SECURITY AGREEMENT


     This SECURITY AGREEMENT dated as of January 18, 1999, is made
by and between VANGUARD AIRLINES, INC., a Delaware Corporation
having its principal place of business at 533 Mexico City Avenue,
Kansas City, Missouri, 64153 ("Grantor"), in favor of J. F. SHEA
CO., INC., a Nevada Corporation ("Shea") and THE HAMBRECHT 1980
REVOCABLE TRUST (the "Hambrecht Trust") (individually, a "Lender"
and, collectively, the "Lenders").

                            RECITALS
     A.   Corporation has requested that the Lenders arrange for
the issuance of letters of credit to be issued in favor of
Michigan National Bank for the account of the Corporation in the
aggregate amount of Four Million Dollars ($4,000,000) (the "Letter
of Credit.")

     B.   Substantially concurrently herewith Grantor and Lenders
have entered into that certain Reimbursement Agreement dated as of
January 18, 1999 (as the same may from time to time be amended,
modified, supplemented or restated, the "Reimbursement Agreement")
whereby Grantor has agreed to reimburse Lenders in full for any an
all drawings made under the Letter of Credit.

     C.   Lenders are willing to arrange for the issuance of the
Letters of Credit, but only upon the condition, among others, that
Grantor shall have executed and delivered to Lenders this Security
Agreement in order to secure Grantor's obligations to Lenders
under and in connection with the Transaction Documents (as defined
herein).


                            AGREEMENT

     NOW, THEREFORE, in order to induce Lenders to arrange the
Letters of Credit, enter into the Reimbursement Agreement and for
other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, and intending to be legally bound,
Grantor hereby represents, warrants, covenants and agrees as
follows:

     1.1 DEFINED TERMS.  Unless otherwise defined herein the
following terms shall have the following meanings (such meanings
being equally applicable to both the singular and plural forms of
the terms defined):

     "ACCOUNTS"  means (i) any and all accounts or other
distributions acquired by, owned by, owed to or payable to Grantor
in any manner, whether now existing or hereafter acquired, in
connection with the MNB Merchant Agreement and (ii) all rights to
payments (including, without limitation actual collections held by
MNB Bank, in connection with any Credit Card transactions), from
Cardholders or card issuers, whether now existing or hereafter
acquired, IN THE AMOUNT OF AND AS A RESULT of such CHANGES, and,
which with respect to each case (i) and (ii) above, shall <PAGE>
include, without limitation, accounts receivable, book debts and
other forms of obligations now owned or hereafter received or
acquired by or belonging or owing to Grantor (including, without
limitation, under any trade name, style or division thereof)
WHETHER ARISING OUT OF GOODS SOLD or services rendered by Grantor
or from any other transaction, whether or not the same involves
the sale of goods or services by Grantor (including, without
limitation, any such obligation which may be characterized as an
account or contract right under the UCC) and all of GRANTOR'S
RIGHTS IN, TO AND UNDER ALL PURCHASE orders or receipts now owned
or hereafter acquired by it for goods or services, and all of
Grantor's rights to any goods represented by any of the foregoing
(including, without limitation, unpaid seller's rights of
rescission, replevin, reclamation and stoppage in transit and
rights to returned, reclaimed or repossessed goods), and all
monies due or to become due to Grantor under all purchase orders
and contracts or other agreements for the sale of goods or the
performance of services or both by Grantor (whether or not yet
earned by performance on the part of Grantor or in connection with
any other transaction), now in existence or hereafter occurring,
including, without limitation, the right to receive the proceeds
of said purchase orders and contracts, and all Collateral and
guarantees of any kind given by any Person with respect to any of
the foregoing;

     "ACCOUNT DEBTOR" means any "account debtor," as such term is
defined in Section 9-105(1)(a) of the UCC, including, without
limitation, all Cardholders.

     "ACT OF BANKRUPTCY" shall have the meaning assigned to such
term in Section 1.1 of the Reimbursement Agreement.

     "CREDIT CARD"  shall have the meaning assigned to such term
in Section 1 of the MNB Merchant Agreement.

     "CARDHOLDERS" shall have the meaning assigned to such term in
Section A of the MNB Merchant Agreement, whichever is applicable.

     "CHATTEL PAPER" means any "chattel paper," as such term is
defined in Section 9-105(1)(b) of the UCC, now owned or hereafter
acquired by Grantor.

     "COLLATERAL"  shall have the meaning assigned to such term in
SECTION 2.1 of this Agreement.

     "CONTRACTS"   shall mean all contracts, undertakings,
franchise agreements or other agreements in or under which Grantor
may now or hereafter have any right, title or interest with
respect to an Account, any agreement relating to the terms of
payment or the terms of performance with respect to an Account,
including, without limitation, the MNB Merchant Agreement.

     "DEPOSITS" shall mean cash, Instruments, Documents or Chattel
Paper or any other securities, including, without limitation, the
Letters of Credit, now existing or hereafter received, acquired or
arising, deposited by or on behalf of Grantor with MNB Bank, all
additions thereto from time to time and all monies, securities
investments and instruments purchase therewith and <PAGE>
all interest, profits and/or dividends accruing thereon and
proceeds thereof, all of the foregoing held by MNB Bank in an
account or otherwise, whether or not within MNB Bank sole dominion
or control, relating to the payment and/or performance by Grantor
of its obligations to Bank under or in connection with the MNB
Merchant Agreement.

