AIRCRAFT LEASE AGREEMENT

                           Dated as of April 15, 1993

                                     between

                           TRUST COMPANY FOR USL, INC.
                      not in its individual capacity except
                   as otherwise specified herein but solely as
                                  Owner Trustee

                                     Lessor

                                       and

                           FEDERAL EXPRESS CORPORATION

                                     Lessee

                           One Boeing 727-2D4 Aircraft

                          U.S. Registration No. N362PA

                               (Mfg. Ser. #21850)







                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA




<PAGE>


                               TABLE OF CONTENTS
                               -----------------

                                                                            PAGE
                                                                            ----

Section 1.      Definitions . . . . . . . . . . . . . . . . . . . . . . . .    1

Section 2.      Delivery and Acceptance . . . . . . . . . . . . . . . . . .   11

        2.1.    Delivery and Lease of Aircraft  . . . . . . . . . . . . . .   11
        2.2.    Confirmation; Acceptance by Lessee  . . . . . . . . . . . .   11
        2.3.    Conditions to Lease . . . . . . . . . . . . . . . . . . . .   11
        2.4.    Inspection; Acceptance Test Flight on
                  Delivery  . . . . . . . . . . . . . . . . . . . . . . . .   13
        2.5.    Appointment of Lessee as Agent; Enforcement
                  of Modification Contract  . . . . . . . . . . . . . . . .   14

Section 3.      Term and Rent . . . . . . . . . . . . . . . . . . . . . . .   15

        3.1.    Term  . . . . . . . . . . . . . . . . . . . . . . . . . . .   16
        3.2.    Basic Rent  . . . . . . . . . . . . . . . . . . . . . . . .   16
        3.3.    Supplemental Rent . . . . . . . . . . . . . . . . . . . . .   16
        3.4.    Adjustments to Basic Rent and Stipulated
                  Loss Values . . . . . . . . . . . . . . . . . . . . . . .   16
        3.5.    Payments  . . . . . . . . . . . . . . . . . . . . . . . . .   16

Section 4.      Lessor's Representations and Warranties;
                DISCLAIMER; Certain Agreements of Lessee  . . . . . . . . .   17

        4.1.    Representations and Warranties of Lessor  . . . . . . . . .   17
        4.2.    DISCLAIMER  . . . . . . . . . . . . . . . . . . . . . . . .   17
        4.3.    Lessee's Representations and Warranties . . . . . . . . . .   19

Section 5.      Return of Aircraft  . . . . . . . . . . . . . . . . . . . .   23

        5.1.    General Condition upon Return . . . . . . . . . . . . . . .   23
        5.2.    Return of the Engines . . . . . . . . . . . . . . . . . . .   25
        5.3.    Fuel; Manuals   . . . . . . . . . . . . . . . . . . . . . .   26
        5.4.    Storage Upon Return . . . . . . . . . . . . . . . . . . . .   26
        5.5.    Severable Parts . . . . . . . . . . . . . . . . . . . . . .   26
        5.6.    Failure to Return Aircraft or Engines . . . . . . . . . . .   27

Section 6.      Liens   . . . . . . . . . . . . . . . . . . . . . . . . . .   27

Section 7.      Registration, Operation, Possession, Sub-
                  leasing and Records . . . . . . . . . . . . . . . . . . .   28


                                      (i)

<PAGE>


                                                                            PAGE
                                                                            ----
        7.1.    Registration and Operation  . . . . . . . . . . . . . . . .   28
                  (a) Registration  . . . . . . . . . . . . . . . . . . . .   28
                  (b) Nameplate . . . . . . . . . . . . . . . . . . . . . .   28
                  (c) Compliance with Laws  . . . . . . . . . . . . . . . .   28
                  (d) Operation; Insurance Requirements . . . . . . . . . .   29

        7.2.    Possession and Subleases  . . . . . . . . . . . . . . . . .   29

        7.3.    Records and Reports . . . . . . . . . . . . . . . . . . . .   35
                  (a) Records . . . . . . . . . . . . . . . . . . . . . . .   35
                  (b) Information and Reports . . . . . . . . . . . . . . .   36

Section 8.      Maintenance; Replacement and Pooling
                  of Parts; Alterations, Modifications and
                  Additions . . . . . . . . . . . . . . . . . . . . . . . .   36

        8.1.    Maintenance . . . . . . . . . . . . . . . . . . . . . . . .   36
        8.2.    Replacement of Parts  . . . . . . . . . . . . . . . . . . .   36
        8.3.    Pooling of Parts  . . . . . . . . . . . . . . . . . . . . .   37
        8.4.    Alterations, Modifications and Additions  . . . . . . . . .   38

Section 9.      Renewal Options; Purchase Options . . . . . . . . . . . . .   39

Section 10.     Loss, Destruction, Requisition, Etc.  . . . . . . . . . . .   41

        10.1.   Event of Loss with Respect to Airframe  . . . . . . . . . .   41

        10.2.   Event of Loss with Restpect to an Engine  . . . . . . . . .   41

                  (a)  Event of Loss  . . . . . . . . . . . . . . . . . . .   41
                  (b)  Conditions; Lessee's Obligations . . . . . . . . . .   42
                  (c)  Recordation and Opinions . . . . . . . . . . . . . .   42
                  (d)  Conveyance; Replacement Engine . . . . . . . . . . .   42
                  (e)  No Reduction of Basic Rent . . . . . . . . . . . . .   43

        10.3.   Application of Payments from Governmental
                  Authorities for Requisition of Title  . . . . . . . . . .   43

                  (a)  Replacement of Engine  . . . . . . . . . . . . . . .   43
                  (b)  Nonreplacement . . . . . . . . . . . . . . . . . . .   43

        10.4.   Application of Payments During Existence of
                  Default . . . . . . . . . . . . . . . . . . . . . . . . .   43

Section 11.     Insurance . . . . . . . . . . . . . . . . . . . . . . . . .   44


                                      (ii)

<PAGE>


                                                                            PAGE
                                                                            ----

                  (a)  Public Liability and Property
                         Damage Insurance . . . . . . . . . . . . . . . . .   44
                  (b)  Insurance Against Loss or Damage to
                         the Aircraft . . . . . . . . . . . . . . . . . . .   45
                  (c)  Reports, etc.  . . . . . . . . . . . . . . . . . . .   46
                  (d)  Self-Insurance . . . . . . . . . . . . . . . . . . .   48
                  (e)  Additional Insurance by Lessor and
                         Lessee . . . . . . . . . . . . . . . . . . . . . .   48
                  (f)  Indemnification by Government in Lieu
                         of Insurance . . . . . . . . . . . . . . . . . . .   48
                  (g)  Application of Payments During
                         Existence of a Lease Event of
                         Default  . . . . . . . . . . . . . . . . . . . . .   49
                  (h)  Terms of Insurance Policies  . . . . . . . . . . . .   49
                  (i)  Insurance Coverage Under
                         Certain Circumstances  . . . . . . . . . . . . . .   51
                  (j)  Non-Discrimination Against the
                         Aircraft in Insurance  . . . . . . . . . . . . . .   51

Section 12.     Inspection  . . . . . . . . . . . . . . . . . . . . . . . .   51

Section 13.     Assignment  . . . . . . . . . . . . . . . . . . . . . . . .   51

Section 14.     Events of Default . . . . . . . . . . . . . . . . . . . . .   52

Section 15.     Remedies    . . . . . . . . . . . . . . . . . . . . . . . .   55

Section 16.     Notices     . . . . . . . . . . . . . . . . . . . . . . . .   58

Section 17.     Net Lease; Lessee's Obligations; No
                  Set-Off, Counterclaim, Etc. . . . . . . . . . . . . . . .   59

Section 18.     Covenants of Lessee . . . . . . . . . . . . . . . . . . . .   60

                  (a)  Certain Assurances . . . . . . . . . . . . . . . . .   60
                  (b)  Filing and Recordation . . . . . . . . . . . . . . .   60
                  (c)  Existence . . . . . . . . . . . . . . . . . . . . .    60

Section 19.     Right To Perform for Lessee . . . . . . . . . . . . . . . .   60

Section 20.     Miscellaneous . . . . . . . . . . . . . . . . . . . . . . .   61

Section 21.     Financing   . . . . . . . . . . . . . . . . . . . . . . . .   62

Section 22.     Section 1110 Compliance . . . . . . . . . . . . . . . . . .   63


                                     (iii)

<PAGE>


SCHEDULE 1      Basic Rent Schedule

EXHIBIT A       Lease Supplement
EXHIBIT B       Form of Receipt for Leased Aircraft
EXHIBIT C       Stipulated Loss Values
EXHIBIT D       Domicile of Permitted Sublessees
EXHIBIT E       Schedule of Reregistration Countries
























                                      (iv)


<PAGE>


     LEASE AGREEMENT, dated as of April 15, 1993, between TRUST COMPANY FOR USL,
INC.,  an Illinois  corporation,  not in its  individual  capacity but solely as
owner Trustee under the Trust Agreement  defined in Section 1 below  ("Lessor"),
and FEDERAL EXPRESS CORPORATION, a Delaware corporation ("Lessee"),

                               W I T N E S S E T H:
                               - - - - - - - - - -

     WHEREAS, Lessee desires to lease from Lessor and Lessor is willing to lease
to Lessee  the  aircraft  described  herein  upon and  subject  to the terms and
conditions of this Lease.

     NOW THEREFORE,  in consideration of the mutual promises herein,  Lessor and
Lessee agree as follows:

     Section 1.  Definitions.
                 -----------

     Unless the context otherwise  requires,  the following terms shall have the
following  meanings  for all  purposes  of  this  Lease  and  shall  be  equally
applicable  to both  the  singular  and the  plural  forms of the  terms  herein
defined.  Any agreement  referred to below shall mean such agreement as amended,
supplemented and modified from time to time.

     "Act" means the Federal Aviation Act of 1958, as amended from time to time.

     "Additional Insureds" means Lessor, in its individual capacity and as owner
of the Aircraft,  each Owner Participant and Lessee in its capacity as sublessor
under any Sublease.

     "Affiliate" means a Person which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under a common control with,
another Person.

     "Aircraft"  means the Airframe,  together with the three Engines  initially
installed  on  such  Airframe  when  delivered  and  leased  hereunder  and  all
applicable  manuals and records  relating  thereto  (or any  Replacement  Engine
substituted  for  any of such  Engines  hereunder),  whether  or not any of such
initial or Replacement  Engines may from time to time thereafter be installed on
such  Airframe  or may  be  installed  on any  other  airframe  or on any  other
aircraft.


<PAGE>




     "Airframe"  means (i) the Boeing  727-2D4  aircraft  (excluding  Engines or
engines from time to time installed  thereon)  manufactured  by  Manufacturer in
1979  and  currently  bearing  United  States  registration  number  N362PA  and
manufacturer's serial number 21850 leased hereunder by Lessor to Lessee and (ii)
any and all Parts so long as the same shall be incorporated in such aircraft and
any and all parts  removed  from such  aircraft so long as title  thereto  shall
remain vested in Lessor in accordance with the terms hereof.

     "Base Rate" means the rate of interest publicly announced from time to time
by The First National Bank of Chicago at its principal  office in Chicago as its
"corporate  base rate" (or its  equivalent  successor rate if the corporate base
rate is no longer  used).  The  effective  date of each  change to the Base Rate
shall  take  effect on the day  specified  in the  public  announcement  of such
change.

     "Basic Rent" means,  for the Basic Term, the rent  identified as Basic Rent
in and payable pursuant to Section 3.2 hereof,  and, for any Renewal Term, Basic
Rent determined pursuant to Section 9 hereof.

     "Basic Term" means the period  commencing on the Delivery Date and expiring
on April 21, 2006.

     "Business Day" means any day other than a Saturday,  Sunday or other day on
which  banking  institutions  in New York,  New York,  Memphis,  Tennessee,  San
Francisco,  California or Chicago, Illinois are authorized or required by law to
be closed.

     "Civil  Reserve Air Fleet  Program"  shall mean the Civil Reserve Air Fleet
Program administered by the Government pursuant to Executive Order No. 11490, as
amended, or any substantially similar program.

     "Conversion Letter Agreement" means the letter agreement, dated as of April
22, 1993 from Lessee to the Owner Participants.

     "Delivery  Date"  means the date of the Lease  Supplement  relating  to the
Aircraft, which date shall be the date on which the Aircraft is leased to Lessee
hereunder.

     "Delivery  Receipt" means the receipt for the Aircraft  delivered by Lessee
on the Delivery Date.

     "Dollars" and "$" mean the lawful currency of the United States of America.

     "DOT"  means  the  United  States   Department  of  Transportation  or  any
governmental  person,  agency or authority  succeeding  to the functions of such
Department of Transportation.


<PAGE>


     "Engine"  means (i) each of the  three  Pratt &  Whitney  JT8D-15A  engines
identified by  manufacturer's  serial number on the Lease Supplement  subjecting
the Aircraft to this Lease and originally  installed on the Airframe on delivery
thereof  pursuant  to this  Lease,  whether or not from time to time  thereafter
installed  on such  Airframe or installed  on any other  airframe,  and (ii) any
Replacement Engine, whether or not from time to time thereafter installed on the
Airframe  or any other  airframe,  together  in each case with any and all Parts
incorporated  in such Engine and any and all Parts  removed  from such Engine so
long as title thereto shall remain vested in Lessor in accordance with the terms
hereof. At such time as a Replacement Engine shall be substituted  hereunder and
the Engine for which the  substitution is made shall be released,  such replaced
Engine shall cease to be an Engine hereunder. The term "Engines" means as of any
date of determination, all Engines then leased hereunder.

     "Event of Default" means a Lease Event of Default.

     "Event of Loss"  means,  with  respect  to the  Aircraft,  Airframe  or any
Engine, any of the following events with respect to such property:  (i) the loss
of such  property or of the use thereof due to the  destruction  of or damage to
such  property  which renders  repair  uneconomic or which renders such property
permanently unfit for normal use by Lessee for any reason  whatsoever;  (ii) any
damage to such property which results in an insurance settlement with respect to
such property on the basis of a total loss,  or a  constructive  or  compromised
total loss;  (iii) the theft or  disappearance  of such property for a period of
120  consecutive  days (or  earlier  if  either  (a)  Lessee  shall no longer be
diligently  attempting  to locate and pursue the return of such  property or (b)
the last day of the Term has occurred); (iv) the confiscation,  condemnation, or
seizure  of,  or  requisition  of title  to,  or use of,  such  property  by any
governmental or purported  governmental  authority (other than a requisition for
use by the Government or by any other government of registry of the Aircraft, or
any agency or  instrumentality  of any thereof),  which in the case of any event
referred to in this clause (iv) shall have resulted in the loss of possession of
such  property  by Lessee  for a period in  excess of 180  consecutive  days (or
shorter if the last day of the Term has  occurred) or shall have resulted in the
loss  of  title  to such  property  by  Lessor  for a  period  in  excess  of 45
consecutive days (or shorter if the last day of the Term has occurred); (v) as a
result of any law, rule, regulation, order or other

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PI

                                      -3-

<PAGE>


action by the FAA or other  governmental  body of the  government of registry of
the Aircraft having  jurisdiction,  use of such property in the normal course of
the business shall have been  prohibited for a period of 120  consecutive  days,
unless  Lessee,  prior to the  expiration  of such  120-day  period,  shall have
undertaken  and  shall be  diligently  carrying  forward  all  steps  which  are
necessary or desirable to permit the normal use of such property by Lessee,  but
in any event if such use shall  have been  prohibited  for a period of one year;
(vi) the  requisition  for use by the  Government  or any  other  government  of
registry  of the  Aircraft  or,  in the  case  of  such  other  government,  any
instrumentality  or agency  thereof,  which shall have occurred  during the Term
and, in the case of the Government,  shall have continued for 30 days beyond the
Term or, in the case of any other government of registry of the Aircraft, or any
instrumentality or agency thereof,  shall have continued to the end of the Term;
provided  that no Event of Loss shall be deemed to have  occurred,  and the Term
--------
shall be extended automatically for a period of six months in the event that the
Aircraft, the Airframe or any Engine is requisitioned by the Government pursuant
to an activation as part of the Civil Reserve Air Fleet Program;  and (vii) with
respect to an Engine  only,  any  divestiture  of title to such  Engine or other
event  specified  as an Event of Loss with  respect to an Engine in Section 10.2
hereof.  An Event of Loss with respect to the  Aircraft  shall be deemed to have
occurred if an Event of Loss occurs with respect to the Airframe.

     "Expenses" means any and all  liabilities,  obligations,  losses,  damages,
penalties, claims (including, but not limited to, negligence, strict or absolute
liability, liability in tort and liabilities arising out of violation of laws or
regulatory  requirements  of any  kind),  actions,  suits,  outof-pocket  costs,
expenses  and   disbursements   (including   reasonable  legal  fees,  costs  of
investigation  of whatsoever  kind and nature and expenses  (including  expenses
referred to in Section 9 of the  Participation  Agreement,  except to the extent
required to be paid by the owner Trustee  thereunder) and all costs and expenses
relating  to  amendments,  supplements,  waivers  and  consents to and under the
Operative Documents,  but excluding internal costs and expenses such as salaries
and overhead of whatsoever kind and nature).

     "FAA"  means the United  States  Federal  Aviation  Administration  or  any
governmental  person,  agency or other authority  succeeding to the functions of
the Federal Aviation Administration

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -4-

<PAGE>


     "Fair Market  Rental Value" or "Fair Market Sales Value" of the Airframe or
any Engine  shall mean the value  which  would be  obtained  in an  arms'-length
transaction  between an informed and willing  lessee-user  or buyer-user  (other
than a lessee  currently in  possession  or a used  equipment  dealer)  under no
compulsion  to lease or buy,  as the case may be, and an  informed  and  willing
lessor or seller,  as the case may be, under no  compulsion to lease or sell, as
the same shall be specified by  agreement  between  Lessor and Lessee or, if not
agreed  to by  Lessor  and  Lessee  within  a  period  of 15 days  after  either
party requests a determination,  then as specified in an appraisal  prepared and
delivered  in New York City  mutually  agreed to by two  recognized  independent
aircraft appraisers,  one of which shall be appointed by Lessor and the other of
which shall be appointed by Lessee,  or, if such appraisers cannot agree on such
appraisal  within 20 days,  each  shall  render its own  appraisal  and shall by
mutual consent appoint a third independent  recognized aircraft appraiser within
five days after the end of such 20-day  period.  If the two  appraisers  fail to
appoint a third independent  recognized  aircraft appraiser within such five-day
period,  then  either  party,  on  behalf  of both  may  apply  to the  American
Arbitration Association (or any successor organization thereto) in New York City
for the  appointment of such third  appraiser.  The appraisal shall be completed
within 30 days of the appointment of such third appraiser.   As soon as the last
appraiser appointed has delivered his appraisal that appraisal shall be compared
with the appraisals given by the other two appraisers.  If the  determination of
one  appraiser is more  disparate  from the average of all three  determinations
than  each of the  other  two  determinations,  then the  determination  of such
appraiser shall be excluded,  the remaining two determinations shall be averaged
and such average shall be final and binding upon the parties  hereto;  otherwise
the  average of all three  determinations  shall be final and  binding  upon the
parties  hereto.  In  determining  Fair Market Rental Value or Fair Market Sales
Value by appraisal or otherwise, it will be. assumed that the Aircraft, Airframe
or Engine  is in the  condition,  location  and  overhaul  status in which it is
required to be returned to Lessor  pursuant to Section 5 hereof  (except  that a
determination  of Fair Market Sales Value pursuant to Section 14 hereof shall be
based on "as is, where is"  condition),  that Lessee has removed all Parts which
it is  entitled to remove  pursuant to  Section 8  hereof.  Except as  otherwise
expressly provided in this Lease, all appraisal costs will be borne by Lessee.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -5-

<PAGE>


     "Government"  means the federal  government of the United States of America
or any  instrumentality or agency thereof the obligations of which are supported
by the full faith and credit thereof.

     "Indemnitee"  means Lessor,  in its  individual and trust  capacities,  the
owner Participant and each of their respective Affiliates,  successors, assigns,
transferees, directors, officers, employees and agents.

     "Lease,"  "this  Lease," "this  Agreement,  "hereby,"  "herein,"  "hereof,"
"hereunder," or other like words mean this Aircraft Lease Agreement,  as amended
or supplemented in accordance with the terms hereof,  including by way of one or
more Lease Supplements.

     "Lease  Default" or  "Default"  means any event or  condition  which,  with
notice or lapse of time, or both, would constitute a Lease Event of Default.

     "Lease Event of Default" is defined in Section 14.

     "Lease Period" means each of the consecutive  semiannual periods throughout
the Term commencing on a Lease Period Date and continuing to, but not including,
the next succeeding Lease Period Date.

     "Lease  Period  Date" means April 21, 1994 and each October 21 and April 21
thereafter to and including April 21, 2006.

     "Lease  Supplement"  means a supplement to this Lease  substantially in the
form  attached  as Exhibit A hereto,  subjecting  an  Aircraft,  Engine or other
property to this Lease.

