EXHIBIT 10.8.1

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                            AIRCRAFT LEASE AGREEMENT

                                     between

                             POLARIS HOLDING COMPANY

                                     Lessor

                                       and

                              POLAR AIR CARGO, INC.

                                     Lessee

                          Dated as of October 24, 2001

                   One Used Boeing 747-200F Freighter Aircraft
                         Manufacturer's Serial No. 22237
             Federal Aviation Administration Registration No. N920FT

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                                TABLE OF CONTENTS

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Section 1.    Definitions ........................................................................       1
Section 2.    Lease ..............................................................................      12
Section 3.    Delivery, Acceptance, Term .........................................................      14
Section 4.    Rent ...............................................................................      14
Section 5.    Representations and Warranties .....................................................      17
Section 6.    Registration, Operation, Possession, Subleasing and Records ........................      21
Section 7.    Information ........................................................................      27
Section 8.    Covenants of Lessee ................................................................      28
Section 9.    Maintenance; Operation; Replacement of Parts; Alterations,
                 Modification and Additions ......................................................      31
Section 10.   General Tax Indemnity ..............................................................      34
Section 11.   Casualty Occurrences ...............................................................      35
Section 12.   Insurance ..........................................................................      39
Section 13.   Indemnification ....................................................................      39
Section 14.   Liens ..............................................................................      44
Section 15.   Perfection of Title and Further Assurances .........................................      45
Section 16.   Return of Aircraft and Records .....................................................      46
Section 17.   Events of Default ..................................................................      47
Section 18.   Remedies ...........................................................................      49
Section 19.   Assignment; Merger .................................................................      53
Section 20.   Intentionally Omitted ..............................................................      54
Section 21.   Alienation .........................................................................      54
Section 22.   Foreign Registration ...............................................................      55
Section 23.   Miscellaneous ......................................................................      57
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EXHIBITS

Exhibit A     -  Schedule and Description of Aircraft
Exhibit B     -  Aircraft Documents
Exhibit C     -  Definitions
Exhibit D     -  Lease Supplement
Exhibit E     -  Return Condition Requirements
Exhibit F     -  Report by Insurance Broker
Exhibit G     -  Insurance
Exhibit H-1   -  Form of Opinion of Special Counsel to Lessee
Exhibit H-2   -  Form of Opinion of Special Counsel to Guarantor
Exhibit I     -  Form of Opinion of In-house Counsel to Lessee
Exhibit J-1   -  Form of Opinion of Special Counsel to Lessor
Exhibit J-2   -  Form of Opinion of In-house Counsel to Lessor
Exhibit K     -  Form of Subordination, Non-Disturbance and Attomment Agreement

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Exhibit L     -  Form of Parent Guaranty

                                      -ii-

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                            AIRCRAFT LEASE AGREEMENT

            THIS AIRCRAFT LEASE AGREEMENT dated as of October 24, 2001 ("Lease")
between POLARIS HOLDING COMPANY, a Delaware corporation, with its principal
place of business at 201 Mission Street, 27th Floor, San Francisco, California
94105 ("Lessor"), and Polar Air Cargo, Inc., a California corporation, with its
principal place of business at One Hundred Oceangate, Fifteenth Floor, Long
Beach, California 90802 ("Lessee").

            Lessee desires to lease from Lessor, and Lessor is willing to lease
to Lessee, the Aircraft (as hereinafter defined) upon and subject to the terms
and conditions of this Aircraft Lease Agreement.

                                    AGREEMENT

            In consideration of the mutual promises herein, Lessor and Lessee
agree as follows:

            Section 1. DEFINITIONS.

            The following terms shall have the following respective meanings for
all purposes of this Lease:

            ACMI CONTRACT means (i) any contract entered into by Lessee pursuant
to which Lessee furnishes the aircraft, crew, maintenance and insurance and the
other party to such contract bears all other operating expenses and (ii) any
similar contract in which the other party to such contract provides the flight
crew, all substantially in accordance with the historical practices of Atlas
Air, Inc. ("Atlas").

            ACT means part A of subtitle VII of title 49, United States Code.

            ACTUAL KNOWLEDGE means, as it applies to Lessor or Lessee, actual
knowledge of a Vice President or more senior officer of Lessor or Lessee,
respectively, or any other officer of Lessor or Lessee, respectively, having
responsibility for the transactions contemplated by the Operative Documents;
PROVIDED that each of Lessee and Lessor shall be deemed to have "Actual
Knowledge" of any matter as to which it has received notice from the other
party, such notice having been given pursuant to Section 23(c) of this Lease.

            ADDITIONAL INSURED shall mean Lessor and its Affiliates, successors
and permitted assigns, and the respective directors, officers, employees and
agents of the foregoing.

            AFFILIATE shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under common control with
such Person, including,

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                                       -2-

without limitation, any limited partnership or grantor trust of which such
Person or any Affiliate of such Person is the sole or co-general partner or
managing agent and any trustee of a trust of which the beneficiary is such
Person, any Affiliate of such Person, such a limited partnership, or such a
grantor trust.

            AFTER-TAX BASIS means with respect to any payment to be received
(actually or constructively) by a Person, the amount of such payment plus a
further payment or payments so that the net amount received (actually or
constructively) by such Person, after deducting from such payments and such
further payments the amount of all Taxes imposed on the Person receiving
(actually or constructively) such payments by any taxing authority with respect
to such payments (net of any current credits, deductions or other Tax benefits
arising from the payment by such Person of any amount, including Taxes, with
respect to the payment received or arising by reason of the receipt or accrual
by such Person of the payment received) is equal to the original payment
required to be received (actually or constructively). Unless expressly provided
otherwise, in making calculations pursuant to this definition with respect to a
Person, it shall be assumed that such Person is fully taxable for all income tax
purposes at the highest Federal rate and the highest state and local rates
applicable to corporations in the relevant jurisdiction at the time such amount
is taxable to such Person.

            AIRCRAFT shall mean the Airframe, together with (a) the Engines,
whether or not installed on the Aircraft, (b) all Parts or components thereof,
(c) ancillary equipment or devices furnished with the Aircraft, under this Lease
(such ancillary equipment and devices, if any, will be identified in the Lease
Supplement), (d) all Aircraft Documents, and (e) all substitutions, replacements
and renewals of any and all thereof.

            AIRCRAFT DOCUMENTS shall mean the items identified on EXHIBIT B
hereto, all of which shall be maintained in the English language.

            AIRFRAME shall mean (a) the aircraft described on EXHIBIT A, but not
including any Engine installed thereon, and (b) any and all Parts so long as the
same shall be incorporated or installed on or attached to the Airframe, or so
long as title thereto shall remain vested in the Lessor in accordance with the
terms of Section 9, after removal from the Airframe.

            APPROVED INSURER shall mean any reputable insurance company or
insurance broker of internationally recognized responsibility and standing
specializing in aircraft insurance.

            AVIATION AUTHORITY shall mean the FAA or, if the Aircraft is
permitted to be, and is, registered with any other Governmental Entity under and
in accordance with Section 6(a)(ii), such other Governmental Entity.

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                                       -3-

            BASIC RENT shall mean the rent for the Aircraft specified in Letter
Agreement No. 1 and payable throughout the Term pursuant to Section 4(a),
hereof.

            BASIC RENT PAYMENT DATE shall mean the day for payment of Basic Rent
determined in accordance with the provisions set forth in Letter Agreement No.
1. It is further understood and agreed that if a Basic Rent Payment Date shall
fall on a day which is not a Business Day, any payment due on such Basic Rent
Payment Date shall be made on the next succeeding Business Day.

            BUSINESS DAY shall mean any day other than a Saturday, Sunday or
other day on which banking institutions in New York, New York are authorized or
required by law to be closed.

            CASH EQUIVALENTS means the following securities (which shall mature
within 90 days of the date of purchase thereof): (a) direct obligations of the
U.S. Government; (b) obligations fully guaranteed by the U.S. Government; (c)
certificates of deposit issued by, or bankers' acceptances of, or time deposits
or a deposit account with any bank, trust company or national banking
association incorporated or doing business under the laws of the United States
or any state thereof having a combined capital and surplus and retained earnings
of at least $500,000,000 and having a rate of "C" or better from the Thomson
Bank Watch Service; or (d) commercial paper of any issuer doing business under
the laws of the United States or one of the states thereof and in each case
having a rating assigned to such commercial paper by Standard & Poor's or
Moody's equal to Al or PI or higher.

            CASUALTY OCCURRENCE means, with respect to the Aircraft, the
Airframe or any Engine, any of the following circumstances, conditions or events
with respect to such property, for any reason whatsoever:

            (a)   the destruction of such property, damage to such property
      beyond economic repair or rendition of such property permanently unfit for
      normal use by Lessee;

            (b)   the actual or constructive total loss of such property or any
      damage to such property, or requisition of title or use of such property,
      which results in an insurance settlement with respect to such property on
      the basis of a total loss or constructive or compromised total loss;

            (c)   any theft, hijacking or disappearance of such property for a
      period of 180 consecutive days or more;

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                                       -4-

            (d)   any seizure, condemnation, confiscation, taking or requisition
      of such property by any Government Entity or purported Government Entity
      that constitutes a taking of title of such property;

            (e)   any seizure, condemnation, confiscation, taking or requisition
      of use of such property by any Government Entity or purported Government
      Entity (other than the U.S. Government or the country of registration of
      the Aircraft) that does not constitute a taking of title to such property
      for a period exceeding 180 consecutive days or, if earlier, the end of the
      Term; and

            (f)   any seizure, condemnation, confiscation, taking or requisition
      of use of such property by the U.S. Government or the country of
      registration of the Aircraft that continues until the 30th day after the
      last day of the Term, PROVIDED that no such Casualty Occurrence shall
      exist if Lessor shall have elected not to treat such event as a Casualty
      Occurrence pursuant to Section 1l(h) of the Lease; and

            (g)   as a result of any law, rule, regulation, order or other
      action by the Aviation Authority or by any Government Entity of the
      government of registry of the Aircraft or by any Government Entity
      otherwise having jurisdiction over the operation or use of the Aircraft,
      the use of such property in the normal course of Lessee's business of
      cargo air transportation is prohibited for a period of 180 consecutive
      days, unless Lessee, prior to the expiration of such 180 day period, shall
      have undertaken and shall be diligently carrying forward such steps as may
      be necessary or desirable to permit the normal use of such property by
      Lessee and such normal use shall have been resumed prior to the expiration
      of a period of two consecutive years, PROVIDED that no Casualty Occurrence
      shall be deemed to have occurred after the expiration of such two-year
      period if (A) such prohibition has been applicable to Lessee's entire U.S.
      fleet of such property and (B) prior to the expiration of such two-year
      period, Lessee shall have conformed at least one unit of such property in
      its fleet to the requirements of any such law, rule, regulation, order or
      other action and commenced regular commercial use of the same in such
      jurisdiction and (C) Lessee shall be diligently carrying forward, in a
      manner which does not discriminate against such property in so conforming
      such property, steps which are necessary or desirable to permit the normal
      use of the Aircraft by Lessee and such normal use shall have resumed prior
      to the expiration of a period of three years or such use shall be
      prohibited at the expiration of the Term.

            CASUALTY VALUE means, with respect to the Aircraft, the amount set
forth in Schedule 1 to the Letter Agreement No. 1 (as adjusted from time to time
in accordance with Section 4(a)(iii) of the Lease) opposite the Casualty Value
Date as of which the Casualty Value is required to be computed.

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            CASUALTY VALUE DATE means, for any month, the day in such month
specified in Schedule 1 to the Letter Agreement No. 1.

            CERTIFICATED AIR CARRIER shall mean any Person (except the United
States Government) domiciled in the United States of America and holding a
Certificate of Convenience and Necessity issued under Sections 401 or 418 of the
Federal Aviation Act by the Department of Transportation or any predecessor or
successor agency thereto, or, in the event such Certificates shall no longer be
issued, any Person (except the United States Government) domiciled in the United
States of America and legally engaged in the business of transporting for hire
passengers or cargo by air to, from or between points within the United States
of America, and, in either event, operating commercial jet aircraft.

            CITIZEN OF THE UNITED STATES is defined in Section 40102(a)(15) of
the Act and FAA Regulations.

            CONSENT AND AGREEMENT means the Manufacturer Consent and Agreement
dated as of even date with this Lease, of the Manufacturer.

            CRAF means the Civil Reserve Air Fleet Program established pursuant
to 10 U.S.C. Section. 9511-13 or any similar substitute program.

            DEFAULT shall mean any event which with the lapse of time or the
giving of notice or both would become an Event of Default.

            DELIVERY DATE shall mean the date on which the Aircraft is delivered
to and accepted by Lessee for purposes of this Lease, which shall be the date
set forth in the Lease Supplement as the Delivery Date.

            DESIGNATED MANUFACTURER means The Boeing Company, Airbus Industrie,
Rolls Royce plc, Rolls Royce Deutschland GmbH, United Technologies Corp.,
General Electric Company, any of their respective Affiliates, or any successor
thereto.

            DISCOUNT RATE shall have the meaning set forth in Letter Agreement
No. 1.

            DOLLARS shall mean lawful currency of the United States of America.

            DOT means the Department of Transportation of the United States or
any Government Entity succeeding to the functions of such Department of
Transportation.

            ENGINE shall mean (a) any engine installed on or furnished with the
Aircraft on the Delivery Date, such engine being identified as to manufacturer,
type and manufacturer serial number on EXHIBIT A hereto to be designated by the
Lessor on the Delivery Date; or (b) any Replacement Engine which may from-time
to time be substituted therefor pursuant to

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Section 11, together in each case with any and all Parts incorporated or
installed in or attached thereto or any and all Parts removed therefrom so long
as title thereto remains vested in Lessor in accordance with the terms of
Section 9 after removal from such Engine. Except as otherwise set forth herein,
at such time as a Replacement Engine shall be so substituted, 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.

            ENGINE MANUFACTURER shall mean the party specified on EXHIBIT C,
hereto.

            EVENT OF DEFAULT shall have the meaning specified in any one or more
clauses in Section 17.

            EXPIRATION DATE shall mean the date specified on EXHIBIT C, hereto.

            FAA shall mean the Federal Aviation Administration of the United
States Department of Transportation or any successor.

            FAIR MARKET RENTAL VALUE means the fair market rental value in
Dollars for the Aircraft that would apply in an arm's length transaction between
an informed and willing lessee under no compulsion to lease, and an informed and
willing lessor under no compulsion to lease, the Aircraft, for the applicable
remainder of the Term, assuming that (a) the Aircraft has been maintained in
accordance with, and is in the condition required by, the Lease, (b) payments of
rent would be made semiannually, and (c) the Aircraft would be leased during any
such remainder of the Term on the same terms and conditions as are set forth in
the Lease with respect to the Term.

            FAIR MARKET SALES VALUE means the fair market sales value in Dollars
for the Aircraft that would apply in an arm's-length transaction between an
informed and willing buyer under no compulsion to buy, and an informed and
willing seller under no compulsion to sell, the Aircraft, in a transaction that
would close on or about the relevant time of determination, assuming that (a)
the Aircraft has been maintained in accordance with, and is in the condition
required by, the Lease and (b) the Aircraft would be delivered to such informed
and willing buyer in the return condition required by the Lease.

            FEDERAL AVIATION ACT shall mean the United States Federal Aviation
Act of 1958, as amended.

            FOP shall mean foreign object damage.

            GAAP shall mean generally accepted accounting principles,
consistently applied with past practices.

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                                       -7-

            GOVEMMENTAL ENTITY shall mean and include (a) any national
government, or political subdivision thereof or local jurisdiction therein; (b)
any board, commission, department, division, organ, instrumentality, court, or
agency of any entity described in (a) above, however constituted; and (c) any
association, organization, or institution of which any entity described in (a)
or (b) above is a member or to whose jurisdiction any such entity is subject or
in whose activities any such entity is a participant but only (except for
purposes of defining Law below) to the extent that any of the preceding have
jurisdiction over the Aircraft or its operations.

            GUARANTOR shall mean Atlas Air Worldwide Holdings, Inc., a Delaware
corporation.

            INDEMNITEE shall mean each of Lessor, GE Capital Aviation Services,
Inc., GE Capital Aviation Services, Limited, and each of their respective
Affiliates, officers, directors and employees; PROVIDED, HOWEVER, that no such
Affiliate that is a manufacturer of the Aircraft, any Engine or any Parts, and
no such Affiliate that provides maintenance or other contractual services to
Lessee, in capacity as such, shall be deemed to be an Affiliate for purposes of
Section 13 of this Lease.

            INSURANCE BROKER shall mean Lessee's regularly retained independent
aircraft insurance broker.

            INTEREST RATE shall have the meaning set forth in Letter Agreement
No. 1.

            LAW shall mean and include (a) any statute, decree, constitution,
regulation, order, judgment or other directive of any applicable Governmental
Entity; (b) any treaty, pact, compact or other agreement to which any applicable
Governmental Entity is a signatory or party; (c) any judicial or administrative
interpretation or application of any Law described in (a) or (b) above; and (d)
any amendment or revision of any Law described in (a), (b) or (c) above.

            LEASE shall mean this Lease, each Lease Supplement, the Letter
Agreement No. 1, and any and all amendments, revisions, supplements and
modifications thereto.

            LEASE IDENTIFICATION shall have the meaning set forth on EXHIBIT C.
hereto.

            LEASE SUPPLEMENT shall mean the Lease Supplement, substantially in
the form of EXHIBIT D hereto, entered into between Lessor and Lessee.

            LESSEE'S ADDRESS shall have the meaning set forth on EXHIBIT C,
hereto.

            LESSOR'S ADDRESS shall have the meaning set forth on EXHIBIT C
hereto.

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                                       -8-

            LESSOR'S LIENS shall mean Liens arising as a result of (a) claims
against Lessor not related to the transactions contemplated by this Lease or the
other Operative Documents; or (b) acts or omissions of Lessor, in violation of
Lessor's obligations under this Lease or other Operative Documents or not
contemplated and expressly permitted under this Lease; or (c) Taxes imposed
against Lessor which are not indemnified against by Lessee pursuant to Section
10; or (d) claims against Lessor arising out of the voluntary transfer by Lessor
of all or any part of its interests in the Aircraft or this Lease, other than a
transfer pursuant to Sections 11 or 18 hereof.

            LETTER AGREEMENT NO. 1 shall mean that certain letter agreement
dated the date of this Lease between Lessor and Lessee, setting forth the
definitions of certain terms used in this Lease and in the Lease Supplement and
addressing certain other matters.

            LIEN shall mean any mortgage, pledge, lien, charge, encumbrance,
lease, exercise of rights, security interest or claim affecting the title to or
any interest in property.

            MAINTENANCE PROGRAM shall mean the FAA approved maintenance program
in effect for the Aircraft as described in Section C of Letter Agreement No. 1,
as the same may be amended from time to time, encompassing scheduled
maintenance, condition monitored maintenance and on-condition maintenance of the
Airframe. Engines and components of the Aircraft.

