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                            AIRCRAFT LEASE AGREEMENT


                                     between


                          KG AIRCRAFT LEASING CO., LTD.


                                       and


                         WESTERN PACIFIC AIRLINES, INC.






                        One Boeing Model 737-3S3 Aircraft
                       Manufacturer's Serial Number 24060
         Philippine Registration Mark RP-C4005 (to be changed to N957WP)
                          With Two CFM56 - 3B2 Engines,
                  Manufacturer's Serial Nos. 722139 and 723130





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<PAGE>






                                TABLE OF CONTENTS


                                                                          PAGE


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

ARTICLE 2.  ACCEPTANCE UNDER THE LEASE.................................... 10
      2.1      Conditions Precedent....................................... 10
               2.1.1    Lessor Conditions................................. 10
               2.1.2    Other Lessor Conditions........................... 10
               2.1.3    Lessee's Conditions............................... 12
      2.2      Time of Delivery........................................... 13
      2.3      Place of Delivery.......................................... 13
      2.4      Delivery Fuel.............................................. 13
      2.5      Indemnity.................................................. 14

ARTICLE 3.  TERM AND RENT................................................. 14
      3.1      Term....................................................... 14
      3.2      Basic Rent................................................. 14
      3.3      Security Deposit........................................... 15
      3.4      Supplemental Rent.......................................... 16
      3.5      Payments on Business Day................................... 16
      3.6      Place of Payment........................................... 17
      3.7      Prohibition Against Setoff, Counterclaim, etc.............. 17

ARTICLE 4.  REPRESENTATIONS AND WARRANTIES................................ 18
      4.1      Lessor's Representations and Warranties.................... 18
      4.2      Lessee's Representations and Warranties.................... 19
      4.3      Suppliers' Warranties...................................... 21

ARTICLE 5.  POSSESSION AND USE............................................ 22
      5.1      Possession................................................. 22
      5.2      Lawful Operations; Use..................................... 23
      5.3      Maintenance................................................ 24
      5.4      Maintenance Payments....................................... 24
      5.5      Registration and Insignia.................................. 29

ARTICLE 6.  REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
            MODIFICATIONS AND ADDITION.................................... 29
      6.1      Replacement of Parts....................................... 30
      6.2      Pooling of Engines and Parts............................... 30
      6.3      Alterations, Modifications and Additions................... 31

ARTICLE 7.  INSPECTION; FINANCIAL INFORMATION; RECORD..................... 34
      7.1      Information and Inspection................................. 34
      7.2      Financial Information...................................... 34
      7.3      Reports of Aircraft Use.................................... 35

ARTICLE 8.  INDEMNIFICATION BY LESSEE..................................... 35
      8.1      General Indemnity.......................................... 35
      8.2      General Tax Indemnity...................................... 39

ARTICLE 9.  DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION................ 44
      9.1      Event of Loss with Respect to the Aircraft................. 45
      9.2      Event of Loss with Respect to an Engine.................... 45
      9.3      Application of Payments from Governmental Authorities in
               Respect of Event of Loss................................... 46
      9.4      Requisition of an Airframe for Use by Government........... 47
      9.5      Requisition of an Engine for Use by the Government......... 47
      9.6      Application of Payments During Existence of Event or
               Event of Default........................................... 48

ARTICLE 10.  INSURANCE.................................................... 48
      10.1     ........................................................... 48
      10.9     Application of Insurance Proceeds for an Event of Loss..... 52
      10.10    Application of Insurance Proceeds for Other than an
               Event of Loss.............................................. 52
      10.11    Application in Default..................................... 53

ARTICLE 11. MORTGAGES, LIENS, ETC......................................... 53

ARTICLE 12. RECORDATION AND FURTHER ASSURANCES............................ 54

ARTICLE 13. RETURN OF AIRCRAFT AND RECORDS................................ 54
      13.1     Return..................................................... 54
      13.2     Overhaul - General......................................... 55
      13.3     Engines.................................................... 55
      13.4     Liens...................................................... 55
      13.5     Records.................................................... 55
      13.6     Redelivery Fuel............................................ 56
      13.7     Indemnity.................................................. 56

ARTICLE 14. EVENTS OF DEFAULT............................................. 56
      14.1     Events of Default.......................................... 56

ARTICLE 15. REMEDIES...................................................... 58

ARTICLE 16. [Intentionally Omitted]....................................... 60

ARTICLE 17. LETTER OF CREDIT.............................................. 60

ARTICLE 18. MISCELLANEOUS................................................. 61
      18.1     Construction and Applicable Law............................ 61
      18.2     Notices.................................................... 61
      18.3     Lessor's Right to Perform for Lessee....................... 63
      18.4     Corporate Existence; Merger................................ 63
      18.5     Quiet Enjoyment............................................ 63
      18.6     Assignment................................................. 63
      18.7     Expenses................................................... 64
      18.8     Survival................................................... 64
      18.9     English Language........................................... 65
      18.10    Jurisdiction............................................... 65
      18.11    Currency................................................... 66
      18.12    Integration................................................ 66
      18.13    Counterparts............................................... 66
      18.14    Bankruptcy - Section 1110.................................. 67

EXHIBIT "A" LEASE  SUPPLEMENT NO.1 APPENDIX A Aircraft Hours and Cycles APPENDIX
      B  Documentation  Delivery  Receipt  Attachment  1  Technical  Records  at
      Delivery APPENDIX C Loose Equipment Schedule
EXHIBIT "B"    FORM OF LETTER OF QUIET ENJOYMENT
EXHIBIT "C"    MAINTENANCE RESERVES ADJUSTMENT FORMULA
EXHIBIT "D"    ADDITIONAL DELIVERY REQUIREMENTS
EXHIBIT "E"    REDELIVERY CONDITION
      APPENDIX A  Redelivery of Technical Documents
EXHIBIT "F"    LEASE SUPPLEMENT NO. 2
      APPENDIX A  Aircraft Hours and Cycles
      APPENDIX B  Documentation Redelivery Receipt
      Attachment 1      Technical Records at Delivery
EXHIBIT "G"    INSURANCE REQUIREMENTS
      APPENDIX A  Broker's Letter of Undertaking
EXHIBIT "H"    IRREVOCABLE STANDBY LETTER OF CREDIT
EXHIBIT "I"    CERTAIN TERMS



<PAGE>






                            AIRCRAFT LEASE AGREEMENT


      This Lease  Agreement,  dated as of May 15,  1997,  is entered into by and
between  KG  AIRCRAFT  LEASING  CO.,  LTD.,  an Irish  corporation,  having  its
principal  place of  business  at 3 Adelaide  Court,  Adelaide  Road,  Dublin 2,
Ireland  ("KG" or the  "Beneficiary"),  and WESTERN  PACIFIC  AIRLINES,  INC., a
Delaware  corporation,  having its  principal  place of  business  at 2864 South
Circle Drive, Suite 1100, Colorado Springs, Colorado 80906 (the "Lessee").

      The  Beneficiary  is the owner of the Aircraft  referred to below which is
registered in the  Philippines  and for purposes of registering  the Aircraft in
the United States will enter into a trust  agreement  with First  Security Bank,
National  Association or another trust company which is a "citizen of the United
States"  under the Federal  Aviation Act whereby such trust company will acquire
legal title to, and be the  registered  owner of, the  Aircraft  for the Term of
this Lease (such trust  company,  not in its  individual  capacity but solely as
owner trustee under the Trust Agreement is herein called "Lessor").  On or prior
to the Delivery Date,  Lessor will enter into a Lease Supplement  agreeing to be
bound by the terms hereof.

      Lessee  desires to lease from Lessor and KG is willing to cause  Lessor to
lease to Lessee the Aircraft  described herein upon and subject to the terms and
conditions of this Lease. In consideration of the mutual promises herein, KG and
Lessee agree as follows:

                              TERMS AND CONDITIONS

ARTICLE 1.  DEFINITIONS
      The following terms shall have the following meanings and shall be equally
applicable  to both the  singular  and the  plural  forms of the  terms  defined
herein:

      "Agreed Value" has the meaning set forth on Exhibit "I".

      "Aircraft" means the Airframe leased hereunder,  together with each Engine
initially installed on such Airframe when delivered and leased hereunder (or any
engine  substituted  for any such Engine  pursuant to the terms of this  Lease),
whether or not any of such initial or substituted  Engines may from time to time
no longer be installed on such Airframe or on any other  aircraft and, where the
context  permits,  shall  include all Records  relating to the Airframe and each
Engine and all Loose Equipment.

      "Airframe"   means  (i)  the  Boeing  Model  737-3S3   airframe,   bearing
manufacturer's serial number 24060,  excluding any Engines or other engines that
may be installed  on such  airframe  from time to time,  and leased by Lessor to
Lessee  hereunder;  and (ii)  any and all  Parts,  so long as the same  shall be
incorporated in or installed on or attached to such Airframe or so long as title
thereto shall remain vested in Lessor in accordance  with the terms of Article 6
hereof after removal from such Airframe.

      "Approved  Insurance Broker" shall mean JH Marsh & McLennan,  or any other
reputable  independent  aviation  insurance broker then arranging  insurance for
Lessee.

      "Authorized Maintenance Performer" means, with respect to any Airframe and
Engine maintenance inspections, repairs or overhauls in accordance with Lessee's
maintenance  program, any individual or maintenance facility approved by the FAA
for the relevant work on Boeing 737-300 aircraft or engines such as the Engines,
(including,  without  limitation,  Lessee if so  approved),  or,  with the prior
written  consent of  Beneficiary,  any other FAA approved  maintenance or repair
facility.

      "Basic Rent" for the Aircraft has the meaning set forth on Exhibit "I".

      "Basic Term" has the meaning set forth in Article 3.1 hereof.

      "Basic Term Expiration Date" has the meaning set forth in Exhibit "I".

      "Beneficiary" means KG Aircraft Leasing Co., Ltd., an Irish corporation as
the beneficial  owner of the Aircraft under the Trust  Agreement,  together with
its successors  and, to the extent  permitted  hereunder,  its assigns under the
Trust Agreement.

      "Business  Day" means any day other  than a Saturday  or a Sunday or other
than a day on which  commercial  banking  institutions in the cities of New York
(or, in lieu thereof, another city designated by Beneficiary under Article 3.6),
Denver or London, are authorized by law to be closed.

      "Cycle,"  with respect to the Airframe,  an Engine or other engine,  means
one take-off and landing of the Airframe or other  airframe on which such Engine
or other engine is installed.

      "Damage Notification Threshold" has the meaning set forth on Exhibit  "I".

      "Delivery  Date" for the Aircraft  means the date of the Lease  Supplement
for the  Aircraft,  which date shall be the same date the  Aircraft is delivered
to, and accepted by, Lessee hereunder.

      "Dollars" or "$" means lawful currency of the United States of America.

      "Eligible Claim" has the meaning specified in Article 5.4.

      "Engine"  means  (i)  each  of the  CFM  International  CFM56-3B2  engines
specified by manufacturer's serial numbers in a Lease Supplement on the Delivery
Date therefor,  whether or not from time to time thereafter no longer  installed
on such  Airframe or installed on any other  aircraft;  or (ii) any engine which
may from time to time be substituted  for an Engine pursuant to Article 9.2, 9.5
or 13.3  hereof;  and  (iii)  any and all  Parts,  so long as the same  shall be
incorporated  in or  installed on or attached to such Engine or so long as title
thereto shall remain vested in Lessor in accordance  with the terms of Article 6
hereof after removal from such Engine.

      "Equipment" means, as the context may require, any or all of the Aircraft,
Airframe,  Engines  and  Loose  Equipment  then  leased  hereunder.  An "item of
Equipment" means, as the context may require, the Aircraft,  Airframe, Engine or
Loose Equipment then leased hereunder.

      "Event"  means an event or  occurrence  which,  with the  passing  of time
and/or the giving of notice, would constitute an Event of Default.

      "Event of Default" shall have the meaning  ascribed  thereto in Article 14
hereof.

      "Event of Loss" with respect to the Aircraft, Airframe or any Engine shall
mean any of the following events with respect to such property:  (i) the loss of
such property or of the use thereof due to the  destruction of or damage to such
property  which  renders  repairs  uneconomic  or which  renders  such  property
permanently unfit for normal use by the Lessee for any reason  whatsoever;  (ii)
any damage to such  property  which  results  in an  insurance  settlement  with
respect  to  such  property  on  the  basis  of a  total  loss,  or  an  actual,
constructive or compromised total loss; (iii) the theft or disappearance of such
property or the  confiscation,  condemnation,  or seizure of, or  requisition of
title to, or use of, such property by any governmental or purported governmental
authority  (other than a requisition  for use by the United  States  Government,
which in the case of any event  referred  to in this  clause  (iii)  shall  have
resulted in the loss of  possession of such property by the Company for a period
in excess of (a) in the case of the requisition of title to such property by any
governmental or purported governmental authority, 90 consecutive days, or (b) in
any other case other than a requisition for use by the government of registry of
the Aircraft or any instrumentality or agency thereof,  180 consecutive days, or
(c) in the case of a  requisition  for use by the  government of registry of the
Aircraft or any  instrumentality or agency thereof such loss of possession shall
be for a period in excess of 365 days (iv) the "grounding" of the Aircraft for a
period of 180 days due to actions by a  governmental  body unless (a) the Lessee
is diligently  carrying forward in a manner which does not discriminate  against
the  Aircraft  all  necessary  or  desirable  steps to permit  normal use of the
Aircraft  by the Lessee and (b) the Lessee has  obtained  the  approval  of such
governmental  body to operate,  in the normal course of the Company's  business,
one  similarly  grounded  aircraft in its fleet within one year from the time of
"grounding,"  but in any event if the Aircraft has been  "grounded" for a period
of one year; and (v) with respect to an Engine only, any divestiture of title to
such Engine treated as an Event of Loss pursuant to this Lease. An Event of Loss
with  respect to the  Aircraft  shall be deemed to have  occurred if an Event of
Loss occurs with respect to the Airframe.

      "Expiration Date" has the meaning specified in Article 3.1.

      "FAA" means the Federal Aviation Administration,  the Administrator of the
Federal Aviation Administration, or any person, governmental department, bureau,
commission  or agency  succeeding to the functions of either of the foregoing in
the United States of America.

      "Fair  Rental  Value"  means the fair rental value of the Aircraft for the
relevant period  determined by an independent  aircraft  appraisal expert agreed
upon by  Beneficiary  and Lessee,  but if  Beneficiary  and Lessee are unable to
agree on such expert, each of them will select such an expert and the experts so
selected shall choose a third expert and the "Fair Rental Value" for such period
will be the average of the two least disparate appraisals.  The cost of any such
appraisal(s) shall be borne equally by Beneficiary and Lessee.

      "Federal Aviation Act" shall mean the United States Federal Aviation
Act of 1958, as amended.

      "Federal  Aviation  Regulations"  shall  mean the  regulations  issued  or
promulgated pursuant to the Federal Aviation Act from time to time.

      "Flight Hour" has the meaning specified in Article 5.4.

      "Government  Entity"  shall mean and include (i) any national  government,
political   subdivision  thereof,  or  local  jurisdiction   therein;  (ii)  any
instrumentality, court, or agency of any thereof, however constituted; and (iii)
any association,  organization,  or institution of which any thereof is a member
or to which  jurisdiction  any  thereof is subject  or in whose  activities  any
thereof is a participant.

      "Incentive  Rate" means three  percentage  points  above the prime rate of
interest  charged by The Chase  Manhattan  Bank,  N.A.  from time to time as its
prime commercial lending rate, but, if prohibited by applicable law, the maximum
contract rate permitted by applicable law.

      "Indemnitees"  means  Lessor and  Beneficiary  together  in each case with
their  respective  shareholders,   subsidiaries,  directors,  officers,  agents,
employees,  and such financial  institutions  as are providing  financing of the
Aircraft.

      "Inherent Defect" has the meaning specified in Article 5.4.

      "Law"  shall  mean and  include  (i) any  statute,  decree,  constitution,
regulation,  order or any directive of any Government  Entity;  (ii) any treaty,
pact or other  agreement to which any  Government  Entity is a signatory  party;
(iii) any judicial or official  administrative  interpretation or application of
any thereof; and (iv) any amendment or revision of any thereof.

      "Lease  Agreement,"  "this Lease," "this Agreement,"  "herein,"  "hereof,"
"hereunder"  or other like words  means  this  Lease  Agreement  as the same may
hereafter  from  time to time  be  supplemented,  amended,  waived  or  modified
pursuant to the applicable  provisions hereof,  including,  without  limitation,
supplementation hereof by one or more Lease Supplements.