     "Lessee" means Federal Express Corporation, a Delaware corporation, and its
permitted successors and assigns hereunder.

     "Lessor" means Trust Company for USL, Inc., not in its individual  capacity
but  solely  as Owner  Trustee  under  the Trust  Agreement,  and its  permitted
successors and assigns thereunder and hereunder.

     "Lessor  Liens" means any Lien on, or disposition of title with respect to,
the  Aircraft,  the  Airframe  or any Engine  arising as a result of: (i) claims
against Lessor,

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -6-

<PAGE>


the Owner Trustee, in its individual  capacity,  or either Owner Participant not
related to the transactions  contemplated by the Operative  Documents;  (ii) any
act or omission of either Owner  Participant,  Lessor, or the Owner Trustee,  in
its individual capacity,  which is not related to the transactions  contemplated
by the  Operative  Documents  or is in  violation  of any  of the  terms  of the
Operative Documents;  (iii) claims against either Owner Participant,  Lessor, or
the Owner Trustee, in its individual  capacity,  with respect to Taxes or Losses
against  which  Lessee is not required to  indemnify  either Owner  Participant,
Lessor or the Owner Trustee, in its individual capacity;  or (iv) claims against
Lessor or such Owner Participant arising out of any transfer by Lessor or either
Owner Participant of all or any portion of the respective interests of Lessor or
such  Owner  Participant  in the  Aircraft,  the Trust  Estate or the  Operative
Documents  other than a transfer  of the,  Aircraft  by Lessor  pursuant to this
Agreement  or a  transfer  pursuant  to  Section  10 hereof or  pursuant  to the
exercise of the remedies set forth in Section 15 hereof; provided, however, that
                                                         --------  -------
any Lien which is attributable solely to Trust Company for USL, Inc. or an owner
Participant  and would  otherwise  constitute a Lessor Lien hereunder  shall not
constitute  a Lessor Lien  hereunder  so long as (a) the  existence of such Lien
poses no material  risk of the sale,  forfeiture  or loss of the Airframe or any
Engine  or any  interest  therein,  (b) the  existence  of such  Lien  does  not
interfere in any way with the use or operation of the Aircraft by Lessee (or any
Sublessee) and (c) Trust Company for USL, Inc. or such Owner Participant, as the
case may be, is diligently contesting such Lien by appropriate proceeding.

     "Lien"  means any  mortgage,  pledge,  lien,  claim,  encumbrance,.  lease,
security interest or any other charge of any kind of property.

     "MAE' means Mobile Aerospace Engineering, Inc., an Alabama corporation.

     "Maintenance Program" is defined in Section 8.1.

     "Manufacturer" means (i) with respect to the Airframe,  The Boeing Company,
a  Delaware  corporation,   and  (ii)  with  respect  to  the  Engines,   United
Technologies  Corporation,  a  Delaware  corporation,  Pratt & Whitney  Aircraft
Commercial Engine Business, and their respective successors and assigns.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -7-

<PAGE>


     "Modification  Contract"  means the Aircraft  Modification  and Maintenance
Agreement between the Lessor and MAE.

     "Obsolete Parts" has the meaning set forth in Section 8.4 hereof.

     "Officer's  Certificate"  means a certificate  signed by the Chairman,  the
President,  the Managing Director,  Aircraft Financing,  any Vice President, the
Treasurer,  any Assistant Treasurer, the Secretary or any Assistant Secretary of
the Person providing such certificate.

     "Operative  Documents" means the Participation  Agreement,  the Lease, each
Lease  Supplement,   the  Trust  Agreement,   the  Modification   Contract,  the
Conversion  Letter  Agreement and  any documents  delivered in connection with a
financing arrangement pursuant to Section 22 hereof.

     "Overdue  Interest  Rate" means a rate per annum equal from time to time to
the lesser of: (a) 2.00% over the Base Rate ox (b) the highest rate permitted by
law.

     "Owner Participant" means each of United States Leasing International, Inc.
and Airlease  Ltd.,  a  California  Limited  Partnership,  and their  respective
successors and permitted assigns under the Trust Agreement.

     "Participation Agreement" means that certain Participation Agreement, dated
as of the date  hereof,  among  Lessee,  each  owner  Participant  and the Owner
Trustee,  as such  Participation  Agreement may be amended or supplemented  from
time to time pursuant to the applicable provisions thereof.

     "Parts"   means   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  or  installed  in or attached  to the  Airframe or any Engine (and
"Part"  means any of the  foregoing)  and all such items which are  subsequently
removed  therefrom so long as title  thereto  shall  remain  vested in Lessor in
accordance with Section 8.2 hereof.

     "Permitted  Lien" means any Lien referred to in clauses (i) through (vi) of
Section 6 hereof.


                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -8-


<PAGE>


     "Permitted  Sublessee"  means any air,  carrier  domiciled and  principally
located in a country listed in Exhibit D hereto as in effect from time to time.

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

     "Renewal Term" has the meaning set forth in Section 9(a) hereof.

     "Rent" means Basic Rent and Supplemental Rent.

     "Replacement  Engine" means an engine which shall have been substituted for
an Engine  leased  hereunder  pursuant to Section 10.2 or 5.2 which is a Pratt &
Whitney  JT8D-15A  engine or an engine of the same or  another  manufacturer  of
equivalent or greater value, condition, utility, airworthiness, remaining useful
life and suitable for installation  and use on the Airframe;  provided that such
                                                              --------
engine shall be of the same make,  model and  manufacturer  as the other engines
installed, on the Airframe,  shall be an engine of a type then being utilized by
Lessee on other Boeing 727-2D4 aircraft operated by Lessee,  and shall have been
maintained,  serviced,  repaired and overhauled in substantially the same manner
as Lessee maintains, services, repairs and overhauls similar engines utilized by
Lessee and without in any way discriminating against such engine.

     "Stipulated  Loss Value" with respect to the  Aircraft  means (i) as of any
date  through and  including  the last day of the Basic  Term,  means the amount
specified  in  Exhibit C hereto  opposite  the  Stipulated  Loss Value Date with
respect to which the amount of  Stipulated  Loss  Value is  determined  (as such
Exhibit C may be  adjusted  from time to time as provided in Section 3.4 hereof)
and (ii) with respect to the  Aircraft,  as of any date during any Renewal Term,
shall mean the amount determined as provided in Section 9 hereof, as such amount
may be adjusted. from time to time.

     "Stipulated  Loss Value Date" shall mean the respective  dates set forth in
Exhibit C to this Lease.

     "Sublease" means any sublease  permitted by the terms of Section  7.2(viii)
hereof.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -9-


<PAGE>


     "Sublessee"  means any Person for so long, but only so long, as such Person
is in  possession of the Airframe  and/or any Engine  pursuant to the terms of a
Sublease which is then in effect pursuant to Section 7.2(viii) hereof.

     "Supplemental  Rent" means all amounts,  liabilities and obligations (other
than Basic  Rent) which  Lessee  assumes or agrees to pay to Lessor or any other
Person  hereunder or under any of the Operative  Documents,  including,  without
limitation, Stipulated Loss Value.

     "Taxes" means any and all fees  (including,  without  limitation,  license,
documentation  and  registration  fees),  taxes (including  without  limitation,
income,  gross receipts,  sales,  rental, use, turnover,  value added,  property
(tangible and intangible),  excise and stamp taxes), licenses,  levies, imposts,
duties, recording charges or fees, charges,  assessments, or withholdings of any
nature whatsoever, together with any assessments, penalties, fines, additions to
tax and interest thereon (each, individually a "Tax").

     "Term"  means the Basic Term and, if  actually  entered  into,  any Renewal
Term.

     "Trust  Agreement"  means the  Trust  Agreement  (1987-N362PA)  dated as of
November 10, 1987, among the owner Participants and Trust Company for USL, Inc.,
as such Agreement has been amended or supplemented in accordance with its terms.

     "U.S. Air Carrier" means any United States air carrier as to which there is
in force a  certificate  issued  pursuant  to Section  401 or Section 418 of the
Federal Aviation Act, and as to which there is in force an air carrier operating
certificate  issued pursuant to Part 121 of the  regulations  under such Act, or
which may  operate as an air carrier by  certification  or  otherwise  under any
successor or substitute provisions therefor or. in the absence thereof.

     "Wet  Lease"  means any  arrangement  whereby  the Lessee (or a  Sublessee)
agrees to furnish the  Airframe  and Engines or engines  installed  thereon to a
third party pursuant to which such Airframe and Engines or engines  (i) shall be
operated solely by regular employees of Lessee (or a Sublessee)  possessing  all
current  certificates  and  licenses  that would be  required  under the Federal
Aviation Act (or if the Aircraft is not  registered  in the United  States,  all
certifi-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -10-


<PAGE>


cates and licenses required by the laws of the jurisdiction of registry) for the
performance by such employees of similar  functions  within the United States of
America  (or  such  jurisdiction  of  registry)  (it is  understood  that  cabin
attendants  need not be  employees  of Lessee) and (ii) shall be  maintained  by
Lessee (or a Sublessee) in accordance with its normal maintenance practices.

     Section 2.  Delivery and Acceptance.
                 -----------------------

     2.1. Delivery and Lease of Aircraft. Subject to the conditions and pursuant
          ------------------------------
to the terms of this Lease,  Lessor hereby agrees to deliver the Aircraft on the
Delivery Date and simultaneously to lease to Lessee hereunder, and Lessee hereby
agrees to lease and accept from Lessor  hereunder,  the  Aircraft.  Delivery and
acceptance  of the Aircraft  shall occur at the storage  facility  maintained by
Aero Corporation at Lake City Airport, Lake City, Florida or such other location
as the parties shall agree.

     2.2.  Confirmation;  Acceptance by Lessee. By execution and delivery of the
           -----------------------------------
Lease Supplement in respect of the Aircraft,  Lessee will confirm to Lessor that
Lessee  has  accepted  the  Aircraft  for all  purposes  hereof as being in good
working  order and repair and without  defect in condition,  design,  operation,
merchantability  or fitness for use, whether or not discoverable by Lessee as of
the date  thereof,  except  for  discrepancies  identified  in  Exhibit 2 to the
Delivery Receipt.

     2.3.  Conditions  to Lease.  Lessor's  obligation  to lease the Aircraft to
           --------------------
Lessee shall be subject to the receipt by Lessor of the  following  documents or
other items on or before the Delivery Date for the Aircraft,  all of which shall
be reasonably satisfactory in form and substance to Lessor:

     (a) each of the Operative Documents shall have been duly  authorized,
executed  and  delivered  by the  parties  thereto,  and shall be in full  force
and effect;

     (b) copies of all documents evidencing corporate action  taken by the
Lessee, with respect to this Lease, the Lease Supplement and each other document
required to be executed and delivered by any such Person in accordance  with the
provisions  hereof and  thereof,  and a copy of the resolutions of the board  of
directors  of Lessee,  certified  by the  Secretary  or  Assistant  Secretary of
Lessee, evidencing the

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -11-


<PAGE>


due  authorization  of the  execution,  delivery  and  performance  of each such
document,  together with an incumbency  certificate  as to the person or persons
authorized to execute and deliver such documents and the signature or signatures
of such persons;

     (c) an Officer's Certificate of Lessee stating that:

          (i) the representations and warranties contained in Section 4.3 hereof
     are true and  correct  on and as of such date as  though  made on and as of
     such time (except to the extent that such  representations  and  warranties
     relate solely to an earlier date); and

          (ii) no event has occurred and is continuing, or would result from the
     lease of the Aircraft,  which constitutes a Lease Default or Lease Event of
     Default;

     (d) an opinion or report signed by an independent insurance broker or
by, an insurer  acceptable to Lessor as to the due compliance with the insurance
provisions  of Section 11 hereof with  respect to the  Aircraft,  together  with
certificates evidencing the insurance as required by Section 11 hereof;

     (e) an opinion of Kenneth R. Masterson,  Esq.,  counsel to the Lessee
and of Davis Polk &  Wardwell,  special  counsel to the  Lessee,  each dated the
Delivery Date, and each in form and substance reasonably satisfactory to Lessor;

     (f) an  opinion of  Daugherty,  Fowler &  Peregrin  or other  counsel
experienced in federal aviation matters, as to the due filing for recordation of
the Lease and the Lease  Supplement  and as to such other  matters as Lessor may
reasonably request, addressed to Lessor and Lessee;

     (g) since  May 31,  1992,  no  material  adverse  change  shall  have
occurred in the financial condition of Lessee;

     (h) a Uniform Commercial code financing statement or statements shall
have been executed and delivered by the Lessee, and such financing statement or
state-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -12-

<PAGE>


ments shall have been duly filed in all places  necessary or advisable,  and any
additional  Uniform  Commercial Code financing  statements  deemed  necessary or
advisable by the Owner  Participant  shall have been  executed and  delivered by
Lessee and duly filed by the Owner Participant;

     (i) the Owner Participant shall have received an opinion addressed to
the Owner  Participant,  the Owner Trustee and Lessee,  from  Stanley E. Gutman,
Esq.,  counsel  for  the  Owner  Trustee,  in  form  and  substance   reasonably
satisfactory to the Owner Partcipant;

     (j) the Owner Participant shall have received an opinion, in form and
substance  satisfactory  to  the  owner  Participant,  from  B.  K.  Associates,
independent  aircraft  appraisers,  or such other recognized  aircraft appraiser
selected by the owner Participant;

     (k) the Owner  Participant  and the Owner Trustee shall have received
an independent insurance broker's report, and certificates of insurance, in form
and substance  reasonably  satisfactory  to the Owner  Participant and the Owner
Trustee,  as to the due compliance with the terms of the  Modification  Contract
relating to insurance with respect to the Aircraft; and

     (1) such other documents,  opinions and certificates  incident to the
foregoing as Lessor may reasonably request.

     2.4.  Inspection;  Acceptance Test Flight on Delivery.  Lessee acknowledges
           -----------------------------------------------
that it has performed,  prior to delivery.and acceptance of the Aircraft, at its
own cost and  expense,  a ground  inspection  of the  Aircraft  and a  boroscope
inspection of each of the Engines:  Lessee  acknowledges  that such  inspections
have not revealed any defects,  includ ing defects that would cause the Aircraft
not to possess a valid  certificate  of  airworthiness  issued by the FAA, other
than those defects identified in Exhibit 2 to the Delivery Receipt.  The cost of
correcting  all such  defects  shall be for the  account of Lessor.  Immediately
following delivery and acceptance,  Lessor and Lessee shall conduct, at Lessee's
cost and expense and with Lessee's crew, an acceptance  test flight  pursuant to
standard test flight procedures utilized by the Lessee, or other such procedures
as the parties  agree.  Lessor shall be permitted  two  representatives  on such
flight, which shall not exceed two hours in length. If such flight

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -13-


<PAGE>


test  reveals  any  discrepancies  that  were not  revealed  in the  ground  and
boroscope inspections, Lessee shall promptly provide Lessor with a detailed list
of such  discrepancies,  and Lessor shall, at its expense,  promptly correct any
such discrepancies or, if the cost of correcting all discrepancies  would exceed
$100,000, Lessor may, at its option, elect to terminate this Lease.

     2.5.  Appointment of Lessee as Agent: Enforcement of Modification Contract.
           --------------------------------------------------------------------

     (a)  Appointment.  Lessor hereby appoints Lessee as its agent for the
          -----------
sole purpose of (1) overseeing the modifications to be performed by MAE pursuant
to the Modification  Contract,  (2) determining whether such modifications  have
been  made in  accordance  with the  terms  of the  Modification  Contract,  (3)
exercising,  on behalf of Lessor,  all rights of Lessor  under the  Modification
Contract  (including  the right to inspect the Aircraft  pursuant to Article VII
thereof),  and (4)  performing,  on behalf of Lessor,  all obligations of Lessor
under the  Modification  Contract  (including  Lessor's  obligation  to  provide
Lessor-Supplied  Parts to MAE in  connection  with Article IV  thereof).  Lessee
accepts such agency and agrees to exercise all rights of Lessor, and perform all
duties  and  obligations  imposed on Lessor,  under the  Modification  Contract;
provided,  however,  that Lessee shall not (x) waive,  in whole or in part,  any
--------   -------
obligation of MAE under the Modification Contract,  (y) consent to any amendment
or modification to the terms of the Modification  Contract or (z) take any other
action which would adversely affect Lessor without,  in the case of (x), (y) and
(z),  having  first  obtained  the prior  written  consent  of Lessor  not to be
unreasonably  withheld or delayed.  The  appointment  contained  in this Section
2.5(a) shall terminate  automatically upon the occurrence of an Event of Default
hereunder.

     (b) Certain Responsibilities.  In  addition  to  its  obligations set
         ------------------------
forth above as Lessor's agent,  Lessee shall, in connection with its appointment
as Lessor's  agent,  (1) at Lessor's  request,  provide to Lessor  copies of any
progress  reports prepared by MAE under the  Modification  Contract,  (2) inform
Lessor  promptly after the inspection and test flights  described in Article VII
of the Modification Contract, and (3) take any other action reasonably requested
by Lessor.

     (c) Indemnity.  Lessee shall indemnify and  hold  harmless Lessor for
         ---------
any amounts in respect of which Lessor is

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -14-


<PAGE>

required to indemnify MAE under the Modification Contract or damages suffered by
Lessor as a result of actions taken by Lessee as Lessor's agent pursuant to this
Section 2.5 except to the extent such damages are attributable to Lessor's gross
negligence  or  willful  misconduct  (other  than any such gross  negligence  or
willful  misconduct  imputed  to  Lessor  by law  but  attributable  to  acts or
omissions of Lessee, acting as agent of Lessor or otherwise).

     (d) Enforcement of Modification  Contract.  So long as no Event of
         -------------------------------------
Default shall have occurred and be continuing,  Lessor hereby agrees that at the
request and election of Lessee, Lessor will either (1) if so directed by Lessee,
take such  reasonable  action as Lessee may  request  in order to enforce  MAE's
obligations to Lessor under the Modification Contract (including  enforcement of
specific performance  remedies, if available) or (2) take all reasonable efforts
to enforce MAE's  obligations  to Lessor in respect of claims of Lessee  arising
from a  default  by MAE  thereunder  to the  extent  that  Lessee,  after  using
reasonable  efforts,  is unable to claim directly against MAE. In the event of a
Delay (as defined in the Modification  Contract) that results in the delivery of
an Aircraft to Lessee being  delayed by more than 210 days beyond the  Scheduled
Date (as defined in the Modification  Contract) therefor,  Lessor may thereafter
commence  remedies against MAE seeking the return of all  Lessor-Supplied  Parts
(as defined in the Modification Contract) which are owned and have been provided
by Lessee.  Lessor  agrees that it will not oppose any such efforts by Lessee to
seek  the  return of such Lessor-Supplied Parts; provided that (i) the foregoing
                                               --------
shall not be construed in any manner as affecting Lessee's  obligations to lease
the  Aircraft  and (ii) in the event that any such  action  results in MAE being
unable  to  comply  with  the  requirements  of  Exhibit  A to the  Modification
Contract,   Lessee  shall  be   obligated   to  take  or  lease  such   Aircraft
notwithstanding  the failure of MAE to satisfy such requirements of such Exhibit
A.

     Section 3. Term and Rent.
                -------------

     3.1.  Term.  The Aircraft shall be leased hereunder for the Term; provided,
           ----                                                        --------
however, that the Term of this Lease may be earlier terminated pursuant  to  the
-------
provisions hereof.

     3.2.  Basic Rent.  Lessee  hereby  agrees  to  pay  to  Lessor  Basic  Rent
           ----------
semiannually in arrears throughout the Term

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -15-

<PAGE>


by paying to Lessor on each Lease Period Date the amount set forth in Schedule I
hereto (as such amounts may be adjusted pursuant to Section 3.4 below).

     3.3.  Supplemental  Rent.  Lessee  also  agrees  to  pay to  Lessor,  or to
           ------------------
whomsoever shall be entitled thereto,  any and all Supplemental Rent when and as
the same  shall  become due and owing.  Lessee  shall also pay to Lessor,  or to
whomsoever  shall be  entitled  thereto,  as  Supplemental  Rent,  to the extent
permitted by applicable law,  interest at the overdue  Interest Rate on any part
of any  installment of Basic Rent not paid when due for any period from the date
on which the same was due to but  excluding  the date of  payment in full and on
any payment of  Supplemental  Rent not paid when due to Lessor,  or to whosoever
shall be entitled thereto, as the case may be, for the period from and including
the date on which the same was due to but  excluding  the date of  payment.  The
expiration  or other  termination  of  Lessee's  obligation  to pay  Basic  Rent
hereunder  shall not limit or modify the  obligations  of Lessee with respect to
Supplemental Rent.

     3.4.  Adjustments to Basic Rent and Stipulated Loss Values.  The Basic Rent
           ----------------------------------------------------
and Stipulated Loss Value payable  hereunder will be adjusted as provided on the
Conversion Letter Agreement.

