 15.05 hereof,  the Indenture  Trustee shall at all times have the right,
to the exclusion of the Owner Trustee and any Owner  Participant,  to (A) (other
than with respect to Excepted Payments) declare the Lease to be in default under
Section 15 thereof or any statute (including,  without limitation, Article 2A of
the Uniform  Commercial  Code) and (B) subject  only to the  provisions  of this
Indenture  (other than in  connection  with  Excepted  Payments),  exercise  the
remedies  set forth in such Section 15 of the Lease,  in any statute  (including
without  limitation  Article 2A of the Uniform  Commercial  Code), at law and in
Article 7 hereof.

         (b) The leasehold interest granted to the Lessee by the Lease shall not
be subject to the security  interest  granted by this Indenture,  and nothing in
this Indenture  shall affect the rights of the Lessee under the Lease so long as
no Event of Default has occurred and is continuing.


HABENDUM CLAUSE

         TO HAVE AND TO HOLD the aforesaid  property unto the Indenture Trustee,
its  successors  and  assigns,  in trust for the equal and  ratable  benefit and
security  of the  Holders  from time to time of the  Certificates,  without  any
priority of any one Certificate over any other and for the uses and purposes and
subject to the terms and  conditions  set forth in this Indenture and the rights
of the Owner Trustee and the Owner Participant under this Indenture.

         It is expressly agreed that anything contained in this Indenture to the
contrary  notwithstanding,  the Owner  Trustee  shall  remain  liable  under the
Indenture Documents to perform all of the obligations assumed by it under any of
those documents, all in accordance with and pursuant to the terms and provisions
of  those  documents,   and  the  Indenture  Trustee  and  the  Holders  of  the
Certificates shall have no obligation or liability under the Indenture Documents
by reason of or arising out of the assignment  under this  Indenture,  nor shall
the  Indenture  Trustee  or the  Holders  of the  Certificates  be  required  or
obligated  in any  manner to perform or  fulfill  any  obligations  of the Owner
Trustee  under or pursuant to the  Indenture  Documents  or, except as expressly
provided in this  Indenture,  to make any payment,  or to make any inquiry as to
the nature or sufficiency of any payment  received by it, or present or file any
claim, or take any action to collect or enforce the payment of any amounts which
may have  been  assigned  to it or to which  it may be  entitled  at any time or
times.

         Effective upon the occurrence and  continuance of an Indenture Event of
Default, the Owner Trustee hereby constitutes the Indenture Trustee the true and
lawful attorney of the Owner Trustee,  irrevocably, with full power (in the name
of the Owner Trustee or otherwise),  subject to the terms and conditions of this
Indenture, to ask, require,  demand, receive,  compound and give acquittance for
any  and all  Basic  Rent,  Supplemental  Rent  payable  to the  Owner  Trustee,
Stipulated Loss Value and Termination Value payments, insurance proceeds and any
and all moneys and claims for moneys due and to become due under or arising  out
of the Lease (subject to Section 8.01 hereof) or the other  Indenture  Documents
(other than Excepted  Payments),  to endorse any checks or other  instruments or
orders in  connection  with the same and to file any claims,  take any action or
institute any proceeding which the Indenture Trustee may deem to be necessary or
advisable in the premises.

         Under the Lease the Lessee is  directed  to make all  payments  of Rent
(other than Excepted Payments not constituting  Basic Rent) payable to the Owner
Trustee and all other  amounts  (other than Excepted  Payments not  constituting
Basic Rent) which are required to be paid to or deposited with the Owner Trustee
pursuant to the Lease  directly to the Indenture  Trustee at such address in the
United States of America as the Indenture  Trustee shall specify for application
as provided in this Indenture. The Owner Trustee agrees that if, notwithstanding
such provision, it shall have received any such amounts,  promptly on receipt of
any such payment,  it will transfer to the Indenture  Trustee any and all moneys
from time to time received by the Owner Trustee  constituting  part of the Trust
Indenture  Estate for  distribution  by the Indenture  Trustee  pursuant to this
Indenture,  except that the Owner Trustee shall accept for distribution pursuant
to the  Trust  Agreement  (i) any  amounts  distributed  to it by the  Indenture
Trustee under this Indenture,  and (ii) any Excepted  Payments not  constituting
Basic Rent.

         The Owner Trustee  agrees that at any time and from time to time,  upon
the written  request of the  Indenture  Trustee,  the Owner Trustee will, at the
expense of the Lessee, promptly and duly execute and deliver or cause to be duly
executed and delivered any and all such further instruments and documents as the
Indenture  Trustee may reasonably  deem desirable in obtaining the full benefits
of the  assignment  hereunder  and of the  rights  and  powers  herein  granted;
provided,  however,  that the Owner  Trustee shall have no obligation to execute
and deliver or cause to be executed or  delivered to the  Indenture  Trustee any
such  instrument or document if such  execution and delivery would result in the
imposition  of  additional  liabilities  on  the  Owner  Trustee  or  any  Owner
Participant  or would  result in a burden on such Owner  Participant's  business
activities,  unless the Owner Trustee or such Owner Participant, as the case may
be,  is  indemnified  to  its  reasonable   satisfaction   against  any  losses,
liabilities  and  expenses  incurred  in  connection  with  such  execution  and
delivery.

         The Owner  Trustee does hereby  warrant and  represent  that it has not
assigned,  pledged or otherwise  disposed of, and hereby  covenants that it will
not  assign  or  pledge  or  otherwise  dispose  of,  so long as the  assignment
hereunder shall remain in effect and shall not have been terminated  pursuant to
Section 14.01 hereof,  any of its right,  title or interest hereby assigned,  to
anyone other than the Indenture Trustee, and that it will not, except in respect
of Excepted Payments or otherwise as provided in or permitted by this Indenture,
enter  into  an  agreement  amending  or  supplementing  any  of  the  Indenture
Documents,  settle or  compromise  any claim  (other  than  claims in respect of
Excepted  Payments)  against  the  Lessee  arising  under  any of the  Indenture
Documents, or submit or consent to the submission of any dispute,  difference or
other matter arising under or in respect of any of the Indenture  Documents,  to
arbitration thereunder.

         Concurrently with the delivery of this Indenture, the Owner Trustee has
delivered to the Indenture Trustee executed counterparts of the Trust Agreement.

         It is hereby  further  covenanted and agreed by and between the parties
as follows:


                                    ARTICLE I

                                   DEFINITIONS

         Section  1.01.  Definitions.  Unless the  context  otherwise  requires,
capitalized  terms utilized herein shall have the meanings set forth in Schedule
I hereto for all purposes of this  Indenture and shall be equally  applicable to
both the singular and plural forms of the terms defined.


                                   ARTICLE II

                           ISSUE, EXECUTION, FORM AND
                          REGISTRATION OF CERTIFICATES;
                               COLLATERAL ACCOUNT

         Section 2.01.  Authentication  and Delivery of Certificates.  Forthwith
upon the  execution  and  delivery  of this  Indenture,  and  from  time to time
thereafter,  Certificates in an aggregate  principal amount not in excess of the
amount  specified  in Section  2.04  hereof  (except as  otherwise  provided  in
Sections  2.06 and 2.07  hereof)  shall be  executed  by the Owner  Trustee  and
delivered to the Indenture Trustee for authentication, and the Indenture Trustee
shall thereupon  authenticate and deliver said  Certificates to or upon the oral
or written  order of the Owner  Trustee,  signed,  if written,  by an authorized
officer of the Owner Trustee, without any further action by the Owner Trustee.

         Section 2.02.  Execution of  Certificates.  The  Certificates  shall be
signed on behalf of the Owner  Trustee by an  authorized  officer  of SSB.  Such
signatures  may be the manual or facsimile  signatures of such officer and minor
errors or defects in any reproduction of any such signature shall not affect the
validity or enforceability of any Certificate which has been duly  authenticated
and delivered by the Indenture Trustee.

         In  case  any  officer  of  SSB  who  shall  have  signed  any  of  the
Certificates  shall cease to be such officer  before the  Certificate  so signed
shall be authenticated  and delivered by the Indenture Trustee or disposed of by
SSB,  such  Certificate  nevertheless  may be  authenticated  and  delivered  or
disposed of as though the person who signed such  Certificate  had not ceased to
be such officer of SSB; and any Certificate may be signed on behalf of the Owner
Trustee by such  person or persons as, at the actual  date of the  execution  of
such  Certificate,  shall be the proper officers of SSB, although at the date of
the  execution  and delivery of this  Indenture  any such person was not such an
officer.  Certificates  bearing the facsimile signatures of individuals who were
authorized  officers of SSB at the time such Certificates were issued shall bind
the Owner  Trustee,  notwithstanding  that such  individuals or any of them have
ceased to hold such  offices  prior to the  authentication  and delivery of such
Certificates  or did not  hold  such  offices  at the  respective  dates of such
Certificates.

         Section 2.03. Certificate of Authentication.  Only such Certificates as
shall bear thereon a certificate of authentication substantially in the form set
forth in Exhibit B, executed by the Indenture Trustee by manual signature of one
of its  authorized  officers,  shall be entitled to the security and benefits of
this  Indenture or be valid or obligatory for any purpose.  Such  certificate by
the Indenture  Trustee upon any Certificate  executed by the Owner Trustee shall
be  conclusive  evidence that the  Certificate  so  authenticated  has been duly
authenticated  and delivered  hereunder and that the Holder, as evidenced on the
Register, is entitled to the security and benefits of this Indenture.

         Section 2.04. Form and Terms of Certificates; Payments on Certificates.
The Certificates and the Indenture Trustee's certificate of authentication shall
be  substantially  in the form set forth in Exhibit B hereto.  Certificates  may
differ  with   respect  to  Maturity   (subject  to  Section   15.01(d)  of  the
Participation  Agreement)  and as to  other  terms.  The  Certificates  shall be
issuable  as  registered  securities  without  coupons  and  shall be  numbered,
lettered,  or otherwise  distinguished in such manner or in accordance with such
plans as the Owner Trustee executing the same may determine with the approval of
the Indenture Trustee.

         The   aggregate   principal   amount  of   Certificates   that  may  be
authenticated  and delivered  under this Indenture is limited as provided in the
form of  Certificate  attached as Exhibit B hereto.  The  Certificates  shall be
issued in registered form only and in  denominations  of $1,000 and any integral
multiple thereof,  shall be dated the Certificate  Closing Date, shall be issued
in four separate series consisting of Series A, Series B, Series C, and Series D
and shall be issued in the  Maturities  and  principal  amounts,  and shall bear
interest at the rates per annum,  specified in the form of Certificate set forth
in Exhibit B.

         Any of the  Certificates  may be issued  with  appropriate  insertions,
omissions,  substitutions  and  variations,  and may have imprinted or otherwise
reproduced thereon such legend or legends,  not inconsistent with the provisions
of this  Indenture,  as may be required to comply with any law or with any rules
or regulations  pursuant thereto,  or with the rules of any securities market in
which the Certificates are admitted to trading, or to conform to general usage.

         Each Certificate shall bear interest from the date of original issuance
thereof or from the most  recent date to which  interest  has been paid and duly
provided for, as the case may be, which shall be payable on the dates  specified
on the face of the form of  Certificate  set forth in Exhibit B hereto until the
principal  thereof  is paid.  Interest  shall be  calculated  on the  basis of a
360-day year of twelve 30-day months.

         Notwithstanding  the preceding  paragraph,  each Certificate shall bear
interest at the Past Due Rate on any  principal,  interest  and any other amount
payable  hereunder  or under such  Certificate,  which shall not be paid in full
when due (whether at stated maturity,  by acceleration,  by mandatory prepayment
or  otherwise),  for the period from and  including  the due date thereof to but
excluding the date the same is paid in full, payable from time to time on demand
of the Indenture Trustee.

         The principal of, and Make-Whole  Premium, if any, and interest on, the
Certificates shall be payable at the Corporate Trust Department of the Indenture
Trustee or at any  office or agency  maintained  for such  purpose  pursuant  to
Section 3.02 hereof in immediately available funds prior to 10:30 A.M. (New York
time) on the due date  thereof and the  Indenture  Trustee  shall remit all such
amounts  received  by it to the  Holders  at such  account or  accounts  at such
financial  institution or  institutions  as the Holders shall have designated to
the Indenture Trustee in writing,  in immediately  available funds, such payment
to be made if the payment was received  prior to 10:30 A.M. New York time by the
Indenture  Trustee  on any  Business  Day,  by 12:00  noon New York time on such
Business Day; otherwise,  the Indenture Trustee shall make payment promptly, but
not later than 11:00 A.M.  New York time on the next  succeeding  Business  Day;
provided,  however,  that interest may be payable at the option of the Indenture
Trustee or its Paying Agent,  as defined in Section 3.04, by mailing  checks for
such  interest  payable to or upon the  written  order of the  Holders  entitled
thereto as they shall appear on the  Register.  If any amount  payable under the
Certificates, or under this Indenture, falls due on a day that is not a Business
Day, then such sum shall be payable on the next succeeding Business Day, without
(provided that payment is made on such next succeeding  Business Day) additional
interest thereon for the period of such extension.

         The Holder at the close of business on any Record Date with  respect to
any Payment  Date shall be  entitled  to receive the  interest if any payable on
such Payment Date  notwithstanding  any transfer or exchange of such Certificate
subsequent to the Record Date and prior to such Payment  Date,  except if and to
the extent the Owner Trustee shall default in the payment of the interest due on
such Payment Date, in which case such  defaulted  interest  shall be paid to the
Holder at the close of business on a subsequent  Record Date (which shall be not
less than five or more than 15  Business  Days  prior to the date of  payment of
such defaulted interest)  established by notice given by mail by or on behalf of
the Owner Trustee to the Holders not less than 15 days preceding such subsequent
Record Date.

         The  Owner  Trustee  agrees  to  pay  to  the  Indenture   Trustee  for
distribution  in  accordance  with Section 5.04 hereof (a) any and all indemnity
amounts received by the Owner Trustee which are payable by the Lessee to (i) the
Indenture Trustee in its individual  capacity,  (ii) the Subordination  Agent or
(iii) each  Liquidity  Provider,  in each case pursuant to Article 8 or 9 of the
Participation  Agreement  (it  being  acknowledged  that  the  Lessee  has  been
instructed  to pay such amounts to the Person or Persons  entitled  thereto) and
(b) the Owner  Trustee's  pro rata share of all amounts  owed to each  Liquidity
Provider by the  Subordination  Agent under each  Liquidity  Facility other than
amounts due as (i) repayments of the principal of advances thereunder,  and (ii)
interest on Interest  Drawings and Final Drawings  except to the extent included
in Net  Interest  and  Related  Charges.  As  used in this  Section,  the  Owner
Trustee's pro rata share means as of any time:

                  (A) with  respect to all amounts  other than Net  Interest and
         Related  Charges,  a fraction the  numerator of which is the  aggregate
         principal  balance then  outstanding of the  Certificates  issued under
         this Indenture other than the Series D Certificates and the denominator
         of which is the aggregate  principal balance of all Certificates issued
         under this Indenture and the Related Indentures other than the Series D
         Certificates, plus

                  (B) with respect to all Net  Interest and Related  Charges (x)
         if there exists a Payment  Default under any  Certificate  issued under
         this  Indenture a fraction,  the  numerator  of which is the  aggregate
         principal  balance then  outstanding of Certificates  issued under this
         Indenture  other than the Series D Certificates  and the denominator of
         which  is the  aggregate  principal  balance  then  outstanding  of all
         Certificates  issued under this  Indenture  and the Related  Indentures
         other than the Series D Certificates under which there exists a Payment
         Default or (y) at all other times, zero.

As used in this Section, "Net Interest and Related Charges" means the sum of (i)
the amount, if any, by which interest payable to each Liquidity  Provider on any
Interest  Drawing and Final Drawing exceeds the amount which would be payable if
such drawings bore interest at the weighted  average Past Due Rate applicable to
amounts in default  on all  Certificates  plus (ii) any  amounts  payable  under
Section  3.1,  Section  3.2,  Section  3.3,  Section  3.9 or Section 7.7 of each
Liquidity Facility (or similar provisions of any replacement Liquidity Facility)
which  result  from  any  Interest  Drawing  or Final  Drawing.  As used in this
Section,  a "Payment Default" when used in connection with a Certificate  issued
hereunder or a Certificate issued under any Related Indenture means a default in
the payment of principal thereof or interest thereon (which default has not been
cured), other than solely because of acceleration.

         Section 2.05.  Payments from Trust Indenture  Estate Only. All payments
to be made by the Owner Trustee under this Indenture shall be made only from the
income and the proceeds from the Lessor's  Estate to the extent  included in the
Trust  Indenture  Estate  and from any other  amounts of the type  described  in
Section 5.01 hereof (but only to the extent  actually  received by the Indenture
Trustee)  and only to the extent that the Owner  Trustee  shall have  sufficient
income or proceeds from the Lessor's  Estate to the extent included in the Trust
Indenture  Estate (and such other  amounts) to enable the  Indenture  Trustee to
make  distributions  of the  amounts  due in  respect  of  the  Certificates  in
accordance with the terms hereof and thereof. Each Holder by its acceptance of a
Certificate  agrees that it will look solely to the income and proceeds from the
Trust Indenture  Estate (and such other amounts of the type described in Section
5.01 hereof but only to the extent actually  received by the Indenture  Trustee)
to the extent  available  for  distribution  to it as  provided  herein and that
neither the Owner Participant, nor the Owner Trustee, nor SSB, nor the Indenture
Trustee is personally  liable to such Holder for any amounts  payable under this
Indenture or such  Certificate or for any amounts payable or liability under any
Certificate or this Indenture,  except as expressly  provided herein in the case
of SSB, the Owner Trustee or the Indenture Trustee.

         SSB is not  personally  liable to any  Holder,  the  Lessee,  the Owner
Participant  or the  Indenture  Trustee  for  any  amounts  payable  under  this
Indenture or for any liability under this Indenture or the Certificates,  except
as a result of SSB's gross  negligence  or willful  misconduct,  or as otherwise
expressly provided herein or in the Participation Agreement.

         If (1) all or any part of the Lessor's Estate becomes the property of a
debtor  subject to the  reorganization  provisions of the  Bankruptcy  Code, (2)
pursuant to such reorganization provisions any Owner Participant is required, by
reason of such Owner  Participant  being held to have recourse  liability to the
debtor or the trustee of the debtor  directly or indirectly,  to make payment on
account of any amount payable as principal of or interest, Make-Whole Premium or
other  amounts  payable  on the  Certificates,  and  (3) the  Indenture  Trustee
actually  receives  any Recourse  Amount which  reflects any payment by an Owner
Participant on account of (2) above,  then the Indenture  Trustee shall promptly
refund to such Owner Participant such Recourse Amount. Nothing contained in this
paragraph  shall  prevent the  Indenture  Trustee  from  enforcing  any personal
recourse   obligation  (and  retaining  the  proceeds   thereof)  of  any  Owner
Participant under the Participation Agreement, or from retaining any amount paid
by any Owner Participant under Sections 5.01, 8.02 and 8.03 hereof.

         Section  2.06.  Registration.  Transfer  and  Exchange.  The  Indenture
Trustee will keep, on behalf of the Owner  Trustee,  at each office or agency to
be  maintained  for the purpose as provided in Section 3.02 hereof a Register or
Registers on which, subject to such reasonable  regulations as it may prescribe,
it will register, and will register the transfer of, Certificates as provided in
this Article.  Such Register shall be in written form in the English language or
in any other form capable of being  converted into such form within a reasonable
period of time.

         Upon due  presentation  for registration of transfer of any Certificate
at any such office or agency,  the Owner Trustee shall execute and the Indenture
Trustee  shall  authenticate  and  deliver  in the  name  of the  transferee  or
transferees a new  Certificate or  Certificates of the same Series and Maturity,
principal amount and interest rate and in authorized  denominations for an equal
aggregate  principal amount;  provided,  that such Certificate being transferred
shall be canceled in accordance with Section 2.08 hereof simultaneously with the
issuance of the new Certificate.

         Any Certificate or  Certificates  may be exchanged for a Certificate or
Certificates  of the same Series and  Maturity  and  interest  rate but in other
authorized denominations,  in an equal aggregate principal amount.  Certificates
to be exchanged shall be surrendered at any office or agency to be maintained by
the  Indenture  Trustee for the purpose as provided in Section 3.02 hereof,  and
the Owner Trustee shall execute and the Indenture Trustee shall authenticate and
deliver in exchange  therefor the Certificate or  Certificates  which the Holder
making  the  exchange  shall  be  entitled  to  receive,   bearing  numbers  not
contemporaneously or previously outstanding.

         All  Certificates  presented for  registration  of transfer,  exchange,
prepayment  or  payment  shall  (if so  required  by the  Owner  Trustee  or the
Indenture  Trustee)  be  duly  endorsed  by,  or  be  accompanied  by a  written
instrument or instruments of transfer in form  satisfactory to the Owner Trustee
and the  Indenture  Trustee  duly  executed by the Holder or its  attorney  duly
authorized  in writing and (except in the case of transfers  pursuant to Article
15 of the  Participation  Agreement) the Indenture  Trustee may require evidence
satisfactory to it as to the compliance of any such transfer with the Securities
Act.

         The  Indenture  Trustee  may require  payment  from the Holder of a sum
sufficient to cover any tax or other governmental  charge that may be imposed in
connection  with any exchange or registration  of transfer of  Certificates.  No
service charge shall be levied for any such transaction.

         The  Indenture  Trustee shall not be required to exchange or register a
transfer of any Certificates  (a) for a period of 15 days immediately  preceding
the first  mailing  of notice of  prepayment  of such  Certificates  or (b) with
respect to which notice of  prepayment  has been given  pursuant to Section 6.03
hereof and such notice has not been revoked.

         All  Certificates  issued upon any transfer or exchange of Certificates
shall be valid  obligations of the Owner Trustee,  evidencing the same debt, and
entitled  to the  same  security  and  benefits  under  this  Indenture,  as the
Certificates surrendered upon such transfer or exchange.

         Section  2.07.   Mutilated.   Defaced,   Destroyed,   Lost  and  Stolen
Certificates.  In case any  temporary  or  definitive  Certificate  shall become
mutilated, defaced or be apparently destroyed, lost or stolen, the Owner Trustee
in its  discretion  may  execute,  and upon the oral or  written  request of any
officer of SSB,  principal  amount and interest  rate as the  Certificate  being
replaced,  bearing a number not contemporaneously or previously outstanding,  in
exchange and substitution for the mutilated or defaced  Certificate,  or in lieu
of and substitution for the Certificate so apparently destroyed, lost or stolen.
In the case of any  Certificate  so apparently  destroyed,  lost or stolen,  the
applicant for a substitute Certificate shall furnish to the Owner Trustee and to
the  Indenture  Trustee such security or indemnity as may be required by them to
indemnify  and defend and to hold each of them  harmless  and  evidence to their
satisfaction of the apparent destruction,  loss or theft of such Certificate and
of the ownership thereof.

         Upon the issuance of any substitute  Certificate,  the Owner Trustee or
the Indenture Trustee may require payment from the Holder of a sum sufficient to
cover any tax or other  governmental  charge  that may be  imposed  in  relation
thereto and any other reasonable expenses incurred in connection  therewith.  In
case any Certificate which has matured or is about to mature, or has been called
for  prepayment  in full,  shall become  mutilated  or defaced or be  apparently
destroyed,  lost or  stolen,  the  Owner  Trustee  may,  instead  of  issuing  a
substitute  Certificate,  pay or  authorize  the  payment  of the same  (without
surrender thereof except in the case of a mutilated or defaced Certificate),  if
the applicant of any Certificate so apparently  destroyed,  lost or stolen,  for
such payment shall  furnish to the Owner  Trustee and to the  Indenture  Trustee
such  security  or  indemnity  as any of them may  require  to hold each of them
harmless  and the  applicant  shall also  furnish to the Owner  Trustee  and the
Indenture  Trustee evidence to their  satisfaction of the apparent  destruction,
loss or theft of such Certificate and of the ownership thereof.

         Every substitute  Certificate issued pursuant to the provisions of this
Section by virtue of the fact that any Certificate is apparently destroyed, lost
or stolen shall constitute an original additional  contractual obligation of the
Owner  Trustee,  whether  or  not  the  apparently  destroyed,  lost  or  stolen
Certificate  shall be enforceable at any time by anyone and shall be entitled to
all the security and benefits of (but shall be subject to all the limitations of
rights set forth in) this Indenture equally and proportionately with any and all
other Certificates duly authenticated and delivered hereunder.  All Certificates
shall be held and owned upon the express condition that, to the extent permitted
by law, the foregoing  provisions are exclusive with respect to the  replacement
or  payment of  mutilated,  defaced,  or  apparently  destroyed,  lost or stolen
Certificates   and  shall   preclude  any  and  all  other  rights  or  remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the  replacement  or payment of negotiable  instruments or other
securities without their surrender.

         Section 2.08.  Cancellation of Certificates:  Destruction  Thereof. All
Certificates  surrendered for payment,  prepayment,  registration of transfer or
exchange,  if surrendered to the Owner Trustee or any agent of the Owner Trustee
or the  Indenture  Trustee,  shall be  delivered  to the  Indenture  Trustee for
cancellation or, if surrendered to the Indenture  Trustee,  shall be canceled by
it; and no  Certificates  shall be issued in lieu  thereof  except as  expressly
permitted by any of the  provisions of this  Indenture.  The  Indenture  Trustee
shall destroy  cancelled  Certificates  held by it and deliver a certificate  of
destruction to the Owner Trustee.  If the Owner Trustee shall acquire any of the
Certificates, such acquisition shall not operate as a prepayment or satisfaction
of the indebtedness  represented by such Certificates  unless and until the same
are delivered to the Indenture Trustee for cancellation.

         Section  2.09.  Temporary  Certificates.  Pending  the  preparation  of
definitive  Certificates,  the Owner  Trustee may execute and,  upon the oral or
written request of an officer of SSB, the Indenture  Trustee shall  authenticate
and  deliver  temporary  Certificates  (printed,  lithographed,  typewritten  or
otherwise  reproduced,  in  each  case  in form  satisfactory  to the  Indenture
Trustee).  Temporary  Certificates shall be issuable as registered  Certificates
without coupons, of any authorized  denomination,  and substantially in the form
of  the  definitive  Certificates  but  with  such  omissions,   insertions  and
variations  as may be  appropriate  for  temporary  Certificates,  all as may be
determined by the Owner Trustee with the  concurrence of the Indenture  Trustee.
Temporary  Certificates  may contain such  reference to any  provisions  of this
Indenture as may be appropriate.  Every temporary  Certificate shall be executed
by the Owner  Trustee  and,  upon the oral or written  request of an  authorized
officer of the Owner Trustee, be authenticated by the Indenture Trustee upon the
same conditions and in substantially  the same manner,  and with like effect, as
the definitive Certificates.  Without unreasonable delay the Owner Trustee shall
execute  and shall  furnish  definitive  Certificates  and  thereupon  temporary
Certificates  shall be  surrendered in exchange  therefor  without charge at any
office or agency to be  maintained  by the  Indenture  Trustee  for the  purpose
pursuant to Section 3.02  hereof,  and,  upon the oral or written  request of an
authorized   officer  of  the  Owner  Trustee,   the  Indenture   Trustee  shall
authenticate  and deliver in exchange for such temporary  Certificates  an equal
aggregate  principal  amount of definitive  Certificates  of the same Series and
Maturities  and  interest  rates  and  in  authorized  denominations.  Until  so
exchanged,  temporary  Certificates  shall be entitled to the same  security and
benefits under this Indenture as definitive Certificates.

         Section 2.10.  Termination  of Interest in Trust  Indenture  Estate.  A
Holder  shall not, as such,  have any further  interest  in, or other right with
respect to, the Trust Indenture  Estate when and if the principal  amount of and
Make-Whole  Premium,  if any,  and  interest on and other  amounts due under all
Certificates  held by such  Holder  and all other sums  payable  to such  Holder
hereunder and under the other Operative Agreements shall have been paid in full.

         Section 2.11. Certificates in Respect of Replacement Aircraft. Upon the
execution and delivery of a supplement to this Indenture  covering a Replacement
Airframe and/or  Replacement  Engine,  as provided in Section 9.09 hereof,  each
Certificate  shall be  deemed  to have  been  issued  in  connection  with  such
Replacement Airframe and/or Replacement Engine and (in the case of a Replacement
Airframe) each Certificate  issued thereafter upon a transfer or exchange of, or
as a replacement  for, a Certificate,  shall be designated as having been issued
in  connection  with such  Replacement  Airframe,  but without any other  change
therein except as provided for in this Article II.

         Section 2.12.  Assumption of Obligations  Under  Certificates and Other
Operative Agreements.  If, in accordance with and subject to the satisfaction of
the conditions  set forth in Section 7.11 of the  Participation  Agreement,  the
Lessee shall assume all of the obligations of the Owner Trustee hereunder, under
the  Certificates,   and  under  all  other  Operative  Agreements,   the  Owner
Participant  and the Owner  Trustee  shall be released and  discharged  from any
further obligations hereunder and under the Certificates and all other Operative
Agreements (except for any recourse  obligations of the Owner Participant or the
Owner Trustee in its individual  capacity with respect to matters arising out of
events occurring prior to such assumption).

         Section 2.13.  Establishment of Collateral  Account.  (a) The Indenture
Trustee shall, pursuant to the Collateral Account Control Agreement,  establish,
or cause  to be  established,  with  State  Street  Bank and  Trust  Company  of
Connecticut,  National Association, who shall represent and warrant that it is a
financial  intermediary  (as  defined in  Section  8-313(4)  of the  Connecticut
Uniform  Commercial  Code),  in its name as secured party  hereunder an Eligible
Deposit Account entitled "The First National Bank of Maryland,  as secured party
under the Trust Indenture and Security Agreement  (Atlantic Coast Airlines Trust
No.  __________) dated as of September 26, 1997, with the Owner Trustee referred
to therein".

         (b) If at any time the  Collateral  Account  ceases  to be an  Eligible
Deposit Account, the Indenture Trustee shall within two Business Days, establish
a new Collateral  Account meeting the conditions  specified in the definition of
Eligible Deposit Account,  and shall transfer any cash or any investments in the
Collateral Account to such new Collateral Account.

         (c) The Indenture Trustee shall have exclusive  dominion and control of
the Collateral  Account and all funds therein,  and shall make  withdrawals from
the Collateral Account only in accordance with this Indenture.

         (d) The Collateral Account Control Agreement shall require FNBM to send
confirmation  to the  Indenture  Trustee and the Lessee that it has credited the
Specified  Investments to the Collateral Account and to make appropriate entries
on its books  identifying the Specified  Investments as pledged to the Indenture
Trustee.

         Section 2.14. Investment of Funds on Deposit in the Collateral Account.
(a) Funds  deposited in the Collateral  Account shall be invested and reinvested
by the  Indenture  Trustee,  subject  to  Section  17.02  of  the  Participation
Agreement,  at the risk of the Owner Trustee, in Specified  Investments selected
by the Lessee and approved by the Indenture Trustee for the account of the Owner
Trustee in accordance with Section  2.14(b) below;  provided,  however,  that if
Specified  Investments  meeting  the  requirements  of Section  2.14(b)  are not
available  on any day on which funds are to be invested as  contemplated  by the
preceding  provisions of this Section 2.14(a),  the Indenture  Trustee may leave
such funds in the Collateral  Account  uninvested  until the earliest of (i) the
date on which an appropriate  Specified  Investment becomes available,  (ii) the
Delivery Date and (iii) the Cut-Off Date.  The Indenture  Trustee shall maintain
possession of the negotiable instruments or securities,  if any, evidencing such
Specified  Investments  and,  in  the  case  of  any  Specified  Investments  in
book-entry form, such Specified  Investments  shall be credited to an account of
the Indenture Trustee or a financial  intermediary  with the applicable  Federal
Reserve Bank; provided, however, if the Specified Investments are credited to an
account of the financial  intermediary,  the financial  intermediary  shall make
written  confirmation  thereof to the Indenture  Trustee and make an appropriate
entry on its books  identifying  the  Specified  Investments  as  pledged to the
Indenture Trustee.  All proceeds of and any income,  interest and other payments
and  distributions  on or with  respect to any  Specified  Investments  shall be
deposited in or credited to the Collateral Account and thereafter shall be held,
invested and applied by the Indenture Trustee in accordance with this Indenture.
The Indenture  Trustee shall promptly notify the Owner Trustee and the Lessee of
any Losses.

         (b) On the Certificate Closing Date, the Indenture Trustee shall invest
the amount  deposited in the Collateral  Account  pursuant to Section 2.01(c) of
the Participation  Agreement in Specified Investments selected by the Lessee and
approved by the  Indenture  Trustee for the account of the Owner  Trustee  which
mature on or prior to  ___________,  199_.  If the  Delivery  Date is  postponed
pursuant to Section 3.02(c) or Section 3.05 of the Participation  Agreement, the
proceeds of the Specified  Investments referred to in the preceding sentence may
be invested  in  Specified  Investments  which  mature  within 14 days after the
rescheduled  Delivery  Date.  If no Delivery  Date  occurs,  then any  Specified
Investment shall mature no later than the 15th day after the Cut-Off Date.

         (c) If for any reason the  Indenture  Trustee shall be required to make
any  distributions  of the Liquid  Collateral  prior to the maturity date of any
Specified  Investment,  the Indenture Trustee shall cause the same to be sold in
accordance with standard commercial  practices,  and the Lessee, for the account
of the Owner Trustee,  shall forthwith  compensate the Indenture Trustee for any
Losses as provided in Section 17.02(a) of the Participation Agreement.

         (d)  Pursuant  to  Section  17.02(b)  of the  Participation  Agreement,
interest  payable on the  Certificates  during the period in which  funds are on
deposit in the Collateral  Account shall, to the extent  investment  earnings in
the Collateral  Account are  insufficient to fund such interest,  be paid by the
Lessee.

         Section  2.15.  Release  of  Collateral  Account  on  Delivery  Date or
Assumption of  Certificates.  (a) Subject to the  satisfaction  or waiver of the
conditions precedent to the Indenture Trustee's obligations set forth in Section
4.02 of the Participation Agreement, on the Delivery Date or, if applicable, the
date  the  Lessee  assumes  the  obligations  of the  Owner  Trustee  under  the
Certificates  pursuant to Section 3.05(a) of the  Participation  Agreement,  the
Indenture Trustee shall release from the Collateral  Account an amount of Liquid
Collateral,  equal to the  lesser  of (A) the Debt  Portion  and (B) the  amount
actually  in the  Collateral  Account  on the  Delivery  Date.  Such  amount  so
released,  together  with the  amount of any  Losses  received  from the  Lessee
pursuant to Section 17.02(a) of the  Participation  Agreement,  shall be used to
finance a portion of the Purchase Price as  contemplated  by Section  3.02(a) or
Section 3.05(a), as the case may be, of the Participation  Agreement. Any amount
remaining in the Collateral Account after such release (net of any uncompensated
Losses)  shall be  remitted  by the  Indenture  Trustee  on  behalf of the Owner
Trustee  to the  Lessee  pursuant  to Section  3.02(a)(C)  of the  Participation
Agreement.

         (b) The Lien of this Indenture on the Collateral Account and the Liquid
Collateral  shall  terminate on (i) the Delivery Date  following the transfer of
amounts described in Section 3.02(a) or Section 3.05(a),  as the case may be, of
the  Participation  Agreement,   (ii)  the  assumption  by  the  Lessee  of  the
obligations  of the Owner  Trustee  under the  Certificates  pursuant to Section
3.05(a)  of  the  Participation   Agreement  or  (iii)  the  prepayment  of  the
Certificates pursuant to Section 3.05(b) of the Participation Agreement.