      "Lease  Supplement" means a document  substantially in the form of Exhibit
"A" or Exhibit "F" hereto,  to be entered into between Lessor and Lessee for the
purpose of adding  Lessor as a party to this  Agreement  and/or  subjecting  the
Aircraft to the terms of this Lease  Agreement or evidencing  the  expiration or
termination of this Lease Agreement and the return of the Aircraft to Lessor.

      "Lessee's  Interest"  means that portion of the  compensation  paid by the
U.S. Government in connection with a requisition of the Aircraft constituting an
Event of Loss hereunder  equal to the excess,  if any, of (i) an amount equal to
the present value, discounted at 7% per annum of fair market rentals, determined
by  independent  appraisal,  for the  Aircraft for the balance of the Lease Term
from the date of  requisition  minus (ii) the present  value,  discounted at the
same rate, of the future rent payments due under this  Agreement for the balance
of the Lease Term from the date of the requisition.

      "Lessor's Tech Rep" means any person or organization designated as such by
Beneficiary  to  Lessee  from  time  to  time;  provided  that  such  person  or
organization will not be an airline competing with Lessee, an affiliate thereof,
or an employee of either  thereof or a  subsequent  lessee of the  Aircraft or a
representative or employee thereof.

      "Lessor  Liens" shall mean Liens arising as a result of (i) claims against
Lessor or Beneficiary not related to the transactions contemplated by this Lease
or which  violate  any  obligation  of Lessor or  Beneficiary  under  this Lease
Agreement;  or (ii) Lessor  Taxes;  or (iii) the  financing  of the  Aircraft by
Beneficiary or Lessor;  or (iv) acts of Lessor or Beneficiary  not  contemplated
and expressly  permitted under this Lease; or (v) taxes,  fees and other charges
imposed against Lessor or any Indemnitee  which are not  indemnified  against by
Lessee  pursuant to Article 8.2; or (iv) claims  against  Lessor or  Beneficiary
arising out of its transfer of all or any part of its  interests in the Aircraft
or this Lease, other than a transfer pursuant to Article 9 or 15 hereof.

      "Lessor Taxes" means taxes, fees and other charges:

            (a)   imposed  as  a  direct  result  of  activities  of  Lessor  or
                  Beneficiary  in  the   jurisdiction   imposing  the  liability
                  unrelated to the transactions  contemplated by this Agreement;
                  or

            (b)   taxes, fees and other charges imposed on Lessor or Beneficiary
                  by any  jurisdiction  or taxing  authority  in which Lessor or
                  Beneficiary,  as applicable, is organized or has its principal
                  place of  business  or is  otherwise  subject to taxation as a
                  result  of   transactions   unrelated   to  the   transactions
                  contemplated  hereby  (I) on,  based on, or  measured  by, the
                  gross  or net  income  or  gross  or net  receipts,  including
                  capital  gains  taxes,  minimum  taxes  from tax  preferences,
                  alternative minimum taxes,  branch profits taxes,  accumulated
                  earnings taxes,  personal  holding  company taxes,  succession
                  taxes and  estate  taxes,  and any state or local  withholding
                  taxes on,  based on or measured by gross or net income or (II)
                  on, or with respect to, or measured  by,  capital or net worth
                  or in the nature of a franchise tax or a tax for the privilege
                  of doing business  (other than any such taxes,  fees and other
                  charges  in the  nature of sales,  use,  rental,  ad  valorem,
                  license, property , value added or similar taxes)

            (c)   taxes,  fees and  other  charges  on, or with  respect  to, or
                  measured by, any trustee  fees,  commissions  or  compensation
                  received by Lessor in its capacity as owner  trustee under the
                  Trust Agreement; or

            (d)   taxes,  fees and other  charges  that are being  contested  as
                  provided in Article 8.2.

            (e)   imposed  with  respect  to  any  period  commencing  or  event
                  occurring  prior to the Delivery Date or after the  Expiration
                  Date (other than the receipt of payments due  hereunder  after
                  the Expiration Date); or

            (f)   imposed as a direct  result of the gross  negligence or wilful
                  misconduct of Lessor or Beneficiary;

            (g)   imposed as a direct result of a voluntary or involuntary sale,
                  transfer,  assignment or  disposition by Lessor or Beneficiary
                  of all or any part of its  interest  in the  Aircraft  or this
                  Agreement,  except for any such sale, transfer,  assignment or
                  other  disposition  which  has  occurred  as a  result  of the
                  exercise of remedies hereunder, following the occurrence of an
                  Event of Default; or

            (h)   to the  extent  that  same  are  imposed  or arise as a direct
                  result of a Lessor Lien.

            (i)   taxes,  fees and other charges  resulting from the purchase or
                  other  acquisition  by Lessor or  Beneficiary of the Aircraft,
                  any Engine or any Part or any interest therein; or

            (j)   taxes,  fees and other charges imposed against a transferee or
                  assignee of Lessor or  Beneficiary to the extent of the excess
                  of such taxes,  fees and other charges over the amount thereof
                  which  would  have  been  imposed  had  there  not been such a
                  transfer or assignment; or

            (k)   to the extent such taxes,  fees or other  charges  (other than
                  U.S.  income taxes  described in Article  8.2(ii)) result from
                  any  failure by Lessor or  Beneficiary  to file such  returns,
                  statements  or other  documentation  as  shall  be  reasonably
                  available  to Lessor  or  Beneficiary,  as shall  not  subject
                  Lessor or Beneficiary to unreasonable cost or expense,  and as
                  shall  enable it to claim a reduced  rate of tax or  exemption
                  from tax with  respect  to any taxes,  fees and other  charges
                  subject to payment or reimbursement by Lessee hereunder and as
                  to  which,  in  the  case  of  returns,  statements  or  other
                  documentation required by a change in applicable law or treaty
                  after the Delivery Date, Lessee shall have notified Lessor and
                  Beneficiary; or

            (l)   to  the  extent  that  such  taxes,  fees  and  other  charges
                  constitute  interest,  fines or  penalties  if such  interest,
                  fines or  penalties  result  from the  failure to file or late
                  filing of any tax return by Lessor or Beneficiary  that is not
                  a result of an act or omission of Lessee or a breach of any of
                  Lessee's obligations under this Agreement.

      "Letter of Credit"  shall  mean the letter of credit  delivered  by Lessee
pursuant to Articles 3.3 and 17 hereof, and any replacement therefor.

      "Letter of Intent" means the letter of intent  executed March 26 and March
28, 1997 by Beneficiary and Lessee, respectively.

      "Letter   of  Quiet   Enjoyment"   means  a  letter  of  quiet   enjoyment
substantially in the form attached hereto as Exhibit "B" provided to Lessee from
any transferee or assignee of Beneficiary and any holder of a security  interest
in the Aircraft.

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

      "Loose Equipment" shall mean the equipment described as such in Appendix C
to Exhibit "A".

      "Loss" has the meaning specified in Article 8.1.

      "Maintenance  Reserves" means the maintenance  reserve payments payable by
Lessee pursuant to Article 5.4 hereof.

      "Manufacturer"  means The Boeing  Company,  in respect of the Airframe and
CFM International in respect of the Engines.

      "Parts"   means   all   appliances,    components,   parts,   instruments,
appurtenances,  accessories,  furnishings and other equipment of whatever nature
(excluding Engines or engines),  so long as the same shall be incorporated in or
installed  on or  attached  to the  Airframe  or any  Engine or so long as title
thereto shall remain vested in Lessor in accordance  with the terms of Article 6
hereof after removal from such Airframe or Engine.

      "Permitted Liens" has the meaning specified in Article 11.

      "Records"  means all items  referred to in clauses (i),  (ii) and (iii) of
Article 13.5.

      "Remarketing Commencement Date" has the meaning specified in Article
8.2.

      "Renewal Term" has the meaning set forth in Article 3.1 hereof.

      "Rent" means Basic Rent and Supplemental Rent.

      "Scheduled Aircraft Delivery" for the Aircraft means the scheduled date of
delivery for the Aircraft set forth in Article 2.2 hereof.

      "Security Deposit" has the meaning specified in Article 3.3.

      "Severable  Equipment" means severable  components or systems installed on
or  affixed  to  the   Airframe   that  are  used  to  (i)  provide   individual
telecommunications   or  electronic   entertainment  to  passengers  aboard  the
Aircraft,  or (ii) provide  capabilities to the Aircraft cockpit navigational or
computer  systems in addition to those which the Aircraft had when  delivered to
Lessee,  if and for so long as such  equipment  shall be owned  by,  or shall be
subject to a security  interest,  license or other  interest of,  another Person
(other  than any  Affiliate  of Lessee) in  accordance  with the  provisions  of
Article 6.4 hereof.

      "Supplemental  Rent" means any and all amounts,  liabilities,  indemnities
and  obligations  which  Lessee  assumes or agrees  hereunder  to pay to Lessor,
Beneficiary  and/or any Indemnitee,  including  Maintenance  Reserves,  Security
Deposit and Agreed Value payments, but excluding Basic Rent.

      "taxes, fees and other charges" has the meaning specified in Article
8.2.

      "Term," in respect of the Aircraft,  means the term for which the Aircraft
is leased hereunder pursuant to Article 3.1 hereof.

      "Termination Value" means as of the Expiration Date the sum of:

            (i)   the  excess,  if any, of the  present  value of the  remaining
                  monthly  payments of Basic Rent during the Basic Term over the
                  present value of the monthly Fair Rental Value of the Aircraft
                  for the remainder of the Basic Term,  in each case  calculated
                  using a discount rate of 7% per annum; plus

            (ii)  any break funding and interest rate swap break costs  actually
                  incurred  by   Beneficiary   in  connection   with  the  early
                  termination of its financing,  if any, then  applicable to the
                  Aircraft as a result of the termination of the Lease.

      "Trust  Agreement"  means the Trust  Agreement  to be entered into between
First Security Bank,  National  Association (or another Trust Company),  and the
Beneficiary  prior to the Delivery  Date, as amended,  modified or  supplemented
from time to time.

      "Wet Lease" means any arrangement whereby the Lessee agrees to furnish the
Airframe and Engines or engines  installed  thereon to a third party pursuant to
which such  Airframe  and  Engines or engines  (i) shall be  operated  solely by
regular employees of the Lessee possessing all current certificates and licenses
that would be required  under the Federal  Aviation Act for the  performance  by
such employees of similar  functions  within the United States of America (it is
understood  that cabin  attendants  need not be employees  of the Lessee),  (ii)
shall  be  maintained  by  the  Lessee  in  accordance  with  its   FAA-approved
maintenance  program,  and (iii) shall be insured by the Lessee on its policy in
accordance with the requirements of the Lease.

ARTICLE 2.  ACCEPTANCE UNDER THE LEASE

2.1   CONDITIONS PRECEDENT.

      Subject to and on the terms  hereof,  (i) Lessor hereby agrees to lease to
      Lessee hereunder, and Lessee hereby agrees to lease from Lessor hereunder,
      the  Aircraft  which shall be  delivered  to Lessee,  such  delivery to be
      evidenced by the execution by Lessor and Lessee of a Lease Supplement, and
      (ii) KG agrees to cause Lessor to lease the Aircraft to Lessee hereunder.

      2.1.1       LESSOR  CONDITIONS.  Lessor's and KG's obligation to lease the
                  Aircraft  hereunder shall be subject to satisfaction or waiver
                  of the  following  conditions  precedent.  On or  prior to the
                  Delivery Date (except for (i) below), Lessor and KG shall have
                  received:

          i.      on the date of execution  hereof, a resolution of the Board of
                  Directors  of  Lessee,   certified  by  the  Secretary  or  an
                  authorized  officer of Lessee,  duly  authorizing the lease of
                  the  Aircraft  hereunder  and  the  execution,   delivery  and
                  performance  of  this  Lease,   together  with  an  incumbency
                  certificate as to the person or persons  authorized to execute
                  and deliver such documents on behalf of Lessee;

         ii.      copies of the  certificate  of  incorporation  and  by-laws of
                  Lessee,  a  good  standing  certificate,  and  copies  of  all
                  consents,  authorizations  and  approvals of any  governmental
                  agency or authority  which are required in connection with the
                  execution, delivery and performance of the Lease by Lessee ;

        iii.      Uniform Commercial Code financing statements for filing in the
                  State  of  Colorado  reasonably  satisfactory  to KG and  duly
                  executed by Lessee; and

         iv.      a letter from the process agent appointed by Lessee  hereunder
                  accepting such appointment.

      2.1.2       OTHER  LESSOR  CONDITIONS.  With respect to the Aircraft to be
                  leased hereunder, the following additional conditions shall be
                  waived or complied  with at or prior to the time the  Aircraft
                  is ready for  delivery  from Lessor to Lessee  hereunder or on
                  such earlier date as may be applicable to such condition:

          i.      Lessor and KG shall have  received the  following on or before
                  the Delivery Date for the Aircraft:

                  A.    a copy of Lessee's maintenance program for the
                        Aircraft;

                  B.    a certificate signed by an Approved Insurance Broker
                        as to the due compliance with the insurance
                        provisions of Article 10 hereof with respect to the
                        Aircraft;

                  C.    the Security Deposit described in Article 3.3;

                  D.    a  favorable  opinion or opinions of counsel for Lessee,
                        addressed  to  Lessor  and  Beneficiary  and  dated  the
                        Delivery Date for the Aircraft,  concerning  the matters
                        set forth in clauses (i)  through  (v),  inclusive,  and
                        clause  (viii) of  Article  4.2  hereof,  and as to such
                        other matters as KG shall reasonably specify;

                  E.    a favorable opinion of United States counsel to KG as to
                        such matters as KG may reasonably request;

                  F.    a favorable  opinion of Lytle,  Soule & Curlee,  special
                        FAA counsel  concerning the proper  registration of, and
                        recordation of Lessor's interest in the Aircraft;

                  G.    such  other  documents  as Lessor  or KG may  reasonably
                        request.

         ii.      Since March 31,  1997 there  shall not have been any  material
                  adverse  change in Lessee's  financial  condition,  and on the
                  Delivery Date for the Aircraft the following  statements shall
                  be true,  and Lessor and KG shall have  received a certificate
                  signed by a duly  authorized  officer  of  Lessee,  dated such
                  Delivery Date, stating that:

                  A.    the representations and warranties  contained in Article
                        4.2 hereof are true and  accurate on and as of such date
                        as  though  made on and as of such date  (except  to the
                        extent that such  representations  and warranties relate
                        to an earlier date);

                  B.    no event has occurred and is continuing, or would result
                        from the lease of the  Aircraft,  which  constitutes  an
                        Event or an Event of Default; and

                  C.    all  necessary  approvals,   authorizations,   consents,
                        licenses,  certificates  and  orders  of the FAA and any
                        other   governmental  or  regulatory   authority  having
                        jurisdiction  with  respect  to  the  ownership,  use or
                        operation   of  such   Aircraft   or  the   transactions
                        contemplated  by this  Lease and  required  by the terms
                        hereof to be obtained by Lessee have been obtained,  and
                        such  approvals,  authorizations,   consents,  licenses,
                        certificates and orders are in full force and effect and
                        constitute sufficient authorization therefor.

      2.1.3 LESSEE'S CONDITIONS.

      Lessee's obligation to Lease the Aircraft shall be subject to satisfaction
      or waiver of the following conditions precedent:

          i.      DELIVERY CONDITION.  The Aircraft shall be delivered to Lessee
                  registered  in Lessor's name in the United States with a valid
                  standard  certificate of airworthiness issued by the FAA, with
                  all systems  functioning in accordance with the Manufacturer's
                  recommendations.  Lessee shall have received at least 48 hours
                  prior  written  notice  of  the  proposed  Delivery  Date.  In
                  addition,   the  Aircraft   shall  comply  with  the  delivery
                  conditions defined in Exhibit "D" to this Lease.  Except as so
                  specified in this section and/or in  Exhibit"D",  the Aircraft
                  shall  be  delivered  to  Lessee  AS IS,  WHERE  IS,  and upon
                  acceptance  by  Lessee  shall  be  without  representation  or
                  warranty  (except as to title) and  subject to the  exclusions
                  from warranties set forth in Article 4.1.

         ii.      OTHER   CONDITIONS.   The  conditions  set  forth  in  Article
                  2.1.1(i), (ii) and (iv) and in Article 2.1.2(i)(F) and (G) and
                  in Article  2.1.2(ii)(A) and (C), in each case with respect to
                  Lessor and Beneficiary, mutatis mutandis, shall have been met.
                  In addition,  Lessee shall have  received  from  Beneficiary a
                  certificate,  dated as of the Delivery Date,  confirming  that
                  the  representation  and warranty of Beneficiary  set forth in
                  Article 8.2 of the Lease is true and accurate.