     "DOCUMENTS" shall mean any "documents," as such term is
defined in Section 9-105(1)(f) of the UCC, now owned or hereafter
acquired by Grantor.

     "EVENT OF DEFAULT" means any of the following:

          (A)  Failure by Grantor to pay, distribute or otherwise
perform the Secured Obligations;

          (B)  Grantor's failure in any material respect to
perform or observe any term, covenant or agreement contained
herein or in any of the Transaction Documents;

          (C)  Any warranty, representation or statement made or
furnished to Lenders by or on behalf of Grantor under this
Security Agreement or any Transaction Document is or proves false
or misleading in any material respect either now or at the time
made;

          (D)  An Act of Bankruptcy; or

     (E)  The occurrence of (or with the giving of notice, lapse
of time, determination of materiality or the fulfillment of any
other applicable condition or any combination of the foregoing,
might constitute) a default under, or the termination of, the MNB
Merchant Agreement.

     "GROSS EXPOSURE" shall mean the Gross Exposure, as such term
is defined in Section C of Amendment to the MNB Merchant Agreement
by and between Grantor and MNB, dated as of December 31, 1996.

     "INSTRUMENTS" means any "instrument," as such term is defined
in Section 9-105(1)(i) of the UCC, now owned or hereafter acquired
by Grantor, including, without limitation, all notes, certificated
securities, and other evidences of indebtedness, other than
instruments that constitute, or are a part of a group of writings
that constitute, Chattel Paper.

     "LIEN" means any mortgage, deed of trust, pledge,
hypothecation, assignment for security, security interest,
encumbrance, levy, lien or charge of any kind, whether voluntarily
incurred or arising by operation of law or otherwise, against any
property of Grantor, including any agreement to grant any of the
foregoing, any conditional sale or other title retention
agreement, any lease in the nature of a security interest, and the
filing of or agreement to file or deliver any financing statement
(other than a precautionary financing statement with respect to a
lease that is not in the nature of a security interest) under the
UCC or comparable law of any jurisdiction.
<PAGE>

     "MNB BANK"  means Michigan National Bank, a national banking
association, with its principal office located at 77 Monroe
Center, Grand Rapids, MI 49503.

     "MNB MERCHANT AGREEMENT"  means an Agreement between Michigan
National Bank and Vanguard Airlines, Inc., that may be entered
into with respect to credit card processing services, as the same
may from time to time be amended, modified or restated.

     "PERMITTED LIEN" means (a) any lien in favor of Hambrecht &
Quist California or H & Q TSP II Investors granted pursuant to the
Security Agreement, dated May 7, 1997, (b) any lien in favor of
Lenders granted hereunder or arising under any of the Transaction
Agreements to secure the Secured Obligations and (c) any interest
in the Pledged Collateral securing a credit to Grantor which is
listed on SCHEDULE III attached hereto and incorporated herein by
this reference.

     "PERSON" means any individual, sole proprietorship,
partnership, limited liability company, limited liability
partnership, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation,
firm, joint stock corporation, estate, other entity or
governmental agency.

     "PROCEEDS" means "proceeds," as such term is defined in
Section 9-306(1) of the UCC, and, in any event, shall include,
without limitation, (a) any and all Accounts, Chattel Paper,
Instruments, cash or other proceeds payable to Grantor from time
to time in respect of the Collateral, (b) any and all proceeds of
any insurance, indemnity, warranty or guaranty payable to Grantor
from time to time with respect to any of the Collateral, (c) any
and all payments (in any form whatsoever) made or due and payable
to Grantor from time to time in connection with any requisition,
confiscation, condemnation, seizure or forfeiture of all or any
part of the Collateral above by any governmental body, authority,
bureau or agency (or any person acting under color of governmental
authority), and (d) any and all other amounts from time to time
paid or payable under or in connection with any of the Collateral.

     "REIMBURSEMENT LOANS" shall have the meaning assigned to such
term in Section 1.1 of the Reimbursement Agreement.

     "REIMBURSEMENT LOAN NOTE" shall have the meaning assigned to
such term in Section 1.1 of the Reimbursement Agreement.

     "SECURED OBLIGATIONS" means all loans, advances, debts,
liabilities and obligations, for monetary amounts owed by Grantor
to Lenders whether due or to become due, matured or unmatured,
liquidated or unliquidated, contingent or non-contingent, and all
covenants and duties regarding such amounts, of any kind or
nature, present or future, whether or not evidenced by any note,
agreement or other instrument, arising under the Transaction
Documents.  This term includes, without limitation, all principal,
interest (including interest that accrues after the commencement
of a case against Grantor or any affiliate of Grantor under the
Bankruptcy Code), fees, including, without limitation, any and all
closing fees, prepayment fees, commitment fees, advisory fees,
agent fees and attorneys' fees and any and all other fees,
expenses, costs or other sums chargeable to Guarantor under any of
the Transaction Documents.
<PAGE>

     "SECURITY AGREEMENT" means this Security Agreement and all
Schedules hereto, as the same may from time to time be amended,
modified or supplemented.