         Section 2.16.  Cut-Off Date. In the case of a prepayment  under Section
6.02(a)(vi)  hereof,  the Indenture  Trustee  shall release from the  Collateral
Account all amounts held in the Collateral  Account on such date. Such amount so
released,  together  with the  amount of any  Losses  received  from the  Lessee
pursuant to Sections  17.02(a) and 17.02(c) of the  Participation  Agreement not
then  deposited in the Collateral  Account,  shall be applied to pay amounts due
under Section  6.02(b)(1) hereof on the 15th day following the Cut-Off Date, and
any amount (net of any  uncompensated  Losses)  remaining after such release and
application shall be remitted by the Indenture  Trustee,  on behalf of the Owner
Trustee, to the Lessee.

         Section 2.17.  Subordination.  (a) The Owner Trustee and, by acceptance
of its Certificates of any Series, each Holder of such Series, hereby agree that
no  payment  or  distribution  shall  be made on or in  respect  of the  Secured
Obligations  owed to such  Certificate  Holder  of such  Series,  including  any
payment or distribution of cash,  property or securities  after the commencement
of a proceeding  of the type referred to in clause (v), (vi) or (vii) of Section
7.01 hereof, except as expressly provided in Article V hereof.

         (b) By the  acceptance  of its  Certificates  of any Series (other than
Series A), each Holder of such Series agrees that in the event that such Holder,
in its capacity as a Holder,  shall receive any payment or  distribution  on any
Secured  Obligations  in  respect of such  Series  which it is not  entitled  to
receive under this Section 2.17 or Article V hereof,  it will hold any amount so
received in trust for the Senior Holder (as defined in Section  2.17(c)  hereof)
and will forthwith  turn over such payment to the Indenture  Trustee in the form
received to be applied as provided in Article V hereof.

         (c) As used in this Section 2.17, the term "Senior  Holder" shall mean,
(i) the  Holders  of Series A  Certificates  until the  Secured  Obligations  in
respect of Series A Certificates  have been paid in full, (ii) after the Secured
Obligations  in respect  of Series A  Certificates  have been paid in full,  the
Holders of Series B  Certificates  until the Secured  Obligations  in respect of
Series  B  Certificates  have  been  paid  in  full,  (iii)  after  the  Secured
Obligations  in respect  of Series B  Certificates  have been paid in full,  the
Holders of Series C  Certificates  until the Secured  Obligations  in respect of
Series C  Certificates  have  been  paid in full,  and (iv)  after  the  Secured
Obligations  in respect  of Series C  Certificates  have been paid in full,  the
Holders of Series D  Certificates  until the Secured  Obligations  in respect of
Series D Certificates have been paid in full.

         Section 2.18.  Reoptimization.  The Owner Trustee shall have the right,
on the Initial  Reoptimization  Date and the Reoptimization  Date, to modify the
schedule  of  principal  payments of the  Certificates  subject to the terms and
conditions set forth in Section 2.03(b) or Section 15.02, as applicable,  of the
Participation  Agreement.  To give effect to the foregoing the Indenture Trustee
shall execute an amendment to this Indenture  which shall amend Section 6.06 and
Schedule  II hereof to set forth the new  schedule  of  principal  payments  and
Schedule I to each  Certificate  shall be  amended  accordingly.  The  Indenture
Trustee shall deliver such  amendments to the  Subordination  Agent on behalf of
the Pass Through Trustee for each of the Pass Through Trusts. To the extent that
such  amendment of this  Indenture  occurs later than the  Delivery  Date,  this
Indenture,  as amended,  shall, if required,  be duly filed for recordation with
the Aeronautics Authority.


                                   ARTICLE III

                                    COVENANTS

         Section 3.01.  Payment of Principal.  Make-Whole  Premium and Interest.
The Owner  Trustee  covenants  and agrees that it will,  subject to Section 2.05
hereof,  duly and  punctually  pay or cause to be paid  the  principal  of,  and
interest and Make-Whole  Premium,  if any, and all other amounts due on, each of
the  Certificates  and  under  this  Indenture  at the place or  places,  at the
respective  times  and in the  manner  provided  in  this  Indenture  and in the
Certificates.

         Principal  and  interest and other  amounts due  hereunder or under the
Certificates  shall  be  payable  in  dollars  on the due date  thereof,  to the
Indenture  Trustee at the Corporate  Trust  Department (or such other account at
such other financial  institution as the Indenture Trustee may designate for the
purpose).  If any amount payable under the  Certificates or under this Indenture
falls due on a day which is not a Business  Day,  then such sum shall be payable
on the next succeeding  Business Day, without  (provided that payment is made on
such next succeeding Business Day) additional interest thereon for the period of
such extension.

         Section  3.02.  Offices  for  Payments,  etc.  So  long  as  any of the
Certificates  remain  outstanding,  the  Indenture  Trustee  will  maintain  the
following:  (a) an office or agency where the  Certificates may be presented for
payment and (b) a facility or agency where the Certificates may be presented for
registration of transfer and for exchange and for prepayment as provided in this
Indenture  (the   "Registrar").   The  Registrar  shall  keep  a  register  (the
"Register")  with respect to the  Certificates  and their transfer and exchange.
The Indenture  Trustee may appoint one or more  co-registrars  ("Co-Registrars")
for the  Certificates  and may terminate any such  appointment  at any time upon
written notice. The term "Registrar" includes any Co-Registrar.

         The Indenture Trustee shall initially act as Registrar.

         Section  3.03.  Appointment  to Fill a Vacancy  in Office of  Indenture
Trustee. The Owner Trustee, whenever necessary to avoid or fill a vacancy in the
office of Indenture Trustee,  will, with the consent of the Lessee,  appoint, in
the manner provided in Section 12.02 hereof, an Indenture Trustee, so that there
shall at all times be an Indenture Trustee hereunder.

         Section 3.04. Paying Agents. Whenever the Indenture Trustee in its sole
discretion shall appoint a paying agent (the "Paying Agent"),  it will cause the
Paying  Agent to execute and  deliver an  instrument  in which the Paying  Agent
shall  agree  with the  Indenture  Trustee,  subject to the  provisions  of this
Section:

                  (a) that it will hold all sums  received  by it as such  agent
         for the  payment of the  principal  of,  and  interest  and  Make-Whole
         Premium, if any, on the Certificates  (whether such sums have been paid
         to it by the Indenture  Trustee or the Owner  Trustee) in trust for the
         benefit of the Holders or of the Indenture Trustee, and

                  (b) that it will  give the  Indenture  Trustee  notice  of any
         failure by the Owner Trustee to make any payment of the principal of or
         interest or Make-Whole  Premium,  if any, on the Certificates  when the
         same shall be due and payable.

         Anything  in  this  Section  to  the  contrary   notwithstanding,   the
agreements  to hold sums in trust as provided in this Section are subject to the
provisions of Sections 14.03 and 14.04 hereof.

         Section 3.05.     Covenants of SSB and the Owner Trustee.

         (a)      SSB hereby  covenants  and agrees to perform  its  covenants  set forth in  Sections  7.04(b) and
7.04(c) of the Participation Agreement.

         (b) The Owner Trustee hereby covenants and agrees as follows:

                  (i) in the event a  Responsible  Officer of the Owner  Trustee
         shall have  actual  knowledge  of an  Indenture  Event of  Default,  an
         Indenture  Default  or an Event of Loss,  the Owner  Trustee  will give
         prompt  written notice of such  Indenture  Event of Default,  Indenture
         Default or Event of Loss to the Indenture  Trustee,  the Lessee and the
         Owner Participant;

                  (ii) the Owner Trustee will furnish to the Indenture  Trustee,
         promptly  upon receipt  thereof,  duplicates  or copies of all reports,
         notices,  requests,  demands,  certificates,  financial  statements and
         other  instruments  furnished  to the Owner  Trustee  under the  Lease,
         including,  without limitation, a copy of each report or notice from an
         insurer or an insurance  broker received  pursuant to Section 12 of the
         Lease, to the extent that the same shall not have been furnished to the
         Indenture Trustee;

                  (iii) the Owner  Trustee  will not enter into any  business or
         other  activity  other than the  business of owning the  Aircraft,  the
         leasing thereof to the Lessee and the carrying out of the  transactions
         contemplated hereby and by the Lease, the Participation  Agreement, the
         Trust Agreement and the other Indenture Documents; and

                  (iv) except as contemplated by the Operative  Agreements,  the
         Owner Trustee will not contract for, create,  incur or assume any debt,
         and will not  guarantee  (directly or  indirectly  or by an  instrument
         having the effect of assuring  another's  payment or performance on any
         obligation  or  capability  of so  doing,  or  otherwise),  endorse  or
         otherwise  take  action  to become  contingently  liable,  directly  or
         indirectly, in connection with the debt of any other Person.

         Section 3.06.     [Reserved]

         Section 3.07.  Disposal of Trust Indenture Estate. At any time and from
time to time any part of the Trust  Indenture  Estate may be sold or disposed of
in accordance with the provisions of this Indenture and the Lease. The Indenture
Trustee shall, from time to time, release any part of the Trust Indenture Estate
so sold or  disposed  of or as to which an Event of Loss has  occurred  or as to
which  the  Lease  has  been  terminated  from the  Lien of this  Indenture.  In
addition,  to the extent that such property  constitutes  an Airframe or Engine,
the further requirements of Section 9.08 hereof shall be complied with.

         Section  3.08.  No  Representations  or  Warranties  as to  Aircraft or
Documents.  NEITHER THE INDENTURE  TRUSTEE NOR THE OWNER TRUSTEE NOR SSB NOR THE
OWNER  PARTICIPANT  MAKES OR SHALL BE DEEMED TO HAVE MADE ANY  REPRESENTATION OR
WARRANTY,  EXPRESS  OR  IMPLIED,  AS TO THE TITLE,  AIRWORTHINESS,  WORKMANSHIP,
VALUE,  CONDITION,  DESIGN,  COMPLIANCE WITH SPECIFICATIONS,  MERCHANTABILITY OR
FITNESS FOR ANY PARTICULAR  USE OR PURPOSE OF THE AIRCRAFT OR ANY ENGINE,  AS TO
THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE
ABSENCE  OF  OBLIGATIONS  BASED  ON  STRICT  LIABILITY  IN  TORT  OR  ANY  OTHER
REPRESENTATION   OR  WARRANTY  WITH  RESPECT  TO  THE  AIRCRAFT  OR  ANY  ENGINE
WHATSOEVER,  except that SSB warrants  that on the  Delivery  Date (a) the Owner
Trustee shall have received whatever title was conveyed to it by the Seller, and
(b) the Aircraft shall be free and clear of Lessor's Liens  attributable to SSB.
Neither SSB nor the Indenture  Trustee makes or shall be deemed to have made any
representation  or warranty as to the validity,  legality or  enforceability  of
this Indenture,  the Trust Agreement, the Certificates or any Indenture Document
or as to the correctness of any statement  contained in any thereof,  except for
the  representations  and warranties of SSB and the Indenture Trustee made under
this  Indenture or in the  Participation  Agreement or of the Owner  Participant
made under the Participation Agreement.

         Section 3.09.     Further Assurances:  Financing  Statements.  At any time and from time to time, upon the
request of the Indenture  Trustee or the Lessee,  at the expense of the Lessee,  the Owner  Trustee shall  promptly
and duly  execute and deliver any and all such  further  instruments  and  documents  as may be  specified  in such
request and as are  necessary  or advisable to perfect,  preserve or protect the Liens and  assignments  created or
intended to be created hereby,  or to obtain for the Indenture  Trustee the full benefit of the specific rights and
powers  granted  herein,  including,  without  limitation,  the execution and delivery of Uniform  Commercial  Code
financing  statements and continuation  statements with respect  thereto,  or similar  instruments  relating to the
perfection of the Liens or assignments created or intended to be created hereby.


                                   ARTICLE IV

                                  HOLDER LISTS

         Section  4.01.  Holder  Lists:  Ownership  of  Certificates.   (a)  The
Indenture  Trustee  shall  preserve  in as  current  a  form  as  is  reasonably
practicable  the most recent list  available to it of the names and addresses of
the Holders. If the Indenture Trustee is not the Registrar,  the Registrar shall
furnish to the Indenture Trustee semi-annually not more than ten days after each
Record  Date,  as of such Record Date,  or at such other times as the  Indenture
Trustee may request in writing,  a list, in such form and as of such date as the
Indenture Trustee may reasonably require,  containing all the information in the
possession  or control of the  Registrar  as to the names and  addresses  of the
Holders and the amounts and Maturities of the Certificates held by such Holders.

         (b)      Ownership of the Certificates shall be proved by the Register kept by the Registrar.


                                    ARTICLE V

                    RECEIPT, DISTRIBUTION AND APPLICATION OF
                     INCOME FROM THE TRUST INDENTURE ESTATE


         Section 5.01. Basic Rent Distribution.  Except as otherwise provided in
Section 5.03 hereof,  each installment of Basic Rent, any payment of interest on
overdue  installments  of Basic  Rent,  any payment  received  by the  Indenture
Trustee  pursuant  to Section  8.03(a)  hereof and any  payment  received by the
Indenture Trustee pursuant to Section 17.02(b) (including any amount received by
the  Indenture  Trustee  pursuant to a draw on the Letter of Credit  pursuant to
such Section 17.02(b) and Section 5.10 hereof) or 17.02(c) of the  Participation
Agreement  shall be distributed by the Indenture  Trustee no later than the time
herein provided in the following order of priority:

first,   (i) so much of such  installment or payment as shall be required to pay
         in full the  aggregate  amount of the payment or payments of  Principal
         Amount and interest  and other  amounts (as well as any interest on any
         overdue  Principal  Amount and, to the extent  permitted by  applicable
         law, on any overdue  interest and any other  overdue  amounts) then due
         under all Series A Certificates  shall be distributed to the Holders of
         Series A Certificates ratably,  without priority of one over the other,
         in the proportion  that the amount of such payment or payments then due
         under each Series A Certificate  bears to the  aggregate  amount of the
         payments then due under all Series A Certificates;

                  (ii) after giving  effect to paragraph  (i) above,  so much of
         such  installment  or payment as shall be  required  to pay in full the
         aggregate  amount of the payment or payments  of  Principal  Amount and
         interest  and other  amounts  (as well as any  interest  on any overdue
         Principal Amount and, to the extent permitted by applicable law, on any
         overdue  interest  and any other  overdue  amounts)  then due under all
         Series B  Certificates  shall be distributed to the Holders of Series B
         Certificates  ratably,  without  priority of one over the other, in the
         proportion  that the amount of such payment or payments  then due under
         each Series B Certificate bears to the aggregate amount of the payments
         then due under all Series B Certificates;

                  (iii) after giving effect to paragraph (ii) above,  so much of
         such  installment  or payment as shall be  required  to pay in full the
         aggregate  amount of the payment or payments  of  Principal  Amount and
         interest  and other  amounts  (as well as any  interest  on any overdue
         Principal Amount and, to the extent permitted by applicable law, on any
         overdue  interest  and any other  overdue  amounts)  then due under all
         Series C  Certificates  shall be distributed to the Holders of Series C
         Certificates  ratably,  without  priority of one over the other, in the
         proportion  that the amount of such payment or payments  then due under
         each Series C Certificate bears to the aggregate amount of the payments
         then due under all Series C Certificates; and

                  (iv) after giving effect to paragraph  (iii) above, so much of
         such  installment  or payment as shall be  required  to pay in full the
         aggregate  amount of the payment or payments  of  Principal  Amount and
         interest  and other  amounts  (as well as any  interest  on any overdue
         Principal Amount and, to the extent permitted by applicable law, on any
         overdue  interest  and any other  overdue  amounts)  then due under all
         Series D  Certificates  shall be distributed to the Holders of Series D
         Certificates  ratably,  without  priority of one over the other, in the
         proportion  that the amount of such payment or payments  then due under
         each Series D Certificate bears to the aggregate amount of the payments
         then due under all Series D Certificates; and

second,  the balance if any of such installment or payment remaining  thereafter
         shall be distributed to the Owner Trustee,  or as the Owner Trustee may
         request, for distribution pursuant to the Trust Agreement.

         Section 5.02. Event of Loss and Replacement;  Prepayment. (a) Except as
otherwise provided in Section 5.03 hereof, any payment received by the Indenture
Trustee  as the  result  of an  Event  of  Loss  with  respect  to the  Aircraft
(including  pursuant to Section 11(a)(2) of the Lease,  but, in the case of such
Section 11(a)(2), subject to the time limits specified therein) or as the result
of, or in connection with any event under the Lease giving rise to, a prepayment
pursuant to Section 6.02 hereof,  shall be promptly distributed by the Indenture
Trustee in the following order of priority:

first,            to reimburse the Indenture  Trustee for any costs or expenses  reasonably  incurred in connection
         with such prepayment,

second,  (i)      to pay the amounts  specified  in  paragraph  (i) of clause  "second" of Section 5.03 hereof then
         due and payable in respect of the Series A Certificates;

                  (ii) after giving  effect to paragraph  (i) above,  to pay the
         amounts  specified in paragraph (ii) of clause "second" of Section 5.03
         hereof then due and payable in respect of the Series B Certificates;

                  (iii) after giving effect to paragraph (ii) above,  to pay the
         amounts specified in paragraph (iii) of clause "second" of Section 5.03
         hereof  then due and  payable in respect of the Series C  Certificates;
         and

                  (iv) after giving effect to paragraph  (iii) above, to pay the
         amounts  specified in paragraph (iv) of clause "second" of Section 5.03
         hereof then due and payable in respect of the Series D Certificates;

         provided,  that payments  pursuant to this clause "second" shall be made without the payment of Make-Whole
         Premium; and

third,   as provided in clause "third" of Section 5.03 hereof;

provided that if a Replacement  Airframe  shall be  substituted  for an Airframe
subject to an Event of Loss as  provided  in Section  11(a)(1)  of the Lease and
Section 9.08 hereof,  any proceeds  which result from such Event of Loss and are
paid to the Indenture  Trustee shall be held by the Indenture Trustee as part of
the Trust Indenture  Estate and, unless  otherwise  applied  pursuant to Section
5.01 or 5.03  hereof,  such  proceeds  shall be  released to the Lessee upon the
release of such damaged Airframe and the replacement thereof as herein provided.

         (b) Any amounts  received  directly or indirectly from any governmental
authority,  insurer or other party pursuant to any provision of Section 11 or 12
of the Lease as the result of loss or damage not  constituting  an Event of Loss
with respect to the Aircraft, or as a result of such loss or damage constituting
an Event of Loss if and to the  extent  that such  amounts  would at the time be
required to be paid to the Lessee  pursuant to Section 11 or 12 but for the fact
that a  Specified  Default  exists  shall be held by the  Indenture  Trustee  as
security for the obligations of the Lessee under the Lease and the Participation
Agreement  and shall be invested in  accordance  with the terms of Section  5.08
hereof and at such time as the conditions for payment to the Lessee specified in
Section  11 or 12,  as the case  may be,  shall be  fulfilled  and no  Specified
Default exists, such amount, and the proceeds of any investment thereof,  shall,
to the  extent  not  theretofore  applied,  be paid to the  Lessee to the extent
provided in the Lease.

         Section 5.03. Payment After Indenture Event of Default.  etc. Except as
otherwise  provided in Sections 5.02(b),  5.04(b),  5.04(c) and 5.05 hereof, all
payments  (other  than  Excepted  Payments)  received  and all  amounts  held or
realized by the Indenture Trustee after an Indenture Event of Default shall have
occurred and so long as such an Indenture  Event of Default shall be continuing,
and after the  Certificates  shall have  become due and  payable as  provided in
Section  7.02(b) or (c) hereof,  shall be promptly  distributed by the Indenture
Trustee in the following order of priority:

first,            so much of such payments or amounts as shall be required to reimburse  the Indenture  Trustee for
-----
                  any tax,  expense,  charge or other  loss  (including,  without  limitation,  all  amounts  to be
                  expended at the expense of, or charged  upon the tolls,  rents,  revenues,  issues,  products and
                  profits of, the  property  included in the Trust  Indenture  Estate  pursuant to Section  7.03(b)
                  hereof) incurred by the Indenture Trustee (to the extent not previously  reimbursed)  (including,
                  without  limitation,  the expenses of any sale, taking or other  proceeding,  attorneys' fees and
                  expenses,  court costs, and any other  expenditures  incurred or expenditures or advances made by
                  the Indenture  Trustee or the Holders in the  protection,  exercise or  enforcement of any right,
                  power or remedy or any damages sustained by the Indenture  Trustee or the Holders,  liquidated or
                  otherwise,  upon such Indenture  Event of Default)  shall be applied by the Indenture  Trustee as
                  between itself and the Holders in reimbursement of such expenses;

second,           (i)      so much of such  payments or amounts  remaining  as shall be required to pay in full the
------
                  aggregate  unpaid  Principal  Amount of all Series A  Certificates,  and the  accrued  but unpaid
                  interest and other amounts due thereon and all other Secured  Obligations  (other than Make-Whole
                  Premium)  in  respect  of the  Series  A  Certificates  to the  date of  distribution,  shall  be
                  distributed to the Holders of Series A  Certificates,  and in case the aggregate  amount so to be
                  distributed  shall be insufficient to pay in full as aforesaid,  then ratably,  without  priority
                  of one over the other,  in the  proportion  that the  aggregate  unpaid  Principal  Amount of all
                  Series A  Certificates  held by each  Holder  plus the  accrued  but  unpaid  interest  and other
                  amounts  due  hereunder  or  thereunder   (other  than   Make-Whole   Premium)  to  the  date  of
                  distribution,  bears to the aggregate unpaid  Principal Amount of all Series A Certificates  held
                  by all such Holders plus the accrued but unpaid  interest  and other  amounts due thereon  (other
                  than Make-Whole Premium) to the date of distribution;

                  (ii) after giving  effect to paragraph  (i) above,  so much of
                  such payments or amounts remaining as shall be required to pay
                  in full the aggregate  unpaid Principal Amount of all Series B
                  Certificates,  and the accrued but unpaid  interest  and other
                  amounts due thereon and all other Secured  Obligations  (other
                  than   Make-Whole   Premium)   in  respect  of  the  Series  B
                  Certificates to the date of distribution, shall be distributed
                  to the  Holders  of  Series  B  Certificates,  and in case the
                  aggregate amount so to be distributed shall be insufficient to
                  pay in full as aforesaid,  then ratably,  without  priority of
                  one over  the  other,  in the  proportion  that the  aggregate
                  unpaid Principal  Amount of all Series B Certificates  held by
                  each Holder plus the  accrued  but unpaid  interest  and other
                  amounts due  hereunder or  thereunder  (other than  Make-Whole
                  Premium) to the date of  distribution,  bears to the aggregate
                  unpaid Principal  Amount of all Series B Certificates  held by
                  all such  Holders  plus the  accrued but unpaid  interest  and
                  other amounts due thereon (other than  Make-Whole  Premium) to
                  the date of distribution;

                  (iii) after giving effect to paragraph (ii) above,  so much of
                  such payments or amounts remaining as shall be required to pay
                  in full the aggregate  unpaid Principal Amount of all Series C
                  Certificates,  and the accrued but unpaid  interest  and other
                  amounts due thereon and all other Secured  Obligations  (other
                  than   Make-Whole   Premium)   in  respect  of  the  Series  C
                  Certificates to the date of distribution, shall be distributed
                  to the  Holders  of  Series  C  Certificates,  and in case the
                  aggregate amount so to be distributed shall be insufficient to
                  pay in full as aforesaid,  then ratably,  without  priority of
                  one over  the  other,  in the  proportion  that the  aggregate
                  unpaid Principal  Amount of all Series C Certificates  held by
                  each Holder plus the  accrued  but unpaid  interest  and other
                  amounts due  hereunder or  thereunder  (other than  Make-Whole
                  Premium) to the date of  distribution,  bears to the aggregate
                  unpaid Principal  Amount of all Series C Certificates  held by
                  all such  Holders  plus the  accrued but unpaid  interest  and
                  other amounts due thereon (other than  Make-Whole  Premium) to
                  the date of distribution; and

                  (iv) after giving effect to paragraph  (iii) above, so much of
                  such payments or amounts remaining as shall be required to pay
                  in full the aggregate  unpaid Principal Amount of all Series D
                  Certificates,  and the accrued but unpaid  interest  and other
                  amounts due thereon and all other Secured  Obligations  (other
                  than   Make-Whole   Premium)   in  respect  of  the  Series  D
                  Certificates to the date of distribution, shall be distributed
                  to the  Holders  of  Series  D  Certificates,  and in case the
                  aggregate amount so to be distributed shall be insufficient to
                  pay in full as aforesaid,  then ratably,  without  priority of
                  one over  the  other,  in the  proportion  that the  aggregate
                  unpaid Principal  Amount of all Series D Certificates  held by
                  each Holder plus the  accrued  but unpaid  interest  and other
                  amounts due  hereunder or  thereunder  (other than  Make-Whole
                  Premium) to the date of  distribution,  bears to the aggregate
                  unpaid Principal  Amount of all Series D Certificates  held by
                  all such  Holders  plus the  accrued but unpaid  interest  and
                  other amounts due thereon (other than  Make-Whole  Premium) to
                  the date of distribution;

                  (it being  understood  that amounts  payable under this clause
                  "second" shall not in any event include  Make-Whole  Premium);
                  and

third,            the  balance,  if any of such  payments  or amounts  remaining
                  thereafter  shall be  distributed  to the  Owner  Trustee  for
                  distribution pursuant to the Trust Agreement.

         Section 5.04.     Certain  Payments.  (a) Except as  otherwise  provided in this  Indenture,  any payments
received  by the  Indenture  Trustee  which  are to be held or  applied  according  to any  provision  in any other
Indenture Document shall be held or applied thereunder in accordance therewith.

         (b) The Indenture Trustee will distribute,  promptly upon receipt,  any
indemnity or other  payment  received by it from the Owner Trustee or the Lessee
in respect of (i) the Indenture  Trustee in its  individual  capacity,  (ii) the
Subordination  Agent, (iii) each Liquidity  Provider,  and (iv) the Pass-Through
Trustee,  in each case whether  pursuant to Article 8 or 9 of the  Participation
Agreement or as Supplemental Rent, directly to the Person (which may include the
Indenture  Trustee)  entitled  thereto.  Any payment  received by the  Indenture
Trustee  under  clause  (b) of the  last  paragraph  of  Section  2.04  shall be
distributed to the Subordination  Agent to be distributed in accordance with the
terms of the Intercreditor Agreement.

         (c) Notwithstanding anything to the contrary contained herein, any sums
received by the Indenture  Trustee which constitute  Excepted  Payments shall be
distributed  promptly  upon  receipt by the  Indenture  Trustee  directly to the
Person or Persons entitled thereto.

         Section 5.05.  Other Payments.  Any payments  received by the Indenture
Trustee for which no provision as to the  application  thereof is made elsewhere
in this Indenture or in any other Indenture Document shall be distributed by the
Indenture  Trustee  (a) to the extent  received or realized at any time prior to
the payment in full of all obligations to the Holders,  in the order of priority
specified in Section 5.01 hereof,  and (b) to the extent received or realized at
any  time  after  payment  in full of all  obligations  to the  Holders,  in the
following order of priority:

first,            in the manner provided in clause "first" of Section 5.03 hereof, and
-----                                               -----

second,  in the manner provided in clause "third" of Section 5.03 hereof.

         Section  5.06.  Payments  to Owner  Trustee.  Any  amounts  distributed
hereunder by the  Indenture  Trustee to the Owner  Trustee  shall be paid to the
Owner  Trustee  by wire  transfer  of  immediately  available  funds of the type
received by the Indenture Trustee at such office and to such account or accounts
of such  entity or  entities  as shall be  designated  by notice  from the Owner
Trustee to the Indenture  Trustee from time to time.  The Owner  Trustee  hereby
notifies  the  Indenture  Trustee  that unless and until the  Indenture  Trustee
receives  notice to the  contrary  from the Owner  Trustee,  all  amounts  to be
distributed to the Owner Trustee  hereunder for  distribution in accordance with
the  Trust  Agreement  shall be  distributed  by wire  transfer  of  immediately
available funds of the type received by the Indenture Trustee to such account of
the Owner Participant as may be specified  pursuant to Section 2.06 of the Trust
Agreement.

         Section 5.07.     Application  of Payments.  Each  payment of  principal of and interest or other  amounts
due on each Certificate shall, except as otherwise provided herein, be applied, first, to the payment of interest on
such Certificate due and payable
                  to the date of such payment,  as provided in such Certificate,
                  as well as any interest on overdue  principal  and  Make-Whole
                  Premium, if any, and, to the extent permitted by law, interest
                  and other amounts due thereunder, second, to the payment of any other amount (other than the principal of such
                  Certificate)  due hereunder
                  to the Holder of such Certificate or under such Certificate, third, to the  payment  of the  principal  of such
                  Certificate  if then due  hereunder  or  under  such
-----
                  Certificate and fourth, the balance,  if any remaining  thereafter,  to the payment of the principal of such
                  Certificate remaining  unpaid (applied to the  installments of principal amount in the inverse order of their
                  normal maturity)  (provided that such Certificate shall not be subject to prepayment  without the
                  consent of the  affected  Holder  except as permitted by Sections  6.02,  6.06 and 8.02  hereof);
                  provided  that,  solely for the  purpose of  determining  whether an  Indenture  Event of Default
                  shall  have  occurred  and be  continuing,  each  such  payment  shall be deemed  applied  in the
                  following order of priority:  first, in the manner provided in clause "first" above,  second,  in
                                                -----                                    -----
                  the manner  provided in clause "third" above,  third,  in the manner  provided in clause "second"
                                                  -----                                                     ------
                  above and fourth, in the manner provided in clause "fourth" above.
                                                                      ------

         Section 5.08. Investment of Amounts Held by Indenture Trustee.  Amounts
held by the Indenture  Trustee pursuant to Section 5.02(b) hereof or pursuant to
any  provision  of  any  Indenture  Document  providing  for  investment  by the
Indenture Trustee of sums pursuant to Section 11(e) of the Lease or this Section
5.08 shall be invested by the Indenture  Trustee from time to time in securities
selected  by (i) so long as no Event  of  Default  shall  have  occurred  and be
continuing,  the Lessee (and in the absence of written  direction by the Lessee,
the  Indenture  Trustee  shall invest such monies in direct  obligations  of the
United  States of  America)  or (ii) so long as an Event of  Default  shall have
occurred and be continuing,  the Indenture  Trustee and in each case shall be of
the type  meeting the  criteria  for  Permitted  Investments.  Unless  otherwise
expressly  provided in this  Indenture,  any income  realized as a result of any
such investment,  net of the Indenture Trustee's reasonable fees and expenses in
making such  investment,  shall be held and applied by the Indenture  Trustee in
the same manner as the principal  amount of such investment is to be applied and
any losses,  net of earnings and such  reasonable  fees and  expenses,  shall be
charged against the principal amount  invested.  The Lessee shall be responsible
for and will promptly pay to the Indenture Trustee or the Owner Trustee,  as the
case may be, on  demand,  the amount of any loss  realized  as the result of any
such  investment  (together  with any  fees,  commissions  and  other  costs and
expenses,  if any,  incurred by the  Indenture  Trustee or the Owner  Trustee in
connection  with such  investment),  such amount to be disposed of in accordance
with the terms hereof or the Lease,  as the case may be. The  Indenture  Trustee
shall not be liable for any loss resulting from any investment made by it or any
investment sold by it under this Indenture in accordance with  instructions from
the Lessee other than by reason of its willful  misconduct or gross  negligence,
and any such  investment  may be sold  (without  regard to its  maturity) by the
Indenture Trustee without instructions whenever the Indenture Trustee reasonably
believes  such  sale  is  necessary  to  make a  distribution  required  by this
Indenture.  Notwithstanding the foregoing, amounts paid to the Indenture Trustee
pursuant  to the  first  sentence  of  Section  17.02(b)  of  the  Participation
Agreement  or Section 5.10 hereof  shall be held by the  Indenture  Trustee in a
non-interest  bearing account until  distributed by the Pass-Through  Trustee on
the next succeeding Payment Date.

         Unless otherwise  confirmed in writing,  an account statement delivered
by the Indenture  Trustee to the Owner Trustee (with a copy to the Lessee) shall
be  deemed  written  confirmation  by the  Owner  Trustee  that  the  investment
transactions  identified therein  accurately  reflect the investment  directions
given to the Indenture Trustee by or on behalf of the Lessee,  unless the Lessee
notifies the Indenture  Trustee in writing to the contrary within 30 days of the
date of receipt of such statement.

         Section 5.09.  Withholding  Taxes. The Indenture Trustee shall withhold
any Taxes  required  to be  withheld,  except to the extent  that the Holder has
furnished  evidence  satisfactory to the Indenture Trustee of any exemption from
withholding  claimed by such Holder and under no circumstances shall the failure
of any such Holder to receive any amounts so withheld  constitute  an  Indenture
Event of Default. Notwithstanding any provision to the contrary in Sections 5.01
through 5.05 hereof and subject to Article 8 of the Participation  Agreement, if
the Lessee is required to pay any such Tax, or any interest or penalty  thereon,
or to indemnify the Owner  Participant or the Owner Trustee with respect thereto
pursuant to Section 8.01(c) of the Participation  Agreement, the Lessee shall be
entitled to receive any payments  otherwise  distributable  to the Holder of any
Certificate who was subject to such Tax pursuant to Sections 5.01 to 5.05 hereof
until the  amounts  the  Lessee  shall  have so paid in  respect of any such Tax
[(together with interest thereon at the Debt Rate)] shall have been recovered in
full by the Lessee.

         Section 5.10.  Letter of Credit. If an amount is due and payable by the
Lessee pursuant to the first sentence of Section  17.02(b) of the  Participation
Agreement,  the  Indenture  Trustee  shall  draw upon the Letter of Credit in an
amount equal to such amount due from the Lessee, and such draw shall satisfy the
obligation of the Lessee under such section with respect to such amount.


                                   ARTICLE VI

                           PREPAYMENT OF CERTIFICATES

         Section 6.01.     No Prepayment  Except as Specified.  Except as provided in Sections 6.02,  6.06 and 8.02
hereof, the Certificates may not be prepaid prior to their respective Maturities.

         Section 6.02.     Prepayment of Certificates.  (a) The Outstanding  Certificates  shall be prepaid in full
(and not in part):

                  (i) If an Event of Loss occurs with respect to the Airframe or
         with respect to the Airframe and the Engines or engines then  installed
         on the Airframe  (unless  pursuant to Section 11(a)(1) of the Lease and
         Section 9.08 hereof replacement equipment is substituted therefor).

                  (ii) If the Lessee,  pursuant  to Section  16(a) of the Lease,
         gives  notice of purchase of the  Aircraft  (and Section 2.12 hereof is
         not  applicable  in  connection  with such  purchase),  but  subject to
         Section 6.02(c) below.

                  (iii) If the Owner Participant, or the Owner Trustee on behalf
         of the Owner  Participant,  gives notice of prepayment to the Indenture
         Trustee  pursuant to Section 8.02 hereof (unless such notice is revoked
         in accordance with such Section).

                  (iv) If the  Lessee,  pursuant  to Section  3(g) of the Lease,
         gives notice of a voluntary  termination  for  obsolescence or surplus,
         but subject to Section 6.02(c) below.

                  (v) Pursuant to Section 15.01 of the  Participation  Agreement
         in connection  with a refinancing of the  Certificates,  but subject to
         Section 6.02(c) below.

                  (vi) As  contemplated  by  Section  2.16  hereof  and  Section
         3.05(b) of the  Participation  Agreement if the  Delivery  Date has not
         occurred on or prior to the Cut-Off Date.

                  (vii) At the  option  of the  Owner  Trustee,  with the  prior
         written consent of the Lessee and the Owner Participant,  upon not less
         than 25 days' prior written notice.