     3.5.  Payments.  Payments of Rent and any and all other amounts  payable to
           --------
Lessor  hereunder  shall be paid in funds of the United  States of America which
shall be  immediately  available  prior to 1:00 p.m., New York time, on the date
due at Citibank,  N.A., ABA  #021-000-089,  Account No.:  4052-9099,  Reference:
Federal  Express:  727 Lease,  or as  otherwise  directed  by Lessor in writing.
Except as otherwise  expressly provided herein,  whenever any payment of Rent or
other payment to be made hereunder shall be due on a day which is not a Business
Day, such payment shall be made  on  the next succeeding day which is a Business
Day. Any payments due and payable to either Lessor or Lessee upon termination or
expiration of the Term shall be paid within ten (10) days.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -16-

<PAGE>


     Section 4. Lessor's  Representations  and Warranties;  DISCLAIMER;  Certain
                Agreements of Lessee.
                ----------------------------------------------------------------

     4.1.  Representations and Warranties of Lessor.
           ----------------------------------------
Lessor warrants that:

     (a) Trust  Company for USL, Inc. is a corporation duly  organized and
validly existing under the laws of Illinois, and this Lease has been executed by
an officer  thereof who is duly authorized to do so in accordance with the terms
of the Trust Agreement.

     (b) The Trust Agreement is in full  force and  effect  and  Lessor is
duly and properly  authorized  to execute and deliver this Lease under the Trust
Agreement.

     (c) So long as Lessee shall not  be in  default under the  terms  and
provisions  of this Lease,  Lessor will not disturb,  and will not permit anyone
claiming by, through or under Lessor to disturb,  the Lessee's  quiet,  peaceful
use and enjoyment of the Aircraft.

     4.2.  DISCLAIMER.  (i) THE AIRCRAFT, WHEN DELIVERED AND LEASED BY LESSOR TO
           ----------
LESSEE  HEREUNDER,  WILL BE LEASED  "AS IS" AND "WHERE  IS."  LESSOR HAS NOT AND
SHALL NOT BE DEEMED TO HAVE MADE, BY VIRTUE OF HAVING LEASED THE AIRCRAFT  UNDER
THIS  LEASE OR  HAVING  DONE OR FAILED  TO DO ANY ACT OR  ACQUIRED  OR FAILED TO
ACQUIRE  ANY STATUS  UNDER OR IN  RELATION  TO THIS  LEASE,  AND  LESSOR  HEREBY
SPECIFICALLY  DISCLAIMS,  ANY GUARANTY,  REPRESENTATION OR WARRANTY,  EXPRESS OR
IMPLIED, AS TO THE TITLE (EXCEPT AS HEREINBELOW PROVIDED), AIRWORTHINESS, VALUE,
CONDITION,  DESIGN,  OPERATION,  MERCHANTABILITY,  OR  FITNESS  FOR  USE  FOR  A
PARTICULAR OR ANY PURPOSE OF THE AIRCRAFT,  OR AS TO THE QUALITY OF THE MATERIAL
OR WORKMANSHIP OF THE AIRCRAFT, THE ABSENCE THEREFROM OF LATENT OR OTHER DEFECTS
WHETHER OR NOT  DISCOVERABLE,  THE  ABSENCE OF ANY  INFRINGEMENT  OF ANY PATENT,
TRADEMARK OR COPYRIGHT OR AS TO ANY OTHER GUARANTY,  REPRESENTATION  OR WARRANTY
WHATSOEVER,  EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRCRAFT, INCLUDING WITHOUT
LIMITATION  ANY  LIABILITY  IN  TORT,   OBLIGATION  OR  LIABILITY  ARISING  FROM
NEGLIGENCE,  STRICT  LIABILITY,  ANY  IMPLIED  WARRANTY  ARISING  FROM COURSE OF
PERFORMANCE  OR  DEALING  OR USAGE OR  TRADE,  OR LOSS OR  INTERRUPTION  OF USE,
PROFIT, OR BUSINESS,  OR OTHER CONSEQUENTIAL  DAMAGES; AND LESSEE HEREBY WAIVES,
RELEASES,  RENOUNCES  AND  DISCLAIMS  EXPECTATION  OF OR RELIANCE  UPON ANY SUCH
GUARANTY, REPRESENTATION OR WARRAN-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -17-


<PAGE>


TIES.  NEITHER LESSOR NOR ANY OTHER INDEMNITEE SHALL HAVE ANY  RESPONSIBILITY OR
LIABILITY TO LESSEE OR ANY OTHER  PERSON,  REGARDLESS OF ANY  NEGLIGENCE  (OTHER
THAN ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT WHICH IS NOT ATTRIBUTABLE TO
ITS  INTEREST IN THE  AIRCRAFT)  OF LESSOR OR ANY OTHER  INDEMNITEE,  AND LESSEE
HEREBY WAIVES,  RELEASES,  RENOUNCES AND DISCLAIMS ANY RIGHTS OR REMEDIES,  WITH
RESPECT  TO (i) ANY  LIABILITY,  LOSS OR DAMAGE  CAUSED OR  ALLEGED TO BE CAUSED
DIRECTLY  OR  INDIRECTLY  BY  THE  AIRCRAFT  OR BY  ANY  INADEQUACY  THEREOF  OR
DEFICIENCY  OR  DEFECT  THEREIN  OR BY  ANY  OTHER  CIRCUMSTANCE  IN  CONNECTION
THEREWITH,  (ii) THE USE,  OPERATION OR PERFORMANCE OF THE AIRCRAFT OR ANY RISKS
RELATING  THERETO,  (iii) ANY  INTERRUPTION  OF  SERVICE,  LOSS OF  BUSINESS  OR
ANTICIPATED PROFITS OR DIRECT,  INCIDENTAL OR CONSEQUENTIAL  DAMAGES OR (iv) THE
DELIVERY, OPERATION, SERVICING,  MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT
OF  THE  AIRCRAFT.   WITHOUT   LIMITING  THE   FOREGOING,   THE  WARRANTIES  AND
REPRESENTATIONS  EXPRESSLY SET FORTH BELOW IN THIS SECTION 4.2 ARE EXCLUSIVE AND
IN LIEU OF ALL OTHER  REPRESENTATIONS  OR WARRANTIES  WHATSOEVER WITH RESPECT TO
THE  AIRCRAFT,  EXPRESS OR IMPLIED,  AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE
ANY OTHER IMPLIED WARRANTIES,  OR GUARANTEES,  INCLUDING BUT NOT LIMITED TO, ANY
IMPLIED WARRANTY OF MERCHANTABILITY, ANY IMPLIED WARRANTY ARISING FROM COURSE OF
PERFORMANCE,  COURSE OF DEALING OR USAGE OF TRADE,  OR ANY  IMPLIED  WARRANTY OF
FITNESS FOR A PARTICULAR OR ANY USE, EXCEPT THAT: Lessor represents and warrants
that,  on the Delivery  Date,  Lessor shall have the right to lease the Aircraft
hereunder and the Aircraft  shall be free of Lessor's  Liens  (disregarding  for
this purpose the proviso to the definition thereof),  other than the Lien of the
Trust Agreement;  and Lessor covenants that thereafter  Lessor shall not create,
incur,  assume or suffer to exist any Lessor's Lien on the Aircraft,  other than
the Lien of the Trust Agreement.

     (ii)  Modification  of Other  Warranties.  None of the  provisions  of this
           ----------------------------------
Article 4 or any other provision of this Lease shall be deemed to amend,  modify
or  otherwise  affect  the  representations,  warranties  or  other  obligations
(express  or implied) of the  Lessee,  or any  subcontractor  or supplier of the
Lessee,  with respect to the Airframe,  the Engines or any Parts incorporated or
installed in or attached to the Airframe or Engines, or to release the Lessee or
any such  subcontractor  or supplier from any such  representation,  warranty or
obligation.  So long as an Event of  Default  shall  not  have  occurred  and be
continuing  under this Lease and to the extent  permitted  under the  applicable
warranty, patent indemnity or service-life policy, (i) the Lessor and the

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -18-


<PAGE>


Lessee  agree that the Lessor  hereby  assigns to the Lessee  such rights as the
Lessor may have under any warranty, patent indemnity or service-life policy made
or given by the Lessee or any of its  subcontractors  or suppliers and any other
claims against the Lessee or any such  subcontractor or supplier with respect to
the   Aircraft;   (ii)  all   payments   pursuant  to  any   manufacturer's   or
subcontractor's  warranty,  patent indemnity or service-life  policy  obligation
shall be paid to the Lessee for  application to the cost of repair or correction
of any condition of the Aircraft which gave rise to such payment;  and (iii) the
Lessee  shall remit to the Lessor the excess of such  payment over the amount so
used by the Lessee for repair, correction or reimbursement.

     4.3.  Lessee's  Representations  and  Warranties.  Lessee  hereby makes the
           ------------------------------------------
following representations and warranties:

     (a) Lessee  is  a  corporation duly organized and validly existing in
good  standing  pursuant  to the  laws  of the  State  of  Delaware  and is duly
qualified  to do  business  as a foreign  corporation  in good  standing  in all
jurisdictions  in which it has intrastate  routes,  or offices or major overhaul
facilities   or  in  which  other   activities   of  the  Lessee   require  such
qualification;  is a "citizen of the United States" and an "air carrier"  within
the meaning of the Federal  Aviation Act  operating  under  certificates  issued
under Section 401 and Section 418 of such Act; holds all licenses, certificates,
per mits and franchises  from the  appropriate  agencies of the United States of
America and/or all other governmental authorities having jurisdiction,  material
to the oper ation of the routes  flown by it and the conduct of its business and
operations as presently conducted;  has its chief executive office (as such term
is defined in Article 9 of  the Uniform Commercial Code) in Memphis,  Tennessee;
and has the  corporate  power and authority to hold under lease the Aircraft and
to enter into and perform its obligations under the Operative Documents;

     (b) the  execution,   delivery  and  performance  by  Lessee  of  the
Operative  Documents to which Lessee is a party will, on the Delivery Date, have
been duly authorized by all necessary  corporate  action on  the part of Lessee,
do not require any stockholder  approval,  or approval or consent of any trustee
or holders of any indebtedness or obligations of Lessee except such as

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -19-


<PAGE>


have been duly  obtained or by the Delivery  Date will have been duly  obtained,
and none of such Lessee  Documents  contravenes  any law,  judgment,  government
rule,  regulation or order binding on Lessee or the certificate of incorporation
or by-laws of Lessee or contravenes  the provisions of, or constitutes a default
under, or results in the creation of any Lien (other than Permitted  Liens) upon
the property of Lessee under its certificate of  incorporation or by-laws or any
indenture,  mortgage,  contract or other agreement to which Lessee is a party or
by which it or any of its properties may be bound or affected;

     (c) neither the execution  and  delivery by Lessee of  the  operative
Documents  to which  Lessee  is a party  nor the  performance  by  Lessee of its
obligations  thereunder  require the consent,  approval or authorization of, the
giving of notice to, or the registration with, or the taking of any other action
in respect of any  federal,  state or foreign  government  authority  or agency,
except for (A) the orders,  permits,  waivers,  exemptions,  authorizations  and
approvals of the regulatory  authorities having  jurisdiction over the operation
of  the  Aircraft  by  Lessee,  which  orders,  permits,  waivers,   exemptions,
authorizations  and approvals have been duly obtained or will on or prior to the
Delivery Date be duly  obtained,  and will on the Delivery Date be in full force
and effect and (B) any normal  periodic and other reporting  requirements  under
the applicable  rules and  regulations  of the FAA to the extent  required to be
given or obtained only after the Delivery Date;

     (d) assuming  due  authorization,   execution  and  delivery  of  the
Operative  Documents by each party thereto other than the Lessee,  the Operative
Documents will each constitute  legal,  valid and binding  obligations of Lessee
enforceable against Lessee in accordance with the terms thereof;

     (e) except as set forth in, and subject to, the opinion of counsel to
the Lessee referred to in Section 2.3 hereof,  there is no pending or threatened
action  or  proceeding   before  any  court  or   administrative   agency  which
individually (or in the aggregate in the case of any group of related lawsuits),
if adversely  determined,  is expected to have a material  adverse effect on the
financial condition of Lessee or the ability of Lessee

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -20-

<PAGE>


to perform its obligations under the Operative Documents;

     (f) except for the filing for  recording  pursuant  to the Act of the Lease
with the Lease Supplement  covering the Aircraft,  no further action,  including
the giving of any notice or any filing or recording  of any document  (including
any  financing  statement  in respect  thereof  under  Article 9 of the  Uniform
Commercial  Code of any applicable  jurisdiction),  is necessary or advisable in
order to establish and perfect the Owner  Trustee's title to and interest in the
Aircraft,  as against the Lessee, as against any third parties in any applicable
jurisdictions in the United States;

     (g) there has not  occurred  any event  which  constitutes a Lease  Default
or a Lease  Event of Default  which is presently continuing;

     (h) the statement of financial  position of Lessee as of May 31, 1992 and
February 28, 1993 and the related statements of earnings and cash flow of Lessee
for the year and nine months then ended,  copies of which have been furnished to
each owner Participant,  fairly present the financial  condition of Lessee as at
such dates and the results of operations and cash flow of Lessee for the periods
ended on such dates, in accordance with generally accepted accounting principles
consistently  applied  (except as may be stated in the notes  thereto) and since
February 28, 1993,  there has been no material  adverse change in such condition
or  operations,  except for such  matters  timely  disclosed in filings with the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended,  by the  Lessee,  copies of which  have been  delivered  to each  Owner
Participant  prior to the date hereof,  or as disclosed in press releases issued
by the Lessee and copies of which have been delivered to each Owner  Participant
prior to the date hereof, and except as noted in this paragraph (h), neither the
financial  statements  referred to in this  paragraph  (h) nor any other written
statement furnished to each Owner Participant, in either case in connection with
the  transactions  contemplated by the Operative  Documents,  by or on behalf of
Lessee or any Person authorized or employed by Lessee as agent,  broker,  dealer
or otherwise in connection with the negotiation of the transactions contemplated
by the Operative Docu-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -21-

<PAGE>


ments, contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained therein not misleading;

     (i) no governmental approval of any kind is required of either Owner Parti-
cipant or Owner Trustee for their respective  execution of or performance  under
this Agreement or any agreement contemplated hereby solely by reason of any fact
or  circumstance  peculiar  to (A)  Lessee,  (B) the nature of, or the  proposed
conversion of, the Aircraft,  or (C) Lessee's proposed operations or use of, or
the proposed conversion of, the Aircraft;

     (j) all sales or use tax then due and for which Lessee is responsible pur-
suant to Section 4(a) of the Participation Agreement shall have been paid, other
than  such  taxes  which  are being  contested  by  Lessee in good  faith and by
appropriate  proceedings (and for which Lessee shall have  established  adequate
reserves) so long as such  proceedings  do not involve any material  risk of the
sale, forfeiture or loss of the Aircraft;

     (k) Lessee is in compliance in all material  respects with all laws, ordi-
nances  or  governmental  rules and  regulations  to which  Lessee  is  subject,
including,  without limitation,  the Act, the Occupational Safety and Health Act
of 1970,  the  Employee  Retirement  Income  Security  Act of 1974 and all laws,
ordinances,   governmental  rules  and  regulations  relating  to  environmental
protection  in all  applicable  jurisdictions,  the  violation  of  which  would
materially and adversely affect the properties,  business, prospects, profits or
condition of the Lessee; and

     (1) No "employee benefit plan" (as defined in Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended)  maintained by the Lessee or
any entity  required to be  aggregated  with the Lessee under Section 414 (b) or
(c) of the Code (an "ERISA  Affiliate")  has  incurred an  "accumulated  funding
deficiency"  (within the meaning of the Employee  Retirement Income Security Act
of 1974,  as  amended)  and neither  the Lessee nor any ERISA  Affiliate  of the
Lessee has  incurred  any material  liability  to the Pension  Benefit  Guaranty
Corporation.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -22-

<PAGE>


     Section 5. Return of Aircraft.
                ------------------

     5.1. General Condition upon Return. Unless an Event of Loss with respect to
          -----------------------------
the Airframe shall have occurred, in which case Section 10.1 hereof shall apply,
upon the  expiration of the Term for the Aircraft or  termination  of this Lease
with  respect to the  Aircraft,  Lessee  will  return the  Aircraft to Lessor by
delivering  the same to Lake City  Airport,  Florida,  or such other site in the
continental  United States on Lessee's route system as shall be mutually  agreed
between Lessee and Lessor. All costs and expenses  associated with the return of
the  Aircraft  and  compliance  with this  Section 5 shall be for the account of
Lessee,  except as  otherwise  expressly  provided  herein.  At the time of such
return,  (i)  Lessee  will  (unless  Lessor at least 90 days prior to the return
hereunder has  requested  that Lessee  retain the existing  registration  of the
Aircraft) cause the Aircraft, if it is not then so registered,  to be registered
under the laws of the  United  States  with the FAA in the name of the Lessor or
its designee;  provided that Lessee shall be relieved of its  obligations  under
this  sentence if such  registration  is  prohibited by reason of the failure of
either  Owner  Participant,  Lessor or Lessor's  designee to be eligible on such
date to own an aircraft  registered  with the FAA, and (ii) the Airframe will be
fully equipped with the Engines (or Replacement Engines) installed thereon.

     Also,  at the time of such return, such Airframe and Engines or Replacement
Engines  (A) shall be  certified  (or, if not then  registered  under the Act by
reason of the proviso to clause (i) in the preceding paragraph or because Lessor
has requested the retention of the existing registration of the Aircraft,  shall
be eligible for  certification)  as an air worthy aircraft by the FAA, (B) shall
be free and clear of all Liens (other than Lessor Liens) and rights of third
parties  under  any  arrangement   including,   but  not  limited  to,  pooling,
interchange,  overhaul, repair or other similar agreements or arrangements,  (C)
shall be in a regular  configuration used by Lessee and in as good an operating
condition  as when  accepted  by  Lessee  (as agent  for the  Lessor)  under the
Modification  Contract,  ordinary wear and tear  excepted,  and otherwise in the
condition  required to be maintained  under  Lessee's  FAA-approved  maintenance
plan,  irrespective of whether such Airframe or Engines have been under Sublease
during  the  Term,  and  shall  have  had  accomplished  the  ongoing  corrosion
prevention  procedures set forth in such maintenance plan, (D) in the event that
Lessee shall not then be using a

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -23-

<PAGE>


continuous maintenance program with respect to the Airframe immediately prior to
such  return but instead  shall have been using a block  overhaul  program  with
respect  to the  Airframe,  then such  block  overhaul  program  shall have been
approved by all necessary  governmental  approvals of the country under the laws
of which the  Aircraft  shall then have been  registered,  (E) in the event that
Lessee during the period of operation of the Aircraft  immediately prior to such
return  shall not have  been  using an on  condition  maintenance  program  with
respect to the Engines (or Replacement Engines),  Lessee agrees that the average
number of hours or cycles of operation  (whichever shall be applicable under the
maintenance  program then in use with  respect to such  Engines (or  Replacement
Engines)),  on such Engines (or  Replacement  Engines)  remaining until the next
scheduled engine heavy maintenance or refurbishment shall be at least 25% of the
hours or cycles  (whichever is applicable)  between engine heavy  maintenance or
refurbishment  allowed under the  FAA-approved  maintenance  program then in use
with  respect  to such  engines  (or  Replacement  Engines),  (F) shall have all
exterior  markings removed or painted over with the areas thereof  refinished to
match  adjacent  areas,  (G) shall be in a state of  cleanliness  suitable under
Lessee's  normal  service  standards for  operation in Lessee's  service and (H)
shall at the time of such return have no deferred maintenance items and shall be
in  compliance  (without  regard to permitted  compliance  extensions)  with all
regulations,  mandatory maintenance directives, Federal Air Regulations or other
instructions of the FAA or other United States  governmental  authorities having
jurisdiction  in each case that are required with respect to the Aircraft  prior
to the date of return of the  Aircraft  under  this  Section 5 and shall have no
airworthiness  directives issued by the FAA requiring  terminating action by the
date of  return;  and in all  such  cases  the  Aircraft  shall  not  have  been
discriminated  against  whether by reason of its leased  status or  otherwise in
maintenance, use, operation or in any other manner whatsoever.