            MANUFACTURER shall have the meaning set forth on EXHIBIT C, hereto.

            MATERIAL ADVERSE CHANGE shall mean, with respect to any Person, any
event, condition or circumstance that materially and adversely affects such
person's business or consolidated financial condition, or its ability to observe
or perform its obligations, liabilities and agreements under the Operative
Documents.

            MINIMUM LIABILITY INSURANCE AMOUNT shall mean $750,000,000; provided
that if after the Delivery Date one party delivers written notice to the other,
including evidence from an insurance broker(s) of international reputation, in
form and substance satisfactory to the recipient, that the custom in the
commercial U.S. aircraft leasing industry with respect to new lease
transactions, similar to the transactions contemplated by the Operative
Documents, with commercial U.S. cargo air carriers which are similarly situated
with the Lessee and relating Boeing 747 aircraft of the same type as the
Aircraft, is to require an amount of War' Risk Insurance of less (or more) than
$750,000,000, the Lessor and the Lessee shall promptly amend this definition of
"Minimum Liability Insurance Amount" to reflect such lesser (or greater) amount;
provided further that in no event shall the "Minimum Liability Insurance Amount"
be reduced below $565,000,000.

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                                       -9-

            MORTGAGE CONVENTION shall mean the Convention for the International
Recognition of Rights in Aircraft, signed (ad referendum) at Geneva,
Switzerland, on June 19, 1948, and amended from time to time, but excluding the
terms of any adhesion thereto or ratification thereof containing reservations to
which the United States of America does not accede.

            NET ECONOMIC RETURN means the Lessor's nominal after tax book yield
(utilizing the multiple investment sinking fund method of analysis) and
aggregate net after tax cash, computed on the basis of the same methodology and
assumptions as were utilized by the initial Lessor in determining Basic Rent
amounts and Casualty Value amounts, as of the Delivery Date, provided, that, if
the initial Lessor shall have transferred its interest, Net Economic Return
shall be calculated as if the initial Lessor has retained its interest.

            NET PRESENT VALUE OF RENTS means the net present value, as of the
date of calculation, of Basic Rent, discounted at the Discount Rate.

            NET WORTH means, for any Person, the excess of its total assets over
its total liabilities in accordance with GAAP.

            OFFICER'S CERTIFICATE means a certificate signed by the Chairman,
the President, any Vice President (including those with varying ranks such as
Executive, Senior, Assistant or Staff Vice President), the Treasurer or the
Secretary of the party executing the certificate.

            OPERATIVE DOCUMENTS shall mean this Lease, all Lease Supplements
hereto, Letter Agreement No. 1, the Parent Guaranty and any other document or
agreement delivered or entered into in connection with the foregoing, and any
and all amendments, revisions, supplements and modifications thereto.

            PARENT GUARANTY shall mean the Parent Guaranty,  substantially
in the form of EXHIBIT L hereto, entered into by Guarantor, in favor of Lessor.

            PARTIES shall mean Lessor and Lessee and their respective permitted
successors and assigns.

            PARTS shall mean all appliances, components, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(other than complete Engines or engines), which may now or from time to time be
incorporated or installed in or attached to the Airframe or any Engine. Except
as otherwise set forth herein, at such time as a replacement part shall be
substituted for a Part in accordance with Section 9 hereof, the Part so replaced
shall cease to be a Part hereunder.

            PAYMENT LOCATION shall have the meaning specified on EXHIBIT C,
hereto.

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                                      -10-

            PERMITTED AIR CARRIER means (i) any Permitted Manufacturer, (ii) any
Permitted Foreign Air Carrier, (iii) any person approved in writing by Lessor or
(iv) any U.S. Air Carrier.

            PERMITTED COUNTRY shall mean any country listed on Schedule 2 to the
Letter Agreement.

            PERMITTED FOREIGN AIR CARRIER shall mean any air carrier with its
principal executive offices in any Permitted Country and which is authorized to
conduct commercial airline operations and to operate jet aircraft similar to the
Aircraft under the applicable Laws of such Permitted Country.

            PERMITTED FOREIGN MANUFACTURER shall mean any Designated
Manufacturer domiciled outside the United States or (ii) any manufacturer of
airframes or aircraft engines, or any Affiliate thereof, which is domiciled in a
Permitted Country.

            PERMITTED INSTITUTION shall mean (a) any bank, trust company,
insurance company, financial institution or corporation (other than, without
Lessee's consent, a commercial air carrier, a commercial aircraft operator, a
freight forwarder or Affiliate of any of the foregoing), in each case with a
combined capital and surplus or Net Worth of at least $75,000,000.

            PERMITTED MANUFACTURER shall mean (i) any manufacturer of airframes
or aircraft engines, or any Affiliate thereof, which is domiciled in the United
States or (ii) any Permitted Foreign Manufacturer.

            PERMITTED SUBLEASE shall mean a sublease permitted under Section
6(b)(vii) of the Lease.

            PERMITTED SUBLESSEE shall mean the sublessee under a Permitted
Sublease.

            PERSONS or PERSONS shall mean individuals, firms, partnerships,
joint ventures, trusts, trustees, Government Entities, organizations,
associations, corporations, government agencies, committees, departments,
authorities and other bodies, corporate or incorporate, whether having distinct
legal status or not, or any member of any of the same.

            RENT shall mean Basic Rent and Supplemental Rent, collectively.

            REPLACEMENT ENGINE shall mean an engine that is the same or improved
make and model as the Engine to be replaced, and that is suitable for
installation and use on the Air-frame, and that has a value, utility and
remaining useful life (without regard to hours and cycles remaining until
overhaul) at least equal to the Engine to be replaced thereby (assuming that
such Engine had been maintained in accordance with this Lease).

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                                      -11-

            SPECIAL DEFAULT shall mean the occurrence of any Default referred to
in Sections 17(a), (e), (f) and (g) of this Lease.

            SUPPLEMENTAL RENT shall mean, without duplication, all amounts,
liabilities and obligations (other than Basic Rent) which Lessee assumes or
agrees to pay hereunder to Lessor, including without limitation, (a) any payment
of Casualty Value and (b) any payment of indemnity required by Sections 10 and
13 hereof.

            TAXES shall mean any and all sales, use, business, gross income,
personal property, transfer, fuel, leasing, occupational, value added, excess
profits, excise, gross receipts, franchise, stamp, income, levies, imposts,
withholdings or other taxes or duties of any nature, together with any
penalties, fines, charges or interest thereon.

            TERM shall mean the period commencing on the Delivery Date and to
and including the Expiration Date; provided that if at the scheduled end of the
Term, the Aircraft or Airframe is being used, or was within six (6) months prior
thereto being used, by the U.S. Government pursuant to CRAF, the Term shall be
deemed extended for the period necessary to accommodate usage of the Aircraft or
Airframe pursuant to CRAF plus up to six months thereafter, and Lessee shall be
obligated to pay Rent with respect to any such period of extension at a daily
equivalent rate equal to the average of the Basic Rent paid prior to the
Expiration Date.

            TRANSFER shall mean the transfer, sale, assignment or other
conveyance of all or any interest in any property, right or interest.

            TRANSFEREE shall mean a person to which the Lessor purports or
intends to Transfer any or all of its right, title or interest in the Aircraft
and the Lease respectively, as described in Section 21 of the Lease.

            TRANSPORTATION CODE means that portion of the United States Code
comprising those provisions formerly referred to as the Federal Aviation Act of
1958, as amended, or any subsequent legislation that amends, supplements or
supersedes such provisions.

            UNITED STATES or "U.S." shall mean the United States of America;
PROVIDED, that for geographic purposes, "United States" means, in aggregate, the
50 states and the District of Columbia of the United States of America.

            U.S. AIR CARRIER shall mean any United States air carrier that is a
Citizen of the United States holding an air carrier operating certificate issued
by the Secretary of Transportation pursuant to chapter 447 of title 49 of the
United States Code for aircraft capable of carrying 10 or more individuals or
6000 pounds or more of cargo, and as to which there is in force an air carrier
operating certificate issued pursuant to Part 121 of the FAA Regulations,

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                                      -12-

or which may operate as an air carrier by certification or otherwise under any
successor or substitute provisions therefor or in the absence thereof.

            U.S. PERSON shall mean any Person described in Section 7701(a)(30)
of the Code.

            U.S. GOVERNMENT shall mean the federal government of the United
States, or any instrumentality or agency thereof the obligations of which are
guaranteed by the full faith and credit of the federal government of the United
States.

            WET LEASE means any arrangement whereby Lessee or a Permitted
Sublessee agrees to furnish the Aircraft (including the Engines or engines
installed thereon), to a third party pursuant to which the Aircraft (including
the Engines or engines installed thereon) shall at all times be under the
operational control of Lessee or a Permitted Sublessee and operated by a crew
under the operational control of Lessee; PROVIDED that Lessee's obligations
under the Lease (including, without limitation, its obligations with respect to
maintenance, insurance, use and operation) shall continue in full force and
effect notwithstanding any such arrangement.

            When used in Sections 5(a) and 23(b) of this Lease, the first letter
of the above-defined terms shall be underlined.

            Section 2. LEASE.

            (a)   Lessor hereby agrees to lease the Aircraft to Lessee, and
Lessee hereby agrees to lease the Aircraft from Lessor, on the terms of this
Lease, as supplemented by Letter Agreement No. 1, which the parties have
executed and delivered contemporaneously with the execution and delivery of this
Lease, and by the Lease Supplement which the parties have executed and delivered
contemporaneously with the execution and delivery of this Lease.

            (b)   Contemporaneously with the execution of this Lease, Lessee is
delivering the following documents to Lessor:

              (i)   a Lease Supplement in the form of EXHIBIT D, hereto,
      completed, executed and delivered by Lessee;

              (ii)  a Parent Guaranty in the form of EXHIBIT L, hereto,
      completed, executed and delivered by Guarantor;

              (iii) a certificate evidencing due authority of Lessee for the
      execution, delivery and performance of this Lease and all other documents
      related thereto, together with an incumbency certificate as to the person
      or persons authorized to execute and deliver such documents on behalf of
      Lessee;

<PAGE>

                                      -13-

                  (iv)  a favorable opinion of special counsel to Lessee as may
      be reasonably satisfactory to Lessor, dated on or about the date hereof,
      and a favorable opinion of special counsel to Guarantor as may be
      reasonably satisfactory to Lessor, dated on or about the date hereof, each
      in the form of EXHIBIT H-1 and EXHIBIT H-2, respectively, hereto;

                  (v)   a favorable opinion of in-house counsel to Lessee as may
      be reasonably satisfactory to Lessor, dated on or about the date hereof,
      in the form of EXHIBIT I, hereto;

                  (vi)  an Officer's Certificate, dated as of the date hereof,
      stating that: (A) the representations and warranties contained in Section
      5(d) hereof are true and accurate on and as of such date; and (B) no event
      has occurred and is continuing, or would result from the lease of the
      Aircraft which constitutes a Default or an Event of Default under this
      Lease;

                  (vii) an opinion or report, dated as of date hereof, signed by
      an Insurance Broker or Approved Insurer as to the due compliance with the
      insurance provisions of Section 12 hereof with respect to the Aircraft,
      substantially in the form as set forth on EXHIBIT F. hereto;

                  (viii) certificates of an Insurance Broker evidencing the
      insurance as required by Section 12 hereof;

                  (ix)  a favorable opinion from Crowe & Dunlevy P.C., or such
      other counsel as may be acceptable to Lessor, as to completion of the due
      filing of this Lease pursuant to the Federal Aviation Act and rules and
      regarding such other matters as Lessor may reasonably request; and

                  (x)   the requisite financing statements;

                  (xi)  such other documents and matters incident to the
      foregoing as Lessor may reasonably request.

                  (c)   Contemporaneously with the execution of this Lease,
Lessor is delivering the following documents to Lessee:

                     (i)   a Lease Supplement in the form of EXHIBIT D, hereto,
      completed, executed and delivered by Lessor;

                     (ii)  an incumbency certificate as to the person or persons
      authorized to execute and deliver such documents on behalf of Lessor;

<PAGE>

                                      -14-

                  (iii) an Officer's Certificate, dated as of the date hereof,
      stating that the representations and warranties contained in Section 5(a)
      are true and accurate on and as of such date;

                  (iv)  a favorable opinion of special counsel to Lessor as may
      be reasonably satisfactory to Lessee, dated on or about the date hereof,
      and a favorable opinion of in-house counsel to Lessor as may be reasonably
      satisfactory to Lessee, each in the form of EXHIBITS J-l and J-2,
      respectively, hereto;

                  (v)   a copy of the current, valid Standard Certificate of
      Airworthiness for the Aircraft duly issued by the FAA;

                  (vi)  an Aircraft Warranty Assignment and Agreement and a
      Consent and Agreement executed by the Manufacturer; and

                  (vii) lease termination certificates in form suitable for
      recording with the FAA terminating (x) the Aircraft Lease Agreement dated
      as of November 12, 1996, between the Company as lessor and Polar Air
      Cargo, L.P. as lessee, supplemented by Lease Supplement No. 1 dated
      November 12, 1996, recorded by the FAA on December 9, 1996, as Conveyance
      No. SS007186, (y) the Assignment and Assumption of Head Lease and
      Termination of Sublease dated as of February 28, 1997, among Polar Air
      Cargo, L.P. as assignor, Polar Air Cargo, Inc. as assignee, and the
      Company, recorded April 21, 1997, as Conveyance No. HK009138, and (z) the
      Amended and Restated Aircraft Lease Agreement dated as of February 28,
      1997, recorded April 21, 1997, as Conveyance No. HK009139.

                  Section 3. DELIVERY, ACCEPTANCE, TERM.

                  (a)  ACCEPTANCE OF AIRCRAFT. By executing and delivering Lease
Supplement No. 1, Lessee confirms to Lessor that Lessee has duly and irrevocably
accepted delivery of the Aircraft for all purposes of this Agreement. Lessee is
confirming its acceptance of the Air craft by delivering herewith to Lessor a
Lease Supplement in the form set forth as EXHIBIT D hereto.

                  (b)  TERM OF LEASE. The Term of this Lease shall commence on
the Delivery Date and shall continue until the Expiration Date; provided that
this Lease may be earlier terminated or extended pursuant to the provisions
hereof.

                  Section 4. RENT.

                  (a)  Lessee covenants and agrees to pay to Lessor, or its
assigns, the following as Rent for use of the Aircraft:

<PAGE>

                                      -15-

            (i)   BASIC RENT: The Basic Rent as set forth in Letter Agreement
      No. 1 throughout the Term hereof, payable in consecutive installments and
      due on each Basic Rent Payment Date.

            (ii)  SUPPLEMENTAL RENT: Any and all Supplemental Rent as the same
      becomes due.

            (iii) ADJUSTMENTS TO BASIC RENT AND SUPPLEMENTAL RENT: (1) Basic
      Rent and Casualty Values shall be subject to adjustment as follows: In the
      event that Lessee is required to indemnify Lessor under Section B of the
      Letter Agreement No. 1, the Basic Rent amount and the Casualty Values set
      forth in Schedule 1 shall be recalculated (upwards or downwards) by
      Lessor, using the same methods and assumptions (except to the extent such
      assumptions shall be varied to take into account the MACRS Loss (as each
      such term is defined in Section B to the Letter Agreement No. 1) that is
      the subject of such indemnification and any prior or contemporaneous MACRS
      Loss) used to calculate the Basic Rent amounts and the Casualty Values in
      order to (1) maintain Lessor's Net Economic Return and (2) to the extent
      possible consistent with clause (1) hereof, minimize the Net Present Value
      of Rents to Lessee.

            (iv)  CALCULATION OF ADJUSTMENTS: All adjustments pursuant to
      Section 4(a)(iii) shall be made as promptly as practicable after either
      Lessor or Lessee gives notice to the other that an event has occurred that
      requires an adjustment. Lessor and Lessee shall give prompt notice to the
      other of any event requiring an adjustment. Any recalculation of the
      amounts of Basic Rent and the Casualty Values shall be prepared by Lessor,
      subject to verification by Lessee in accordance with Section 4(a)(v),
      using the same methodology and assumptions used by Lessor in determining
      the percentages of Basic Rent and the Casualty Values, as of the Delivery
      Date, except as such methodologies and assumptions have been modified to
      reflect the events giving rise to adjustments hereunder. Promptly after an
      adjustment is made hereunder, Lessor shall deliver to Lessee a description
      of such adjustment, setting forth in reasonable detail the calculation
      thereof. All adjustments required pursuant to Section 4(a)(iii) shall be
      set forth in a Lease Supplement or in an amendment to this Lease.

            (v)   VERIFICATION: If Lessee believes that any calculations by
      Lessor pursuant to Section 4(a)(iv) are in error, and if, after
      consultation, Lessee and Lessor are unable to agree on an adjustment, then
      Babcock & Brown Inc. or any other nationally recognized certified public
      accounting or lease advisory firm selected by Lessee and reasonably
      satisfactory to Lessor shall verify such calculations. Lessor will make
      available to such firm, but not, in any circumstances, to Lessee or any
      representative of Lessee, the methodology and assumptions referred to in
      Section 4(a)(iii) and any modifications thereto made to reflect the events
      giving rise to adjustments hereunder (subject to the execution by such
      firm of a confidentiality agreement, reasonably ac-

<PAGE>

                                      -16-

      ceptable to Lessor, prohibiting disclosure of such methodology and
      assumptions to any third party). The determination by such firm shall be
      final. Lessee will pay the reasonable costs and expenses of such further
      verification by such firm, provided that if such verification results in a
      decrease in Basic Rent which decreases the remaining Net Present Value of
      Rents by $10,000 or more from the remaining Net Present Value of Rents as
      recalculated by Lessor, then Lessor will pay such costs and expenses.

            (b)   PLACE AND METHOD OF PAYMENT. All Basic Rent and Supplemental
Rent and other amounts payable under this Lease shall be paid in immediately
available currency of the United States of America, at the Payment Location
specified on EXHIBIT C hereto, or at such other location as Lessor shall
designate in writing.