2.2   TIME OF DELIVERY.

      Subject to the provisions of the next paragraph and satisfaction or waiver
      of the  conditions  set  forth  in  Article  2.1,  the  Aircraft  shall be
      delivered to Lessee,  and Lessee shall accept  delivery of the Aircraft on
      or about  November 25, 1997 (the  "Scheduled  Aircraft  Delivery") or such
      earlier or later date  agreed  mutually  in  writing  by  Beneficiary  and
      Lessee.  Beneficiary  shall give  Lessee at least 48 hours  prior  written
      notice of the proposed  delivery of the  Aircraft.  The  pre-delivery  and
      delivery  procedures  are  described  in  Exhibit  "D"  hereto.   Lessee's
      acceptance of delivery of the Aircraft shall be evidenced by the execution
      by Lessee and Lessor of a Lease  Supplement  substantially  in the form of
      Exhibit "A" hereto.

      If KG  expects  to be unable to cause  Lessor  to tender  delivery  of the
      Aircraft  to Lessee on the  Scheduled  Aircraft  Delivery  date,  KG shall
      notify Lessee as soon as practicable  prior  thereto.  If Lessor shall not
      have tendered the Aircraft for delivery to Lessee by December 25, 1997 for
      any reason  other than the  failure of Lessee to fulfill  its  obligations
      hereunder,  Lessee  shall  have the  right,  by  written  notice to KG, to
      terminate this Lease,  and KG shall thereupon  return the Security Deposit
      theretofore paid to Lessee, including interest thereon at the rate paid by
      KG's bank on such deposit.  If Lessor tenders  delivery of the Aircraft to
      Lessee on the Scheduled  Aircraft  Delivery Date, or prior to December 25,
      1997 if there is a delay,  and Lessee  refuses to accept  delivery for any
      reason other than the failure of Lessee's  conditions  precedent contained
      in Article 2.1.3 to have been met, KG may  terminate  this Lease and apply
      the Security Deposit  theretofore paid,  including interest thereon at the
      rate paid by KG's bank on such deposit against any actual damages suffered
      by it as a result  of  Lessee's  breach.  In any suit by  Lessee or KG for
      breach of the obligation to take or deliver the Aircraft,  as the case may
      be, such party's damages shall be limited to its actual damages  suffered,
      and both Lessee and KG waive the right to claim  consequential  or similar
      damages.

2.3   PLACE OF DELIVERY.

      The Aircraft shall be delivered to Lessee hereunder, at KG's option, at BF
      Goodrich/Tramco in Everett,  Washington,  or Colorado Springs, Colorado or
      at such alternate site as may be agreed between Lessee and KG.

2.4   DELIVERY FUEL.

      Fuel in the tanks of the  Aircraft  at  delivery  shall be recorded in the
      Lease Supplement.

2.5   INDEMNITY.

            i.    The Lessee shall  indemnify and hold harmless the  Indemnitees
                  from and  against  any and all  liabilities,  damages,  losses
                  (including costs and expenses  incidental  thereto) arising by
                  reason of death or injury to any  observer or any  employee of
                  the Lessee,  arising out of, or in any way connected  with any
                  demonstration  flight and inspection of the Aircraft conducted
                  pursuant to Exhibit "D" hereto.

            ii.   The Lessor shall  indemnify and hold  harmless  Lessee and its
                  shareholders,  affiliates,  directors,  officers,  agents  and
                  employees from and against any and all  liabilities,  damages,
                  losses  (including  costs  and  expenses  incidental  thereto)
                  arising  by reason of death or injury to any  observer  or any
                  employee of the Lessor or any  Indemnitee,  arising out of, or
                  in  any  way  connected  with  any  demonstration  flight  and
                  inspection of the Aircraft  conducted  pursuant to Exhibit "D"
                  hereto.

ARTICLE 3.  TERM AND RENT

3.1 TERM.

      The Aircraft shall be leased to Lessee hereunder for (i) a term commencing
      on the  Delivery  Date for the  Aircraft  and  ending  on the  Basic  Term
      Expiration Date (the "Basic Term"),  and (ii) at Lessee's  option,  for an
      additional period of up to two (2) years (the "Renewal Term"),  unless, in
      each case,  earlier  terminated as herein  provided.  If Lessee desires to
      exercise its option to extend the Term of this Lease for the Renewal Term,
      it shall give Beneficiary  irrevocable written notice of such election not
      less than 180 days prior to the last day of the Basic Term  specifying the
      length of the Renewal Term.  The Renewal Term shall commence at the end of
      the Basic Term and shall continue to the date specified in such notice. If
      the Lessee  exercises  its option to extend the Term,  the  parties  shall
      execute a Lease  Supplement  evidencing the extension of the Term prior to
      the end of the  Basic  Term.  The  date on which  the  Term of this  Lease
      expires or earlier terminates is herein called the "Expiration Date".

3.2   BASIC RENT.

      Lessee shall pay to Beneficiary  Basic Rent for the Aircraft  monthly,  in
      advance,  on the Delivery Date and on the same day as the Delivery Date in
      each month  thereafter  during the Basic Term (or, if there is no such day
      in such month,  on the last day of such month),  and monthly in advance on
      the first day of the  Renewal  Term,  if any,  and on the same day of each
      month thereafter during the Renewal Term.

3.3   SECURITY DEPOSIT.

      Beneficiary  has received from Lessee the sum of $[ ]* ([ ]* dollars) (the
      "Signing Deposit") in cash pursuant to the terms of the Letter of Intent.

      The  Lessee  shall pay to  Beneficiary  upon  execution  hereof $[ ]* (the
      "Second Deposit").

      In addition,  Lessee shall pay to  Beneficiary  (i) $[ ] * on September 1,
      1997 (the  "Third  Deposit")  and (ii) on the  Delivery  Date,  $[ ]* (the
      "Fourth Deposit").

      The Signing Deposit, the Second Deposit,  Third Deposit and Fourth Deposit
      aggregating $[ ]* are collectively  referred to as the "Security Deposit".
      Any cash portion of the Security  Deposit shall be held by the Beneficiary
      in a separate interest bearing account until such time as it is applied to
      Lessee's  obligations  as herein  provided or  returned  to Lessee.  On or
      before  the tenth day after the  Delivery  Date,  Lessee  shall  provide a
      letter of credit in accordance  with Article 17 for the Security  Deposit;
      provided  that if such Letter of Credit is provided on the Delivery  Date,
      the  Fourth  Deposit  shall not be  payable  by  Lessee in cash.  Upon the
      receipt of such letter of credit,  Beneficiary  shall  reimburse to Lessee
      the Security Deposit,  including interest thereon at the rate paid on such
      deposit by Beneficiary's bank.

      In the event that the Aircraft is not delivered to Lessee hereunder due to
      the  fault  of  Lessee,  Beneficiary  shall  have the  right to apply  the
      Security Deposit,  including  interest earned thereon,  against any actual
      damages suffered by it as a result of Lessee's  breach.  In the event that
      the Aircraft is delivered to Lessee hereunder,  the Security Deposit shall
      be  held by the  Beneficiary  as  security  for the  timely  and  faithful
      performance by Lessee of all of Lessee's obligations under this Lease, and
      Lessee hereby grants Beneficiary a security interest in all sums deposited
      under  this  Article  3.3.  Lessee  agrees  to  execute  and file with the
      appropriate  governmental  entities any and all  documents  necessary  and
      reasonably  requested  by Lessor to  evidence  and perfect  such  security
      assignment  in favor of  Beneficiary.  If an Event of  Default  shall have
      occurred  which is  continuing  in addition to all other rights Lessor and
      Beneficiary  shall have under the New York  Uniform  Commercial  Code as a
      secured party, Beneficiary may, but shall not be obligated to, use, apply,
      set-off or retain all or any  portion of the  Security  Deposit in payment
      for sums due by Lessee,  to compensate  Lessor or Beneficiary for any sums
      advanced  as a result of an Event of Default by Lessee or to apply  toward
      any losses or expenses  Lessor or Beneficiary  actually incurs as a result
      of such  Event of  Default.  If  Beneficiary  uses or  applies  all or any
      portion of such Security Deposit as provided above, such application shall
      not be deemed a cure of any Events of  Default,  and Lessee  shall  within
      five (5) days after written demand  therefor  deposit with  Beneficiary in
      cash an amount sufficient to restore the Security Deposit to the aggregate
      amount of such Security Deposit prior to Beneficiary's  use or application
      and Lessee's  doing so shall be deemed a cure of any such Event of Default
      but the  failure  of  Lessee to do so shall be a  material  breach of this
      Lease by Lessee. Provided that an Event of Default shall not have occurred
      and then be  continuing  and  provided  that  Lessee  shall  have paid all
      amounts  owing  hereunder,  any  cash  portion  of the  Security  Deposit,
      including  interest  earned  thereon,  and any  Letter of Credit  shall be
      returned  to  Lessee  at the end of the Term and  Lessee's  return  of the
      Aircraft in compliance with Article 13 hereof; provided that if the Letter
      of Credit or any cash portion of the  Security  Deposit is not returned to
      Lessee  because  an Event  of  Default  shall  have  occurred  and then be
      continuing or any amount owed by Lessee shall then be unpaid,  such Letter
      of Credit or cash portion of the Security  Deposit,  in each case,  to the
      extent not applied  hereunder shall be returned to Lessee at such time as,
      in the case of an Event of  Default,  such  Event of  Default is no longer
      continuing or Lessee's obligations under Article 15 have been satisfied in
      full,  as the case may be,  or,  in the case of an unpaid  amount  owed by
      Lessee, such unpaid amount has been satisfied in full.

3.4   SUPPLEMENTAL RENT.

      Lessee also agrees to pay to Beneficiary,  or the Person entitled  thereto
      hereunder,  any and all Supplemental Rent as the same shall become due and
      owing.  Lessee  will also pay to  Beneficiary  (or to the Person  entitled
      thereto), as Supplemental Rent, on demand,  interest at the Incentive Rate
      on any part of any Basic  Rent not paid when due and on any other  payment
      of Supplemental Rent not paid when due in accordance with the terms hereof
      for the period for which the same shall become due until the same shall be
      paid.

3.5   PAYMENTS ON BUSINESS DAY.

      If any date on which a payment of Rent  becomes  due and  payable is not a
      Business  Day,  the Rent  payment  otherwise  due and payable on such date
      shall be due and payable on the next Business Day (without  interest being
      payable as a result of such delay)  unless such  Business Day falls in the
      next  calendar  month,  in  which  case  such  amount  shall be due on the
      preceding Business Day.

3.6   PLACE OF PAYMENT.

      Notwithstanding  any other provision  hereof,  all payments of Rent (other
      than  indemnity  payments  in favor of a Person  other  than  Beneficiary)
      hereunder shall be payable in Dollars, in immediately  available funds, to
      the Beneficiary's account at:

                        The Bank of Tokyo-Mitsubishi, Ltd., New York
                        Chips UID: 076 886 ABA No. 026 009632

                        A/C The Bank of Tokyo-Mitsubishi, Ltd.,
                          London Branch
                        12-15 Finsbury Circus
                        London EC2M 7BT
                        England

                        Tel:  44 171 577 1087
                        Fax:  44 171 577 1128

                        F/O KG Aircraft Leasing Co., Ltd.
                          Number 245662 Current Account

                  or at such other  location in the United States as Beneficiary
                  shall from time to time designate in writing.

3.7   PROHIBITION AGAINST SETOFF, COUNTERCLAIM, ETC.

      Lessee's obligation to pay Basic Rent and Security Deposit hereunder shall
      be  absolute  and   unconditional   and  shall  not  be  affected  by  any
      circumstances,    including,   without   limitation:   (i)   any   setoff,
      counterclaim,  recoupment,  defense or other right  which  Lessee may have
      against  Lessor,  Manufacturer,  Beneficiary,  or any other person for any
      reason  whatsoever,  (ii) any defect in the title, (iii) any defect in the
      airworthiness,  condition,  design,  operation, or fitness for use, or any
      damage to or loss or destruction, of the Equipment, or any interruption or
      cessation  in the use or  possession  thereof  by  Lessee  for any  reason
      whatsoever,  (iv) any insolvency,  bankruptcy,  reorganization  or similar
      proceedings by or against Lessee, or (v) any other circumstance, happening
      or event  whatsoever,  whether or not similar to any of the  foregoing and
      Lessee hereby waives,  to the extent  permitted by applicable law, any and
      all  rights  which it may now have or which may at any time  hereafter  be
      conferred  upon it by statute or otherwise to terminate,  cancel,  quit or
      surrender  this Lease or the Equipment,  or to any abatement,  suspension,
      deferment or reduction of Rent,  except in each case,  with respect to any
      period in which  Lessee's  use of the  Aircraft is  adversely  affected by
      Lessor's breach of the covenant set forth in Article 18.5 hereof.

ARTICLE 4.  REPRESENTATIONS AND WARRANTIES

4.1   LESSOR'S REPRESENTATIONS AND WARRANTIES.

      THE  EQUIPMENT,  ONCE ACCEPTED BY LESSEE  HEREUNDER,  IS LEASED  HEREUNDER
      "AS-IS",  EXCEPT FOR DISCREPANCIES (IF ANY) IDENTIFIED IN LEASE SUPPLEMENT
      NO.  1  WHICH   LESSOR  IS  OBLIGED  TO  REMEDY  AFTER   ACCEPTANCE   AND,
      NOTWITHSTANDING  THE DELIVERY CONDITION REQUIRED HEREBY,  ONCE ACCEPTED BY
      LESSEE THE PARTIES  CONFIRM THAT (A) THE  AIRCRAFT,  THE AIRFRAME AND EACH
      ENGINE ARE OF A SIZE,  DESIGN,  CAPACITY AND  MANUFACTURE  SELECTED BY AND
      ACCEPTABLE TO LESSEE, (B) LESSOR IS NOT A MANUFACTURER OF PROPERTY OF SUCH
      KIND, AND (C) LESSOR AND BENEFICIARY HAVE NOT MADE, NOR SHALL BE DEEMED TO
      HAVE MADE,  AND LESSOR AND  BENEFICIARY  WILL BE DEEMED TO HAVE  EXPRESSLY
      DISCLAIMED,  ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE
      AIRWORTHINESS,  CONDITION,  VALUE, DESIGN,  OPERATION,  MERCHANTABILITY OR
      FITNESS  FOR USE FOR ANY  PARTICULAR  PURPOSE OF THE  AIRCRAFT OR ANY PART
      THEREOF,  AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP WITH RESPECT TO
      THE  AIRCRAFT OR ANY PARTY  THEREOF,  AS TO THE ABSENCE OF LATENT OR OTHER
      DEFECTS,   WHETHER  OR  NOT  DISCOVERABLE,   AS  TO  THE  ABSENCE  OF  ANY
      INFRINGEMENT OF ANY PATENT,  TRADEMARK OR COPYRIGHT,  AS TO THE ABSENCE OF
      OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR ANY OTHER REPRESENTATION
      OR WARRANTY WHATSOEVER,  EXPRESS OR IMPLIED,  WITH RESPECT TO THE AIRCRAFT
      OR ANY  PART  THEREOF;  provided,  however,  Lessor  warrants  that on the
      Delivery Date,  (i) the Lessor shall have whatever  interest in and to the
      Aircraft  that was  conveyed to it by the  Beneficiary;  (ii) the Aircraft
      shall  be  free  of  Lessor  Liens  attributable  to it in its  individual
      capacity;  and (iii) it is a "citizen of the United  States" as defined in
      Section 40102 of Title 49 of the United States Code.  Beneficiary warrants
      that on or prior to the Delivery Date,  Beneficiary shall have caused good
      title to the  Aircraft to be  transferred  to Lessor free and clear of all
      Liens other than any Lien permitted under clause (i) of Article 11 hereof.

      THE  REPRESENTATIONS AND WARRANTIES OF LESSOR AND BENEFICIARY SET FORTH IN
      THIS ARTICLE 4 ARE EXCLUSIVE AND IN LIEU OF ALL OTHER  REPRESENTATIONS AND
      WARRANTIES  OF LESSOR  AND  BENEFICIARY  WITH  RESPECT  TO THE  EQUIPMENT,
      INCLUDING  FITNESS FOR USE AND  MERCHANTABILITY,  WHETHER WRITTEN OR ORAL,
      EXPRESS OR IMPLIED.