     If clause (E) above shall be  applicable  but the Engines (or Replacement
Engines) do not meet the conditions  specified in said clause (E) , Lessee shall
pay or cause to be paid to Lessor a Dollar amount  computed by  multiplying  (I)
125% of the direct  cost to Lessee  (based  upon the  direct  cost to Lessee for
similar  aircraft  in the fleet of  Lessee)  during the  preceding  12 months of
performing  for an  engine  of the same  model as the  Engines  (or  Replacement
Engines) the scheduled engine heavy maintenance or refurbishment under the FAA-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -24-

<PAGE>


approved  maintenance  program then used by Lessee for engines of the same model
as the Engines  (or  Replacement  Engines)  (or in the event that Lessee has not
performed such a scheduled engine heavy maintenance or refurbishment  during the
preceding  12 months,  then the amount  determined  pursuant  to this clause (I)
shall be equal to the fair  market  cost of the  performance  of such  scheduled
engine heavy  maintenance or  refurbishment) by (II) a fraction of which (x) the
numerator  shall be the  excess  of 25% of the  hours or  cycles  (whichever  is
applicable)  of operation of one Engine  between  engine  heavy  maintenance  or
refurbishment  allowable under the FAA-approved  maintenance program then in use
with respect to such Engines (or  Replacement  Engines) over the actual  average
number of hours or cycles of operation on such Engines (or Replacement  Engines)
remaining   until  the  next  such   scheduled   engine  heavy   maintenance  or
refurbishment  and (y) the  denominator  shall be the  number of hours or cycles
allowable   between  the  times  permitted  for  such  scheduled   engine  heavy
maintenance or refurbishment by (III) three.

     During the last six months of the Term,  with  reasonable  notice,  Lessee
will cooperate,  and cause any Sublessee to cooperate, at Lessor's sole cost, in
all  reasonable  respects  with the  efforts  of  Lessor  to sell or  lease  the
Aircraft,  including,  without limitation,  permitting prospective purchasers or
lessees to inspect the  Aircraft and any records  relating to the Aircraft  then
required to be retained by the FAA or by the comparable government agency of the
country in which the Aircraft is registered,  all in accordance  with Section 12
hereof,  provided that any such cooperation  shall not interfere with the normal
         --------
operation of the Aircraft by, or the business of, Lessee or any Sublessee.

     5.2. Return of the Engines.  In the event that a Replacement Engine  shall
          ---------------------
be delivered  With the  returned Air frame as set forth in Section 5.1,  Lessee,
concurrently with such delivery,  will, at no cost to Lessor,  furnish, or cause
to be  furnished,  to Lessor a full  warranty  (as to  title)  bill of sale with
respect  to each  such  Replacement  Engine,  in form and  substance  reasonably
satisfactory  to Lessor  (together  with an  opinion  of  counsel  (which may be
Lessee's General Counsel) to the effect that such full warranty bill of sale has
been duly  authorized and delivered and is  enforceable  in accordance  with its
terms and that such  Replacement  Engines  are free and clear of all Liens other
than Lessor Liens  (including  for this purpose Liens that would be Lessor Liens
but for the proviso to the definition of Lessor

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -25-

<PAGE>


Liens)),  upon receipt from Lessor of a bill of sale  evidencing  the  transfer,
without  recourse  or  warranty  (except  as to  the  absence  of  Lessor  Liens
(including for this purpose Liens that would be Lessor Liens but for the proviso
to the  definition of Lessor  Liens)) by Lessor to Lessee or its designee of all
of Lessor's right,  title and interest in and to any Engine not installed on the
Airframe at the time of the return of the Airframe.

     5.3. Fuel; Manuals. Upon the return of the Aircraft upon any termination of
          -------------
this Lease in  accordance  with Section 5.1, (i) Lessor shall have no obligation
with  respect  to the fuel or oil  contained  in the  fuel or oil  tanks of such
Aircraft,  and (ii) Lessee shall  deliver or cause to be delivered to Lessor all
logs,  manuals  and data  and  inspection,  modification  and  overhaul  records
required to be  maintained  with  respect  thereto  under  applicable  rules and
regulations  of each  country  under  the laws of which  the  Aircraft  has been
registered during the period of operation thereof.

     5.4.  Storage  Upon  Return.  If,  at least 15 days  prior to termination
           ---------------------
of this Lease at the end of the Term or pursuant to Section 15, Lessee  receives
from  Lessor a written  request  for  storage  of the  Aircraft  upon its return
hereunder,  Lessee will provide  Lessor,  or cause  Lessor to be provided,  with
storage  facilities  for the Aircraft (at Lessor's risk and at Lessor's cost for
insurance,  maintenance,  and Lessee's out-of-pocket  expenses) for a period not
exceeding 45 days (or, if a Lease  Default or a Lease Event of Default  shall be
continuing at the time of Lessor's  request for storage,  90 days) commencing on
the date of such  termination,  at a location in the  continental  United States
selected by Lessee (or, if a Lease  Default or a Lease Event of Default shall be
continuing at the time of Lessor's request for storage, selected by Lessor) used
as a location for the parking or storage of aircraft.  Lessee shall, at Lessor's
written request,  maintain insurance (if available) for the Aircraft during such
period not  exceeding  sixty days (or,  if a Lease  Default or a Lease  Event of
Default  shall be continuing  at the time of Lessor's  request for storage,  120
days) and shall be reimbursed by Lessor for the premiums thereon.

     5.5. Severable Parts. At any time during the last 120 days of the Term or
          ---------------
if the Aircraft is otherwise to be returned to Lessor, Lessee shall, at Lessor's
request, advise Lessor of the nature and condition of all severable nonpro-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -26-

<PAGE>


prietary  Parts owned by Lessee which have been used by Lessee  during the prior
six months  and which  Lessee has or  intends  to remove  from the  Aircraft  in
accordance with Section 8 hereof. Lessor may, at its option, upon 30 days notice
to Lessee, purchase any or all of such nonproprietary Parts from Lessee upon the
expiration of the Term or upon such return at their then fair market value.

     5.6.  Failure to Return  Aircraft or Engines.  If Lessee  shall,  for any
           --------------------------------------
reason  whatsoever,  fail to  return  the  Aircraft  or any  Engine  at the time
specified  herein,  the  obligations  of Lessee as  provided in this Lease shall
continue  in effect  with  respect to the  Aircraft  or such  Engine  until such
Aircraft or such Engine is returned to Lessor; but this Section 5.6 shall not be
construed as  permitting  Lessee to fail to meet its  obligations  to return the
Aircraft or such Engine in  accordance  with the  requirements  of this Lease or
constitute a waiver of a Lease Default or Lease Event of Default.

     Section 6. Liens.
                -----

     Lessee will not directly or indirectly create,  incur, assume or suffer to
exist any Lien on or with respect to the  Aircraft,  Airframe or Engines,  title
thereto or any  interest  therein or in this  Lease,  except (i) the  respective
rights  of  Lessor  as owner of the  Aircraft  and  Lessee  as  herein  provided
(including any Sublease  permitted pursuant to Section 7.2 hereof) and any other
rights  existing  pursuant  to  the  Operative  Documents,   (ii)  Lessor  Liens
(including  for the  purposes of this Section 6 Liens that would be Lessor Liens
but for the proviso to the  definition  of Lessor Liens) , (iii) Liens for Taxes
of Lessee (or any Sublessee) either not yet due or being contested in good faith
by  appropriate  proceed  ing so long as such  proceedings  do not  involve  any
material  risk of the sale,  forfeiture or loss of the Airframe or any Engine or
any interest therein, (iv) materialmen's,  mechanics',  workmen's,  repairmen's,
employees',  or other like liens  arising in the ordinary  course of Lessee's or
any Sublessee's  business securing obligations that are not overdue for a period
of more  than 30  days or are  being  contested  in good  faith  by  appropriate
proceedings  so long  as  during  such  30 day  period  there  is  not,  or such
proceedings do not involve, any material risk of the sale, forfeiture or loss of
the Airframe or any Engine or any interest therein, (v) Liens arising out of any
judgment or award against Lessee (or any Sublessee), unless the judgment secured
shall not, within 30 days after

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -27-

<PAGE>


the entry thereof, have been discharged,  vacated, reversed or execution thereof
stayed  pending  appeal or shall not have been  discharged,  vacated or reversed
within 30 days after the  expiration  of such  stay,  (vi)  Liens  permitted  by
Section  22  hereof,  and (vii) any Lien with  respect  to which  Lessee (or any
Sublessee)  shall have provided a bond or other  security in an amount and under
terms  reasonably  satisfactory  to Lessor.  Lessee  will  promptly,  at its own
expense,  take (or cause to be taken) such actions as may be  necessary  duly to
discharge any such Lien not excepted above if the same shall arise at any time.

     Section 7. Registration, Operation, Possession, Sub-leasing and Records.
                ------------------------------------------------------------

     7.1. Registration and Operation.
          --------------------------

     (a) Registration.  Lessee,  at its own cost and expense,  shall (and shall
         ------------
cause any Sublessee to) cause the Aircraft to remain duly registered in the name
of Lessor under the Federal Aviation Action Act (except as otherwise required by
applicable  law or to the  extent  that such  registration  cannot  be  effected
because  of  Lessor's  or an Owner  Participant's  failure  to  comply  with the
citizenship or other eligibility requirements for registration of aircraft under
such Act) at all times  during  the Term;  provided  that  Lessor  and the Owner
                                           --------
Participant  shall  execute  and deliver  all such  documents  as Lessee (or any
Sublessee)  may  reasonably  request for the purpose of effecting and continuing
such registration.  Notwithstanding  the foregoing,  at any time after the fifth
anniversary of the  Commencement  Date,  subject to compliance with the terms of
Section 5(b) of the  Participation  Agreement,  Lessor shall, at the request and
sole expense of Lessee,  cooperate with Lessee and take all action  requested by
Lessee to change the country of registration of the Aircraft to another country.

     (b)  Nameplate.  Lessor  agrees to affix and Lessee  agrees to maintain in
          ---------
the cockpit of the Aircraft and on each Engine in a clearly visible location,  a
nameplate bearing the following  legend:  "Owned by Trust Company for USL, Inc.,
as Owner Trustee,  Owner and Lessor,  or such other legend as may be required by
Lessor.

     (c) Compliance with Laws. Lessee agrees that it will not use or operate the
         --------------------
Aircraft, Airframe or any Engine in violation of any law or any rule, regulation
or

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -28-

<PAGE>


order of the FAA or any federal,  state or foreign governmental authority having
jurisdiction  or in  violation  of any  airworthiness  certificate,  license  or
registration relating to the Aircraft, Airframe or any Engine issued by any such
authority.  In the event  that  such law,  rule,  regulation,  treaty,  order or
certificate requires alteration of the Aircraft, the Lessee will conform thereto
or obtain  conformance  therewith at no expense to Lessor.  Notwithstanding  the
foregoing,  after Lessee shall have provided  Lessor with a  certificate  of its
President or any  operating  Vice  President or the  Treasurer or any  Assistant
Treasurer  stating  all  relevant  facts  with  respect  thereto,  Lessee or any
Sublessee may contest in good faith the validity or application of any such law,
rule, regulation, treaty, order, certificate, license, registration or violation
in any reasonable  manner which does not materially  adversely affect the Lessor
or any Owner Participant or any of their respective legal and economic interests
in or to the Aircraft or the Lease. In addition,  no contest with respect to the
Aircraft  shall  continue  beyond  the Term and  Lessee  shall  comply  with the
provisions of Sections 5 and 11 hereof and the other  provisions of this Section
7  notwithstanding  such contest;  provided,  that Lessee or such  Sublessee may
continue such contest beyond the Term unless Lessor or either Owner  Participant
shall  reasonably   determine  that  it  would  be  adversely  affected  by  the
continuation of such contest beyond the Term.

     (d)  Operation;  Insurance  Requirements.  Lessee agrees not to operate,
          -----------------------------------
use or locate the  Aircraft,  Airframe  or any Engine,  or suffer the  Aircraft,
Airframe or any Engine to be operated, used or located, (i) in any area excluded
from coverage by the  insurance  required by the terms of Section 11, or (ii) in
any  recognized  or  threatened  area of  hostilities  unless  fully  covered by
war-risk  insurance  satisfying the terms of Section 11, or (iii) in any country
with which the United States does not maintain normal diplomatic relations.

     7.2.  Possession and Subleases.  Lessee will not, without the prior written
           ------------------------
consent of Lessor,  sublease or  otherwise  in any manner  deliver,  transfer or
relinquish  possession of the  Airframe or any Engine or install or permit any
Engine to be installed on any airframe other than the airframe;  provided,  that
                                                                 --------
so long as no Lease Default or Lease Event of Default shall have occurred and be
continuing at the time of such sublease, delivery, transfer or relinquishment of
possession or installation, and so long as any Sublessee

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -29-

<PAGE>


shall  continue to comply  with the  provisions  of Sections  7.1 and 11 hereof,
Lessee may, without the prior written consent of Lessor:

          (i) subject the Engines or engines  then  installed on the Airframe to
     normal  interchange  agreements or any Engine to normal  pooling or similar
     arrangements,  in each case  customary in the airline  industry and entered
     into by Lessee (or any  Sublessee) in the ordinary  course of its business;
     provided,  that if Lessor's title to any Engine shall be divested under any
     --------
     such agreement or arrangement,  such  divestiture  shall be deemed to be an
     Event of Loss with  respect to such Engine and Lessee shall (or shall cause
     Sublessee to) comply with Section 10.2 hereof in respect thereof;

          (ii)  deliver  possession  of the  Airframe or any Engine to the manu-
     facturer  thereof or to any other  Person  for  testing,  service,  repair,
     maintenance  or overhaul  work on the Airframe or Engine or any Part of any
     thereof  or for  alterations  or  modifications  in or  additions  to  such
     Airframe  or Engine to the extent  required  or  permitted  by the terms of
     Section 8.4 hereof;

          (iii)  install  an  Engine  on an  airframe  owned by  Lessee  (or any
     Sublessee)  which  airframe  is free and clear of all  Liens,  except:  (A)
     Permitted  Liens and those  which  apply only to the  engines  (other  than
     Engines),  appliances,  parts,  instruments,  appurtenances,   accessories,
     furnishings  and other  equipment  (other  than  Parts)  installed  on such
     airframe (but not to the airframe as an entirety),  (B) the rights of third
     parties  under  interchange  agreements  which  would  be  permitted  under
     subparagraph (i) of this Section 7.2; provided, that Lessor's title to such
                                           --------
     Engine shall not be divested as a result thereof, and (C) mortgage Liens or
     other security interests; provided, that (as regards this clause (C)), such
                               --------
     mortgage Liens or other security  interests  effectively  provide that such
     Engine  shall not become  subject to the lien of such  mortgage or security
     interest, notwithstanding the installation thereof on such airframe;

          (iv)  install  an Engine  on an  airframe  leased  to  Lessee  (or any
     Sublessee)  or  purchased  by  Lessee  (or  any  Sublessee)  subject  to  a
     conditional sale or other secu-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -30-

<PAGE>


     rity agreement;  provided,  that (A) such airframe is free and clear of all
                      --------
     Liens,  except:  (1) the right of the  parties to the lease or  conditional
     sale  or  other  security  agreement  covering  such  airframe,   or  their
     assignees,  and (2) Liens of the type  permitted by  subparagraph  (iii) of
     this  Section 7.2 and (B) such lease,  conditional  sale or other  security
     agreement effectively provides that such Engine shall not become subject to
     the  lien of such  lease,  conditional  sale or other  security  agreement,
     notwithstanding the installation thereof on such airframe;

          (v)  install  an  Engine  on an  airframe  owned  by  Lessee  (or  any
     Sublessee),  leased to Lessee (or any Sublessee) or purchased by Lessee (or
     any Sublessee)  subject to a conditional  sale or other security  agreement
     under circumstances where neither  subparagraph (iii) nor subparagraph (iv)
     of this Section 7.2 is applicable;  provided,  that such installation shall
                                         --------
     be deemed an Event of Loss with respect to such Engine and Lessee shall (or
     shall cause any  Sublessee  to) comply with  Section 10.2 hereof in respect
     thereof,  Lessor not intending hereby to waive any right or interest it may
     have to or in such Engine under  applicable law until  compliance by Lessee
     with such Section 10.2;

          (vi) transfer (or permit any Sublessee to transfer)  possession of the
     Airframe or any Engine to the Government  pursuant to the Civil Reserve Air
     Fleet Program for a period, including all permissible renewal periods, that
     does  not  extend  beyond  the end of the  Term so long as  Lessee  (or any
     Sublessee) shall promptly notify Lessor upon transferring possession of the
     Airframe or any Engine to the Government  pursuant to the Civil Reserve Air
     Fleet  Program,  provided,  that if such transfer of  possession  continues
                      --------
     beyond  the end of the Basic Term or the  then-current  Renewal  Term,  the
     Basic Term or such Renewal  Term,  as  applicable,  shall be  automatically
     extended (including the obligation to pay Rent at the rate then applicable)
     for a period of six (6) months thereafter;

          (vii)  transfer  possession  of  the  Airframe  or any  Engine  to the
     Government  pursuant  to a  contract,  a copy of which shall be provided to
     Lessor, provided that the term of such contract,  including all permissible
     renewal

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -31-

<PAGE>


     periods, shall not continue beyond the end of the Term; or

          (viii) so long as the  Sublessee  is not  subject to a  proceeding  or
     final order under applicable bankruptcy,  insolvency or reorganization laws
     on the date the sublease is entered into,  Lessee may, at any time (subject
     to the notice  requirements  specified  in the second to last  paragraph of
     this Section 7.2), in its sole discretion, enter into a sublease with (A) a
     U.S. Air Carrier, (B) after the fifth anniversary of the Commencement Date,
     any Permitted Sublessee or (C) any other Person approved in writing by each
     owner  Participant,  which  approval  shall not be  unreasonably  withheld;
     provided, however, that:
     --------  -------

               (1) no  Sublease,  including  all  permissible  renewal  periods,
          entered into pursuant to this subparagraph (viii), shall extend beyond
          the date three months prior to the expiration of the Basic Term or any
          Renewal  Term then in effect,  unless  Lessee  shall have  irrevocably
          committed  to purchase  the Aircraft or renew this Lease at the end of
          the Basic Term or Renewal Term, as the case may be, to a date at least
          three months  beyond the latest  permissible  expiration  date of such
          sublease;

               (2) each Sublease,  including all  permissible  renewal  periods,
          entered into pursuant to this  subparagraph  (viii) shall provide that
          (i) the Sublessee  may not operate the Aircraft (A) in countries  with
          which the United States does not maintain diplomatic  relations or (B)
          in areas of armed  hostilities,  and (ii) the Sublease shall terminate
          if the Subleases's country of domicile and the United States terminate
          normal diplomatic relations; and

               (3) no  Sublease,  including  all  permissible  renewal  periods,
          entered into pursuant to this  subparagraph  (viii) shall be made to a
          Person  described in clause (C) of this  subparagraph  (viii) which is
          not domiciled in a country listed in Exhibit D, as in effect from time
          to time,  unless Lessor and each Owner Participant shall have received
          reasonably satisfactory assurances

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -32-


<PAGE>


          regarding  the  protection  of the rights of lessors under the laws of
          such Person's jurisdiction and domicile, including a favorable opinion
          of counsel (which counsel and opinion are reasonably  satisfactory  to
          Lessor and each Owner  Participant) in such  jurisdiction (a) that the
          terms   (including,    without    limitation,    the    governing-law,
          service-of-process and  jurisdictional-submission  provisions thereof)
          of  the  Sublease  and  the  Lease  are  legal,  valid,   binding  and
          enforceable   in  such   jurisdiction   against   third   parties  to,
          substantially  the same extent as in the United  States,  and that the
          Sublease is subject and  subordinate to the Lease,  (b) that it is not
          necessary  for the  Owner  Trustee  or  either  Owner  Participant  to
          register  or qualify to do  business  in such  jurisdiction,  (c) that
          there  is no  tort  liability  of  the  owner  of an  aircraft  not in
          possession  thereof  under  the laws of such  jurisdiction  (it  being
          understood that, in the event such latter opinion cannot be given in a
          form  satisfactory  to the  Lessor and each  Owner  Participant,  such
          opinion  shall be  waived  if  insurance  reasonably  satisfactory  to
          Lessor, each Owner Participant and the Owner Trustee in its individual
          capacity is  available to cover such risk and is provided by Lessee or
          the  Sublessee),  (d)  unless  Lessee  shall have  provided  insurance
          reasonably  satisfactory to Lessor and each Owner Participant covering
          the risk of  requisition  of use of the Aircraft by the  government of
          such jurisdiction so long as the Aircraft is subleased,  that the laws
          of such  jurisdiction  require fair  compensation by the government of
          such  jurisdiction  payable  in a  currency  freely  convertible  into
          Dollars  for  the  loss of use of the  Aircraft  in the  event  of the
          requisition  by such  government  of such use, (e) that there exist no
          possessory  rights in favor of such  Sublessee  under the laws of such
          jurisdiction  which would,  upon bankruptcy of Lessee or other default
          by Lessee or  Sublessee,  prevent the return of the Aircraft to Lessor
          in accordance with and where permitted by the terms of Sections 14 and
          15 hereof upon the exercise by Lessor of its remedies under Section 15
          hereof  and the  practical  realization  by Lessor of its  rights  and
          benefits under Section 15, and (f) to such further effect

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -33-

<PAGE>


          with  respect  to  such  other  matters  as  Lessor  or  either  Owner
          Participant may reasonably request or unless the Lessor and each Owner
          Participant  shall  otherwise  approve.  Upon receipt of the foregoing
          opinion of counsel  by Lessor  and each Owner  Participant,  Exhibit D
          shall be amended to add such country.  If at any time Lessor or either
          Owner Participant  determines (which  determination shall be evidenced
          by an opinion of  counsel)  with  respect to a country  then listed on
          Exhibit D, that the opinion of counsel  referred to in this  subclause
          (3)  would  not be  obtainable  or that  the  United  States  does not
          maintain  normal  diplomatic  relations  with such country,  Exhibit D
          shall be amended to delete such country;  provided, that such deletion
                                                    --------
          will not impair any Sublease or any  interchange  agreement or pooling
          or  similar  arrangement  then in  effect.  If the  Aircraft  shall be
          subject to a Sublease  at any time  within the last four months of the
          Term, the Aircraft shall be returned to Lessee's active fleet upon the
          expiration of such Sublease.