     "TRANSACTION DOCUMENTS" means, collectively, this Security
Agreement, the Reimbursement Agreement, the Reimbursement Loan
Note, and any other agreement entered into between Grantor and
Lenders, and any certificate or instrument executed by Lenders, in
connection with said agreements and note, as the same may from
time to time be amended, modified, supplemented or restated.

     "UCC"  means the Uniform Commercial Code as the same may,
from time to time, be in effect in the State of California;
PROVIDED, HOWEVER, in the event that, by reason of mandatory
provisions of law, any or all of the attachment, perfection or
priority of Lenders' security interest in any collateral is
governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the State of California, the term "UCC"
shall mean the Uniform Commercial Code as in effect in such other
jurisdiction for purposes of the provisions hereof relating to
such attachment, perfection of priority and for purposes of
definitions related to such provisions.

     "VANGUARD" means Vanguard Airlines, Inc.

     2.1 GRANT OF SECURITY INTEREST.  As collateral security for
the prompt and complete payment and performance when due (whether
at stated maturity, by acceleration or otherwise) of all the
Secured Obligations and in order to induce Lenders to arrange the
Letters of Credit, to enter into the Transaction Documents and to
make the Reimbursement Loans, each in accordance with the terms
and conditions thereof, Grantor hereby assigns, conveys,
mortgages, pledges, hypothecates and transfers to Lenders, and
hereby grants to Lenders, a security interest in and to all of
Grantor's right, title and interest in, to and under the following
(all of which being hereinafter collectively called the
"COLLATERAL"):

          (A)  All Accounts;

          (B)  All Contracts;

          (C)  The Deposit; and

          (D)  To the extent not otherwise included, all Proceeds
of each of the foregoing and all accessions to, substitutions and
replacements for, and rents, profits and products of each of the
foregoing.

     3.1 RIGHTS OF LENDERS; COLLECTION OF ACCOUNTS.

          (A)  Notwithstanding anything contained in this Security
Agreement to the contrary, Grantor expressly agrees that it shall
remain liable under each of its Contracts to observe
<PAGE>
and perform all the conditions and obligations to be observed and
performed by it thereunder and that it shall perform all of its
duties and obligations thereunder, all in accordance with and
pursuant to the terms and provisions of each such Contract.
Lenders shall not have any obligation or liability under any
Contract by reason of or arising out of this Security Agreement or
the granting to Lenders of a Lien therein or the receipt by
Lenders of any payment relating to any Contract pursuant hereto,
nor shall Lenders be required or obligated in any manner to
perform or fulfill any of the obligations of Grantor under or
pursuant to any Contract, or to make any payment, or to make any
inquiry as to the nature or the sufficiency of any payment
received by it or the sufficiency of any performance by any Person
under any Contract, or to present or file any claim, or to take
any action to collect or enforce any performance or the payment of
any amounts which may have been assigned to it or to which it may
be entitled at any time or times.

          (B)  Lenders authorizes Grantor to collect its Accounts,
provided that such collection is performed in a prudent and
businesslike manner, and Lenders may, upon the occurrence and
during the continuation of any Event of Default and without
notice, limit or terminate said authority at any time.  If
required by Lenders at any time during the continuation of any
Event of Default, any Proceeds, when first collected by Grantor,
received in payment of any such Account or on account of any of
its Contracts shall, subject to the rights of MNB under the MNB
Merchant Agreement, be promptly deposited by Grantor in precisely
the form received (with all necessary endorsements) in a special
bank account maintained by Lenders subject to withdrawal by
Lenders only, as hereinafter provided, and until so turned over
shall be deemed to be held in trust by Grantor for and as Lenders'
property and shall not be commingled with Grantor's other funds or
properties.  Such Proceeds, when deposited, shall continue to be
Collateral for all of the Secured Obligations and shall not
constitute payment thereof until applied as hereinafter provided.
Lenders may, in its sole discretion, apply all or a part of the
funds on deposit in said special account to the principal of or
interest on or both in respect of any of the Secured Obligations
in accordance with the provisions of SECTION 7.1(D) hereof, and
any part of such funds which Lenders elects not so to apply and
deem not required as Collateral for the Secured Obligations shall
be paid over from time to time by Lenders to Grantor.  If an Event
of Default has occurred and is continuing, at the request of
Lenders, subject to the rights of MNB Bank under the MNB Merchant
Agreement, Grantor shall deliver all original and other documents
evidencing and relating to, the performance of service which
created such Accounts, including, without limitation, all original
orders, invoices, and shipping receipts.

          (C)  Lenders may at any time, upon the occurrence and
during the continuation of any Event of Default after first
notifying Grantor of its intention to do so, notify Account
Debtors of Grantor, parties to the Contracts of Grantor and
obligors in respect of Instruments and Chattel Paper of Grantor
constituting or relating to the Collateral, that the Accounts and
the right, title and interest of Grantor in and under such
Contracts, Instruments and Chattel Paper have been assigned to
Lenders and that payments shall be made directly to Lenders.  Upon
the request of Lenders, Grantor shall so notify such Account
Debtors, parties to such Contracts, obligors in respect of such
Instruments and such Chattel Paper.  Upon the occurrence and
<PAGE>
during the continuation of an Event of Default, Lenders may, in
its name, or in the name of others communicate with such Account
Debtors, parties to such Contracts, such Instruments and such
Chattel Paper to verify with such parties, to Lenders'
satisfaction, the existence, amount and terms of any such
Accounts, Contracts, Instruments or Chattel Paper.