      Beneficiary represents and warrants that:

      (i)         Beneficiary is a limited  liability  company  incorporated and
                  existing  under  the laws of  Ireland  and has the  power  and
                  authority to enter into and to perform its  obligations  under
                  this Agreement;

      (ii)        this  Agreement  has been  duly  authorized  by all  necessary
                  corporate  action  on the part of  Beneficiary,  has been duly
                  executed and  delivered by  Beneficiary  and  constitutes  the
                  valid, legal and binding obligation of Beneficiary enforceable
                  in  accordance  with its  terms  except as may be  limited  by
                  applicable bankruptcy, insolvency, moratorium and similar laws
                  affecting  creditors' rights generally and except as equitable
                  remedies such as specific performance may be in the discretion
                  of the courts;

      (iii)       the execution and delivery by Beneficiary  of this  Agreement,
                  and  performance  of any of the  transactions  by  Beneficiary
                  contemplated   hereby,   have  received  and  Beneficiary  has
                  complied with, every necessary  consent,  approval,  order, or
                  authorization of, or registration with, or the giving of prior
                  notice  to,   any   Government   Entity  in   Ireland   having
                  jurisdiction  with  respect to the  execution  and delivery of
                  this  Agreement or the validity and  enforceability  hereof or
                  the  satisfaction  of all  monetary and other  obligations  of
                  Beneficiary hereunder; and

      (iv)        the provisions of Article 18.1 and 18.10 concerning applicable
                  law and  jurisdiction  are valid and  binding  on  Beneficiary
                  under the laws of Ireland and no provision  of this  Agreement
                  is prohibited, unlawful or unenforceable under any such laws.

4.2   LESSEE'S REPRESENTATIONS AND WARRANTIES.

      Lessee represents and warrants that:

          i.      Lessee is a  corporation  duly  organized and existing in good
                  standing  under  the laws of the State of  Delaware,  has full
                  power,  authority and legal right to own its properties and to
                  carry on its  business as presently  conducted  and to perform
                  its  obligations   under  this  Lease;   holds  all  licenses,
                  certificates   and  permits  from   governmental   authorities
                  necessary for the performance of its obligations hereunder and
                  is a "citizen  of the United  States"  (as  defined in section
                  40102 of the  Federal  Aviation  Act)  holding an air  carrier
                  operating    certificate    issued   by   the   Secretary   of
                  Transportation pursuant to chapter 447 of the Federal Aviation
                  Act for aircraft  capable of carrying ten or more  individuals
                  or 6,000 pounds or more of cargo.

         ii.      This Lease has been duly authorized by all necessary action on
                  the  part  of  Lessee,   does  not  require  any  approval  of
                  shareholders of Lessee, 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 do or will  violate  any  provision  of the
                  articles  of  incorporation  or  by-laws of Lessee or any law,
                  rule, regulation,  judgment, order or decree of any government
                  or governmental  instrumentality or court having  jurisdiction
                  over Lessee or any of its activities or  properties,  or do or
                  will result in any breach of, or constitute any default under,
                  or result in the  creation  of any Lien upon any  property  of
                  Lessee  under,  any  indenture,   mortgage,   deed  of  trust,
                  conditional sale contract,  loan or credit agreement, or other
                  agreement or instrument to which Lessee is a party or by which
                  Lessee or its  properties  may be bound (other than this Lease
                  Agreement).

        iii.      Except for the  registration of the Aircraft and the filing of
                  this  Lease  Agreement  with  the FAA and  the  filing  of the
                  financing statements referred to in Article 2.1.1(iii) hereof,
                  neither the execution and delivery by Lessee of this Lease nor
                  the   performance  by  Lessee  of  any  of  the   transactions
                  contemplated  hereby require the consent,  approval,  order or
                  authorization  of,  or  registration  with,  or the  giving of
                  notice  to,  the  FAA,  or  any  other   domestic  or  foreign
                  governmental authority.

         iv.      This Lease has been duly  executed and delivered by Lessee and
                  constitutes,  and each  Lease  Supplement  when  executed  and
                  delivered by Lessee will constitute,  legal, valid and binding
                  obligations of Lessee,  enforceable  in accordance  with their
                  terms  except  as  such  enforceability  may  be  affected  by
                  bankruptcy,  insolvency,   reorganization  or  other  laws  of
                  general  application  affecting  creditors' or lessors' rights
                  and except for general principles of equity.

          v.      There are no suits or proceedings pending or, to the knowledge
                  of Lessee,  threatened  in any court or before any  regulatory
                  commission,  board or other administrative governmental agency
                  against  Lessee  which may  reasonably  be  expected to have a
                  materially  adverse  effect  on  the  financial  condition  of
                  Lessee.

         vi.      Lessee has filed or caused to be filed all tax  returns  which
                  are required to be filed and has paid or caused to be paid all
                  taxes  shown to be due or payable on said  returns  and on any
                  assessment  received by Lessee,  to the extent that such taxes
                  have become due and payable.

        vii.      The balance  sheet of Lessee as of  December  31, 1996 and the
                  statements  of income and retained  earnings of the Lessee for
                  the three  fiscal  years then ended and the  balance  sheet of
                  Lessee as of March 31, 1997 (copies of each of which have been
                  furnished to Beneficiary), are complete and correct and fairly
                  set forth  Lessee's  financial  condition as of such dates and
                  the  results of its  operations  for such  periods,  and since
                  March 31, 1997, there has been no materially adverse change in
                  such condition or operations.

       viii.      The   provisions  of  Articles   18.1  and  18.10   concerning
                  applicable  law and  jurisdiction  are  valid and  binding  on
                  Lessee.

         ix.      Lessee's  maintenance  program for the Aircraft  complies with
                  all FAA requirements.

          x.      The principal place of business and chief executive  office of
                  the Lessee is the address set forth at the  beginning  of this
                  Lease.

4.3   SUPPLIERS' WARRANTIES.

      Lessor hereby assigns to Lessee any and all  warranties,  representations,
      services,  policies  and  product  support  plans of  Manufacturer  or any
      subcontractor,  vendor or supplier of any Equipment or part hereof. Lessor
      authorizes  Lessee,  to the extent it may legally do so, to enforce in its
      own name such rights,  claims and interests as Lessor or  Beneficiary  may
      have under any warranty, representation, service policy or product support
      plan of  Manufacturer  or any  subcontractor,  vendor or  supplier  of any
      Equipment,  or part thereof, and to retain any benefit resulting therefrom
      to the extent the same  relates to  Lessee's  interests  in the  Equipment
      under this Lease and is not  compensation  in respect of work performed on
      the   Aircraft   prior   to  the   Delivery   Date;   provided,   however,
      notwithstanding  anything herein to the contrary,  if at any time an Event
      of Default shall have  occurred and be  continuing:  (i) at  Beneficiary's
      option,  the  authorization  hereby given to Lessee may be suspended until
      such time as no Event of Default which has occurred is then  continuing or
      terminated when the Lease is terminated and Beneficiary  shall be entitled
      to assert  and  enforce  such  rights,  claims and  interests,  whether as
      substitute  party plaintiff or otherwise,  and Lessee shall cooperate with
      Beneficiary to enforce such rights,  claims and interests and (ii) whether
      or  not   Beneficiary   exercises  its  option  under  clause  (i)  above,
      Beneficiary  shall be entitled to receive all proceeds  resulting from any
      such assertion or  enforcement  or rights,  claims or interests and, after
      deducting  from the  proceeds  thereof all costs and  expenses,  including
      attorneys'  fees that have been  incurred  by  Beneficiary  in  connection
      therewith,  Beneficiary may hold the remaining proceeds until Lessee shall
      have cured,  or  Beneficiary  in writing shall have waived,  all Events of
      Default, or at Beneficiary's  option, if there is in existence an Event of
      Default,  apply all or any such  remaining  proceeds to the payment of any
      obligation of Lessee at the time due  hereunder  and the balance,  if any,
      shall be payable to Lessee when Lessee  shall have cured,  or  Beneficiary
      shall have waived, all Events of Default. The assignment and authorization
      hereby given as to the Equipment  shall be effective so long,  and only so
      long, as such  Equipment  shall be subject to this Lease;  provided,  that
      Lessee may pursue  claims  after the end of the Term  against  maintenance
      providers  subject to the same  conditions set forth above in this Article
      4.3; and provided further that the assignment and  authorization  shall be
      permanent and free of all conditions with respect to any item of Equipment
      which  ceases to be  subject  to this  Lease  Agreement  as the  result of
      replacement or substitution in accordance with the terms hereof.

ARTICLE 5.  POSSESSION AND USE

5.1 POSSESSION.

      Subject  to the  right of  Lessee  to  deliver  possession  of any item of
      Equipment  to the  Manufacturer  thereof  for  testing  or  other  similar
      purposes or to any Authorized  Maintenance Performer for service,  repair,
      maintenance or overhaul work on such item of Equipment or any part thereof
      or for  alterations  or  modifications  in or  additions  to such  item of
      Equipment  to the extent  required or permitted by the terms of Articles 5
      and 6 hereof or to any  member of a pooling  arrangement  as  provided  in
      Article 6.2,  Lessee  shall not  sublease,  assign or  otherwise  transfer
      possession of any item of Equipment, or any part thereof, leased hereunder
      without the prior written consent of Beneficiary which consent will not be
      unreasonably  withheld,  but  may be  subject  to  such  conditions  as it
      reasonably  deems  necessary to protect its interests and the interests of
      Lessor; PROVIDED that a Wet Lease of 90 days or less (including all stated
      renewals)  may be entered  into without  Beneficiary's  consent so long as
      such Wet Lease is  expressly  subject  and  subordinate  to this Lease and
      Lessee provides a copy thereof to Beneficiary upon  commencement  thereof.
      This Lease and all or any part of Lessee's  rights  hereunder shall not be
      assigned or otherwise in any way  transferred  or  hypothecated  by Lessee
      without the prior written consent of Lessor, and any purported assignment,
      transfer  or  hypothecation  without the prior  written  consent of Lessor
      shall constitute an Event of Default hereunder and be void.

      Lessor  agrees for the  benefit of Lessee and for the benefit of any other
      holder of a security interest in any engine owned by Lessee, any lessor of
      any  engine  leased to Lessee  and any  conditional  vendor of any  engine
      purchased by Lessee  subject to a conditional  sale agreement or any other
      security  agreement,  that no interest  shall be created  hereunder in any
      engines so owned,  leased or  purchased  and that  neither  Lessor nor its
      successors or assigns will acquire or claim as against  Lessee or any such
      mortgagee,  lessor or  conditional  vendor or other  holder of a  security
      interest or any successor or assignee of any thereof, any right, title, or
      interest in such engine as a result of such engine being  installed on the
      Airframe;  PROVIDED  that such  agreement  of Lessor  shall not be for the
      benefit of any lessor or secured party of an airframe  leased to Lessee or
      purchased  by  Lessee  subject  to a  conditional  sale or other  security
      agreement  or for the benefit of any  mortgagee  or any other  holder of a
      security  interest  in an  airframe  owned by Lessee on which  Lessee then
      proposes to install an Engine,  unless such  lessor,  conditional  vendor,
      other  secured  party or mortgagee  party has  effectively  agreed  (which
      agreement  may be  contained  in such  lease,  conditional  sale or  other
      security  agreement or mortgage)  that  neither it nor its  successors  or
      assigns will acquire, as against Lessor or Beneficiary any right, title or
      interest in an Engine as a result of such Engine  being  installed on such
      airframe.

5.2   LAWFUL OPERATIONS; USE.

      Lessee will not permit any item of  Equipment  to be  maintained,  used or
      operated  in  violation  of any  law,  rule,  regulation  or  order of any
      government or  governmental  authority  having  jurisdiction  (domestic or
      foreign),  or in violation of any  airworthiness  certificate,  license or
      registration  relating  to any  item  of  Equipment  issued  by  any  such
      authority,  unless  (a)  Lessee  could not  reasonably  have known of such
      violation  in advance or  prevented  it  through  commercially  reasonable
      efforts or (b) the validity  thereof is being  contested in good faith and
      by appropriate  proceedings,  but only so long as, (i) such proceedings do
      not involve the likelihood of the sale,  forfeiture or loss of any item of
      Equipment or interest  therein,  and (ii) such  violation will not subject
      Lessor or Beneficiary to any criminal liability. Lessee shall base and use
      the Equipment solely in its commercial airline  operations,  and shall not
      use or permit the use of any item of  Equipment  for any purpose for which
      such item of Equipment is not designed and reasonably suitable.

5.3   MAINTENANCE.

      Lessee,  at its own cost and expense  shall,  subject to Articles  5.4 and
      6.3: (i) cause an  Authorized  Maintenance  Performer to service,  repair,
      maintain, overhaul and test each item of Equipment leased hereunder (A) so
      as to keep such item of Equipment in the same  condition as when delivered
      to Lessee hereunder (except as otherwise  permitted  hereunder),  ordinary
      wear and tear excepted, and in good operating condition, (B) so as to keep
      the  Aircraft  in  the  condition  as  may  be  necessary  to  enable  the
      airworthiness  certification  of such Aircraft by the FAA to be maintained
      in good standing (except for periods when such  airworthiness  certificate
      is not in effect due to the  performance of maintenance or overhaul of the
      Equipment  and  periods  when the  airworthiness  certificates  of 737-300
      aircraft  in general are  withdrawn  or  suspended  by the FAA) and (C) in
      strict compliance with Lessee's overhaul and maintenance  program approved
      by the FAA (ii) comply with all airworthiness directives issued by the FAA
      prior to the Expiration  Date having a mandatory  compliance date prior to
      12 months after the Expiration Date; (iii) maintain all records,  logs and
      other materials  required by the FAA to be maintained with respect to such
      Equipment;  (iv)  promptly  furnish to Lessor such  information  as may be
      required to enable Lessor and/or  Beneficiary to file any reports required
      to be filed by Lessor and/or  Beneficiary with any governmental  authority
      because of Lessor's ownership of the Equipment.

5.4   MAINTENANCE PAYMENTS.

          i.      DEFINITIONS.

                  In this Article 5.4, the following  expressions shall have the
                  meanings respectively ascribed thereto:

            ELIGIBLE CLAIM          means a claim  submitted  by the  Lessee for
                                    payment  or   reimbursement   of  the  costs
                                    incurred   (including   labor,   parts   and
                                    materials)  in  performing  or causing to be
                                    performed  in  relation  to the  Aircraft in
                                    accordance with such maintenance program any
                                    or all of the maintenance processes referred
                                    to in Article 5.4 (iii) (a) and (b);provided
                                    that,  subject to the  provisions of Article
                                    5.4(vi)(d)  hereof,  the  amount  payable or
                                    reimbursable  hereunder  with  respect to an
                                    Eligible Claim shall not include those costs
                                    attributable to the repair of foreign object
                                    or other  accidental  damage to the Aircraft
                                    or any Engine,  negligent or other  improper
                                    maintenance,      repair,      modification,
                                    alteration, use or operation of the Aircraft
                                    or any Engine,  or an Inherent Defect or any
                                    cost which is reimbursable from insurance or
                                    warranty claims.

            FLIGHT HOUR             means  with  respect to the  Airframe,  each
                                    hour  or  part  thereof   (measured  to  one
                                    decimal place) which elapses from takeoff to
                                    touchdown  and with  respect to each Engine,
                                    each hour or part  thereof  (measured to one
                                    decimal place) which elapses from takeoff to
                                    touchdown  (whether such Engine is installed
                                    on the  Airframe  or another  airframe),  in
                                    each  case  as  recorded  in  the   relevant
                                    aircraft   log   book   or  the   applicable
                                    technical records for the item of Equipment.

            HOURLY                  RATE means the hourly rate payable by way of
                                    maintenance   reserve  in  respect  of  each
                                    complete  Flight  Hour  (pro  rata  for part
                                    thereof) for the Airframe and each Engine.

            INHERENT                DEFECT  means any defect in the  Aircraft or
                                    any part  thereof  arising out of a fault or
                                    error   in  the   design,   manufacture   or
                                    construction thereof.

         ii.      MAINTENANCE RESERVE PAYMENTS.

                  The Lessee shall pay  Maintenance  Reserves to the Beneficiary
                  throughout the Term of this Lease for the period commencing on
                  the Delivery Date,  monthly in arrears on the 15th day of each
                  month,  each  payment to be made in  respect  of the  previous
                  calendar  month based on a utilization  report to be furnished
                  by Lessee on the 15th day of each month;  provided always that
                  the final  payment shall be made on the date on which the Term
                  expires in respect of that part of the  calendar  month ending
                  on that date.  Each payment shall be calculated by multiplying
                  the applicable  Hourly Rate or per Cycle rate by the number of
                  Flight  Hours or  Cycles,  as the  case  may be,  flown by the
                  Airframe or each Engine,  as  applicable,  as evidenced by the
                  relevant aircraft log book for the relevant period.

        iii.      MAINTENANCE RESERVE ACCOUNTS.

                  Beneficiary shall maintain for its own purposes one account in
                  respect of each of the following maintenance processes:

            (a)   the Airframe heavy  maintenance (C-7) or equivalent check (but
                  excluding rotable repairs) and landing gear overhauls; and

            (b)   two such accounts for each Engine (which expression shall, for
                  this purpose,  not extend to any rotable  components or Engine
                  components  forming  part of a  quick  engine  change  ("QEC")
                  assembly,  nose cowl and  thrust  reverser)  one for  off-wing
                  scheduled  maintenance  and the  accomplishment  of comparable
                  work performed during  unscheduled shop visits,  and the other
                  for  Engine  life  limited  part  ("LLP")   replacement,   but
                  excluding,  in each case,  QEC repair,  foreign object damage,
                  operational misuse and Lessee's negligence.