     The rights of any Sublessee or other  transferee who receives possession by
reason of a transfer  permitted  by this Section 7.2 (other than the transfer of
an engine which is deemed an Event of Loss) shall be subject and subordinate to,
and any Sublease  permitted by this Section 7.2 shall be made expressly  subject
and subordinate to, all the terms of this Lease, including,  without limitation,
the  covenants   contained  in  Section  7.1  hereof  and  Lessor's   rights  to
repossession  pursuant to Section 15 hereof and to void such  Sublease upon such
repossession,  and  Lessee  shall  remain  primarily  liable  hereunder  for the
performance  of all of the  terms  of this  Lease,  and the  terms  of any  such
Sublease  shall not permit any  Sublessee to take any action not permitted to be
taken by Lessee or such Sublessee in this Lease with respect to the Aircraft. No
pooling  agreement,  sublease  or  other  relinquishment  of  possession  of the
Airframe or any Engine  shall in any way  discharge  or diminish any of Lessee's
obligations  to Lessor  hereunder or  constitute a waiver of Lessor's  rights or
remedies hereunder. Lessor agrees, for the benefit of Lessee (and any Sublessee)
and for the benefit of any  mortgagee or other holder of a security  interest in
any engine owned by Lessee (or any  Sublessee),  any lessor of any engine leased
to Lessee (or any Sublessee) and any conditional  vendor of any engine purchased
by Lessee (or any Sublessee)

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -34-

<PAGE>


subject to a conditional sale agreement or any other security agreement, that no
interest shall be created hereunder in any engine so owned,  leased or purchased
and that neither Lessor nor its successors or assigns will acquire or claim,  as
against Lessee (or any Sublessee) or any such  mortgagee,  lessor or conditional
vendor or other  holder of a security  interest or any  successor or assignee of
any thereof,  any right,  title or interest in such engine as the result of such
engine being installed on the Airframe;  provided,  however, that such agreement
                                         --------   -------
of Lessor  shall not be for the  benefit of any  lessor or secured  party of any
airframe  leased to Lessee (or any  Sublessee)  or  purchased  by Lessee (or any
Sublessee)  subject to a conditional sale or other security agreement or for the
benefit of any  mortgagee  of or any other  holder of a security  interest in an
airframe  owned by Lessee (or any  Sublessee),  unless such lessor,  conditional
vendor,  other secured party or mortgagee has expressly  agreed (which agreement
may be contained in such lease,  conditional sale or other security agreement or
mortgage) that neither it nor its successors or assigns will acquire, as against
Lessor,  any right,  title or  interest  in an Engine as a result of such Engine
being  installed on such airframe.  Lessee shall provide each Owner  Participant
written  notice and a copy of any  Sublease  hereunder  which has a term of more
than  three (3)  months  (such  notice to be given in any event  promptly  after
entering into such Sublease).

     Lessor acknowledges that any Wet Lease or similar arrangement under which
Lessee  maintains  operational  control of the Aircraft  shall not  constitute a
delivery,  transfer or relinquishment of possession for purposes of this Section
7.2,  provided that any Wet Lease entered into by a Sublessee  shall comply with
      --------
the  restrictions  that would otherwise be applicable  under this Section 7.2 if
such Wet Lease were a Sublease.  Lessor  acknowledges  that any consolidation or
merger of Lessee or conveyance, transfer or lease of all or substantially all of
Lessee's assets permitted hereunder shall not be prohibited by this Section 7.2.

     7.3.  Records and Reports. Lessee shall:
           -------------------

          (a)  Records.  Maintain  or  cause to be  maintained  in  English  all
               -------
     records,  logs and other  materials  generally  required by the FAA and any
     other  governmental  authority  having  jurisdiction  to be  maintained  in
     respect of the Aircraft, the Airframe and each Engine; and

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -35-

<PAGE>


          (b) Information and Reports. Promptly furnish or cause to be furnished
              -----------------------
     to Lessor such  information as may be required to enable Lessor to file any
     reports,  including  tax  returns,  required to be filed by Lessor with any
     governmental  authority  because of  Lessor's  ownership  of the  Aircraft,
     Airframe or any Engine or because of receipt of Rent.

     Section 8.  Maintenance; Replacement and Pooling of Parts; Alterations,
                 -----------------------------------------------------------
                 Modifications and Additions.
                 ---------------------------

     8.1.  Maintenance.  Lessee shall maintain,  service,  repair,  overhaul,
           -----------
alter,  modify, add to and test or cause to be maintained,  serviced,  repaired,
overhauled,  altered,  modified,  added to and tested the Aircraft, the Airframe
and each  Engine,  and each  other  engine  installed  from  time to time on the
Airframe; in accordance with Lessee's or the Sublessee's maintenance program for
the  Aircraft,  Airframe  and  engines  approved  by the  FAA or the  applicable
regulatory  agency or body of any other  jurisdiction  in which the Aircraft may
then be registered (the "Maintenance  Program"), so as to keep the Aircraft, the
Airframe  and each Engine in as good  operating  condition  as when  accepted by
Lessee under the Modification Contract,  ordinary wear and tear excepted, in the
same manner as used by Lessee or the Sublessee  with similar  aircraft  owned or
operated  by  Lessee or the  Sublessee  and so as to keep the  Aircraft  in such
operating condition as may be necessary to enable the airworthiness  certificate
for the  Aircraft  to be  maintained  in good  standing  at all times  under the
applicable rules and regulations of the FAA and any other applicable law. Lessee
will  comply  or  cause  Sublessee  to  comply  with  all  service,  inspection,
maintenance,  repair and overhaul regulations,  directions and instruments which
are made mandatory by the FAA or any other governmental authority upon operation
of Boeing 727 aircraft and/or Pratt & Whitney JT8D-15A  engines.  Lessee further
agrees that the Aircraft,  Airframe and Engines will be maintained in compliance
with all laws, rules,  regulations and orders of each government or governmental
authority  having  jurisdiction  over the  maintenance  of the  Aircraft  and in
compliance  with  each  applicable   airworthiness   certificate,   license  and
registration  relating to the  Aircraft,  Airframe  or any Engine  issued by any
such authority.

     8.2.  Replacement of Parts.  Lessee,  at its sole cost and expense,  will
           --------------------
promptly replace or cause the replace-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -36-


<PAGE>


ment of all Parts which may from time to time be  incorporated  in the Aircraft,
Airframe or any Engine and which may from time to time  become  worn out,  lost,
stolen,  destroyed,  seized,  confiscated,  damaged beyond repair or permanently
rendered  unfit for use for any reason.  In  addition,  Lessee may remove in the
ordinary course of maintenance,  service,  repair, overhaul or testing any Parts
as permitted by Section 8.1, whether or not worn out, lost,  stolen,  destroyed,
seized,  confiscated,  damaged beyond repair or  permanently  rendered unfit for
use; provided,  however,  Lessee, at its own cost and expense, will replace such
     --------   -------
Parts as promptly as possible.  All replacement Parts shall be free and clear of
all Liens (except for Permitted Liens) and shall be in good operating condition
and have a value and utility at least equal to the Parts replaced  assuming such
replaced Parts were in the condition and repair required to be maintained by the
terms hereof.  All Parts at any time removed from the Aircraft,  Airframe or any
Engine shall remain the property of Lessor no matter where  located,  until such
time as such Parts shall be  replaced by Parts which have been  incorporated  in
the  Aircraft,  Airframe  or such  Engine  and which meet the  requirements  for
replacement  Parts  specified  above.  Immediately  upon  any  replacement  Part
becoming  incorporated  in the  Aircraft,  Airframe  or  such  Engine  as  above
provided,  without  further act, (i) title to the replaced Part shall  thereupon
vest in Lessee  free and clear of all  rights of Lessor  and the  replaced  Part
shall no longer be deemed a Part hereunder,  (ii) title to such replacement Part
shall thereupon vest in Lessor (subject only to Permitted Liens), and (iii) such
replacement  Part shall  become  subject to this Lease and be deemed  part of an
Aircraft,  Airframe or such Engine for all purposes hereof to the same extent as
the Parts originally incorporated in such Aircraft, Airframe or Engine.

     8.3. Pooling of Parts.  Any Part  removed  from the  Aircraft,  Airframe or
          ----------------
any Engine as  provided in Section  8.2 may be  subjected  by Lessee to a normal
pooling  arrangement  customary in the U. S. commercial airline industry entered
into in the  ordinary  course of business of Lessee or  Sublessee,  so long as a
Part  replacing  such  removed  Part  shall be  incorporated  in such  Aircraft,
Airframe or Engine in accordance  with Section 8.2 as promptly as possible after
the  removal of such  removed  Part.  In  addition,  any  replacement  Part when
incorporated  in such  Aircraft,  Airframe  or such  Engine in  accordance  with
Section  8.2 may be owned by any air  carrier  subject to such a normal  pooling
arrangement,  so long as Lessee, as promptly thereafter as reasonably  possible,
either

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -37-

<PAGE>


(i) causes title to such  replacement  Part to vest in Lessor in accordance with
Section  8.2  by  Lessee  acquiring  title  thereto  for  the  benefit  of,  and
transferring such title to, Lessor free and clear of all Liens (except Permitted
Liens), or (ii) replaces such replacement Part by incorporating in the Aircraft,
Airframe  or such  Engine a further  replacement  Part owned by Lessee  free and
clear of all Liens (except Permitted Liens) and by causing title to such further
replacement Part to vest in Lessor in accordance with Section 8.2.

     8.4. Alterations,  Modifications and Additions.  Lessee shall make or cause
          -----------------------------------------
to be made,  at its own  expense,  such  alterations  and  modifications  in and
additions to each Aircraft,  Airframe and Engine as may be required from time to
time to meet the standards of the FAA or other governmental  authority (domestic
or foreign) having jurisdiction and to enable the airworthiness  certificate for
the Aircraft to be maintained in good standing at all times under the applicable
rules and  regulations of the FAA and any other  governmental  authority  having
jurisdiction.  In addition,  upon written consent of Lessor,  Lessee,  at it own
cost and expense, may, from time to time make such alterations and modifications
in and  additions  to the  Aircraft,  Airframe  or any Engine as Lessee may deem
desirable in the proper conduct of its business,  including without limitation,
removal  of  Parts  which  Lessee  deems  obsolete  or  no  longer  suitable  or
appropriate  for use in the  Aircraft,  Airframe  or such  Engine  (such  parts,
"Obsolete Parts"); provided,  however, that no such alteration, modification or
                   --------   -------
addition  shall  materially  diminish  the  value or  utility  of the  Aircraft,
Airframe or such Engine, or impair the airworthiness  thereof,  below the value,
utility,  and  airworthiness  thereof  immediately  prior to such  alteration,
modification  or addition  assuming the  Aircraft,  Airframe or such Engine was
then of the value or utility and in the  condition  required to be maintained by
the terms of this Lease except that the value (but not the utility, condition or
airworthiness)  of the  Airframe  or any  Engine may be reduced by the value of
Obsolete  Parts which shall have been removed so long as the aggregate  original
cost of all Obsolete  Parts which shall have been removed and not replaced shall
not exceed  $300,000;  provided  further,  that any value  received by Lessee in
                       -----------------
respect of the sale or use of such Obsolete  Parts shall be paid to Lessor on a
net after-tax basis.  Title to all Parts on the Aircraft,  Airframe or Engine as
the result of such alteration, modification or addition shall, without further
act, vest in Lessor.  Notwithstanding the  foregoing  sentence of this Section
8.4, so long

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -38-

<PAGE>


as no Lease  Default  under  Sections  14 (a) , (b) , (h) or (i) hereof or Lease
Event of Default shall have occurred and be continuing,  lessee may, at any time
during the Term,  remove any Part if (i) such Part is in addition to, and not in
replacement of or  substitution  for, any Part  originally  incorporated  in any
Aircraft,  Airframe or Engine at the time of delivery  thereof  hereunder or any
Part in replacement of or substitution  for any such Part, (ii) such Part is not
required to be incorporated in such Aircraft, Airframe or Engine pursuant to the
terms of this Section 8, and (iii) such Part can be removed from such  Aircraft,
Airframe or Engine without  diminishing or impairing the value or  airworthiness
required  to be  maintained  by the  terms of this  Lease  which  the  Aircraft,
Airframe  or such  Engine  would  have had at such  time  had  such  alteration,
modification or addition not occurred. Upon the removal by Lessee of any Part as
above  provided,  title thereto shall,  without  further act, vest in Lessee and
such Part shall no longer be deemed  part of such  Aircraft,  Airframe or Engine
from which it was  removed.  Any Part not  removed  by Lessee as above  provided
prior to the return of such  Aircraft,  Airframe  or Engine to Lessor  hereunder
shall remain the property of Lessor. Lessee hereby grants to Lessor a perpetual,
non-exclusive,  royalty  free  license  in any  supplemental  type  certificates
relating to any of the alterations,  modifications or additions performed, being
performed  or to be  performed  on the  Aircraft  and  which  are  necessary  or
desirable for the operation of the Aircraft, effective on the earlier of (i) the
Redelivery Date as such term is defined in the Modification Contract or (ii) the
date upon which there shall have occurred a Lease Event of Default.

     Section 9. Renewal Options; Purchase options.
                ----------------------------------

     (a)  Renewal  Options.  Subject to the  provisions  set forth herein,  and
          ----------------
so long as no Lease  Default  or Lease  Event of  Default  has  occurred  and is
continuing,  upon the expiration of the Basic Term,  Lessee shall have the right
to extend this Lease for one six month term (the  "Initial  Renewal  Term") and,
thereafter,  four  successive  one (1) year terms (the Initial  Renewal Term and
each such successive term being  hereinafter  referred to as a "Renewal  Term").
The  Initial  Renewal  Term will  commence at the end of the Basic Term and each
Renewal Term subsequent to the Initial Renewal Term shall commence at the end of
the preceding  Renewal Term. The rental payable during any Renewal Term shall be
(i) for the Initial Renewal Term, the then applicable Basic Rent

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -39-

<PAGE>


payable under this Lease, and (ii) for each of the remaining  Renewal Terms, the
then Fair Market Rental Value for the Aircraft.  Such rental during each Renewal
Term shall be payable semi-annually in arrears. The Stipulated Loss Value of the
Aircraft  during each Renewal Term shall be equal to the Fair Market Sales Value
thereof at the commencement of such Renewal Term.

     (b) Purchase  Options.  So long as no Lease  Default or Lease Event of
         -----------------
Default has occurred and is continuing, Lessee shall have the option to purchase
the  Aircraft  at the end of the Basic Term or any  Renewal  Term for a purchase
price equal to the Fair Market Sales Value of the Aircraft as of such date. Upon
the  payment by Lessee of the  purchase  price for the  Aircraft,  Lessor  shall
convey to Lessee all right, title and interest of Lessor in and to the Aircraft
on an "as-is,  where is" basis,  without  recourse or warranty except a warranty
against Lessor's Liens.

     (c) Notice of Purchase or Renewal. In order to exercise  any renewal option
         -----------------------------
under Section 9(a) or any purchase option under  Section 9(b),  Lessee shall be
required  to give not less  than 180 days  (or,  in the case of any such  notice
delivered  during the Initial  Renewal Term, 120 days),  prior written notice to
Lessor,  which notice shall be irrevocable.  Not less than 120 days prior to the
date on which such renewal option or purchase option will be exercised,  Lessee
shall give  written  notice to Lessor  identifying  the option to be  exercised.
Notwithstanding  the  foregoing,  in the event  that  Lessee is  contesting  the
validity or application of any law, rule,  regulation,  order,  or  registration
which  relates to the  Aircraft  or  Lessee's  obligations  under any  Operative
Document,  and Lessee has delivered to Lessor not less than 90 days prior to the
end of the Basic Term or Renewal  Term,  as the case may be, a certificate of a
duly authorized  officer to the effect that it is reasonable to assume that such
contest may continue beyond such Basic Term or Renewal Term,  then Lessee shall
be entitled to exercise any of the options  available to it pursuant to Section
9(a) or 9(b)  hereof by giving  written  notice to Lessor  not less than 90 days
prior to the end of such Basic  Term or  Renewal  Term,  which  notice  shall be
irrevocable.  If Lessee fails to exercise any renewal  option under Section 9(a)
or any purchase  option under Section 9(b) in accordance  with the provisions of
this paragraph,  all of Lessee's rights to extend the term hereof or to purchase
the Aircraft expire.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -40-

<PAGE>


     Section 10. Loss Destruction. Requisition. Etc.
                 -----------------------------------

     10.1. Event of Loss with Respect to Airframe. Upon the occurrence of an
           --------------------------------------
Event of Loss with  respect to the  Aircraft,  Lessee  shall give Lessor  prompt
written  notice  thereof and on or before the  Business Day next  preceding  the
earlier of (i) the 31st day following  the date of the  occurrence of such Event
of Loss and (ii) five days  following  the receipt of  insurance  proceeds  with
respect to such occurrence,  Lessee shall pay to Lessor (A) the Stipulated Loss
Value for the Aircraft, determined as of Stipulated Loss Value Date immediately
following such date, together with interest thereon at the Overdue Rate from and
including  the date of  occurrence  of such Event of Loss to but  excluding  the
payment  date and (B) any  other  Rent  which  is due and  payable  through  and
including the date of the  occurrence  of such Event of Loss (not  including any
Basic Rent payable on or after or  attributable to periods after the date of the
occurrence of such Event of Loss but including any unpaid  installments of Basic
Rent due prior to such date of the occurrence of such Event of Loss and all Rent
attributable to the period from the Lease Period Date immediately  preceding the
date of payment to such date of payment.  In the event of payment in full of the
Stipulated  Loss Value for such  Aircraft  pursuant to this Section 10.1 and all
other Rent and amounts then due and payable hereunder by Lessee,  the obligation
of Lessee to pay Basic Rent  hereunder  with  respect to such  Aircraft  for any
period  commencing after the date of such payment of Stipulated Loss Value shall
terminate  (but Lessee shall remain  liable for all payments of Rent,  including
Basic Rent for such Aircraft,  due or accrued  through and including the date of
such payment of Stipulated  Loss Value),  the Term fox such Aircraft  shall end,
and Lessor will transfer the Aircraft to Lessee on an "as-is,  where-is"  basis,
free and clear of Lessor Liens, but otherwise without  recourse,  representation
or warranty, express or implied.

     10.2.  Event of Loss with Respect to an Engine.
            ---------------------------------------

     (a) Event of Loss.  Upon the  occurrence  of an Event of Loss with respect
         -------------
to an Engine  under  circumstances  in which there has not  occurred an Event of
Loss with respect to an Airframe, Lessee shall give Lessor prompt written notice
(and in any event within three days after such occurrence) thereof and shall, as
promptly as possible  and in any event  within 60 days after the  occurrence  of
such Event of Loss, convey or cause to be conveyed to Lessor as replacement for

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -41-

<PAGE>


the  Engine  with  respect  to which  such  Event of Loss  occurred,  title to a
Replacement Engine free and clear of all Liens, other than Permitted Liens, and
having a value and utility at least  equal to the Engine  with  respect to which
such Event of Loss  occurred,  assuming such Engine was of the value and utility
and in the condition and repair required by the terms hereof  immediately  prior
to the occurrence of such Event of Loss.

     (b) Conditions;  Lessee's  Obligations.  Prior to or at the time of any
         ----------------------------------
such  Conveyance,  Lessee will promptly  (all  writings  referred to below to be
reasonably satisfactory in form and substance to Lessor):

          (i) furnish owner with a full warranty bill of sale duly  conveying to
     Lessor each  Replacement  Engine  together  with such  evidence of title as
     Lessor may reasonably request;

          (ii) cause a Lease Supplement  subjecting each such Replacement Engine
     to this Lease,  duly  executed  by Lessee,  to be  delivered  to Lessor for
     execution and, upon such execution, to be filed for recordation;

          (iii)  furnish  Lessor  with  such  evidence  of  compliance  with the
     insurance  provisions  of Section 11 with respect to each such  Replacement
     Engine as may be reasonably requested; and

          (iv)  furnish the  documentation  required to be provided  pursuant to
     Section 6 of the  Participation  Agreement and such other  certificates  or
     documents to effect such replacement as Lessor may reasonably request.