                  (viii) If a Triggering Event (as defined in the  Intercreditor
         Agreement)  occurs prior to the earliest of (A) the Delivery  Date, (B)
         the date the  obligations  of the Owner Trustee under the  Certificates
         are  assumed  by  the  Lessee   pursuant  to  Section  3.05(a)  of  the
         Participation Agreement and (iii) the Cut-Off Date.

         (b) In the  event  of a  prepayment  of the  Certificates  pursuant  to
Sections  6.02(a)(ii),  (iv) and (v) above,  the Owner Trustee,  having received
notice  from the Lessee in  accordance  with and subject to the terms of Section
16(a) or 3(g) of the Lease or Article 15 of the Participation  Agreement, as the
case may be, shall give irrevocable  (subject to Section 6.02(c) hereof) written
notice to the  Indenture  Trustee and to the Holders of all of the  Certificates
specifying the Business Day on which the Certificates  shall be prepaid.  In the
case of a prepayment of the Certificates  pursuant to Section  6.02(a)(i) above,
the Certificates shall be prepaid in full on the Loss Payment Date as defined in
Section  11(a)(2) of the Lease. In the case of a prepayment of the  Certificates
pursuant to Section  6.02(a)(iii)  above, the  Certificates  shall be prepaid in
full on the date so designated in the notice referred to in Section 8.02 hereof.
In the case of a prepayment of the Certificates  pursuant to Section 6.02(a)(ii)
or (iv)  above,  the  Certificates  shall be prepaid in full on the  Termination
Date.  In the case of a  prepayment  of the  Certificates  pursuant  to  Section
6.02(a)(v) above, the Certificates shall be prepaid on the effective date of the
Refinancing. In the case of a prepayment of the Certificates pursuant to Section
6.02(a)(vi)  above, the Certificates  shall be prepaid on the 15th day following
the Cut-Off Date. In the case of a prepayment  of the  Certificates  pursuant to
Section  6.02(a)(vii)  above,  the  Certificates  shall be  prepaid  on the date
designated in the notice referred to therein. In the case of a prepayment of the
Certificates pursuant to Section 6.02(a) (viii) above, the Certificates shall be
prepaid  on the  Special  Distribution  Date (as  defined  in the  Intercreditor
Agreement) as provided in Section 2.4(b)(ii) of the Intercreditor Agreement. The
day on which the Certificates are to be prepaid pursuant to this Section 6.01(b)
is herein referred to as the "Prepayment Date".

         On or prior to the Prepayment Date,  immediately  available funds shall
be  deposited  with  the  Indenture  Trustee  in an  amount  in  respect  of the
Certificates equal to:

                  (1) if such prepayment is made pursuant to Section 6.02(a)(i),
         (iii) (if clause (i),  but not clause (ii) or clause (iii) of the first
         sentence of Section  8.02(a) of the  Indenture is  applicable  and such
         prepayment  is made  when an Event of  Default  has  occurred  and been
         continuing  for 180 days or more,  or if clause (ii) or clause (iii) of
         the  first  sentence  of  Section   8.02(a)   hereof  is   applicable),
         6.02(a)(vi)  or  6.02(a)(viii)  above,  the  sum of (A)  the  aggregate
         principal amount of such  Certificates  then  Outstanding,  (B) accrued
         interest on the  Certificates  to the Prepayment Date and (C) all other
         aggregate  sums  due the  Indenture  Trustee  hereunder  or  under  the
         Participation  Agreement or the Lease,  but  excluding  any  Make-Whole
         Premium or other premium or penalty, or

                  (2)  if  such   prepayment   is  made   pursuant   to  Section
         6.02(a)(ii), 6.02(a)(iii) (if clause (i), but not clause (ii) or clause
         (iii) of the first  sentence  of Section  8.02(a) of the  Indenture  is
         applicable  and such  prepayment  is made when an Event of Default  has
         occurred  and been  continuing  for less  than 180  days)  6.02(a)(iv),
         6.02(a)(v) or 6.02(a)(vii)  above, the sum of the amounts  specified in
         clauses  (A),  (B)  and  (C) of  the  preceding  clause  (1)  plus  any
         Make-Whole Premium payable in respect of all Certificates

(the aggregate amount required to be paid pursuant to this sentence being herein
referred to as the "Prepayment Price").

         (c) If, pursuant to the last paragraph of Section 3(g) of the Lease, no
Termination  Date shall  occur,  or if no  refinancing  shall occur  pursuant to
Article 15 of the Participation  Agreement, the Lessee shall give notice thereof
to the Indenture Trustee,  and the prepayment proposed to be effected in respect
thereof shall not occur.

         Section 6.03.  Notice of Prepayment to Holders.  In order to effect any
prepayment set forth in Section 6.02(a) hereof, the Indenture Trustee shall give
prompt notice by first class mail of prepayment to each Holder of an Outstanding
Certificate.  Any notice of prepayment given by the Owner Trustee may be revoked
by the Owner  Trustee  at any time on or before  the  Prepayment  Date by prompt
notice  to  the  Holders  except  as  otherwise  provided  in the  Lease  or the
Participation Agreement.

         All notices of prepayment shall state:

                  (1)      the Prepayment Date,

                  (2)      the applicable basis for determining the Prepayment Price,

                  (3) that on the  Prepayment  Date,  subject to the  provisions
         hereof,  the  Prepayment  Price will become due and  payable,  and that
         interest  on the  Certificates  shall cease to accrue on and after such
         Prepayment Date, and

                  (4) the  place or places  where  such  Certificates  are to be
surrendered for payment.

         Section 6.04.  Deposit of Prepayment  Price and Sinking Fund Redemption
Price. On the Prepayment Date or the Sinking Fund Redemption Date (as defined in
Section 6.06 hereof),  the Owner Trustee shall, to the extent an amount equal to
the Prepayment Price or the Sinking Fund Redemption Price (as defined in Section
6.06  hereof),  as the case may be,  shall not then be held in cash or Permitted
Investments  (marked-to-market  net of all costs  and  expenses  of  liquidation
thereof) by the Indenture  Trustee in immediately  available funds and deposited
for the purpose,  pay to the Indenture Trustee an amount equal to the difference
between (a) the amount then so held and (b) the Prepayment  Price or the Sinking
Fund  Redemption  Price,  as the case may be.  If there  shall so be on  deposit
and/or  deposited the  applicable  Prepayment  Price or Sinking Fund  Redemption
Price on or prior to a Prepayment Date or Sinking Fund Redemption Date, interest
shall cease to accrue in respect of all or, in the case of a  mandatory  sinking
fund  redemption,  the  relevant  portion  being  prepaid  of,  the  Outstanding
Certificates  on and after such  Prepayment Date or such Sinking Fund Redemption
Date.

         Section  6.05.   Certificates   Payable  on  Prepayment  Date.  On  the
Prepayment  Date, the  Outstanding  Certificates  shall (except (A) if the Owner
Trustee has requested the Indenture  Trustee to revoke such notice of prepayment
in  accordance  with  Section  6.03 hereof or (B) as  otherwise  provided in the
Lease)  become due and payable and from and after such  Prepayment  Date (unless
there  shall  be a  default  in  the  payment  of  the  Prepayment  Price)  such
Certificates  shall cease to bear interest.  Upon surrender by any Holder of its
Certificate for prepayment in accordance with said notice,  such Holder shall be
paid the principal amount of its Certificate then outstanding,  accrued interest
thereon to the  Prepayment  Date,  all other sums due to such Holder  hereunder,
under the Participation Agreement or the Lease, plus, if a Make-Whole Premium is
payable pursuant to Section 6.02(b) hereof, the Make-Whole Premium in respect of
such Certificate.

         If any  Certificate  called  for  prepayment  shall not be so paid upon
timely  surrender  thereof for  prepayment,  the  principal  shall,  until paid,
continue  to  bear  interest  from  the  Prepayment  Date at the  interest  rate
applicable to such Certificate.

         Section 6.06. Mandatory Sinking Fund Redemption. The Certificates shall
be subject to partial  redemption,  at the aggregate  principal amount set forth
for the Certificates of the respective Series and Maturity, on a pro rata basis,
on each date  specified in this Section (a "Sinking Fund  Redemption  Date") for
such payment on the Certificates of such Series and Maturity.  The Owner Trustee
shall deposit funds sufficient to pay the Sinking Fund Redemption Price with the
Indenture  Trustee as provided in Section 6.04  hereof.  The  Indenture  Trustee
shall  pay from  the  amounts  so  deposited  on each  applicable  Sinking  Fund
Redemption Date to the  Certificates of each Series in the order of priority set
forth  in  clause  "first"  of  Section  5.01  and  among  the  Holders  of  the
Certificates  of each Series then  Outstanding on a pro rata basis the aggregate
principal amount set forth in Schedule II hereto, together with accrued interest
to such  Sinking  Fund  Redemption  Date,  but without  Make-Whole  Premium (the
"Sinking Fund Redemption Price"):



                                   ARTICLE VII

                      INDENTURE EVENTS OF DEFAULT; REMEDIES
                        OF INDENTURE TRUSTEE AND HOLDERS

         Section 7.01. Indenture Event of Default.  "Indenture Event of Default"
means any of the following  events (whatever the reason for such Indenture Event
of Default and whether it shall be voluntary or  involuntary or come about or be
effected by operation of law or pursuant to or in compliance  with any judgment,
decree  or  order  of  any  court  or  any  order,  rule  or  regulation  of any
administrative or governmental body):

                  (i) any Event of Default  specified in Section 14 of the Lease
         (other  than an Event of  Default  arising  solely as the result of the
         failure to make an Excepted Payment unless the Owner  Participant shall
         notify  the  Indenture  Trustee  in  writing  that such  failure  shall
         constitute an Indenture Event of Default); or

                  (ii) the failure of the Owner  Trustee other than by reason of
         a Default  or an Event of Default  (i) to pay  principal,  interest  or
         Make-Whole  Premium,  if any,  on any  Certificate  when due,  and such
         failure shall have continued unremedied for ten Business Days after the
         date when due or (ii) to pay any other  amounts  hereunder or under the
         Certificates when due and such failure shall have continued  unremedied
         for a  period  of 30  days  after  the  Owner  Trustee  and  the  Owner
         Participant  shall receive  written demand  therefor from the Indenture
         Trustee or by the Holders of not less than 25% in  aggregate  principal
         amount of Outstanding Certificates; or

                  (iii) (A) any  representation  or  warranty  made by SSB,  the
         Owner Trustee, the Owner Participant or any Owner Participant Guarantor
         or any Owner Trustee  Guarantor,  in any Operative  Agreement or in any
         certificate of SSB, the Owner Trustee,  the Owner  Participant,  or any
         Owner Participant  Guarantor  furnished to the Indenture Trustee or any
         Holder in  connection  herewith  or  therewith  or  pursuant  hereto or
         thereto  shall  prove  to have  been  incorrect  when  made and was and
         remains  in  any   respect   material   to  the  Holders  and  if  such
         misrepresentation is capable of being corrected as of a subsequent date
         and  if  such   correction  is  being  sought   diligently,   and  such
         misrepresentation   shall  not  have  been  corrected  within  30  days
         following notice thereof  identified as a "Notice of Indenture Event of
         Default" being given to the Owner Trustee and the Owner  Participant by
         the  Indenture  Trustee or by a Majority  in  Interest  of  Certificate
         Holders; or

                  (B) any (x)  covenant  made by the Owner  Trustee in the fifth
         paragraph following the Habendum Clause hereof or Section  3.05(b)(iii)
         hereof or Section 7.02(b) or 7.12 of the Participation  Agreement shall
         be breached in any respect,  (y) covenant made by the Owner Participant
         in Section 7.02(c) or Section 7.13 of the Participation Agreement shall
         be breached in any  respect,  or (z) other  covenant  made by the Owner
         Trustee,  in its  individual  capacity or as Owner  Trustee,  or by any
         Owner Trustee  Guarantor,  or by any Owner  Participant or by any Owner
         Participant  Guarantor in any Operative  Agreement shall be breached in
         any respect and such breach shall remain  unremedied for a period of 30
         days  after  there has been  given to the Owner  Trustee  and any Owner
         Participant  by the  Indenture  Trustee or by Holders  holding not less
         than 25% in aggregate  principal  amount of Outstanding  Certificates a
         written notice  identified as a "Notice of Indenture  Event of Default"
         specifying such breach and requiring it to be remedied; or

                  (iv) the Owner Trustee, the Lessor's Estate, any Owner Trustee
         Guarantor,  any Owner  Participant or any Owner  Participant  Guarantor
         shall   file  any   petition   or  answer   seeking   for   itself  any
         reorganization,  arrangement, composition,  readjustment,  liquidation,
         dissolution or similar  relief under any present or future  bankruptcy,
         insolvency or similar statute, law or regulation;

                  (v) an order for  relief  shall be  entered  in respect of the
         Owner Trustee or any Owner Trustee  Guarantor or any Owner  Participant
         or any Owner  Participant  Guarantor or the Lessor's  Estate by a court
         having  jurisdiction  in the premises in an involuntary  case under the
         federal  bankruptcy  laws as now or hereafter  in effect;  or the Owner
         Trustee or any Owner Trustee  Guarantor or any Owner Participant or any
         Owner  Participant  Guarantor  or the  Lessor's  Estate  shall file any
         answer  admitting  or not  contesting  the  material  allegations  of a
         petition filed against the Owner Trustee or any Owner Trustee Guarantor
         or any Owner  Participant  or any Owner  Participant  Guarantor  or the
         Lessor's  Estate in any proceeding  referred to in clause (vi) below or
         seek  or  consent  or  acquiesce  in the  appointment  of any  trustee,
         custodian,  receiver or  liquidator  of the Owner  Trustee or any Owner
         Trustee  Guarantor or any Owner  Participant  or any Owner  Participant
         Guarantor or the Lessor's Estate,  as the case may be, or of all or any
         substantial part of its properties; or

                  (vi) without the consent or  acquiescence of the Owner Trustee
         or any Owner Trustee  Guarantor or any Owner  Participant  or any Owner
         Participant  Guarantor or the Lessor's  Estate,  as the case may be, an
         order shall be entered  constituting an order for relief or approving a
         petition for relief or reorganization or any other petition seeking any
         reorganization,  arrangement, composition,  readjustment,  liquidation,
         dissolution  or other  similar  relief  under  any  present  or  future
         bankruptcy, insolvency or similar statute, law or regulation, or if any
         such  petition  shall be filed  against the Owner  Trustee or any Owner
         Trustee  Guarantor or any Owner  Participant  or any Owner  Participant
         Guarantor or the Lessor's Estate, as the case may be, and such petition
         shall not be dismissed  within 60 days,  or if,  without the consent or
         acquiescence of the Owner Trustee or any Owner Trustee Guarantor or any
         Owner  Participant or any Owner  Participant  Guarantor or the Lessor's
         Estate,  as the case may be, an order  shall be  entered  appointing  a
         trustee, custodian,  receiver or liquidator of the Owner Trustee or any
         Owner  Trustee   Guarantor  or  any  Owner  Participant  or  any  Owner
         Participant Guarantor or the Lessor's Estate, as the case may be, or of
         all or any  substantial  part of the properties of the Owner Trustee or
         any  Owner  Trustee  Guarantor  or any Owner  Participant  or any Owner
         Participant  Guarantor or the Lessor's Estate,  as the case may be, and
         such order shall not be dismissed within 60 days; or

                  (vii)  any Owner  Trustee  Guaranty  or any Owner  Participant
         Guaranty  shall cease to be a valid and  enforceable  obligation of any
         Owner Trustee Guarantor or any Owner Participant Guarantor, as the case
         may be, or otherwise shall not be in full force and effect.

         Section 7.02. Remedies. (a) If an Indenture Event of Default shall have
occurred  and be  continuing  and  so  long  as the  same  shall  be  continuing
unremedied,  then and in every such case,  the  Indenture  Trustee may, and when
required by the provisions of Article IX or Section  7.02(c)  hereof,  shall (i)
exercise  any or all of the  rights  and  powers  and  pursue any and all of the
remedies  pursuant to this  Article  VII,  and (ii) in the event such  Indenture
Event of Default is an Indenture  Event of Default  referred to in clause (i) of
Section 7.01 hereof, exercise any and all of the remedies pursuant to Section 15
of the Lease;  provided  that  without the consent of the Owner  Trustee and the
Owner  Participant  such  exercise of  remedies  shall not occur until after the
latest date on which the Owner  Trustee  may cure the  related  Event of Default
pursuant to Section  8.03  hereof.  The  Indenture  Trustee may  (subject to the
provisions of the next succeeding  paragraph) take possession of all or any part
of the  properties  covered or intended  to be covered by the Lien and  security
interest   created  hereby  or  pursuant   hereto  and  may  exclude  the  Owner
Participant,  the Owner  Trustee,  the Lessee and any  transferee  of the Lessee
(subject to Section 15.05  hereof),  and all Persons  claiming under any of them
wholly or partly therefrom.  In addition,  the Indenture Trustee may (subject to
the  provisions of the next  succeeding  paragraph)  exercise any other right or
remedy in lieu of or in addition to the  foregoing  that may be  available to it
under  applicable  law, or proceed by  appropriate  court  action to enforce the
terms hereof,  of the Lease, or both, or to rescind the Lease.  Without limiting
any of the foregoing, it is understood and agreed that the Indenture Trustee may
exercise any right of sale of the Aircraft available to it, even though it shall
not have taken possession of the Aircraft and shall not have possession  thereof
at the time of such sale.

         Notwithstanding the foregoing,  it is understood and agreed that if the
Indenture  Trustee  shall proceed to foreclose  the Lien of this  Indenture,  it
shall  substantially  simultaneously  therewith,  to the  extent  the  Indenture
Trustee is then entitled to do so hereunder and under the Lease, and is not then
stayed or otherwise  prevented  from doing so, proceed (to the extent it has not
already  done so) to declare the Lease in default and  commence  the exercise in
good faith of one or more of the  significant  remedies  under Section 15 of the
Lease (as the  Indenture  Trustee  determines  in its sole  discretion)  for the
purpose of recovering the Aircraft.  It is further understood and agreed that if
the Indenture  Trustee is unable to exercise one or more remedies  under Section
15 of the  Lease  because  of any stay or  operation  of law or  otherwise,  the
Indenture  Trustee shall not be entitled to foreclose the Lien of this Indenture
(A)  until  the  earlier  of (i) 60  days  from  the  date of any  such  stay or
applicable  order under Section 1110 of the  Bankruptcy  Code plus any extension
consented to by the  Indenture  Trustee or the Holders of  Certificates  of such
period as permitted  under Section  1110(b) of the Bankruptcy  Code and (ii) the
date of actual  repossession of the Aircraft by the Indenture  Trustee or (B) if
the Lessee has agreed to perform or assume the Lease  pursuant to Section 365 or
1110 of the Bankruptcy  Code and no Event of Default (other than as specified in
Section  14(f),  (g),  (h) or (i) of the  Lease,  or other  Event of  Default in
respect of which the 30-day  period  referred to in clause  (a)(1)(B)(ii)(l)  of
Section  1110 of the  Bankruptcy  Code  shall  not yet  have  expired)  shall be
continuing.  For the avoidance of doubt,  it is expressly  understood and agreed
that except as aforesaid the above-described  inability of the Indenture Trustee
to exercise  any right or remedy  under the Lease shall in no event and under no
circumstances  prevent the Indenture  Trustee from exercising all of its rights,
powers and remedies under this Indenture,  including,  without limitation,  this
Article  VII.  The  Indenture  Trustee  further  agrees that notice of intent to
foreclose shall be given to the Owner Trustee at the earlier of the commencement
of any proceeding or at least 30 days prior to the  consummation  of foreclosure
of the Lien of this Indenture.

         (b) If an Indenture  Event of Default under clause (iv), (v) or (vi) of
Section 7.01 hereof shall occur and be continuing,  the unpaid  principal of all
Outstanding Certificates,  together with interest accrued but unpaid thereon and
all  other  amounts  due  thereunder,  but  without  Make-Whole  Premium,  shall
immediately  become due and payable,  without  presentment,  demand,  protest or
notice, all of which are hereby waived.

         (c) If any  Indenture  Event of Default not  described in the preceding
paragraph  (b) shall have  occurred  and be  continuing,  then and in every such
case,  the  Indenture  Trustee  may on its own accord or at the  direction  of a
Majority in Interest of Certificate  Holders,  at any time, by written notice to
the Owner Trustee,  the Owner Participant and the Lessee,  declare the principal
of all the  Certificates to be due and payable,  whereupon the unpaid  principal
amount of all Outstanding  Certificates,  together with accrued interest thereon
and all other amounts due  thereunder,  but without  Make-Whole  Premium,  shall
immediately become due and payable without presentment, demand, protest or other
notice,  all of which are hereby waived.  At any time after such declaration and
prior to the sale or disposition of the Trust  Indenture  Estate,  however,  the
Holders  of not less  than 50% in  aggregate  principal  amount  of  Outstanding
Certificates,  by notice to the  Indenture  Trustee,  the Owner  Trustee and the
Lessee,  may rescind such declaration,  whether made by the Indenture Trustee on
its own accord or as directed,  if (x) there has been paid or deposited with the
Indenture  Trustee a sum sufficient to pay all overdue  installments of interest
on all Certificates  (together, to the extent permitted by law, with interest on
such overdue  installments of interest),  the principal on any Certificates that
would have become due otherwise than by such  declaration of  acceleration,  all
sums paid or advanced by the  Indenture  Trustee  hereunder  and the  reasonable
compensation, expenses, disbursements and advances of the Indenture Trustee, its
agents and  counsel,  or (y) all  Indenture  Events of Default  (other  than the
nonpayment of principal that has become due solely because of such acceleration)
have been either  cured or waived as provided in Section  7.11  hereof.  No such
rescission  shall affect any subsequent  default or impair any right  consequent
thereon.

         (d) Each Holder  shall be  entitled  at any sale to credit  against any
purchase  price bid at such sale by such  Holder  all or any part of the  unpaid
obligations owing to such Holder secured by the Lien of this Indenture (but only
to the extent that an amount equal to such  purchase  price would have been paid
to such Holder  pursuant to Article V hereof if such purchase price were paid in
cash and the foregoing provisions of this subsection (d) were not given effect).

         Section  7.03.  Return of  Aircraft.  etc.  (a) Subject to Section 7.02
hereof,  if an Indenture Event of Default shall have occurred and be continuing,
at the  request of the  Indenture  Trustee,  the Owner  Trustee  shall  promptly
execute and deliver to the  Indenture  Trustee such  documents as the  Indenture
Trustee may deem  necessary or advisable to enable the  Indenture  Trustee or an
agent or  representative  designated by the Indenture  Trustee,  at such time or
times and  place or  places as the  Indenture  Trustee  may  specify,  to obtain
possession  of all or any  part of the  Trust  Indenture  Estate  to  which  the
Indenture Trustee shall at the time be entitled under this Indenture. Subject to
the  foregoing,  if the Owner  Trustee  shall for any reason fail to execute and
deliver  such  documents  after  such  request  by the  Indenture  Trustee,  the
Indenture Trustee may pursue all or part of such Trust Indenture Estate wherever
it may be found and enter any of the premises of the Lessee or the Owner Trustee
wherever such Trust Indenture  Estate may be or be supposed to be and search for
such  Trust  Indenture  Estate  and take  possession  of and  remove  such Trust
Indenture Estate. All expenses of pursuing,  searching for and taking such Trust
Indenture Estate shall, until paid, be secured by the Lien of this Indenture.

         (b) Upon every such taking of  possession,  the Indenture  Trustee may,
from time to time, at the expense of the Trust Indenture  Estate,  make all such
expenditures  for  maintenance,  insurance  and  repairs  to and of  such  Trust
Indenture  Estate,  as the Indenture Trustee may reasonably deem proper. In each
case subject to Section 7.02 hereof,  the Indenture Trustee shall have the right
to maintain,  use, operate,  store, lease, control or manage the Trust Indenture
Estate and to carry on the business and to exercise all rights and powers of the
Owner  Participant and the Owner Trustee relating to the Trust Indenture Estate,
as the Indenture Trustee may reasonably deem best,  including the right to enter
into any and all such  agreements  with respect to the  maintenance,  insurance,
use, operation,  storage, leasing, control,  management or disposition of all or
any part of the Trust Indenture  Estate as the Indenture  Trustee may determine.
Further, the Indenture Trustee shall be entitled to collect and receive directly
all tolls,  rents  (including  Rent),  revenues,  issues,  income,  products and
profits of the Trust  Indenture  Estate other than  Excepted  Payments,  without
prejudice, however, to the right of the Indenture Trustee under any provision of
this  Indenture  to collect  and  receive  all cash held by, or  required  to be
deposited with, the Indenture  Trustee under this Indenture.  Such tolls,  rents
(including  Rent),  revenues,  issues,  income,  products  and profits  shall be
applied to pay the expenses of the use, operation,  storage,  leasing,  control,
management, or disposition of the Trust Indenture Estate, and of all maintenance
and  repairs,  and to make all  payments  which  the  Indenture  Trustee  may be
required or may reasonably elect to make for any taxes,  assessments,  insurance
or  other  proper  charges  upon  the  Trust  Indenture  Estate  (including  the
employment of engineers  and  accountants  to examine,  inspect and make reports
upon the  properties and books and records of the Owner Trustee and the Lessee),
and all other payments which the Indenture Trustee may be required or authorized
to make under any provision of this  Indenture,  as well as just and  reasonable
compensation  for the  services  of the  Indenture  Trustee  and of all  persons
properly  engaged  and  employed  for such  purposes by the  Indenture  Trustee;
provided,  that any excess  amounts shall be promptly  distributed in accordance
with Section 5.03 hereof.

         (c) Subject to Section  7.02 hereof,  if an Indenture  Event of Default
shall  have  occurred  and be  continuing  and the  Indenture  Trustee  shall be
entitled to exercise remedies hereunder, and subject to Article VIII hereof, the
Indenture Trustee,  either with or without taking possession,  and either before
or after  taking  possession,  and  without  instituting  any legal  proceedings
whatsoever,  may sell,  assign,  transfer and deliver the whole or, from time to
time, to the extent permitted by law, any part of the Trust Indenture Estate, or
any part thereof,  or interest therein, at any private sale or public auction to
the highest bidder, with or without demand, advertisement or notice, except that
in respect of any private sale 30 days' prior written notice by registered  mail
to the Owner Trustee and any Owner  Participant  will be provided,  for cash or,
with the consent of the Owner Trustee and any Owner  Participant,  credit or for
other property,  for immediate or future delivery,  and for such price or prices
and on such terms as the Indenture Trustee in exercising  reasonable  commercial
discretion  may determine;  provided,  that any such action shall be at the time
lawful and that all mandatory  legal  requirements  shall be complied  with. Any
notice required pursuant to the terms hereof in the case of a public sale, shall
state the time and place fixed for such sale. Any such public sale shall be held
at such time or times within  ordinary  business hours as the Indenture  Trustee
shall fix in the notice of such  sale.  At any such  sale,  the Trust  Indenture
Estate may be sold in one lot as an entirety or in separate  lots. The Indenture
Trustee  shall not be  obligated to make any sale  pursuant to such notice.  The
Indenture  Trustee may,  without  notice or  publication,  adjourn any public or
private sale or cause the same to be adjourned from time to time by announcement
at the time and place fixed for such sale,  and any such sale may be made at any
time or place to which the same may be so adjourned  without  further  notice or
publication.  The  Indenture  Trustee may  exercise  such right of sale  without
possession or production of the Certificates or proof of ownership thereof,  and
as  representative  of the Holders may exercise such right without notice to the
Holders or without  including the Holders as parties to any suit or  proceedings
relating to the foreclosure of any part of the Trust Indenture Estate. The Owner
Trustee  shall  execute  any and all such bills of sale,  assignments  and other
documents,  and  perform  and do all  other  acts and  things  requested  by the
Indenture  Trustee  in order to  permit  consummation  of any sale of the  Trust
Indenture  Estate in accordance  with this Section 7.03(c) and to effectuate the
transfer  or  conveyance  referred  to in the  first  sentence  of this  Section
7.03(c).  Notwithstanding  any other provision of this Indenture,  the Indenture
Trustee shall not sell the Trust Indenture Estate or any part thereof unless the
Certificates shall have been accelerated.

         (d) To the extent  permitted by applicable  law, and subject to Section
7.02 hereof, the Indenture Trustee or any Holder may be a purchaser of the Trust
Indenture  Estate  or any  part  thereof  or any  interest  therein  at any sale
thereof,  whether  pursuant to  foreclosure  or power of sale or otherwise.  The
Indenture  Trustee may apply against the purchase price therefor the amount then
due hereunder or under any of the Certificates secured hereby and any Holder may
apply against the purchase  price  therefor the amount then due to it hereunder,
under any other Indenture Document or under the Certificates held by such Holder
to the extent of such  portion of the purchase  price as it would have  received
had it been entitled to share any distribution thereof. The Indenture Trustee or
any Holder or nominee thereof shall, upon any such purchase,  acquire good title
to the property so  purchased,  free of the Lien of this  Indenture  and, to the
extent  permitted by  applicable  law,  free of all rights of  redemption in the
Owner Trustee or the Owner Participant in respect of the property so purchased.

         (e) The Indenture  Trustee shall,  as a matter of right, be entitled to
the appointment of a receiver (who may be the Indenture Trustee or any successor
or nominee)  for all or any part of the Trust  Indenture  Estate,  whether  such
receivership be incidental to a proposed sale of the Trust  Indenture  Estate or
the taking of  possession  thereof or otherwise,  and the Owner  Trustee  hereby
consents  to the  appointment  of such  receiver  and will not  oppose  any such
appointment.  Any receiver  appointed for all or any part of the Trust Indenture
Estate  shall be  entitled  to  exercise  all of the  rights  and  powers of the
Indenture Trustee with respect to the Trust Indenture Estate.

         Section  7.04.  Indenture  Trustee May Prove Debt. If the Owner Trustee
shall fail to pay any amount payable  hereunder or under the  Certificates,  the
Indenture Trustee,  in its own name and as trustee of an express trust, shall be
entitled  and  empowered  to institute  any action or  proceedings  at law or in
equity for the  collection of the sums so due and unpaid,  and may prosecute any
such action or proceedings to judgment or final decree, and may enforce any such
judgment or final  decree  against  the Owner  Trustee and collect in the manner
provided by law out of the property of the Owner Trustee wherever situated,  the
moneys adjudged or decreed to be payable; provided, that any sale of any portion
of the Trust Indenture Estate shall be done in accordance with Sections 7.02 and
7.03(c) hereof.

         In case  there  shall be  pending  proceedings  relative  to the  Owner
Trustee  under the  Bankruptcy  Code or any other  applicable  Federal  or state
bankruptcy,  insolvency or other similar law, or in case a receiver, assignee or
trustee in bankruptcy or  reorganization,  liquidator,  sequestrator  or similar
official shall have been appointed for or taken  possession of the Owner Trustee
or its  property,  or in  case  of any  other  comparable  judicial  proceedings
relative  to the Owner  Trustee,  or to the  creditors  or property of the Owner
Trustee,  the Indenture  Trustee,  irrespective  of whether the principal of the
Certificates  shall then be due and payable as therein or herein expressed or by
declaration or otherwise and irrespective of whether the Indenture Trustee shall
have made any  demand  pursuant  to the  provisions  of this  Section,  shall be
entitled and empowered, by intervention in such proceedings or otherwise:

                  (a) to file and prove a claim or claims  for the whole  amount
         of principal, interest and other amounts owing and unpaid in respect of
         the  Certificates  or  hereunder,  and to file  such  other  papers  or
         documents  as may be necessary or advisable in order to have the claims
         of  the  Indenture   Trustee   (including   any  claim  for  reasonable
         compensation to the Indenture  Trustee and each  predecessor  Indenture
         Trustee,  and their respective agents,  attorneys and counsel,  and for
         reimbursement of the Indenture  Trustee and each predecessor  Indenture
         Trustee,  except as a result of  negligence  or bad  faith)  and of the
         Holders  allowed  in any  judicial  proceedings  relative  to the Owner
         Trustee or to the creditors or property of the Owner Trustee,

                  (b) unless  prohibited by applicable law and  regulations,  to
         vote on behalf of the Holders in any election of a trustee or a standby
         trustee in arrangement, reorganization, liquidation or other bankruptcy
         or insolvency  proceedings or person  performing  similar  functions in
         comparable proceedings, and

                  (c) to  collect  and  receive  any  moneys  or other  property
         payable  or  deliverable  on any such  claims,  and to  distribute  all
         amounts  received  with respect to the claims of the Holders and of the
         Indenture Trustee on their behalf;

and any trustee, receiver, or liquidator, custodian or other similar official is
hereby  authorized  by each of the  Holders to make  payments  to the  Indenture
Trustee,  and,  in the event that the  Indenture  Trustee  shall  consent to the
making of payments directly to the Holders, to pay to the Indenture Trustee such
amounts as shall be sufficient to cover reasonable compensation to the Indenture
Trustee,  each  predecessor  Indenture  Trustee  and  their  respective  agents,
attorneys and counsel, and all other expenses and liabilities incurred,  and all
advances made, by the Indenture  Trustee and each predecessor  Indenture Trustee
except as a result of negligence or willful misconduct.

         Nothing  contained  herein shall be deemed to authorize  the  Indenture
Trustee to  authorize  or consent to or vote for or accept or adopt on behalf of
any Holder any plan of  reorganization,  arrangement,  adjustment or composition
affecting the Certificates or the rights of any Holder thereof,  or to authorize
the Indenture  Trustee to vote in respect of the claim of any Holder in any such
proceeding  except,  as  aforesaid,  to vote for the  election  of a trustee  in
bankruptcy or similar person.

         All rights of action and rights to assert claims under this  Indenture,
or under any of the  Certificates,  may be  enforced  by the  Indenture  Trustee
without the  possession  of such  Certificates.  Any trial or other  proceedings
instituted by the Indenture  Trustee shall be brought in its own name as trustee
of an express trust, and any recovery of judgment, subject to the payment of the
expenses,   disbursements  and  compensation  of  the  Indenture  Trustee,  each
predecessor  Indenture Trustee and their respective agents and attorneys,  shall
be for the ratable benefit of the Holders, as provided herein.

         In any  proceedings  brought  by the  Indenture  Trustee  (and also any
proceedings  involving the  interpretation of any provision of this Indenture to
which the Indenture  Trustee  shall be a party) the  Indenture  Trustee shall be
held to  represent  all the  Holders  of the  Certificates,  and it shall not be
necessary to make any Holders parties to such proceedings.

         Section  7.05.  Remedies  Cumulative.  Each and every right,  power and
remedy given to the Indenture  Trustee in this Indenture shall be cumulative and
shall be in addition to every other right,  power and remedy  specifically given
herein or now or  hereafter  existing at law, in equity or by statute,  and each
and every right, power and remedy whether specifically given herein or otherwise
existing  may be  exercised  from time to time and as often and in such order as
may be  deemed  expedient  by the  Indenture  Trustee  or the  Holders,  and the
exercise or the  beginning  of the  exercise of any power or remedy shall not be
construed  to be a waiver of the right to exercise at the same time or later any
other right,  power or remedy.  No delay or omission by the Indenture Trustee or
of any Holder in the exercise of any right,  remedy or power or in the pursuance
of any remedy shall impair any such right, power or remedy or be construed to be
a waiver of any default on the part of the Owner  Trustee or the Lessee or to be
an acquiescence in any such default.