                  Auxiliary  power  unit  maintenance  is  not  covered  by  the
                  Maintenance  Reserves.  The five Maintenance  Reserve accounts
                  are  to  be  maintained  by  the   Beneficiary   for  its  own
                  administrative convenience.  Maintenance Reserves shall accrue
                  interest  at the rate  offered by  Beneficiary's  bank for one
                  month  deposits  from  time  to  time.   Interest  accrued  on
                  Maintenance  Reserves shall be credited  monthly and available
                  for the payment of Eligible  Claims.  The amount available for
                  the  payment of  Eligible  Claims  shall be the amount paid by
                  Lessee  with  respect  to  the  relevant  Maintenance  Reserve
                  account plus interest accrued thereon.

         iv.      RATES.

            The Hourly Rate and per Cycle rate payable  shall be as set forth on
            Exhibit "I" hereto:

          v.      ADJUSTMENT OF HOURLY RATES.

            The  Hourly  Rates for Engine  off-wing  scheduled  maintenance  are
            computed on the basis of 1.7 Flight  Hours per  Aircraft  Cycle.  On
            each  anniversary  of the Delivery  Date during the Term,  the total
            Engine  Flight  Hours for each  Engine  recorded  in  respect of the
            previous  twelve  months shall be compared with the Cycles flown for
            such Engine and,  the Hourly  Rate for such Engine  applicable  with
            respect to Maintenance  Reserve  payments due from Lessee after such
            adjustment  and  prior to the  next  annual  adjustment  shall be as
            provided  in  Exhibit C hereof for such  recomputed  ratio of Flight
            Hours to Cycles.

         vi.      APPLICATION OF MAINTENANCE RESERVES.

            (a)   Beneficiary's  obligation to reimburse Lessee for any Eligible
                  Claims  referred to in Article 5.4 (i)/(iii) is subject to the
                  conditions  that:  (i)  before  any work with  respect to such
                  Eligible Claim is performed,  Lessee shall notify  Beneficiary
                  of the  proposed  date of the check or shop visit and the work
                  to be performed (to the extent then known to Lessee); and (ii)
                  following completion of the work with respect to such Eligible
                  Claim,  the  Lessee  shall  present to  Lessor's  Tech Rep all
                  worksheets,  invoices,  vouchers  and/or receipts with respect
                  thereto which are reasonably necessary to establish the amount
                  of such Eligible Claim;

            (b)   Within  20  days  after   Lessor's   Tech  Rep  receives  such
                  documentation, Beneficiary will pay the amount of the Eligible
                  Claim to Lessee by making a drawdown against the amount in the
                  applicable  Maintenance Reserve account. In the event that the
                  amount of such Eligible Claim exceeds the amount available for
                  reimbursement thereof pursuant to the terms hereof, the Lessee
                  shall be responsible for the payment of such excess.

                  The cost of  replacement  of LLPs at the first  scheduled shop
                  visit  for  each  Engine  after  the  Delivery  Date  shall be
                  allocated as follows:  (i) Beneficiary's  share of the cost of
                  any LLP  shall  be an  amount  equal  to the  cost of the LLPs
                  replaced during such shop visit times a fraction the numerator
                  of which is the number of Cycles  accumulated on the LLP prior
                  to the  Delivery  Date and the  denominator  is the  number of
                  Cycles  accumulated  on the LLP since it was installed in such
                  Engine and (ii) the  Lessee's  share  shall be the cost of the
                  LLP minus the  Beneficiary's  share.  The Lessee may draw down
                  from respective LLP accounts of the  Maintenance  Reserves for
                  its share of the cost of such first scheduled shop visit,  but
                  if the Lessee's  share of such cost exceeds the amount in such
                  account Lessee will pay the difference.  Beneficiary  will pay
                  its  share  at the time  Lessee  draws  from  the  Maintenance
                  Reserves.

                  Notwithstanding  anything  else to the  contrary  contained in
                  this Lease,  in no event shall the Beneficiary be obligated to
                  pay any amounts with respect to Eligible  Claims  (whether out
                  of the applicable  reserve account or otherwise) so long as an
                  Event under Article  14.1(a) or an Event of Default shall have
                  occurred and be continuing.

            (c)   Any repair or overhaul  work that is performed by Lessee shall
                  be billed at Lessee's actual,  fully-burdened  labor cost (not
                  to exceed 130% of direct  cost) and without any mark-up in the
                  cost of  materials.  If work is done by a  company  affiliated
                  with  Lessee,   charges  made  by  such  affiliate   shall  be
                  reasonable market rates for such maintenance work.

            (d)   For the avoidance of doubt, Maintenance Reserves in respect of
                  the  Engines  may be  used  for (i) the  cost of a  repair  or
                  overhaul of an Engine which would  otherwise  be  reimbursable
                  from the  Maintenance  Reserves and which is undertaken at the
                  same  time as  other  remedial  work  which is  excluded  from
                  reimbursement  (for example repair of a foreign object damage)
                  subject to the requirements of Article 5.4(vi)(a), and (ii) to
                  pay for the cost of bringing any Engine into  compliance  with
                  the return conditions hereof.

            (e)   NEITHER LESSOR NOR  BENEFICIARY  SHALL HAVE ANY DUTY TO LESSEE
                  TO  DETERMINE  WHETHER ANY ITEM OF EQUIPMENT IS REQUIRED TO BE
                  OVERHAULED  OR  MAINTAINED,  OR  TO  OBSERVE  OR  INSPECT  THE
                  OVERHAUL OR MAINTENANCE OF ANY ITEM OF EQUIPMENT,  AND NEITHER
                  LESSOR NOR BENEFICIARY SHALL INCUR ANY LIABILITY OR OBLIGATION
                  TO  LESSEE BY REASON OF THE  FAILURE  OF ANY  EQUIPMENT  TO BE
                  PROPERLY  OVERHAULED OR MAINTAINED  AFTER THE DELIVERY DATE OR
                  BY REASON OF LESSOR'S OR BENEFICIARY'S  ELECTION TO OBSERVE OR
                  INSPECT  OR  NOT  TO  OBSERVE  OR  INSPECT  ANY   OVERHAUL  OR
                  MAINTENANCE OF ANY ITEM OF EQUIPMENT.

        vii.      Lessee  acknowledges that the Maintenance Reserve payments for
                  an item of Equipment shall become the unencumbered property of
                  Beneficiary upon payment thereof by Lessee, free of any claims
                  or rights  thereto  by  Lessee  and any  Maintenance  Reserves
                  remaining at the end of the Term shall  belong to  Beneficiary
                  provided  that, if an Event of Loss occurs with respect to the
                  Aircraft  or  the  Airframe,  any  Maintenance  Reserves  then
                  remaining  shall  be  paid  to  Lessee  upon  satisfaction  of
                  Lessee's  obligation  under  Article 10 to pay, or cause to be
                  paid,  the  Agreed  Value  and  all  other  amounts  then  due
                  hereunder,  to Beneficiary.  To the extent Maintenance Reserve
                  payments  are  used  to pay for the  cost of any  overhaul  or
                  maintenance  contemplated  in this Article 5.4, any recoveries
                  from Manufacturer or any subcontractor,  vendor or supplier in
                  respect  thereof  shall  be  for  the  exclusive   benefit  of
                  Beneficiary.

                  On the 15th day of each month, Lessee shall notify Beneficiary
                  and Lessor's Tech Rep of the number of Flight Hours and Cycles
                  which have been  accumulated on the Airframe and the number of
                  Flight  Hours and Cycles  that have been  accumulated  on each
                  Engine during the preceding  calendar month,  and Lessee shall
                  provide Beneficiary and Lessor's Tech Rep with such supporting
                  information and  documentation as Beneficiary or Lessor's Tech
                  Rep may from time to time reasonably request.

5.5   REGISTRATION AND INSIGNIA.

      Lessee agrees that it will at all times at Beneficiary's expense cooperate
      with Lessor and  Beneficiary in maintaining  the U.S.  registration of the
      Aircraft.  Upon delivery of the Aircraft,  Lessee shall fasten or cause to
      be fastened and maintained in the cockpit of the Aircraft  adjacent to the
      airworthiness  certificate  for  the  Aircraft  and on each  Engine,  in a
      prominent location,  metal nameplates at least three inches by five inches
      bearing the following legend:

                  "First Security Bank, National Association
                            Owner Trustee and Lessor"

      Except as above  provided,  Lessee  will not allow the name of any person,
      firm or  corporation  to be  placed  on the  Airframe  or any  Engine as a
      designation that might be interpreted as a claim of ownership or to a Lien
      thereon;  provided,  however,  Lessee may cause the Airframe to be painted
      with its name and in its livery during the Term hereof.

ARTICLE 6.  REPLACEMENT AND POOLING OF PARTS; ALTERATIONS; MODIFICATIONS AND
ADDITION

6.1 REPLACEMENT OF PARTS.

      Lessee,  at its own cost and expense  (but  subject to Article 5.4 and 6.3
      hereof),  will replace as promptly as practicable 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.
      All  replacement  Parts  shall be free and clear of all Liens  other  than
      Permitted Liens and shall be in as good operating  condition as, and shall
      have a value and utility at least equal to, the Parts  replaced,  assuming
      such  replaced  Parts  were in the  condition  and repair  required  to be
      maintained by the terms hereof.

      All Parts at any time removed from the Airframe or any Engine shall remain
      the property of Lessor,  no matter where located,  until such time as such
      Parts shall be replaced by parts owned or paid for by Lessee (or  provided
      by a  Manufacturer  or service  provider  pursuant to a warranty,  service
      contract  or  similar  agreement)  and  incorporated  or  installed  in or
      attached to such  Airframe or Engine in compliance  with the  requirements
      for  replacement   Parts  specified  above.   Immediately  upon  any  such
      replacement Part becoming  incorporated or installed in or attached to the
      Airframe or an Engine as above provided, without further act: (i) title to
      such  replacement   Part  shall  thereupon  vest  in  Lessor,   (ii)  such
      replacement  Part shall become subject to this Lease and be deemed part of
      such  Airframe or Engine,  as the case may be, for all purposes  hereof to
      the same extent as the Part  originally  incorporated  or  installed in or
      attached to such  Airframe or Engine,  and (iii) title to the removed Part
      shall thereupon vest in Lessee, free and clear of all Lessor Liens and all
      rights of  Lessor  and  Beneficiary,  and shall no longer be deemed a Part
      hereunder.
6.2   POOLING OF ENGINES AND PARTS.

      (i) The Lessee may subject the  Engines to normal  interchange  or pooling
      agreements with the Manufacturer or responsible  scheduled  commercial air
      carriers  customary in the airline  industry and entered into by Lessee in
      the ordinary  course of business so long as (a) such Engine is required to
      be returned to Lessee  within two (2) months,  (b) no transfer of title to
      the Engine  occurs (or if such transfer of title occurs it will be treated
      as an Event of Loss),  (c) the other  terms of this Lease  continue  to be
      observed with respect to the Engines and (d) Lessee  continues to be fully
      responsible  to Lessor for the  performance of all  obligations  hereunder
      relating to such Engines

      (ii) Any Part  removed  from the  Airframe  or an  Engine as  provided  in
      Article 6.1 may be  subjected  by Lessee to a normal  pooling  arrangement
      customary in the airline  industry  entered into in the ordinary course of
      Lessee's business,  provided the part replacing such removed Part shall be
      incorporated  or  installed  in or attached  to the  Airframe or Engine in
      accordance  with Article 6.1 as promptly as possible  after the removal of
      such removed Part. In addition,  any replacement part when incorporated or
      installed in or attached to the Airframe or any Engine in accordance  with
      Article  6.1 may be  owned  by an air  carrier  subject  to such a  normal
      pooling  arrangement,   provided  Lessee,  at  its  expense,  as  promptly
      thereafter as possible either (a) causes title to such replacement part to
      vest in Lessor in accordance  with Article 6.1 by Lessee  acquiring  title
      thereto for the benefit of, and  transferring  such title to,  Lessor free
      and clear of all Liens other than  Permitted  Liens,  or (b) replaces such
      replacement  part by  incorporating  or  installing in or attaching to the
      Airframe  or Engine a further  replacement  part owned by Lessee  free and
      clear of all Liens other than Permitted  Liens,  and causing title to such
      further replacement part to vest in Lessor in accordance with Article 6.1

6.3   ALTERATIONS, MODIFICATIONS AND ADDITIONS.

      Subject only to the last paragraph of this Article 6.3, Lessee, at its own
      expense, shall make such alterations and modifications in and additions to
      the  Equipment  as may be  required  from time to time by the FAA or other
      governmental authority having jurisdiction, unless the validity thereof is
      being contested in good faith and by appropriate  proceedings (but only so
      long as (i)  such  proceedings  do not  involve  the  likelihood  of sale,
      forfeiture or loss of any Equipment, or any interest therein and (ii) such
      proceedings   do  not  subject  Lessor  or  Beneficiary  to  any  criminal
      liability).

      In addition,  Lessee, at its own expense,  may from time to time make such
      alterations and  modifications  in and additions to each item of Equipment
      as Lessee  may deem  desirable  in the  proper  conduct  of its  business,
      provided that no such alteration,  modification or addition diminishes the
      value or utility of such item of  Equipment  or impairs the  condition  or
      airworthiness   thereof   below  the   value,   utility,   condition   and
      airworthiness  thereof immediately prior to such alteration,  modification
      or addition,  assuming  such item of  Equipment  was then of the value and
      utility and in the condition and  airworthiness  required to be maintained
      by the terms of this  Lease;  provided  further  that no such  alteration,
      modification,  or addition with an estimated cost in excess of $[ ]* shall
      be made (other than an alteration,  modification,  or addition required to
      be made pursuant to the first  sentence of this Article 6.3 or as provided
      in Article  6.4) without the prior  written  consent of  Beneficiary.  Any
      permitted modification shall be made in accordance with, and in compliance
      with,  FAA-approved  modification  documentation,  any  FAA  certification
      issues  shall  have been  addressed  to  Lessor's  Tech  Rep's  reasonable
      satisfaction,  and copies of all such  documentation  will be  supplied to
      Lessor's  Tech Rep.  Title to all Parts  incorporated  or  installed in or
      attached  or  added  to any  item  of  Equipment  as the  result  of  such
      alteration,  modification or addition shall,  without further act, vest in
      Lessor; provided,  however, that so long as no Event under Article 14.1(a)
      or Event of Default  shall have  occurred and be  continuing,  at any time
      during the Term in effect for an item of Equipment,  Lessee may remove any
      Part  from  such  item of  Equipment,  provided  that (i) such  Part is in
      addition to, and not in  replacement of or in  substitution  for, any Part
      originally  incorporated  or  installed  in or  attached  to such  item of
      Equipment  at the time of the  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 or added to such
      item of  Equipment  pursuant  to the terms of the first  sentence  of this
      Article  6.3,  and  (iii)  such  Part can be  removed  from  such  item of
      Equipment   without  causing  any  material  damage  thereto  and  without
      diminishing or impairing the value,  utility,  condition or  airworthiness
      which  such  item of  Equipment  would  have  had at such  time  had  such
      alteration,  modification  or addition not  occurred.  Upon the removal by
      Lessee of any such Part as provided  above,  title thereto shall,  without
      further act,  vest in Lessee free of Lessor Liens and all rights of Lessor
      and  Beneficiary and such Part shall no longer be deemed a Part hereunder.
      Any Part not  removed by Lessee as above  provided  prior to the return of
      the item of  Equipment  to Lessor  hereunder  shall remain the property of
      Lessor.

      Neither  Lessor nor  Beneficiary  shall bear any liability or cost for any
      alteration,  modification, addition, or for any grounding or suspension of
      certification  of any item of Equipment  or for loss of revenue;  provided
      always,  however,  that in the event that the cost (material and labor) of
      (i) compliance with any  airworthiness  directive ("AD") issued by the FAA
      during the Term which  requires  terminating  action  during the Term,  or
      within twelve months after the Expiration Date or (ii) compliance with any
      regulatory  requirement  necessary  for the Aircraft to meet FAR Part 121,
      exceeds $[ ]*,  Lessee  shall pay the first $[ ]* and the  excess  will be
      shared between Lessee and Beneficiary as follows.  The Beneficiary's share
      shall be calculated by application of the following formula:

            [1 - (N - M)/(300 - (X + M))] x (C - $[     ]*)

            where,

            "N"   equals 120;

            "M"   equals  the  number  of whole  months  of the Term  that  have
                  elapsed  as of the date of actual  compliance  with such AD or
                  regulatory change;

            "X"   equals the number of whole months from the date of
                  manufacture of the Aircraft to the Delivery Date; and

            "C"   equals the cost of compliance with such AD or regulatory
                  change.