     (c)  Recordation and Opinions.  In the case of any  Replacement Engine con-
          ------------------------
veyed  under this  Section  10.2,  promptly  upon the  recordation  of the Lease
Supplement  covering such  Replacement  Engine  pursuant to the Act, Lessee will
cause to be  delivered  to Lessor an opinion of counsel  experienced  in federal
aviation matters and reasonably satisfactory to Lessor as to the due recordation
of such Lease Supplement as Lessor may require.

     (d) Conveyance; Replacement Engine. Upon full compliance by Lessee with the
         ------------------------------
terms of this Section 10.2,

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -42-

<PAGE>


Lessor  will  transfer  the  Engine  with  respect  to which  such Event of Loss
occurred  to  Lessee on an  "as-is,  where-is"  basis,  free and clear of Lessor
Liens, but otherwise  without recourse,  representation or warranty,  express or
implied.

     (e) No  Reduction  of Basic Rent.  No Event of Loss with respect to an
         ----------------------------
Engine under the  circumstances  contemplated  by the terms of this Section 10.2
shall result in any reduction of Basic Rent.

     10.3. Application of Payments from Governmental Authorities for Requisition
           ---------------------------------------------------------------------
of Title.  Any  payments  received  at any time by  Lessor  or  Lessee  from any
--------
governmental  authority or other Person with respect to any Event of Loss, other
than a requisition for use by the Government not  constituting an Event of Loss,
will be applied as follows:

          (a) Replacement of Engine.  If such payments are received with respect
              ---------------------
     to an  Engine  that has been or is  being replaced  by Lessee  pursuant  to
     Section 10.2, so much of such payments  remaining  after  reimbursement  of
     Lessor for reasonable  out-of-pocket  costs and expenses shall be paid over
     to, or retained by, Lessee,  provided Lessee shall have fully performed or,
     concurrently  therewith, is fully performing the terms of Section 10.2 with
     respect to the Event of Loss for which such payments are made.

          (b)  Nonreplacement.  If such payments are received with respect to an
               --------------
     Airframe and Engines  installed  thereon,  if any, that has not or have not
     been and will not be replaced,  so much of such  payments  remaining  after
     reimbursement  of Lessor for reasonable costs and expenses shall be applied
     in reduction of Lessee's  obligation to pay Stipulated Loss Value and other
     amounts  required to be paid by Lessee  hereunder,  if not already  paid by
     Lessee, or, if already paid by Lessee, shall be applied to reimburse Lessee
     for its  payment  of such  Stipulated  Loss  Value and other  amounts.  The
     balance,  if any, of such payment  remaining  thereafter  shall be paid to
     Lessee.

     10.4.  Application of Payments  During  Existence of Default. Any amount
            -----------------------------------------------------
referred to in this Section 10 which is payable or  creditable  to or retainable
by Lessee  shall not be paid or  credited  to or  retained by Lessee if, at the
time of such  payment,  credit or  retention,  a Lease Default or Lease Event of
Default shall have occurred and be continuing hereunder but shall be paid to and
held by Lessor as security for

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -43-

<PAGE>


the obligations of Lessee under this Lease and, if Lessor declares this Lease to
be in default  pursuant to Section 15 or it shall otherwise become in default in
accordance with its terms, applied against Lessee's obligations hereunder as and
when due and at such  time as  there  shall  not be  continuing  any such  Lease
Default or Lease  Event of Default,  such amount  shall be paid to Lessee to the
extent not previously applied in accordance with the preceding sentence.

     Section 11. Insurance. (a) Public Liability and Property Damage Insurance.
                 ---------      ----------------------------------------------

     (i) Except as  provided in clause (ii) of this  Section  11(a),  and
subject to the  provisions of Section 11 (d) hereof  permitting  self-insurance,
Lessee  will  carry or cause to be carried  at its or any  Sublessee's  expense,
comprehensive  airline liability  (including,  without limitation,  contractual,
bodily  injury  and  property   damage   liability)   insurance   (exclusive  of
manufacturer's product liability insurance) with respect to the Aircraft, (A) in
an amount not less than the greater of (1) the amounts of comprehensive  airline
liability  insurance  from time to time  applicable to aircraft owned or leased,
and  operated by Lessee of the same type as the  Aircraft  and (2) an amount per
occurrence not less than the amount per occurrence set forth in the  Certificate
of Insurance of Aircraft Hull and Liability  Insurance  delivered by Alexander &
Alexander of Texas,  Inc. to Lessor and each owner  Participant  on the Delivery
Date,  (B) of the  type  and  covering  the  same  risks  as  from  time to time
applicable  to aircraft  owned or leased and operated by Lessee of the same type
as the  Aircraft  and (C)  which  is  maintained  in  effect  with  insurers  of
recognized  reputation and responsibility.  Lessee shall also maintain, or cause
to be  maintained  at its or any  Sublessee's  expense,  cargo  legal  liability
insurance  in an amount and on such terms as  maintained  for  similar  aircraft
owned or leased and operated by Lessee.

     (ii)  During any period that the  Airframe  or an Engine  while temporarily
removed from the Aircraft  and not replaced by similar  components,  as the case
may be, is on the ground and not in  operation,  Lessee may carry or cause to be
carried as to such non-operating  property, in lieu of the insurance required by
clause (i)  above,  and  subject  to the  provisions  of  section  11(d)  hereof
permitting  self-insurance,  insurance by insurers of recognized  reputation and
responsibility  otherwise  conforming  with the  provisions  of said  clause (i)
except  that (A) the  amounts of  coverage  shall not be  required to exceed the
amounts  of  comprehensive   airline  liability  insurance  from  time  to  time
applicable to property owned

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -44-

<PAGE>


or leased by Lessee of the same or similar  type as such  nonoperating  property
and which is on the ground and not in  operation,  and (B) the scope of the risk
covered and the type of  insurance  shall be the same as from time to time shall
be applicable to property  owned or leased by Lessee of the same or similar type
as such non-operating property and which is on the ground and not in operation.

     (b)  Insurance  Against Loss or Damage to the  Aircraft. (i)  Except as
          --------------------------------------------------
provided in clause (ii) of this Section 11(b),  and subject to the provisions of
Section 11(d) hereof permitting  self-insurance,  Lessee shall maintain or cause
to be maintained in effect, at its or any Sublessee's expense,  with insurers of
recognized  reputation and  responsibility,  all-risk ground and flight aircraft
hull insurance covering the Aircraft and fire and extended coverage and all-risk
property damage insurance  covering Engines and Parts while temporarily  removed
from the  Aircraft and not replaced by similar  components  (including,  without
limitation, war risk and governmental confiscation and expropriation (other than
by the government of registry of the Aircraft) and hijacking  insurance,  if and
to the  extent the same  is maintained  either by Lessee or any  Sublessee  with
respect to other aircraft owned, leased or operated by either the Lessee or such
Sublessee on the same routes);  provided, that such insurance shall at all times
                                --------
while the  Aircraft  is  subject  to this  Lease be for an amount  (taking  into
account self-insurance to the extent permitted by Section 11(d) hereof) not less
than the  Stipulated  Loss  Value for the  Aircraft.  In the case of a loss with
respect to an engine (other than an Engine)  installed on the  Airframe,  Lessor
shall promptly remit any payment made to it of any insurance proceeds in respect
of such loss to Lessee or any other third party that is entitled to receive such
proceeds.

     Except  during  a period  when a  Default  or Lease  Event of Default has
occurred  and is  continuing,  all losses  will be  adjusted  by Lessee with the
insurers. As between Lessor and Lessee, it is agreed that all insurance payments
received as the result of the  occurrence of an Event of Loss will be applied as
follows:

          (A) if  such  payments  are  received  with  respect  to the Airframe
     (or the Airframe and the Engines installed thereon), so much of such pay-
     ments remaining, after reimbursement  of Lessor and each Owner Participant,
     for reasonable  costs and expenses,  as shall not exceed the

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -45-

<PAGE>


     Stipulated Loss Value and the other amounts payable under Section 10.1
     hereof  required to be paid by Lessee  pursuant to such  Section  10.1
     shall be applied  in  reduction  of  Lessee's  obligation  to pay such
     Stipulated Loss Value and the other amounts payable under such Section
     10.1,  if not already  paid by Lessee,  or, if already paid by Lessee,
     shall  be  applied  to  reimburse  Lessee  for  its  payment  of  such
     Stipulated  Loss Value,  and the  balance,  if any,  of such  payments
     remaining thereafter will be paid over to, or retained by, Lessee (or,
     if directed by Lessee, any Sublessee); and

          (B) if such  payments are received  with respect to an Engine
     under the  circumstances  contemplated by Section 10.2 hereof, so much
     of such payments  remaining,  after  reimbursement  of Lessor and each
     Owner  Participant  for reasonable  costs and expenses,  shall be paid
     over to, or retained  by,  Lessee  (or,  if  directed  by Lessee,  any
     Sublessee),  provided  that  Lessee  shall  have fully  performed  or,
                  --------
     concurrently  therewith,  willfully  perform the terms of Section 10.2
     (b) hereof with  respect to the Event of Loss for which such  payments
     are made.

     As between Lessor and Lessee, the insurance payments for any property
damage loss to the Airframe or any Engine not constituting an Event of Loss with
respect  thereto  shall be paid to  Lessee  (or any  Sublessee  if  directed  by
Lessee).

     (ii) During any period  that the  Aircraft is on the ground and not in
operation,  Lessee may carry or cause to be  carried,  in lieu of the  insurance
required by clause (A) above,  and subject to the  provisions  of Section  11(d)
hereof  permitting  self-insurance,  insurance  otherwise  conforming  with  the
provisions of said clause (A) except that the scope of the risks and the type of
insurance shall be the same as from time to time applicable to aircraft owned or
leased by Lessee of the same type as the  Aircraft  similarly  on the ground and
not in  operation;  provided,  that subject to the  provisions  of Section 11(d)
                    --------
hereof permitting  self-insurance,  Lessee shall maintain insurance against risk
of loss or damage to the Aircraft in an amount at least equal to the  Stipulated
Loss Value of the Aircraft during such period that the Aircraft is on the ground
and not in operation.

     (c)  Reports,  etc.  Lessee will  furnish,  or cause to be  furnished,  to
          ----------------
Lessor and each owner Participant on or before the Delivery Date and during each
calendar year there-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -46-

<PAGE>


after on or before the anniversary of the Delivery Date a report,  signed by (i)
Alexander & Alexander of Texas, Inc., (ii) Arkwright Mutual Insurance Company or
(iii) any other independent firm of insurance brokers  reasonably  acceptable to
Lessor  which  brokers  may be in the regular  employ of Lessee (the  "Insurance
Brokers"), describing in reasonable detail the hull and liability insurance (and
property  insurance for detached  engines and parts) then carried and maintained
with  respect to the  Aircraft  and  stating  the opinion of such firm that such
insurance  complies  with the  terms  hereof;  provided,  that  all  information
                                               --------
contained in the foregoing  report shall not be made available by Lessor or each
Owner Participant to anyone except (A) to prospective and permitted  transferees
of  Lessor's  or each  Owner  Participant's  interest,  who  agree to hold  such
information confidential, (B) to Lessor's or each owner Participant's counsel or
independent certified public accountants, independent insurance brokers or other
agents who agree to hold such information  confidential,  (C) as may be required
by any statute,  court or administrative  order or decree or governmental ruling
or  regulation  or (D) as  may be  necessary  for  purposes  of  protecting  the
interests  of any such  person or for  enforcement  of this Lease by the Lessor;
provided,  however,  that any and all disclosures  permitted by (C) or (D) above
--------   -------
shall be made only to the extent necessary to meet the specific  requirements or
needs of the Persons to whom such disclosures are hereby permitted.  Lessee will
cause  such  Insurance  Brokers  to  agree  to  advise  Lessor  and  each  Owner
Participant  in writing of any  default in the payment of any premium and of any
other act or omission on the part of Lessee of which it has actual knowledge and
which  might  invalidate  or  render  unenforceable,  in whole  or in part,  any
insurance  on the  Aircraft as  required by the terms  hereof and to advise such
Persons  in  writing at least 30 days (7 days in the case of war risk and allied
perils coverage  or  such  longer  period  as may  be  customary)  prior  to the
cancellation  (but not scheduled  expiration) or material  adverse change of any
insurance maintained pursuant to this Section 11; provided,  that if the notice
                                                  --------
period specified above is not reasonably obtainable, the Insurance Brokers shall
provide  for as long a  period  of prior  notice  as  shall  then be  reasonably
obtainable.  In  addition,  Lessee  will also  cause such  Insurance  Brokers to
deliver  to  Lessor  and  each  Owner  Participant,  on or  prior to the date of
expiration  of  any  insurance  policy  referenced  in  a  previously  delivered
certificate of insurance, a new certificate of insurance,  substantially in the
same form as delivered by Lessee to such parties on the Delivery Date except for
changes in the report or the coverage consistent with the

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -47-

<PAGE>


terms hereof.  In the event that Lessee or any Sublessee  shall fail to maintain
or cause to be maintained  insurance as herein provided,  Lessor may at its sole
option  provide such insurance  and, in such event,  Lessee shall,  upon demand,
reimburse  Lessor,  as  Supplemental  Rent,  for the  cost  thereof  to  Lessor;
provided,  however,  that no exercise by the Lessor of said option  shall affect
--------   -------
the  provisions  of this Lease,  including  the  provisions  that failure by the
Lessee to maintain the prescribed  insurance  shall  constitute a Lease Event of
Default.

     (d)  Self-Insurance.  Lessee may  self-insure  the risks  required to be
          --------------
insured  against  pursuant to this Section 11 under a program  applicable to all
aircraft in Lessee's  fleet,  but in no case shall the aggregate  amount of such
self-insurance in regard to Section 11(a) and Section 11(b) hereof exceed,  with
respect to all of the aircraft in Lessee's fleet (including, without limitation,
the Aircraft),  the lesser of (i) 50% of the largest  replacement  value of any
single  aircraft  in  Lessee's  fleet  or (ii) 1 1/2% of the  average  aggregate
insurable value (during the preceding calendar year) of all aircraft (including,
without limitation,  the Aircraft) on which Lessee carries insurance;  provided,
                                                                       --------
however, that nothing contained in this Section 11(d) limiting Lessee's right to
-------
self-insure  shall be  deemed  to apply to any  minimum  per  aircraft  (or,  if
applicable,  per annum or other period) hull or liability  insurance  deductible
imposed by the aircraft hull or liability insurers.

     (e) Additional Insurance by Lessor and Lessee. Lessee (and any Sublessee)
         -----------------------------------------
may at its own  expense  carry  insurance  with  respect to its  interest in the
Aircraft in amounts in excess of that  required to be maintained by this Section
11. Each Owner  Participant or any Affiliate  thereof may carry for its or their
own account  (directly  or through the owner  Trustee) at its or their sole cost
and expense  insurance  with respect to its interest in the  Aircraft,  provided
                                                                        --------
that such  insurance  does not  prevent  or  materially  impair  Lessee  (or any
Sublessee) from carrying the insurance  required by this Section 11 or adversely
affect such insurance or the cost thereof (it being  understood that all salvage
rights to the Airframe and Engines shall remain with the Lessee's insurers).

     (f)  Indemnification  by Government in Lieu of  Insurance.  Notwithstanding
          ----------------------------------------------------
any provisions of this Section 11 requiring insurance,  Lessor agrees to accept,
in  lieu  of  insurance   against  any  risk  with  respect  to  the   Aircraft,
indemnification from, or insurance provided by, the Government, against

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -48-

<PAGE>


such risk in an amount which, when added to the amount of insurance against such
risk  maintained  by Lessee (or any  Sublessee)  shall be at least  equal to the
amount of  insurance  against  such risk  otherwise  required by this Section 11
(taking into account self-insurance permitted by Section 11(d) hereof). Any such
indemnification   or  insurance   provided  by  the  Government   shall  provide
substantially  similar  protection as the insurance required by this Section 11.
Lessee shall furnish, in advance of attachment of such indemnity or insurance, a
certificate of a responsible  financial or legal officer of Lessee confirming in
reasonable detail the amount and scope of such  indemnification or insurance and
that such indemnification or insurance complies with the preceding sentence.

     (g) Application of Payments During Existence  of a Lease  Event of Default.
         ----------------------------------------------------------------------
Any amount  referred to in this Section 11 which is payable to or  retainable by
Lessee (or any  Sublessee)  shall not be paid to or  retained  by Lessee (or any
Sublessee)  if at the time of such  payment or  retention  a Lease  Default or a
Lease Event of Default shall have occurred and be continuing,  but shall be held
by or paid over to Lessor as security for the  obligations  of Lessee under this
Lease and, if a Lease  Default or a Lease Event of Default  shall have  occurred
and be continuing,  applied against Lessee's  obligations  hereunder as and when
due. At such time as there  shall not be  continuing  any such Lease  Default or
such Lease Event of Default,  such amount  shall be paid to Lessee to the extent
not previously applied in accordance with the preceding sentence.

     (h) Terms of  Insurance  Policies.  Any  policies  carried in  accordance
         -----------------------------
with Sections  11(a) and 11(b) hereof  covering the  Aircraft,  and any policies
taken out in substitution  or replacement for any such policies,  (i) shall name
the  Additional  Insureds as  additional  insureds,  and, as  appropriate,  loss
payees,  as their  respective  interests may appear (but without imposing on any
such party  liability to pay  premiums,  calls or other  charges with respect to
such insurance),  (ii) may provide for self-insurance to the extent permitted in
Section  11(d)  hereof,  (iii) shall  provide that if the  insurers  cancel such
insurance  for any  reason  whatever,  or if the same is  allowed  to lapse  for
nonpayment of premium or if any material  change is made in the insurance  which
adversely  affects  the  interest  of any  Additional  Insured  under this Lease
Agreement,  such lapse,  cancellation or change shall not be effective as to any
Additional Insured for thirty days (seven days

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -49-

<PAGE>


in the  case of war risk and  allied  perils  coverage)  after  receipt  by such
Additional   Insured  of  written   notice  by  such  insurers  of  such  lapse,
cancellation or change;  provided,  however, that if any notice period specified
                         --------   -------
above is not  reasonably  obtainable,  such policies shall provide for as long a
period of prior  notice  as shall  then be  reasonably  obtainable,  (iv)  shall
provide that in respect of the respective  interests of each Additional  Insured
under  this  Lease  Agreement  in  such  policies  the  insurance  shall  not be
invalidated  by any  action  or  inaction  of  Lessee  or,  in the  case  of any
particular  Additional  Insured,  the action or inaction of any other Additional
Insured and shall insure the respective interests of the Additional Insureds, as
they appear under this Lease Agreement, regardless of any breach or violation of
any warranty,  declaration or condition contained in such policies by Lessee or,
in the case of an  Additional  Insured,  the  breach or  violation  by any other
Additional Insured,  (v) shall be primary without any right of contribution from
any other  insurance  which is carried  by any  Additional  Insured,  (vi) 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, (vii) shall waive any right of the insurers to set-off or
counterclaim  or any other  deduction,  whether by attachment  or otherwise,  in
respect of any  ,liability of any Additional  Insured,  and (viii) shall provide
that (A) in the event of a loss  involving the  Aircraft,  Airframe or an Engine
for which  proceeds  are in excess of  $1,000,000  (or, if the  Aircraft is then
under a Sublease,  in excess of $500,000),  the proceeds in respect of such loss
up to the amount of Stipulated  Loss Value for the Aircraft  shall be payable to
Lessor, it being understood and agreed that in the case of any payment to Lessor
otherwise  than in respect of an Event of Loss,  Lessor  shall,  upon receipt of
evidence  reasonably  satisfactory  to it that the  damage  giving  rise to such
payment  shall have been repaired or that such payment shall then be required to
pay for  repairs  then  being  made,  pay the  amount of such  payment,  and any
interest or income  earned  thereon in  accordance  with  Section 21 hereof,  to
Lessee  or its  order,  and (B) the  entire  amount  of any such  loss for which
proceeds  are $1, 000,  000 (or, if the  Aircraft is then under a Sublease,  are
$500,000  or less or the  amount of any  proceeds  of any such loss in excess of
Stipulated  Loss  Value  for the  Aircraft  shall be paid to Lessee or its order
unless a Lease Event of Default shall have  occurred and be  continuing  and the
insurers have been notified thereof by Lessor.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -50-

<PAGE>

           (i) Insurance Coverage Under Certain Circumstances.  If substantially
               ----------------------------------------------
all of the  Boeing  Model 727  aircraft  in  Lessee's  fleet  shall no longer be
insured on the same fleet policy or policies,  and if subsequent hereto,  Lessee
shall agree to maintain more extensive  insurance on a Boeing Model 727 aircraft
than that required to be maintained  pursuant hereto or shall  self-insure  with
respect  to Boeing  Model  727  aircraft  in  amounts  less  than the  amount of
self-insurance  permitted  pursuant to Section  11(d)  hereof then Lessee  shall
provide to Lessor with respect to the Aircraft the same insurance coverage as is
maintained on such aircraft and may not  self-insure  pursuant to Sections 11(a)
and 11(b) hereof for amounts in excess of the amount of  self-insurance  for any
such aircraft.