         Section 7.06. Suits for  Enforcement.  If an Indenture Event of Default
has occurred,  has not been waived and is continuing,  the Indenture Trustee may
in its discretion and subject to its rights of appropriate indemnification under
Sections 7.08 and 9.03 and Article XI hereof  proceed to protect and enforce its
rights and rights of the Holders by such appropriate judicial proceedings as the
Indenture  Trustee shall deem most  effectual to protect and enforce any of such
rights,  either at law or in equity or in bankruptcy  or otherwise,  whether for
the  specific  enforcement  of any  covenant  or  agreement  contained  in  this
Indenture or in aid of the exercise of any power granted in this Indenture or to
enforce any other legal or equitable  right vested in the  Indenture  Trustee or
the Holders by this Indenture or by law; provided,  that any sale of any portion
of the Trust Indenture Estate shall be done in accordance with Sections 7.02 and
7.03(c) hereof.

         Section  7.07  Discontinuance  of  Proceedings.  In case the  Indenture
Trustee or any Holder shall have instituted any proceeding to enforce any right,
power or remedy under this  Indenture by  foreclosure,  entry or otherwise,  and
such  proceeding  shall have been  discontinued  or abandoned  for any reason or
shall have been  determined  adversely to the Indenture  Trustee or such Holder,
then the Owner  Trustee,  the  Indenture  Trustee,  any Owner  Participant,  the
Holders  and the Lessee  shall,  subject to any  binding  determination  in such
proceeding,  be  restored  to their  former  positions  and  rights  under  this
Indenture with respect to the Trust Indenture Estate,  and all rights,  remedies
and powers of the Indenture Trustee and the Holders shall continue as if no such
proceeding had been instituted.

         Section  7.08.  Limitations  on  Suits by  Holders.  No  Holder  of any
Certificate  shall have any right by virtue or by availing of any  provision  of
this  Indenture to institute  any action or proceeding at law or in equity or in
bankruptcy or otherwise upon or under or with respect to this Indenture,  or for
the appointment of a trustee, receiver,  liquidator,  custodian or other similar
official or for any other remedy hereunder,  unless such Holder previously shall
have given to the Indenture  Trustee  written notice that an Indenture  Event of
Default shall then have occurred and be continuing,  as  hereinbefore  provided,
and a Majority  in  Interest  of  Certificate  Holders  shall have made  written
request upon the Indenture  Trustee to institute  such action or  proceedings in
its own name as  trustee  hereunder  and shall  have  offered  to the  Indenture
Trustee such reasonable indemnity as it may require against the costs,  expenses
and liabilities to be incurred therein or thereby and the Indenture  Trustee for
60 days after its receipt of such notice,  request and offer of indemnity  shall
have  failed to  institute  any such  action  or  proceedings  and no  direction
inconsistent  with such written  request  shall have been given to the Indenture
Trustee pursuant to Section 7.10 hereof;  it being understood and intended,  and
being expressly  covenanted by the Holder of each  Certificate  with every other
Holder of each other Certificate and the Indenture Trustee,  that no one or more
Holders  shall  have any right in any  manner  whatever  to  affect,  disturb or
prejudice  the rights of any other  Holder or the Lien of this  Indenture or any
part of the Trust Indenture  Estate or to obtain or seek to obtain priority over
or  preference  to any other  such  Holder or to  enforce  any right  under this
Indenture,  except in the manner provided herein and for the equal,  ratable and
common  benefit  of all  Holders.  For the  protection  and  enforcement  of the
provisions  of this  Section,  each and every Holder and the  Indenture  Trustee
shall be entitled to such relief as can be given either at law or in equity.

         Section   7.09.   Unconditional   Right  of  Holders  to   Payments  on
Certificates.  Notwithstanding  any other  provision in this  Indenture  and any
provision of any Certificate,  the right of any Holder to receive payment of the
principal of and interest and Make-Whole Premium, if any, on such Certificate on
or  after  the  respective  due  dates  and  in the  manner  expressed  in  such
Certificate,  or,  subject to Section  7.08 hereof,  to  institute  suit for the
enforcement  of any such payment on or after such  respective  dates as provided
herein, shall not be impaired or affected without the consent of such Holder.

         Section  7.10.  Control  by  Holders.   The  Majority  in  Interest  of
Certificate  Holders shall have the right to direct the Indenture  Trustee as to
the  time,  method,  and  place of  conducting  any  proceeding  for any  remedy
available to the Indenture  Trustee,  or exercising any trust or power conferred
on the Indenture  Trustee by this Indenture;  provided that such direction shall
not be  otherwise  than  in  accordance  with  law and  the  provisions  of this
Indenture and the Indenture Trustee shall have received,  to the extent provided
in Sections 7.08 and 9.03 and Article XI hereof, such reasonable indemnification
as it may require against the costs,  expenses and liabilities to be incurred by
the Indenture  Trustee;  and provided further that (subject to the provisions of
Section 9.02 hereof) the  Indenture  Trustee  shall have the right to decline to
follow any such  direction if the Indenture  Trustee,  being advised by counsel,
shall  determine  that the action or  proceeding so directed may not lawfully be
taken or if the Indenture  Trustee in good faith by its board of directors,  the
executive  committee,  or a trust committee of directors or Responsible Officers
of the  Indenture  Trustee shall  determine  that the action or  proceedings  so
directed  would  involve the Indenture  Trustee in personal  liability or if the
Indenture  Trustee  in good  faith  shall  so  determine  that  the  actions  or
forebearances  specified  in or  pursuant  to such  direction  shall  be  unduly
prejudicial  to the  interests  of  Holders  not  joining  in the giving of said
direction,  it being  understood  that  (subject  to Section  9.02  hereof)  the
Indenture Trustee shall have no duty to ascertain whether or not such actions or
forebearances are unduly prejudicial to such Holders.

         Nothing  in this  Indenture  shall  impair  the right of the  Indenture
Trustee in its  discretion  to take any action  deemed  proper by the  Indenture
Trustee and which is not  inconsistent  with the  direction  by the  Majority in
Interest of Certificate Holders.

         Section  7.11.   Waiver  of  Past  Indenture   Default.   Upon  written
instructions from the Majority in Interest of Certificate Holders, the Indenture
Trustee shall waive any past Indenture Default and its consequences and upon any
such waiver such Indenture  Default shall cease to exist and any Indenture Event
of  Default  arising  therefrom  shall be deemed  to have  been  cured for every
purpose of this Indenture,  but no such waiver shall extend to any subsequent or
other  Indenture  Default  or impair  any right  consequent  thereon;  provided,
however,  that in the absence of written  instructions from all Holders and each
Liquidity Provider,  the Indenture Trustee shall not waive any Indenture Default
(a) in the  payment  of the  principal  of or  Make-Whole  Premium,  if any,  or
interest on, or other amounts due under,  any Certificate then  Outstanding,  or
(b) in respect of a covenant or provision of this Indenture which, under Article
XIII hereof, cannot be modified or amended without the consent of each Holder.

         Section 7.12. Notice of Indenture Default.  The Indenture Trustee shall
transmit to the Owner Trustee,  the Holders and to any Owner Participant  notice
of any  Indenture  Defaults  actually  known  to a  Responsible  Officer  of the
Indenture  Trustee,  such notice to be transmitted by mail to the Holders within
90 days, and to the Owner Trustee and any Owner  Participant  promptly after the
occurrence  thereof,  unless such Indenture Default shall have been cured before
the giving of such notice;  provided that except in the case of a default in the
payment  of  the  principal  of  or  interest  on  any  Certificate,   under  no
circumstances  shall the Indenture Trustee give such notice to the Holders until
the  expiration  of a period of 60 days from the  occurrence  of such  Indenture
Default; and provided further that, except in the case of default in the payment
of the  principal  of or  interest  on or any other  amount due under any of the
Certificates,  the  Indenture  Trustee  shall be protected in  withholding  such
notice to the Holders if and so long as the board of  directors,  the  executive
committee,  or a trust  committee of directors  or trustees  and/or  Responsible
Officers of the Indenture  Trustee in good faith determines that the withholding
of such notice is in the interests of the Holders.


                                  ARTICLE VIII

                           RIGHTS OF THE OWNER TRUSTEE
                            AND THE OWNER PARTICIPANT


         Section 8.01.  Certain  Rights of Owner Trustee and Owner  Participant.
(a)  Subject to  Section  13.01  hereof  and the  provisions  of  paragraph  (a)
immediately  following  the  Granting  Clause  hereof,  without the consent of a
Majority in Interest  of  Certificate  Holders,  the  respective  parties to the
Indenture Documents may not modify,  amend or supplement any of said agreements,
or give any  consent,  waiver,  authorization  or approval  thereunder,  for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the  provisions  thereof  or of  modifying  in any  manner  the rights of the
respective parties thereunder;  provided, however, that the actions specified in
subsection  (b) of this  Section  8.01,  the actions  specified  in Section 2.18
hereof,  and the amendments  contemplated  by Section 2.03 of the  Participation
Agreement  (subject to the  limitations  set forth therein) may be taken without
the consent of the Indenture Trustee or any Holder.

         (b) Subject to the  provisions of subsection  (c) of this Section 8.01,
the Lessor and the respective  parties to the Indenture  Documents,  at any time
and from time to time,  without the consent of the  Indenture  Trustee or of any
Holder, may:

                  (1) so  long as no  Indenture  Event  of  Default  shall  have
         occurred and be continuing,  modify,  amend or supplement the Lease, or
         give any waiver with respect  thereto,  except that without  compliance
         with subsection (a) of this Section 8.01 the parties to the Lease shall
         not modify, amend or supplement,  or give any waiver for the purpose of
         adding any provisions to or changing in any manner or  eliminating  any
         of the  provisions  thereof or of modifying in any manner the rights of
         the  respective  parties  thereunder,  with  respect  to the  following
         provisions  of the  Lease as in effect on the  effective  date  hereof:
         Sections 2, 3(c) (except to the extent such Section  relates to amounts
         payable  (whether  directly or pursuant to this  Indenture)  to Persons
         other than Holders,  each Liquidity  Provider,  the Subordination Agent
         and the  Indenture  Trustee in its  individual  capacity),  3(e),  3(f)
         (except insofar as it relates to the address or account  information of
         the  Owner  Trustee  or the  Indenture  Trustee)  (other  than  as such
         Sections 3(c), 3(e) and 3(f) may be amended pursuant to Section 3(d) of
         the Lease as in effect on the effective date hereof), 3(g) (except that
         further restrictions may be imposed on the Lessee), 4, 6, 8, 10 (except
         in order to increase the Lessee's  liabilities  or enhance the Lessor's
         rights  thereunder),  11 (except that  additional  requirements  may be
         imposed on the  Lessee),  12 (except for Section  12(e) and except that
         additional  insurance  requirements  may be imposed on the Lessee),  14
         (except to impose  additional or more stringent Events of Default),  15
         (except to impose additional remedies), 20 (except to impose additional
         requirements on the Lessee), 23(f), and 26, and any definition of terms
         used  in the  Lease,  to the  extent  that  any  modification  of  such
         definition  would result in a  modification  of the Lease not permitted
         pursuant to this subsection (b); provided that the parties to the Lease
         may take any such action  without the consent of the Indenture  Trustee
         or any  Holder to the extent  such  action  relates  to the  payment of
         amounts constituting,  or the Owner Trustee's,  the Owner Participant's
         or the  Lessee's  rights  or  obligations  with  respect  to,  Excepted
         Payments  (other  than the  place,  time and  manner of  payment of any
         portion of Basic Rent constituting an Excepted Payment);

                  (2) modify,  amend or supplement  the Trust  Agreement and any
         other Indenture  Document  (other than the Lease and the  Participation
         Agreement), or give any consent, waiver, authorization or approval with
         respect thereto,  in each case only to the extent any such action shall
         not materially adversely impact the interests of the Holders;

                  (3) modify,  amend or supplement the Participation  Agreement,
         or give any consent,  waiver,  authorization  or approval  with respect
         thereto,  except that without  compliance  with  subsection (a) of this
         Section  8.01 the  parties  to the  Participation  Agreement  shall not
         modify, amend or supplement, or give any consent, waiver, authorization
         or approval for the purpose of adding  provisions to or changing in any
         manner or eliminating any of the provisions  thereof or of modifying in
         any  manner  the  rights of the  respective  parties  thereunder,  with
         respect to the following  provisions of the Participation  Agreement as
         in effect on the effective date hereof:  Article 6 and Section 10.01(b)
         (insofar as such Article 6 and Section 10.01(b) relate to the Indenture
         Trustee,  the  Pass-Through  Trustee  and the  Holders),  Article 7 and
         Sections 3.05, 15.01,  17.02 and 17.10 and Articles 8 and 9 (insofar as
         such Articles relate to the Indenture Trustee; it being understood that
         only  the  Indenture  Trustee's  consent  in  respect  thereof  need be
         obtained)  and  any  definition  of  terms  used  in the  Participation
         Agreement, to the extent that any modification of such definition would
         result in a modification of the  Participation  Agreement not permitted
         pursuant to this subsection (b); and

                  (4) modify,  amend or  supplement  any of said  agreements  in
         order to cure any  ambiguity,  to correct or supplement  any provisions
         thereof which may be defective or inconsistent with any other provision
         thereof or of any  provision  of this  Indenture,  or to make any other
         provision  with respect to matters or questions  arising  thereunder or
         under  this  Indenture  which  shall  not  be  inconsistent   with  the
         provisions  of this  Indenture,  provided  the making of any such other
         provision shall not adversely affect the interests of the Holders.

         (c)  No   modification,   amendment,   supplement,   consent,   waiver,
authorization  or  approval  with  respect  to the  Lease  or the  Participation
Agreement, whether effected pursuant to subsection (a) or pursuant to subsection
(b) of this Section 8.01 and anything in such  subsections  or elsewhere in this
Indenture to the  contrary  notwithstanding,  shall,  without the consent of the
Holder of each  Outstanding  Certificate  affected  thereby,  and each Liquidity
Provider,

                  (1) modify,  amend or supplement the Lease in such a way as to
         extend the time of payment  of Basic Rent or  Stipulated  Loss Value or
         Supplemental  Rent payable to the Holders or any Liquidity  Provider or
         any  other  amounts  payable  for the  account  of the  Holders  or any
         Liquidity  Provider (subject in any event to Section 3(e) of the Lease)
         upon the  occurrence of an Event of Loss or  Termination  Value and any
         other  amounts  payable for the account of the Holders  (subject in any
         event to Section 3(e) of the Lease) upon  termination of the Lease with
         respect to the Aircraft  payable under, or as provided in, the Lease as
         in effect on the  effective  date  hereof,  or reduce the amount of any
         installment of Basic Rent or Supplemental Rent so that the same is less
         than the payment of principal of, and interest on the  Certificates and
         Make-Whole Premium, if any, and amounts due to each Liquidity Provider,
         as the case may be, to be made from such  installment  of Basic Rent or
         Supplemental  Rent, or reduce the aggregate  amount of Stipulated  Loss
         Value, or any other amounts payable under, or as provided in, the Lease
         as in  effect  on  the  date  of  the  Indenture  Supplement  upon  the
         occurrence  of an  Event  of Loss so that  the  same is less  than  the
         accrued  interest on and the  principal as of the Loss Payment Date, of
         the  Certificates  at the time  Outstanding  or  reduce  the  amount of
         Termination  Value and any other amounts  payable under, or as provided
         in, the Lease as in effect on the date of the Indenture Supplement upon
         termination  of the Lease with respect to the Aircraft so that the same
         is less than the  accrued  interest  on and  principal  as of the Lease
         Termination Date and Make-Whole Premium, if any, of Certificates at the
         time Outstanding, or

                  (2) modify, amend or supplement the Lease in such a way as to,
         or consent to any assignment of the Lease or give any consent,  waiver,
         authorization  or  approval  which  would,  release the Lessee from its
         absolute and  unconditional  obligations in respect of payment of Basic
         Rent or  Supplemental  Rent,  or  Stipulated  Loss  Value and any other
         amounts payable for the account of the Holders (subject in any event to
         Section 3(e) of the Lease) upon the  occurrence of an Event of Loss, or
         Termination  Value and any other amounts payable for the account of the
         Holders  (subject  in any  event to  Section  3(e) of the  Lease)  with
         respect to the Aircraft, payable under, or as provided in, the Lease as
         in effect on the date of the Indenture Supplement,  except for any such
         assignment  pursuant to Section 2.12 hereof,  and except as provided in
         the Lease as in effect on the date of the Indenture Supplement.

         (d) At all times so long as this Indenture is in effect, the consent of
the Owner Trustee (at the direction of the Owner  Participant) shall be required
in order (i) to amend,  modify or  supplement  the Lease or any other  Operative
Document  to which the Owner  Trustee is a party or to waive  compliance  by the
Lessee  with any of its  obligations  thereunder  and (ii) to grant any  consent
requested under the Lease.

Notwithstanding  the  foregoing,  but subject always to the provision of Section
15.05 hereof,  the Indenture  Trustee shall at all times have the right,  to the
exclusion  of the Owner  Trustee and the Owner  Participant,  to (A) declare the
Lease to be in default  under  Section 15 (other  than with  respect to Excepted
Payments)  thereof and (B) subject  only to the  provisions  of this  Indenture,
exercise  the  remedies  set forth in  Section  15 of the Lease  (other  than in
connection with Excepted Payments) and in Article 7 hereof.

         Nothing  in this  Indenture  shall be  deemed  to  prohibit  the  Owner
Participant  or the Owner  Trustee from making demand on the Lessee for, or from
commencing an action at law to obtain the payment of, or from receiving  payment
of,  any  Excepted  Payment;  provided,  however,  that if the Owner  Trustee is
proceeding  under the Lease, the Owner Trustee shall proceed pursuant to Section
15(a)(5), and only Section 15(a)(5), of the Lease.

         Section  8.02.  Owner  Participant's  Right to Prepay or  Purchase  the
Certificates.  (a) If  (i) an  Event  of  Default  shall  have  occurred  and be
continuing  or (ii) the Indenture  Trustee shall have taken action,  or notified
the Owner  Participant that it intends to take action,  to foreclose the Lien of
this  Indenture or otherwise  commence  the exercise of any  significant  remedy
under  Section 7.02 of this  Indenture or Section 15 of the Lease,  or (iii) the
Certificates  shall have become due and payable  pursuant to Section  7.02(b) or
(c) hereof,  the Owner  Participant (or the Owner Trustee on behalf of the Owner
Participant)  may,  but  shall  be  under  no  obligation  to do  either  of the
following:

         (1) direct the Owner  Trustee to cause the  prepayment  of all, but not
less than all, of the  Certificates  then Outstanding by notifying the Indenture
Trustee of such election, which notice in order to be effective shall state that
it is irrevocable  (except as provided  below) and shall  designate a Prepayment
Date which  shall be a Business  Day which  shall be not less than 15 days after
the date of such notice on which the Owner Trustee shall, in the manner provided
for in Section 6.04 hereof, deposit the sum of amounts contemplated by paragraph
"first" under Section 5.03 and the aggregate  Prepayment  Price  (determined  in
accordance  with  Section  6.02(b)  hereof)  of all such  Certificates  with the
Indenture Trustee. If such payment by the Owner Trustee to the Indenture Trustee
is made,  the  Certificates  shall cease to accrue  interest  from and after the
Prepayment  Date,  and after  distribution  of such payment to the Holders,  the
Indenture Trustee shall release the Trust Indenture Estate from the Lien of this
Indenture; or

         (2)  purchase   all,  but  not  less  than  all,  of  the   Outstanding
Certificates by notifying the Indenture  Trustee of such election,  which notice
in order to be effective shall state that it is irrevocable  (except as provided
below) and shall  designate a date which shall be a Business  Day which shall be
not less than 15 days after the date of such  notice on which the Owner  Trustee
shall pay to the  Indenture  Trustee  an amount  equal to the  aggregate  unpaid
principal amount of all Outstanding Certificates, together with accrued interest
on such  amount to the date of  purchase,  plus all other sums due any Holder or
the  Indenture  Trustee  hereunder or under the  Participation  Agreement or the
Lease, but without any Make-Whole  Premium (provided that the Make-Whole Premium
shall be included if the purchase is made  pursuant to clause  (a)(i) above (but
not  pursuant  to clause  (a)(ii) or  (a)(iii)  above) when the Event of Default
shall have occurred and been continuing for less than 180 days). Upon receipt by
the Indenture Trustee of such amount, each Holder will be deemed, whether or not
Certificates shall have been delivered to the Indenture Trustee on such date, to
have thereupon sold, assigned, transferred and conveyed (and shall promptly take
such actions as the Owner Participant shall reasonably  request to evidence such
sale,  assignment,  transfer and conveyance) to the Owner  Participant  (without
recourse or  warranty  of any kind  except for its own acts),  all of the right,
title and interest of such Holder in and to the Trust Indenture  Estate and this
Indenture and all Certificates  held by such Holder and the former Holders shall
not be  entitled  to  receive  any  interest  on the  principal  amount  of such
Certificates  after the purchase date, and the Owner Participant shall be deemed
to have  assumed  (and shall  promptly  take such  actions  as any Holder  shall
reasonably request to evidence such assumption) all of such Holder's obligations
under the Participation  Agreement and this Indenture arising subsequent to such
sale. If the Owner  Trustee  shall so request,  such Holder will comply with all
the provisions of Section 2.06 of this Indenture to enable new  Certificates  to
be issued to the Owner Participant in such authorized denominations as the Owner
Participant shall request. All charges and expenses required pursuant to Section
2.06 hereof in connection with the issuance of any such new  Certificates  shall
be borne by the Owner Participant.

         (b) From and after the deposit by the Owner  Trustee of the  applicable
Prepayment  Price or  purchase  price with the  Indenture  Trustee  pursuant  to
Section  8.02(a)  hereof,  the Owner  Trustee  shall be entitled to exercise all
remedies of the  Indenture  Trustee  under  Article VII hereof as well as of the
Lessor under the Lease.

         (c) Any  election to prepay or  purchase  the  Certificates  under this
Section 8.02 shall be  irrevocable,  provided that if on the specified  date for
prepayment or purchase,  the Event of Default giving rise to such election shall
no longer be  continuing  under the Lease  such  election  shall be deemed to be
automatically withdrawn.

         Section 8.03.  Certain  Rights of Owner  Participant.  (a) If (A) there
shall  occur an Event of  Default  under the  Lease as a result of the  Lessee's
failure to make any payment of an  installment  of Basic Rent, and (B) the Owner
Trustee shall have paid or caused to be paid on or prior to the date which is 15
Business Days after the Owner  Participant's  receipt of written  notice of such
Event of Default all  principal  and interest on the  Certificates  then due (as
well as any  interest  on  overdue  principal  and (to the extent  permitted  by
applicable law) interest),  but not including any principal or interest becoming
due on account of such Event of Default,  then the failure of the Lessee to make
the payment of such  installment of Basic Rent or of interest on account of such
installment's being overdue shall not constitute or result in an Indenture Event
of Default  under this  Indenture and any  declaration  based solely on the same
shall  be  deemed  to be  automatically  rescinded.  Nothing  contained  in  the
preceding  sentence shall be deemed to entitle the Owner Trustee to exercise any
rights and powers or pursue any remedies  pursuant to Article 15 of the Lease or
otherwise  except  as set forth in this  Indenture,  and  except  that the Owner
Trustee or the Owner Participant may attempt to recover any amount paid by it or
them under this Indenture by demanding of the Lessee payment of such amount,  or
by commencing  an action at law or equity  against the Lessee for the payment of
such amount or taking  appropriate action in a pending action at law against the
Lessee  pursuant to Section  15(a)(5),  but only said Section  15(a)(5),  of the
Lease.  Upon curing any such Event of Default pursuant to this Section 8.03, the
Owner Trustee or the Owner Participant,  as the case may be, shall be subrogated
on an unsecured basis to all the rights of the Indenture Trustee under the Lease
in respect of the payment giving rise to such Event of Default, and any right to
any  interest  in respect of the same,  and shall be  entitled to any payment of
Basic Rent (or interest  thereon) actually made by the Lessee in respect of such
cured  payment  upon receipt by the  Indenture  Trustee;  provided  that no such
amount  shall be paid to the Owner  Trustee or the Owner  Participant  until all
amounts then due and payable to each Certificate Holder hereunder and thereunder
shall  have been  paid in full and no  Indenture  Event of  Default  shall  have
occurred and be  continuing.  Notwithstanding  anything in this Indenture or the
Lease to the contrary, the Owner Participant and the Owner Trustee collectively,
shall not be  entitled  to cure more than six  Events of  Default  (no more than
three of which may be  consecutive)  occasioned  by  defaults  in the payment of
Basic Rent.

         (b) If (A) there  shall  occur an Event of Default  under the Lease for
any reason other than the Lessee's failure to make any payment of an installment
of Basic Rent and (B) the Owner  Trustee  shall have taken or caused to be taken
such action  necessary to cure and shall have cured such Event of Default  prior
to the date which is 15 Business Days after the Owner  Participant's  receipt of
the written  notice of such Event of Default,  then the failure of the Lessee to
perform such covenant,  condition or agreement, the observance or performance of
which was  accomplished  by the Owner Trustee  hereunder shall not constitute or
result in an Indenture Event of Default under this Indenture and any declaration
based solely on the same shall be deemed to be automatically rescinded.  Nothing
contained in the preceding sentence shall be deemed to entitle the Owner Trustee
or the Owner  Participant  to  exercise  any  rights  and  powers or pursue  any
remedies pursuant to Section 15 of the Lease or otherwise except as set forth in
this Indenture,  and except that the Owner Trustee or the Owner  Participant may
attempt  to  recover  any amount  paid by it or them in  effecting  such cure by
demanding  of the Lessee  payment of such amount,  plus any interest  due, or by
commencing  an action at law or in equity  against the Lessee for the payment of
such amount or taking appropriate action in a pending action at law or in equity
against the Lessee pursuant to Section 15(a)(5),  but only Section 15(a)(5),  of
the  Lease.  Upon  curing any such Event of  Default  pursuant  to this  Section
8.03(b),  the Owner Trustee or the Owner Participant,  as the case may be, shall
be  subrogated  to all the rights of the  Indenture  Trustee  under the Lease in
respect of the  payment,  agreement  or  covenant  giving  rise to such Event of
Default,  and any right to any  interest  in respect  of the same,  and shall be
entitled  to any  payment or other  performance  upon  receipt by the  Indenture
Trustee;  provided that no such amount shall be paid to the Owner Trustee or the
Owner  Participant  until all amounts  then due and payable to each  Certificate
Holder  hereunder and  thereunder  shall have been paid in full and no Indenture
Event of Default shall have occurred and be continuing.


                                   ARTICLE IX

                        CONCERNING THE INDENTURE TRUSTEE

         Section  9.01.  Acceptance  of  Trusts.  The  Indenture  Trustee in its
individual capacity hereby accepts the trusts imposed upon it by this Indenture,
and covenants  and agrees to perform the same as expressed  herein and agrees to
receive and disburse all moneys  constituting part of the Trust Indenture Estate
in accordance with the terms hereof.

         Section 9.02 Duties Before, and During, Existence of Indenture Event of
Default.  (a) The  Indenture  Trustee,  prior to the  occurrence of an Indenture
Event of Default  and after the curing or  waiving  of all  Indenture  Events of
Default which may have occurred, undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture.  So long as an Indenture
Event of Default has  occurred and has not been cured or waived,  the  Indenture
Trustee  shall  exercise  such of the  rights  and  powers  vested in it by this
Indenture,  and use the same  degree of care and skill in their  exercise,  as a
prudent man would exercise or use under the  circumstances in the conduct of his
own affairs.  No provision of this  Indenture  shall be construed to relieve the
Indenture Trustee from liability for its own negligent action, its own negligent
failure to act or its own willful misconduct, except that:

         (i) prior to the occurrence of an Indenture  Event of Default and after
the  curing  or  waiving  of all  Indenture  Events  of  Default  which may have
occurred:

                  (x) the duties and obligations of the Indenture  Trustee shall
         be determined solely by the express  provisions of this Indenture,  and
         the Indenture Trustee shall not be liable except for the performance of
         such  duties  and  obligations  as are  specifically  set forth in this
         Indenture,  and no implied covenants or obligations shall be read in to
         this Indenture against the Indenture Trustee; and

                  (y) in the  absence of bad faith on the part of the  Indenture
         Trustee,  the Indenture Trustee may conclusively  rely, as to the truth
         of  the  statements  and  the  correctness  of the  opinions  expressed
         therein, upon any statements, certificates or opinions furnished to the
         Indenture Trustee and conforming to the requirements of this Indenture;
         but in the case of any such  statements,  certificate or opinions which
         by any provision  hereof are  specifically  required to be furnished to
         the Indenture  Trustee,  the Indenture Trustee shall be under a duty to
         examine  the  same to  determine  whether  or not they  conform  to the
         requirements of this Indenture;

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

         (iii) the  Indenture  Trustee  shall not be liable with  respect to any
action taken or not taken by it in good faith in  accordance  with the direction
of the  Holders of not less than a majority  in  aggregate  principal  amount of
Outstanding  Certificates  relating to the time,  method and place of conducting
any proceeding for any remedy available to the Indenture Trustee,  or exercising
any trust or power conferred upon the Indenture Trustee, under this Indenture.

         None of the provisions  contained in this  Indenture  shall require the
Indenture  Trustee to expend or risk its own funds or otherwise  incur  personal
financial  liability in the  performance of any of its duties or in the exercise
of any of its rights or powers,  if the Indenture  Trustee shall have determined
in good faith that the  repayment  of such funds or adequate  indemnity  against
such liability is not reasonably assured to it.

         The Indenture Trustee agrees that it will execute and the Owner Trustee
agrees that it will,  at the  expense of the  Lessee,  file or cause to be filed
such continuation  statements with respect to financing  statements  relating to
the security  interest created hereunder in the Trust Indenture Estate as may be
specified from time to time in written  instructions  of the Holders of not less
than 25% in aggregate  principal amount of Certificates (which instructions may,
by  their  terms,  be  operative  only at a  future  date  and  which  shall  be
accompanied  by the  execution  form of  such  continuation  statement  so to be
filed); provided that,  notwithstanding the foregoing, the Indenture Trustee may
execute and file or cause to be filed any financing statement which it from time
to time deems appropriate.

         (b) If any Event of Default shall have occurred and be continuing  and,
after the latest date on which the Owner  Trustee may cure such Event of Default
pursuant to Section 8.03 hereof,  on request of the Holders of not less than 25%
in aggregate  principal  amount of outstanding  Certificates  (unless  otherwise
instructed  by a greater  percentage)  and  subject to  indemnification,  to the
extent  provided  in  Sections  7.08 and 9.03 and  Article XI hereof,  as it may
require  against  the  costs,  expenses  and  liabilities  to be  incurred,  the
Indenture  Trustee shall exercise such remedies under Section 15 of the Lease as
shall be specified in such request.

         (c) The  Indenture  Trustee  agrees  that it  will,  in its  individual
capacity  and at its own cost and expense (but without any right of indemnity in
respect of any such cost or expense  under  Article XI hereof or under any other
Operative  Agreement)  promptly  take such  action as may be  necessary  duly to
discharge  all  Indenture  Trustee's  Liens on any part of the  Trust  Indenture
Estate.

         (d) The  Indenture  Trustee  will execute and deliver to the Lessee for
filing  in  accordance  with  Section  20 of the Lease  any  properly  presented
document,  instrument or financing or  continuation  statement  specified in any
opinion delivered  pursuant to Section 6.03(e) of the  Participation  Agreement.
The Indenture  Trustee may rely on the act of presentation of any such document,
instrument,  financing or continuation  statement as evidencing the fact that it
is properly  prepared and presented,  provided that the Indenture  Trustee shall
promptly  correct  any  error in any such  document,  instrument,  financing  or
continuation  statement of which a Responsible  Officer of the Indenture Trustee
has actual knowledge.

         (e) The  Indenture  Trustee will furnish to each Holder  promptly  upon
receipt  thereof,  duplicates  or  copies  of all  reports,  notices,  requests,
demands,  certificates,  financial statements and other instruments furnished to
the Indenture Trustee, to the extent that the same shall not have been otherwise
furnished  to such  Holder  pursuant  to this  Indenture  or to the  extent  the
Indenture  Trustee  does not  reasonably  believe  that the same shall have been
furnished by the Lessee directly to such Holder.

         Section 9.03.     Certain Rights of the Indenture Trustee. Subject to Section 9.02 hereof:

         (a) the Indenture  Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution,  Officer's  Certificate or any other
certificate,  statement,  instrument, opinion, report, notice, request, consent,
order,  bond,  debenture,  note,  coupon,  security  or other  paper or document
believed by it to be genuine and to have been signed or  presented by the proper
party or parties;

         (b) any  request,  direction,  order or  demand  of the  Owner  Trustee
mentioned  herein shall be  sufficiently  evidenced by an Officer's  Certificate
(unless other  evidence in respect  thereof be herein  specifically  prescribed)
upon which the  Indenture  Trustee  may rely to prove or  establish a matter set
forth therein;

         (c) the  Indenture  Trustee may consult  with counsel and any advice or
Opinion of Counsel shall be full and complete  authorization  and  protection in
respect of any action taken,  suffered or omitted to be taken by it hereunder in
good faith and in accordance with such advice or Opinion of Counsel;

         (d) the Indenture  Trustee shall be under no obligation to exercise any
of the trusts or powers vested in it by this Indenture at the request,  order or
direction of any of the Holders  pursuant to the  provisions of this  Indenture,
unless such  Holders  shall have  offered to the  Indenture  Trustee  reasonable
security or indemnity against the costs, expenses and liabilities which might be
incurred therein or thereby;

         (e) the  Indenture  Trustee shall not be liable for any action taken or
omitted by it in good faith and  believed by it to be  authorized  or within the
discretion, rights or powers conferred upon it by this Indenture;

         (f) prior to the occurrence of an Indenture Event of Default  hereunder
and after  the  curing or  waiving  of all  Indenture  Events  of  Default,  the
Indenture Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution,  certificate,  statement, instrument, opinion,
report, notice, request, consent, order, approval,  appraisal,  bond, debenture,
note, coupon,  security,  or other paper or document unless requested in writing
to do so by the Majority in Interest of Certificate  Holders;  provided that, if
the payment  within a  reasonable  time to the  Indenture  Trustee of the costs,
expenses  or  liabilities  likely  to be  incurred  by it in the  making of such
investigation  is, in the  opinion  of the  Indenture  Trustee,  not  reasonably
assured to the Indenture  Trustee by the security afforded to it by the terms of
this Indenture,  the Indenture Trustee may require reasonable  indemnity against
such costs, expenses or liabilities as a condition to proceeding; the reasonable
expenses  of every such  examination  shall be paid by the Owner  Trustee or, if
paid by the Indenture Trustee or any predecessor trustee, shall be repaid by the
Owner Trustee upon demand; and

         (g) the  Indenture  Trustee  may  execute  any of the  trusts or powers
hereunder  or perform  any duties  hereunder  either  directly  or by or through
agents or attorneys not regularly in its employ and the Indenture  Trustee shall
not be  responsible  for any  misconduct  or  negligence on the part of any such
agent or attorney appointed with due care by it hereunder.

         Section  9.04.   Indenture   Trustee  Not   Responsible  for  Recitals,
Certificates,  or Proceeds.. The Indenture Trustee assumes no responsibility for
the correctness of the recitals contained herein and in the Certificates, except
the Indenture  Trustee's  certificates of authentication.  The Indenture Trustee
makes no  representation  as to the validity or sufficiency of this Indenture or
of the Certificates.  The Indenture Trustee shall not be accountable for the use
or  application  by the  Owner  Trustee  of any  of the  Certificates  or of the
proceeds thereof.

         Section  9.05.  Indenture  Trustee  and Agents  May Hold  Certificates;
Collections, etc. The Indenture Trustee or any agent of the Indenture Trustee in
its  individual  or any  other  capacity  may  become  the owner or  pledgee  of
Certificates  with the same  rights it would  have if it were not the  Indenture
Trustee or such agent and may otherwise deal with the Owner Trustee and receive,
collect, hold and retain collections from the Owner Trustee with the same rights
it would have if it were not the Indenture Trustee or such agent.