      The Lessee's share will be the balance. If during any calendar year Lessee
      is  required  to  comply  with more  than ten (10) ADs  and/or  regulatory
      changes,  and the cost to Lessee of such compliance  exceeds $[ ]* in such
      calendar year, then Beneficiary will contribute to the eleventh (11th) and
      any  subsequent  AD or  regulatory  change  during such  calendar  year in
      accordance with the above formula without deducting $[ ]* from "C."

Lessee shall give Beneficiary  prior written notice of any such AD or FAR before
commencing any alteration, modification or addition of the Aircraft with respect
thereto. Any work that is performed by Lessee with respect to any such AD or FAR
shall be billed at Lessee's  actual fully  burdened  labor cost (which shall not
exceed 130% of direct  cost) and  without any mark-up in the cost of  materials.
Lessee shall provide to Lessor's Tech Rep all original invoices, work sheets and
or receipts  reasonably  necessary to establish costs for which reimbursement is
sought,  and Beneficiary  shall  reimburse  Lessee for its share of any eligible
costs within 20 days of receipt of such documentation.

6.4   CERTAIN MATTERS REGARDING SEVERABLE EQUIPMENT.

      Lessee  may at any time and from time to time,  so long as no Event  under
      Article  14.1(a)  or Event of  Default  has  occurred  and is  continuing,
      install  on the  Airframe,  subject  to  the  requirements  of the  second
      paragraph of Article 6.3 above,  Severable  Equipment that is (i) owned by
      another Person and leased to Lessee, (ii) sold to Lessee by another Person
      subject  to  a  conditional  sale  contract  or  other  retained  security
      interest, (iii) leased to Lessee pursuant to a lease which is subject to a
      security  interest  in favor of another  Person or (iv)  installed  on the
      Aircraft subject to a license granted to Lessee by another Person,  and in
      any such case (A) Lessor  will not  acquire or claim,  as against any such
      other Person, any right, title or interest in any such Severable Equipment
      solely as a result of its  installation on the Airframe,  (B) Lessee shall
      notify such Person of Lessor's and  Beneficiary's  respective  interest in
      the Aircraft,  and (C) Lessee shall  procure  that,  and such Person shall
      confirm in writing to Lessor  that,  upon the  occurrence  of any  default
      under the applicable lease, conditional sale agreement, security agreement
      or license,  such Person  shall not be entitled to detain the  Aircraft or
      repossess such Severable  Equipment  unless it shall,  in connection  with
      such  repossession,  restore the  Aircraft to the  condition it would have
      been in had the installation of such Severable Equipment not occurred.

ARTICLE 7.  INSPECTION; FINANCIAL INFORMATION; RECORD

7.1 INFORMATION AND INSPECTION.

      During  the  Term of this  Lease,  Lessee  shall  furnish  to  Lessor  and
      Beneficiary   such   additional   information   concerning  the  location,
      condition,  modification status,  compliance with the maintenance program,
      installed equipment, use and operation of each item of Equipment as Lessor
      or Beneficiary may reasonably request,  and Lessee shall permit any person
      designated by Lessor or Beneficiary in writing (other than a person who is
      not eligible to be  designated  as Lessor's Tech Rep unless such person is
      inspecting  the  Aircraft in  connection  with  Beneficiary's  remarketing
      efforts  during  the  final  year of the  Lease or  during  the  continued
      existence  of an Event of  Default),  at  Beneficiary's  expense (or if an
      Event under 14.1(a) or an Event of Default has occurred and is continuing,
      at Lessee's  expense),  to inspect each item of Equipment,  its condition,
      use, and operation and the Records maintained in connection therewith, and
      to meet with the  principal  officers  of Lessee,  all at such  reasonable
      times and as often as Lessor or Beneficiary may reasonably request so that
      such  inspections  and  meetings do not  unreasonably  interfere  with the
      operation or maintenance of the Aircraft or the conduct of the business of
      Lessee.  Any such inspection of the Aircraft shall be a visual walk-around
      inspection which shall not include opening any panels, bays or the like or
      any  disassembly  or  removal  of  components  which are not then  opened,
      disassembled  or  removed  in the course of  Lessee's  maintenance  of the
      Aircraft at the time of such inspection. Lessor and Beneficiary shall have
      no duty to make any such  inspection  and shall not incur any liability or
      obligation by reason of not making such inspection.

7.2   FINANCIAL INFORMATION.

      Lessee also agrees to furnish  Lessor and  Beneficiary  with the following
      during the Term of this Lease;

          i.      within  one  hundred  twenty  (120) days after the end of each
                  fiscal year of Lessee (or such longer period of time as agreed
                  by Lessor  and  Lessee),  a balance  sheet and  statements  of
                  income and  retained  earnings  of Lessee,  as of the close of
                  such  fiscal  year,  setting  forth  in  comparative  form the
                  figures  for  the  previous   fiscal  year,  as  certified  by
                  independent  public  accountants,  including their certificate
                  and accompanying comments;

         ii.      promptly upon their becoming available,  copies of all regular
                  and periodic  reports filed by Lessee with the  Securities and
                  Exchange  Commission and the principal  securities exchange on
                  which the common stock of Lessee is listed; and

        iii.      such other  information  concerning  Lessee as Beneficiary may
                  from time to time reasonably request.

7.3   REPORTS OF AIRCRAFT USE.

      Without limiting Lessee's other obligations under this Lease, Lessee shall
      also  provide  in  a  timely  manner  Beneficiary  with  details  of:  (i)
      replacement of Engines, auxiliary power unit, avionics,  undercarriage and
      control  surface  changes  (and the reason for such  changes),  (ii) major
      repairs in excess of the  Damage  Notification  Threshold,  modifications,
      alterations and additions to an item of Equipment, (iii) service bulletins
      and airworthiness  directives  applicable to and accomplished with respect
      to any item of  Equipment,  (iv)  copies  of any  repair  or  modification
      drawings  and  approvals  or data  covering  any  unique  or  non-standard
      modifications  to an item of Equipment,  in each case with respect to such
      preceding  calendar  month;  and  (v)  within  30  days of the end of each
      calendar  year of the Term  copies of  Lessee's  work  papers  prepared to
      apportion  Lessee's usage of the Aircraft among the various states. In the
      case of (i), (ii), (iii) and (iv), the data shall be provided on a monthly
      basis.

ARTICLE 8.  INDEMNIFICATION BY LESSEE.

8.1   GENERAL INDEMNITY.

      Lessee  agrees  to pay,  and on  demand to  indemnify  and hold  harmless,
      Lessor,  Beneficiary and their respective successors,  assigns, agents and
      servants,  from  and  against  any  and  all  claims,   damages,   losses,
      liabilities  (including,  but not limited to, any claim or  liability  for
      strict  liability in tort or  otherwise,  including,  without  limitation,
      liability  arising under any  applicable  environment,  noise or pollution
      control statute, rule or regulation), demands, suits, judgments, causes of
      action and all legal  proceedings,  whether civil or criminal,  penalties,
      fines  and  other  sanctions,  and any  costs  and  expenses  incurred  in
      connection  therewith,  including  attorney's fees, which may result from,
      relate to or arise out of the condition, lease, sub-lease, possession, use
      or  operation  of any item of  Equipment,  or which  may be  caused by any
      defect in any item of  Equipment,  latent or  otherwise,  arising from the
      material or any article  used  therein or from the design,  testing or use
      thereof or from any  maintenance,  service,  repair,  overhaul  or testing
      thereof,  (any such basis for an indemnity set forth above being  referred
      to herein as a "Loss");  provided,  however, that in all cases referred to
      in this Article 8.1,  excluding  any Loss to the extent that such Loss (i)
      is the  subject  matter  of  another  indemnity  provision  of this  Lease
      Agreement  or  consists  of  a  cost  or  expense  imposed  on  Lessor  or
      Beneficiary by the terms hereof or is incurred by Lessor or Beneficiary in
      performing its obligations to Lessee hereunder, (ii) arises as a result of
      the wilful misconduct or gross negligence of any Indemnitee,  (iii) arises
      as a  result  of  Lessor  Taxes  or a  Lessor  Lien or any  breach  by any
      Indemnitee of its representations or obligations hereunder, (iv) is caused
      by  acts,  omissions  or  events  which  occur  following  the  return  of
      possession  of the  Aircraft  to Lessor or its  designee at a time when no
      Event or Default shall have occurred and then be continuing,  (v) consists
      of costs,  fees or  expenses  related to the  negotiation  preparation  or
      execution of the Letter of Intent or the Lease Agreement, (vi) consists of
      costs,  fees or  expenses  arising out of the  acquisition  or transfer by
      Lessor or any  Indemnitee  of any  interest in the  Aircraft or this Lease
      Agreement  except any such  transfer in  connection  with the  exercise of
      remedies hereunder in accordance with the terms of Article 15 hereof after
      the occurrence of an Event of Default or as a result of a replacement of a
      Part or an Engine pursuant to Article 6.1 or 9.2 hereof,  (vii) arises out
      of or results  from acts of any  Indemnitee  prior to the  Delivery  Date,
      (viii)  is one  with  respect  to  which  the  Indemnitee  has a right  to
      participate in a proceeding  with respect to such Loss, if such Indemnitee
      refuses to implead,  to the extent  reasonable and practicable,  any party
      whom Lessee believes is ultimately responsible with respect to such Losses
      or to assert, to the extent  reasonable and practicable,  any cross-Losses
      Lessee  deems  appropriate  where it in not  possible for Lessee to assert
      such rights itself,  (ix) relates to the  performance by any Indemnitee of
      its  obligations  under this Lease Agreement or arising out of any default
      under  any  financing  of any  item of  Equipment  that is not an Event of
      Default hereunder,  (x) arises, out of any change in any agreement related
      to the financing of the Aircraft,  any Engine or any Part thereof,  unless
      Lessee has expressly  agreed to undertake  such  obligations,  and/or (xi)
      relates to the costs, fees and any other  out-of-pocket  expenses incurred
      in connection with the establishment,  maintenance or restructuring of the
      financing or refinancing of the Aircraft or any  Indemnitee's  interest in
      the trust estate  established under the Trust Agreement or the creation or
      maintenance  of such trust estate or to any action or dispute  between the
      parties to any  agreement  with  respect to the  financing  of any Item of
      Equipment not resulting from the occurrence and continuance of an Event of
      Default hereunder.

      Notwithstanding  anything to the  contrary  contained in this Article 8.1,
      the indemnification  provided for herein shall not include indemnification
      of any person in such person's  capacity as designer,  manufacturer  of or
      maintenance performer for the Aircraft, any Engine or any Part.

      The following  shall apply to all claims for indemnity  under this Article
      8.1: an Indemnitee  shall promptly  notify Lessee of any claim as to which
      indemnification   is  sought  upon  obtaining  actual  knowledge  thereof;
      provided that the failure to provide such notice shall not release  Lessee
      from any of its  obligations  to  indemnity  hereunder  or from any  other
      obligation that the Lessee may have to such Indemnitee at law or in equity
      (provided  that Lessee's  obligations to indemnify  hereunder  shall in no
      event be increased due to such a failure to provide  notice and no payment
      by Lessee to such  Indemnitee  shall be deemed to  constitute  a waiver or
      release  of any  right  or  remedy  which  Lessee  may have  against  such
      Indemnitee for any damages as a result of such failure to provide notice).
      Subject to the rights of insurers under  policies of insurance  maintained
      by Lessee,  Lessee shall investigate,  and provided no Event under Article
      14.1(a),  (b), (f) or (g) of the Lease or Event of Default under the Lease
      shall  have  occurred  and be  continuing,  at its sole cost and  expense,
      defend  or  compromise  (other  than with  respect  to a  compromise  of a
      non-monetary  claim the  compromise of which shall  adversely  affect such
      Indemnitee,)  any claim for which  indemnification  is sought  under  this
      Article 8.1, and the Indemnitee shall cooperate, at Lessee's expense, with
      all reasonable requests of Lessee in connection  therewith;  provided that
      if such an Event or Event of Default has occurred and is  continuing,  the
      applicable  Indemnitee  shall  in good  faith  contest  such  claim at the
      request and expense of Lessee;  and provided further that such proceedings
      do not  involve  the  likelihood  of loss or  forfeiture  of  title to the
      Aircraft  (unless  Lessee  shall  have  posted  a bond or  other  security
      reasonably satisfactory to such Indemnitee in respect of such risk) or any
      material risk of any civil or criminal  penalty being assessed against any
      Indemnified  Person.  Where  Lessee  or the  insurers  under a  policy  of
      insurance maintained by Lessee undertake the defense of an Indemnitee with
      respect  to a  claim,  no  additional  legal  fees  or  expenses  of  such
      Indemnitee  in  connection  with  the  defense  of  such  claim  shall  be
      indemnified  hereunder  unless such fees or expenses  were incurred at the
      written request of Lessee or such insurers;  provided, however, that if in
      the written opinion of counsel to such Indemnitee a potential material, or
      an actual,  conflict of interest  exists  where is it  advisable  for such
      Indemnitee to be represented by separate counsel, then the reasonable fees
      and expenses of such separate counsel shall be borne by Lessee. Subject to
      the requirements of any policy of insurance, an Indemnitee may participate
      at its  own  expense  in any  judicial  proceeding  controlled  by  Lessee
      pursuant  to  the  preceding   provisions;   provided  that  such  party's
      participation  does  not,  in  the  opinion  of  the  independent  counsel
      appointed by Lessee or its insurers to conduct such proceedings, interfere
      with such  control  (except in the case  specified  in the  proviso to the
      third  sentence  of this  paragraph;  and  such  participation  shall  not
      constitute a waiver of the  indemnification  provided in this Article 8.1.
      Notwithstanding  anything to the contrary  contained herein,  Lessee shall
      not under any  circumstances  be liable for the fees and  expenses of more
      than one counsel for all  Indemnitee  except in the case  specified in the
      proviso to the third sentence of this paragraph.

      No Indemnitee shall enter into a settlement or other compromise or consent
      to a judgment with respect to any Loss without the prior  written  consent
      of Lessee,  which consent shall not be  unreasonably  withheld or delayed,
      unless such Indemnitee waives its rights with respect to such Losses under
      this Article 8.1;  provided  that the payment of an amount to which a Loss
      relates  when  legally  compelled  to  do  so by a  Government  Entity  of
      competent  jurisdiction  after which a request for a refund of such amount
      is diligently  pursued by  appropriate  procedures in accordance  with the
      terms of this Article 8.1 will not be considered a settlement,  compromise
      or consent to judgment  requiring Lessee's prior consent or resulting in a
      waiver of such Indemnitee's rights of indemnification with respect to such
      amount.   Except  as  otherwise  provided  in  the  immediately  preceding
      sentence,  the entering into any such  settlement or compromise or consent
      without  Lessee's prior written consent shall  constitute a waiver by such
      Indemnitee  of all its rights of  indemnification  hereunder in respect of
      such matter.

      To the extent that a claim  indemnified  by Lessee under Article 8.1 is in
      fact paid in full by Lessee  and/or an insurer under a policy of insurance
      maintained  by Lessee,  Lessee  and/or such  insurer,  as the case may be,
      shall be  subrogated  to rights and  remedies of the  Indemnitee  on whose
      behalf such claim was paid (other  than  rights of such  Indemnitee  under
      insurance  policies  maintained  at its own  expense)  with respect to the
      transaction or event giving rise to such claim.  So long as no Event under
      Article 14.1(a), (b), (f) or (g) or Event of Default under the Lease shall
      have occurred and be continuing,  should an Indemnitee receive any payment
      from any person  other than Lessee or its insurers and except for payments
      received under insurance  policies  maintained by an Indemnitee at its own
      expense,  in whole or in part,  with respect to any claim  already paid by
      Lessee or its insurers  hereunder,  such Indemnitee shall promptly pay the
      amount so  received  (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.

      Notwithstanding  anything to the  contrary  contained in this Article 8.1,
      the  indemnification  provided for in this Article 8.1 shall only apply to
      matters which occur or fail to occur  subsequent to the  acceptance of the
      Aircraft  hereunder  and prior to the  Expiration  Date and  return of the
      Equipment pursuant to the terms hereof. The indemnities  contained in this
      Article  8.1 shall  expire  and be of no  further  force and  effect  with
      respect  to any  claim  or  other  circumstance  set  forth  in the  first
      paragraph of this Article 8.1 notice of which shall not have been given to
      Lessee in writing (referring expressly to this Article 8.1) on or prior to
      the second anniversary of the Expiration Date.