           (j) Non-Discrimination  Against the Aircraft in  Insurance.  Notwith-
               ------------------------------------------------------
standing any provisions contained in this Section 11, (i) all insurance required
to be  maintained by Lessee under this Lease shall cover at least the same risks
as that maintained on other aircraft owned,  leased or operated by Lessee of the
same type as the Aircraft,  and (ii) Lessee shall not  discriminate  against the
Aircraft in the placement,  terms and  conditions,  or collection,  of insurance
required to be  maintained  by Lessee under  Section 11 hereof as compared  with
other  aircraft  owned,  leased  or  operated  by Lessee of the same type as the
Aircraft.

     Section 12. Inspection.
                 ----------

     At all reasonable times during  the  Term,  on  three days'  prior  written
notice,  Lessor  and each  Owner  Participant,  or their  respective  authorized
representatives, may inspect the Aircraft and the books and records of Lessee or
any operator  relative  thereto.  No such Person shall have any duty to make any
such inspection or incur any liability or obligation by reason of not making any
such  inspection.  Any costs or expenses  relating to such  inspection  shall be
borne by the Person  making  such  inspection,  unless a Lease  Event of Default
shall have  occurred  and be  continuing,  in which case such costs and expenses
shall be borne by Lessee.

     Section 13. Assignment.
                 ----------

     Lessee will not, without the prior written consent of Lessor, assign any of
its  rights  under  this  Lease.  Subject  to  the  further  provisions  of  the
Participation Agreement, Lessor may assign or convey any of its right, title and

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -51-

<PAGE>


interest in and to this Lease or the Aircraft.  The terms and  provisions of the
Lease  shall be binding  upon and inure to the  benefit of Lessor and Lessee and
their respective permitted successors and assigns.

     Section 14. Events of Default.
                 -----------------

     The following  events shall constitute Lease Events 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 judgement,  decree or
order of any court or any order,  rule or  regulation of any  administrative  or
governmental  body) and each such Lease Event of Default shall  continue so long
as, but only as long as, it shall not have been remedied:

     (a) Lessee shall not have made a payment of Basic Rent or  Stipulated
Loss Value within 10 days after the same shall have become due; or

     (b) Lessee  shall have failed to make a payment of  Supplemental Rent
(other than Stipulated Loss Value) after the same shall have become due and such
failure shall continue for 15 days after the earlier of (i) Lessee's  receipt of
written  demand  therefor or (ix)  knowledge  of such  failure by a  responsible
financial officer of Lessee; or

     (c) Lessee shall fail to carry and maintain on or with respect to the
Aircraft  (or cause to be  carried  and  maintained)  insurance  required  to be
maintained in accordance with the provisions of section 11 hereof; or

     (d) Lessee  shall have failed to perform or observe  (or caused to be
performed and observed) any other material covenant or agreement to be performed
or observed by it hereunder,  and such failure shall  continue  unremedied for a
period of thirty days after written notice thereof by Lessor; provided, however,
                                                              --------  -------
that if Lessee shall have undertaken to cure any such failure which arises under
Section 8.1 hereof,  or under the first sentence of Section 7.1 (c) hereof as it
relates to maintenance, service, repair or overhaul, or under the first sentence
of Section 8.4 hereof and, notwithstanding the reasonable diligence of Lessee in
attempting to cure such  failure,  such failure is  not cured within said thirty
day period but is curable with future due diligence, there shall exist no

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -52-

<PAGE>


Lease  Event of Default  under this  Section 14 so long as Lessee is  proceeding
with due diligence to cure such failure,  but if such failure is still not cured
within 180 days after Lessee shall have received written notice of such failure,
such failure shall  constitute a Lease Event of Default  unless (i) Lessee shall
provide  a  certificate  from  a  responsible  operating  officer,  including  a
statement in reasonable detail of Lessee's program and timetable for curing such
failure indicating (A) that Lessee is proceeding with due diligence to cure such
failure,  (B) that in such officer's  opinion,  such failure can be cured within
one full year after such 180-day period,  and (C) the officer's  estimate of the
costs  (including  direct  internal  costs and  expenses  such as  salaries  but
excluding  indirect costs,  expenses and  allocations  such as overhead) to cure
such failure,  (ii) if the  estimated  costs to cure such failure shall equal or
exceed  $1,000,000,  such  aggregate  amount  shall be placed in a reserve  fund
established by Lessee with an institution approved by Lessor in an account as to
which Lessee has granted a first perfected  security interest for the benefit of
Lessor and applied (in a manner reasonably  approved by Lessor) toward the costs
of curing such failures (and once such failures are cured,  the amount remaining
in the reserve  fund shall be  returned  to Lessee) , and (iii) such  failure is
cured within one full year after such 180-day period; or

     (e) any  representation  or warranty  made by Lessee herein or in any
document or certificate  furnished by Lessee in connection herewith or therewith
or pursuant hereto or thereto shall prove to have been incorrect in any material
respect at the time made; provided, however, such incorrectness shall constitute
                          --------  -------
a default  hereunder only if such  incorrectness  shall  continue  uncured for a
period of  thirty  days  after the  earlier  of (i) the  receipt  by Lessee of a
written   notice  from  Lessor   advising   Lessee  of  the  existence  of  such
incorrectness,  or (ii) actual knowledge of such incorrectness by  a responsible
financial officer of Lessee; or

     (f) Lessee  shall not  be an "air carrier" within  the meaning of the
Federal Aviation Act; or

     (g) subject to the second sentence of Section 7. 1(a) hereof,  Lessee
shall fail to cause the  Aircraft  to be duly  registered  in the name of Lessor
under the

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -53-

<PAGE>


Federal Aviation Act (except to the extent such registration  cannot be effected
because  of  Lessor's  or an Owner.  Participant's  failure  to comply  with the
citizenship or other eligibility requirements for registration of aircraft under
such Act or because  Lessor or an Owner  Participant  shall fail to execute  and
deliver all such documents as Lessee (or any  Sublessee) may reasonably  request
for the purpose of effecting and continuing such registration); or

     (h) the  commencement of an involuntary  case or other  proceeding in
respect of Lessee in an involuntary  case under the federal  bankruptcy laws, as
now  or  hereafter  constituted,  or  any  other  applicable  federal  or  state
bankruptcy,  insolvency or other similar law in the United States or seeking the
appointment   of  a  receiver,   liquidator,   assignee,   custodian,   trustee,
sequestrator (or similar  official) of Lessee or for all or substantially all of
its property,  or seeking the  winding-up or  liquidation of its affairs and the
continuation of any such case or other proceeding  undismissed or unstayed for a
period of 60  consecutive  days or an order for relief  under  Chapter 11 of the
Bankruptcy Code with respect to Lessee as debtor or any other order, judgment or
decree shall be entered in any proceeding by any court of competent jurisdiction
appointing,  without the consent of Lessee, a receiver, trustee or liquidator of
Lessee, or for all or substantially all of its property,  or sequestering of all
or substantially  all of the property of Lessee and any such order,  judgment or
decree or appointment or  sequestration  shall be final or shall remain in force
undismissed, unstayed or unvacated for a period of 60 consecutive days after the
date of entry thereof; or

     (i) the commencement by  Lessee of a voluntary case under the federal
bankruptcy  laws,  as  now  constituted  or  hereafter  amended,  or  any  other
applicable  federal or state bankruptcy,  insolvency or other similar law in the
United  States,  or the  consent  by  Lessee  to the  appointment  of or  taking
possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator
(or other  similar  official) of Lessee or for all or  substantially  all of its
property, or the making by Lessee of any assignment for the benefit of creditors
or Lessee shall take any corporate action to authorize any of the foregoing;

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -54-


<PAGE>


provided,  however, that,  notwithstanding anything to the contrary contained in
--------   -------
this  Section  14, any  failure of Lessee to  perform or observe  any  covenant,
condition,  agreement  or any error in a  representation  or warranty  shall not
constitute a Lease Event of Default if such failure or error is caused solely by
reason  of any  event  that  constitutes  an Event of Loss so long as  Lessee is
continuing  to  comply,  and does  comply,  with all of the terms of  Section 10
hereof.

     Section 15. Remedies.
                 --------

     Upon  the  occurrence  of any  Lease  Event  of  Default  and  at any  time
thereafter so long as the same shall be  continuing,  Lessor may, at its option,
declare  by  written  notice to Lessee  this  Lease  Agreement  to be in default
(provided  that no such  declaration  shall be a condition  to any suit  against
Lessee for  specific  performance  of a  defaulted  covenant  or for  damages in
respect of such default upon such occurrence or at any time thereafter);  and at
any time  thereafter,  so long as any such Lease Event of Default shall not have
been remedied, Lessor may do one or more of the following with respect to all or
any part of the  Airframe  and any or all of the  Engines  as Lessor in its sole
discretion  shall elect,  to the extent  permitted by, and subject to compliance
with any mandatory requirements of, applicable law then in effect:

     (a) upon the written demand of Lessor and at Lessee's  expense, cause
Lessee to return promptly, and Lessee shall return promptly, the Airframe or any
Engine as  Lessor  may so  demand  to  Lessor  or its  order in the  manner  and
condition  required by, and otherwise in accordance  with all the provisions of,
Section 5 hereof as if such Airframe or Engine were being returned at the end of
the Term, or Lessor, at its option, may enter upon the premises where all or any
part of the Airframe or any Engine is located and take  immediate  possession of
and  remove the same by summary  proceedings  or  otherwise  (and,  at  Lessor's
option,  store the same at Lessee's  premises until disposal thereof by Lessor),
all  without  liability  accruing  to Lessor  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;

     (b) sell the  Aircraft,  Airframe  or any Engine at public or private
sale, as Lessor may  determine,  or otherwise  dispose of, hold,  use,  operate,
lease to others

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -55-

<PAGE>


or keep  idle the  Aircraft,  Airframe  or any  Engine  as  Lessor,  in its sole
discretion, may determine, all free and clear of any rights of Lessee, except as
hereinafter set forth in this Section 15;

     (c) hold,  keep idle or lease to others the Aircraft, Airframe or any
Engine or any part thereof, as Lessor in its sole discretion may determine, free
and clear of any rights of Lessee and without any duty to account to Lessee with
respect to such action or inaction or for any  proceeds  with  respect  thereto,
except that  Lessee's  obligation to pay Basic Rent with respect to the Aircraft
on Lease Period Dates  subsequent  to the date upon which Lessee shall have been
deprived of use of the Aircraft  pursuant to this Section 15 shall be reduced by
the net proceeds, if any, received by Lessor from leasing the Aircraft, Airframe
or any Engine or any part thereof to any Person other than Lessee;

     (d) whether or not Lessor shall have exercised,  or shall  thereafter
at any time  exercise,  any of its rights under  paragraph (a), (b) or (c) above
with respect to the Aircraft,  Lessor,  by written notice to Lessee specifying a
payment date, may demand that Lessee pay to Lessor, and Lessee shall pay Lessor,
on the payment date so specified,  as  liquidated  damages for loss of a bargain
and not as a penalty (in lieu of the installments of Basic Rent for the Aircraft
due for Lease Periods  commencing after the date specified in such notice) , any
unpaid Basic Rent due on or before Lease Period Dates on or prior to the payment
date so specified plus whichever of the following  amounts  Lessor,  in its sole
discretion,  shall specify in such notice  (together with  interest,  if any, on
such amount at the Past Due Rate from such specified payment date until the date
of actual payment of such amount): (i) an amount equal to the excess, if any, of
the stipulated Loss Value for the Aircraft, computed as of the date specified as
the payment date in such notice,  over the aggregate Fair Market Rental Value of
such Aircraft for the remainder of the Term,  after  discounting  such aggregate
Fair  Market  Rental  Value to  present  value as of the date  specified  as the
payment  date in such  notice at an annual  rate equal to the Past Due Rate;  or
(ii) an amount  equal to the excess,  if any, of the  Stipulated  Loss Value for
such  Aircraft,  computed as of the date  specified  as the payment date in such
notice, over the

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -56-

<PAGE>


Fair Market Sales Value of such Aircraft as of the date specified as the payment
date in such notice;

     (e) in the event Lessor,  pursuant to paragraph (b) above, shall have
sold the Aircraft,  Lessor, in lieu of exercising its rights under paragraph (d)
above with  respect to such  Aircraft,  may,  if it shall so elect,  demand that
Lessee pay Lessor,  and Lessee shall pay to Lessor, on the date of such sale, as
liquidated damages for loss of a bargain and not as a penalty,  any unpaid Basic
Rent with  respect to the  Aircraft due on or prior to such date plus the amount
of any deficiency  between the net proceeds of such sale (after deduction of all
reasonable  costs of  sale)  and the  Stipulated  Loss  Value of such  Aircraft,
computed as of the Stipulated  Loss Value Date on or  immediately  following the
date of  such  sale  together  with  interest,  if any,  on the  amount  of such
deficiency,  at the Past  Due  Rate,  from the date of such  sale to the date of
actual payment of such amount; and/or

     (f) Lessor may  terminate  this Lease  Agreement, and/or may exercise
any other right or remedy which may be available to it under  applicable  law or
proceed by  appropriate  court  action to enforce the terms hereof or to recover
damages for breach hereof.

     In addition,  Lessee shall be liable,  except as otherwise  provided above,
without  duplication of amounts payable  hereunder,  for any and all unpaid Rent
due  hereunder  before,  after or during the  exercise  of any of the  foregoing
remedies  (other than Basic Rent due after the exercise of any of the  foregoing
remedies)  and,  for all  reasonable  legal  fees and other  costs and  expenses
incurred  byLessor and each Owner  Participant in connection  with the return of
the Airframe or any Engine in  accordance  with the terms of Section 5 hereof or
in placing such Airframe or Engine in the condition and  airworthiness  required
by such Section.

     At any sale of the  Aircraft or any part  thereof  pursuant to this Section
15, Lessor or each Owner  Participant  may bid for and purchase  such  property.
Lessor agrees to give Lessee at least 10 days' written  notice of the date fixed
for any public  sale of any  Airframe or Engine or of the date on or after which
will  occur the  execution  of any  contract  providing  for any  private  sale;
provided,  however,  that Lessee may not bid at any such public sale.  Except as
--------   -------
otherwise expressly

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -57-

<PAGE>


provided  above,  no remedy  referred  to in this  Section 15 is  intended to be
exclusive,  but each shall be  cumulative  and in addition  to any other  remedy
referred to above or otherwise  available to Lessor at law or in equity; and the
exercise or beginning of exercise by Lessor of any one or more of such  remedies
shall not preclude the simultaneous or later exercise by Lessor of any or all of
such other remedies.  No waiver by Lessor of any Lease Event of Default shall in
any way be, or be  construed to be, a waiver of any future or  subsequent  Lease
Event of Default.  To the extent  permitted by  applicable  law,  Lessee  hereby
waives any rights now or hereafter  conferred by statute or otherwise  which may
require Lessor to sell,  lease,  or otherwise use the Aircraft,  Airframe or any
Engine or any part  thereof in  mitigation  of Lessor's  damages as set forth in
this Section 15 or which may  otherwise  limit or modify any of Lessor's  rights
and remedies in this Section 15.

     Section 16. Notices.
                 -------

     All notices  required  under the terms and  provisions  hereof  shall be in
writing and shall be given by registered mail, telecopy,  telex, teletype or any
other customary means of written communication, addressed:

     If  to  Lessee,  at  2007  Corporate  Avenue,  Memphis,   Tennessee  38132,
Attention: Vice President and Treasurer,  Telephone: (901) 395-4533, Telecopier:
(910)  395-3910,  or at such  other  address  as Lessee  shall from time to time
designate in writing;

     If to Lessor,  at 615 Battery  Street,  San  Francisco,  California  94111,
Attention:  President, with copies to each Owner Participant,  c/o United States
Leasing  International,  Inc., 615 Battery  Street,  San  Francisco,  California
94111, Attention: Executive Vice President,  Transportation Financing, Telephone
(415) 627-9300, Telecopier (415) 627-9240, or at such other address as Lessor or
such other Person shall from time to time  designate in writing.  The  effective
date of any such notice shall be, if sent by mail,  five days after  mailing or,
if sent by telex,  telecopy  or  teletype,  the date when such notice is sent or
dispatched, and otherwise the date on which it is received by the addressee.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -58-


<PAGE>


      Section 17. Net Lease; Lessee's Obligations; No Set-Off,Counterclaim, Etc.
                  --------------------------------------------------------------

     This is a net lease.  Lessee's obligation to pay all Rent payable hereunder
shall  be  absolute  and   unconditional  and  shall  not  be  affected  by  any
circumstance,  including  without  limitation:  (a)  any  setoff,  counterclaim,
recoupment, defense or other right which Lessee may have against Lessor; (b) any
defect in the title, airworthiness,  condition, design, operation or fitness for
use of, or any damage to or loss or  destruction  of, the Aircraft,  Airframe or
any Engine, or any interruption or cessation in the use or possession thereof by
Lessee for any reason whatsoever; (c) any insolvency, bankruptcy, reorganization
or similar proceedings by or against Lessee or any other Person; (d) any change,
waiver,  extension,  indulgence  or other  action or  omission in respect of any
obligation  or liability  of Lessee or Lessor;  (e) any claim that Lessee has or
might have against any Person;  or (f) any  invalidity  or  unenforceability  or
disaffirmance of this Lease or any provision hereof.

     If for any reason  whatsoever this Lease shall be terminated in whole or in
part by operation of law or otherwise  except as specifically  provided  herein,
Lessee  nonetheless  agrees  to pay an  amount  equal  to each  Basic  Rent  and
Supplemental  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.  All Rent payable by Lessee shall be paid without notice or
demand  (except  as  otherwise   expressly   provided)  and  without  abatement,
suspension,  deferment,  deduction,  diminution  or  proration  by reason of any
circumstance  or occurrence  whatsoever.  Lessee  hereby  waives,  to the extent
permitted by applicable  law, any and all rights which it may now have or  which
at any time  hereafter  may be conferred  upon it, by statute or  otherwise,  to
terminate,  cancel,  quit or surrender this Lease or any part hereof,  or to any
abatement,  suppression,  deferment,  diminution, reduction or proration of Rent
except in accordance with the express terms hereof. Each payment of Rent made by
Lessee  shall be final as to Lessor and Lessee.  Lessee will not seek to recover
all or any part of any such payment of Rent for any reason whatsoever.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -59-

<PAGE>


     Section 18. Covenants of Lessee
                 -------------------

     (a) Certain  Assurances.  Lessee shall do,  execute,  acknowledge and
         -------------------
deliver  or cause to be done,  executed,  acknowledged  and  delivered  all such
further acts,  conveyances and assurances as Lessor shall reasonably request for
accomplishing  the  purposes of this Lease.  Lessee shall also do or cause to be
done,  at its own  expense,  any and all acts and things  which may be  required
under the terms of any law, rule,  regulation,  agreement,  treaty,  convention,
pact or by any  practice,  custom,  or understanding  recognized  as having wide
application or control involving any jurisdiction in which the Aircraft is being
operated,  or any and all other acts and  things  which  Lessor  may  reasonably
request and which are  necessary or advisable to perfect and preserve the rights
of Lessor in and to the Aircraft within any such jurisdiction.

     (b) Filing and Recordation.  Lessee will cause this Lease  in respect
         ----------------------
of the  Aircraft  to be duly  and  timely  filed  and  recorded,  or  filed  for
recordation,  to the  extent  permitted  under  the Act or  required  under  any
applicable law.

     (c) Existence.  Lessee  will  preserve  and  maintain  its  corporate
         ---------
existence  and such of its rights,  privileges,  licenses and  franchises  where
failure to maintain  such rights and  privileges  or obtain  such  licensing  or
qualification would have a material adverse effect upon Lessee.

     Section 19. Right To Perform for Lessee.
                 ---------------------------

     If Lessee fails to make any payment  required to be made by it hereunder or
fails to perform or comply with any of its agreements  contained herein,  Lessor
may (but shall not be obligated  to) make such payment or perform or comply with
such agreement, and the amount of such payment and the amount of the expenses of
Lessor  incurred  in  connection  with such  payment  or the  performance  of or
compliance  with such  agreement,  as the case may be,  together  with  interest
thereon at the  Overdue  Rate,  shall be deemed  Supplemental  Rent,  payable by
Lessee upon demand.  No such payment,  performance or compliance shall be deemed
to cure any  default of Lessee  hereunder  or  otherwise  relieve  Lessee of its
obligations with respect thereto.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -60-

<PAGE>


     Section 20. Miscellaneous.
                 -------------

     Any  provision of this Lease 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.  The  prevailing  party in any action to enforce its rights
hereunder shall be entitled to recover from the  nonprevailing  party reasonable
attorneys  fees and costs.  No term or  provision  of this Lease may be changed,
waived,  discharged or terminated  orally,  but only by an instrument in writing
signed by the  party  against  which  the  enforcement  of the  change,  waiver,
discharge or termination is sought.