         Section  9.06.  Moneys Held by Indenture  Trustee.  Subject to Sections
5.08  hereof and 14.04  hereof,  all moneys  received by the  Indenture  Trustee
shall,  until  used or  applied  as  herein  provided,  be held in trust for the
purposes for which they were  received,  but need not be  segregated  from other
funds except to the extent required by mandatory  provisions of law. Neither the
Owner Trustee nor, subject to Section 5.08 hereof, the Indenture Trustee nor any
agent thereof  shall be under any liability for interest on any moneys  received
by it hereunder.

         Section  9.07.  Right  of  Indenture   Trustee  to  Rely  on  Officer's
Certificate,  etc.  Subject to Sections  9.02 and 9.03  hereof,  whenever in the
administration  of the trusts of this Indenture the Indenture Trustee shall deem
it necessary or desirable that a matter be proved or established prior to taking
or  suffering  or  omitting  any action  hereunder,  such matter  (unless  other
evidence  in respect  thereof be  specifically  prescribed  herein)  may, in the
absence  of bad  faith on the part of the  Indenture  Trustee,  be  deemed to be
conclusively proved and established by an Officer's Certificate delivered to the
Indenture Trustee, and such certificate, in the absence of bad faith on the part
of the Indenture Trustee, shall be full warrant to the Indenture Trustee for any
action taken,  suffered or omitted by it under the  provisions of this Indenture
upon the faith thereof.

         Section 9.08.  Replacement  Airframes and Replacement  Engines.  At any
time and from time to time any  Airframe or Engine  may,  or is required  to, be
replaced  under  Section  3(i),  11(a),  or 11(b) of the Lease by a  Replacement
Airframe  or  Replacement  Engine,  as the case may be,  shall  be  replaced  in
accordance  with the  provisions of this Section 9.08 and the provisions of such
Sections of the Lease,  the Owner Trustee shall,  from time to time,  direct the
Indenture  Trustee to execute  and  deliver to or as  directed in writing by the
Owner Trustee an appropriate instrument releasing such Airframe and/or Engine as
appropriate  from the Lien of this  Indenture  and the  Indenture  Trustee shall
execute and deliver such instrument as aforesaid  without  recourse or warranty,
but only upon receipt by or deposit with the Indenture Trustee of the following:

         (1) A written  request from the Owner Trustee  requesting  such release
and specifically describing the Airframe and/or Engine(s) to be so released.

         (2) A  certificate  signed by a duly  authorized  officer of the Lessee
stating the following:

         A.       With respect to the replacement of any Airframe:

                  (i) a description of the Airframe subject to the Event of Loss
         including the  manufacturer,  model, FAA registration  number (or other
         applicable registration information) and manufacturer's serial number;

                  (ii) a description of the Replacement Airframe,  including the
         manufacturer,  model,  FAA  registration  number  (or other  applicable
         registration information) and manufacturer's serial number;

                  (iii)  that on the date of the  supplement  to this  Indenture
         relating to the  Replacement  Airframe  the Owner  Trustee  will be the
         legal owner of and have good title to such  Replacement  Airframe  free
         and clear of all Liens except Liens  permitted  under  Section 8 of the
         Lease, that such Replacement  Airframe will on such date be in at least
         as good operating  condition and repair as required by the terms of the
         Lease,  and that such Replacement  Airframe has been or,  substantially
         concurrently with such replacement, will be duly registered in the name
         of the Owner  Trustee  under the  Transportation  Code or under the law
         then  applicable  to the  registration  of the Airframe  subject to the
         Event of Loss  and  that an  airworthiness  certificate  has been  duly
         issued  under the  Aviation  Act (or such  other  applicable  law) with
         respect to such  Replacement  Airframe and that such  registration  and
         certificate  is, or will be, in full  force  and  effect,  and that the
         Lessee will have the full right and  authority to use such  Replacement
         Airframe;

                  (iv) that the insurance required by Section 12 of the Lease is
         in full force and effect with respect to such Replacement Airframe;

                  (v)  that  the  Replacement  Airframe  is of  the  same  or an
         improved  make or model as the Airframe  requested to be released  from
         this Indenture;

                  (vi) that the value of the Replacement Airframe as of the date
         of  such  certificate  is not  less  than  the  value  of the  Airframe
         requested to be released  (assuming  such Airframe was in the condition
         and repair required to be maintained under the Lease);

                  (vii) that no Event of Default exists or would result from the
         making and  granting of the  request for release and the  addition of a
         Replacement Airframe;

                  (viii) that the release of the  Airframe  subject to the Event
         of Loss will not impair the security of the Indenture in  contravention
         of any of the provisions of this Indenture;

                  (ix) that upon such  replacement,  the Lien of this  Indenture
         will apply to the  Replacement  Airframe  and such Lien will be a first
         priority security interest in favor of the Indenture Trustee; and

                  (x) that each of the conditions  specified in Section 11(a)(1)
         of the  Lease  with  respect  to such  Replacement  Airframe  has  been
         satisfied.

         B.       With respect to the replacement of any Engine:

                  (i)      a description of the Engine  subject to the Event of Loss  including the  manufacturer's
         serial number;

                  (ii) a description  of the  Replacement  Engine  including the
         manufacturer's name, the engine model and serial number;

                  (iii)  that on the date of the  supplement  to this  Indenture
         relating to the Replacement  Engine the Owner Trustee will be the legal
         owner of such  Replacement  Engine  free and clear of all Liens  except
         Liens permitted under Section 8 of the Lease, and that such Replacement
         Engine will on such date be in at least as good operating condition and
         repair as required by the terms of the Lease and will otherwise conform
         to the  requirements  set  forth  in  the  definition  of  "Replacement
         Engine";

                  (iv) that the value of the  Replacement  Engine as of the date
         of such  certificate  is not less  than the  value of the  Engine to be
         released  (without  regard to the  number of hours or cycles  remaining
         until the next scheduled  maintenance  visit,  and assuming such Engine
         was in the  condition and repair  required to be  maintained  under the
         Lease);

                  (v) that the  release  of the  Engine  subject to the Event of
         Loss will not impair the security of the Indenture in  contravention of
         any of the provisions of this Indenture;

                  (vi) that upon such  replacement,  the Lien of this  Indenture
         will  apply to the  Replacement  Engine  and such  Lien will be a first
         priority security interest in favor of the Indenture Trustee; and

                  (vii)    that each of the  conditions  specified  in  Section  11(a) or 11(b) of the  Lease  with
         respect to such Replacement Engine has been satisfied.

         (3) The appropriate  instruments (i)  transferring to the Owner Trustee
title to the  Replacement  Airframe  or  Replacement  Engine to be  received  as
consideration  for the Airframe or Engine to be released  and (ii)  assigning to
the Owner Trustee the benefit of all manufacturer's and vendor's warranties,  if
any,  generally   available  with  respect  to  such  Replacement   Airframe  or
Replacement  Engine,  and  a  supplement  to  this  Indenture   subjecting  such
Replacement  Airframe or  Replacement  Engine to the Trust  Agreement and to the
Lien of this Indenture.

         (4) A certificate  from a firm of  independent  aircraft  appraisers of
national standing reasonably satisfactory to the Indenture Trustee and the Owner
Trustee  confirming the accuracy of the information set forth in clause (2)A(vi)
of this Section 9.08.

         (5) The  opinions  of  Troutman  Sanders  LLP,  special  counsel to the
Lessee,  and of Special  Aviation  Counsel,  or (in either  case) other  counsel
reasonably satisfactory to the Indenture Trustee, stating that:

                  (i) the certificates,  opinions and other  instruments  and/or
         property  which have been or are  therewith  delivered to and deposited
         with  the  Indenture  Trustee  conform  to  the  requirements  of  this
         Indenture  and the Lease and, upon the basis of such  application,  the
         property so sold or disposed of may be properly  released from the Lien
         of this  Indenture and all  conditions  precedent  herein  provided for
         relating to such release have been complied with; and

                  (ii) the Replacement  Airframe or Replacement  Engine has been
         validly  subjected  to the Lien of this  Indenture  and  covered by the
         Lease,  the  instruments   subjecting  such  Replacement   Airframe  or
         Replacement  Engine to the Lease and to the Lien of this Indenture,  as
         the case may be, have been duly filed for  recordation  pursuant to the
         Transportation   Code  or  any  other  law  then   applicable   to  the
         registration  of  the  Aircraft,  and  no  further  action,  filing  or
         recording  of any  document  is  necessary  or  advisable  in  order to
         establish and perfect the title of the Owner Trustee to and the Lien of
         this Indenture on such Replacement  Airframe or Replacement  Engine and
         the Indenture Trustee would be entitled to the benefits of Section 1110
         of the  Bankruptcy  Code with respect to such  Replacement  Airframe or
         Replacement  Engine,  provided,  that such  opinion  need not be to the
         effect  specified  in the  foregoing  clause  to the  extent  that  the
         benefits  of such  Section  1110  would not have  been,  by reason of a
         change in law or  governmental  interpretation  thereof  after the date
         hereof, available to the Indenture Trustee with respect to the Aircraft
         immediately  prior  to such  substitution  had  such  Event of Loss not
         occurred.

         Section 9.09 Indenture Supplement for Replacements. In the event of the
substitution of a Replacement  Airframe or a Replacement  Engine as contemplated
by Section 11 of the Lease,  the Owner Trustee and the  Indenture  Trustee agree
for the benefit of the Holders and the  Lessee,  subject to  fulfillment  of the
conditions precedent and compliance by the Lessee with its obligations set forth
in  Section  11 of the  Lease,  to  execute  and  deliver a  supplement  to this
Indenture as contemplated  by Section  9.08(3) hereof and,  provided no Event of
Default shall have occurred and be continuing, execute and deliver to the Lessee
an appropriate  instrument  releasing the Airframe or Engine being replaced from
the Lien of this Indenture.

         Section 9.10.  Effect of Replacement.  In the event of the substitution
of a Replacement  Airframe or a Replacement Engine as contemplated by Section 11
of the Lease and Section 9.08 hereof,  all provisions of this Indenture relating
to the Airframe or Engine or Engines being  replaced shall be applicable to such
Replacement  Airframe or  Replacement  Engine or Engines with the same force and
effect as if such Replacement Airframe or Replacement Engine or Engines were the
same  Airframe  or engine or  engines,  as the case may be, as the  Airframe  or
Engine or Engines  being  replaced but for any Event of Loss with respect to the
Airframe or Engine or Engines being replaced.

         Section 9.11.  Compensation.  The Owner Trustee covenants and agrees to
pay,  and the  Indenture  Trustee  shall  be  entitled  to  receive,  reasonable
compensation and payment or reimbursement for its reasonable advances,  expenses
and  disbursements  (including  the  reasonable  compensation  and  expenses and
disbursements  of its  counsel,  agents and other  persons not  regularly in its
employ)  in  connection  with  its  services  rendered  hereunder  or in any way
relating to or arising out of the  administration  of the Trust Indenture Estate
and shall have a priority claim on the Trust Indenture Estate for the payment of
such compensation,  advances, expenses and disbursements to the extent that such
compensation,  advances,  expenses  and  disbursements  shall not be paid by the
Lessee, and shall have the right to use or apply any moneys held by it hereunder
in the Trust  Indenture  Estate toward such payments;  provided that, so long as
the  Lease is in  effect,  the  Indenture  Trustee  shall not make any claim for
payment under this Section 9.11 against the Owner  Trustee  without first making
demand on the Lessee for payment of such claim.  The  Indenture  Trustee  agrees
that it shall have no right  against any Holder,  SSB, or the Owner  Participant
for any fee as compensation for its services as trustee under this Indenture.


                                    ARTICLE X

                             CONCERNING THE HOLDERS

         Section  10.01.  Evidence of Action Taken by Holders.  (a) Any request,
demand,  authorization,  direction,  notice,  consent,  waiver  or other  action
provided  by this  Indenture  to be given or taken by Holders may be embodied in
and evidenced by one or more instruments of  substantially  similar tenor signed
by such Holders in person or by an agent duly appointed in writing,  and, except
as otherwise  expressly provided herein, such action shall become effective when
such  instrument or instruments  are delivered to the Indenture  Trustee and, if
expressly  required  herein,  to the Owner  Trustee.  Proof of  execution of any
instrument or of a writing appointing any such agent shall be sufficient for any
purpose  of this  Indenture  and  (subject  to  Sections  9.02 and 9.03  hereof)
conclusive in favor of the Indenture  Trustee and the Owner Trustee,  if made in
the manner provided in this Article.

         (b) For the  purpose of  determining  the  Holders  entitled to vote or
consent to any  direction,  waiver or other action of such Holders under Section
7.10 or 7.11  hereof,  the Lessee may set a record date for such vote or consent
by  specifying  such record date in an  Officer's  Certificate  delivered to the
Indenture Trustee.  Such record date shall be a date not more than 15 days prior
to the first solicitation of such vote or consent.

         Section  10.02.  Proof of  Execution of  Instruments  and of Holding of
Certificates.  Subject to Sections  9.02 and 9.03 hereof,  the  execution of any
instrument  by a Holder or his agent or proxy may be proved in  accordance  with
such  reasonable  rules and  regulations  as may be  prescribed by the Indenture
Trustee.  The holding of  Certificates  shall be proved by the  Register or by a
certificate of the Registrar.

         Section  10.03.   Holders  to  Be  Treated  as  Owners.  Prior  to  due
presentment for registration of transfer of any Certificate,  the Owner Trustee,
the Indenture Trustee,  any agent of the Owner Trustee or the Indenture Trustee,
the Paying Agent,  if any, the Registrar and the Lessee shall deem and treat the
Person in whose name such  Certificate  shall be registered upon the Register as
the absolute owner of such Certificate (whether or not such Certificate shall be
overdue and  notwithstanding any notation of ownership or other writing thereon)
for the purpose of receiving  payment of or on account of the  principal of and,
subject to the provisions of this  Indenture,  interest on such  Certificate and
for all other purposes;  and neither the Owner Trustee nor the Indenture Trustee
(nor any agent of the Owner  Trustee or the  Indenture  Trustee)  nor the Paying
Agent,  if any, nor the Registrar nor the Lessee shall be affected by any notice
to the  contrary.  All such  payments  so made to any such  person,  or upon his
order, shall be valid, and, to the extent of the sum or sums so paid,  effectual
to  satisfy  and  discharge  the  liability  for  moneys  payable  upon any such
Certificate.

         Section 10.04. Certificates Owned by Owner Trustee or Lessee Deemed Not
Outstanding.  In  determining  whether  the Holders of the  requisite  aggregate
principal  amount of  Certificates  have concurred in any direction,  consent or
waiver under this Indenture,  Certificates which are owned by the Owner Trustee,
any Owner  Participant,  SSB,  the  Lessee  or any  Affiliate  thereof  shall be
disregarded  and  deemed  not to be  Outstanding  for the  purpose  of any  such
determination;  provided  that  for  the  purpose  of  determining  whether  the
Indenture  Trustee shall be protected in relying on any such direction,  consent
or waiver,  only if a Responsible  Officer of the  Indenture  Trustee has actual
knowledge  that  certain  Certificates  are so owned by any person  directly  or
indirectly  controlling  or  controlled  by or under  direct or indirect  common
control with the Owner Trustee, such Owner Participant,  SSB or the Lessee shall
such  Certificates  be  so  disregarded;   and  provided  further  that  if  all
Certificates  which would be deemed  Outstanding in the absence of the foregoing
provision are owned by the Owner Trustee, SSB or any Owner Participant or by any
Affiliate  thereof,  then such Certificates  shall be deemed Outstanding for the
purpose of any such determination. Certificates so owned which have been pledged
in good faith may be regarded as Outstanding  if the pledgee  establishes to the
satisfaction of the Indenture Trustee the pledgee's right so to act with respect
to such  Certificates  and that the pledgee is not the Owner Trustee,  the Owner
Participant,  SSB or the Lessee or any Person directly or indirectly controlling
or  controlled  by or under  direct or indirect  common  control  with the Owner
Trustee,  the Owner  Participant,  SSB or the Lessee. In case of a dispute as to
such right,  the advice of counsel  shall be full  protection  in respect of any
decision made by the Indenture  Trustee in accordance  with such advice,  unless
the Lessee, the Owner Trustee,  SSB, or the Owner Participant are actually named
in the Register.  Upon request of the Indenture Trustee,  the Owner Trustee, the
Owner  Participant,  SSB and the Lessee shall furnish to the  Indenture  Trustee
promptly an Officer's  Certificate listing and identifying all Certificates,  if
any, known by the Owner Trustee, the Owner Participant,  SSB or the Lessee to be
owned or held by or for the account of any of the above-described  persons; and,
subject  to  Sections  9.02 and 9.03  hereof,  the  Indenture  Trustee  shall be
entitled to accept such  Officer's  Certificate  as  conclusive  evidence of the
facts set forth therein and of the fact that all Certificates not listed therein
are outstanding for the purpose of any such determination.

         Section 10.05.  Right of Revocation of Action Taken.  At any time prior
to (but not after) the  evidencing  to the  Indenture  Trustee,  as  provided in
Section  10.01,  of the taking of any action by the Holders of the percentage in
aggregate  principal amount of the  Certificates  specified in this Indenture in
connection with such action,  any Holder of a Certificate,  the serial number of
which is shown by the  evidence to be included  among the serial  numbers of the
Certificates the Holders of which have consented to such action,  may, by filing
written  notice at the Corporate  Trust  Department and upon proof of holding as
provided  in  this  Article,   revoke  such  action  so  far  as  concerns  such
Certificate.  Except as aforesaid,  any such action taken by the Holder shall be
conclusive  and binding upon such Holder and upon all future  Holders and owners
of such Certificate and of any  Certificates  issued in exchange or substitution
therefor,  irrespective of whether or not any notation in regard thereto is made
upon any such  Certificate or otherwise.  Any action taken by the Holders of the
percentage in aggregate  principal amount of the Certificates  specified in this
Indenture in connection with such action shall be conclusively  binding upon the
Owner Trustee, the Indenture Trustee and the Holders of all the Certificates.

         Section 10.06. ERISA. Any Person,  other than the Subordination  Agent,
any  Pass-Through   Trustee,   and  any  pass-through   trustee  in  respect  of
pass-through  certificates,  if any,  issued in accordance with Section 15.01 of
the Participation Agreement, who is acquiring the Certificates will be deemed to
represent and warrant that (i) no assets of an employee  benefit plan subject to
Title I of ERISA or an individual  retirement account or plan subject to Section
4975 of the Code, or any trust established under any such plan or account,  have
been used to acquire or hold any of the  Certificates,  or (ii) that one or more
administrative  or statutory  exemptions from the prohibited  transaction  rules
under  Section 406 of ERISA and Section 4975 of the Code applies to its purchase
and  holding  of the  Certificates  such that its  purchase  and  holding of the
Certificates  will not  result  in a  non-exempt  prohibited  transaction  under
Section 406 of ERISA and Section 4975 of the Code.


                                   ARTICLE XI

                          INDEMNIFICATION OF INDENTURE
                            TRUSTEE BY OWNER TRUSTEE

         The Owner Trustee, not individually but solely in its capacity as Owner
Trustee  under the Trust  Agreement,  hereby  agrees,  whether or not any of the
transactions contemplated hereby shall be consummated,  to assume liability for,
and  does  hereby  indemnify,  protect,  save and keep  harmless  the  Indenture
Trustee, in its individual  capacity,  and its successors,  assigns,  agents and
servants  solely from the  Lessor's  Estate,  with  respect to the claims of the
Indenture  Trustee for payment or  reimbursement  under  Section 9.11 hereof and
from  and  against  any  and  all  liabilities,  obligations,  losses,  damages,
penalties,  taxes  (excluding  any taxes payable by the Indenture  Trustee on or
measured by any compensation  received by the Indenture Trustee for its services
under  this  Indenture  and any  taxes  excluded  from  the  Lessee's  indemnity
obligation  under  Section  8.01(b)  of the  Participation  Agreement),  claims,
actions,  suits,  costs,  expenses or  disbursements  (including  legal fees and
expenses) of any kind and nature whatsoever which may be imposed on, incurred by
or asserted  against  the  Indenture  Trustee  (whether or not also agreed to be
indemnified  against by any other  person  under any other  document) in any way
relating to or arising out of this Indenture,  or any other Indenture  Documents
or the enforcement of any of the terms of any thereof, or in any way relating to
or  arising  out  of  the  manufacture,  purchase,  acceptance,   nonacceptance,
rejection,  ownership,  delivery, lease, possession, use, operation,  condition,
sale,  return or other  disposition  of the  Aircraft or any Engine  (including,
without limitation,  latent and other defects, whether or not discoverable,  and
any  claim for  patent,  trademark  or  copyright  infringement),  or in any way
relating to or arising out of the  administration  of the Trust Indenture Estate
or the action or inaction of the Indenture Trustee hereunder, except only (a) in
the case of willful  misconduct or gross negligence of the Indenture  Trustee in
the performance of its duties  hereunder,  (b) as may result from the inaccuracy
of any  representation or warranty of the Indenture Trustee in the Participation
Agreement,  (c) as  otherwise  provided  in  Section  9.02(c)  hereof  or (d) as
otherwise  excluded by the terms of Article 8 or Article 9 of the  Participation
Agreement  from the Lessee's  general  indemnity or general tax indemnity to the
Indenture  Trustee under said Article;  provided that so long as the Lease is in
effect, the Indenture Trustee shall not make any claim under this Article XI for
any claim or expense indemnified by the Lessee under the Participation Agreement
without  first making demand on the Lessee for payment of such claim or expense.
The  Indenture  Trustee  shall be  entitled to  indemnification,  from the Trust
Indenture Estate, for any liability,  obligation,  loss, damage, penalty, claim,
action, suit, cost, expense or disbursement indemnified against pursuant to this
Article XI to the extent not  reimbursed  by the Lessee or others,  but  without
releasing any of them from their respective agreements of reimbursement;  and to
secure  the same the  Indenture  Trustee  shall  have a prior  Lien on the Trust
Indenture Estate. The indemnities contained in this Article XI shall survive the
termination  of this  Indenture and the  resignation or removal of the Indenture
Trustee.  Upon payment in full by the Owner Trustee of any indemnity pursuant to
this  Article XI, the Owner  Trustee  shall,  so long as no  Indenture  Event of
Default  shall have occurred and be  continuing,  be subrogated to the rights of
the  Indenture  Trustee,  if any,  in  respect  of the  matter  as to which  the
indemnity was paid.


                                   ARTICLE XII

                               SUCCESSOR TRUSTEES

         Section 12.01.  Notice of Successor  Owner Trustee.  In the case of any
appointment of a successor to the Owner Trustee  pursuant to the Trust Agreement
or any merger,  conversion,  consolidation or sale of  substantially  all of the
corporate trust business of the Owner Trustee  pursuant to the Trust  Agreement,
the  successor  Owner Trustee shall give prompt  written  notice  thereof to the
Indenture Trustee.

         Section   12.02.   Resignation   and  Removal  of  Indenture   Trustee:
Appointment of Successor. (a) The Indenture Trustee or any successor thereto may
resign  at any time  without  cause by giving  at least 30 days'  prior  written
notice to the Owner Trustee, the Owner Participant,  the Lessee and each Holder,
such  resignation to be effective  upon the  acceptance of the  trusteeship by a
successor  Indenture  Trustee.  In  addition,  the  Majority  in Interest of the
Certificate Holders or the Owner Trustee, with the consent of the Lessee and the
Majority  in  Interest  of the  Certificate  Holders  may at any time remove the
Indenture  Trustee  without cause by an  instrument in writing  delivered to the
Lessee, the Owner Trustee, the Owner Participant, and the Indenture Trustee, and
the Indenture  Trustee shall promptly  notify each Holder thereof of such action
in writing,  such removal to be effective upon the acceptance of the trusteeship
by a successor  Indenture Trustee.  In the case of the resignation or removal of
the Indenture Trustee,  the Majority in Interest of the Certificate  Holders, or
the Owner  Trustee,  with the consent of the Lessee and the Majority in Interest
of the  Certificate  Holders,  may appoint a successor  Indenture  Trustee by an
instrument  signed by such Holders.  If a successor  Indenture Trustee shall not
have been appointed  within 30 days after such notice of resignation or removal,
the Indenture Trustee, the Owner Trustee, the Lessee, the Owner Participant,  or
any  Holder  may  apply to any  court of  competent  jurisdiction  to  appoint a
successor Indenture Trustee to act until such time, if any, as a successor shall
have been  appointed  as provided  above.  The  successor  Indenture  Trustee so
appointed by such court shall  immediately and without further act be superseded
by any successor Indenture Trustee appointed as provided above.

         (b)      In case at any time any of the following shall occur:

                  (i) the  Indenture  Trustee  shall  cease  to be  eligible  in
         accordance  with the  provisions of Section 12.03 hereof and shall fail
         to resign after written request therefor by the Owner Trustee or by any
         Holder; or

                  (ii) the Indenture  Trustee shall become  incapable of acting,
         or  shall be  adjudged  a  bankrupt  or  insolvent,  or a  receiver  or
         liquidator  of the  Indenture  Trustee  or of  its  property  shall  be
         appointed,  or any public  officer  shall take charge or control of the
         Indenture  Trustee or of its  property  or affairs  for the  purpose of
         rehabilitation, conservation or liquidation;

then the Owner Trustee may remove the Indenture Trustee and, with the consent of
the Lessee,  appoint a successor  trustee by written  instrument,  in duplicate,
executed  by a  Responsible  Officer  of the  Owner  Trustee,  one copy of which
instrument  shall be delivered to the Indenture  Trustee so removed and one copy
to the successor trustee,  or, subject to the provisions of Section 7.13 hereof,
any Holder  who has been a bona fide  Holder  for at least six  months  may,  on
behalf of  himself  and all others  similarly  situated,  petition  any court of
competent  jurisdiction  for  the  removal  of the  Indenture  Trustee  and  the
appointment of a successor trustee. Such court may thereupon, after such notice,
if any, as it may deem proper and  prescribe,  remove the Indenture  Trustee and
appoint  a  successor  trustee,  which  removal  and  appointment  shall  become
effective upon acceptance of appointment by the successor trustee as provided in
Section 12.04 hereof. The successor Indenture Trustee so appointed by such court
shall  immediately  and  without  further  act be  superseded  by any  successor
Indenture  Trustee  appointed as provided above within one year from the date of
appointment by such court.

         Section 12.03.  Persons Eligible for Appointment as Indenture  Trustee.
There shall at all times be an Indenture Trustee hereunder which shall be (i)(x)
a bank or trust  company  organized  and  doing  business  under the laws of the
United  States of  America or any state or the  District  of  Columbia  having a
combined  capital  and surplus of at least  $100,000,000  or (y) a bank or trust
company whose obligations hereunder are fully guaranteed by a direct or indirect
parent  thereof having a combined  capital and surplus of at least  $100,000,000
and (ii) a Citizen of the  United  States  authorized  under  applicable  law to
exercise  corporate  trust powers and subject to  supervision  of examination by
Federal, state or District of Columbia authority.  If such corporation publishes
reports of condition at least annually,  pursuant to law or to the  requirements
of the aforesaid  supervising or examining  authority,  then for the purposes of
this  Section,  the combined  capital and surplus of such  corporation  shall be
deemed to be its  combined  capital  and surplus as set forth in its most recent
report of  condition so  published.  In case at any time the  Indenture  Trustee
shall cease to be eligible in  accordance  with the  provisions of this Section,
the Indenture Trustee shall resign immediately in the manner and with the effect
specified in Section 12.02 hereof.

         Section  12.04.  Acceptance of Appointment  by Successor  Trustee.  Any
successor  trustee  appointed as provided in Section  12.02 hereof shall execute
and deliver to the Owner Trustee,  the Lessee, and to its predecessor trustee an
instrument  accepting  such  appointment   hereunder,   in  form  and  substance
reasonably  satisfactory to the Owner Trustee,  and thereupon the resignation or
removal of the  predecessor  trustee shall become  effective and such  successor
trustee,  without any further act, deed or conveyance,  shall become vested with
all rights,  powers, duties and obligations of its predecessor  hereunder,  with
like effect as if originally named as trustee herein; but, nevertheless,  on the
written request of the Owner Trustee or of the successor  trustee,  upon payment
of its charges then unpaid, the trustee ceasing to act shall, subject to Section
14.04 hereof,  pay over to the successor  trustee all moneys at the time held by
it hereunder and shall execute and deliver an  instrument  transferring  to such
successor trustee all such rights, powers, duties and obligations.  Upon request
of any such  successor  trustee,  the Owner  Trustee  shall  execute any and all
instruments in writing for more fully and certainly vesting in and confirming to
such successor  trustee all such rights and powers.  Any trustee  ceasing to act
shall,  nevertheless,  retain a prior  claim upon all  property or funds held or
collected  by such  trustee to secure any  amounts  then due it  pursuant to the
provisions of Article XI hereof.

         No  successor  trustee  shall  accept  appointment  as provided in this
Section 12.04 unless at the time of such acceptance such successor trustee shall
be eligible under the provisions of Section 12.03 hereof.

         Upon  acceptance of appointment  by a successor  trustee as provided in
this  Section  12.04,  the  successor  trustee  shall  mail  notice  thereof  by
first-class  mail to the Holders at their last addresses as they shall appear in
the  Register,  and shall mail a copy of such notice to the Lessee and the Owner
Trustee. If the acceptance of appointment is substantially  contemporaneous with
the  resignation,  then the notice called for by the  preceding  sentence may be
combined with the notice called for by Section 12.02 hereof.

         Section  12.05.  Merger,  Consolidation  or  Succession  to Business of
Indenture  Trustee.  Any  corporation  into which the  Indenture  Trustee may be
merged or converted  or with which it may be  consolidated,  or any  corporation
resulting from any merger,  conversion or  consolidation  to which the Indenture
Trustee shall be a party, or any  corporation  succeeding to the corporate trust
business of the  Indenture  Trustee,  shall be the  successor  to the  Indenture
Trustee   hereunder,   provided   that,   anything   herein   to  the   contrary
notwithstanding,  such  corporation  shall be eligible  under the  provisions of
Section  12.03  hereof,  without  the  execution  or  filing of any paper or any
further act on the part of any of the parties hereto.

         In case at the time  such  successor  to the  Indenture  Trustee  shall
succeed to the trusts  created by this Indenture any of the  Certificates  shall
have been  authenticated but not delivered,  any such successor to the Indenture
Trustee may adopt the certificate of authentication of any predecessor Indenture
Trustee and deliver such  Certificates  so  authenticated;  and, in case at that
time any of the Certificates shall not have been authenticated, any successor to
the Indenture Trustee may authenticate  such Certificates  either in the name of
any predecessor hereunder or in the name of the successor Indenture Trustee; and
in all such  cases  such  certificate  shall  have the  full  force  which it is
anywhere in the Certificates or in this Indenture  provided that the certificate
of the  Indenture  Trustee  shall  have;  provided,  that the right to adopt the
certificate  of  authentication  of  any  predecessor  Indenture  Trustee  or to
authenticate Certificates in the name of any predecessor Indenture Trustee shall
apply  only  to  its   successor  or   successors   by  merger,   conversion  or
consolidation.

         Section  12.06.  Appointment of Separate  Trustees.  (a) At any time or
times, for the purpose of meeting any legal  requirements of any jurisdiction in
which any part of the Trust  Indenture  Estate  may at the time be located or in
which any action of the  Indenture  Trustee may be required to be  performed  or
taken,  the Indenture  Trustee,  by an  instrument in writing  signed by it, may
appoint one or more  individuals or corporations to act as a separate trustee or
separate trustees or co-trustee,  acting jointly with the Indenture Trustee,  of
all or any part of the Trust Indenture Estate, to the full extent that local law
makes it necessary for such separate trustee or separate  trustees or co-trustee
acting jointly with the Indenture Trustee to act.

         (b) The Indenture Trustee and, at the request of the Indenture Trustee,
the Owner Trustee,  shall execute,  acknowledge and deliver all such instruments
as may be required by the legal  requirements of any jurisdiction or by any such
separate  trustee or  separate  trustees or  co-trustee  for the purpose of more
fully  confirming  such  title,  rights or duties to such  separate  trustee  or
separate  trustees  or  co-trustee.  Upon  the  acceptance  in  writing  of such
appointment by any such separate trustee or separate trustees or co-trustee, it,
he or they shall be vested with such title to the Trust Indenture  Estate or any
part thereof, and with such rights, powers, duties and obligations,  as shall be
specified in the instrument of appointment,  and such rights, powers, duties and
obligations shall be conferred or imposed upon and exercised or performed by the
Indenture  Trustee,  or the  Indenture  Trustee  and such  separate  trustee  or
separate  trustees or co-trustee  jointly with the Indenture  Trustee subject to
all the terms of this Indenture,  except to the extent that under any law of any
jurisdiction  in  which  any  particular  act or acts  are to be  performed  the
Indenture  Trustee shall be  incompetent  or  unqualified to perform such act or
acts,  in which  event such  rights,  powers,  duties and  obligations  shall be
exercised  and  performed  by such  separate  trustee or  separate  trustees  or
co-trustee,  as the case may be. Any  separate  trustee or separate  trustees or
co-trustee  may,  at any  time  by an  instrument  in  writing,  constitute  the
Indenture  Trustee  its or his  attorney-in-fact  and agent  with full power and
authority to do all acts and things and to exercise all discretion on its or his
behalf and in its or his name. In case any such  separate  trustee or co-trustee
shall die, become  incapable of acting,  resign or be removed,  the title to the
Trust Indenture  Estate and all assets,  property,  rights,  powers,  duties and
obligations and duties of such separate  trustee or co-trustee  shall, so far as
permitted by law, vest in and be exercised by the Indenture Trustee, without the
appointment  of a successor to such separate  trustee or  co-trustee  unless and
until a successor is appointed.

         (c) All provisions of this  Indenture  which are for the benefit of the
Indenture Trustee  (including without limitation Article XI hereof) shall extend
to and apply to each separate  trustee or co-trustee  appointed  pursuant to the
foregoing provisions of this Section 12.06.

         (d) Every additional  trustee and separate trustee  hereunder shall, to
the extent  permitted by law, be  appointed  and act and the  Indenture  Trustee
shall act, subject to the following provisions and conditions:

                  (i) all powers, duties,  obligations and rights conferred upon
         the Indenture  Trustee in respect of the receipt,  custody,  investment
         and  payment  of moneys  shall be  exercised  solely  by the  Indenture
         Trustee;

                  (ii)  all  other  rights,   powers,   duties  and  obligations
         conferred or imposed upon the  Indenture  Trustee shall be conferred or
         imposed and  exercised or performed by the  Indenture  Trustee and such
         additional trustee or trustees and separate trustee or trustees jointly
         except to the extent  that under any law of any  jurisdiction  in which
         any particular act or acts are to be performed,  the Indenture  Trustee
         shall be  incompetent  or  unqualified  to perform such act or acts, in
         which event such rights,  powers, duties and obligations (including the
         holding   of  title  to  the  Trust   Indenture   Estate  in  any  such
         jurisdiction)  shall be  exercised  and  performed  by such  additional
         trustee or trustees or separate trustee or trustees;

                  (iii) no power  hereby given to, or  exercisable  by, any such
         additional trustee or separate trustee shall be exercised  hereunder by
         such  additional  trustee or separate  trustee  except jointly with, or
         with the consent of, the Indenture Trustee; and

                  (iv) no trustee hereunder shall be liable either personally or
         in its  capacity as such  trustee,  by reason of any act or omission of
         any other trustee hereunder.