          (D)  Notwithstanding anything to the contrary set forth
in paragraphs (a) or (b) above or elsewhere herein, Grantor shall,
by execution and delivery of the Notification of Assignment
attached hereto as EXHIBIT A, immediately notify MNB of the
security interest granted hereby and (b) authorize and direct MNB,
at such time as Lenders shall notify MNB as to the occurrence of
an Event of Default hereunder, to pay and or distribute to Lenders
all Collateral owned by, owed to, payable to or otherwise
distributable to Grantor pursuant to the MNB Merchant Agreement.
In the event that the Company's credit card processing function is
transferred to MNB Bank, Grantor shall cause to be executed a
Notification of Assignment in substantially the form attached
hereto as EXHIBIT A from MNB Bank.

     4.1 REPRESENTATIONS AND WARRANTIES.  Grantor hereby
represents and warrants to Lenders that:
          (a) Except for the security interest granted to Lenders
under this Security Agreement and other Permitted Liens, Grantor
is the sole legal and equitable owner of each item of the
Collateral in which it purports to grant a security interest
hereunder, having good, marketable and insurable title thereto
free and clear of any and all Liens other than Permitted Liens.

          (b) This Security Agreement creates a legal and valid
security interest on and in all of the Collateral in which Grantor
now has rights, and all filings and other actions necessary or
desirable to perfect and protect such security interest have been
duly taken.  Accordingly, Lenders has a fully perfected first
priority security interest in all of the Collateral in which
Grantor now has rights, subject only to the Permitted Liens.  This
Security Agreement will create a legal and valid and fully
perfected first priority security interest in the Collateral in
which Grantor later acquires rights, when Grantor acquires those
rights, subject only to the Permitted Liens.

          (c) Subject to the Permitted Liens, Grantor's chief
executive office, principal place of business, and the place where
Grantor maintains its records concerning the Collateral are
presently located at the addresses set forth on SCHEDULE I
attached hereto and incorporated herein by this reference.
Grantor shall not, during the continuance of this Security
Agreement, change such chief executive office or principal place
of business or remove or cause to be removed, except in the
ordinary course of Grantor's business, the records relating to the
Collateral from those premises without prior written notice to
Lenders.

          (d) All Collateral of Grantor with respect to which a
security interest may be perfected by the secured party's taking
possession thereof, including, without limitation, all Chattel
Paper and Instruments, except for any such Collateral which is in
the possession of Bank, <PAGE>
are set forth on SCHEDULE II attached hereto and incorporated
herein by this reference.  All action necessary or desirable to
protect and perfect such security interest in each item set forth
on SCHEDULE II, including,  without limitation, the delivery of
all originals thereof to Lenders, has been duly taken, except with
respect to those Chattel Paper, Instruments or other documents
constituting or relating to the Collateral evidencing obligations
of non-material amounts payable to Grantor.  The security interest
of Lenders in the Collateral listed on SCHEDULE II is prior in
right and interest to all other Liens and is enforceable as such
against creditors of and purchasers from Grantor.

          (e) The amount represented by Grantor to Lenders from
time to time as owing by each Account Debtor or by all Account
Debtors in respect of the Accounts of Grantor shall at such time
be the correct amount actually and unconditionally owing by such
Account Debtors thereunder.

          (f) The amount represented by Grantor to Lenders from
time to time as the Deposits and as the Gross Exposure shall at
such time be the correct total of such Amounts.

     5.1 COVENANTS.  Grantor covenants and agrees with Lenders
that from and after the date of this Security Agreement and until
the Secured Obligations have been performed and paid in full and
the letter of credit has expired:

     5.2 FURTHER ASSURANCES; PLEDGE OF INSTRUMENTS.  At any time
and from time to time, upon the written request of Lenders, and at
the sole expense of Grantor, Grantor shall promptly and duly
execute and deliver any and all such further instruments and
documents and take such further action as Lenders may reasonably
deem desirable to obtain the full benefits of this Security
Agreement and of the rights and powers herein granted, including,
without limitation, (a) using its best efforts to secure all
consents and approvals necessary or appropriate for the assignment
to Lenders of any Contract held by Grantor or in which Grantor has
any rights not heretofore assigned, (b) filing any financing or
continuation statements under the UCC with respect to the security
interests granted hereby, and (c) transferring Collateral to
Lenders' possession (if a security interest in such Collateral can
be perfected by possession).  Grantor also hereby authorizes
Lenders to file any such financing or continuation statement
without the signature of Grantor.  If any amount payable under or
in connection with any of the Collateral is or shall become
evidenced by any Instrument, such Instrument, other than checks
and notes received in the ordinary course of business, shall be
duly endorsed in a manner satisfactory to Lenders and, subject to
the rights of MNB under the MNB Merchant Agreement, be delivered
to Lenders immediately upon Grantor's receipt thereof.