            (c)   PROHIBITION AGAINST SETOFF, COUNTERCLAIM, ETC. This Lease is a
net lease. Lessee's obligation to pay all Rent hereunder shall be absolute and
unconditional and shall not be affected or reduced by any circumstances,
including, without limitation, (i) any setoff, counterclaim, recoupment, defense
or other right which Lessee may have against Lessor, the Manufacturer, the
Engine Manufacturer, any seller of or Person or individual person providing
services with respect to the Aircraft or any other Person or individual person,
including without limitation maintenance, modification and other services
provided by any Person for any reason whatsoever; (ii) any defect in the title,
airworthiness or eligibility for registration under applicable Law, or any
condition, design, operation or fitness for use of, or any damage to or loss or
destruction of, the Aircraft, or any interruption or cessation in the use or
possession thereof by Lessee for any reason whatsoever, whether arising out of
or related to an act or omission of Lessee, or any other Person or individual
person; (iii) any Liens with respect to the Aircraft; (iv) the invalidity or
unenforceability or lack of due authorization or other infirmity of this Lease
or any absence of right, power or authority of Lessor or Lessee to enter into
this Lease; (v) any insolvency, bankruptcy, reorganization or similar
proceedings by or against Lessor or Lessee; (vi) any other circumstance or
happening of any nature whatsoever, similar to any of the foregoing; or (vii)
any Taxes; it being the express intention of Lessor and Lessee that all Rent
payable hereunder shall be payable in all events, unless the obligation to pay
the same shall be terminated pursuant to the express provisions of this Lease.

            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 Law or otherwise, to terminate this Lease or any
obligation imposed upon Lessee hereunder or in relation hereto.

            Nothing contained in this Section shall be construed as a waiver of
Lessee's right to pursue any claim that it may have, including without
limitation, the right to seek a separate recovery of any payment of Basic Rent
or Casualty Value or other Supplemental Rent which is not due and payable in
accordance with the terms of this Lease.

<PAGE>

                                      -17-

            If for any reason whatsoever this Lease shall be terminated in whole
or in part by operation of law, Lessee nonetheless agrees to pay to Lessor
amounts equal to the Rent payments hereunder at the time such payments would
have become due and payable in accordance with the terms hereof had this Lease
not been terminated, and so long as such payments are made and all other terms
and conditions hereof are complied with by Lessor and Lessee, Lessor and Lessee
will deem this Lease to remain in full force and effect.

            (d)   INVESTMENT OF FUNDS HELD AS SECURITY.

               (i)   INVESTMENT. Any moneys held by Lessor as security for
      Lessee's obligations under this Lease shall, until paid to Lessee as
      provided herein or applied as provided herein, be invested by Lessor from
      time to time as directed in writing by Lessee (or, if Lessee fails to so
      direct, as directed by Lessor in its sole discretion) and at the expense
      and risk of Lessee in Cash Equivalents so long as such Cash Equivalents
      specified by Lessee or Lessor, as the case may be, can be acquired by
      Lessor using its commercially reasonable efforts.

               (ii)  PAYMENT OF GAIN OR LOSS. Any net gain (including interest
      received) realized as the result of investments pursuant to Section
      4(d)(i) (net of any fees, commissions and other reasonable expenses, if
      any, incurred in connection with such investment) shall be held and
      applied in the same manner as the principal amount is to be held and
      applied hereunder. Lessee will promptly pay to Lessor, on demand, the
      amount of any loss realized as the result of any such investment (together
      with any fees, commissions and other reasonable expenses, if any, incurred
      in connection with such investment), such amount so paid to be held and
      applied by Lessor as contemplated in Section 4(d)(i) above.

            Section 5. REPRESENTATIONS AND WARRANTIES.

            (a)   WARRANTIES AND DISCLAIMER OF WARRANTIES. LESSOR LEASES AND
LESSEE TAKES THE AIRCRAFT "AS IS, WHERE IS" AND LESSEE AGREES AND ACKNOWLEDGES
THAT, SAVE AS EXPRESSLY STATED IN THIS LEASE, LESSOR WILL HAVE NO LIABILITY IN
RELATION TO, AND LESSOR HAS NOT AND WILL NOT BE DEEMED TO HAVE MADE OR GIVEN
(WHETHER BY VIRTUE OF HAVING DONE OR FAILED TO DO ANY ACT, OR HAVING ACQUIRED OR
FAILED TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO THIS LEASE OR OTHERWISE),
ANY WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO, THE
AIRCRAFT, INCLUDING, WITHOUT LIMITATION, TO:

            (X)   THE TITLE, DESCRIPTION, AIRWORTHINESS, COMPLIANCE WITH
      SPECIFICATIONS, OPERATION, MERCHANTABILITY, FREEDOM FROM CLAIMS OF
      INFRINGEMENT OR THE LIKE, FITNESS FOR ANY PAR-

<PAGE>

                                      -18-

      TICULAR USE OR PURPOSE, VALUE, DURABILITY, CONDITION, OR DESIGN, OR AS TO
      THE QUALITY OF THE MATERIAL OR WORKMANSHIP, THE ABSENCE OF LATENT OR OTHER
      DEFECTS, WHETHER OR NOT DISCOVERABLE, OR AS TO ANY OTHER REPRESENTATION OR
      WARRANTY WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY
      ARISING FROM A COURSE OF PERFORMANCE OR DEALING OR USAGE OF TRADE) WITH
      RESPECT TO THE AIRCRAFT, ANY ENGINE OR ANY PART; OR

            (Y)   ANY OBLIGATION, LIABILITY, RIGHT, CLAIM OR REMEDY IN CONTRACT
      OR IN TORT OUT OF ANY NEGLIGENCE OR STRICT LIABILITY OF LESSOR OR
      OTHERWISE; FOR: (A) ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE
      CAUSED DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY ANY
      INADEQUACY THEREOF OR DEFICIENCY OR DEFECT THEREIN OR BY ANY OTHER
      CIRCUMSTANCE IN CONNECTION THEREWITH; (B) THE USE, OPERATION, OR
      PERFORMANCE OF THE AIRCRAFT OR ANY RISKS RELATING THERETO; (C) ANY
      INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR ANTICIPATED PROFITS OR
      CONSEQUENTIAL DAMAGES; (D) THE DELIVERY, OPERATION, SERVICING,
      MAINTENANCE, REPAIR, IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT, ANY
      ENGINE OR ANY PART; OR (E) ANY OTHER DIRECT, INCIDENTAL OR CONSEQUENTIAL
      LOSSES OR DAMAGES.

            THE WARRANTIES AND REPRESENTATIONS SET FORTH IN THIS SECTION 5(a)
ARE EXCLUSIVE AND IN LIEU OF ALL OTHER REPRESENTATIONS OR WARRANTIES WHATSOEVER,
EXPRESS OR IMPLIED, AND LESSOR SHALL NOT BE DEEMED TO HAVE MADE ANY OTHER
WARRANTIES, EXCEPT THAT:

               (i)   Lessor warrants that on the Delivery Date title to the
      Aircraft was vested in Lessor and that the Aircraft was free and clear of
      any and all Liens, except for this Lease;

               (ii)  Lessor further represents and warrants that Lessor is a
      corporation duly organized and validly existing and in good standing under
      the laws of Delaware and is, and shall remain so long as it shall be the
      Lessor under this Lease, a Citizen of the United States, and has the
      corporate power and authority to carry on its business as presently
      conducted and to perform its obligations under this Lease;

               (iii) Lessor further represents and warrants that the making and
      performance by Lessor of this Lease has been duly authorized by all
      necessary corporate action on the part of Lessor and does not require
      approval of any shareholder of Lessor (or if such approval is required,
      such approval has been obtained), and neither the execution

<PAGE>

                                      -19-

      and delivery hereof nor the consummation of the transactions contemplated
      hereby nor compliance by Lessor with any of the terms and provisions
      hereof will contravene any Law applicable to Lessor or result in any
      breach of, or constitute any default under, or result in the creation of
      any lien, charge or encumbrance upon any property of Lessor under, any
      credit agreement or instrument corporate charter or bylaw or other
      agreement or instrument to which Lessor is a party or by which Lessor or
      its properties or assets are bound or affected.

            (iv)  Lessor has received every consent, approval or authorization
      of, and has given every notice to, each Governmental Entity having
      jurisdiction with respect to the execution, delivery or performance of
      this Lease (including all monetary and other obligations hereunder) that
      is required for Lessor to execute and deliver this Lease, and to perform
      the transactions contemplated hereby and each such consent, approval or
      authorization is valid and effective and has not been revoked;

            (v)   Lessor further represents and warrants that this Lease and the
      Lease Supplement have been duly entered into and delivered by Lessor, and
      assuming the due authorization, execution and delivery thereof by the
      Lessee, the Lease and Lease Supplement constitute legal, valid and binding
      obligations of Lessor, enforceable against Lessor in accordance with their
      respective terms except as may be limited by bankruptcy, insolvency,
      reorganization, moratorium or other similar laws affecting the enforcement
      of creditors' rights generally, and general principles of equity
      (regardless of whether such enforceability is considered in a proceeding
      in equity or at law).

        (b) WAIVER. LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND THE LESSOR, ALL
ITS RIGHTS IN RESPECT OF ANY WARRANTY OR REPRESENTATION, EXPRESS OR IMPLIED, ON
THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER AND WHENEVER ARISING
AT ANY TIME IN RESPECT OF OR OUT OF THE POSSESSION, OPERATION OR PERFORMANCE OF
THE AIRCRAFT, ANY ENGINE OR ANY PART OF THIS AGREEMENT EXCEPT TO THE EXTENT
ARISING UNDER CLAUSES (i) THROUGH (v) OF SECTION 5(a) HEREOF.

        (c) CONFIRMATION. LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE
PROVISIONS OF THIS SECTION 5 AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS HAVE
BEEN CALCULATED BASED ON ITS PROVISIONS.

        (d) LESSEE'S REPRESENTATIONS AND WARRANTIES. Lessee hereby makes the
following representations and warranties as of the date hereof which
representations and warranties shall survive the execution and delivery of this
Lease:

            (i)   Lessee is a corporation duly organized, and existing in good
      standing under the Laws of the State of California and has the requisite
      power and authority to

<PAGE>

                                      -20-

      carry on its business as presently conducted and to perform its
      obligations under this Lease;

            (ii)  this Lease has been duly authorized by all necessary action on
      the part of Lessee and does not require any approval of the shareholders
      of Lessee (or if such approval is required, such approval has been
      obtained), and neither the execution and delivery hereof nor the
      consummation of the transactions contemplated hereby nor compliance by
      Lessee with any of the terms and provisions hereof will contravene any Law
      applicable to Lessee or result in any breach of, or constitute any default
      under (other than a breach or default that would not result in a Material
      Adverse Change to Lessee), or result in the creation of any Lien (other
      than as permitted under this Lease), on any property of Lessee under, any
      credit agreement or instrument corporate charter or by-law or other
      material agreement or instrument to which Lessee is a party or by which
      Lessee or its properties or assets are bound or affected in any material
      respect;

            (iii) Lessee has received every consent, approval or authorization
      of, and has given every notice to, each Governmental Entity having
      jurisdiction with respect to the execution, delivery or performance of
      this Lease (including all monetary and other obligations hereunder) that
      is required for Lessee to execute and deliver this Lease, and to perform
      the transactions contemplated hereby and each such consent approval or
      authorization is valid and effective and has not been revoked;

            (iv)  this Lease and the Lease Supplement have been duly executed
      and delivered by Lessee, and, assuming the due authorization, execution
      and delivery thereof by the Lessor, the Lease and the Lease Supplement
      constitute legal, valid and binding obligations of Lessee, enforceable
      against Lessee in accordance with their respective terms, except as
      enforcement thereof may be limited by applicable bankruptcy, insolvency,
      reorganization, receivership, moratorium or other similar laws affecting
      the enforcement of creditors' rights generally, and general principles of
      equity (regardless of whether such enforceability is considered in a
      proceeding in equity or at law);

            (v)   Lessee's chief executive office is located at 100 Oceangate,
      15th Floor, Long Beach, CA 90802; the records of Lessee concerning the
      Aircraft are maintained at such chief executive office and Lessee is
      incorporated under the laws of the State of California and its
      organizational identification number is C1483679;

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

            (vii) except for the filing for recordation of this Lease and the
      Lease Supplement with the FAA, the filing of any Uniform Commercial Code
      financing statements required (and continuation statements at periodic
      intervals), the taking of possession and retention of the original
      counterparts of the Lease and Lease Supplement

<PAGE>

                                      -21-

      by Lessor and the placing on the Aircraft and on each Engine of the plates
      containing the legends referred to in Section 6(a)(iii) hereof, no further
      filing or recording of this Lease or of any other document (including any
      financing statement under Article 9 of the Uniform Commercial Code) and no
      further action, is necessary or desirable under the laws of the United
      States of America or any state in order to (A) fully establish Lessor's
      title to, and interest in, and property in rights with respect to the
      Aircraft as against Lessee or any third party and to ensure that under all
      such laws the property rights of Lessor therein will have priority in all
      respects over the claims of all creditors of Lessee, or (B) ensure the
      validity, effectiveness and enforceability of this Lease;

            (viii) as of the date hereof, Lessee does not hold any contract or
      other obligation to operate the Aircraft to any of the countries
      designated under the United States Foreign Asset Control Regulations (31
      C.F.R. Parts 500-599), including, as of the date hereof, North Korea,
      Cambodia, North Vietnam and South Vietnam, except to the extent that
      Lessee has obtained written permission of the United States government,
      copies of which have been provided to Lessor;

            (ix)  Lessee holds all licenses, permits, approvals, certificates,
      etc. required to conduct its business and to lease and operate the
      Aircraft, except where the failure to so hold such licenses, permits,
      approvals and certificates would not give rise to a Material Adverse
      Change to Lessee.

            Section 6. REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND
      RECORDS.

            (a) REGISTRATION AND OPERATION

               (i)   REGISTRATION AND RECORDATION. Subject to the compliance by
      Lessor with its obligations under Section 22(e), Lessee shall cause the
      Aircraft to be, and at all times during the Term to remain, duly
      registered with the FAA under the Act or with such other country of
      registry as shall be permitted under Section 6(a)(ii) below, in the name
      of Lessor as owner and lessor (except to the extent that such registration
      under the Act cannot be effected with the FAA because of Lessor's failure
      to comply with the citizenship requirements for registration of the
      Aircraft under the Act). Lessor shall execute and deliver all such
      documents as Lessee (or any Permitted Sublessee) may reasonably request
      for the purpose of effecting and continuing such registration.

               (ii)  REREGISTRATION. So long as no Event of Default shall have
      occurred and be continuing, Lessee may, by written notice to Lessor,
      request to change the country of registration of the Aircraft. Any such
      change in registration shall be effected only in compliance with, and
      subject to all of the conditions set forth in, Section 22.

<PAGE>

                                      -22-

               (iii) MARKINGS. If permitted by applicable Law, on or reasonably
      promptly after the Delivery Date, Lessee will cause to be affixed to, and
      maintained in, the cockpit of the Airframe and on each Engine, in each
      case, in a clearly visible location (it being understood that the location
      of such placards, as identified to Lessor prior to the Delivery Date,
      shall be deemed to be in compliance with this requirement), a placard of a
      reasonable size and shape bearing the legend, in English, set forth in
      Exhibit C as the Lease Identification. Such placards may be removed
      temporarily, if necessary, in the course of maintenance of the Airframe or
      Engines. If any such placard is destroyed or becomes illegible, Lessee
      shall promptly replace it with a placard complying with the requirements
      of this Section 6(a)(iii).

               (iv)  COMPLIANCE WITH LAWS. Lessee shall not, and shall not allow
      any other person to, operate, use, maintain, service, repair or overhaul
      the Aircraft (A) in violation of any Law binding on or applicable to the
      Aircraft, the Airframe or any Engine, or (B) in violation of any
      airworthiness certificate, license or registration of any Government
      Entity relating to the Aircraft, the Airframe or any Engine, except (1)
      immaterial or non-recurring violations with respect to which corrective
      measures are taken promptly by Lessee or a Permitted Sublessee, as the
      case may be, upon discovery thereof, and (2) to the extent Lessee or any
      Permitted Sublessee is contesting the validity or application of any such
      Law or requirement relating to any such certificate, license or
      registration in good faith in any reasonable manner which does not involve
      any material risk of the sale, forfeiture or loss of the Aircraft, the
      Airframe or any Engine or any material risk of criminal liability or of
      material risk of civil penalty against Lessor.

               (v)   OPERATION. Lessee agrees not to operate, use or locate the
      Aircraft, the Airframe or any Engine, or allow the Aircraft, the Airframe
      or any Engine to be operated, used or located, (A) in any area excluded
      from coverage by any insurance required by the terms of Section 12, except
      in the case of a requisition by or transfer to the U.S. Government where
      Lessee obtains an indemnity in lieu of such insurance from the U.S.
      Government, or insurance from the U.S. Government, covering such area, in
      accordance with Section 12(c) or (B) in any recognized area of hostilities
      unless fully covered in accordance with Section 12 by war-risk insurance,
      unless in any case referred to in this Section 6(a)(v) the Aircraft is
      only temporarily operated, used or located in such area as a result of an
      emergency, equipment malfunction, navigational error, hijacking, weather
      condition or other similar unforeseen circumstances, so long as Lessee
      diligently and in good faith proceeds to remove the Aircraft from such
      area.

            (b)   POSSESSION. Lessee will not, without the prior written consent
of Lessor, sublease or otherwise in any manner deliver, transfer or relinquish
possession of the Air-

<PAGE>

                                      -23-

craft, the Airframe or any Engine or install any Engine, or permit any Engine to
be installed, on any airframe other than the Airframe; PROVIDED, HOWEVER,
subject to the provisions of Section 6(c), Lessee may, without such prior
written consent:

            (i)   INTERCHANGE AND POOLING. Subject or permit any Permitted
      Sublessee to subject any Engine to normal interchange agreements or
      pooling agreements or arrangements, in each case customary in the
      commercial air cargo industry and entered into by Lessee or such Permitted
      Sublessee, as the case may be, in the ordinary course of business;
      PROVIDED, HOWEVER, that if Lessor's title to any such Engine is divested
      under any such agreement or arrangement, then such Engine shall be deemed
      to have suffered a Casualty Occurrence as of the date of such divestiture,
      with the effect that Lessee shall be required to replace such Engine with
      a Replacement Engine.

            (ii)  TESTING AND SERVICE. Deliver or permit any Permitted Sublessee
      to deliver possession of the Aircraft, Airframe, any Engine or any Part
      (A) to the manufacturer thereof or to any third-party maintenance
      provider, for testing, service, repair, maintenance or overhaul work on
      the Aircraft, Airframe, any Engine or any Part, or, to the extent required
      or permitted by the terms of Section 9, for alterations or modifications
      in or additions to the Aircraft, Airframe or any Engine or (B) to any
      Person for the purpose of transport to a Person referred to in the
      preceding clause (i).

            (iii) TRANSFER TO U.S. GOVERNMENT. Transfer or permit any Permitted
      Sublessee to transfer possession of the Aircraft, Airframe or any Engine
      to the U.S. Government, in which event Lessee shall promptly notify Lessor
      in writing of any such transfer of possession and, in the case of any
      transfer pursuant to CRAF, in such notification shall identify by name,
      address and telephone numbers the Contracting Office Representative or
      Representatives for the Military Airlift Command of the United States Air
      Force to whom notices must be given and to whom requests or claims must be
      made to the extent applicable under CRAF.