8.2         GENERAL TAX INDEMNITY.

      (i)   Beneficiary  represents and warrants that, on the date hereof it is,
            and on the day prior to the Delivery Date it will be, eligible for a
            withholding  rate of zero under the double  taxation  treaty then in
            effect  between the United States and Ireland,  and that payments of
            Rent may be made directly to it without withholding on account of US
            income taxes by Lessee.

      (ii)  Lessee agrees that,  if as the result of a change in the  U.S.-Irish
            Tax Treaty occurring after the Delivery Date ("Irish Treaty Change")
            withholding  of U.S.  income  tax is  required  with  respect to any
            payment  of Rent  hereunder,  each  payment  of Rent due  after  the
            effective date of such change shall be free of all  withholdings and
            deductions for or on account of taxes,  duties and any other charges
            of any  nature  whatsoever,  present  or  future,  unless  Lessee is
            required  by  operation  of law or  otherwise  to withhold or deduct
            amounts for or on account of any of the same, in which event, Lessee
            will pay such  additional  amounts as will  result in the receipt by
            Beneficiary  on the due date for  payment  thereof of the sums which
            would  otherwise have been receivable on such date had there been no
            such withholding or deduction; Lessor and Beneficiary shall file and
            provide to Lessee such returns, statements or other documentation as
            shall enable it to claim any reduced rate of tax withholding and any
            exemption from tax  withholding  with respect to any taxes,  fees or
            other  charges to which the terms of Article  8.2 hereof  apply,  in
            each case, to the extent properly  available under applicable law or
            any applicable  treaty without  subjecting  Lessor or Beneficiary to
            any unreasonable  cost or expense.  If and to the extent that Lessor
            and Beneficiary  fail to file or provide any such return,  statement
            or other  documentation  (as to which,  in the case of any such item
            required by a change in applicable  law or treaty after the Delivery
            Date,  Lessee has notified  them) and as a result thereof either (i)
            tax  withholding  is  required  at a rate which is higher  than that
            which would have been applicable had such return, statement or other
            documentation  been filed or  provided  or (ii) tax  withholding  is
            required  which  would  not have  been  required  had  such  return,
            statement or other  documentation  been filed or provided,  Lessee's
            obligation to make the increased payment otherwise  required by this
            paragraph of Article  8.2(ii)  hereof shall be limited to the amount
            which would have been required if Lessor or Beneficiary had filed or
            provided such return, statement or other documentation.

            If,  as a  result  of any  change  in  applicable  statutory  or any
            applicable tax law or treaties which has an effective date after the
            Delivery  Date,  including,  without  limitation,  an  Irish  Treaty
            Change,  any  withholding  or  deduction  is  required to be made by
            Lessee (or Lessor as withholding agent) and/or taxes, fees and other
            charges  indemnified  by Lessee  pursuant  to this  Article  8.2 are
            imposed in an amount  which  increases  the cost to Lessee of making
            Basic Rent  payments  hereunder by more than ten (10) percent in any
            calendar year, the parties will in good faith  negotiate for 60 days
            following  written notice from Lessee a method of restructuring  the
            transaction  in order to avoid the  withholding,  deduction,  taxes,
            fees or other  charges  (during  which period  Lessee shall make all
            payments in the full amount required  hereby) and if no solution can
            be found in such period which is  acceptable  to the  parties,  then
            Beneficiary  will begin  remarketing  the  Aircraft on such 60th day
            (the "Remarketing  Commencement  Date").  For the period starting on
            the Remarketing  Commencement Date, and ending on the earlier of (i)
            the date of sale or  commencement  of a new lease for the  Aircraft,
            and (ii) twelve months from the Remarketing  Commencement Date, this
            Lease will continue (unless terminated by Lessor as provided below),
            Lessee  will  continue  to pay Basic Rent  (including  any  gross-up
            required by this Article 8.2(11)), and Beneficiary will remarket the
            Aircraft.  During such period,  Lessor may require  Lessee to return
            the Aircraft upon thirty days' prior written notice and, on the date
            the  Aircraft  is  returned,  it shall  meet the  return  conditions
            required  herein this Lease  Agreement  shall  terminate  and Lessee
            shall pay the Termination Value to Beneficiary.

      (iii) If  such a  change  of  law or  treaty  described  in the  preceding
            paragraph  occurs and has an  effective  date prior to the  Delivery
            Date such that Beneficiary's representation above would be incorrect
            in any material  respect on the Delivery  Date,  the parties will in
            good faith attempt to restructure  the transaction to avoid any such
            tax  withholding  and if no solution  can be found by the  Scheduled
            Delivery Date,  which is acceptable to the parties,  Beneficiary may
            terminate  this Lease and will return the amounts paid in respect of
            the Security Deposit, plus interest thereon at the rate paid on such
            deposit by Beneficiary's bank.

      In addition,  and not by way of limiting the  foregoing,  Lessee agrees to
      pay and to indemnify and hold harmless  Lessor and  Beneficiary  from, all
      license fees and all taxes, levies, imposts, duties, assessments,  charges
      and  withholdings of any nature  whatsoever,  together with any penalties,
      additions to tax, fines and interest thereon  (collectively,  "taxes, fees
      and other charges") imposed against the Lessor, Beneficiary, Lessee or any
      item of  Equipment or any part  thereof by any  Federal,  state,  or local
      government or governmental  subdivision or taxing  authority in the United
      States of America or any possession or territory thereof,  or by any other
      country or international taxing authority, or by any subdivision or taxing
      authority of any of the foregoing upon or with respect to the Equipment or
      any part thereof, or interest therein, or upon the manufacture, financing,
      servicing,   maintenance,   warranty,   repair,   replacement,   insuring,
      improvement, transfer of title, purchase, erection, installation, testing,
      acceptance  or  rejection,  ownership,  delivery,   non-delivery,   lease,
      sublease,  rental,  acquisition,  registration,  rebuilding,  abandonment,
      transportation,  storage,  possession,  use, operation,  condition,  sale,
      return or other  disposition  thereof,  or upon the  rentals,  receipts or
      earnings arising  therefrom,  or with respect to any contract  relating to
      the manufacture, construction, acquisition or delivery of the Equipment or
      otherwise with respect to the transactions contemplated by this Agreement.

      Notwithstanding the foregoing,  the indemnity provided for in this Article
      8.2 does not extend to any Lessor Taxes or to any withholding of US income
      taxes except to the extent provided in Article 8.2(ii) hereof.

      If a claim is made against Lessor or Beneficiary  for any taxes,  fees and
      other   charges  for  which   Lessor  or   Beneficiary   intends  to  seek
      indemnification  hereunder,  Lessor or Beneficiary  shall promptly  notify
      Lessee. If requested by Lessee in writing, Lessor or Beneficiary shall, in
      good faith contest or, at Lessee's request if permitted by applicable law,
      permit  Lessee  to  contest  (and in such  case,  provide  all  reasonable
      cooperation  to  Lessee)  the  validity,  applicability  or amount of such
      taxes,  fees  and  other  charges  by (A)  resisting  payment  thereof  if
      practicable,  (B) paying the same under  protest,  if protest is necessary
      and proper, or (C) if payment be made, using reasonable  efforts to obtain
      a refund thereof, in appropriate  administrative and judicial  proceedings
      including  appeals  other  than  to  the  Supreme  Court.  Notwithstanding
      anything to the contrary herein,  in no event shall Lessor and Beneficiary
      be required or Lessee  permitted to contest the  imposition  of any taxes,
      fees or other charges  asserted  against Lessor or  Beneficiary  for which
      Lessee is obligated pursuant to this Section 8.2 unless (i) on demand from
      time to time,  Lessee pays any and all expenses  incurred by Lessor and/or
      Beneficiary  reasonably  allocable  to such  contest  (including,  without
      limitation,  all costs,  expenses,  losses,  legal and accounting fees and
      disbursements),  (ii) no Event under  Article  14.1(a) or Event of Default
      shall have occurred and be  continuing,  (iii) the action to be taken will
      not  result  in the  likelihood  of sale,  forfeiture  or loss of,  or the
      creation of any lien on the Equipment or any interest  therein  (except if
      Lessee shall have adequately  bonded such lien or otherwise made provision
      to protect the interests of Lessor and Beneficiary in a manner  reasonably
      satisfactory   to  Lessor  and  Beneficiary  or  result  in  any  criminal
      penalties, and (iv) Lessee shall have delivered to Lessor and Beneficiary,
      at Lessee's sole expense,  an opinion of independent tax counsel  selected
      by Lessee and reasonably acceptable to the indemnified party to the effect
      that a  reasonable  basis for such  contest  exists.  If any such  contest
      involves payment of the taxes, fees and other charges in question,  Lessee
      shall either make such payment  directly to the  appropriate  authority or
      furnish to Lessor and Beneficiary sufficient funds on an interest-free and
      after-tax basis to make such payment.  Lessor or Beneficiary,  as the case
      may be,  shall  consult with Lessee in good faith  regarding  the means of
      contesting such claim and shall keep Lessee reasonably  informed regarding
      the  progress of such  contest.  If Lessor or  Beneficiary  shall obtain a
      refund of or be entitled to a credit  against  other  liability for all or
      any part of such taxes,  fees and other charges paid by Lessee,  Lessor or
      Beneficiary  as the case may be shall pay Lessee the amount of such refund
      (or credit),  after deducting all costs and expenses that were incurred by
      Lessor or Beneficiary in connection  therewith;  provided,  however,  that
      such amount shall in no event be payable  before such time as Lessee shall
      have made all payments and  indemnities  then due to Lessor or Beneficiary
      under this Agreement; provided further, however, that the aggregate amount
      of all payments  pursuant to this sentence by Lessor or  Beneficiary  with
      respect  to any  taxes,  fees and  other  charges  shall  not  exceed  the
      aggregate  amount of all payments made by Lessee  pursuant to this Section
      8.2 with respect to such taxes, fees and other charges.  If in addition to
      such  refund (or credit)  Lessor or  Beneficiary  shall  receive an amount
      representing  interest on the amount of such refund (or credit),  or would
      have received interest but for an offsetting liability for taxes, fees and
      other charges not indemnified by Lessee  hereunder,  Lessee shall promptly
      be paid that portion of such  interest (or such  interest  that would have
      been  received)  that is fairly  attributable  to any tax,  fees and other
      charges paid or  reimbursed  by Lessee prior to the receipt of such refund
      for the period from Lessee's  payment or  reimbursement  to the payment to
      Lessee of such  refund,  reduced  by the amount of any  Federal,  state or
      local  income  taxes  payable  by the  Indemnified  Party by reason of the
      receipt or accrual of such interest and increased by the amount of any tax
      benefits resulting from such payment to Lessee; provided, however, that no
      amount shall be payable  under this or the preceding  sentence  during any
      period in which an Event of Default has  occurred  and is  continuing.  If
      Lessor or  Beneficiary  receives an award of attorney's  fees in a contest
      for which  Lessee has paid an allocable  portion of the contest  expenses,
      Lessor  or  Beneficiary,  as  applicable,  shall  pay to  Lessee  the same
      proportion  of the amount of such award as the amount of  attorney's  fees
      paid or reimbursed  by Lessee bears to the total amount of the  attorney's
      fees  actually  incurred  by  Lessor or  Beneficiary,  as  applicable,  in
      conducting  such  contest.  In case any report or return is required to be
      made with respect to any obligation of Lessee under or arising out of this
      Article 8.2,  Lessee will either make such report or return in such manner
      as will show the  ownership  of Lessor in the  Aircraft and send a copy of
      such report or return to Lessor, or will notify Lessor of such requirement
      and make  such  report or  return  in such  manner as shall be  reasonably
      satisfactory  to Lessor.  Lessor shall provide to Lessee such  information
      within  its  possession  or control as is  necessary  to enable  Lessee to
      properly make such return or report.

      If Lessor or Beneficiary  shall release,  waive,  compromise or settle, or
      fail  to  pursue  any   required   contest  of  any  claim  which  may  be
      indemnifiable  by Lessee  pursuant to this Article 8.2 without the written
      permission  of  Lessee,   Lessee's   obligation  to  indemnify  Lessor  or
      Beneficiary  with respect to such claim (and all directly  related  claims
      and claims based on the outcome of such claim) shall terminate, and Lessor
      or Beneficiary, as applicable, shall repay to Lessee any amount previously
      paid or advanced  with  respect to such claim,  plus  interest at the rate
      that would have been payable by the relevant taxing authority with respect
      to a refund of such taxes,  fees and other  charges.  Notwithstanding  the
      foregoing,  Lessor and  Beneficiary  will not be  required  to contest the
      imposition of any taxes,  fees and other charges and shall be permitted to
      settle or compromise any claim without  Lessee's consent if such Lessor or
      Beneficiary,  as applicable,  (I) shall waive its right to indemnity under
      this Article 8.2 with respect to such taxes,  fees and other  charges (and
      any  directly  related  claim  and any  claim  the  outcome  of  which  is
      determined  based upon the  outcome  of such  claim) and (II) shall pay to
      Lessee any amount  previously  paid or advanced by Lessee pursuant to this
      Article 8.2 with respect to such Tax, plus interest at the rate that would
      have been  payable by the  relevant  taxing  authority  with  respect to a
      refund of such taxes, fees and other charges.

      Lessee further agrees that any payment or indemnity made under Article 8.1
      or this Article 8.2 by Lessee shall  include any amount  necessary to hold
      Lessor and Beneficiary harmless on an after-tax basis (after giving effect
      to all  deductions,  credits  and  other  tax  benefits  available  to the
      recipient  of  such   indemnity   payments  with  respect  to  the  matter
      indemnified  under  Article  8.1 or with  respect to the  payments  of the
      taxes,  fees and other  charges  indemnified  under  Article 8.2) from all
      taxes, fees and other charges required to be paid by Lessor or Beneficiary
      with respect to such  payment or indemnity  under the laws of any domestic
      or foreign governmental or taxing authority, agency or subdivision.

      At Lessee's  request,  the computation of any amount owed by Lessee or any
      amount owed to Lessee by an  Indemnitee  pursuant to Article 8.1 hereof or
      by Lessor or  Beneficiary  pursuant to this  Article 8.2 shall be verified
      and certified by an independent  public accounting firm selected by Lessee
      and  reasonably  satisfactory  to the  applicable  Indemnitee,  Lessor  or
      Beneficiary,  as the case may be.  Such  verification  shall be binding on
      both Lessee and such Indemnitee, Lessor and Beneficiary. The costs of such
      verification  (including the fee of such public  accounting firm) shall be
      borne by Lessee unless such verification  shall result in an adjustment in
      Lessee's  favor of 10% or more of the net present  value of the payment as
      computed by such Indemnitee,  Lessor or Beneficiary,  as applicable.  Such
      Indemnitee,  Lessor or Beneficiary,  as applicable,  shall provide to such
      public accounting firm on a confidential basis all information  reasonably
      necessary for such verification.

      All of the rights and  obligations  of Lessee under this Article 8.2 shall
      continue  in  full  force  and  effect  to  the  extent   provided  herein
      notwithstanding  the  expiration or sooner  termination  of this Lease and
      such  obligations  are  expressly  made for the  benefit  of, and shall be
      enforceable by, Lessor and Beneficiary and their respective successors.
      and assigns.

ARTICLE 9.  DAMAGE, DESTRUCTION, REQUISITION, CONDEMNATION

9.1 EVENT OF LOSS WITH RESPECT TO THE AIRCRAFT.

      Upon the  occurrence  of an Event of Loss with  respect to the Airframe or
      the  Airframe and any Engines or engines then  installed  thereon,  Lessee
      shall give Lessor and  Beneficiary  prompt  written notice thereof (and in
      any event within two  Business  Days) and shall pay or cause to be paid to
      Beneficiary  on the 90th day after such  Event of Loss (or  earlier if the
      insurance or other proceeds have been paid earlier):  (i) the Agreed Value
      in respect of the  Aircraft,  and (ii) all other Rent,  other than amounts
      paid pursuant to Clause (i), then due and payable hereunder.  At such time
      as  Beneficiary  has  received  the sum of (i),  and (ii)  above:  (A) the
      obligation  of Lessee to pay Basic  Rent  hereunder  with  respect to such
      Aircraft  shall  terminate and (B) the Term for the Aircraft shall end and
      (C) Lessor shall transfer full legal and beneficial  title to the Aircraft
      to Lessee (or, if applicable,  to Lessee's insurers) free of all rights of
      Beneficiary  and all Lessor's  Liens. An Event of Loss with respect to the
      Airframe  shall be deemed to  constitute  an Event of Loss with respect to
      the Aircraft.