     5.3 MAINTENANCE OF RECORDS.  Grantor shall keep and maintain
at its own cost and expense satisfactory and complete records of
the Collateral, including, without limitation, a record of all
payments received and all credits granted with respect to the
Collateral and all other dealings with the Collateral.  Grantor
shall mark its books and records pertaining to the Collateral to
<PAGE>
evidence this Security Agreement and the security interests
granted hereby.  All Chattel Paper shall be marked with the
following legend:  "THIS WRITING AND THE OBLIGATIONS EVIDENCED OR
SECURED HEREBY ARE SUBJECT TO THE SECURITY INTEREST OF HAMBRECHT &
QUIST CALIFORNIA."

     5.4 INDEMNIFICATION.  In any suit, proceeding or action
brought by or against Lenders relating to any Account or Contract,
or any Chattel Paper, Instrument or Document constituting or
relating to the Collateral, for any sum owing thereunder, or to
enforce any provision of any Account or Contract, or any Chattel
Paper, Instrument or Document constituting or relating to the
Collateral, Grantor shall save, indemnify and keep Lenders
harmless from and against all expense, loss or damage suffered by
reason of any defense, setoff, counterclaim, recoupment or
reduction of liability whatsoever of the obligor thereunder
arising out of a breach by Grantor of any obligation thereunder or
arising out of any other agreement, indebtedness or liability at
any time owing to, or in favor of, such obligor or its successors
from Grantor, and all such obligations of Grantor shall be and
remain enforceable against and only against Grantor and shall not
be enforceable against Lenders.

     5.5 COMPLIANCE WITH TERMS OF ACCOUNTS, ETC.  In all material
respects, Grantor shall perform and comply with all obligations in
respect of the Accounts and Contracts and in respect to any
Chattel Paper, Documents and Instruments constituting or relating
to the Collateral.

     5.6 LIMITATION ON LIENS ON COLLATERAL.  Grantor shall not
create, permit or suffer to exist, and shall defend the Collateral
against and take such other action as is necessary to remove, any
Lien on the Collateral, except (a) Permitted Liens and (b) the
Lien granted to Lenders under this Security Agreement.  Grantor
shall further defend the right, title and interest of Lenders in
and to any of Grantor's rights under the Contracts and Accounts or
in the Deposit or under Chattel Paper, Documents, and Instruments
constituting or relating to the Collateral, and in and to the
Proceeds thereof against the claims and demands of all Persons
whomsoever.

     5.7 LIMITATIONS ON MODIFICATIONS OF ACCOUNTS, ETC.  Upon the
occurrence and during the continuation of any Event of Default,
Grantor shall not, without Lenders' prior written consent, (a)
grant any extension of the time of payment of any of the Accounts
or amounts due under any Contract (including, without limitation,
amounts due from the Deposit) or under any Chattel Paper,
Instruments or Document constituting or relating to the
Collateral, (b) compromise, compound or settle the same for less
than the full amount thereof, (c) release, wholly or partly, any
Person liable for the payment thereof, or (d) allow any credit or
discount whatsoever thereon other than trade discounts granted in
the ordinary course of business of Grantor.

     5.8 TAXES, ASSESSMENTS, ETC.  Grantor shall pay promptly when
due all property and other taxes, assessments and government
charges or levies imposed upon, and all claims (including claims
for labor, materials and supplies) against, the Collateral except
to the extent the validity thereof is being contested in good
faith and adequate reserves are being maintained in connection
therewith.
<PAGE>

     5.9 LIMITATIONS ON DISPOSITION.  Grantor shall keep the
records regarding the Collateral and any Collateral in possession
of Grantor separate and identifiable from other property located
on the same premises as the Collateral and Grantor shall not sell,
lease, transfer or otherwise dispose of any of the Collateral, or
attempt or contract to do so.

     5.10 FURTHER IDENTIFICATION OF COLLATERAL.  Grantor shall, if
so requested by Lenders, furnish to Lenders, as often as Lenders
shall reasonably request, statements and schedules further
identifying and describing the Collateral and such other reports
in connection with the Collateral as Lenders may reasonably
request, all in reasonable detail.

     5.11 NOTICES.  Grantor shall advise Lenders promptly, in
reasonable detail, of (a) any material Lien, other than Permitted
Liens, attaching to or asserted against any of the Collateral, (b)
any material change in the composition of the Collateral and (c)
the occurrence of any other event which would have a material
adverse effect on the aggregate value of the Collateral or on the
Lien created hereunder.

     5.12 RIGHT OF INSPECTION AND AUDIT.

          (A)  Upon reasonable notice to Grantor (unless an Event
of Default has occurred and is continuing, in which case no notice
is necessary), Lenders shall at all times have full and free
access during normal business hours to all the books and records
and correspondence of Grantor, and Lenders or any agents or
representatives of Lenders may examine the same, take extracts
therefrom and make photocopies thereof, and Grantor agrees to
render to Lenders, at Grantor's cost and expense, such clerical
and other assistance as may be reasonably requested with regard
thereto.  Upon reasonable notice to Grantor (unless an Event of
Default has occurred and is continuing, in which case no notice is
necessary), Lenders and its agents and  representatives shall also
have the right to enter into and upon any premises where any of
records regarding the Collateral are located for the purpose of
conducting audits and making test verifications of the Accounts in
any manner and through any medium that it considers advisable, and
Grantor agrees to furnish all such assistance and information as
Lenders may reasonably require in connection therewith.  Grantor,
at its own expense, shall cause certified independent public
accountants, reasonably satisfactory to Lenders, to prepare and
deliver to Lenders the results of and any test verification of
Grantor's Accounts made or observed by such accountants when and
if such verification is conducted.