            (iv)  INSTALLATION OF ENGINES ON OWNED AIRCRAFT. Install or permit
      any Permitted Sublessee to install an Engine on an airframe owned by
      Lessee or such Permitted Sublessee, as the case may be, free and clear of
      all Liens, except (A) those Liens which are permitted by Section 14 hereof
      and those that do not apply to the Engines and (B) the rights of third
      parties under normal interchange or pooling agreements and arrangements of
      the type that would be permitted under Section 6(b)(i).

            (v)   INSTALLATION OF ENGINES ON OTHER AIRFRAMES. Install or permit
      any Permitted Sublessee to install an Engine on an airframe leased to
      Lessee or such Permitted Sublessee, or purchased by Lessee or such
      Permitted Sublessee subject to a mortgage, security agreement, conditional
      sale or other secured financing arrangement, but only if (A) such airframe
      is free and clear of all Liens, except (1) the rights of the par-

<PAGE>

                                      -24-

      ties to such lease, or any such secured financing arrangement, covering
      such airframe and (2) Liens of the type permitted by clauses (A) and (B)
      of Section 6(b)(iv) and (B) Lessee or Permitted Sublessee, as the case may
      be, shall have received from the lessor, mortgagee, secured party or
      conditional seller, in respect of such airframe, a written agreement
      (which may be a copy of the lease, mortgage, security agreement,
      conditional sale or other agreement covering such airframe), whereby such
      Person agrees that it will not acquire or claim any right, title or
      interest in, or Lien on, such Engine by reason of such Engine being
      installed on such airframe at any time while such Engine is subject to
      this Lease or is owned by Lessor.

            (vi)  INSTALLATIONS OF ENGINES ON FINANCED AIRCRAFT. Install or
      permit any Permitted Sublessee to install an Engine on an airframe owned
      by Lessee or such Permitted Sublessee, leased to Lessee or such Permitted
      Sublessee, or purchased by Lessee or such Permitted Sublessee subject to a
      conditional sale or other security agreement under circumstances where
      neither Section 6(b)(iv) or 6(b)(v) is applicable; PROVIDED, HOWEVER, that
      any such installation shall be deemed an Casualty Occurrence with respect
      to such Engine, and Lessee shall comply with Section 1l(d) hereof in
      respect thereof. Until Section 11(d) has been fully complied with,
      Lessor's interest in any such Engine shall continue in full force and
      effect.

            (vii) SUBLEASING. With respect to the Aircraft, Airframe or any
      Engine, so long as no Event of Default shall have occurred and is
      continuing, enter into a sublease with any Permitted Air Carrier, but only
      if:

                  (A)   Lessee shall provide written notice to Lessor (such
            notice in the event of a sublease to a U.S. Air Carrier to be given
            promptly after entering into any such sublease or, in the case of a
            sublease to any other Permitted Air Carrier, 10 days in advance of
            entering into such sublease);

                  (B)   At the time that Lessee enters into such sublease, such
            Permitted Air Carrier shall not be subject to any bankruptcy,
            insolvency, liquidation, reorganization, dissolution or similar
            proceeding, and shall not have substantially all of its property in
            the possession of any liquidator, trustee, receiver or similar
            person;

                  (C)   Any such sublease (1) shall not extend beyond the
            expiration of the Term, (2) shall include provisions for the
            maintenance, operation, possession, inspection and insurance of the
            Aircraft that are the same in all material respects as the
            applicable provisions of this Lease and (3) shall be expressly
            subject and subordinate to all the terms of this Agreement and to
            the rights, powers and remedies of Lessor hereunder, including,
            without limitation, Les-

<PAGE>

                                      -25-

            sor's rights under Section 18 to repossess the Aircraft, Airframe
            and Engines and to terminate such sublease upon the occurrence of an
            Event of Default;

                  (D)   In connection with a sublease to a Permitted Foreign Air
            Carrier or a Permitted Foreign Manufacturer, (1) the United States
            maintains diplomatic relations with the country of domicile of such
            Permitted Foreign Air Carrier or Permitted Foreign Manufacturer (or,
            in the case of Taiwan, diplomatic relations at least as good as
            those in effect on the Delivery Date) and (2) Lessee shall have
            furnished Lessor a favorable opinion of counsel, reasonably
            satisfactory to Lessor, in the country of domicile of such Permitted
            Foreign Air Carrier or Permitted Foreign Manufacturer, that (i) the
            terms of such sublease are the legal, valid and binding obligations
            of the parties thereto enforceable under the laws of such
            jurisdiction, (ii) it is not necessary for Lessor to register or
            qualify to do business in such jurisdiction, if not already so
            registered or qualified, as a result, in whole or hi part, of the
            proposed sublease, (iii) Lessor's title to the Aircraft, Airframe
            and Engines will be recognized in such jurisdiction, (iv) the Laws
            of such jurisdiction of domicile require fair compensation by the
            government of such jurisdiction, payable in a currency freely
            convertible into Dollars, for the loss of title to the Aircraft,
            Airframe or Engines in the event of the requisition by such
            government of such title (unless Lessee shall provide insurance in
            the amounts required with respect to hull insurance under Section 12
            covering the requisition of title to the Aircraft, Airframe or
            Engines by the government of such jurisdiction so long as the
            Aircraft, Airframe or Engines are subject to such sublease) and (v)
            the agreement of such Permitted Foreign Air Carrier or Permitted
            Foreign Manufacturer that its rights under the sublease are subject
            and subordinate to all the terms of this Lease is enforce able
            against such Permitted Foreign Air Carrier or Permitted Foreign
            Manufacturer under applicable law;

                  (E)   Lessee shall furnish to Lessor evidence reasonably
            satisfactory to Lessor that the insurance required by Section 12
            remains in effect;

                  (F)   All necessary documents shall have been duly filed,
            registered or recorded in such public offices as may be required
            fully to preserve the title of Lessor in the Aircraft, Airframe and
            Engines;

                  (G)   Lessee shall reimburse Lessor for all of its reasonable
            out-of- pocket fees and expenses, including, without limitation,
            reasonable fees and disbursements of counsel incurred by Lessor in
            connection with any such sublease;

<PAGE>

                                      -26-

                  (H)   For all purposes of this Section 6(b)(vii), the term
            "sublease" shall be deemed to include interchange agreements with
            respect to the Aircraft or Airframe; and

                  (I)   No such sublease shall be made to a Permitted Foreign
            Air Carrier or a Permitted Foreign Manufacturer prior to the close
            of the Tax Attribute Period, unless Lessee prepays on a lump-sum
            basis any liability due under Section B of the Letter Agreement No.
            1 as a result of such sublease based upon the assumption that such
            sublease were to continue for the remainder of the term of such
            sublease; PROVIDED, HOWEVER, that such sublease shall not be
            restricted under this paragraph (i) if it would not have the effect
            of lengthening the "recovery period" (as defined in Section 168 of
            the Code) then applicable to the Aircraft.

            (c)   CERTAIN LIMITATIONS ON SUBLEASINR OR OTHER RELINQUISHMENT OF
POSSESSION. Notwithstanding anything to the contrary in Section 6(b):

            (i)   The rights of any person that receives possession of the
      Aircraft in accordance with Section 6(b) shall be subject and subordinate
      to all the terms of this Lease, and to Lessor's rights, powers and
      remedies hereunder, including, without limitation (A) Lessor's right to
      repossess the Aircraft pursuant to Section 18, (B) Lessor's right to
      terminate and avoid such sublease, delivery, transfer or relinquishment of
      possession upon the occurrence of an Event of Default and (C) the right to
      require such person to forthwith deliver the Aircraft, the Airframe and
      Engines subject to such transfer upon the occurrence of an Event of
      Default;

            (ii)  Lessee shall remain primarily liable hereunder for the
      performance of all the terms of this Lease to the same extent as if such
      transfer had not occurred, and no transfer of possession of the Aircraft,
      the Airframe, any Engine or any Part shall in any way discharge or
      diminish any of Lessee's obligations to Lessor hereunder or under any
      Operative Document;

            (iii) Lessee shall ensure that no sublease, delivery, transfer or
      relinquishment permitted under Section 6(b) shall affect the United States
      registration of the Aircraft, unless also made in accordance with the
      provisions of Section 22;

            (iv)  Any event that constitutes or would, with the passage of time,
      constitute a Casualty Occurrence under paragraph (c), (d), or (e) of the
      definition of such term shall not be deemed to violate the provisions of
      Section 6(b); and

            (v)   Any Wet Lease or ACMI Contract shall not constitute a
      delivery, transfer or relinquishment of possession for purposes of Section
      6(b) and shall not be prohib-

<PAGE>

                                      -27-

      ited by the terms thereof. Neither a Wet Lease nor an ACMI contract shall
      be deemed to be a "sublease", and the counterparty of a Wet Lease or an
      ACMI Contract shall not be deemed to be a sublessee for any purposes under
      this Lease. Any contract that is part of the United States Civil Reserve
      Air Fleet Program shall not be deemed to be a sublease for any purposes
      under this Lease.

            (d)   SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT OF A PERMITTED
SUBLESSEE. Notwithstanding anything to the contrary contained in Sections 6(b)
and 6(c), if: (i) the Lessee assigns a Permitted Sublease to Lessor as security
for the performance of Lessee's obligations under this Lease; (ii) the basic
rent payments under such Permitted Sublease are at least equal to Lessee's
payments under this Lease; and (iii) the Lessee and the Permitted Sublessee
execute and deliver a Subordination, Non-Disturbance and Attornment Agreement in
substantially the form attached hereto as EXHIBIT K (the "Attornment Agreement")
to Lessor, then Lessor: (A) shall execute and deliver such Attornment Agreement
to the Lessee and Permitted Sublessee; (B) agrees that the requirement contained
in Section 6(b)(vii)(C)(3) shall be deemed satisfied by Section 1 of the
Attornment Agreement; and (3) shall not disturb the Permitted Sublessee's
possession of the Aircraft, Airframe or Engines during the term of the Permitted
Sublease nor void the Permitted Sublease so long as no event of default has
occurred under the Permitted Sublease.

            Section 7. INFORMATION.

            During the term of this Lease, Lessee agrees to furnish Lessor the
following:

            (a)   within ninety (90) days following the end of each quarter of
      the fiscal year of Guarantor, if Guarantor is a public reporting company,
      or Lessee, if Guarantor is not a public reporting company, except the last
      such quarter of such year, consolidated balance sheets of Guarantor
      prepared as of the close of each month during such quarterly period,
      together with the related unaudited profit and loss statements and cash
      flow statements for each month during such period, prepared in accordance
      with generally accepted accounting principles, and Lessor agrees that
      delivery of Guarantor's Form 10-Q satisfies the obligation contained in
      this clause (a);

            (b)   within one hundred twenty (120) days after the close of each
      fiscal year of Guarantor, if Guarantor is a public reporting company, or
      Lessee, if Guarantor is not a public reporting company, an audited balance
      sheet, profit and loss statement and cash flow statements, and statement
      of stockholders' equity of Lessee (prepared on a consolidated basis), as
      of the close of such fiscal year, prepared in accordance with generally
      accepted accounting principles, and Lessor agrees that delivery of
      Guarantor's Form 10-K satisfies the obligation contained in this clause
      (b);

<PAGE>

                                      -28-

            (c)   within one hundred twenty (120) days after the close of each
      fiscal year of Lessee, a certificate signed by a duly authorized officer
      of Lessee, stating (i) that such officer is familiar with the relevant
      terms of this Lease and has made a review of Lessee's compliance herewith
      during the preceding fiscal year, and (ii) that no event has occurred
      which constitutes a Default or, if such an event has occurred, the nature
      thereof and action Lessee has taken or is taking to cure the same; and

            (d)   from time to tune such other information as Lessor may
      reasonably request, including information concerning the location,
      condition, use and operation of the Aircraft.

            Lessee shall permit Lessor or its designee, at Lessor's expense, on
ten (10) days' prior written notice to visit and inspect the Aircraft, its
condition, use and operation and the records maintained in connection therewith;
PROVIDED, HOWEVER, that unless an Event of Default has occurred and is
continuing, such inspection right shall be limited to one inspection every 12
months. Any inspection of the Aircraft hereunder shall be limited to a visual,
walk-around inspection and shall not include the opening of any panels, bays or
other components of the Aircraft (although those otherwise open may be
inspected), and no such inspection shall interfere with Lessee's or any
Permitted Sublessee's maintenance and operation of the Aircraft, the Airframe
and the Engines. Lessor shall have no duty to make any such inspection and shall
not incur any liability or obligation by reason of not making any such
inspection. Lessor's failure to object to any condition or procedure observed or
observable in the course of an inspection hereunder shall not be deemed to waive
or modify any of the terms of this Lease with respect to such condition or
procedure. Lessor shall indemnify and hold harmless Lessee from and against any
claims and losses incurred by Lessee and caused by Lessor in connection with any
such inspection.

            Section 8. COVENANTS OF LESSEE.

            (a)   Lessee covenants and agrees that:

            (i)   MAINTENANCE OF CORPORATE EXISTENCE. Except as provided in
      Section 8(iv) and as permitted by Section 19(b), during the term of this
      Lease, Lessee will preserve and maintain its corporate existence and such
      of its rights, privileges, licenses and franchises in any jurisdiction
      where failure to obtain such licensing or qualification would result in a
      Material Adverse Change to Lessee.

            (ii)  MAINTENANCE OF STATUS. Lessee is, and shall remain so long as
      it shall be the Lessee under this Lease, a Citizen of the United States
      and Lessee is and shall maintain and operate the Aircraft at all times as
      a Certificated Air Carrier.

<PAGE>

                                      -29-

            (iii) PLACE OF BUSINESS; STATE OF FORMATION. Lessee will not,
      without prior written notice to Lessor, change its principal place of
      business or chief executive office if there is more than one place of
      business or change its state of formation or existence.

            (iv)  NOTICE OF AN EVENT OF DEFAULT. Immediately after a responsible
      officer of Lessee obtains knowledge of an Event of Default hereunder,
      Lessee shall notify Lessor in writing of such an Event of Default.

            (v)   GOVERNMENTAL CONSENTS. Lessee undertakes to maintain or cause
      its Permitted Sublessee to maintain in full force and effect all
      governmental consents, licenses, authorizations, approvals, declarations,
      filing's and registrations obtained or effected in connection with this
      Lease and every document or instrument contemplated hereby and to take all
      such additional action as may be proper or advisable in connection
      herewith or therewith. Lessee further undertakes to obtain or effect any
      new or additional governmental consents, licenses, authorizations,
      approvals, declarations, filings or registrations as may become necessary
      for the performance of any of the terms and conditions of this Lease or
      any other document or instrument contemplated hereby.

            (vi)  FURNISHING OF DOCUMENTS. Lessee will furnish to Lessor the
      financial statements, documents, certificates and other information and
      materials described in Section 7.

            (b)   Lessor covenants and agrees that:

               (i)   QUIET ENJOYMENT. So long as no Event of Default shall have
      occurred and be continuing, Lessor shall not take or cause to be taken or
      permit any Person lawfully claiming by or through it to take any action to
      interfere with Lessee's (or any Permitted Sublessee's) rights hereunder to
      continued possession, use and operation of, and quiet enjoyment of the
      Aircraft, the Airframe, any Engine or any Part and other rights with
      respect to the Aircraft hereunder during the Term.

            If Lessor has received an assignment of a Permitted Sublease
      pursuant to Section 6(d), so long as no event of default under such
      Permitted Sublease shall have occurred and be continuing, Lessor shall not
      take or cause to be taken or permit any Person lawfully claiming by or
      through it to take any action to interfere with the Permitted Sublessee's
      rights under such Permitted Sublease to continued possession, use and
      operation of, and quiet enjoyment of the Aircraft, the Airframe, any
      Engine or any Part and other rights with respect to the Aircraft
      thereunder during the term of the Permitted Sublease.

<PAGE>

                                      -30-

            (ii)  MANUFACTURERS' WARRANTIES. So long as an Event of Default has
      not occurred and be continuing, Lessor hereby agrees to make available
      such rights as Lessor may have under any warranty, express or implied,
      with respect to the Aircraft made by the Manufacturer, or the Engine
      Manufacturer, to the extent that the same may be assigned or otherwise
      made available to Lessee and hereby authorizes Lessee to exercise such
      rights; PROVIDED, HOWEVER, that upon an Event of Default all such rights
      shall immediately revert to Lessor including all claims thereunder whether
      or not perfected.

            (iii) TITLE TRANSFERS BY LESSOR. If Lessor shall be required to
      transfer title to the Aircraft, Airframe or any Engine to Lessee or any
      other person pursuant to this Lease, then (A) Lessor shall (1) transfer to
      Lessee or such other person, as the case may be, all of Lessor's right,
      title and interest in and to the Aircraft, Airframe or such Engine, as the
      case may be, free and clear of all Lessor's Liens, (2) assign to Lessee or
      such other person, as the case may be, if and to the extent permitted, all
      warranties of Airframe Manufacturer and Engine Manufacturer with respect
      to the Aircraft, Airframe or such Engine, and (3) assign to Lessee or
      such other person, as the case may be, if and to the extent permitted, all
      claims, if any, for damage to the Aircraft, Airframe or such Engine, in
      each case free of Lessor's Liens and without recourse or warranty of any
      kind whatsoever (except as to the transfer described in clause (1) above
      and as to the absence of such Lessor's Liens, as aforesaid), and (B)
      Lessor shall promptly deliver to Lessee or such other person, as the case
      may be, a bill of sale and agreements of assignment, evidencing such
      transfer and assignment, and such other instruments of transfer, all in
      form and substance reasonably satisfactory to Lessee (or such other
      person, as the case may be), as Lessee (or such other person, as the case
      may be) may reasonably request.

            (iv)  LESSOR'S INTEREST IN CERTAIN ENGINES. Lessor hereby agrees for
      the benefit of each lessor, conditional seller, indenture trustee or
      secured party of any engine leased to, or purchased by, Lessee or any
      Permitted Sublessee subject to a lease, conditional sale, trust indenture
      or other security agreement that Lessor, its successors and assigns will
      not acquire or claim, as against such lessor, conditional seller,
      indenture trustee or secured party, any right, title or interest in any
      engine as the result of such engine being installed on the Airframe at any
      time while such engine is subject to such lease, conditional sale, trust
      indenture or other security agreement and owned by such lessor or
      conditional seller or subject to a trust indenture or security interest in
      favor of such indenture trustee or secured party.

            (v)   CHANGE IN CITIZENSHIP. Lessor agrees that, in the event its
      status is to change or has changed as a Citizen of the United States, or
      it makes public disclosure of circumstances as a result of which it
      believes that such status is likely to change, it will notify Lessee of
      (A) such change in status promptly after obtaining Actual

<PAGE>

                                      -31-

      Knowledge thereof or (B) such belief as soon as practicable after such
      public disclosure but in any event within ten Business Days after such
      public disclosure.