     The Lessee  irrevocably  agrees,  by execution  and delivery of this Lease,
that any legal action or proceeding  brought  against the Lessee with respect to
this Lease may be brought and  determined  in the Supreme  Court of the State of
New York,  New York  County,  or in the  United  States  District  Court for the
Southern  District of New York, and the Lessee hereby  irrevocably  accepts with
regard to any such  action or  proceeding,  for  itself  and in  respect  of its
properties, generally and unconditionally,  the nonexclusive jurisdiction of the
aforesaid  courts.  The Lessee  further  irrevocably  consents to the service of
process out of any of the aforementioned courts in any such action or proceeding
by the mailing of copies thereof by registered airmail,  postage prepaid, to the
Lessee at its  address  set forth in  Section 16 hereof.  Nothing  herein  shall
affect the right of Lessor to serve process in any other manner permitted by law
or to commence legal  proceedings or otherwise proceed against the Lessee in any
other jurisdiction in which the Lessee may be subject to suit.

     This Lease shall constitute an agreement of lease, and nothing herein shall
be construed  as  conveying to Lessee any right,  title or interest in or to the
Aircraft,  Airframe  or any Engine  except as a lessee  only.  The  section  and
paragraph  headings in this Lease and the table of contents are for  convenience
of reference only and shall not modify, define, expand or limit any of the terms
or provisions  hereof and all  references  herein to numbered  sections,  unless
otherwise  indicated,  are to sections of this Lease.  This Lease has been,  and
each Lease  Supplement and amendment  hereto is intended to be, delivered in the
State of New York and shall in all re-

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA

                                      -61-


<PAGE>


spects be governed by, and construed in accordance  with,  the laws of the State
of New York applicable to contracts made in such State by residents  thereof and
as  if  performed   entirely  within  such  State,   including  all  matters  of
construction, validity and performance. This Lease and each Lease Supplement and
amendment hereto may be executed in several counterparts, each of which shall be
deemed an original,  and all such counterparts shall constitute one and the same
instrument.

     Section  21.  Financing.  After the  Delivery  Date (or,  in the case of an
                   ---------
assignment by Airlease,  Ltd.  ("Airlease")  in favor of United  States  Leasing
International,  Inc.  ("USL"),  at any time),  and  subject  to the  immediately
succeeding  proviso,  an Owner  Participant  (or the Owner Trustee acting at the
direction  of an Owner  Participant)  may,  upon not less than  thirty (30) days
prior written notice from an owner  Participant to the Lessee,  assign,  for the
purpose of securing  debt  obligations,  all or any part of its  interest in the
Aircraft or in the Trust Estate to any  lender(s)  and/or an indenture  trustee,
acting  on behalf of one or more  lenders,  and the  Lessee  hereby  agrees,  in
connection with any such assignment or contemplated  assignment,  to execute and
deliver a consent and agreement  relating  thereto  containing,  in the Lessee's
reasonable  judgment,  customary  covenants,   representation,   warranties  and
indemnities  and all such other documents and  instruments  (including,  without
limitation, opinions of counsel and other ancillary documents), and to cooperate
generally  and in such  other  ways,  as the owner  Participant  may  reasonably
request;  provided,  that:  (a) such  lender(s) and such  indenture  trustee are
          --------
reasonably  acceptable  to the  Lessee  (it being  understood  that USL shall be
deemed to be  acceptable  to Lessee);  (b) such  financing  documents  include a
covenant by such lender (s) and indenture trustee, if any, agreeing that as long
as no Event of Default shall have occurred and be continuing  the Lessee's quiet
enjoyment,   operation,  possession  and  use  of  the  Aircraft  shall  not  be
interrupted  by such lender (s) or indenture  trustee or by any Person  claiming
through or under such  lender(s) or indenture  trustee;  (c) no such  assignment
shall  materially  impair the rights and benefits,  or  materially  increase the
burdens or obligations,  of the Lessee under the Operative Documents (all in the
Lessee's  reasonable  judgment);  and (d) all  out-of-pocket  costs and expenses
(including  reasonable  legal  fees and  expenses)  incurred  by the  Lessee  in
connection with such assignment shall be reimbursed by the Owner-Participant.

                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -62-

<PAGE>


     Section 22. Section 1110 Compliance.  Notwithstanding  any provision herein
                 -----------------------
to the contrary, it is understood and agreed between the parties hereto that the
transactions  contemplated by this Lease are expressly  intended to be, shall be
and should be construed so as to be,  entitled to the full benefits of 11 U.S.C.
Section 1110.





























                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


                                      -63-

<PAGE>


     IN WITNESS WHEREOF,  the parties hereto have caused this Lease Agreement to
be duly executed by their  respective  officers  thereunto duly authorized as of
the day and year first above written.

                                FEDERAL EXPRESS CORPORATION
                                  Lessee

                                By: /s/ ROBERT D. HENNING
                                  -----------------------------------
                                  Robert D. Henning
                                  Managing Director, Aircraft
                                  Financing and Assistant Secretary

                                TRUST COMPANY FOR USL, INC., not
                                  in its individual capacity,
                                  except as expressly provided
                                  herein, but solely as Owner
                                  Trustee,

                                Owner Trustee

                                By /s/ STANLEY E. GUTMAN
                                  ----------------------------------
                                  Name: Stanley E. Gutman
                                  Title: Vice President











                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA





<PAGE>


                                                                      SCHEDULE 1
                                                                      ----------

                              Basic Rent Schedule
                              -------------------

Lease Period Date                          Basic Rent Payment
-----------------                          ------------------

April 21, 1994                                 $710,000
October 21, 1994                                710,000
April 21, 1995                                  710,000
October 21, 1995                                710,000
April 21, 1996                                  710,000
October 21, 1996                                710,000
April 21, 1997                                  710,000
October 21, 1997                                710,000
April 21, 1998                                  710,000
October 21, 1998                                710,000
April 21, 1999                                  710,000
October 21, 1999                                710,000
April 21, 2000                                  710,000
October 21, 2000                                710,000
April 21, 2001                                  710,000
October 21, 2001                                710,000
April 21, 2002                                  710,000
October 21, 2002                                710,000
April 21, 2003                                  710,000
October 21, 2003                                710,000
April 21, 2004                                  710,000
October 21, 2004                                710,000
April 21, 2005                                  710,000
October 21, 2005                                710,000
April 21,2006                                   710,000





<PAGE>




                                                                       EXHIBIT A
                                                                       ---------

                                LEASE SUPPLEMENT

     THIS LEASE SUPPLEMENT, dated April _____, 1993, between ___________________
_____________________ ,  a _____________________________________  "Lessor"), and
FEDERAL EXPRESS CORPORATION ("Lessee").

     Lessor  and  Lessee  have  heretofore   entered  into  that  certain  Lease
Agreement,  dated as of April ______,  1993 (as at any  time  amended,  modified
or  supplemented,  herein called the "Lease" and the terms defined therein being
herein used with the same  meanings) , which Lease provides in section 2 for the
execution of a Lease Supplement substantially in the form hereof for the purpose
of  leasing  the  Aircraft  under the Lease as and when  delivered  by Lessor to
Lessee in accordance  with the terms  thereof.  The Lease  relates,  among other
matters,  to the Airframe and Engines described below, and this Lease Supplement
is  attached  to  a  counterpart  of  the  Lease  for  purposes  of  filing  and
recordation.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  other  good and
sufficient  consideration,  and  pursuant to Section 2 of the Lease,  Lessor and
Lessee hereby agree as follows:

     1. Lessor hereby  delivers and leases to Lessee,  and Lessee hereby accepts
and leases from Lessor, under the Lease, as herein supplemented:

     The following described Boeing 727-2D4 aircraft (the "Delivered  Aircraft")
which Delivered Aircraft as of the date hereof consists of the following:

     Airframe:  FAA Registration Number N _____________ ,  Manufacturer's Serial
 No. __________ and manufactured in _____________; and

     Engines:   Three Pratt & Whitney JT8D-15A engines installed thereon bearing
Engine Manufacturer's Serial Numbers __________, ___________ and ____________.

Each of the Engines described above has 750 or more rated takeoff  horsepower or
the equivalent of such horsepower.


<PAGE>




                                                                       EXHIBIT A
                                                                          Page 2


     2. The Delivery Date of the  Delivered  Aircraft and Engines is the date of
this Lease Supplement set forth in the opening paragraph hereof.

     3. Lessee hereby  confirms to Lessor that Lessee has accepted the Delivered
Aircraft and Engines for all  purposes  hereof and of the Lease,  including  its
being airworthy,  in accordance with  specifications,  in good working order and
repair and without  defect in condition,  design,  operation or fitness for use,
whether or not discoverable by Lessee as of the date hereof.

     4. All the provisions of the Lease are hereby  incorporated by reference in
this Lease Supplement,  on and as of the date of this Lease  Supplement,  to the
same extent as if fully set forth herein.

     5. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN AND SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE  TO  CONTRACTS  MADE IN SUCH  STATE BY  RESIDENTS  THEREOF  AND TO BE
PERFORMED  ENTIRELY  WITHIN SUCH STATE,  INCLUDING ALL MATTERS OF  CONSTRUCTION,
VALIDITY AND PERFORMANCE.

     6. This Lease  Supplement 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>


                                                                       EXHIBIT A
                                                                          Page 3


     IN WITNESS WHEREOF,  Lessor and Lessee have caused this Lease Supplement to
be duly executed and delivered as of the date and year first above written.

                                TRUST COMPANY FOR USL, INC.
                                  as Owner Trustee, Lessor


                                By___________________________
                                  Title:


                                FEDERAL EXPRESS CORPORATION, Lessee


                                By___________________________
                                  Title









<PAGE>


                                                                       EXHIBIT B
                                                                       ---------

                           RECEIPT FOR LEASE AIRCRAFT
                           --------------------------

Date: ________________________________________

Time: ________________________________________

Place: _______________________________________

Received from ________________________________________________________________,

pursuant to the Lease Agreement between ______________________________________

and _________________________________________, as Owner Trustee, dated as of

______________________, the following:

One (1) Boeing 727-2D4 Aircraft

Federal Aviation Administration Registry No. N___________

Manufacturer's Serial No._____________

Exhibit 1, "Inventory of Aircraft and Engine Records" provided at Delivery.

Exhibit 2, "List of Open Discrepancies" at Delivery and Acceptance of the

Aircraft.

The  undersigned  is  authorized  by  Lessee  to  accept  delivery  of the above

designated aircraft pursuant to the aforesaid Agreement.


                                FEDERAL EXPRESS CORPORATION



                                By____________________________
                                  Title:




<PAGE>



                                                                       EXHIBIT C

                             STIPULATED LOSS VALUES


Stipulated Loss Value Date                  Stipulated Loss Value
--------------------------                  ---------------------

October 21, 1993                               $14,601,000.00
April 21, 1994                                  14,313,000.00
October 21, 1994                                13,999,000.00
April 21, 1995                                  13,663,000.00
October 21, 1995                                13,305,000.00
April 21, 1996                                  12,927,000.00
October 21, 1996                                12,530,000.00
April 21, 1997                                  12,115,000.00
October 21, 1997                                11,687,000.00
April 21, 1998                                  11,246,000.00
October 21, 1998                                10,793,000.00
April 21, 1999                                  10,328,000.00
October 21, 1999                                 9,851,000.00
April 21, 2000                                   9,362,000.00
October 21, 2000                                 8,863,000.00
April 21, 2001                                   8,353,000.00
October 21, 2001                                 7,835,000.00
April 21, 2002                                   7,309,000.00
October 21, 2002                                 6,775,000.00
April 21, 2003                                   6,233,000.00
October 21, 2003                                 5,683,000.00
April 21, 2004                                   5,125,000.00
October 21, 2004                                 4,560,000.00
April 21, 2005                                   3,987,000.00
October 21, 2005                                 3,407,000.00
April 21, 2006                                   2,819,000.00













Prior  to  the  Induction  Date  (as  defined  in  the  Modification  Contract),
Stipulated Loss Value shall be $6,500,000.


<PAGE>



                                                                       EXHIBIT E
                                                                       ---------

                       SCHEDULE OF REGISTRATION COUNTRIES
                       ----------------------------------

Argentina                                       Japan

Australia                                       Luxembourg

Austria                                         Malaysia

Bahamas                                         Mexico

Belgium                                         Netherlands

Brazil                                          New Zealand

Canada                                          Norway

Chile                                           People's Republic of China

Denmark                                         Philippines

Fiji                                            Portugal

Finland                                         Singapore

France                                          Spain

Germany                                         Sweden

Greece                                          Switzerland

Hong Kong                                       Thailand

Iceland                                         Turkey

India                                           United Kingdom

Ireland                                         Venezuela

Italy



<PAGE>




                                                                       EXHIBIT D
                                                                       ---------


                        SCHEDULE OF COUNTRIES AUTHORIZED
                      FOR DOMICILE OF PERMITTED SUBLESSEES
                      ------------------------------------

Argentina                                       Japan

Australia                                       Luxembourg

Austria                                         Malaysia

Bahamas                                         Mexico

Belgium                                         Netherlands

Brazil                                          New Zealand

Canada                                          Norway

Chile                                           People's Republic of China

Denmark                                         Philippines

Fiji                                            Portugal

Finland                                         Singapore

France                                          Spain

Germany                                         Sweden

Greece                                          Switzerland

Hong Kong                                       Thailand

Iceland                                         Turkey

India                                           United Kingdom

Ireland                                         Venezuela

Italy



<PAGE>




                                                                PAPER N0. 07


                             LEASE SUPPLEMENT NO. 1

     THIS LEASE  SUPPLEMENT  NO. 1, dated April 22, 1993,  between Trust Company
for  USL,  Inc.,  an  Illinois  corporation  ("Lessor"),   and  FEDERAL  EXPRESS
CORPORATION ("Lessee").

     Lessor  and  Lessee  have  heretofore   entered  into  that  certain  Lease
Agreement,  dated as of April  15,  1993  (as at any time  amended, modified  or
supplemented,  herein  called the "Lease" and the terms  defined  therein  being
herein used with the same  meanings),  which Lease provides in Section 2 for the
execution of a Lease Supplement substantially in the form hereof for the purpose
of  leasing  the  Aircraft  under the Lease as and when  delivered  by Lessor to
Lessee in accordance  with the terms  thereof.  The Lease  relates,  among other
matters,  to the Airframe and Engines described below, and this Lease Supplement
is  attached  to  a  counterpart  of  the  Lease  for  purposes  of  filing  and
recordation.

     NOW,  THEREFORE,  in  consideration  of the  premises  and  other  good and
sufficient  consideration,  and  pursuant to Section 2 of the Lease,  Lessor and
Lessee hereby agree as follows:

     1. Lessor hereby  delivers and leases to Lessee,  and Lessee hereby accepts
and leases from Lessor, under the Lease, as herein supplemented:

     The following described Boeing 727-2D4 aircraft (the "Delivered  Aircraft")
which Delivered Aircraft as of the date hereof consists of the following:

     Airframe:  FAA Registration Number N362PA,  Manufacturer's Serial No. 21850
and manufactured in 1979; and

     Engines:  Three Pratt & Whitney JTSD-15A engines  installed thereon bearing
Engine Manufacturer's Serial Numbers 700-267, 700-360 and 708-902.

Each of the Engines described above has 750 or more rated takeoff  horsepower or
the equivalent of such horsepower.

     2. The Delivery Date of the  Delivered  Aircraft and Engines is the date of
this Lease Supplement set forth in the opening paragraph hereof.

     3. Lessee hereby  confirms to Lessor that Lessee has accepted the Delivered
Aircraft and Engines for all


<PAGE>


Purposes hereof and of the Lease,  including its being airworthy,  in accordance
with  specifications,  in good  working  order and repair and without  defect in
condition,  design, operation or fitness for use, whether or not discoverable by
Lessee as of the date hereof.

     4. All the provisions of the Lease are hereby  incorporated by reference in
this Lease Supplement,  on and as of the date of this Lease  Supplement,  to the
same extent as if fully set forth herein.

     5. THIS LEASE SUPPLEMENT IS BEING DELIVERED IN AND SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE  TO  CONTRACTS  MADE IN SUCH  STATE BY  RESIDENTS  THEREOF  AND TO BE
PERFORMED  ENTIRELY  WITHIN SUCH STATE,  INCLUDING ALL MATTERS OF  CONSTRUCTION,
VALIDITY AND PERFORMANCE.

     6. This Lease  Supplement 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.













                                      -2-

<PAGE>


     IN WITNESS WHEREOF, the parties hereto have caused this Lease Supplement to
be duly executed by their  respective  officers  thereunto duly authorized as of
the day and year first above written.

                                FEDERAL EXPRESS CORPORATION,
                                  Lessee

                                By /s/ ROBERT D. HENNING
                                  -----------------------------------
                                   Robert D. Henning
                                   Managing Director, Aircraft
                                   Financing


                                TRUST COMPANY FOR USL,  INC.,  not
                                  in its  individual  capacity,
                                  except as expressly  provided
                                  herein,  but solely as Owner
                                  Trustee,

                                Owner Trustee

                                By /s/ STANLEY E. GUTMAN
                                  -----------------------------------
                                  Name: Stanley E Gutman
                                  Title: Vice President




                                                                 Federal Express
                                                                  Boeing 727-2D4
                                                                          N362PA


<PAGE>


                                                                    PAPER NO. 42
                                                 (CERTIFIED COPY TO BE RETURNED)
ATTACHMENT NO. 1
----------------

                                                                   Airlease Ltd.
                                                                          N288FE



                             LEASE SUPPLEMENT N0. 2


     THIS LEASE  SUPPLEMENT  NO. 2, dated as of October 19, 1994  between  TRUST
COMPANY FOR USL, INC., as Trustee,  the Trustee, in its capacity as such Trustee
being herein called Lessor (under a Trust Agreement  (N362) dated as of July 27,
1993  among  AIRLEASE  LTD.,  A  CALIFORNIA   LIMITED   PARTNERSHIP,   as  Owner
Participant,  Trust Company for USL, Inc., as Trustee, and United States Leasing
International, Inc., as Agent), and FEDERAL EXPRESS CORPORATION ("Lessee").

                               W I T N E S S E T H :
                               - - - - - - - - - -

     WHEREAS,  the  Lease  Agreement  dated as of April  15,  1993 and the Lease
Supplement No. 1 dated April 22, 1993 covering one (1) Hoeing  727-2D4  aircraft
(Serial Number 21850) bearing U.S. Registration Number N288FE (formerly N362PA),
were recorded as one instrument by the Federal Aviation  Administration  on June
7, 1993 and assigned Conveyance No. JJ08133.

     WHEREAS,  the Trust  Termination  and Assignment  and Assumption  Agreement
(N362PA)  dated  as of July  27,  1993  was  recorded  by the  Federal  Aviation
Administration on August 5, 1993 and assigned Conveyance No. 5090852.

     WHEREAS,   the  Separation  of  Joint  Interests  in  Leased  Aircraft  and
Assignment and Assumption  Agreement dated as of September 29, 1993 was recorded
by  the  Federal  Aviation  Administration  on  October  6,  1993  and  assigned
Conveyance No RR006494.

     WHEREAS, the Lessor and the Lessee desire to amend and supplement the Lease
for the purpose of  adjusting  the dollar  amount of the Basic Rent set forth in
Schedule 1 of the Lease

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

     SECTION 1.  Definitions.   Unless the context shall otherwise require,  the
                 -----------
capitalized  terms used  herein  shall  have the  respective  meanings  assigned
thereto in the Lease

                                                            RECORDED
                                                 Federal Aviation Administration
                                                Date  11-22-94       Time 6:18AM
                                                     ---------------      ------
                                                Conveyance Number  JJ12723
                                                                 ---------------
                                                By /s/ JEAN VAYLAND
                                                   -----------------------------


<PAGE>

                                                                     SCHEDULE IA

                              Basic Rent Schedule
                              -------------------

Lease Period Date                               Basic Rent Payment
-----------------                               ------------------


April 21, 1994                                  $710,000.00
October 21, 1994                                 600,375.22
April 21, 1995                                   655,187.61
October 21, 1995                                 655,187.61
April 21, 1996                                   655,187.61
October 21, 1996                                 655,187.61
April 21, 1997                                   655,187.61
October 21, 1997                                 655,187.61
April 21, 1998                                   655,187.61
October 21, 1998                                 655,187.61
April 21, 1999                                   655,187.61
October 21, 1999                                 655,187.61
April 21, 2000                                   655,187.61
October 21, 2000                                 655,187.61
April 21, 2001                                   655,187.61
October 21, 2001                                 655,187.61
April 21, 2002                                   655,187.61
October 21, 2002                                 655,187.61
April 21, 2003                                   655,187.61
October 21, 2003                                 655,187.61
April 21, 2004                                   655,187.61
October 21, 2004                                 655,187.61
April 21, 2005                                   655,187.61
October 21, 2005                                 655,187.61
April 21, 2006                                   655,187.61







[Federal Express Corporation]
[N288FE - Schedule 1 to Lease Supplement No. 2]