If at any time the  Indenture  Trustee  shall  deem it no  longer  necessary  or
prudent in order to conform to any such law, the Indenture Trustee shall execute
and  deliver an  indenture  supplemental  hereto and all other  instruments  and
agreements  necessary  or proper to remove any  additional  trustee or  separate
trustee.

         (e) Any  request,  approval  or consent  in  writing  by the  Indenture
Trustee  to any  additional  trustee or  separate  trustee  shall be  sufficient
warrant to such additional  trustee or separate trustee,  as the case may be, to
take such action as may be so requested, approved or consented to.

         (f)  Notwithstanding  any other  provision of this Section  12.06,  the
powers of any additional  trustee or separate  trustee shall not exceed those of
the Indenture Trustee hereunder.


                                  ARTICLE XIII

                       SUPPLEMENTS AND AMENDMENTS TO THIS
                       TRUST INDENTURE AND OTHER DOCUMENTS

         Section 13.01.  Supplemental Indentures Without Consent of Holders. The
Owner  Trustee  (when  authorized  by the Owner  Participant)  and the Indenture
Trustee,  without  consent  of the  Holders,  may  enter  into an  indenture  or
indentures supplemental hereto for one or more of the following purposes:

         (a)      to convey,  transfer,  assign, mortgage or pledge any property or assets to the Indenture Trustee
as security for the Certificates;

         (b) to evidence  the  succession  of another  corporation  to the Owner
Trustee  or  successive  successions,   and  the  assumption  by  the  successor
corporation  of the covenants,  agreements and  obligations of the Owner Trustee
herein and in the Certificates;

         (c)  to add  to  the  covenants  of  the  Owner  Trustee  such  further
covenants,  restrictions,  conditions  or  provisions  as it and  the  Indenture
Trustee shall consider to be for the protection of the Holders,  and to make the
occurrence,  or the  occurrence  and  continuance,  of a  default  in  any  such
additional covenants, restrictions,  conditions or provisions an Indenture Event
of Default  permitting  the  enforcement  of all or any of the several  remedies
provided  herein;  provided,  that in respect of any such  additional  covenant,
restriction,  condition or provision such supplemental indenture may provide for
a  particular  period of grace  after  default  (which  period may be shorter or
longer than that  allowed in the case of other  defaults)  or may provide for an
immediate  enforcement  upon such an Indenture Event of Default or may limit the
remedies  available to the  Indenture  Trustee  upon such an Indenture  Event of
Default  or may limit the right of not less than the  Majority  in  Interest  of
Certificate Holders to waive such an Indenture Event of Default;

         (d) to  surrender  any right or power  conferred  herein upon the Owner
Trustee or the Owner Participant;

         (e) to cure any  ambiguity or to correct or  supplement  any  provision
contained  herein or in any  supplemental  indenture  which may be  defective or
inconsistent  with any other provision  contained  herein or in any supplemental
indenture;  or to make such other  provisions  in regard to matters or questions
arising under this  Indenture or under any  supplemental  indenture as the Owner
Trustee may deem necessary or desirable and which shall not adversely affect the
interests of the Holders;

         (f) to correct or amplify the  description  of any property at any time
subject to the Lien of this  Indenture  or better to assure,  convey and confirm
unto the Indenture Trustee any property subject or required to be subject to the
Lien of this  Indenture or to subject any  Replacement  Airframe or  Replacement
Engine to the Lien of this Indenture in accordance with the provisions hereof or
with the Lease or to release from the Lien of this  Indenture  property that has
been substituted on or removed from the Aircraft as contemplated in Section 3.07
hereof; provided that supplements to this Indenture entered into for the purpose
of subjecting any Replacement Airframe or Replacement Engine to the Lien of this
Indenture need only be executed by the Owner Trustee and the Indenture Trustee;

         (g) to provide for the issuance under this Indenture of Certificates in
coupon form  (including  Certificates  registrable as to principal  only) and to
provide  for  exchangeability  of such  Certificates  with  Certificates  issued
hereunder in fully registered form, and to make all appropriate changes for such
purpose;

         (h)      to effect the  re-registration  of the Aircraft  pursuant to Section 6.03(b) of the Participation
Agreement;

         (i) to add, eliminate or change any provision hereunder so long as such
action shall not adversely affect the interests of the Holders; and

         (j) to  effect  the  amendments  contemplated  by  Section  2.03 of the
Participation  Agreement and/or Section 2.18 hereof,  subject to the limitations
set forth therein.

         The Indenture  Trustee is hereby authorized to join in the execution of
any such supplemental  indenture, to make any further appropriate agreements and
stipulations  which  may be  contained  therein  and to accept  the  conveyance,
transfer,  assignment,  mortgage or pledge of any property  thereunder,  but the
Indenture  Trustee  shall not be obligated  to enter into any such  supplemental
indenture which adversely affects the Indenture Trustee's own rights,  duties or
immunities under this Indenture or otherwise.

         Any such supplemental  indenture may be executed without the consent of
the Holders of Outstanding  Certificates,  notwithstanding any of the provisions
of Section 13.02 hereof.

         Section 13.02.  Supplemental  Indentures With Consent of Holders.  With
the consent  (evidenced as provided in Article X) of the Majority in Interest of
Certificate   Holders,   the  Owner  Trustee  (when   authorized  by  the  Owner
Participant)  and the Indenture  Trustee may, from time to time and at any time,
enter into an indenture  or  indentures  supplemental  hereto for the purpose of
adding any  provisions  to or changing in any manner or  eliminating  any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights of the  Holders;  provided,  however,  that,  without  the
consent of each and every Holder and each Liquidity Provider,  no such amendment
of or supplement  to this  Indenture or any indenture  supplemental  hereto,  or
modification  of the terms of, or consent under,  any thereof,  shall (a) modify
any of the provisions of Section 7.11 hereof or this Section  13.02,  (b) reduce
the amount or extend the time of  payment of any amount  owing or payable  under
any Certificate or reduce the interest  payable on any Certificate  (except that
only the consent of the Holder shall be required for any decrease in any amounts
of or the rate of interest  payable on such Certificate or any extension for the
time of payment  of any amount  payable  under  such  Certificate),  or alter or
modify  the  provisions  of  Article  V  hereof  with  respect  to the  order of
priorities in which  distributions  thereunder shall be made as among Holders of
different  Series of Certificates or as between the Holder and the Owner Trustee
or the Owner Participant or with respect to the amount or time of payment of any
such distribution, or alter or modify the circumstances under which a Make-Whole
Premium  shall be payable,  or alter the  currency  in which any amount  payable
under  any  Certificate  is to be paid,  or impair  the  right of any  Holder to
commence legal proceedings to enforce a right to receive payment hereunder,  (c)
reduce, modify or amend any indemnities in favor of any Holder or in favor of or
to be paid by the Owner  Participant  (except  as  consented  to by each  Person
adversely affected thereby), or (d) create or permit the creation of any Lien on
the Trust  Indenture  Estate or any part thereof prior to or pari passu with the
Lien of this Indenture,  except as expressly  permitted  herein,  or deprive any
Holder of the  benefit  of the Lien of this  Indenture  on the  Trust  Indenture
Estate,  except as provided in Section  7.02  hereof or in  connection  with the
exercise of remedies  under  Article VII.  This Section 13.02 shall not apply to
any indenture or indentures supplemental hereto permitted by, and complying with
the terms of, Section 13.06 hereof.

         Upon the request of the Owner  Trustee (at the  direction  of the Owner
Participant)  and upon the filing with the Indenture  Trustee of evidence of the
consent of Holders and other documents,  if any,  required by Section 10.01, the
Indenture  Trustee  shall  join with the  Owner  Trustee  and the  Lessee in the
execution of such  supplemental  indenture  unless such  supplemental  indenture
affects the  Indenture  Trustee's own rights,  duties or  immunities  under this
Indenture  or  otherwise,  in  which  case  the  Indenture  Trustee  may  in its
discretion,  but  shall  not be  obligated  to,  enter  into  such  supplemental
indenture.

         It shall not be  necessary  for the consent of the  Holders  under this
Section to approve the particular form of any proposed  supplemental  indenture,
but it shall be sufficient if such consent shall approve the substance thereof.

         Promptly  after the  execution  by the  Owner  Trustee,  the  Indenture
Trustee and the Lessee of any supplemental  indenture pursuant to the provisions
of  this  Section,  the  Indenture  Trustee  shall  mail  a  notice  thereof  by
first-class  mail to the Holders at their  addresses as they shall appear on the
registry books of the Registrar, setting forth in general terms the substance of
such supplemental  indenture.  Any failure of the Indenture Trustee to mail such
notice, or any defect therein,  shall not, however,  in any way impair or affect
the validity of any such supplemental indenture.

         Section 13.03. Effect of Supplemental Indenture.  Upon the execution of
any supplemental  indenture  pursuant to the provisions  hereof,  this Indenture
shall be and be deemed to be modified and amended in  accordance  therewith  and
the respective rights, limitations of rights, obligations, duties and immunities
under this Indenture of the Indenture Trustee, the Owner Trustee, the Lessee and
the Holders shall  thereafter be  determined,  exercised and enforced  hereunder
subject in all respects to such modifications and amendments,  and all the terms
and conditions of any such  supplemental  indenture shall be and be deemed to be
part of the terms and conditions of this Indenture for any and all purposes.

         Section  13.04.  Documents  to  Be  Given  to  Indenture  Trustee.  The
Indenture  Trustee,  subject to the  provisions of Sections  9.02 and 9.03,  may
receive an  Officer's  Certificate  and an  Opinion  of  Counsel  as  conclusive
evidence  that any such  supplemental  indenture  complies  with the  applicable
provisions of this Indenture.

         Section  13.05.  Notation on  Certificates  in Respect of  Supplemental
Indentures.  Certificates authenticated and delivered after the execution of any
supplemental  indenture  pursuant to the  provisions  of this Article may bear a
notation in form approved by the Indenture Trustee as to any matter provided for
by such  supplemental  indenture.  If the Owner Trustee or the Indenture Trustee
shall so determine,  new Certificates so modified as to conform,  in the opinion
of the Owner  Trustee and the Indenture  Trustee,  to any  modification  of this
Indenture  contained in any such  supplemental  indenture may be prepared by the
Owner Trustee,  authenticated by the Indenture Trustee and delivered in exchange
for the Outstanding Certificates.

         Section 13.06. No Request  Necessary for Lease  Supplement or Indenture
Supplement.  Notwithstanding  anything  contained in Section  13.02  hereof,  no
written  request or consent of the  Indenture  Trustee,  any Holder or the Owner
Participant  pursuant to Section  13.02  hereof  shall be required to enable the
Owner  Trustee  to enter  into any  supplement  to the Lease  with the Lessee in
accordance  with the terms and  conditions of the Lease to subject a Replacement
Airframe or Replacement  Engine thereto or to execute and deliver any supplement
to the  Indenture  (including  the Indenture  Supplement)  pursuant to the terms
hereof.

         Section 13.07. Notices to Liquidity Providers.  Any request made to any
Holder for consent to any  amendment,  supplement or waiver  pursuant to Section
7.11,  8.01 or this  Article XIII shall be promptly  furnished by the  Indenture
Trustee to each Liquidity Provider.


                                   ARTICLE XIV

                    SATISFACTION AND DISCHARGE OF INDENTURE;
                                UNCLAIMED MONEYS

         Section 14.01. Satisfaction and Discharge of Indenture:  Termination of
Indenture.  If at any time after (a) the Owner Trustee shall have paid or caused
to be paid the  principal  of and interest on all the  Certificates  outstanding
hereunder,  as and when the same shall have become due and  payable,  or (b) the
Owner Trustee shall have delivered to the Indenture Trustee for cancellation all
Certificates theretofore  authenticated (other than any Certificates which shall
have been  destroyed,  lost or stolen and which shall have been replaced or paid
as  provided  in  Section  2.07  hereof)  or (c) (i) all such  Certificates  not
theretofore  delivered  to the  Indenture  Trustee for  cancellation  shall have
become due and payable,  or are by their terms to become due and payable  within
one year or are to be called for prepayment  within one year under  arrangements
satisfactory to the Indenture  Trustee for the giving of notice of prepayment by
the Indenture  Trustee in the name and at the expense of the Owner Trustee,  and
(ii) the  Owner  Trustee  shall  have  irrevocably  deposited  or  caused  to be
deposited  with the  Indenture  Trustee as trust funds the entire amount in cash
(other than moneys  repaid by the  Indenture  Trustee or any paying agent to the
Owner Trustee in accordance with Section 14.04 hereof) or Government obligations
maturing as to principal  and interest in such amounts and at such times as will
insure  the  availability  of  cash  sufficient  to pay  at  maturity  all  such
Certificates   not   theretofore   delivered  to  the   Indenture   Trustee  for
cancellation, including principal and interest due or to become due to such date
of  maturity  as the case may be,  and if, in any such case,  the Owner  Trustee
shall also pay or cause to be paid all other sums then payable  hereunder by the
Owner Trustee,  then this Indenture  shall cease to be of further effect (except
in the case of (c)  above as to (A)  rights  of  registration  of  transfer  and
exchange,  and the Owner  Trustee's  right of  optional  prepayment  pursuant to
Section 6.02(a)(ii) hereof, (B) substitution of mutilated,  defaced,  destroyed,
lost or stolen  Certificates,  (C)  rights of Holders  to  receive  payments  of
principal  thereof and  interest  thereon,  upon the  original  stated due dates
therefor (but not upon acceleration),  (D) the rights, obligations,  indemnities
and  immunities of the Indenture  Trustee  hereunder,  and (E) the rights of the
Holders as  beneficiaries  hereof with respect to the property so deposited with
the Indenture Trustee payable to all or any of them), and the Indenture Trustee,
on demand of the Owner Trustee  accompanied by an Officer's  Certificate  and an
Opinion of Counsel (covering such matters  reasonably  requested by, and in form
and substance reasonably satisfactory to, the Indenture Trustee) and at the cost
and expense of the Owner Trustee, shall execute proper instruments acknowledging
such satisfaction of and discharging this Indenture. The Owner Trustee agrees to
reimburse  and  indemnify  the  Indenture  Trustee  for any  costs  or  expenses
thereafter  reasonably  and properly  incurred and to  compensate  the Indenture
Trustee for any services  thereafter  reasonably  and  properly  rendered by the
Indenture Trustee in connection with this Indenture or the Certificates.

         Upon (or at any time after)  payment in full to the Indenture  Trustee,
as trust funds, of the principal of and interest on and Make-Whole  Premium,  if
any,  and all other  amounts  due  hereunder  and under  all  Certificates,  and
provided that there shall then be no other amounts due to the Indenture  Trustee
hereunder or under the Participation  Agreement or otherwise secured hereby, the
Owner Trustee shall direct the Indenture Trustee to execute and deliver to or as
directed in writing by the Owner Trustee an appropriate instrument releasing the
Aircraft from the Lien of this  Indenture and releasing the Indenture  Documents
from the assignment thereof  hereunder,  and the Indenture Trustee shall execute
and deliver such  instrument as aforesaid and, at the Owner  Trustee's  expense,
will  execute  and  deliver  such  other  instruments  or  documents  as  may be
reasonably  requested  by the Owner  Trustee  to give  effect  to such  release;
provided,  however,  that this  Indenture  and the trusts  created  hereby shall
terminate earlier and this Indenture shall be of no further force or effect upon
any sale or other final  disposition  by the  Indenture  Trustee of all property
forming a part of the Trust Indenture  Estate and the final  distribution by the
Indenture Trustee of all moneys or other property or proceeds  constituting part
of the Trust  Indenture  Estate in accordance  with the terms hereof.  Except as
aforesaid otherwise provided, this Indenture and the trusts created hereby shall
continue in full force and effect in accordance with the terms hereof.

         Section 14.02.  Application by Indenture Trustee of Funds Deposited for
Payment of Certificates.  Subject to Section 14.04 hereof,  all moneys deposited
with the  Indenture  Trustee  pursuant to Section  14.01 hereof shall be held in
trust and applied by it to the prompt  payment,  either  directly or through any
Paying Agent, to the Holders of the particular  Certificates  for the payment or
prepayment of which such moneys have been deposited with the Indenture  Trustee,
of all sums due and to become due thereon for principal, interest and Make-Whole
Premium,  if any, but such money need not be segregated  from other funds except
to the extent required by law.

         Section  14.03.  Repayment  of Moneys  Held by Paying  Agent.  Upon the
satisfaction  and discharge of this Indenture all moneys then held by any Paying
Agent under the  provisions of this  Indenture  shall,  upon demand of the Owner
Trustee,  be repaid to it or paid to the Indenture  Trustee and  thereupon  such
Paying Agent shall be released from all further  liability  with respect to such
moneys.

         Section 14.04.  Transfer of Unclaimed  Money Held by Indenture  Trustee
and Paying Agent.. Any moneys deposited with or paid to the Indenture Trustee or
any Paying Agent for the payment of the  principal of or interest or  Make-Whole
Premium on any Certificate and not applied but remaining unclaimed for two years
and  eleven  months  after the date  upon  which  such  principal,  interest  or
Make-Whole  Premium shall have become due and payable,  shall,  unless otherwise
required by mandatory provisions of applicable escheat or abandoned or unclaimed
property law, be paid to the Owner Trustee (or, if the Trust  Agreement shall no
longer be in effect, to the Owner  Participant) by the Indenture Trustee or such
Paying  Agent  and  the  Holder  of such  Certificate,  as a  general  unsecured
creditor, shall, unless otherwise required by mandatory provisions of applicable
escheat or abandoned or unclaimed  property  laws,  thereafter  look only to the
Owner Trustee (or the Owner  Participant)  for any payment which such Holder may
be entitled to collect,  and all  liability  of the  Indenture  Trustee,  or any
Paying Agent with respect to such moneys shall thereupon cease.


                                   ARTICLE XV

                                  MISCELLANEOUS

         Section 15.01.  Capacity in Which Acting. Each of SSB (or its permitted
successors or assigns) and FNBM acts  hereunder not in its  individual  capacity
but  solely as  trustee  except as  expressly  provided  herein and in the other
Operative  Documents,  and, in the case of SSB (or its  permitted  successors or
assigns), in the Trust Agreement.

         Section 15.02. No Legal Title to Trust Indenture Estate in Holders.  No
Holder  shall have legal  title to any part of the Trust  Indenture  Estate.  No
transfer,  by operation of law or otherwise,  of any Certificate or other right,
title  and  interest  of any  Holder  in and to the  Trust  Indenture  Estate or
hereunder  shall operate to terminate  this  Indenture or entitle such Holder or
any  successor or  transferee of such Holder to an accounting or to the transfer
to it of legal title to any part of the Trust Indenture Estate.

         Section 15.03.  Sale of Trust Indenture Estate by Indenture  Trustee is
Binding.  Any sale or other conveyance of all or any part of the Trust Indenture
Estate by the Indenture  Trustee made pursuant to the terms of this Indenture or
of the Lease shall bind the Lessee, the Owner Trustee, the Holders and the Owner
Participant  and shall be effective  to transfer or convey all right,  title and
interest of the Indenture Trustee,  the Owner Trustee, the Owner Participant and
such  Holders  therein and  thereto.  No  purchaser  or other  grantee  shall be
required to inquire as to the authorization, necessity, expediency or regularity
of  such  sale or  conveyance  or as to the  application  of any  sale or  other
proceeds with respect thereto by the Indenture Trustee.

         Section 15.04. Indenture Benefits Trustees,  Participants,  Lessee, and
Liquidity Providers Only. Nothing in this Indenture, whether express or implied,
shall be construed to give to any person other than SSB, the Owner Trustee,  the
Lessee,  FNBM,  the Indenture  Trustee,  the Owner  Participant,  each Liquidity
Provider and the Holders any legal or equitable right,  remedy or claim under or
in respect of this  Indenture.  Upon  termination of this Indenture  pursuant to
Article XIV hereof, the Indenture Trustee in connection with the satisfaction of
the  Indenture  shall  return to the Owner  Trustee all  property  (and  related
documents  and  instruments)  constituting  or  evidencing  the Trust  Indenture
Estate.

         Section 15.05.  No Action  Contrary to Lessee's Rights Under the Lease.
Notwithstanding  any of the provisions of this Indenture or the Trust  Agreement
to the  contrary,  so long as no Event of  Default  shall have  occurred  and be
continuing,  neither the  Indenture  Trustee nor the Owner Trustee will take any
affirmative  acts that  interfere  with the  peaceful and quiet  possession  and
enjoyment of the Aircraft by the Lessee or any Permitted Sublessee.

         Section  15.06.  Notices.   Unless  otherwise  expressly  specified  or
permitted by the terms hereof, all notices, requests,  demands,  authorizations,
directions,  consents,  waivers  or  documents  provided  or  permitted  by this
Indenture to be made, given,  furnished or filed shall be in writing,  and shall
be given and become  effective  in the manner set forth in Section  14.01 of the
Participation  Agreement.  Any party  hereto  may  change  the  address to which
notices to such party will be sent by giving  notice of such change to the other
parties to this Indenture.

         Section 15.07.  Officer's  Certificates and Opinions of Counsel..  Upon
any  application  or demand by the Lessee or the Owner  Trustee to the Indenture
Trustee to take any action under any of the  provisions of this  Indenture,  the
Lessee or the Owner Trustee,  as the case may be, shall furnish to the Indenture
Trustee upon request (a) an Officer's  Certificate  stating that all  conditions
precedent  provided for in this Indenture  relating to the proposed  action have
been  complied  with and that the  proposed  action  is in  conformity  with the
requirements  of this  Indenture,  and (b) an Opinion of Counsel stating that in
the opinion of such counsel all such  conditions  precedent,  if any,  have been
complied with,  except that in the case of any such  application or demand as to
which the furnishing of such documents is specifically required by any provision
of this  Indenture  relating  to  such  particular  application  or  demand,  no
additional certificate or opinion need be furnished.

         Any  certificate,  statement  or  opinion  of an  officer of SSB may be
based, insofar as it relates to legal matters,  upon a certificate or opinion of
or representations by counsel, unless such officer knows that the certificate or
opinion  or  representations   with  respect  to  the  matters  upon  which  his
certificate, statement or opinion may be based as aforesaid are erroneous, or in
the exercise of  reasonable  care should know that the same are  erroneous.  Any
certificate, statement or opinion of counsel may be based, insofar as it relates
to factual matters information with respect to which is in the possession of the
Lessee or SSB, upon the certificate,  statement or opinion of or representations
by an officer or officers of the Lessee or SSB, as the case may be,  unless such
counsel knows that the certificate, statement or opinion or representations with
respect to the matters upon which his  certificate,  statement or opinion may be
based as aforesaid are erroneous,  or in the exercise of reasonable  care should
know that the same are erroneous.

         Any  certificate,  statement  or opinion of an officer of the Lessee or
SSB or of counsel  thereto  may be based,  insofar  as it relates to  accounting
matters, upon a certificate or opinion of or representations by an accountant or
firm of accountants employed by the Lessee or the Owner Trustee, as the case may
be,  unless  such  officer  or  counsel,  as the  case  may be,  knows  that the
certificate or opinion or representations with respect to the accounting matters
upon which his  certificate,  statement or opinion may be based as aforesaid are
erroneous,  or in the exercise of reasonable  care should know that the same are
erroneous.

         Any  certificate  or  opinion  of  any   independent   firm  of  public
accountants filed with the Indenture Trustee shall contain a statement that such
firm is independent.

         Section 15.08.  Severability.  Any provision of this Indenture which is
prohibited or unenforceable in any jurisdiction  shall, as to such jurisdiction,
be ineffective to the extent of such  prohibition  or  unenforceability  without
invalidating  the  remaining  provisions  hereof,  and any such  prohibition  or
unenforceability   in  any   jurisdiction   shall  not   invalidate   or  render
unenforceable such provision in any other jurisdiction.

         Section 15.09. No Oral Modifications or Continuing Waivers. No terms or
provisions  of  this  Indenture  or the  Certificates  may be  changed,  waived,
discharged or terminated  orally, but only by an instrument in writing signed by
the party or other  person  against  whom  enforcement  of the  change,  waiver,
discharge or termination is sought; and any waiver of the terms hereof or of any
Certificate  shall  be  effective  only  in the  specific  instance  and for the
specific purpose given.

         Section  15.10.  Successors  and Assigns.  All covenants and agreements
contained herein shall be binding upon, and inure to the benefit of, each of the
parties hereto and the  successors and permitted  assigns of each, all as herein
provided. Any request, notice, direction, consent, waiver or other instrument or
action by any Holder shall bind the successors and assigns of such Holder.  This
Indenture and the Trust Indenture  Estate shall not be affected by any amendment
or  supplement  to the Trust  Agreement or by any other action taken under or in
respect of the Trust Agreement,  except that each reference in this Indenture to
the Trust Agreement  shall mean the Trust Agreement as amended and  supplemented
from time to time to the extent permitted hereby and thereby.

         Section 15.11.    Headings.  The headings of the various  Articles and Sections herein and in the table of
contents  hereto  are for the  convenience  of  reference  only and shall  not  define or limit any of the terms or
provisions hereof.

         Section 15.12. Normal Commercial Relations.  Anything contained in this
Indenture to the contrary notwithstanding,  the Owner Participant, the Indenture
Trustee and any Holder,  or any bank or other  affiliate of any such party,  may
conduct any banking or other financial  transactions,  and have banking or other
commercial  relationships,  with the Lessee  fully to the same extent as if this
Indenture were not in effect,  including without  limitation the making of loans
or other extensions of credit to the Lessee for any purpose whatsoever,  whether
related to any of the transactions contemplated hereby or otherwise.

         Section  15.13.  Governing Law;  Counterparts.  THIS INDENTURE AND EACH
CERTIFICATE  SHALL IN ALL RESPECTS BE GOVERNED BY, AND  CONSTRUED IN  ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK,  INCLUDING ALL MATTERS OF  CONSTRUCTION,
VALIDITY AND  PERFORMANCE.  This Indenture may be executed by the parties hereto
in separate counterparts,  each of which when so executed and delivered shall be
an original, but all such counterparts shall together constitute but one and the
same instrument.



<PAGE>


         IN WITNESS WHEREOF, the parties hereto have caused this Trust Indenture
and Security Agreement to be duly executed this ___th day of September,  1997 by
their  respective  officers  thereunto duly authorized and acknowledge that this
Indenture has been made and delivered in the State of New York.


                                                     STATE STREET BANK AND TRUST
                                                     COMPANY   OF   CONNECTICUT,
                                                     NATIONAL  ASSOCIATION,  not
                                                     in its individual capacity,
                                                     except as specifically  set
                                                     forth  herein but solely as
                                                     Owner Trustee


                                                     By
                                      Name:
                                     Title:



                                                     THE  FIRST   NATIONAL  BANK  OF  MARYLAND,   not  in  its
                                                     individual capacity, but solely as Indenture Trustee


                                                     By
                                                              Name:
                                                              Title:



<PAGE>



9



                                                                                                          Exhibit A
                                                                                                                 to
                                                                                                Trust Indenture and
                                                                                                 Security Agreement


                           Indenture Supplement No. 1


         This  Indenture  Supplement  No. 1 (Atlantic  Coast  Airlines Trust No.
___________) dated ____________, 199_, of State Street Bank and Trust Company of
Connecticut,  National Association,  a national banking association,  not in its
individual  capacity  but  solely as owner  trustee  (herein  called  the "Owner
Trustee")  under the Trust  Agreement dated as of September __, 1997 (the "Trust
Agreement")   between  State  Street  Bank  and  Trust  Company  and  the  Owner
Participant named therein,


                                   WITNESSETH:


         WHEREAS, the Trust Agreement provides for the execution and delivery of
this  Indenture  Supplement  which  shall  particularly  describe  the  Aircraft
included in the property covered by the Trust Agreement.

         WHEREAS,  the Trust  Indenture and Security  Agreement  (Atlantic Coast
Airlines Trust No.  __________) dated as of September 26, 1997 (the "Indenture")
between the Owner Trustee and The First National Bank of Maryland (herein called
the "Indenture Trustee") provides for the execution and delivery of an Indenture
Supplement  substantially in the form of this Indenture  Supplement No. 1, which
Supplement  shall  particularly  describe  the  Aircraft  included  in the Trust
Indenture Estate, and shall specifically mortgage such Aircraft to the Indenture
Trustee.

         WHEREAS,  the  Indenture  relates  to  the  Aircraft  and  the  Engines
described in the  following  paragraph  and a  counterpart  of the  Indenture is
attached  to and  made a part of this  Indenture  Supplement  No.  1,  and  this
Indenture  Supplement No. 1, together with such  attachment,  is being filed for
recordation  on or  promptly  after the date of this  Supplement  No. 1 with the
Federal Aviation Administration as one document.

         NOW, THEREFORE, this Supplement witnesseth,  that, to secure the prompt
payment of the principal of and Make-Whole Premium, if any, and interest on, and
all other amounts due with respect to, all  Outstanding  Certificates  under the
Indenture and all other amounts due hereunder and the performance and observance
by the Owner Trustee of all the  agreements,  covenants and  provisions  for the
benefit  of the  Holders  contained  in the  Indenture,  in  the  Lease,  in the
Participation Agreement and the Certificates,  and the prompt payment of any and
all amounts  from time to time owing under the  Participation  Agreement  by the
Owner  Trustee,  the Owner  Participant or the Lessee to the Holders and for the
uses and purposes and subject to the terms and  provisions  of the Indenture and
the  Certificates,  and in  consideration  of the premises and of the  covenants
contained  in the  Indenture,  and of the  purchase of the  Certificates  by the
Holders, and of the sum of $1 paid to the Owner Trustee by the Indenture Trustee
at or before  the  delivery  of the  Indenture,  the  receipt of which is hereby
acknowledged,   the  Owner  Trustee  has  granted,  bargained,  sold,  assigned,
transferred,  conveyed,  mortgaged, pledged, granted a security interest in, and
confirmed,  and does hereby grant,  bargain,  sell,  assign,  transfer,  convey,
mortgage,  pledge, grant a security interest in, and confirm, unto the Indenture
Trustee, its successors and assigns, in trust for the equal and ratable security
and benefit of the Holders,  in the trust created by the Indenture,  and subject
to all of the terms,  conditions,  provisions and  limitations  set forth in the
Indenture,  a first  priority  security  interest  in and  mortgage  lien on all
estate,  right,  title and  interest  of the Owner  Trustee in, to and under the
following described property:


                                    AIRFRAME

One Airframe identified as follows:

                                                     FAA                        Manufacturer's
                                                     Registration               Serial
Manufacturer               Model                     Number                     Number

Canadair          CL600-2B19                N___                       ____________



together with all appliances, equipment, instruments and accessories (including,
without limitation,  radio and radar) from time to time belonging thereto, owned
by the Owner Trustee and installed in or appurtenant to said aircraft.

                                AIRCRAFT ENGINES

Two  aircraft  engines,  each  such  engine  having  750 or more  rated  takeoff
horsepower or the equivalent thereof, identified as follows:

                                                                                Manufacturer's
                                                                                Serial
Manufacturer                                Model                               Number

General Electric                    CF34-3B1


together with all equipment and  accessories  belonging  thereto,  by whomsoever
manufactured, owned by the Owner Trustee and installed in or appurtenant to such
aircraft engines.

         Together  with all  substitutions,  replacements  and  renewals  of the
property  described  above,  and all property  owned by the Owner  Trustee which
shall hereafter  become  physically  attached to or incorporated in the property
described  above,  whether the same are now owned by the Owner  Trustee or shall
hereafter be acquired by it.

         As further  security for the obligations  referred to above and secured
by the Indenture and hereby,  the Owner  Trustee has granted,  bargained,  sold,
assigned,  transferred,  conveyed,  mortgaged,  pledged and confirmed,  and does
hereby grant, bargain,  sell, assign,  transfer,  convey,  mortgage,  pledge and
confirm,  unto the  Indenture  Trustee,  its  successors  and  assigns,  for the
security and benefit of the Holders, in the trust created by the Indenture,  and
subject to all of the terms, conditions, provisions and limitations set forth in
the Indenture, all of the estate, right, title and interest of the Owner Trustee
in, to and under the Lease  Supplement  (other than Excepted  Payments,  if any)
covering the property described above.

         TO HAVE AND TO HOLD all and singular the  aforesaid  property  unto the
Indenture Trustee,  its successors and assigns,  for the benefit and security of
the Holders for the uses and  purposes  and subject to the terms and  provisions
set forth in the Indenture.

         This Supplement shall be construed as supplemental to the Indenture and
shall form a part thereof, and the Indenture is hereby incorporated by reference
herein and is hereby ratified, approved and confirmed.

         This Supplement is being delivered in the State of New York.

         AND, FURTHER,  the Owner Trustee hereby  acknowledges that the Aircraft
(including  Engines)  referred to in this  Supplement  and the  aforesaid  Lease
Supplement  has been  delivered  to the Owner  Trustee  and is  included  in the
property of the Owner Trustee and covered by all the terms and conditions of the
Trust Agreement, subject to the Lien of the Indenture.



<PAGE>



         IN  WITNESS  WHEREOF,  the Owner  Trustee  has  caused  this  Indenture
Supplement  No. 1 to be duly  executed as of the date first written above by one
of its officers thereunto duly authorized.


                                                     STATE STREET BANK AND TRUST
                                                     COMPANY   OF   CONNECTICUT,
                                                     NATIONAL  ASSOCIATION,  not
                                                     in its individual capacity,
                                                     except as specifically  set
                                                     forth herein, but solely as
                                                     Owner Trustee


                                                     By
                                                              Name:
                                                              Title:



<PAGE>



                                                                                                          Exhibit B
                                                                                                                 to
                                                                                                Trust Indenture and
                                                                                                 Security Agreement


                              [Form of Certificate]


                 THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER
                 THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY
          NOT BE SOLD OR OFFERED FOR SALE IN CONTRAVENTION OF SAID ACT


No. _________                                                                             $____________

                           EQUIPMENT TRUST CERTIFICATE
                 (Atlantic Coast Airlines Trust No. __________)

                       STATE STREET BANK AND TRUST COMPANY
                      OF CONNECTICUT, NATIONAL ASSOCIATION
                  not in its individual capacity but solely as
                       OWNER TRUSTEE UNDER TRUST AGREEMENT
                 (Atlantic Coast Airlines Trust No. __________)
                         dated as of September __, 1997

                                  SERIES _____

Interest Rate                                                                                    Maturity

     ___%                                                                               ____________, 2___


         State  Street  Bank  and  Trust   Company  of   Connecticut,   National
Association, a national banking association,  not in its individual capacity but
solely as Owner  Trustee  (herein in such capacity  called the "Owner  Trustee")
under that certain Trust Agreement (Atlantic Coast Airlines Trust No. _________)
dated as of September __, 1997,  between the Owner Participant named therein and
State Street Bank and Trust Company of Connecticut, National Association (herein
as such Trust Agreement may be amended or supplemented  from time to time called
the "Trust  Agreement"),  hereby  promises to pay to The First  National Bank of
Maryland,  as Subordination  Agent, or its registered assigns, the principal sum
of  ______________________  ________________ Dollars, payable as set forth below
for the Maturity  specified above, in such coin or currency of the United States
of America as at the time of payment  shall be legal  tender for the  payment of
public and private debts, and to pay interest on the principal  outstanding from
time to time,  semiannually  on each January 1 and July 1, on such principal sum
in like coin or  currency at the rate per annum set forth above from the January
1 or the July 1, as the case may be, next preceding the date of this Certificate
to which interest on the Certificates has been paid or duly provided for, unless
the date hereof is a date to which interest on the Certificates has been paid or
duly  provided   for,  in  which  case  from  the  date  of  this   Certificate.
Notwithstanding the foregoing, if the date hereof is after any January 1 or July
1 and  before  the  following  January  1 or July 1, as the  case  may be,  this
Certificate shall bear interest from such January 1 or July 1; provided that, if
the Owner Trustee shall default in the payment of interest due on such January 1
or July 1, then this  Certificate  shall bear interest  from the next  preceding
January 1 or July 1 to which interest on this  Certificate has been paid or duly
provided for. The interest so payable on any January 1 or July 1 will, except as
otherwise  provided in the Indenture referred to below, be paid to the person in
whose  name this  Certificate  is  registered  at the close of  business  on the
December 15 or June 15  preceding  such January 1 or July 1, whether or not such
day is a Business Day.