            Lessor agrees, solely for the benefit of Lessee, that if, during
      such time as the Aircraft is registered in the United States, (1) it shall
      not be a Citizen of the United States and (2) the Aircraft shall be, or
      would therefore become, ineligible for registration in the name of Lessor
      under the Act and regulations then applicable thereunder (without giving
      consideration to Section 47.9 of the FAA Regulations or any other
      provision that may restrict Lessee's use or operation of the Aircraft),
      then Lessor shall, as soon as is reasonably practicable, but in any event
      within 30 days after obtaining Actual Knowledge of such ineligibility and
      of such loss of citizenship, effect a voting trust or other similar
      arrangements or take any other action as may be necessary to prevent any
      deregistration or maintain the United States registration of the Aircraft.

            Section 9. MAINTENANCE; OPERATIONS; REPLACEMENT OF PARTS;
ALTERATIONS, MODIFICATION AND ADDITIONS.

            (a)   Lessee, at its own cost and expense, shall: (A) on a
nondiscriminatory basis relative to the other aircraft which it operates,
maintain, service, repair and/or overhaul (or cause to be maintained, serviced,
repaired and/or overhauled) (i) so as to keep the Aircraft in as good an
operating condition as when delivered to Lessee (ordinary wear and tear
excepted) and in such condition as necessary to enable the airworthiness
certification for the Aircraft to be maintained in good standing at all times
under Part 121 of the Federal Aviation Regulations (or under the applicable
requirements of an Aviation Authority except (a) when the Aircraft is being
temporarily stored and is not operational, (b) when the Aircraft is being
serviced, repaired, maintained, overhauled, tested or modified as permitted or
required by the terms of this Lease or (c) when all of Lessee's Boeing 747-200F
aircraft of comparable vintage and configuration, powered by power-plants and
having systems and avionics comparable to the Aircraft ("SIMILAR AIRCRAFT") have
been grounded by the FAA or an Aviation Authority under the laws of any
jurisdiction in which the Aircraft may then be registered as permitted by
Section 6(a)(ii) hereof, or such Aviation Authority has revoked or suspended the
airworthiness certificates for all such aircraft, and (ii) in accordance with
the Maintenance Program and utilizing the same manner of maintenance, service,
repair or overhaul used by Lessee (or any Permitted Sublessee) with respect to
Similar Aircraft operated by it and without in any way discriminating against
the Aircraft on the basis of its leased status or otherwise; (C) maintain or
cause to be maintained all records, logs and other materials required to be
maintained in respect of the Aircraft by the FAA or the Aviation Authority; and
(D) promptly furnish to Lessor any information required to enable Lessor to
perform any applicable government filings required of the owner of the Aircraft
by such registration jurisdiction.

            (b)   OPERATION. Lessee will not (and will not allow any other
Permitted Sublessee to) maintain, use, service, repair, overhaul or operate the
Aircraft in violation of any

<PAGE>

                                      -32-

Law or certificate of any government or governmental authority (domestic or
foreign) having jurisdiction over the Aircraft, or contrary to any airworthiness
certificate, license or registration relating to the Aircraft issued by any such
authority, except (A) immaterial or non-recurring violations with respect to
which corrective measures are taken promptly by Lessee or a Permitted Sublessee,
as the case may be, upon discovery thereof, and (B) to the extent Lessee (or any
other Permitted Sublessee) is contesting in good faith and by appropriate
proceedings the validity or application of any such law, rule, regulation or
order which does not involve (x) any material risk of sale, forfeiture or
permanent loss of the Aircraft, the Airframe, any Engine or any Part (y) any
risk of criminal liability to the Lessor or (z) any risk of material civil
liability against the Lessor. Lessee will not (and will not allow any Permitted
Sublessee to) operate the Aircraft in any area excluded from coverage by
insurance provided pursuant to Section 12 hereof; PROVIDED, HOWEVER, that the
failure of Lessee to comply with the provisions of this sentence shall not give
rise to an Event of Default hereunder if indemnification complying with SECTION
12(c) has been provided or where such failure is attributable to extraordinary
circumstances involving an isolated occurrence or series of incidents not in the
ordinary course of the regular operations of Lessee or any Permitted Sublessee
such as a hijacking, medical emergency, equipment malfunction, weather
condition, navigational error, or other isolated extraordinary event beyond the
control of Lessee or any Permitted Sublessee and Lessee or any Permitted
Sublessee is diligently and in good faith proceeding to rectify such failure.

            (c)   REPLACEMENT OF PARTS. Lessee, at its own cost and expense,
will, or will cause a Permitted Sublessee to, at its own cost and expense,
promptly replace (or cause to be replaced) all Parts 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 whatsoever. In
addition, in the ordinary course of maintenance, service, repair, overhaul or
testing, Lessee may, at its own cost and expense, or may permit a Permitted
Sublessee at its own cost and expense to, remove (or cause to be removed) any
Parts, whether or not worn out, destroyed, damaged beyond repair or permanently
rendered unfit for use, provided that Lessee, except as otherwise provided
herein, at its own cost and expense will, or will cause a Permitted Sublessee at
its own cost and expense to, replace such Parts as promptly as practicable. All
replacement Parts shall be free and clear of all Liens, other than Liens
permitted by Section 14 hereof and pooling arrangements to the extent permitted
by paragraph (c) below, shall be in as good an operating condition as, and have
a utility to and value not less than the utility and value of the Parts replaced
(assuming such replaced parts were in the condition and repair in which they
were required to be maintained by the terms hereof) and, when installed, will
not diminish the useful life of the Airframe or Engine.

            Except as otherwise provided herein, all Parts owned by the Lessor
which are at any time removed from the Aircraft shall remain the property of the
Lessor and subject to this Lease, no matter where located, until such time as
such Parts shall be replaced by Parts

<PAGE>

                                      -33-

which have been incorporated or installed in or attached to the Aircraft and
which meet the requirements for replacement Parts specified above. Immediately
upon any replacement Part becoming incorporated or installed in or attached to
the Aircraft as above provided, without further act, (i) title to the removed
part shall thereupon vest in Lessee, free and clear of all rights of Lessor,
(ii) title to such replacement part shall thereupon vest solely in Lessor,
subject only to Liens permitted by Section 14 hereof and pooling arrangements to
the extent permitted by paragraph (c) below and (iii) such replacement part
shall become subject to this Lease and be deemed a Part for all purposes thereof
and hereof to the same extent as the Part which it has replaced.

            (d)   POOLING OF PARTS. Any Part removed from the Aircraft, Airframe
or any Engine may be subjected by Lessee or a Permitted Sublessee to a normal
pooling arrangement customary in the airline industry and entered into in the
ordinary course of business of Lessee or Guarantor or such Permitted Sublessee,
so long as a Part replacing such removed Part shall be incorporated or installed
in or attached to the Aircraft, Airframe or such Engine in accordance with
paragraph (b) of this Section 9 as promptly as practicable after the removal of
such removed Part. In addition, any replacement Part when incorporated or
installed in or attached to the Aircraft, Airframe or any Engine may be owned by
any third party subject to such a normal pooling arrangement, so long as Lessee
or Permitted Sublessee, at its own cost and expense, as promptly thereafter as
reasonably possible either (i) causes title to such replacement Part to vest in
Lessor in accordance with paragraph (b) of this Section 9, free and clear of all
Liens (except Liens permitted by Section 14), or (ii) replaces (or causes to be
replaced) such replacement Part by incorporating or installing in or attaching
to the Aircraft, Airframe or such Engine a further replacement Part owned by
Lessee or a Permitted Sublessee free and clear of all Liens (except Liens
permitted by Section 14) and by causing title to such further replacement Part
to vest in Lessor in accordance with paragraph (b) of this Section 9.

            (e)   ALTERATIONS, MODIFICATIONS AND ADDITIONS. Lessee shall, or
shall cause a Permitted Sublessee to, make (or cause to be made) such
alterations and modifications in and additions to the Aircraft, Airframe and
each Engine as may be required from time to time to meet the applicable
standards of the FAA or other Aviation Authority having jurisdiction over the
operation of the Aircraft, to the extent made mandatory in respect of the
Aircraft (a "Mandatory Modification"); PROVIDED, HOWEVER, that (1) Lessee's
obligations are subject to Section C of the Letter Agreement and (2) Lessee or
any Permitted Sublessee may, in good faith and by appropriate procedure, contest
the validity or application of any law, rule, regulation or order in any
reasonable manner which does not materially adversely affect Lessor's interest
in the Aircraft and does not involve any material risk of sale, forfeiture or
loss of the Aircraft, any material risk of material civil penalty or any risk of
criminal liability being imposed on Lessor. In addition, Lessee, at its own cost
and expense, may, or may permit a Permitted Sublessee at its own cost and
expense to, from time to time make such alterations and modifications in and
additions to the Aircraft, Airframe or any Engine (each an "Optional Modifica-

<PAGE>

                                      -34-

tion") as Lessee or such Permitted Sublessee may deem desirable in the proper
conduct of its business, including, without limitation, removal of Parts which
Lessee deems are obsolete or no longer suitable or appropriate for use in the
Aircraft, Airframe or such Engine; PROVIDED, HOWEVER, that no such Optional
Modification shall (i) materially diminish the fair market value, utility, or
useful life of the Aircraft or any Engine below its fair market value, utility
or useful life immediately prior to such Optional Modification (assuming the
Aircraft or such Engine was in the condition required by the Lease immediately
prior to such Optional Modification) or (ii) cause the Aircraft to cease to have
the applicable standard certificate of airworthiness. Except as otherwise
provided herein, title to all Parts (other than Removable Parts (as defined
below)) incorporated or installed in or attached to the Aircraft, Airframe or
such Engine as the result of such Optional Modification shall, without further
act, vest in Lessor and become subject to this Lease.

            Notwithstanding anything to the contrary in this paragraph (d),
Lessee or a Permitted Sublessee may, at any time during the Term, remove any
Part (such Part being referred to herein as a "Removable Part") if (i) such Part
is in addition to, and not in replacement of or substitution for, any Part
originally incorporated or installed in or attached to the Aircraft, Airframe or
such 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 or installed in or attached to the Aircraft, Airframe or such
Engine pursuant to the terms of Section A of Exhibit E to the Lease, and (iii)
such Part can be removed from the Aircraft, Airframe or such Engine without
materially diminishing the fair market value, utility or remaining useful life
which the Airframe or such Engine would have had at the time of removal had such
removal not occurred, assuming that such Airframe or Engine was in the condition
and repair required to be maintained by the terms hereof. Removable Parts may be
leased from or financed by third parties other than Lessor. Title to any
Removable Part shall be vested in Lessee or such Permitted Sublessee, and to the
extent such Removable Part is leased from or financed by a third party other
than Lessor, may be vested in such third-party lessor or financing party. Upon
the removal by Lessee or such Permitted Sublessee of any Removable Part as above
provided, title thereto shall remain vested in Lessee or such Permitted
Sublessee or in such third-party lessor or financing party, as the case may be,
and such Part shall no longer be deemed part of the Aircraft, Airframe or such
Engine from which it was removed. Title to any Removable Part not removed as
above provided prior to the return of the Aircraft, Airframe or such Engine to
Lessor hereunder shall, without further act, vest in Lessor.

            Section 10. GENERAL TAX INDEMNITY.

            The general tax indemnity obligations of Lessee are set forth in
Section B of Letter Agreement No. 1.

<PAGE>

                                      -35-

            Section 11. CASUALTY OCCURRENCES.

            (a)   CASUALTY OCCURRENCE WITH RESPECT TO THE AIRFRAME. Within
fifteen (15) days after a Casualty Occurrence with respect to the Airframe and
any Engine then installed thereon, Lessee shall give Lessor written notice of
such occurrence. Within sixty (60) days of such occurrence, Lessee shall give
Lessor written notice of Lessee's election to make payment in respect of the
Casualty Occurrence, as provided in Section 1l(b), or to replace the Airframe
and any such Engines as provided in Section 1l(c). Any failure by Lessee to
give notice of its election shall be deemed an election of the option set forth
in Section 1l(b). In addition, if an Event of Default or Special Default has
occurred and is continuing, Lessee shall be required to make payment in respect
of such Casualty Occurrence pursuant to Section 1l(b).

            (b)   PAYMENT OF LOSS AND TERMINATION OF LEASE, (i) If Lessee elects
or is deemed to have elected, in accordance with Section 1l(a), to make payment
in respect of any such Casualty Occurrence, then Lessee shall pay or cause to be
paid, in the manner and in funds of the type specified in Section 4(b), the
following amounts:

            (A)   on the Casualty Value Date next following the earlier of (x)
      the 90th day following the date of the occurrence of such Casualty
      Occurrence, or so long as Lessee shall be diligently pursuing receipt of
      insurance proceeds, the 180th day following the date of the occurrence of
      such Casualty Occurrence, and (y) the third Business Day following the
      receipt of sufficient insurance proceeds with respect to such occurrence
      (but in any event not earlier than the date of Lessee's election or deemed
      election under Section 11(a) to make payment under this Section 11(b)),
      Lessee shall pay to Lessor an amount equal to the Casualty Value of the
      Aircraft as of the Casualty Value Date plus:

            (B)   any unpaid Basic Rent due prior to the Casualty Value Date but
      excluding any Basic Rent, payable on, the Casualty Value Date; plus

            (C)   all amounts of Supplemental Rent due on or before the Casualty
      Value Date and any reasonable out-of-pocket fees and expenses incurred in
      connection with such Casualty Occurrence by Lessor.

            (ii)  Upon such payment of the amounts set forth in clause (b)(i)
above, (A) the obligations of Lessee to make further payments of Basic Rent
hereunder shall terminate, (B) this Lease shall terminate with respect to the
Aircraft, and (C) Lessor will transfer or cause to be transferred to Lessee,
without recourse or warranty, all of Lessor's right title and interest, if any,
in and to the Airframe and Engines (if any) suffering the Casualty Occurrence,
as well as all of Lessor's right, title and interest in and to any Engine
constituting part of the Aircraft but not installed thereon at the time of the
Casualty Occurrence.

<PAGE>

                                      -36-

            (c)   REPLACEMENT OF AIRFRAME AND ENGINES. (i) If Lessee elects, in
accordance with Section 1l(a), to replace the Airframe, and any Engines
actually suffering the Casualty Occurrence, then Lessee shall, as promptly as
possible and in any event within 180 days after the occurrence of such Casualty
Occurrence, convey or cause to be conveyed to Lessor, in compliance with Section
11 (f) and as replacement for the Airframe, title to a Replacement Airframe
(which shall comply with paragraph (ii) below), and for each such Engine, title
to a Replacement Engine, in each case free and clear of all Liens other than
Liens permitted by Section 14. If Lessee makes such election, but for any reason
fails or is unable to effect such replacement within such time period and in
compliance with the requirements set forth in this Section 11 (c), then Lessee
shall be deemed to have initially made the election set forth in Section 1l(b)
with the effect that Lessee shall immediately pay, in the manner and in funds of
the type specified in Section 4(b), the amounts required under, and in
accordance with, Section 11(b)(i).

            (ii)  Any replacement airframe shall be an airframe that is the same
model as the Airframe to be replaced thereby, or an improved model, and that has
a value, utility and remaining useful life (without regard to hours or cycles
remaining until the next regular maintenance check), at least equal to the
Airframe to be replaced thereby (assuming that such Airframe had been maintained
in accordance with this Lease) (a "Replacement Airframe"). Any such Replacement
Engine shall meet the requirements of, and be conveyed by Lessee to Lessor in
accordance with, Section 1 l(d) (other than the notice requirement set forth in
Section 11 (d)(i)).

            (d)   CASUALTY OCCURRENCE WITH RESPECT TO AN ENGINE. Upon a Casualty
Occurrence with respect to an Engine only, Lessee shall give Lessor prompt
written notice thereof and shall, within ninety (90) days after such occurrence,
convey or cause to be conveyed to Lessor, as replacement for the Engine
suffering a Casualty Occurrence, title to a Replacement Engine. Each Replacement
Engine shall be free of all Liens (except those Liens which are permitted by
Section 14 hereof).

            (e)   ENGINE EXCHANGE. Upon not less than five Business Days' prior
written notice to Lessor, Lessee may replace any Engine leased hereunder with
another engine (the "Exchanged Engine") meeting the requirements of Section 11
(d). Such Exchanged Engine shall be deemed to be a "Replacement Engine" and
Lessor and Lessee shall comply with the provisions of paragraph (f) below with
regard to the Exchanged Engine and the Engine so replaced.

            (f)   CONDITIONS TO ANY REPLACEMENT. Upon full compliance by Lessee
with the terms of this paragraph, Lessor will transfer to Lessee title to the
Engine which suffered the Casualty Occurrence. Prior to or at the time of any
such conveyance of title to any Replacement Airframe or Replacement Engine to
Lessor, Lessee, at its own expense, will promptly (i) furnish Lessor with a full
warranty bill of sale, in form and substance reasonably

<PAGE>

                                      -37-

satisfactory to Lessor, with respect to such Replacement Airframe or Replacement
Engine; (ii) cause a supplement hereto, in form and substance reasonably
satisfactory to Lessor, subjecting such Replacement Airframe or Replacement
Engine to this Lease, to be duly executed by Lessee, and recorded pursuant to
applicable Law; (iii) furnish Lessor with such evidence of title to such
Replacement Airframe or Replacement Engine and of compliance with the insurance
provisions of Section 12 hereof with respect to such Replacement Airframe or
Replacement Engine as Lessor may reasonably request; (iv) furnish Lessor with an
opinion of Lessee's counsel to the effect that such full warranty bill of sale
referred to in clause (i) above constitutes an effective instrument for
conveyance of title to the Replacement Airframe or Replacement Engine; (v)
furnish a certificate signed by a duly authorized financial officer or executive
of Lessee certifying that, upon consummation of such replacement, no Default or
Event of Default will exist hereunder; (vi) furnish Lessor with such documents
as Lessor may reasonably request in connection with the consummation of the
transactions contemplated by this Section 11, in each case in form and substance
satisfactory to Lessor; and (vii) furnish such financing statement covering the
Replacement Airframe or Replacement Engine as may be requested by Lessor. Upon
full compliance by Lessee with the terms of this Section 1l(f), Lessor will
cause to be transferred or will transfer to Lessee all of the right title and
interest in the Airframe or Engine which suffered the Casualty Occurrence and
which was originally leased to Lessee. For all purposes hereof, each such
Replacement Airframe or Replacement Engine shall be deemed part of the property
leased hereunder, shall be deemed an "Airframe" or an "Engine" as defined herein
and shall be deemed part of the same Aircraft as was the Airframe or Engine
replaced thereof. No Casualty Occurrence covered by Section 11 (c) shall result
in any reduction in Rent.

            Lessor and Lessee understand and agree that if at the time of any
replacement of the Airframe or any Engine, as contemplated in this Section 11,
the Airframe was registered in a jurisdiction other than the United States, then
the requirements set forth above in this Section 1l(f) shall be deemed to refer
to the comparable applicable Law of, and the Aviation Authority of, such other
jurisdiction.