          (B)  Lenders shall have all rights of Grantor to audit,
copy or make extracts of the records of MNB Bank as are specified
under the respective agreements.
<PAGE>

     5.13 CONTINUOUS PERFECTION.  Grantor shall not change its
name, identity or corporate structure in any manner which might
make any financing or continuation statement filed in connection
herewith seriously misleading within the meaning of Section 9-
402(7) of the UCC (or any other then applicable provision of the
UCC) unless Grantor shall have given Lenders at least thirty (30)
days' prior written notice thereof and shall have taken all action
(or made arrangements to take such action substantially
simultaneously with such change if it is impossible to take such
action in advance) necessary or reasonably requested by Lenders to
amend such financing statement or continuation statement so that
it is not seriously misleading.

     5.14 Grantor shall provide upon written request of Lenders,
or shall cause MNB Bank to provide, to Lenders such reports and
notices as are required to be sent, or may be sent, by MNB to
Grantor with respect to the Accounts, the Deposit, the Gross
Exposure, or as otherwise are required to be sent or may be made
available to Grantor pursuant to the MNB Merchant Agreement.

     5.15 Grantor may not enter into any amendment to the MNB
Merchant Agreement,  without the written consent of Lenders,
except where such amendment only relates to the fees and charges
to be paid to MNB by Vanguard or the extension of said agreement.

     6.1 LENDERS' APPOINTMENT AS ATTORNEY-IN-FACT.

          (A)  Grantor hereby irrevocably constitutes and appoints
Lenders, and any officer or agent thereof, with full power of
substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of Grantor
and in the name of Grantor or in its own name, from time to time
at Lenders' discretion, for the purpose of carrying out the terms
of this Security Agreement, to take any and all appropriate action
and to execute and deliver any and all documents and instruments
which may be necessary or desirable to accomplish the purposes of
this Security Agreement and, without limiting the generality of
the foregoing, hereby gives Lenders the power and right, on behalf
of Grantor, without notice to or assent by Grantor, to do the
following:

               (I)  to ask, demand, collect, receive and give
acquittances and receipts for any and all monies due or to become
due under any Collateral and, in the name of Grantor in its own
name or otherwise to take possession of, endorse and collect any
checks, drafts, notes, acceptances or other Instruments for the
payment of monies due under any Collateral and to file any claim
or to take or commence any other action or proceeding in any court
of law or equity or otherwise deemed appropriate by Lenders for
the purpose of collecting any and all such monies due under any
Collateral whenever payable;

               (II) to pay or discharge any Liens, including,
without limitation, any tax lien, levied or placed on or
threatened against the Collateral, to effect any repairs or any
insurance called for by the terms of this Security Agreement and
to pay all or any part of the premiums therefor and the costs
thereof; and

<PAGE>

               (III)  (1) direct any person liable for any payment
under or in respect of any of the Collateral to make payment of
any and all monies due or to become due thereunder directly to
Lenders or as Lenders shall direct, (2) receive payment of any and
all monies, claims and other amounts due or to become due at any
time arising out of or in respect of any Collateral, (3) sign and
endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with Accounts
and other Instruments and Documents constituting or relating to
the Collateral, (4) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any part thereof and to
enforce any other right in respect of any Collateral, (5) defend
any suit, action or proceeding brought against Grantor with
respect to any Collateral, (6) settle, compromise or adjust any
suit, action or proceeding described above and, in connection
therewith, give such discharges or releases as Lenders may deem
appropriate, and (7) sell, transfer, pledge, make any agreement
with respect to or otherwise deal with any of the Collateral as
fully and completely as though Lenders were the absolute owner
thereof for all purposes, and to do, at Lenders' option and
Grantor's expense, at any time, or from time to time, all acts and
things which Lenders may reasonably deem necessary to protect,
preserve or realize upon the Collateral and Lenders' Lien therein
in order to effect the intent of this Security Agreement, all as
fully and effectively as Grantor might do.

          (B)  Lenders agrees that, except upon the occurrence and
during the continuation of an Event of Default, it shall not
exercise the power of attorney or any rights granted to Lenders
pursuant to this SECTION 6.1 provided; however, that Lender may
exercise the power of attorney with respect to filing of financing
statements and otherwise perfecting its security interest in the
Collateral when no Event of Default exists.  Grantor hereby
ratifies, to the extent permitted by law, all that said attorney
shall lawfully do or cause to be done by virtue hereof.  The power
of attorney granted pursuant to this SECTION 6.1 is a power
coupled with an interest and shall be irrevocable until the
Secured Obligations are paid and performed in full.

          (C)  The powers conferred on Lenders hereunder are
solely to protect Lenders' interests in the Collateral and shall
not impose any duty upon it to exercise any such powers.  Lenders
shall be accountable only for amounts that it actually receives as
a result of the exercise of such powers and neither it nor any of
its officers, directors, employees, agents or representatives
shall be responsible to Grantor for any act or failure to act,
except for its own gross negligence or willful misconduct.