         This  Certificate  shall  bear  interest  at the  Past  Due Rate on any
principal  hereof  and on any  other  amount  payable  hereunder  or  under  the
Indenture which shall not be paid in full when due (whether at stated  maturity,
by acceleration,  by mandatory prepayment or otherwise), for the period from and
including  the date thereof to but  excluding the date the same is paid in full,
payable from time to time on demand of the Indenture Trustee.

         Principal and interest and other amounts due hereunder shall be payable
at the office or agency of The First  National Bank of Maryland (the  "Indenture
Trustee")  maintained for such purpose in immediately  available  funds prior to
10:30 A.M.  (New York time) on the due date  thereof and the  Indenture  Trustee
shall remit all such  amounts  received by it to the Holders at such  account or
accounts at such financial institution or institutions as the Holders shall have
designated to the Indenture Trustee in writing, in immediately  available funds,
such payment to be made if the payment was received prior to 10:30 A.M. New York
time by the  Indenture  Trustee on any Business Day, by 12:00 noon New York time
on such  Business  Day;  otherwise,  the  Indenture  Trustee  shall make payment
promptly,  but not later than 11:00  A.M.  New York time on the next  succeeding
Business  Day;  provided  that,  at the option of the  Indenture  Trustee or its
Paying  Agent,  interest may be paid by mailing a check  therefor  payable to or
upon the written order of the  registered  holder  entitled  thereto at his last
address  as it  appears  on the  Register.  If any  amount  payable  under  this
Certificate,  or under the Indenture,  falls due on a day that is not a Business
Day, then such sum shall be payable on the next succeeding Business Day, without
(provided that payment is made on such next succeeding  Business Day) additional
interest thereon for the period of such extension.

         State  Street  Bank  and  Trust   Company  of   Connecticut,   National
Association, and The First National Bank of Maryland are not acting individually
hereunder, but solely as Owner Trustee and Indenture Trustee, respectively.

         Any  Person,  other  than the  Subordination  Agent,  any  Pass-Through
Trustee and any pass-through trustee in respect of pass-through certificates, if
any, issued in accordance with Section 15.01 of the Participation Agreement, who
is acquiring the  Certificates  will be deemed to represent and warrant that (i)
no  assets  of an  employee  benefit  plan  subject  to  Title I of  ERISA or an
individual  retirement  account or plan subject to Section 4975 of the Code,  or
any trust established under any such plan or account,  have been used to acquire
or hold any of the  Certificates,  or (ii)  that one or more  administrative  or
statutory exemptions from the prohibited  transaction rules under Section 406 of
ERISA and Section  4975 of the Code  applies to its  purchase and holding of the
Certificates  such that its  purchase and holding of the  Certificates  will not
result in a non-exempt  prohibited  transaction  under  Section 406 of ERISA and
Section 4975 of the Code.

         This  Certificate  is one of a duly  authorized  issue of  Certificates
issued  and to be issued  under  the  Trust  Indenture  and  Security  Agreement
(Atlantic  Coast  Airlines Trust No.  _________)  dated as of September 26, 1997
(herein  as  amended,  supplemented  or  modified  from time to time  called the
"Indenture") between the Owner Trustee and the Indenture Trustee,  designated as
Equipment  Trust  Certificates  (Atlantic  Coast  Airlines  Trust No.  ________)
limited in aggregate initial principal amount to $_______________  consisting of
the following  aggregate  principal  amounts of  Certificates  with the interest
rates per annum and Maturities shown:


                                     Initial
                                    Aggregate
                                    Principal
         Series            Maturity         Amount                     Interest Rate

            A
            B
            C
            D

         Reference is made to the Indenture and all  supplements  and amendments
thereto (a copy of which is on file with the Indenture  Trustee at its principal
corporate  trust  office)  for a  more  complete  statement  of  the  terms  and
provisions thereof,  including a statement of the properties  conveyed,  pledged
and assigned  thereby,  the nature and extent of the  security,  the  respective
rights of the Owner Trustee,  the Owner  Participant,  the Lessee, the Indenture
Trustee and the Holders,  and the terms upon which the Certificates are, and are
to be,  executed  and  delivered,  to all of which terms and  conditions  in the
Indenture each Holder hereof agrees by its acceptance of this Certificate.

         Capitalized  terms not otherwise defined herein shall have the meanings
given to them in the Indenture.

         The principal  amounts of the  Certificates are payable as set forth in
Schedule I attached  hereto,  which schedule is subject to amendment as provided
in Section 2.18 of the Indenture.  The Certificates are subject to redemption in
part,  pro rata  (based  on the  face  amount  thereof),  in each  case  through
mandatory  sinking fund redemptions  providing for the redemption on the Sinking
Fund  Redemption  Dates of the  aggregate  principal  amounts  set forth  below,
together with interest accrued thereon to the applicable Sinking Fund Redemption
Date, but without Make-Whole Premium.

         Except  as  expressly  provided  in  the  Indenture,  all  payments  of
principal, Make-Whole Premium, if any, and interest and other amounts to be made
to the Holder hereof by or at the behest of the Owner Trustee hereunder or under
the Indenture  shall be made only from the income and proceeds from the Lessor's
Estate to the  extent  included  in the Trust  Indenture  Estate and only to the
extent that the Owner Trustee shall have sufficient  income or proceeds from the
Lessor's Estate to the extent  included in the Trust Indenture  Estate to enable
the Indenture Trustee to make such distributions in accordance with the terms of
the Indenture;  provided that under the Lease, the Lessee is obligated to pay or
cause to be paid,  to the extent such  payments are not required to be made from
the assets  subject  to the Lien of this  Indenture  or the income and  proceeds
received by the  Indenture  Trustee  therefrom,  any net loss  arising  from the
investment  of funds  held by the  Indenture  Trustee  which but for an Event of
Default would be payable to Lessee, and each Holder hereof, by its acceptance of
this  Certificate,  agrees that it will (except as aforesaid) look solely to the
income and proceeds from the Trust Indenture  Estate to the extent available for
distribution  to the Holder hereof as provided  above and that neither the Owner
Participant,  nor the Owner Trustee,  nor State Street Bank and Trust Company of
Connecticut,  National  Association,  nor the  Indenture  Trustee is  personally
liable to the Holder hereof for any amounts  payable or any liability under this
Certificate  or  under  the  Indenture,  except  as  expressly  provided  in the
Indenture,  in the case of State Street Bank and Trust  Company of  Connecticut,
National Association, the Owner Trustee and the Indenture Trustee.

         The   Certificates   are  subject  to   prepayment   in  the  following
circumstances at the price determined as set forth below.

         (i) If an Event of Loss  occurs  with  respect to the  Airframe or with
respect  to the  Airframe  and the  Engines  or engines  then  installed  on the
Airframe  (unless  pursuant to Section 11(a)(1) of the Lease and Section 9.08 of
the Indenture replacement equipment is substituted therefor).

         (ii) If the Lessee,  pursuant to Section 16 of the Lease,  gives notice
of purchase of the  Aircraft  (and the Lessee shall not have revoked such notice
or effected an assumption of the Certificates as provided in Section 2.12 of the
Indenture).

         (iii) If the Owner  Participant,  or the Owner Trustee on behalf of the
Owner Participant,  gives notice of prepayment to the Indenture Trustee pursuant
to Section 8.02 of the Indenture.

         (iv) If the Lessee, pursuant to Section 3(g) of the Lease, gives notice
of a voluntary  termination for obsolescence or surplus,  but subject to Section
6.02(c) of Indenture.

         (v)  Pursuant  to  Section  15.01  of the  Participation  Agreement  in
connection with a Refinancing of the Certificates.

         (vi) As  contemplated  by Section  2.16 of the  Indenture  and  Section
3.05(b) of the Participation  Agreement if the Delivery Date has not occurred on
or prior to the Cut-Off Date.

         (vii) At the option of the Owner Trustee with the prior written consent
of the  Lessee  and the  Owner  Participant  upon not less  than 25 days'  prior
written notice.

         (viii)  If  a  Triggering  Event  (as  defined  in  the   Intercreditor
Agreement)  occurs prior to the earliest of (A) the Delivery  Date, (B) the date
the obligations of the Owner Trustee under the  Certificates  are assumed by the
Lessee pursuant to Section 3.05(a) of the Participation  Agreement and (iii) the
Cut-Off Date.

         In the case of a  prepayment  of the  Certificates  pursuant to clauses
(ii),  (iv) and (v) above,  the Lessee,  in  accordance  with and subject to the
terms (including timing of notice) of Section 3(g) or Section 16 of the Lease or
Article  15 of the  Participation  Agreement,  as the  case may be,  shall  give
irrevocable  (subject to Section 6.02(c) of the Indenture) written notice to the
Owner  Trustee  and  the  Indenture  Trustee  and to the  Holders  of all of the
Certificates  specifying the Business Day on which the Owner Trustee is directed
to prepay the Certificates.  In the case of a prepayment  pursuant to clause (i)
above, the Certificates shall be prepaid on the Loss Payment Date (as defined in
Section 11(a)(2) of the Lease).  In the case of a prepayment  pursuant to clause
(iii) above,  the  Certificates  shall be prepaid on the date  designated in the
notice of prepayment required by Section 8.02 of the Indenture. In the case of a
prepayment  of the  Certificates  pursuant to clauses  (ii) and (iv) above,  the
Certificates  shall be prepaid in full on the Termination Date. In the case of a
prepayment of the  Certificates  pursuant to clause (v) above,  the Certificates
shall be  prepaid on the  effective  date of the  Refinancing.  In the case of a
prepayment of the  Certificates  pursuant to clause (vi) above, the Certificates
shall be prepaid on the 15th day  following  the Cut-Off  Date. In the case of a
prepayment of the Certificates  pursuant to clause (vii) above, the Certificates
shall be prepaid on the date  designated in the notice  referred to therein.  In
the case of a prepayment of the Certificates  pursuant to Section  6.02(a)(viii)
above, the Certificates  shall be prepaid on the Special  Distribution  Date (as
defined in the Intercreditor Agreement) as provided in Section 2.4(b)(ii) of the
Intercreditor  Agreement. The day on which the Certificates are to be prepaid is
herein referred to as the "Prepayment Date". On or prior to the Prepayment Date,
immediately  available funds shall be deposited with the Indenture Trustee in an
amount in respect of the Certificates equal to:

                  (1) if such  prepayment is made pursuant to clause (i),  (iii)
         (if  clause  (i),  but not  clause  (ii) or  clause  (iii) of the first
         sentence of Section  8.02(a) of the  Indenture is  applicable  and such
         prepayment  is made  when an Event of  Default  has  occurred  and been
         continuing  for 180 days or more or if clause  (ii) or clause  (iii) of
         the first sentence of Section  8.02(a) hereof is  applicable),  (vi) or
         (viii)  above,  the sum of (A) the aggregate  principal  amount of such
         Certificates then Outstanding, (B) accrued interest on the Certificates
         to the  Prepayment  Date  and  (C) all  other  aggregate  sums  due the
         Indenture  Trustee  under  the  Indenture  or under  the  Participation
         Agreement or the Lease,  but excluding any Make-Whole  Premium or other
         premium or penalty, or

                  (2) if such prepayment is made pursuant to clause (ii),  (iii)
         (if  clause  (i),  but not  clause  (ii) or  clause  (iii) of the first
         sentence of Section  8.02(a) of the  Indenture is  applicable  and such
         prepayment  is made  when an Event of  Default  has  occurred  and been
         continuing for less than 180 days),  (iv), (v) or (vii) above,  the sum
         of the amounts  specified in clauses (A), (B) and (C) of the  preceding
         clause  (1) plus any  Make-Whole  Premium  payable  in  respect  of all
         Certificates

(the aggregate amount required to be paid pursuant to this sentence being herein
referred to as the "Prepayment Price").

         If,  in  accordance  with  and  subject  to  the  satisfaction  of  the
conditions set forth in Section 7.11 of the Participation  Agreement, the Lessee
shall assume all of the  obligations of the Owner Trustee  hereunder,  under the
Certificates and all other Operative  Agreements,  the Owner Participant and the
Owner Trustee shall (except for prior acts) be released and discharged  from any
further obligations hereunder and under the Certificates and all other Operative
Agreements (except any obligations that have accrued prior to such assumption).

         If an Indenture Event of Default under the Indenture shall occur and be
continuing, the principal of the Certificates may be declared due and payable in
the manner and with the effect provided in the Indenture. The Indenture provides
that in certain events such  declaration and its  consequences  may be waived by
the  Majority  in  Interest  of  Holders.  Any such  consent or waiver  shall be
conclusive and binding upon the Holder of this  Certificate  and upon all future
Holders and owners of this Certificate and any Certificate that may be issued in
exchange or substitution  therefor,  whether or not any notation thereof is made
upon this Certificate or such other Certificates.  Moreover, if, and only if, an
Event of Default shall occur, the Indenture  Trustee may declare the Lease to be
in default, and may, to the exclusion of the Owner Trustee, exercise one or more
of the remedies of the Owner Trustee provided in the Lease.

         The Owner  Trustee or the Owner  Participant  may cure a default by the
Lessee under the Lease  arising from the failure of the Lessee to make any Basic
Rent payments under the Lease, but the Owner Trustee and the Owner  Participant,
collectively,  may not cure more than three  consecutive  such  failures or more
than six such failures in total. The Owner Trustee or the Owner  Participant may
cure any other default by the Lessee in the performance of its obligations under
the Lease, provided that such default can be cured by the payment of money.

         If (A) an Event of Default shall have occurred and be continuing or (B)
the Indenture Trustee shall have taken action, or notified the Owner Participant
that it  intends to take  action,  to  foreclose  the Lien of the  Indenture  or
otherwise  commence the exercise of any significant remedy under Section 7.02 of
the  Indenture or Section 15 of the Lease,  or (C) the  Certificates  shall have
been  accelerated,  the Owner Participant (or the Owner Trustee on behalf of the
Owner Participant) may:

                  (1) direct the Owner  Trustee to cause the  prepayment  of all
the Outstanding Certificates by notifying the Indenture Trustee of such election
and  depositing  the sum of amounts  contemplated  by  paragraph  "first"  under
Section 5.03 of the  Indenture and the  aggregate  Prepayment  Price of all such
Certificates with the Indenture Trustee for distribution to the Holders; or

                  (2) purchase all of the Outstanding  Certificates by paying to
the Indenture  Trustee an amount equal to the aggregate  unpaid principal amount
of all  Outstanding  Certificates,  plus accrued  interest on such amount to the
date of purchase,  plus all other sums due any Holder or the  Indenture  Trustee
under the Indenture,  the Participation  Agreement or the Lease, but without any
Make-Whole  Premium  (provided that the Make-Whole  Premium shall be included if
such purchase is made pursuant to clause (i) of Section 8.02(a) of the Indenture
(but not  pursuant  to clause  (ii) or clause  (iii) of  Section  8.02(a) of the
Indenture) when the Event of Default shall have occurred and been continuing for
less than 180 days).

         The right of the Holder  hereof to  institute  an action for any remedy
under  the  Indenture  is  subject  to  certain  restrictions  specified  in the
Indenture,  except that the right of the Holder of this  Certificate  to receive
payment of the principal of and interest and Make-Whole Premium, if any, on this
Certificate on or after the  respective due dates,  or to institute suit for the
enforcement of any such payment,  shall not be impaired or affected  without the
consent of such Holder.

         The Certificates are issuable only as registered  Certificates  without
coupons in denominations of $1,000 and integral  multiples  thereof.  So long as
any of the Certificates remain Outstanding,  the Indenture Trustee will maintain
an office or agency where the  Certificates  may be presented  for payment and a
facility or agency in New York, New York where the Certificates may be presented
for  registration of transfer and for exchange as provided in the Indenture.  As
provided in the  Indenture  and  subject to certain  limitations  therein,  this
Certificate  is  transferable,  and  upon  surrender  of  this  Certificate  for
registration  of  transfer  at  the  principal  corporate  trust  office  of the
Indenture Trustee, or at the office or agency maintained for such purposes, duly
endorsed  by,  or  accompanied  by a  written  instrument  of  transfer  in form
satisfactory  to the Owner Trustee and the  Indenture  Trustee duly executed by,
the  Holder  or his  attorney  duly  authorized  in  writing,  one or  more  new
Certificates of the same Series and Maturity and interest rate and of authorized
denominations and for the same aggregate  principal amount will be issued to the
designated transferee or transferees.

         As  provided  in the  Indenture  and  subject  to  certain  limitations
therein,  the Certificates  are  exchangeable  for an equal aggregate  principal
amount of  Certificates of the same Series and Maturity and interest rate and of
authorized denominations, as requested by the Holder surrendering the same, upon
presentation thereof for such purpose at the principal corporate trust office of
the Indenture Trustee, or at an office or agency maintained for such purpose.

         No service charge shall be levied for any such registration of transfer
or exchange,  but the Indenture  Trustee may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.

         Prior to the due  presentment  for  registration  of  transfer  of this
Certificate,  the Owner Trustee,  the Indenture Trustee,  any agent of the Owner
Trustee or the Indenture  Trustee,  the Paying Agent,  if any, the Registrar and
the Lessee  shall deem and treat the  person in whose name this  Certificate  is
registered  as the absolute  owner  hereof for all purposes  whether or not this
Certificate  is overdue,  and neither the Owner Trustee,  the Indenture  Trustee
(nor any agent of the Owner  Trustee or the Indenture  Trustee),  nor the Paying
Agent,  if any, the  Registrar nor the Lessee shall be affected by notice to the
contrary.

         The indebtedness evidenced by this Certificate is, to the extent and in
the  manner  provided  in the  Indenture,  subordinate  and  subject in right of
payment to the prior payment in full of the Secured  Obligations  (as defined in
the  Indenture) in respect of [Series A  Certificates]1,  [Series A and Series B
Certificates]2  [Series  A,  Series  B,  and  Series C  Certificates]3  and this
Certificate  is  issued  subject  to  such   provisions.   The  Holder  of  this
Certificate,  by  accepting  the same,  (a) agrees to and shall be bound by such
provisions,  (b) authorizes  and directs the Indenture  Trustee on such Holder's
behalf to take such action as may be necessary or  appropriate to effectuate the
subordination  as provided in the  Indenture,  and (c)  appoints  the  Indenture
Trustee such Holder's attorney-in-fact for such purpose.*

         As provided in the Indenture,  the Indenture and the Certificates shall
be  construed  in  accordance  with and governed by the laws of the State of New
York.

         This Certificate  shall not be secured by or be entitled to any benefit
under  the  Indenture  or  be  valid  or  obligatory   for  any  purpose  unless
authenticated  by the Indenture  Trustee as evidenced by the manual signature of
one of its authorized officers on the certificate below.


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

         1To be inserted in the case of a Series B Certificate.  2To be inserted
         in the case of a Series C Certificate. 3To be inserted in the case of a
         Series D Certificate.

         *To be inserted for each Certificate other than any Series A Certificate.


<PAGE>



         IN WITNESS  WHEREOF,  the Owner Trustee has caused this Equipment Trust
Certificate (Atlantic Coast Airlines Trust No. ____________) to be duly executed
in its corporate name by its officer thereunto duly authorized.


Dated: September  __, 1997                           STATE  STREET  BANK AND  TRUST  COMPANY  OF  CONNECTICUT,
                                                     NATIONAL  ASSOCIATION,  not in its  individual  capacity,
                                                     but solely as Owner Trustee


                                                     By
                                      Name:
                                     Title:


                                                         FORM OF INDENTURE TRUSTEE'S CERTIFICATE OF AUTHENTICATION]


         This is one of the Equipment Trust  Certificates  (Atlantic Coast Airlines Trust No.  _________)  referred
to in the within mentioned Indenture.


Dated:  September __, 1997                           THE FIRST  NATIONAL  BANK OF MARYLAND,  not in its  individual
                                                     capacity, but solely as Indenture Trustee


                                                     By
                                      Name:
                                     Title:


<PAGE>


1
O7853/O59/N670FE/TRUST/trust.agt
Federal Express Corporation Trust No. N67OFE
0156828.07


===================================================================================================================



                                 TRUST AGREEMENT

                (ATLANTIC COAST AIRLINES TRUST NO. ____________)

                          Dated as of September 1, 1997

                                     between

                            ATLANTIC COAST AIRLINES,
                                     Trustor

                                       and

               STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
                              NATIONAL ASSOCIATION,
                                  Owner Trustee



                            COVERING ONE CANADAIR REGIONAL JET, SERIES 200 ER AIRCRAFT
                 SERIAL NO._______, REGISTRATION NO. ___________




===================================================================================================================


<PAGE>



16

                                 TRUST AGREEMENT
                  (ATLANTIC COAST AIRLINES TRUST NO.__________)



         TRUST AGREEMENT (ATLANTIC COAST AIRLINES TRUST  NO.____________)  dated
as of September 1, 1997 (this  "Agreement")  between STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT, NATIONAL ASSOCIATION, a national banking association (in
its individual capacity, "SSB", and not in its individual capacity but solely as
trustee  hereunder,  the  "Owner  Trustee"),  and  ATLANTIC  COAST  AIRLINES,  a
California  corporation (together with its successors and permitted assigns, the
"Trustor").  The capitalized terms used herein,  unless otherwise herein defined
or the  context  hereof  shall  otherwise  require,  shall  have the  respective
meanings set forth in Schedule I attached hereto.


                                               W I T N E S S E T H:

         WHEREAS,  the  Trustor  desires  to create a trust for the  purpose  of
issuing Certificates,  the proceeds of which issuance shall initially be held by
the Indenture  Trustee on behalf of the Owner Trustee in the Collateral  Account
and  released,  subject to the proviso to Section  3.02(b) of the  Participation
Agreement,  on the  Delivery  Date in order to finance a portion of the Purchase
Price of the Aircraft, to acquire the Aircraft from Seller on the Delivery Date,
to lease the  Aircraft  to the Lessee on the  Delivery  Date and to receive  the
benefits provided for herein.

         WHEREAS,  SSB is willing to accept the trust as herein  provided and to
perform its  obligations  hereunder in its  individual  capacity or as the Owner
Trustee as the case may be.

         NOW THEREFORE,  in consideration of the mutual covenants and agreements
contained herein, SSB and the Trustor agree as follows:

                                    ARTICLE 1

                               THE LESSOR'S ESTATE

         Section 1.01. Authorization and Direction to Owner Trustee. The Trustor
hereby  authorizes  and  directs  (or has  authorized  and  directed)  the Owner
Trustee, not individually but solely as the Owner Trustee hereunder:

                  (a) to execute and deliver as and when  specified  in Sections
         4.01  and  4.02  of  the  Participation  Agreement,  the  Participation
         Agreement and each of the other Operative Agreements to which the Owner
         Trustee  is a party  and to enter  into and  perform  the  transactions
         contemplated thereby including, without limitation, accepting title to,
         and  delivery of, the Aircraft  from Seller on the Delivery  Date,  and
         taking all  appropriate  action to cause the Airframe to be  registered
         with the  Federal  Aviation  Administration  in the  name of the  Owner
         Trustee;

                  (b) to execute and deliver from time to time the  Certificates
         in the manner and subject to the terms and  conditions  provided in the
         Participation Agreement and the Indenture;

                  (c) to execute and deliver each other document  referred to in
         the Operative Agreements to which the Owner Trustee is a party or which
         the Owner  Trustee is  required to deliver  pursuant  to the  Operative
         Agreements;

                  (d)  subject to the terms of this  Agreement,  to perform  the
         obligations and duties and, upon  instruction of the Trustor,  exercise
         the rights of the Owner Trustee under the Operative Agreements; and

                  (e)  to  execute  and  deliver  all  such  other  instruments,
         documents or certificates and take all such other actions in accordance
         with the  directions of the Trustor,  as the Trustor may deem necessary
         or advisable in connection  with the  Certificate  Closing Date and the
         Delivery Date and the transactions  contemplated  hereby, the taking of
         any such action by the Owner  Trustee in the presence of the Trustor or
         its counsel to evidence, conclusively, the direction of the Trustor.

         Section 1.02.  Declaration of Trust. SSB hereby declares and agrees, in
its individual capacity,  that it will, and in its capacity as the Owner Trustee
does,  hold the Lessor's  Estate upon the trust herein set forth for the use and
benefit of the Trustor,  subject,  however,  to the  provisions of, and the Lien
created by, the  Indenture.  This  Agreement  is not  intended by the Trustor to
create,  and the trust  created  hereby is not  intended  by the Trustor and the
other parties  interested  herein to constitute a business trust for purposes of
the Bankruptcy Code.

         Section 1.03.  Conditions  Precedent.  The right and  obligation of the
Owner  Trustee to take the  actions  required by Section  1.01  hereof  shall be
subject to the condition  that the terms and conditions of Section 4.01 or 4.02,
as the case may be, of the Participation Agreement shall have been complied with
in a manner satisfactory to the Owner Trustee and the Trustor.

                                    ARTICLE 2

                                  DISTRIBUTIONS

         Section 2.01.  Predelivery Funding;  Rent, Etc. (a) The Trustor and the
Owner Trustee acknowledge that the proceeds from the sale of the Certificates to
be  effected on the  Certificate  Closing  Date are to be held by the  Indenture
Trustee in the Collateral  Account in the manner  specified in the Indenture for
application  as  provided  therein  and in  Section  3.02  of the  Participation
Agreement.

                  (b) The Trustor  and the Owner  Trustee  acknowledge  that the
         Lease will be security for the  Certificates  pursuant to the Indenture
         which  provides  that all  moneys  payable  by the  Lessee to the Owner
         Trustee under the Lease (other than Excepted  Payments) are to be first
         paid to the  Indenture  Trustee  while the Lien of the  Indenture is in
         effect,  for  distribution in accordance with the terms of Article V of
         the Indenture.  Except for amounts received from the Indenture Trustee,
         which shall be applicable  only in accordance  with clause (iii) below,
         the Owner Trustee shall  promptly apply each payment of the Rent (other
         than Excepted Payments),  Stipulated Loss Value, Termination Value, and
         any proceeds from the sale,  requisition or disposition of the Aircraft
         received by it as follows:

                           (i)  prior  to  the   release  of  the  Lien  of  the
                  Indenture,  each such payment shall be payable directly to the
                  Indenture  Trustee (and if any of the same are received by the
                  Owner  Trustee  shall,  upon  receipt,  be  paid  over  to the
                  Indenture Trustee without deduction,  set off or adjustment of
                  any kind) for  distribution  in accordance with the provisions
                  of Article V of the  Indenture;  provided,  that any  payments
                  received by the Owner Trustee from (x) the Lessee with respect
                  to SSB's or the Owner Trustee's fees and  disbursements  under
                  this  Agreement,  or (y) the Trustor  pursuant to Section 5.01
                  hereof  shall not be paid over to the  Indenture  Trustee  but
                  shall be retained by the Owner Trustee and applied  toward the
                  purpose for which such payments were made;

                           (ii) after the release of the Lien of the  Indenture,
                  any amount  remaining after  application in full in accordance
                  with   paragraph   (b)(i)  of  this  Section  2.01  and  which
                  represents  payments for which provision as to the application
                  thereof  is made in any  other  Operative  Agreement  shall be
                  applied  promptly to the purpose for which such payment  shall
                  have been made in accordance  with the terms of such Operative
                  Agreement; and

                  (iii) after  application in accordance with paragraphs (i) and
                  (ii) of this Section  2.01(b),  or to the extent received from
                  the Indenture  Trustee under the terms of the  Indenture,  the
                  balance, if any, remaining shall be paid to the Trustor.

         Section 2.02.  Excepted Payments.  Notwithstanding  any other provision
contained  herein,  all  Excepted  Payments  at any time  received  by the Owner
Trustee shall be distributed promptly to the applicable Person entitled thereto,
and such payment shall not be deemed under any  circumstances  to be part of the
Lessor's Estate.

         Section  2.03.  Distributions  after  Release  of Lien of  Indenture.  Except  as  otherwise  provided  in
Sections 2.01 and 2.02 hereof:

                  (a) all payments  received  and amounts  realized by the Owner
         Trustee  under the Lease or  otherwise  with respect to the Aircraft or
         any part thereof (including,  without limitation, all payments received
         pursuant to Section  15(a) of the Lease and amounts  realized  upon the
         sale or lease of the Aircraft or any part thereof after the termination
         of the Lease with respect thereto),  to the extent received or realized
         at any time after the Lien of the  Indenture  shall have been  released
         pursuant to the terms of the Indenture, and

                  (b) moneys not included in paragraph  (a) of this Section 2.03
         remaining  as  part  of the  Lessor's  Estate  after  the  Lien  of the
         Indenture has been released,

                    shall,  to the extent  required,  be  retained  by the Owner
    Trustee as reimbursement  for all expenses  hereunder or under the Lease not
    theretofore  reimbursed under this Agreement,  the Lease or otherwise and to
    which the  Owner  Trustee  is  entitled  to be  reimbursed  pursuant  to the
    provisions   thereof,   and  any  balance  remaining   thereafter  shall  be
    distributed to the Trustor.

         Section 2.04. Manner of Making  Distributions.  The Owner Trustee shall
make distributions or cause distributions to be made to (i) the Trustor pursuant
to this Article 2 by  transferring  by wire  transfer in  immediately  available
funds the amount to be distributed to the account set forth in the Participation
Agreement  or to  such  other  account  or  accounts  of the  Trustor  as it may
designate  from time to time by  written  notice to the Owner  Trustee  (and the
Owner  Trustee shall use best efforts to cause such funds to be  transferred  by
wire  transfer on the same day as  received,  but in any case not later than the
next succeeding  Business Day), and (ii) the Indenture  Trustee pursuant to this
Article 2 by paying the amount to be distributed to the Indenture Trustee in the
manner specified in the Indenture; provided, that the Owner Trustee shall invest
overnight,  for the  benefit  of the  Trustor,  in  investments  that  would  be
permitted  by  Section  11(e) of the  Lease  (but only to the  extent  funds are
received  on or prior to 2:00  P.M.  (Eastern  Time)  and such  investments  are
available  and, if such  investments  are not  available to the Owner Trustee in
investments  which,  after  consultation  with the  Trustor,  the Trustor  shall
direct) all funds not  transferred by wire transfer on the same day as they were
received. Notwithstanding the foregoing but subject always to the provisions of,
and the Lien created by, the Indenture,  the Owner Trustee will, if so requested
by the Trustor by written notice, pay in immediately available funds any and all
amounts payable by the Owner Trustee hereunder to the Trustor as directed by the
Trustor.

                                    ARTICLE 3

                                THE OWNER TRUSTEE

         Section  3.01.  Acceptance  of Trust and Duties.  SSB accepts the trust
hereby created and, subject to Section 1.03 hereof, in its capacity as the Owner
Trustee agrees to perform the same,  including  without  limitation,  subject to
Section  1.03  hereof,  the actions  specified  in Section 1.01 hereof as herein
provided. The Owner Trustee agrees to disburse all monies that it receives under
the Operative  Agreements in accordance with the terms hereof. The Owner Trustee
shall not be answerable or accountable in its  individual  capacity  except as a
result of or arising from (a) the Owner  Trustee's  willful  misconduct or gross
negligence  (in its  individual  capacity or as trustee),  (b) any breach by the
Owner Trustee of its  representations,  warranties  and  covenants  given in its
individual  capacity in this  Agreement,  Section 6 of the Lease,  and  Sections
7.02(a) and (b) and 7.04 of the Participation  Agreement or its representations,
warranties and covenants  given in its individual  capacity in Sections 3.05 and
3.08 of the  Indenture,  (c) the  failure  to use  ordinary  care in  receiving,
handling and  disbursing  funds,  (d) Lessor's Liens  attributable  to it in its
individual  capacity,  and (e) taxes,  fees,  or other  charges on, based on, or
measured by, any fees,  commissions or compensation received by SSB or the Owner
Trustee in  connection  with the  transactions  contemplated  by the Lease,  the
Indenture and the Operative Agreements including this Agreement.

         Section  3.02.  Limitation  on  Authority of Owner  Trustee.  The Owner
Trustee  shall have no power,  right,  duty or authority  to, and agrees that it
will not, manage,  control,  possess,  use, sell, lease, dispose of or otherwise
deal  with the  Aircraft,  Airframe,  Engines,  any Part  thereof  or any  other
property at any time constituting a part of the Lessor's Estate, or otherwise to
take or refrain from taking any action under or in connection with the Operative
Agreements,  except (i) to execute and deliver the Operative Agreements to which
it is a party,  (ii) to  exercise  and  carry  out or cause to be  exercised  or
carried out the rights,  duties and  obligations of the Owner Trustee  hereunder
and under the other  Operative  Agreements,  or (iii) as  expressly  provided in
written  instructions  from the Trustor  given  pursuant to Section 3.03 or 3.04
hereof;  provided,  that  nothing in this Section 3.02 shall limit in any manner
the obligations of the Owner Trustee hereunder.

         Section  3.03.  Notice  of  Default.  In the event  that a  Responsible
Officer in the Corporate Trust Department of the Owner Trustee shall have actual
knowledge  of a Default or an Event of Default,  or an  Indenture  Default or an
Indenture Event of Default, the Owner Trustee shall give or cause to be given to
the Trustor and the  Indenture  Trustee  prompt  telephone or facsimile  notice,
followed by prompt  confirmation  thereof by certified mail, postage prepaid (in
any event within two Business Days of the discovery thereof), in accordance with
Article 14 of the Participation  Agreement,  of such Default,  Event of Default,
Indenture Default or Indenture Event of Default. Subject to the terms of Section
3.06(e) hereof and the rights of the Indenture Trustee under the Indenture,  the
Owner  Trustee  shall take such action with  respect to such  Default,  Event of
Default,  Indenture  Default or Indenture Event of Default as shall be specified
in written instructions from the Trustor;  provided that the Owner Trustee shall
have no duty to take any (and shall take no) action whatsoever in the absence of
written  instructions  from the Trustor.  For all purposes of this Agreement and
the Lease,  in the absence of actual  knowledge of a Responsible  Officer of the
Owner  Trustee,  the Owner  Trustee  shall not be deemed to have  knowledge of a
Default,  Event of  Default,  Indenture  Default or  Indenture  Event of Default
unless notified in writing by the Lessee, the Trustor,  the Indenture Trustee or
any Certificate Holder.

         Section 3.04. Action Upon Instructions.  Upon the written  instructions
at any time and from time to time of the Trustor, the Owner Trustee will take or
refrain  from  taking such  action,  not  inconsistent  with  provisions  of the
Indenture, as may be specified in such instructions.

         Section 3.05.  Certain  Duties and  Responsibilities  of Owner Trustee.
(a)(i) The Owner Trustee  undertakes to perform such duties and only such duties
as are specifically  set forth herein,  and with the degree of care specified in
Section 3.01 hereof,  and in accordance with written  instructions  given by the
Trustor hereunder, and no implied duties, covenants or obligations shall be read
into this Agreement,  any such instructions or the Operative  Agreements against
the  Owner  Trustee,  and the  Owner  Trustee  agrees  that it will not  manage,
control,  possess,  use,  sell,  lease,  dispose of or  otherwise  deal with the
Aircraft or any part of the Lessor's  Estate  except as required by the terms of
the  Operative  Agreements,  any such  instructions  and as  otherwise  provided
herein; and

                           (ii) in the  absence  of bad faith on its  part,  the
                  Owner  Trustee may  conclusively  rely, as to the truth of the
                  statements  and  the  correctness  of the  opinions  expressed
                  therein,  upon certificates or opinions furnished to the Owner
                  Trustee and conforming to the  requirements  of this Agreement
                  or the other Operative Agreements, but in the case of any such
                  certificates  or opinions  which by any  provisions  hereof or
                  thereof are specifically required to be furnished to the Owner
                  Trustee,  the Owner  Trustee  shall be under a duty to examine
                  the  same to  determine  whether  or not they  conform  to the
                  requirements   of  this  Trust   Agreement  or  the  Operative
                  Agreements.