            (g)   APPLICATION OF PAYMENTS. Any amounts, other than insurance
proceeds in respect of damage or loss not constituting a Casualty Occurrence
(the application of which is provided for in Section 12), received at any time
by Lessor, Lessee or any Permitted Sublessee from any Government Entity or any
other Person in respect of any Casualty Occurrence will be applied as follows:

            (i)   REPLACEMENT OF AIRFRAME AND ENGINES. If such amounts are
      received with respect to the Airframe, and any Engine installed thereon at
      the time of such Casualty Occurrence, upon compliance by Lessee with the
      applicable terms of Section 1l(c) with respect to the Casualty Occurrence
      for which such amounts are received, such amounts shall be paid over to,
      or retained by, Lessee.

<PAGE>

                                      -38-

            (ii)  LOSS OF ENGINE. If such amounts are received with respect to
      an Engine (other than an Engine installed on the Airframe at the time such
      Airframe suffers a Casualty Occurrence), upon compliance by Lessee with
      the applicable terms of Section 1l(d) with respect to the Casualty
      Occurrence for which such amounts are received, such amounts shall be paid
      over to, or retained by, Lessee.

            (iii) PAYMENT OF LOSS. If such amounts are received, in whole or in
      part, with respect to the Airframe, and Lessee makes, has made or is
      deemed to have made the election set forth in Section 1l(b), such amounts
      shall be applied as follows:

                  (a)   first, if the sum described in Section 11 (b) has not
            then been paid in full by Lessee, such amounts shall be paid to
            Lessor to the extent necessary to pay in full such sum; and

                  (b)   second, the remainder, if any, shall be paid to Lessee.

            (h)   REQUISITION FOR USE BY GOVERNMENT WITH RESPECT TO THE
AIRCRAFT. In the event of the requisition for use by a Governmental Entity of
the Airframe or any Engine (other than a requisition constituting a Casualty
Occurrence), Lessee shall promptly notify Lessor of such requisition and all
Lessee's obligations under this Lease with respect to the Airframe or Engine
shall continue to the same extent as if such requisition had not occurred. If
the Air-frame and Engines or engines installed thereon are not returned by the
Government or such government by the end of the Term or within 180 days
thereafter, Lessor, upon notice given not less than forty-five (45) days before
the end of the Term, may elect to treat such event as constituting a Casualty
Occurrence with respect to the Aircraft, and the provisions of Section 11 (b)
shall apply, with payment and determination of Casualty Value with respect to
the Aircraft on and as of the date of expiration of the Term. If Lessor does not
so elect, Section 16 shall apply promptly upon such return by such Governmental
Entity. All payments received by Lessor or Lessee or any Permitted Sublessee
from the Governmental Entity for the use of the Airframe or Engine prior to the
time such requisition becomes a Casualty Occurrence shall be paid over to, or
retained by, Lessee if no Special Default or Event of Default shall have
occurred and be continuing; and all payments received by Lessor or Lessee from
the Governmental Entity for the use of such item thereafter shall be paid over
to, or retained by, Lessor; provided that if such requisition constitutes a
Casualty Occurrence, or Lessor has elected to treat such requisition as a
Casualty Occurrence, then all such payments shall be paid over to Lessor and
applied as provided for in Section 1l(g)(iii).

            (i)   OTHER DISPOSITIONS. Any amounts not payable to or retainable
by Lessee pursuant to this Section 11 or Section 12 hereof because a Special
Default or an Event of Default shall have occurred and be continuing shall be
held by Lessor and shall be paid over to Lessee when such Special Default or
Event of Default shall cease to be continuing, except that if Lessor shall have
theretofore declared this Lease to be in default pursuant to Section 18

<PAGE>

                                      -39-

hereof, such amounts shall be retained by Lessor and disposed of in accordance
with the provisions thereof.

            (j)   APPLICATION IN DEFAULT. Any amount referred to in Section
1l(g) which is otherwise payable to Lessee shall not be paid to Lessee, or, if
it has been previously paid to Lessee, and not yet applied by Lessee as
permitted or required hereunder, shall be delivered from Lessee to Lessor, if at
the time of such payment a Special Default or an Event of Default shall have
occurred and be continuing. In such case, all such amounts shall be paid to and
held by Lessor as security for the obligations of Lessee and shall be invested
pursuant to Section 4(d), or, at the option of Lessor, applied by Lessor toward
payment of any of Lessee's obligations at the time due hereunder, as Lessor may
elect. At such time as there shall not be continuing any such Special Default or
Event of Default, all such amounts at the time held by Lessor in excess of the
amount, if any, which Lessor has elected for application as provided above,
shall be paid to Lessee.

            (k)   REQUISITION FOR USE OF ENGINE. In the event of the requisition
for use by any Governmental Entity of any Engine but not the Airframe, a
Casualty Occurrence shall be deemed to have occurred with respect to such
Engine.

            Section 12. INSURANCE.

            (a)   LESSEE'S OBLIGATION TO INSURE. Lessee shall comply with, or
cause to be complied with, each of the provisions of EXHIBIT G, which provisions
are hereby incorporated by this reference as if set forth in full herein. All
references to "Section 12" or "this Section 12" shall be deemed to include
EXHIBIT G.

            (b)   INSURANCE FOR OWN ACCOUNT. Nothing in this SECTION 12 shall
limit or prohibit (i) Lessee (or any Permitted Sublessee) from maintaining the
policies of insurance required under EXHIBIT G with higher limits than those
specified in EXHIBIT G (and any proceeds greater than those specified in EXHIBIT
G shall be payable to Lessee, as provided in the policy relating thereto), or
(ii) Lessor from obtaining insurance for its own account (and any proceeds
payable under such separate insurance shall be payable as provided in the policy
relating thereto); provided, however, that no insurance may be obtained or
maintained that would limit or otherwise adversely affect the coverage of any
insurance required to be obtained or maintained by Lessee pursuant to this
SECTION 12 and EXHIBIT G.

            (c)   INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE. Lessor
agrees to accept, in lieu of insurance against any risk with respect to the
Aircraft described in EXHIBIT G, indemnification from, or insurance provided by,
the U.S. Government, or upon the written consent of Lessor, other Government
Entity, against such risk in an amount that, when added to the amount of
insurance (including permitted self-insurance), if any, against such risk that
Lessee (or any Permitted Sublessee) may continue to maintain, in accordance with
this SEC-

<PAGE>

                                      -40-

TION 12 shall be at least equal to the amount and terms of insurance against
such risk otherwise required by this SECTION 12.

            (d)   APPLICATION OF INSURANCE PROCEEDS. As between Lessor and
Lessee, all insurance proceeds received as a result of the occurrence of a
Casualty Occurrence with respect to the Aircraft or any Engine under policies
required to be maintained (or caused to be maintained) by Lessee pursuant to
this SECTION 12 will be applied in accordance with SECTION 11(g). All proceeds
of insurance required to be maintained (or caused to be maintained) by Lessee,
in accordance with this SECTION 12 and SECTION B of EXHIBIT G, in respect of any
property damage or loss not constituting a Casualty Occurrence with respect to
the Aircraft, Airframe or any Engine will be applied in accordance with SECTION
B and CLAUSE (12) of SECTION E of EXHIBIT G.

            (e)   APPLICATION OF PAYMENTS DURING EXISTENCE OF A SPECIAL DEFAULT
OR EVENT OF DEFAULT. If a Special Default or Event of Default shall have
occurred and be continuing at any time that an amount described in this Section
12 or clause (12)(ii) of Section E of Exhibit G is payable or creditable to, or
retainable by, Lessee, Lessee shall cause such amount to be paid over to Lessor
as security for the obligations of Lessee under this Lease and shall be invested
pursuant to Section 4(d) hereof unless and until such amount is applied, at the
option of Lessor, or upon the written request of Lessee to Lessor, from time to
time during the continuance of a Special Default or Event of Default, to
Lessee's obligations under this Lease and the other Operative Documents as and
when due, it being understood that any such application shall be made to such
obligations of Lessee as Lessor may determine in its sole discretion. At such
time as there shall not be continuing any Special Default or Event of Default,
such amount shall be paid to Lessee to the extent not previously applied in
accordance with this Section 12(e).

            Section 13. INDEMNIFICATION.

            (a)   INDEMNIFICATION. Lessee agrees to indemnify, reimburse and
hold harmless each Indemnitee from and against any and all claims, damages,
losses, liabilities, demands, suits, judgments, causes of action, legal
proceedings, whether civil or criminal, penalties, fines and other sanctions,
and any reasonable attorney's fees and other reasonable costs and expenses in
connection herewith or therewith, including, without limitation, any of the
foregoing arising or imposed with or without Lessor's fault or negligence
(whether passive or active), or under the doctrine of strict liability (any and
all of which are hereafter referred to as "Claims") which in any way may result
from, pertain to or arise in any manner out of, or are in any manner related to
(i) the Aircraft or any of the Operative Documents, or the breach of any
representation, warranty or covenant made by Lessee hereunder or under any other
such document, or (ii) the condition, ownership, manufacture, delivery,
non-delivery, lease, acceptance, possession, return, disposition following the
happening of an Event of Default, use, or operation of the Aircraft either in
the air or on the ground, or (iii) any defect in the Aircraft

<PAGE>

                                      -41-

(whether or not discovered or discoverable by Lessee or Lessor) arising from the
material or any articles used therein or from the design, testing, or use
thereof or from any maintenance, service, repair, overhaul, or testing of the
Aircraft whether or not the Aircraft is in the possession of Lessee and
regardless of where the Aircraft may then be located; or (iv) any transaction,
approval, or document contemplated by this Lease or any of the other Operative
Documents or given or entered into in connection herewith or therewith. In the
event Lessee is required to indemnify any Indemnitee hereunder, Lessee shall pay
to such Indemnitee an amount which, after deduction of all Taxes and like
charges required to be paid by such Indemnitee in respect of such payment, is
equal to the amount of the indemnification required; provided that each
Indemnitee shall pay to Lessee the amount of any tax benefits obtained in
respect of such payment.

            The indemnities contained in this Section 13 shall continue in full
force and effect notwithstanding the expiration or other termination of this
Lease and are expressly made for the benefit of and shall be enforceable by each
Indemnitee.

            Notwithstanding anything to the contrary expressed or implied
herein, Lessee shall have no liability under this Section 13 in respect of any
Claim to the extent the same shall arise out of or be attributable:

            (A)   To any grossly negligent act or omission or willful misconduct
      of any Indemnitee or any related Indemnitee (as defined below);

            (B)   To any Taxes;

            (C)   To a loss of future profits of, a cost or expense unreasonably
      incurred by or the normal and ordinary administrative and operating costs
      and overhead expenses of any Indemnitee;

            (D)   To acts or events which occur after (x) the date the Aircraft
      has been redelivered to Lessor in accordance with Section 16 hereof (it
      being understood that the date of placement of the Aircraft in storage as
      provided in Section 16(1) constitutes the date of redelivery referred to
      herein) pursuant to the terms of and in compliance with this Lease or (y)
      if the Aircraft is not required to be returned, the date of termination of
      the Term in accordance with this Lease, unless any such act or event shall
      itself result from an act or omission of Lessee which occurred during the
      Term;

            (E)   The failure by any Indemnitee or related Indemnitee to perform
      or observe any agreement, covenant or condition on its part to be
      performed or observed in any Operative Document;

<PAGE>

                                      -42-

            (F)   The incorrectness or breach of any representation or warranty
      of any Indemnitee or related Indemnitee contained in or made pursuant to
      any Operative Document;

            (G)   To the extent directly attributable to any Transfer (voluntary
      or involuntary) by or on behalf of Lessor of any interest in the Aircraft,
      except for those out-of-pocket costs and expenses described in Section 18
      incurred as a result of such Transfer, if, at the time of such Transfer, a
      Event of Default shall have occurred and be continuing; PROVIDED that
      nothing herein shall restrict or limit Lessor's right to Transfer in
      accordance with Section 21 or shall restrict or limited any such permitted
      Transferee of Lessor to exercise its rights under this Section 13;

            (H)   To the extent attributable to the offer or sale by an
      Indemnitee or any related Indemnitee of any interest in the Aircraft in
      violation of the Securities Act or other applicable federal, state or
      foreign securities laws (other than any thereof caused by the acts or
      omissions of Lessee);

            (I)   To any amount which such Indemnitee expressly agrees to pay or
      such Indemnitee expressly agrees shall not be paid by or be reimbursed by
      Lessee;

            (J)   To the deregistration of the Aircraft under the Act as a
      result of Lessor (or any related Indemnitee) not being a Citizen of the
      United States as a result of any act;

            (K)   For any Lessor's Lien attributable to any Indemnitee or any
      related Indemnitee;

            (L)   If another provision of this Lease or any Operative Document
      specifies the extent of Lessee's responsibility or obligation with respect
      to such Claim, expense or other amount, to the extent Lessee has complied
      with such specified responsibility or obligation; or

            (M)   For any loss attributable to, arising from or in connection
      with any inspections or inspection rights arising from or in connection
      with any of the Operative Documents, except inspection or inspection
      rights resulting from a Lease Event of Default.

            For purposes of this Section 13, a Person shall be considered a
      "related" Indemnitee with respect to an Indemnitee if such Person is an
      Affiliate or employer of such Indemnitee, a director, officer, employee,
      agent, or servant of such Indemnitee or any such Affiliate or a successor
      or permitted assignee of any of the foregoing.

<PAGE>

                                      -43-

            (b)   NOTICE. If a Claim for any amount that an Indemnitee shall be
indemnified against under this Section 13(a) is made, such Indemnitee shall
give prompt written notice thereof to Lessee. Notwithstanding the foregoing, the
failure of any Indemnitee to notify Lessee as provided in this Section 13(b) or
13(c), shall not release Lessee from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure results in an
additional or larger Claim (in which event Lessee shall not be responsible for
such additional or larger Claim) or materially impairs Lessee's ability to
contest such Claim.

            (c)   NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS.

            (i)   In case any action, suit or proceeding shall be brought
      against any Indemnitee for which Lessee is responsible under this Section
      13, such Indemnitee shall notify Lessee of the commencement thereof and
      Lessee may, at its expense, participate in and to the extent that it shall
      wish (subject to the provisions of the following paragraph), assume and
      control the defense thereof and, subject to Section 13(c)(iii), settle or
      compromise the same.

            (ii)  Lessee or its insurer(s) shall have the right, at its or their
      expense, to investigate or, if Lessee or its insurer(s) shall agree not to
      dispute liability to the Indemnitee giving notice of such action, suit or
      proceeding under this Section 13(c) for indemnification hereunder or under
      any insurance policies pursuant to which coverage is sought, control the
      defense of, any action, suit or proceeding, relating to any Claim for
      which indemnification is sought pursuant to this Section 13, and each
      Indemnitee shall cooperate with Lessee or its insurer(s) with respect
      thereto; PROVIDED, that Lessee shall not be entitled to control the
      defense of any such action, suit, proceeding or compromise any such Claim
      during the continuance of any Event of Default arising under Section 17(a)
      of the Lease. In connection with any such action, suit or proceeding being
      controlled by Lessee, such Indemnitee shall have the right to participate
      therein, at its sole cost and expense, with counsel reasonably
      satisfactory to Lessee; PROVIDED, that such Indemnitee's participation
      does not, in the reasonable opinion of the independent counsel appointed
      by the Lessee or its insurers to conduct such proceedings, interfere with
      the defense of such case.

            (iii) In no event shall any Indemnitee enter into a settlement or
      other compromise with respect to any Claim without the prior written
      consent of Lessee, which consent shall not be unreasonably withheld or
      delayed. Any settlement or compromise without such consent of Lessee shall
      be deemed a waiver by such Indemnitee of its right to be indemnified with
      respect to such Claim under this Section 13.

            (iv)  In the case of any Claim indemnified by the Lessee hereunder
      which is covered by a policy of insurance maintained by Lessee pursuant to
      Section 12 of the Lease, at Lessee's expense, each Indemnitee agrees to
      cooperate with the insurers in

<PAGE>

                                      -44-

      the exercise of their rights to investigate, defend or compromise such
      Claim as may be required to retain the benefits of such insurance with
      respect to such Claim.

            (v)   If an Indemnitee is not a party to this Agreement, Lessee may
      require such Indemnitee to agree in writing to the terms of this Section
      13 and Section 23(b) prior to making any payment to such Indemnitee under
      this Section 13.

            (d)   INFORMATION. Lessee will provide the relevant Indemnitee with
such information not within the control of such Indemnitee, as is in Lessee's
control or is reasonably available to Lessee, which such Indemnitee may
reasonably request and will otherwise cooperate with such Indemnitee so as to
enable such Indemnitee to fulfill its obligations under Section 13(c). The
Indemnitee shall supply Lessee with such information not within the control of
Lessee, as is in such Indemnitee's control or is reasonably available to such
Indemnitee, which Lessee may reasonably request to control or participate in any
proceeding to the extent permitted by Section 13(c).

            (e)   EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER ASSURANCES.
Upon the payment in full by Lessee of any indemnity provided for under this
Agreement, Lessee, without any further action and to the full extent permitted
by Law, will be subrogated to all rights and remedies of the person indemnified
in respect of the matter as to which such indemnity was paid, including, but not
limited to any rights and remedies which Lessor may have against the
Manufacturer of the Aircraft and its subcontractors. Each Indemnitee will give
such further assurances or agreements and cooperate with Lessee to permit Lessee
to pursue such claims, if any, to the extent reasonably requested by Lessee and
at Lessee's expense.

            (f)   REFUNDS AND RECOVERIES. If an Indemnitee receives any refund
or recovers any amount, in whole or in part, with respect to any Claim paid by
Lessee hereunder, it will promptly pay the amount refunded or recovered (but not
an amount in excess of the amount Lessee or any of its insurers has paid in
respect of such Claim) over to Lessee.

            Section 14. LIENS.