          (D)  Grantor also authorizes Lenders, at any time and
from time to time upon the occurrence and during the continuation
of any Event of Default, to (i) communicate in its own name with
any party to any Contract with regard to the assignment of the
right, title and interest of Grantor in and under the Contracts
hereunder and other matters relating thereto and (ii) execute, in
connection with the sale of Collateral provided for in SECTION 7.1
hereof, any endorsements, assignments or other instruments of
conveyance or transfer with respect to the Collateral.

<PAGE>

          (E)  If Grantor fails to perform or comply with any of
its agreements contained herein and Lenders, as provided for by
the terms of this Security Agreement, shall perform or comply, or
otherwise cause performance or compliance, with such agreement,
the reasonable expenses, including attorneys' fees, of Lenders
incurred in connection with such performance or compliance,
together with interest thereon at the rate then in effect in
respect of the Reimbursement Loans, shall be payable by Grantor to
Lenders on demand and shall constitute Secured Obligations secured
hereby.

     7.1 RIGHTS AND REMEDIES UPON DEFAULT.

          (A)  If any Event of Default shall occur and be
continuing, Lenders may exercise in addition to all other rights
and remedies granted to it under this Security Agreement, the MNB
Merchant Agreement, the other Loan Documents and under any other
instrument or agreement securing, evidencing or relating to the
Secured Obligations, all rights and remedies of a secured party
under the UCC.  Without limiting the generality of the foregoing,
Grantor expressly agrees that in any such event Lenders, without
demand of performance or other demand, advertisement or notice of
any kind (except the notice specified below of time and place of
public or private sale) to or upon Grantor or any other person
(all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the UCC
and other applicable law), may forthwith collect, receive,
appropriate and realize upon the Collateral, or any part thereof,
and may forthwith sell, lease, assign, give an option or options
to purchase or sell or otherwise dispose of and deliver said
Collateral (or contract to do so), or any part thereof, in one or
more parcels at public or private sale or sales, at any exchange
or broker's board or at any of Lenders' offices or elsewhere at
such prices as it may deem best, for cash or on credit or for
future delivery without assumption of any credit risk.  Lenders
shall have the right upon any such public sale or sales, and, to
the extent permitted by law, upon any such private sale or sales,
to purchase the whole or any part of said Collateral so sold, free
of any right or equity of redemption, which equity of redemption
Grantor hereby releases.  Grantor further agrees, at Lenders'
request, to assemble the Collateral and make it available to
Lenders at places which Lenders shall reasonably select, whether
at Grantor's premises or elsewhere.  Lenders shall apply the net
proceeds of any such collection, recovery, receipt, appropriation,
realization or sale as provided in SECTION 7.1(D) hereof, Grantor
remaining liable for any deficiency remaining unpaid after such
application, and only after so paying over such net proceeds and
after the payment by Lenders of any other amount required by any
provision of law, including Section 9-504(1)(c) of the UCC, need
Lenders account for the surplus, if any, to Grantor.  To the
maximum extent permitted by applicable law, Grantor waives all
claims, damages, and demands against Lenders arising out of the
repossession, retention or sale of the Collateral except such as
arise out of the gross negligence or willful misconduct of
Lenders.  Grantor agrees that Lenders need not give more than ten
(10) days' notice (which notification shall be deemed given if
given in accordance with SECTION 9.3 of the Reimbursement
Agreement) of the time and place of any public sale or of the time
after which a private sale may take place and that such notice is
reasonable notification <PAGE>
of such matters.  Grantor shall remain liable for any deficiency
if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all amounts to which Lenders are entitled,
Grantor also being liable for the reasonable fees of any attorneys
employed by Lenders to collect such deficiency.

          (B)  Grantor also agrees to pay all fees, costs and
expenses of Lenders, including, without limitation, reasonable
attorneys' fees, incurred in connection with the enforcement of
any of its rights and remedies hereunder.

          (C)  Grantor hereby waives presentment, demand, protest
or any notice (to the maximum extent permitted by applicable law)
of any kind in connection with this Security Agreement or any
Collateral.

          (D)  The Proceeds of any sale, disposition or other
realization upon all or any part of the Collateral shall be
distributed by Lenders in the following order of priorities:

                    FIRST, to Lenders in an amount sufficient to
pay in full the reasonable costs of Lenders in
connection with such sale, disposition or other
realization, including all fees, costs, expenses,
liabilities and advances incurred or made by Lenders in
connection therewith, including, without limitation,
reasonable attorneys' fees;

                    SECOND, to Lenders in an amount equal to the
then unpaid principal of and accrued interest and
prepayment premiums, if any, on the Secured Obligations;

                    THIRD, to Lenders in an amount equal to any
other Secured Obligations which are then unpaid; and

                    FINALLY, upon payment in full of all of the
Secured Obligations, to Grantor or its representatives
or as a court of competent jurisdiction may direct.

     8.1 LIMITATION ON LENDERS' DUTY IN RESPECT OF COLLATERAL.
Lenders shall be deemed to have acted reasonably in the custody,
preservation and disposition of any of the Collateral if it takes
such action as Grantor requests in writing, but failure of Lenders
to comply with any such request shall not in itself be deemed a
failure to act reasonably, and no failure of Lenders to do any act
not so requested shall be deemed a failure to act reasonably.