                  (b) No provision  hereof shall  require SSB in its  individual
         capacity  to  expend  or risk its own  funds  or  otherwise  incur  any
         financial  liability in the performance of any of its duties hereunder,
         or in the  exercise  of any of its rights or  powers,  if it shall have
         reasonable  grounds  for  believing  that  repayment  of such  funds or
         adequate  indemnity  against such risk or  liability is not  reasonably
         assured  to  it.  Notwithstanding  the  foregoing,  SSB  agrees  in its
         individual capacity that it will, at its own cost and expense, promptly
         take such action as may be  necessary  to  discharge  duly all Lessor's
         Liens  attributable to it in its individual  capacity and will claim no
         indemnity therefor hereunder,  or under the Participation  Agreement or
         any Operative Agreement.

                  (c)  Whether  or not  therein  expressly  so  provided,  every
         provision of this  Agreement  relating to the conduct or affecting  the
         liability  of or affording  protection  to the Owner  Trustee  shall be
         subject to the  provisions  of this  Section  3.05,  except that in the
         event of a conflict  between this Section 3.05 and Section 3.01 hereof,
         Section 3.01 hereof shall be controlling.

                  (d) The Owner  Trustee will  furnish to the Trustor,  promptly
         upon receipt  thereof,  duplicates  or copies of all reports,  notices,
         requests,  demands,  certificates,  financial  statements and any other
         instruments furnished to the Owner Trustee hereunder or under the other
         Operative  Agreements  (including  those  furnished  to  the  Indenture
         Trustee  pursuant  to the  terms of the  Indenture)  and not  otherwise
         furnished to the Trustor.

                  (e) Notwithstanding anything herein to the contrary, the Owner
         Trustee  shall not be  authorized  and shall have no power to "vary the
         investment" of the Trustor  within the meaning of Treasury  Regulations
         Section  301.7701-4(c)(1),  it being  understood that the Owner Trustee
         shall have the power and  authority  to fulfill its  obligations  under
         Section 2.06 hereof and Section 11(e) of the Lease.

         Section 3.06.  Certain Rights of Owner Trustee. Except as otherwise provided in Section 3.05 hereof:

                  (a) in the absence of bad faith on its part, the Owner Trustee
         may rely and shall be  protected  in acting or  refraining  from acting
         upon  any  resolution,  certificate,  statement,  instrument,  opinion,
         report, notice,  request,  direction,  consent, order or other paper or
         document  reasonably  believed  by it to be  genuine  and to have  been
         signed or presented by the proper party or parties;

                  (b) any request,  direction or authorization by the Trustor or
         any other party to any other Operative  Agreement shall be sufficiently
         evidenced  by  a  request,   direction  or  authorization  in  writing,
         delivered to the Owner Trustee, and signed in the name of such party by
         any of the Chairman of the Board,  the President,  any Vice  President,
         the  Treasurer  or Assistant  Treasurer  or the  Secretary or Assistant
         Secretary  or other  duly  authorized  officer of such  party;  and any
         resolution of the Board of Directors or committee thereof of such party
         shall be sufficiently  evidenced by a copy of such resolution certified
         by the Secretary or an Assistant  Secretary of such party, to have been
         duly  adopted  and to be in full  force and  effect on the date of such
         certification, and delivered to the Owner Trustee;

                  (c) whenever in the administration of this Agreement the Owner
         Trustee shall deem it desirable  that a matter be proved or established
         prior to taking,  suffering or omitting  any action  hereunder or under
         any of the other Operative Agreements,  the Owner Trustee (unless other
         evidence be herein or therein specifically  prescribed),  absent actual
         knowledge  of a  Responsible  Officer  of  the  Owner  Trustee  to  the
         contrary,  may  rely in  good  faith  upon a  certificate  in  writing,
         delivered to the Owner Trustee and signed by any of the Chairman of the
         Board,  the President,  any Vice President,  the Treasurer or Assistant
         Treasurer or the  Secretary or Assistant  Secretary of the Lessee,  the
         Trustor,  or the  Indenture  Trustee  and  notice of such need for such
         proof or  establishment  shall be  delivered  to the  Trustor,  who may
         advise  the Owner  Trustee  in  respect  of such  matter  and the Owner
         Trustee shall act in conformity with such advice;

                  (d) the Owner  Trustee may exercise its powers and perform its
         duties by or through  such  attorneys,  agents and servants as it shall
         appoint with due care, and it shall be entitled to rely upon the advice
         of  counsel  reasonably  selected  by it with  due  care  and  shall be
         protected by the advice of such counsel in anything  done or omitted to
         be done in accordance with such advice;

                  (e) the Owner  Trustee  shall not be under any  obligation  to
         take  any  action  under  this  Agreement  or  under  any of the  other
         Operative  Agreements at the request or direction of the Trustor unless
         the Persons making such request or direction  shall have offered to the
         Owner  Trustee  reasonable  security  or  indemnity  against the costs,
         expenses and  liabilities  which might be incurred by it in  compliance
         with such request or direction; nor shall the Owner Trustee be required
         to take any action deemed to impose on the Owner Trustee any obligation
         to take any action, if the Owner Trustee shall have been advised by its
         counsel  that such  action is  unlawful  or is contrary to the terms of
         this Agreement or the other Operative Agreements;

                  (f)  the  Owner  Trustee  shall  not  be  bound  to  make  any
         investigation  into the  facts or  matters  stated  in any  resolution,
         certificate,  statement,  instrument, opinion, report, notice, request,
         direction,   consent,  order  or  other  paper  or  document  unless  a
         Responsible  Officer of the Owner Trustee has actual knowledge that the
         facts or matters stated therein are false or inaccurate,  but the Owner
         Trustee  in  its   discretion   may  make  such   further   inquiry  or
         investigation into such facts or matters as it may see fit, and, if the
         Owner  Trustee  shall   determine  to  make  such  further  inquiry  or
         investigation,  it shall be entitled,  to the same extent  permitted to
         the Lessor  under the Lease,  to examine  the books and  records of the
         Lessee to reasonably determine whether the Lessee is in compliance with
         the terms and  conditions  of the Lease and to  examine  the  Aircraft,
         Airframe,  Engines  or any  Part  thereof  personally  or by  agent  or
         attorney; and

                  (g) without  limiting the  generality  of Section 3.05 hereof,
         except as otherwise provided in written instructions given to the Owner
         Trustee by the Trustor or as otherwise provided in the Indenture or the
         Participation  Agreement, the Owner Trustee shall not have any duty (i)
         to see to any recording or filing of the Lease or of this  Agreement or
         any financing statement or other notice or document relating thereto or
         contemplated   under  the  Operative   Agreements  or  to  see  to  the
         maintenance  of any such  recording or filing (other than FAA reporting
         requirements  contained in 14 C.F.R. Sections 47.45 and 47.51), (ii) to
         see to any  insurance  on the Aircraft or any part thereof or to effect
         or maintain any such  insurance,  whether or not the Lessee shall be in
         default with respect thereto,  other than to forward to the Trustor and
         (to the extent provided in the Indenture) the Indenture  Trustee copies
         of all  certificates,  reports and other written  information  which it
         receives  from the Lessee  pursuant  to the Lease,  (iii) to see to the
         payment  or  discharge  of any tax,  assessment  or other  governmental
         charges or any Lien (except any Lessor's Lien attributable to it in its
         individual  capacity)  owing with  respect  to, or  assessed  or levied
         against any part of the Lessor's Estate,  (iv) to confirm or verify any
         financial  statements  or reports of the Lessee,  or (v) to inspect the
         Aircraft at any time or ascertain or inquire as to the  performance  or
         observance of any of the Lessee's covenants under the Lease.

         Section 3.07. No  Representations  or Warranties as to Certain Matters.
NEITHER THE OWNER  TRUSTEE NOR SSB MAKES OR SHALL BE DEEMED TO HAVE MADE (a) ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE TITLE,  AIRWORTHINESS,
VALUE,   CONDITION,   WORKMANSHIP,   DESIGN,   COMPLIANCE  WITH  SPECIFICATIONS,
CONSTRUCTION,  OPERATION,  MERCHANTABILITY  OR FITNESS FOR USE FOR A  PARTICULAR
PURPOSE OF THE AIRCRAFT,  AS TO THE ABSENCE OF LATENT OR OTHER DEFECTS,  WHETHER
OR NOT  DISCOVERABLE,  AS TO THE  ABSENCE  OF ANY  INFRINGEMENT  OF ANY  PATENT,
TRADEMARK  OR  COPYRIGHT,  AS TO THE  ABSENCE  OF  OBLIGATIONS  BASED ON  STRICT
LIABILITY IN TORT, OR ANY OTHER REPRESENTATION OR WARRANTY  WHATSOEVER,  EXPRESS
OR IMPLIED,  WITH RESPECT TO THE AIRCRAFT OR ANY PART  THEREOF,  except that SSB
represents  and warrants  that on the Delivery Date the Owner Trustee shall have
received whatever right,  title and interests in, to and under the Aircraft that
were  conveyed to it by the Seller and SSB  represents,  warrants and  covenants
that at all times on and after the Delivery  Date the Aircraft  shall be free of
all Lessor's Liens  attributable  to it, and that the Owner Trustee shall comply
with the last sentence of Section 3.05(b) hereof,  or (b) any  representation or
warranty as to the validity, legality or enforceability of this Agreement or any
other  Operative  Agreement to which the Owner Trustee is a party,  or any other
document or instrument,  or as to the correctness of any statement  contained in
any  thereof,  except to the extent  that any such  representation,  warranty or
statement is expressly made herein or therein as a representation or warranty by
the Owner Trustee or SSB and except that SSB hereby represents and warrants that
this  Agreement has been,  and (assuming  the due  authorization,  execution and
delivery of this  Agreement by the Trustor) the other  Operative  Agreements  to
which the Owner  Trustee is a party have been (or at the time of  execution  and
delivery of any such  instrument by the Owner  Trustee  hereunder or pursuant to
the terms of the  Participation  Agreement that such an instrument will be) duly
executed and delivered by one of its officers who is or will be, as the case may
be, duly  authorized  to execute and deliver such  instruments  on behalf of the
Owner  Trustee and that this  Agreement has been duly  authorized,  executed and
delivered by SSB and (assuming due authorization, execution and delivery of this
Trust  Agreement  by the  Trustor)  constitutes  the  legal,  valid and  binding
obligation of SSB enforceable against it in accordance with its terms, except as
such  enforceability may be limited by bankruptcy,  insolvency,  reorganization,
moratorium or other similar laws affecting the rights of creditors generally and
by general principles of equity.

         Section 3.08.  Status of Moneys  Received.  All moneys  received by the
Owner  Trustee  under or  pursuant to any  provision  of this  Agreement  or any
Operative  Agreement shall constitute trust funds for the purpose for which they
were paid or are held,  but need not be  segregated in any manner from any other
moneys  except to the extent  required by law and may be  deposited by the Owner
Trustee under such conditions as may be prescribed or permitted by law for trust
funds, or may be invested in direct obligations of the United States.

         Section  3.09.  Self-Dealing.  The  Owner  Trustee  in  its  individual
capacity,  or  any  corporation  in or  with  which  the  Owner  Trustee  may be
interested or  affiliated,  or any officer or director of any such  corporation,
may have normal commercial relations, and otherwise deal, in the ordinary course
of business,  with the Lessee or any other corporation having relations with the
Lessee to the full extent permitted by law.

         Section 3.10. Definition of a Responsible Officer. For purposes of this
Trust Agreement only,  "Responsible Officer" when used with respect to the Owner
Trustee means the Chairman or the  Vice-Chairman of the Board of Directors,  the
Chairman or Vice-Chairman of the Executive  Committee of the Board of Directors,
the President,  any Vice  President  (whether or not designated by a number or a
word or words added before or after the title "Vice President"),  the Secretary,
any Assistant Secretary,  or any other officer in the Corporate Trust Department
of SSB customarily performing functions similar to those performed by any of the
above designated officers.

         Section  3.11.  Resignation  or  Removal  of Owner  Trustee.  The Owner
Trustee or any successor  thereof (a) shall resign if required to do so pursuant
to Section 7.02(b) of the Participation Agreement and (b) may resign at any time
without  cause by giving at least 60 days' prior  written  notice to the Trustor
and the Indenture  Trustee,  such  resignation in each case to be effective only
upon  the  appointment  of a  successor  trustee  and  the  acceptance  of  such
appointment by such successor.  In addition,  the Trustor may at any time remove
the Owner Trustee  without  cause by an  instrument in writing  delivered to the
Owner Trustee and the Indenture Trustee,  such removal to be effective only upon
the  appointment by the Trustor of a successor  Owner Trustee and the acceptance
of such appointment by such successor.  Upon the giving of notice of resignation
or removal of the Owner  Trustee,  the Trustor  may  appoint a  successor  Owner
Trustee by an instrument signed by the Trustor. If the Trustor shall not have so
appointed a successor  Owner Trustee  within 30 days after such  resignation  or
removal,  the Owner Trustee,  the Indenture  Trustee or the Trustor may apply to
any court of competent  jurisdiction to appoint a successor Owner Trustee to act
until such time, if any, as a successor or successors  shall have been appointed
by the Trustor as above provided.  Any successor Owner Trustee so appointed by a
court shall be superseded by any successor Owner Trustee subsequently  appointed
by the Trustor.

         The  appointment of any successor Owner Trustee shall be subject to the
conditions set forth in Section 11.01 of the Participation Agreement.

         Section  3.12.  Estate  and  Rights of  Successor  Owner  Trustee.  Any
successor  Owner Trustee,  however  appointed,  shall execute and deliver to the
predecessor Owner Trustee, with a copy to the Trustor and the Indenture Trustee,
an instrument  accepting such appointment,  in form and substance  acceptable to
the predecessor Owner Trustee and the Trustor and thereupon each successor Owner
Trustee,  without  further  act,  shall  become  vested  with  all the  estates,
properties, rights, powers, duties and trust of the predecessor Owner Trustee in
the trust hereunder with like effect as if originally  named as an Owner Trustee
herein,  but  nevertheless  upon the  written  request of such  successor  Owner
Trustee,  such predecessor Owner Trustee shall execute and deliver an instrument
transferring to such successor Owner Trustee,  upon the trust herein  expressed,
all estates, properties, rights, powers, duties, property or moneys then held by
such predecessor  Owner Trustee upon the trust herein  expressed.  Upon any such
transfer by a predecessor  Owner Trustee,  such predecessor  Owner Trustee shall
provide the  successor  Owner  Trustee and Trustor an accounting of the Lessor's
Estate and the trust hereunder.

         Upon the  appointment  of any successor  Owner Trustee  hereunder,  the
predecessor Owner Trustee will use its best efforts to cause registration of the
Aircraft  included in the Lessor's Estate to be transferred  upon the records of
the  Aeronautics  Authority  or other  registry  where the  Aircraft may then be
registered  into the name of the successor Owner Trustee and shall otherwise use
its best efforts to comply,  or assist the successor Owner Trustee in complying,
with the provisions of Section 11.01 of the Participation Agreement.

         Section 3.13.  Merger or  Consolidation  of SSB. Any  corporation  into
which SSB in its  individual  capacity  may be  merged  or with  which it may be
consolidated,  or any corporation  resulting from any merger or consolidation to
which SSB shall be a party,  or any corporation to which  substantially  all the
business of the Owner  Trustee in its  individual  capacity may be  transferred,
shall,  subject to Section 11.01 of the  Participation  Agreement,  be the Owner
Trustee  under  this  Agreement  without  further  act;   provided,   that  such
corporation shall not also be the Indenture Trustee.

         Section  3.14.  Co-Trustees.  At any time,  if the Owner Trustee or the
Trustor  shall deem it  necessary or prudent or desirable in order to conform to
legal  requirements of any jurisdiction in which any part of the Lessor's Estate
may at the time be located, the Owner Trustee by an instrument in writing signed
by it,  shall  appoint  one or more  Persons  approved  by the Trustor to act as
co-trustee, or co-trustees,  jointly with the Owner Trustee, or separate trustee
or separate  trustees (except insofar as local law makes it necessary or prudent
or desirable for any such co-trustee or separate  trustee to act alone),  of all
or any part of the Lessor's  Estate,  and to vest in such Person or Persons,  in
such capacity,  such title to the Lessor's Estate or any part thereof,  and such
rights,  powers,  duties,  trusts or  obligations  as the Trustor  may  consider
necessary or prudent or desirable. The Owner Trustee shall not be liable for any
act or  omission of any  co-trustee  or separate  trustee  appointed  under this
Section  3.14.  No  appointment  of, or action by, any  co-trustee  or  separate
trustee  appointed under this Section 3.14 will relieve the Owner Trustee of any
of its obligations under any Operative  Agreement or otherwise affect any of the
terms of the  Indenture  or  adversely  affect the  interests  of the  Indenture
Trustee or the Certificate Holders in the Trust Indenture Estate.

         Any co-trustee or separate trustee may, at any time by an instrument in
writing, constitute the Owner Trustee its or his attorney-in-fact and agent with
full  power  and  authority  to do all  acts  and  things  and to  exercise  all
discretion on its or his behalf and in its or his name subject to the conditions
of this Agreement.

         Every  additional  trustee  hereunder  shall be a Citizen of the United
States and, to the extent  permitted by law, be appointed and act, and the Owner
Trustee and its successors  shall act,  subject to the following  provisions and
conditions:

                  (A) all powers, duties,  obligations and rights conferred upon
         the Owner Trustee in respect of the custody,  control and management of
         monies, the Aircraft or documents  authorized to be delivered hereunder
         or under the  Participation  Agreement shall be exercised solely by the
         Owner Trustee;

                  (B) all other rights, powers, duties and obligations conferred
         or imposed  upon the Owner  Trustee  shall be conferred or imposed upon
         and  exercised or performed  by the Owner  Trustee and such  additional
         trustee  jointly,  except  to the  extent  that  under  any  law of any
         jurisdiction  in which any  particular  act or acts are to be performed
         (including  the  holding  of title to the  Lessor's  Estate)  the Owner
         Trustee  shall be  incompetent  or  unqualified  to perform such act or
         acts, in which event such rights,  powers, duties and obligations shall
         be exercised and performed by such additional trustee;

                  (c) no power  given to,  or which is  provided  hereby  may be
         exercised by, any such additional trustee, except jointly with, or with
         the consent in writing of, the Owner Trustee;

                  (D) no trustee  hereunder shall be personally liable by reason
         of any  act or  omission  of any  other  trustee  hereunder  except  as
         otherwise provided hereunder; and

                  (E) the Trustor,  at any time, by an instrument in writing may
         remove any such additional trustee.

         Section 3.15. Interpretation of Agreements. In the event that the Owner
Trustee is unsure as to the  application  of any provision of this  Agreement or
any  other  Operative   Agreement  or  any  other  agreement   relating  to  the
transactions  contemplated  by the  Operative  Agreements  or such  provision is
ambiguous as to its  application,  or is, or appears to be, in conflict with any
other  applicable  provision,  or in the event that this  Agreement or any other
Operative  Agreement permits any determination by the Owner Trustee or is silent
or  incomplete as to the course of action which the Owner Trustee is required to
take with respect to a particular set of facts,  the Owner Trustee shall request
in writing sent in  accordance  with Article 14 of the  Participation  Agreement
instructions  of the Trustor  and, to the extent that the Owner  Trustee acts in
good faith in accordance with any instructions received from the Trustor,  shall
not be liable to any  Person;  provided,  that in the event that no  response is
made to the Owner  Trustee by the  Trustor  within 25  Business  Days after such
request,  the Owner  Trustee shall not be liable to any Person for acts taken by
the Owner Trustee in good faith in what it deems to be the best interests of the
Trustor  or for any  failure  to act in any  situation  described  above in this
Section 3.15. The provisions of this Section 3.15 shall not be applicable to the
Owner  Trustee's  obligations  set forth in the last  sentence  of Section  3.01
hereof.

         Section 3.16.  Not Acting in Individual  Capacity.  In carrying out the
trust hereby created, the Owner Trustee will act solely as trustee hereunder and
not in its individual  capacity  except as expressly  provided  herein or in the
other Operative  Agreements to which it is a party; and all Persons,  other than
the Trustor as provided in this  Agreement,  having any claim  against the Owner
Trustee by reason of the transactions contemplated hereby shall look only to the
Lessor's  Estate  for  payment  or  satisfaction  thereof,  except to the extent
provided in the last sentence of Section 3.01 hereof.

         Section 3.17. Books and Records:  Tax Returns.  The Owner Trustee shall
be responsible for the keeping of all appropriate  books and records relating to
its receipt and disbursement of all moneys under this Agreement or any Operative
Agreement  and shall,  upon the  request of the  Trustor or its duly  authorized
representative,  make  available  such books and records at its principal  trust
office  during  normal  business  hours for  inspection  and copying.  The Owner
Trustee  agrees to sign and file all  returns  with  respect  to Taxes  that the
Trustor  prepares  (or causes to be prepared)  and directs the Owner  Trustee to
sign and file.  The Owner Trustee,  upon request,  will furnish the Trustor with
all such  information as may be reasonably  required or necessary from the Owner
Trustee in connection with the preparation of such tax returns and in connection
with any other  filing  or audit  and  related  litigation  obligations.  At the
request of the  Trustor,  and at the  expense of the Lessee,  the Owner  Trustee
shall file an  application  with the  Internal  Revenue  Service  for a taxpayer
identification number with respect to the trust created hereunder and prepare or
cause to be prepared and sign and/or file the Federal  fiduciary tax return with
respect  to  Taxes  due  and  payable  by  the  Trust  in  connection  with  the
transactions contemplated hereby or by any other Operative Agreement;  provided,
however,  that the Owner Trustee shall send a completed copy of each such return
to the  Trustor  not more than 60 nor less than 30 days prior to the due date of
such return;  provided  that the Owner  Trustee  shall have timely  received all
necessary  information  to complete and deliver to the Trustor such return.  The
Trustor,  upon request, will furnish the Owner Trustee with all such information
as may be required from the Trustor in connection  with the  preparation of such
income tax returns.
The Owner Trustee shall keep copies of all returns delivered to or filed by it.

                                    ARTICLE 4

                              TERMINATION OF TRUST

         Section  4.01.  Termination.  This  Agreement  and the trust  created and  provided for hereby shall cease
and be terminated in any one of the following events, whichever shall first occur:

                  (a) The sale or other final  disposition  by the Owner Trustee
         of all of its interest in all property  constituting or included in the
         Lessor's Estate and, if the Indenture shall then be in effect, the sale
         or other disposition by the Indenture Trustee of all of its interest in
         all property  constituting or included in the Lessor's Estate,  and the
         final disposition by the Owner Trustee and, if the Indenture shall then
         be in effect, the Indenture Trustee, of all moneys or other property or
         proceeds  constituting  part of the Lessor's  Estate in accordance with
         the terms hereof; or

                  (b) 21 years less one day from the death of the last  survivor
         of the  descendants  of Queen Victoria of England living on the date of
         this Agreement; provided, however, that if the Trust shall be or become
         valid under applicable law for a period subsequent to 21 years less one
         day from the death of the last  survivor  of the  descendants  of Queen
         Victoria of England  living on the date of this  Agreement or,  without
         limiting the generality of the foregoing,  if legislation  shall become
         effective  providing for the validity or permitting the effective grant
         of such trust for a period,  in gross,  exceeding  the period for which
         such  trust is  hereinabove  stated to extend  and be valid,  then such
         trust  shall  not  terminate  as  provided  in the  first  part of this
         sentence but shall extend to and continue in effect until,  but only if
         such non-termination and extension shall then be valid under applicable
         law, such time as the same shall,  under  applicable  law,  cease to be
         valid.

         Section  4.02.  Termination  at Option of the Trustor.  Notwithstanding
Section 4.01 hereof, this Agreement and the trust created hereby shall terminate
and the Trust Estate shall be  distributed  to the Trustor,  and this  Agreement
shall be of no further  force and  effect,  upon the  election of the Trustor by
notice to the Owner Trustee,  if such notice shall be accompanied by the written
agreement  (in form and  substance  satisfactory  to the Owner  Trustee)  of the
Trustor  assuming all the obligations of the Owner Trustee under or contemplated
by the Operative Agreements or incurred by it as trustee hereunder and releasing
the Owner Trustee therefrom;  provided,  however,  that such notice may be given
only after the time the Lien of the Indenture is discharged  under Section 14.01
of the  Indenture  and the Lease has  terminated  unless the Trustor  shall have
received  the  prior  written  consent  of the  Indenture  Trustee  to any  such
termination  in  which  case  such  notice  may be given  while  the Lien of the
Indenture is outstanding.

         Section 4.03.  Distribution of Lessor's Estate upon  Termination.  Upon
any termination of this trust pursuant to the provisions of Section 4.01 hereof,
the Owner Trustee shall convey the Lessor's Estate (subject to all  obligations,
if any, of the Owner  Trustee then existing  under the  Operative  Agreements to
which the Owner  Trustee  is a party) to such  purchaser  or  purchasers  or the
Trustor,  as the case may be, and for such  amount and on such terms as shall be
specified  in  written  instructions  from the  Trustor  delivered  to the Owner
Trustee prior to the date of termination;  provided,  that (i) if at the time of
any termination the Lease remains in force and effect,  then the Lessor's Estate
shall be sold as a unit (and not in parcels) and subject to the Lease,  and (ii)
in the event such written instructions are not delivered to the Owner Trustee on
or before the date of termination, the Owner Trustee shall transfer title to the
Lessor's Estate to the Trustor. Upon making such transfer or sale and accounting
for all funds  which  have  come into its  hands,  the  Owner  Trustee  shall be
entitled to receipt of any sums due and owing to the Owner  Trustee for expenses
incurred pursuant hereto as set forth in Section 2.05 hereof.

                                                         ARTICLE 5

                                              TRANSFER OF BENEFICIAL INTEREST

         The  Initial  Owner  Participant  may,  on the  Delivery  Date (or,  if
earlier, the Transfer Date), assign, convey or otherwise transfer its Beneficial
Interest  to one or more  Persons to enable the Owner  Trustee to  purchase  the
Aircraft pursuant to Section 3.02 of the Participation Agreement.

                                                         ARTICLE 6

                                                       MISCELLANEOUS

         Section 6.01. Indemnification.  The Trustor shall assume liability for,
and shall  indemnify,  protect,  save and keep harmless SSB from and against any
and all liabilities,  obligations,  losses, damages,  penalties,  taxes, claims,
actions,  proceedings,  suits,  costs (including  reasonable  attorneys'  fees),
expenses and  disbursements of any kind and nature  whatsoever  ("Trust Claims")
imposed on,  incurred by or  asserted  against the Owner  Trustee or SSB, as the
case may be (but only to the  extent the Owner  Trustee or SSB,  as the case may
be, is not  indemnified  by the Lessee for such Trust Claims under any Operative
Document or is not indemnified by any other Person for such Trust Claims, within
a reasonable time after demand therefor),  in any way relating to or arising out
of (X) the Trust Estate or any of the  properties  included  therein and (Y) the
administration  of the Trust  Estate  or the  action  of  inaction  of the Owner
Trustee hereunder or under the Operative  Documents  including,  but not limited
to, claims under any Environmental Laws; provided, however, that (a) the Trustor
shall not be required to indemnify  the Owner  Trustee or SSB in the case of (i)
willful  misconduct,  negligence  with  respect  to  handling  of  funds,  gross
negligence  or bad faith of the Owner  Trustee or SSB,  as the case may be, (ii)
the Owner  Trustee's or SSB's  failure to use  ordinary  care in the handling of
monies  constituting part of the Trust Estate,  (iii) Taxes of the Owner Trustee
or SSB, as the case may be,  that are based on or  measured by the  compensation
received by SSB for acting as Owner Trustee  hereunder,  and (iv) items excluded
from  indemnification  by the Lessee as, as to the  extent,  provided in Section
8.01(b)(i)-(xiii) and 9.01(b)(i)-(xii) of the Participation  Agreement,  and (b)
the Trustor  shall not be required to  indemnify  with  respect to Trust  Claims
resulting  from a breach of the  covenants  by SSB in  Article 3 hereof or Trust
Claims resulting because any  representation or warranty of the Owner Trustee or
SSB, as the case may be, contained in any Operative Document proves to be untrue
or inaccurate or the failure by the Owner Trustee or SSB, as the case may be, to
perform or observe any  agreements,  covenants or  conditions to be performed or
observed  by it in  any of  the  Operative  Documents.  None  of  the  foregoing
exclusions  shall limit the  obligation of the Trustor to indemnify SSB (but SSB
shall still be required to seek  indemnification from the Lessee before making a
claim against the Trustor  hereunder unless such exclusion is otherwise  limited
under  Sections  8.01(b) and 9.01(b) of the  Participation  Agreement),  (i) for
actions taken in accordance with written instructions received from the Trustor,
and (ii) to the extent such exclusions are  attributable to acts or omissions of
the  Trustor.  The payor of any  indemnity  under  this  Section  5.01  shall be
surrogated to any right of the person indemnified in respect of the matter as to
which such  indemnity was paid. The  indemnities  contained in this Section 6.01
shall survive the termination of this Agreement.

         Section 6.02. Limitations on the Trustor's Liability. The Trustor shall
not have any liability for the performance of this Agreement except as expressly
set forth herein.

         Section 6.03. Fees; Compensation. Except as provided in Section 3.06(e)
or 6.01 hereof, the Owner Trustee agrees that it shall have no right against the
Trustor  or the  Trust  Estate  for any  fee as  compensation  for its  services
hereunder.

         Section 6.04. Supplements and Amendments.  At any time and from time to
time, only upon the written request of the Trustor (a) SSB and the Trustor shall
execute a supplement hereto for the purpose of adding provisions to, or changing
or  eliminating  provisions  of, this Agreement as specified in such request and
(b) the Owner Trustee  shall,  subject to the  provisions of Section 8.01 of the
Indenture, enter into or consent to such written amendment or modification of or
supplement  to any of the  Operative  Agreements  as the  Trustor  and any other
necessary  parties  may  agree to in  writing  and as may be  specified  in such
request,  or execute and deliver such written  waiver of the terms of any of the
Operative Agreements as may be agreed to in writing by the Trustor and as may be
specified  in such  request;  provided,  that (i) the  Owner  Trustee  shall not
execute any such supplement, amendment, waiver or modification without the prior
written consent of the Trustor,  (ii) if in the reasonable  opinion of the Owner
Trustee any  document  required  to be  executed by it pursuant to this  Section
adversely  affects any right or duty of, or immunity or  indemnity  in favor of,
the Owner Trustee under this  Agreement or any other  Operative  Agreement,  the
Owner Trustee may in its  discretion  decline to execute such document and (iii)
any amendment or supplement to this  Agreement  shall comply with the provisions
of Section 7.13 of the Participation  Agreement.  It shall not be necessary that
any request pursuant to this Section specify the particular form of the proposed
document to be executed pursuant to such request,  but it shall be sufficient if
such request shall indicate the substance thereof.  Promptly after the execution
by SSB or the Owner Trustee of any document pursuant to this Section,  the Owner
Trustee  shall mail a  conformed  copy  thereof to the  Trustor,  the  Indenture
Trustee  and the  Lessee,  but the  failure  of the Owner  Trustee  to mail such
conformed copies shall not impair or affect the validity of such document.

         Section  6.05.  Nature of Title of Trustor.  The Trustor shall not have
any legal title to any part of the Lessor's Estate. No transfer, by operation of
law or otherwise,  of the right, title and interest of the Trustor in and to the
Lessor's Estate or the trust hereunder shall operate to terminate this Agreement
or Lessor's Estate.

         Section 6.06. Power of Owner Trustee to Convey.  Any assignment,  sale,
transfer or other  conveyance  by the Owner Trustee of the interest of the Owner
Trustee in the  Operative  Agreements  or in the  Aircraft  or any part  thereof
pursuant to and in compliance  with the terms of this Agreement or the Operative
Agreements  shall bind the Trustor and shall be  effective to transfer or convey
all right,  title and  interest  of the Owner  Trustee  in and to the  Operative
Agreements or the right, title and interest of the Owner Trustee and the Trustor
in and to the Aircraft or such part thereof. 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 the Owner
Trustee.

         Section 6.07.  Notices.  All notices,  demands,  declarations  and other  communications  required by this
Agreement shall be given and become effective in the manner prescribed in the Participation Agreement.

         Section  6.08.  Situs of  Trust;  Applicable  Law;  Severability.  THIS
AGREEMENT  SHALL IN ALL  RESPECTS BE GOVERNED BY, AND  CONSTRUED  IN  ACCORDANCE
WITH,  THE INTERNAL LAWS OF THE STATE OF  CONNECTICUT,  INCLUDING ALL MATTERS OF
VALIDITY, CONSTRUCTION AND PERFORMANCE. If any provision of this Agreement shall
be invalid or unenforceable,  the remaining  provisions hereof shall continue to
be fully effective; provided, that such remaining provisions do not increase the
obligations or liabilities of the Owner Trustee or the Trustor.

         Section 6.09.  Successors and Assigns.  This Agreement shall be binding
upon and shall inure to the benefit of, and shall be enforceable by, the parties
hereto and their  respective  successors  and permitted  assigns,  including any
successive  holder  of the  Beneficial  Interest,  but  only to the  extent  the
Beneficial  Interest has been  transferred  or assigned in  accordance  with the
limitations of Section 7.03(d) of the Participation Agreement.

         Section  6.10.  Headings  and Table of  Contents.  The  headings of the
Articles and Sections of this  Agreement  and the Table of Contents are inserted
for convenience  only and shall not affect the meaning or construction of any of
the provisions hereof.

         Section 6.11.  Identification  of Trust.  This trust may for  convenience  be referred to as the "Atlantic
Coast Airlines Trust No. _______________."

         Section  6.12.  Counterparts.  This  instrument  may be executed in any
number of  counterparts  or upon  separate  signature  pages  bound  together in
several counterparts, each fully-executed set of which when so executed shall be
deemed to be an original, and such counterparts together shall constitute and be
one and the same instrument.

         Section  6.13.  Trustor  Interest.  The Trustor  has only a  beneficial
interest in any  specific  property  of this  Trust.  No creditor of the Trustor
shall have any right to obtain  possession  of, or otherwise  exercise  legal or
equitable  remedies  with  respect to, the property of this trust (as opposed to
the Trustor's beneficial interest in this trust).

         Section 6.14.  Performance by the Trustor.  Any obligation of the Owner
Trustee   hereunder  or  under  any  Operative   Agreement  or  other   document
contemplated  herein may be  performed  by the Trustor and any such  performance
shall not be construed as a revocation of the trust created hereby.



<PAGE>


         IN WITNESS  WHEREOF,  SSB and the Trustor have caused this Agreement to
be duly executed all as of the date first above written.

                                                     ATLANTIC COAST AIRLINES



                                                     By:
                                                          Name:  ______________________
                                                          Title:  _______________________



                                                     STATE STREET BANK AND TRUST COMPANY
                                                     OF CONNECTICUT, NATIONAL ASSOCIATION



                                                     By:
                                                          Name:  ______________________
                                                          Title:  _______________________

</TABLE>