            Lessee shall not directly or indirectly create, incur, assume or
suffer to exist any Lien on or with respect to the Aircraft or any Engine, title
thereto or any interest therein, except (i) the respective rights of Lessor and
Lessee as herein provided or of any Permitted Sublessee under any Permitted
Sublease; (ii) Lessor's Liens with respect to the Aircraft or any Engine; (iii)
Liens in favor of any Affiliate of Lessor with respect to any Engine; (iv) Liens
for Taxes of Lessee or any Permitted Sublessee (and their respective U.S.
federal tax law consolidated groups) or Liens for Taxes of any Indemnitee for
which Lessee is obligated to indemnify such Indemnitee under any Operative
Document, in any case either not yet due or being contested in good faith by
appropriate proceedings so long as there is no material risk of the Aircraft or
such Engine being lost, sold, confiscated, forfeited or seized as a result of
any such

<PAGE>

                                      -45-

Lien; (v) inchoate materialmen's, mechanics', workmen's, repairmen's, employees'
or other like Liens arising in the ordinary course of business, which either are
not delinquent or are being contested in good faith by appropriate proceedings,
so long as there is no material risk of the Aircraft or such Engine being lost,
sold, confiscated, forfeited or seized as a result of any such Lien; (vi) Liens
arising out of any judgment or award against Lessee (or against any Permitted
Sublessee), so long as such judgment shall within 60 days after the entry
thereof, have been discharged or vacated, or execution thereof stayed pending
appeal or shall have been discharged, vacated or reversed within 60 days after
the expiration of such stay, and so long as during any such 60-day period there
is not, or any such judgment or award does not involve, any material risk of the
sale, forfeiture or loss of the Aircraft, the Airframe or any Engine; and (vii)
any other Lien with respect to which Lessee (or any Permitted Sublessee) shall
have provided a bond, cash collateral or other security adequate in the
reasonable opinion of Lessor. Lessee shall promptly take (or cause to be taken)
such action as may be necessary duly to discharge (by bonding or otherwise) any
Lien not excepted above if the same shall at any time arise in respect of the
Aircraft, the Airframe, any Engine or any Part during the Term. Lessee shall
promptly, at its own expense, take such action as may be necessary to duly
discharge any Lien not excepted above if the same shall arise at any time with
respect to the Aircraft or any Engine during the Term.

            Section 15. PERFECTION OF TITLE AND FURTHER ASSURANCES.

            If at any time subsequent to the initial recordation of title under
this Lease, any filing or recording is reasonably necessary to protect the
interest of Lessor, Lessee, at its own cost and expense and upon request by
Lessor, shall cause this Lease, any financing statements with respect hereto,
and any and all additional instruments which shall be executed pursuant to the
terms hereof, to be kept, filed and recorded and to be re-executed, refiled and
rerecorded in the appropriate office or offices pursuant to applicable Laws, to
perfect, protect and preserve the rights and interests of Lessor hereunder and
in the Aircraft. At the reasonable request of Lessor, Lessee, at its expense,
shall furnish to Lessor an Officer's Certificate or other evidence satisfactory
to Lessor of each such filing or refiling and recordation or re-recordation.

            Without limiting the foregoing, Lessee shall do or cause to be done,
at Lessee's cost and expense, any and all acts and things which may be required
under the terms of the Mortgage Convention to perfect and preserve the title and
interest of Lessor in the Aircraft within the jurisdiction of any signatory
which has ratified the Mortgage Convention if such jurisdiction is in the
territory in which Lessee may operate the Aircraft, as Lessor may reasonably
request. Lessee shall also do or cause to be done, at its own cost and expense,
any and all acts and things which may be required under the terms of any other
Law involving any jurisdiction in which Lessee may operate, or any and all acts
and things which Lessor may

<PAGE>

                                      -46-

reasonably request, to perfect and preserve Lessor's ownership rights regarding
the Aircraft within any such jurisdiction.

            In addition, (a) Lessee will promptly and duly execute and deliver
to Lessor such further documents and assurances and take such further actions as
Lessor may from time to time reasonably request in order to more effectively
carry out the intent and purpose of this Lease and to establish and protect the
rights and remedies created or intended to be created in favor of Lessor
hereunder, including, without limitation, if reasonably requested by Lessor at
the expense of Lessee, the execution and delivery of supplements or amendments
hereto in recordable form, subjecting to this Lease any Replacement Engine and
the recording or filing of counterparts thereof, in accordance with the laws of
any appropriate jurisdiction; and (b) Lessee shall do or cause to be done, at
Lessor's expense, any and all acts and things which Lessor may reasonably
request as shall be necessary to maintain, preserve and protect Lessor's
interest in the Aircraft.

            Section 16. RETURN OF AIRCRAFT AND RECORDS.

            (a) CONDITION UPON RETURN. Lessee shall comply with each of the
provisions of EXHIBIT E, which provisions are hereby incorporated by this
reference as if set forth in full herein. All references to "Section 16" or
"this Section 16" shall be deemed to include EXHIBIT E.

            (b) STORAGE AND RELATED MATTERS. If Lessor gives written notice to
Lessee not less than thirty (30) days nor more than one hundred twenty (120)
days prior to the end of the Term requesting storage of the Aircraft upon its
return hereunder, Lessee will assist Lessor, at Lessor's expense, in arranging
storage for the Aircraft for a period up to thirty (30) days, commencing on the
date of such return, and upon request of Lessor to Lessee made at least ten (10)
days prior to the end of such initial thirty (30) day period, for an additional
one hundred twenty (120) day period commencing upon expiration of such initial
period, at such storage facility in the forty eight (48) contiguous states of
the United States of America as Lessee and Lessor may agree; PROVIDED that such
location shall be a location generally used for the storage of commercial
aircraft by aircraft owners or operators. Notwithstanding subsection (a) of
EXHIBIT E, such storage shall be deemed to be the return location of the
Aircraft for purposes of such EXHIBIT E. Such storage shall be at Lessor's risk
and expense and Lessor shall pay all applicable storage, maintenance and
insurance fees and expenses. Lessee's obligation to assist Lessor in arranging
storage for the Aircraft shall be subject to Lessor entering into an agreement
satisfactory to Lessee prior to the commencement of the storage period with the
storage facility providing, among other things, that Lessor shall bear all
storage, maintenance charges (other than those to be paid by Lessee as set forth
herein and maintenance required as a direct breach of Lessee's obligations under
this Section 16) and other costs (including those costs referred to above) other
than those to be paid by Lessee as set forth herein) and incurred relating to
such storage. Lessee agrees to arrange for insurance coverage for the

<PAGE>

                                      -47-

Aircraft during such storage period; PROVIDED that Lessor reimburses Lessee for
its out-of-pocket costs therefor.

            (c) RETURN OF OTHER ENGINES. In the event that any Engine owned by
Lessor shall not be installed on the Airframe at the time of return hereunder,
Lessee shall be required to return the Airframe hereunder with a Replacement
Engine meeting the requirements of, and title of which is transferred to Lessor
in accordance with, this Section 16 and Section 11. Thereupon, Lessor will
transfer or cause to be transferred to Lessee on an "as is, where is, with all
faults" basis the Engine constituting part of such Aircraft but not installed on
such Airframe at the time of the return of the Airframe.

            (d) OBLIGATIONS CONTINUE UNTIL RETURN. If Lessee shall fail to
return the Aircraft at the time and in the condition specified herein, the Term
of this Lease shall be deemed to have been automatically extended (unless Lessor
has terminated this Lease pursuant to Section 18(f) hereof) and all obligations
of Lessee under this Lease shall continue in effect with respect to the Aircraft
until the Aircraft is so returned to Lessor and Lessee shall pay to Lessor an
amount equal to the higher of Fair Market Rental Value and 100% of the average
daily Basic Rent payable by Lessee during the Term for each day after the end of
the Term to, but excluding, the day of such return; PROVIDED, however, that
Lessee shall not be responsible for Lessor's failure to accept return of the
Aircraft in accordance with this Section 16 in a timely manner or for any Rent
with respect to periods after Lessee has tendered the Aircraft for return in
accordance with this Lease. Any Rent owed to Lessor pursuant to this Section
16(d) shall be payable upon acceptance of the Aircraft by Lessor. The provisions
of this Section 16(d) shall not limit any remedy the Lessor would otherwise have
for breach of Section 16(a).

            Section 17. EVENTS OF DEFAULT.

            Any one or more of the following occurrences or events shall
constitute an Event of Default:

            (a) Lessee shall fail to make any payment of Rent to Lessor when due
      under this Lease and such payment shall be overdue for a period of five
      (5) Business Days after written notice thereof is given by Lessor to
      Lessee;

            (b) Lessee shall fail to obtain and maintain or fail to cause to be
      obtained and maintained, any insurance required under the provisions of
      Section 12 hereof;

            (c) Any representation or warranty made by Lessee herein, by
      Guarantor in the Parent Guaranty or in any document or certificate
      furnished Lessor in connection herewith or therewith or pursuant hereto
      (1) is incorrect in any material respect at the time given, (2) such
      incorrect representation is material at the time in question and (3)

<PAGE>

                                      -48-

the same shall remain uncured (to the extent of the adverse impact of such
incorrectness on the interest of Lessor) for a period of 30 days from the date
of written notice thereof from Lessor to Lessee or Guarantor, as the case may
be;

            (d) Lessee or Guarantor shall fail to perform or observe (or cause
to be observed and performed) in any material respect any other covenant,
condition or agreement to be performed or observed by it pursuant to this Lease
or any of the other Operative Documents and such failure shall continue for a
period of thirty (30) days after written notice thereof is given by Lessor to
Lessee or Guarantor, as the case may be; provided, however, that if the Lessee
or Guarantor cannot reasonably cure such failure within such period and is
diligently pursuing such cure, then Lessee or Guarantor shall have an additional
period of up to one hundred eighty (180) days to cure such failure;

            (e) Lessee or Guarantor, as the case may be, consents to the
appointment of a receiver, trustee or liquidator of itself or of a substantial
part of its property, or Lessee or Guarantor admits in writing its inability to
pay its debts generally as they come due, or makes a general assignment for the
benefit of creditors, or Lessee or Guarantor files a voluntary petition in
bankruptcy or a voluntary petition seeking reorganization in a proceeding under
any bankruptcy laws (as now or hereafter in effect), or an answer admitting the
material allegations of a petition filed against Lessee or Guarantor in any such
proceeding, or Lessee or Guarantor by voluntary petition, answer or consent
seeks relief under the provisions of any bankruptcy or other similar law
providing for the reorganization or winding-up of corporations, or provides for
an agreement, composition, extension or adjustment with its creditors;

            (f) An order, judgment or decree is entered by any court, with or
without the consent of Lessee or Guarantor, as the case may be, appointing a
receiver, trustee or liquidator for Lessee or Guarantor, as the case may be, or
of all or any substantial part of its property, or all or any substantial part
of the property of Lessee or Guarantor is sequestered, and any such order,
judgment or decree of appointment or sequestration remains in effect,
undismissed, unstayed or unvacated for a period of ninety (90) days after the
date of entry thereof;

            (g) A petition against Lessee or Guarantor, as the case may be, in a
proceeding under the bankruptcy, insolvency or other similar Laws (as now or
hereafter in effect) of any Governmental Entity is filed and is not withdrawn or
dismissed within ninety (90) days thereafter, or if, under the provisions of any
Law providing for reorganization or winding-up of corporations which may apply
to Lessee or Guarantor, any court of competent jurisdiction assumes jurisdiction
over, or custody or control of, Lessee or Guarantor, as the case may be, or of
all or any substantial part of its property and such jurisdiction, custody or
control remains in effect, unrelinquished, unstayed or unterminated for a period
of ninety (90) days.

<PAGE>

                                      -49-

            (h) The Parent Guaranty shall fail to be in full force and effect
and enforceable according to its terms; or

            (i) Lessee shall have failed to satisfy the return requirement
provisions of Section 16(a), and such failure shall continue unremedied for a
period of 60 days from the last day of the Term that is then in effect, provided
that if the Aircraft has been requisitioned by the United States Government or
the government of registry of the Aircraft as provided in Section 11(h) hereof,
the Lessee's inability to deliver the Aircraft shall not constitute an Event of
Default hereunder unless such failure shall continue unremedied beyond the
earlier of (A) the one hundred and eightieth (180th) day from the last day of
the Term, or (B) the day the requisition of the Aircraft by the United States
Government or the government of registry of the Aircraft has been terminated
(but not earlier than the sixty (60) day period specified above in this clause
(i).

            Section 18. REMEDIES.

            Upon the occurrence of any Event of Default and any time thereafter
so long as the same shall be continuing, Lessor, at its option and without
notice to Lessee, may exercise one or more of the following remedies as Lessor
in its sole discretion shall elect, to the extent available and permitted by,
and subject to compliance with any mandatory requirements of, applicable Law
then in effect:

            (a) Demand that Lessee, and Lessee shall upon the written demand of
      Lessor and at Lessee's expense, immediately return the Aircraft to Lessor
      in the manner specified in such notice, in which event such return shall
      not be delayed for purposes of complying with the return conditions
      specified in Section 16 hereof (none of which conditions shall be deemed
      to affect Lessor's possession of the Aircraft) or delay for any other
      reason. Notwithstanding the foregoing, at Lessor's option Lessee shall be
      required thereafter to take such actions as would be required by the
      provisions of this Lease if the Aircraft were being returned at the end of
      the Term hereof and Lessor agrees to cooperate with Lessee's required
      actions. In addition, Lessor, at its option and to the extent permitted by
      applicable Law, may enter upon the premises where all or any part of the
      Aircraft is located and take immediate possession of and, at Lessor's sole
      option, remove the same (and/or any engine which is not an Engine but
      which is installed on the Airframe, subject to the rights of the owner,
      lessor or secured party thereof) by summary proceedings or otherwise, all
      without liability accruing to Lessor for or by reason of such entry or
      taking of possession whether for the restoration of damage to property, or
      otherwise, caused by such entry or taking, except damages caused by gross
      negligence or willful misconduct.

            (b) Sell at private or public sale, as Lessor may determine, or
      hold, use, operate or lease to others the Aircraft as Lessor in its sole
      discretion may determine, all

<PAGE>

                                      -50-

      free and clear of any rights to Lessee without any duty to account to
      Lessee with respect to such action or inaction or for any proceeds with
      respect thereto, except as hereinafter set forth in this Section 18, and
      except to the extent that such proceeds would constitute, under applicable
      Law, a mitigation of Lessor's damages suffered or incurred as a result of
      the subject Event of Default. Lessor shall give Lessee at least 15 days
      prior written notice of the date fixed for any public sale of the Airframe
      and/or any Engine or of the date on or after which will occur the
      execution of any contract providing for any private sale.

            (c) Whether or not Lessor shall have exercised, or shall thereafter
      at any time exercise, any of its rights under paragraph (a) or paragraph
      (b) of this Section 18, Lessor, by thirty (30) days written notice to
      Lessee specifying a payment date, may demand that Lessee pay to Lessor,
      and Lessee shall pay to Lessor, on the payment date specified in such
      notice (which shall be the Casualty Value Date next occurring not less
      than 10 days after the date of such notice), as liquidated damages for
      loss of a bargain and not as a penally (in lieu of the Basic Rent for the
      Aircraft in respect of all periods commencing on or after the date
      specified for payment in such notice), the following amounts:

                  (A) all unpaid Basic Rent due at any time prior to (but not
            including) the Casualty Value Date specified in such notice; plus

                  (B) whichever of the following amounts Lessor, in its sole
            discretion shall specify in such notice:

                        (1) an amount equal to the excess, if any, of the
                  present value, computed as of the Casualty Value Date
                  specified in such notice, discounted to such date at a rate
                  per annum equal to the Discount Rate, compounded semiannually,
                  of all unpaid Basic Rent during the then remaining portion of
                  the Term, over the Fair Market Rental Value of the Aircraft
                  for the remainder of the Term, after discounting such Fair
                  Market Rental Value to its then present value (at a rate per
                  annum equal to the Discount Rate, compounded semiannually) as
                  of the Casualty Value Date specified in such notice, or

                        (2) an amount equal to the excess, if any, of the
                  Casualty Value for the Aircraft, computed as of the Casualty
                  Value Date specified in such notice, over the Fair Market
                  Sales Value of the Aircraft, as of the Casualty Value Date
                  specified in such notice; plus

<PAGE>

                                      -51-

                  (C) interest on the amounts specified in the foregoing clause
            (A) at the Interest Rate from and including the date on which any
            such amount was due to the date of payment of such amount; plus

                  (D) interest on the amount specified in the foregoing clause
            (B)(l) or (B)(2), according to Lessor's election, at the Interest
            Rate from and including the Casualty Value Date specified in such
            notice to the date of payment of such amount.

            (d) If Lessor, pursuant to Section 18(b) or applicable Law, shall
      have sold the Airframe and/or any Engine, Lessor, in lieu of exercising
      its rights under Section 18(c) with respect to the Aircraft, Airframe or
      any Engine, as the case may be, may, if Lessor shall so elect, upon giving
      written notice to Lessee, demand Lessee to 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 (in lieu of the Basic Rent for the Aircraft
      in respect of all periods commencing on or after the date of such sale),
      the following amounts:

                  (i) all unpaid Basic Rent due at any tune prior to (but not
            including) the Casualty Value Date on or immediately preceding the.
            date of such sale; plus

                  (ii) an amount equal to the excess, if any, of (i) the
            Casualty Value of the Aircraft, computed as of the Casualty Value
            Date used in the foregoing clause (a) for the computation of unpaid
            Rent, over (ii) the proceeds of such sale; plus

                  (iii) all reasonable brokerage and other reasonable
            out-of-pocket fees and expenses incurred by Lessor in connection
            with such sale; plus

                  (iv) interest on the amounts specified in the foregoing clause
            (i) at the Interest Rate from and including the date on which any
            such amount was due to the date of payment of such amount; plus

                  (v) interest on the sum of the amounts specified in the
            foregoing clause (ii) at the Interest Rate from and including the
            date of such sale to the date of payment of such amounts.

            (e) Proceed by appropriate court action or actions, either at law or
      in equity, to enforce performance by Lessee of the applicable covenants of
      this Lease and to recover damages for the breach thereof (including,
      without limitation, the payment of all Rent and other amounts which are or
      become due and payable hereunder prior to

<PAGE>

                                      -52-

      the date Lessor recovers possession of the Aircraft and all reasonable
      out-of-pocket expenses incurred by Lessor and occasioned by Lessee's
      failure to return the Aircraft in conformance with all of the requirements
      imposed by this Lease and particularly Section 16(f)) and to rescind this
      Lease.

            (f) By written notice to Lessee, which notice shall be effective
      upon dispatch, terminate the letting of the Aircraft (but without
      prejudice to the obligations of Lessee under this Lease), whereupon all
      rights of Lessee under this Lease shall cease, and whereupon Lessor may
      repossess the Aircraft.

            In effecting any repossession, Lessor and its representatives and
agents, to the extent permitted by law shall: (i) have the right to enter upon
any premises where it reasonably believes the Aircraft, the Airframe, an Engine
or Part to be located; (ii) not be liable, in conversion or otherwise, for the
taking of any personal property of Lessee which is in or attached to the
Aircraft, the Airframe, an Engine or Part which is repossessed; provided,
however, that Lessor shall return to Lessee all personal property of Lessee or
its passengers which was on the Aircraft at the time Lessor retakes possession
of the Aircraft; (iii) not be liable or responsible, in any manner, for any
inadvertent damage or injury to any of Lessee's property in repossessing and
holding the Aircraft, the Airframe, an Engine or Part, except for that caused by
or in connection with Lessor's gross negligence or willful acts; (iv) have the
right to maintain possession of and dispose of the Aircraft, the Airframe, an
Engine or Part on any premises owned by Lessee or under Lessee's control; and
(v) have the right to obtain a key to any premises at which, the Aircraft, the
Airframe, an Engine or Part may be located from the landlord or owner thereof.