     9.1 REINSTATEMENT.  This Security Agreement shall remain in
full force and effect and continue to be effective should any
petition be filed by or against Grantor for liquidation or
reorganization, should Grantor become insolvent or make an
assignment for the benefit of
<PAGE>
creditors or should a receiver or trustee be appointed for all or
any significant part of Grantor's property and assets, and shall
continue to be effective or be reinstated, as the case may be, if
at any time payment and performance of the Secured Obligations, or
any part thereof, is, pursuant to applicable law, rescinded or
reduced in amount, or must otherwise be restored or returned by
any obligee of the Secured Obligations, whether as a "voidable
preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made.  In the event that
any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Secured Obligations shall be reinstated and
deemed reduced only by such amount paid and not so rescinded,
reduced, restored or returned.

     10.1 MISCELLANEOUS.

     10.2 NOTICES.  Any notice or other communication hereunder to
any party shall be addressed and delivered (and shall be deemed
given) in accordance with SECTION 9.3 of the Reimbursement
Agreement.

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

     10.4 HEADINGS.  The various headings in this Security
Agreement are inserted for convenience only and shall not affect
the meaning or interpretation of this agreement or any provisions
hereof.

     10.5 NO WAIVER; CUMULATIVE REMEDIES.

          (A)  Lenders shall not by any act, delay, omission or
otherwise be deemed to have waived any of its respective rights or
remedies hereunder, nor shall any single or partial exercise of
any right or remedy hereunder on any one occasion preclude the
further exercise thereof or the exercise of any other right or
remedy.

          (B)  The rights and remedies hereunder provided are
cumulative and may be exercised singly or concurrently, and are
not exclusive of any rights and remedies provided by law.

          (C)  None of the terms or provisions of this Security
Agreement may be waived, altered, modified or amended except by an
instrument in writing, duly executed by Grantor and Lenders.
<PAGE>

     10.6 TERMINATION OF THIS SECURITY AGREEMENT.  Subject to
SECTION 9.1 hereof, this Security Agreement shall terminate on the
Termination Date, as defined in the Reimbursement Agreement.

     10.7 SUCCESSOR AND ASSIGNS.  This Security Agreement and all
obligations of Grantor hereunder shall be binding upon the
successors and assigns of Grantor, and shall, together with the
rights and remedies of Lenders hereunder, inure to the benefit of
Lenders, any future holder of any Reimbursement Loan Note executed
by Grantor in connection with the Reimbursement Agreement and
their respective successors and assigns.  No sales of
participations, other sales, assignments, transfers or other
dispositions of any agreement governing or instrument evidencing
the Secured Obligations or any portion thereof or interest therein
shall in any manner affect the Lien granted to Lenders hereunder.

     10.8 FURTHER INDEMNIFICATION.  Grantor agrees to pay, and to
save Lenders harmless from, any and all liabilities with respect
to, or resulting from any delay in paying, any and all excise,
sales or other similar taxes which may be payable or determined to
be payable with respect to any of the Collateral or in connection
with any of the transactions contemplated by this Security
Agreement.

     10.9 GOVERNING LAW.  In all respects, including all matters
of construction, validity and performance, this Security Agreement
and the Secured Obligations arising hereunder shall be governed
by, and construed and enforced in accordance with, the laws of the
State of California applicable to contracts made and performed in
such state, without regard to the principles thereof regarding
conflict of laws.

     10.10 COUNTERPARTS.  This Security Agreement may be executed
in any number of counterparts, each of which when so delivered
shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.  Each such agreement
shall become effective upon the execution of a counterpart hereof
or thereof by each of the parties hereto and telephonic
notification thereof has been received by Grantor and Lenders.


     [Intentionally Left Blank]
<PAGE>

     IN WITNESS WHEREOF, each of the parties hereto has caused
this Security Agreement to be executed and delivered by its duly
authorized officer on the date first set forth above.

GRANTOR                            VANGUARD AIRLINES, INC.



                                   By:
                                      --------------------------
                                   Printed Name:
                                                -----------------
                                   Title:
                                         -----------------------



Accepted and acknowledged by:

THE HAMBRECHT 1980 REVOCABLE TRUST,
WILLIAM R. HAMBRECHT AS TRUSTEE



By:
    -----------------------------
Printed Name:
              -------------------
Title:
       --------------------------

Accepted and acknowledged by:

J. F. SHEA CO., INC.



By:
    -----------------------------
Printed Name:
             -------------------
Title:
       --------------------------
<PAGE>
                         SCHEDULE I

                LOCATION OF GRANTOR'S CHIEF EXECUTIVE OFFICE
                     PRINCIPAL PLACE OF BUSINESS
                  AND RECORDS PERTAINING TO COLLATERAL

                     CHIEF EXECUTIVE OFFICE:

                     533 Mexico City Avenue
                     Kansas City International Airport
                     Kansas City, MO 64153


                     RECORDS PERTAINING TO COLLATERAL:

                     7000 Squibb Road
                     Third Floor
                     Mission, KS  66202

                     PRINCIPAL PLACE OF BUSINESS:

                     533 Mexico City Avenue
                     Kansas City, MO 64153
<PAGE>
                         SCHEDULE II

               LIST OF COLLATERAL DELIVERED TO LENDERS




                              None
<PAGE>
                          SCHEDULE III

                         PERMITTED LIENS

                              None

<PAGE>
                            EXHIBIT A

                    NOTIFICATION OF ASSIGNMENT


<PAGE>