            If reasonably required by Lessor, Lessee, at its sole expense, shall
assemble and make the Aircraft, the Airframe, an Engine or Part available at a
place designated by Lessor in accordance with Section 16 hereof. Lessee hereby
agrees that, in the event of the return to or repossession by Lessor of the
Aircraft, the Airframe, an Engine or Part, any rights in any warranty (express
or implied) heretofore assigned to Lessee or otherwise held by Lessee shall
without further act, notice or writing be assigned or reassigned to Lessor, if
assignable. Following an Event of Default, Lessee shall be liable to Lessor
(without duplication) for all reasonable expenses, disbursements, costs and fees
incurred in (i) repossessing, storing, preserving, shipping, maintaining,
repairing and refurbishing the Aircraft, the Airframe, an Engine or Part to the
condition required by Section 16 hereof and (ii) preparing the Aircraft, the
Air-frame, an Engine or Part for sale or lease, advertising the sale or lease of
the Aircraft, the Airframe, an Engine or Part and selling or releasing the
Aircraft, the Airframe, an Engine or Part. Lessor is hereby authorized and
instructed, at its option, to make reasonable expenditures which Lessor
considers advisable to repair and restore the Aircraft, the Airframe, an Engine
or Part to the condition required by Section 16 hereof, all at Lessee's sole
expense.

<PAGE>

                                      -53-

            At any public sale of the Aircraft, the Airframe, an Engine or Part
pursuant to this Section, Lessor may bid for and purchase such property and
Lessee agrees that the amounts paid therefor shall be used in the computation
contemplated herein.

            No remedy referred to in this Section 18 is intended to be
exclusive, but, to the extent permissible hereunder or under applicable Law,
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 express or implied waiver by Lessor of any Default or Event
of Default shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default.

            Lessee agrees that upon and after the occurrence of an Event of
Default, any sums which may otherwise be due and owing by Lessor to Lessee under
this Lease, shall be offset against any sums due and owing by Lessee to Lessor
under this Lease.

            Section 19. ASSIGNMENT; MERGER.

            (a) IN GENERAL. This Lease shall be binding upon and inure to the
benefit of Lessor and Lessee and their respective permitted successors and
permitted assigns. Except as otherwise expressly permitted by the terms of this
Lease, Lessee will not, without the prior written consent of Lessor, assign any
of its rights under this Lease.

            (b) MERGER OF LESSEE. Lessee shall not consolidate with or merge
into any other Person under circumstances in which Lessee is not the surviving
corporation, or convey, transfer or lease in one or more transactions all or
substantially all of its assets to any other Person, unless:

            (i) such Person is organized, existing and in good standing under
      the Laws of the United States, any State of the United States or the
      District of Columbia and, upon consummation of such transaction, such
      Person will be a U.S. Air Carrier;

            (ii) such Person executes and delivers to Lessor a duly authorized,
      legal, valid, binding and enforceable agreement, reasonably satisfactory
      in form and substance to Lessor, containing an effective assumption by
      such Person of the due and punctual performance and observance of each
      covenant, agreement and condition in the Operative Documents to be
      performed or observed by Lessee;

            (iii) such Person makes such filings and recordings with the FAA
      pursuant to the Act as shall be necessary to evidence such consolidation
      or merger;

<PAGE>

                                      -54-

            (iv) immediately after giving effect to such consolidation or merger
      no Event of Default shall have occurred and be continuing; and

            (v) such Person files any requisite financing statements under the
      Uniform Commercial Code.

            (c) EFFECT OF MERGER. Upon any such consolidation or merger of
Lessee with or into, or the conveyance, transfer or lease by Lessee of all or
substantially all of its assets to, any Person in accordance with this Section
19(c), such Person will succeed to, and be substituted for, and may exercise
every right and power of, Lessee under the Lessee with the same effect as if
such person had been named as "Lessee" therein. No such consolidation or merger,
or conveyance, transfer or lease, shall have the effect of releasing Lessee or
such Person from any of the obligations, liabilities, covenants or undertakings
of Lessee under the Lease.

            Section 20. INTENTIONALLY OMITTED.

            Section 21. ALIENATION.

            (a) During the Term, Lessor shall not Transfer any or all of its
right, title or interest in the Aircraft and to the Lease unless such transfer
is a Transfer of the entire interest held by Lessor, and:

            (i) The Transferee shall have full power, authority and legal right
      to execute and deliver and to perform the obligations of Lessor under the
      Lease and the Operative Documents and shall provide reasonably
      satisfactory evidence of such power and authority to Lessee;

            (ii) The Transferee shall enter into an assignment and assumption
      agreement in form and substance reasonably satisfactory to Lessee;

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

            (iv) Lessor shall deliver to Lessee, an opinion of counsel (in form
      and substance reasonably satisfactory to Lessee) to the effect that such
      agreement or agreements referred to in paragraphs (a)(ii) and, if
      applicable, (a)(vi) hereof are legal, binding and enforceable in
      accordance with its or their terms and that such transfer will not

<PAGE>

                                      -55-

      violate the Act, the registration provisions of the Securities Act of
      1933, as amended, or any other applicable Federal law;

            (v) The Transferee is a Citizen of the United States (it being
      understood that the existence of any such requirement is to be determined
      without giving consideration to Section 47.9 of the FAA Regulations or any
      other provision that may restrict Lessee's use or operation of the
      Aircraft), or shall use a voting powers trust or similar arrangement in
      order to hold an interest in the Aircraft and the Lease such that the
      Aircraft can be registered in the United States (without giving
      consideration to Section 47.9 of the FAA Regulations); and

            (vi) The Transferee shall be a single entity and shall be either (A)
      a Permitted Institution or (B) any other entity (other than, without
      Lessee's consent, a commercial air carrier, a commercial aircraft
      operator, a freight forwarder or an Affiliate of any of the foregoing) the
      obligations of which under the Operative Documents are guaranteed by a
      Permitted Institution in any case, pursuant to a written guaranty, in form
      and substance reasonably satisfactory to Lessee.

            (b) Lessor shall give written notice to Lessee at least 10 days
prior to any such Transfer, specifying the name and address of the proposed
Transferee, and providing financial statements of the proposed Transferee
evidencing satisfaction of the requirements described in paragraph (a)(vi)(A)
or (B) above.

            (c) Any fees, charges and expenses, including the reasonable legal
fees, charges and expenses incurred by Lessee, in connection with any Transfer
by Lessor permitted by this Section 21, or by the Transferee in any such case,
will be paid for by Lessor.

            Section 22. FOREIGN REGISTRATION.

            Lessor hereby agrees, for the benefit of Lessee but subject to the
provisions of Section 6(a)(ii) of the Lease:

            (a) that Lessee shall be entitled to register the Aircraft or cause
      the Aircraft to be registered in a country other than the United States
      subject to compliance with the following:

                  (i) each of the following requirements is satisfied:

                        (A) such registration shall be made only after the close
                  of the Tax Attribute Period, unless Lessee prepays to Lessor
                  on a lump sum basis any indemnity due under the Section B of
                  the Letter Agreement No. 1 as a result of such registration
                  based upon the assumption that

<PAGE>

                                      -56-

                  such registration would continue for the remainder of the term
                  of the Permitted Sublease described in clause (C) below;

                        (B) no Event of Default shall have occurred and be
                  continuing at the time of such registration;

                        (C) such proposed change of registration is made in
                  connection with a Permitted Sublease to a Permitted Air
                  Carrier;

                        (D) such country is a Permitted Country with which the
                  United States then maintains normal diplomatic relations or,
                  if Taiwan, the United States then maintains diplomatic
                  relations at least as good as those in effect on the Delivery
                  Date;

                  (ii) Lessor shall have received an opinion of counsel (subject
            to customary exceptions) reasonably satisfactory to Lessor addressed
            to Lessor as to the effect that:

                        (A) such country would recognize Lessor's ownership
                  interest in the Aircraft;

                        (B) the obligations of Lessee, and the rights and
                  remedies of Lessor, under the Lease are valid, binding and
                  enforceable under the laws of such jurisdiction (or the laws
                  of the jurisdiction to which the laws of such jurisdiction
                  would refer as the applicable governing law);

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

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

                        (E) unless Lessee shall have agreed to provide insurance
                  covering the risk of requisition of use of the Aircraft by the
                  government of such country (so long as the Aircraft is
                  registered under the laws of

<PAGE>

                                      -57-

                  such country), the laws of such country require fair
                  compensation by the government of such country payable in
                  currency freely convertible into Dollars and freely removable
                  from such country (without license or permit, unless Lessee
                  prior to such proposed reregistration has obtained such
                  license or permit) for the taking or requisition by such
                  government of such use;

            (b) In addition, as a condition precedent to any change in
      registration, Lessee shall have given to Lessor assurances reasonably
      satisfactory to it:

                  (i) to the effect that the provisions of Section 12 of the
            Lease will have been complied with after giving effect to such
            change of registration;

                  (ii) of the payment by Lessee of all reasonable out-of-pocket
            expenses of Lessor in connection with such change of registry,
            including, without limitation, (A) the reasonable fees and
            disbursements of counsel to Lessor and (B) any filing or recording
            fees, Taxes or similar payments incurred in connection with the
            change of registration of the Aircraft; and

                  (iii) to the effect that the tax and other indemnities in
            favor of each person named as an indemnitee under Section B of the
            Letter Agreement No. 1 afford each such person substantially the
            same protection as provided prior to such change of registration (or
            Lessee shall have agreed upon additional indemnities that, together
            with such original indemnities, in the reasonable judgment of
            Lessor, afford such protection).

            Section 23, MISCELLANEOUS.

            (a) SEVERABILITY AND CONSTRUCTION. 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, any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. To the extent
permitted by Law, Lessee hereby waives any provisions of Law which renders any
provisions hereof prohibited or unenforceable in any respect. This Lease shall
constitute an agreement of lease, and nothing herein shall be construed as
conveying to Lessee any right, title or interest in the Aircraft or any Engine
or Part except as a lessee only. The headings in this Lease are for convenience
of reference only and shall not define or limit any of the terms of provisions
hereof. Whenever required by the context hereof, the singular shall include the
plural and vice versa. Reference to this Lease shall mean this Lease as amended
or supplemented from time to time.

<PAGE>

                                      -58-

            (b) GOVERNING LAW; JURISDICTION. THIS LEASE SHALL IN ALL RESPECTS BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
EXCEPT TO THE EXTENT WHERE THOSE LAWS ARE GOVERNED BY THE FEDERAL LAWS OF THE
UNITED STATES INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.
EACH PARTY HEREBY IRREVOCABLY CONSENTS THAT ANY LEGAL ACTION OR PROCEEDING
AGAINST IT OR ANY OF ITS ASSETS WITH RESPECT TO THE LEASE MAY BE BROUGHT IN ANY
JURISDICTION WHERE IT OR ANY OF ITS ASSETS MAY BE FOUND, OR IN ANY COURT OF THE
STATE OF NEW YORK OR ANY FEDERAL COURT OF THE UNITED STATES OF AMERICA LOCATED
IN NEW YORK CITY, NEW YORK AS SUCH PARTY MAY ELECT, AND BY EXECUTION AND
DELIVERY OF THIS LEASE EACH PARTY HEREBY IRREVOCABLY SUBMITS TO AND ACCEPTS WITH
REGARD TO ANY SUCH ACTION OR PROCEEDING, FOR ITSELF AND IN RESPECT OF ITS
ASSETS, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS.
EACH PARTY 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 OR CERTIFIED AIRMAIL, POSTAGE PREPAID, TO SUCH
PARTY AT ITS ADDRESS SET FORTH ON EXHIBIT C HERETO. THE FOREGOING, HOWEVER,
SHALL NOT LIMIT THE RIGHTS OF EITHER PARTY TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR TO BRING ANY LEGAL ACTION OR PROCEEDING OR TO OBTAIN
EXECUTION OF JUDGMENT IN ANY JURISDICTION. EACH PARTY HEREBY IRREVOCABLY WAIVES,
TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING
OUT OF OR RELATING TO THIS LEASE BROUGHT IN THE STATE OF NEW YORK, AND HEREBY
FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN THE STATE OF NEW YORK HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

            EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIMS OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION BASED
UPON OR ARISING OUT OF OR RELATING TO THIS LEASE OR ANY OTHER OPERATIVE
DOCUMENT.

            (c) NOTICES. All notices required under the terms and provisions
hereof shall be in writing, shall be sent to Lessor, or Lessee at their
respective addresses set forth on EXHIBIT C hereto (or such other addresses as
the parties may designate from time to time in writing) and, except as otherwise
provided herein, such notice shall become effective upon the

<PAGE>

                                      -59-

earlier of the transmission of a facsimile, actual receipt of the notice or the
fifth day following the date such notice is sent by U.S. mail.

            (d) LESSOR'S RIGHT TO PERFORM FOR LESSEE. If Lessee fails to make
any payment of Supplemental Rent required to be made by it hereunder or fails to
perform or comply with any covenant, agreement or obligation contained herein,
Lessor shall have the right but not the obligation to make such payment or
conform or comply with such agreement, covenant or obligation, and the amount of
such payment and the amount of the reasonable expenses of Lessor incurred in
connection with such payment or the performance thereof or compliance therewith,
together with interest thereon at the Interest Rate, shall be payable by Lessee
to Lessor (as Supplemental Rent) upon demand. Lessor agrees to notify Lessee in
writing prior to making any payment under this Section 23(d), unless the
Aircraft will be in danger of loss, sale, confiscation, forfeiture or seizure
should such payment not be made. The making of any such action by Lessor
pursuant to this Section 23(d) shall not constitute a waiver or release of any
obligation of Lessee under the Lease, nor a waiver of any Event of Default which
may arise out of Lessee's nonperformance of such obligation, nor an election or
waiver by Lessor of any remedy or right available to Lessor under or in relation
to this Lease.

            (e) COUNTERPARTS. This Lease may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. To the extent, if
any, that this Lease constitutes chattel paper (as such term is defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction) no security
interest in this Lease may be created through the transfer or possession of any
counterpart other than the counterpart which has been marked "Original" on the
signature page thereof.

            (f) BROKERS. Each party agrees to indemnify and hold the other
harmless from and against any and all claims, suits, damages, costs and expenses
(including, but not limited to reasonable attorneys' fees) asserted by any
agent, broker or other third party for any commission or compensation of any
nature whatsoever based upon the lease of the Aircraft, if such claim, damage,
cost or expense arises out of any action or alleged action by the indemnifying
party, its employees or agents.

            (g) TIME IS OF THE ESSENCE. Time and strict and punctual performance
are of the essence with respect to each provision of this Lease.

            (h) DISCLAIMER OF CONSEQUENTIAL DAMAGE. LESSEE AGREES THAT IT SHALL
NOT BE ENTITLED TO RECOVER, AND HEREBY DISCLAIMS AND WAIVES ANY RIGHT THAT IT
MAY OTHERWISE HAVE TO RECOVER, CONSEQUENTIAL DAMAGES AS A RESULT OF ANY BREACH
OR ALLEGED BREACH BY LESSOR OF ANY OF THE AGREEMENTS, REPRESENTATIONS

<PAGE>

                                      -60-

OR WARRANTIES OF LESSOR CONTAINED IN THIS LEASE OR ANY OF THE OTHER OPERATIVE
DOCUMENTS.

            (i) INCORPORATION BY REFERENCE. The definitions, and other terms and
provisions set forth in Letter Agreement No. 1 are hereby incorporated in this
Lease to the same extent as if fully set forth herein.

            (j) ENTIRE AGREEMENT MODIFICATION OR REVISION. This Lease and the
other Operative Documents are intended to be a complete and exclusive statement
of the terms of the agreement of the parties hereto, and this Lease and the
other Operative Documents supersede any prior or contemporaneous agreements,
whether oral or in writing. Neither this Lease nor the other Operative Documents
nor any term of this Lease or the other Operative Documents may be modified,
rescinded, changed, waived, discharged or terminated except by a writing signed
by the party to be charged. Lessor and Lessee acknowledge their agreement to the
provisions of this Section 23(j) by their signatures below.

            (k) USURY LAWS. The parties intend to contract in strict compliance
with the usury Laws of the State of New York and, to the extent applicable, the
United States of America. Notwithstanding anything to the contrary in this Lease
or the other Operative Documents, Lessee will not be obligated to pay any
interest in excess of the maximum non-usurious rate, as in effect from time to
time, which may by applicable Law be charged, contracted for, reserved, received
or collected by Lessor in connection with this Lease or the other Operative
Documents. During any period of time in which the then applicable highest lawful
rate is lower than the rate specified in Letter Agreement No. 1, interest will
accrue and be payable at such highest lawful rate; however, if at later times
such highest lawful rate is greater than the rate specified in Letter Agreement
No. 1, then Lessee will pay interest at the highest lawful rate until the
aggregate amount of interest paid by Lessee equals the amount of interest that
would have been payable in accordance with the interest rate specified in Letter
Agreement No. 1.

            (1) WAIVERS. All waivers by Lessee set forth in this Lease or in the
other Operative Documents shall be deemed to have been made by Lessee in its own
capacity.

            (m) PURCHASE DOCUMENTS. Lessor shall endeavor to deliver to Lessee
within 30 days from the Delivery Date copies of the purchase agreement with the
Manufacturer in Lessor's possession relating to its acquisition of the Aircraft
(the "Purchase Documents"); provided, that failure to deliver to Lessee any or
all of the Purchase Documents shall not limit, affect or impair in any respect
Lessee's obligations or Lessor's rights under this Lease.

<PAGE>

            IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due
authority, have each caused this Aircraft Lease Agreement to be duly executed as
of the day and year first above written.

                                           LESSOR:

                                           POLARIS HOLDING COMPANY, a
                                           Delaware corporation

                                           By /s/
                                              ----------------------------------
                                              VICE PRESIDENT
                                              ----------------------------------
                                              [Printed Name and Title]

                                           LESSEE:

                                           POLAR AIR CARGO, INC., a California
                                           corporation
                                           By
                                              ----------------------------------

                                              ----------------------------------
                                              [Printed Name and Title]

<PAGE>

            IN WITNESS WHEREOF, Lessor and Lessee, each pursuant to due
authority, have each caused this Aircraft Lease Agreement to be duly executed as
of the day and year first above written.

                                           LESSOR:

                                           POLARIS HOLDING COMPANY, a
                                           Delaware corporation

                                           By
                                              ----------------------------------

                                              ----------------------------------
                                              [Printed Name and Title]

                                           LESSEE:

                                           POLAR AIR CARGO, INC., a California
                                           corporation

                                           By /s/ Ronald A. Lane
                                              ----------------------------------
                                              Ronald A. Lane
                                              Chief Marketing Officer