9.2 EVENT OF LOSS WITH RESPECT TO AN ENGINE.

      Upon the occurrence of an Event of Loss with respect to an Engine not then
      installed  on the  Airframe,  or in the Event of Loss with  respect  to an
      Engine  installed on the Airframe but not  involving an Event of Loss with
      respect to such Airframe,  Lessee shall give Lessor and Beneficiary prompt
      written  notice  thereof (and in any event within five Business  Days) and
      Lessee  shall,  as promptly as possible  and in any event  within 120 days
      after the  occurrence of such Event of Loss,  duly convey to Lessor,  as a
      replacement  for the  Engine  with  respect  to which  such  Event of Loss
      occurred, title to another CFM56-3B2 engine owned by Lessee free and clear
      of all Liens and having,  unless Beneficiary otherwise agrees, a value and
      utility at least equal to, and being in as good  operating  condition  as,
      the Engine  with  respect to which such Event of Loss  occurred,  assuming
      such Engine was of the value and utility and in the  condition  and repair
      required by the terms hereof  immediately  prior to the occurrence of such
      Event of Loss.  Lessee shall demonstrate to Lessor's Tech Rep's reasonable
      satisfaction  the value and utility of any substitute  engine by providing
      all necessary  information  and data in respect of such engine as Lessor's
      Tech Rep  shall  reasonably  request.  In such  case,  Lessee,  at its own
      expense, will promptly (i) furnish Lessor with a bill of sale, in form and
      substance  satisfactory to Lessor and  Beneficiary,  for such  replacement
      engine, (ii) execute a supplement hereto in form and substance  reasonably
      satisfactory to Lessor and Beneficiary  subjecting such replacement engine
      to this Lease,  (iii)  furnish  Lessor and  Beneficiary  with  evidence of
      Lessee's title to such replacement  engine  (including,  if requested,  an
      opinion  of  Lessee's  counsel)  and  of  compliance  with  the  insurance
      provisions of Article 10 hereof with respect to such replacement engine as
      Lessor and  Beneficiary may reasonably  request,  and (iv) take such other
      action as Lessor  and  Beneficiary  may  reasonably  request in order that
      title to such replacement engine be duly and properly vested in Lessor and
      leased hereunder to the same extent as the Engine replaced  thereby.  Upon
      full  compliance by Lessee with the terms of this Article 9.2, Lessor will
      transfer to Lessee,  without  representation,  recourse or warranty of any
      kind,  express or implied  (except a warranty  that such Engine is free of
      Lessor  Liens,  other than Liens which  Lessee is  required  to  discharge
      hereunder,  and all rights of Beneficiary  and defects in title  resulting
      from Lessor's acts), all of Lessor's right, title and interest, if any, in
      and to the Engine with respect to which such Event of Loss  occurred  and,
      for all  purposes  hereof,  such  replacement  engine  shall be  deemed an
      Engine.  No Event of Loss with  respect to an Engine  shall  result in any
      reduction in Basic Rent.

9.3   APPLICATION OF PAYMENTS FROM GOVERNMENTAL AUTHORITIES IN RESPECT OF
      EVENT OF LOSS.

      Any payments (other than insurance  proceeds,  the application of which is
      provided  for in  Article  10  hereof)  received  at any  time by  Lessor,
      Beneficiary or Lessee from any governmental authority or other person with
      respect to an Event of Loss with respect to any item of Equipment  will be
      applied as follows:

          i.      if such payments are received with respect to an Event of Loss
                  relating to the  Airframe or the  Airframe  and the Engines or
                  engines  installed on such Airframe,  after  reimbursement  of
                  Lessor and Beneficiary for its reasonable  out-of-pocket costs
                  and  expenses  if any,  so much of such  payment  as shall not
                  exceed  the  amounts  due under  Article 9 shall be applied in
                  reduction of Lessee's  obligation to pay such amounts,  if not
                  already paid by Lessee,  or, if already paid by Lessee,  shall
                  be  applied  to  reimburse  Lessee  for  its  payment  of such
                  amounts,  and the balance,  if any, of such payment  remaining
                  thereafter to the extent not exceeding Lessee's Interest shall
                  be paid to Lessee,  and the  balance,  if any, of such payment
                  remaining  thereafter  will be paid  over  to or  retained  by
                  Beneficiary; and

         ii.      if such  payments are received with respect to an Engine under
                  circumstances  contemplated  Article  9.2,  so  much  of  such
                  payments remaining after  reimbursement of Beneficiary for its
                  reasonable  out-of-pocket costs and expenses, if any, shall be
                  paid over to, or retained  by,  Lessee,  provided  that Lessee
                  shall have fully  performed  or  concurrently  therewith  will
                  fully perform the terms of Article 9.2.

9.4   REQUISITION OF AN AIRFRAME FOR USE BY GOVERNMENT.

      In the event of the  requisition  for use by the  Government of the United
      States of  America  ("Government")  of the  Airframe  and the  Engines  or
      engines installed thereon during the Term therefor,  Lessee shall promptly
      notify  Lessor and  Beneficiary  of such  requisition  and all of Lessee's
      obligations  under  this  Lease  Agreement  with  respect to such items of
      Equipment shall continue to the same extent as if such requisition had not
      occurred  (except to the extent that compliance  with such  obligations by
      Lessee  is not  possible  as the  result of such  requisition);  PROVIDED,
      HOWEVER,  that if such items of  Equipment  are not returned to the Lessor
      prior to the end of the Term  therefor,  the Term shall  automatically  be
      extended  until  such  requisition  for use  ceases  (subject  to the next
      PROVISO) and such  Equipment is returned to Lessor in compliance  with the
      provisions  of  Article  13 as soon as  reasonably  practicable  after its
      return by the  Government,  and,  during such extended Term,  Lessee shall
      continue  to  perform  all  obligations   under  this  Lease  as  if  such
      requisition for use had not occurred (except to the extent that compliance
      with such  obligations  by Lessee is not  possible  as the  result of such
      requisition); PROVIDED FURTHER, HOWEVER, if such Equipment is not returned
      to Lessor prior to the first anniversary of the extended Term contemplated
      by this Article 9.4 in full compliance  with Article 13, at  Beneficiary's
      sole option such  Equipment  shall be deemed to have been  subjected to an
      Event of Loss as of such  anniversary date and Lessee shall, on such date,
      pay to  Beneficiary  the Agreed  Value.  Lessee  shall be  entitled to all
      compensation  payable by the Government  with respect to such  requisition
      and, to the extent received by Lessor or  Beneficiary,  shall be paid over
      to Lessee on receipt.

9.5   REQUISITION OF AN ENGINE FOR USE BY THE GOVERNMENT.

      In the event of the  requisition  for use by the  Government of any Engine
      without  the  requisition  for  use of the  Airframe,  if  and  when  such
      requisition  exceeds 180 consecutive days, Lessee will replace such Engine
      hereunder by complying with the terms of Article 9.2 to the same extent as
      if an Event of Loss had  occurred  with  respect to such  Engine,  and any
      payments  received  by  Beneficiary  or Lessee  from the  Government  with
      respect to such requisition shall be paid over to, or retained by, Lessee.

9.6   APPLICATION OF PAYMENTS DURING EXISTENCE OF EVENT OR EVENT OF DEFAULT.

      Any amount  referred to in clause (i) or (ii) of Article 9.3 or in Article
      9.4 or 9.5 which is payable  to Lessee  shall not be paid to Lessee or, if
      such amount has been previously  paid to Lessee,  shall not be retained by
      Lessee,  if at the time of such  payment  an Event  described  in  Article
      14.1(a) or Event of Default shall have occurred and be continuing. In such
      event,  all  such  amounts  shall be paid to and  held by  Beneficiary  as
      security for the performance by Lessee of its obligations hereunder or, at
      Beneficiary's option, applied by Beneficiary toward payment of any of such
      obligations of Lessee at the time due hereunder as Beneficiary  may elect.
      At such time as Lessee  shall  have  cured all such  Events  and Events of
      Default, all such amounts at the time held by Beneficiary in excess of the
      amounts,  if any, which  Beneficiary  shall have elected to apply as above
      provided shall be paid to Lessee.

ARTICLE 10.  INSURANCE

10.1  From the Delivery Date and at all times during the Term and thereafter, to
      the extent  provided in Article  10.7,  Lessee  shall be  responsible  for
      effecting and  maintaining  or causing to be effected and  maintained,  in
      full  force and  effect,  insurance  in respect  of the  Aircraft  in form
      comparable to that  maintained by other  similarly-situated  United States
      airlines  (the  "Insurance"  which  expression  shall where the context so
      admits include any relevant  re-insurance(s)  obtained in respect thereof)
      through the Approved  Insurance  Broker.  The  Insurance  will be effected
      either (1) on a direct  basis with  insurers of  recognized  standing  who
      normally  participate in aviation insurance in the London,  United States,
      European or Japanese aviation  insurance markets  (collectively,  together
      with such other aviation  insurance  market(s) as Beneficiary may approve,
      such approval not to be unreasonably withheld or delayed,  "World Aviation
      Insurance  Markets")  (such  insurers  to be led in any case by  reputable
      underwriter(s)  who  regularly  participate  in World  Aviation  Insurance
      Markets) or (2) with such an insurer who will effect  reinsurance  of such
      primary  insurance,  in  whole or in part,  in  World  Aviation  Insurance
      Markets.  In the latter  case,  Lessee  shall  procure  that the  Approved
      Insurance  Broker  maintains  in full force and effect  reinsurances  with
      reinsurers in the World  Aviation  Insurance  Markets and through  brokers
      each of recognized  standing who regularly deal in such insurance  markets
      for that  percentage  of the risks  insured not retained on a direct basis
      (the "Reinsurance").

10.2  The  requirements  at the date of this Agreement as to required  Insurance
      are as specified  in this  Article 10 and in Exhibit "G". The  Beneficiary
      acting  reasonably and in consultation  with Lessee shall be entitled from
      time to time to stipulate other reasonable  insurance  requirements (other
      than  those  prescribed  in this  Article  10 or  Exhibit  "G") to reflect
      changes in insurance  practice  relating to the method in which  insurable
      risks  are  covered  in World  Aviation  Insurance  Markets,  which  other
      insurance  requirements  shall be in  accordance  with normal  practice of
      organizations   operating  similar  aircraft  in  similar   circumstances;
      provided, however, that any such further requirements shall be of the type
      generally available in such markets at commercially reasonably rates.

10.3  If at any time due to changes in World Aviation  Insurance Market practice
      or custom, it becomes or will become commercially impracticable for Lessee
      to comply  with its  obligations  under this  Article 10 or in Exhibit "G"
      then the Lessee  shall  forthwith  notify the  Beneficiary  and as soon as
      practicable  thereafter Beneficiary and Lessee shall in good faith consult
      as to what changes,  if any,  might be made to the terms and conditions of
      the insurance  required  hereunder in order to take account of the changes
      in World  Aviation  Insurance  Market  practice  or custom  and as to what
      amendments, if any, should be made to the provisions of this Article 10 or
      Exhibit  "G"  provided no  amendment  to the  insurances  required by this
      Article 10 and Exhibit "G" shall be effective  unless and until  consented
      to by Beneficiary.

10.4  [Intentionally Omitted]

10.5  Lessee shall:-

      (a)   ensure that all legal  requirements  as to insurance of the Aircraft
            or any Part  thereof  which may from time to time be  imposed by the
            United States or any state to, from or over which the Aircraft shall
            be flown,  in so far as they affect or concern the  operation of the
            Aircraft,  are complied  with and in particular  those  requirements
            compliance  with which is  necessary to ensure that (a) the Aircraft
            is not in danger  of  detention  or  forfeiture,  (b) the  Insurance
            remain valid and in full force and effect,  and (c) the interests of
            the  Indemnities  in the  Insurance  and the  Aircraft  or any  part
            thereof are not thereby prejudiced;

      (b)   not use,  cause or permit the Aircraft to be used for any purpose or
            in  any  manner  not  covered  by  the   Insurance  or  outside  any
            geographical  limit imposed by such  Insurance or for any purpose or
            in any manner  which is contrary to  applicable  Law.  Lessee  shall
            comply and procure compliance, with the terms and conditions of each
            and every policy of the Insurance and shall not do, consent or agree
            to any  act or  omission  which  invalidates  or may  invalidate  or
            renders  unenforceable or may render  unenforceable the whole or any
            part of any such Insurance;

      (c)   ensure that no insurance or  reinsurance  in respect of the Aircraft
            other than those  required under this Article 10 and Exhibit "G" are
            taken out if such other  insurance or  reinsurances  would prejudice
            Lessor's  or  Beneficiary's  rights with  respect to the  Insurance.
            Lessor and Beneficiary  agree that subject to the foregoing,  Lessee
            may maintain  hull and other  insurance in relation to the Aircraft,
            Engines or Parts  thereof.  Insurance  proceeds  arising out of such
            insurance shall be paid to Lessee;

      (d)   ensure that the renewal negotiation is commenced prior to expiration
            of any of the Insurance.  If requested by Beneficiary in writing,  a
            written  status report shall be given to the Lessor and  Beneficiary
            seven (7) Business Days prior to expiry date. Facsimile confirmation
            of  completion  of renewal  shall be  provided  by the Lessee to the
            Lessor and the  Beneficiary  at least two (2)  Business  Days before
            such  expiry.  Certificates  of  insurance  (and  where  appropriate
            Certificates of reinsurance), in the English language, detailing the
            coverage and  confirming  the  insurers' (or as the case may be, the
            reinsurers')  agreement to the specified  insurance  requirements of
            this Lease must be  provided to Lessor and  Beneficiary  at delivery
            and within seven days after each renewal date;

      (e)   if requested  by  Beneficiary,  provide or procure the  provision to
            Lessor  or  Beneficiary  of  copies  of  documents   evidencing  the
            Insurance  upon request if there is a denial of  coverage;  provided
            always that Lessor and  Beneficiary  shall not disclose the contents
            of actual  insurance  policies to third  parties  other than (i) its
            professional  advisors,  (ii) as may be required by applicable  law,
            and (iii) when  required to settle a dispute over  coverage  but, in
            any  such  event,  shall  take  such  actions  in good  faith as may
            reasonably be requested by Lessee to protect the  confidentiality of
            such documents;

      (f)   on  request,   provide  or  procure  the  provision  to  Lessor  and
            Beneficiary of evidence of premium payment;

      (g)   promptly  notify  Beneficiary  of any occurrence (i) with respect to
            which Lessee  believes the cost of repairs to the Airframe,  Engines
            or any Part will  exceed,  or (ii) which is likely to give rise to a
            claim in excess  of,  the  Damage  Notification  Threshold  for Hull
            claims  and US$[ ]* for  claims  arising  under the legal  liability
            insurance;

      (h)   not make or cause to be made any  modification  or alteration to the
            Insurance  which is adverse and material to any of the  Indemnities,
            nor do or leave undone anything which  reasonably  would be expected
            to invalidate the insurance coverage;

      (i)   be responsible for any deductible/excluded loss under the Insurance;

      (j)   subject to the  limitations  of 10.5(e),  provide and cause Lessee's
            insurance  broker to provide  any other  insurance  and  reinsurance
            related  information,  or assistance,  as Beneficiary may reasonably
            request;

      (k)   reimburse  Lessor and/or the Beneficiary for any premiums  (together
            with interest thereon at the Incentive Rate from the date of payment
            until the date of  reimbursement)  paid by any of them  pursuant  to
            Article 10.6.

10.6  If at any time Lessee fails to maintain the Insurance  (without  prejudice
      to any other rights which Lessor may have acquired under this Agreement by
      reason of such  failure),  Lessor and the  Beneficiary  shall,  after such
      advance notice to and  consultation  (if possible) with Lessee as shall be
      reasonable under the circumstances, be entitled

      (a)   to pay the premiums due or, in the event  Lessor or  Beneficiary  is
            not  allowed to pay such  premiums,  with notice to Lessee to effect
            and maintain similar  insurance  satisfactory to it. Such sums so as
            shall have been so expended by it shall, upon written demand, become
            immediately due and payable by Lessee together with interest thereon
            at the Incentive  Rate, from the date of expenditure by it up to the
            date of reimbursement by Lessee;

      (b)   at any time while such failure is continuing to require the Aircraft
            to remain at any  airport  or (as the case may be) to proceed to and
            remain  at any  airport  designated  by it  until  such  failure  is
            remedied to its reasonable satisfaction.

10.7  Beneficiary  shall be  entitled,  after the expiry or  termination  of the
      leasing of the Aircraft, to require Lessee at Lessee's expense to maintain
      legal  liability  insurance  under  Lessee's  fleet policies in the amount
      required  immediately prior to the expiry or termination of the leasing of
      the Aircraft insofar as the same relates to the Aircraft for two (2) years
      after  the end of the  Term  such  insurance  to  provide  for each of the
      Indemnities to be named as additional  insured thereunder to the extent of
      its interest under the said  indemnities,  and the obligation of Lessee to
      effect the same shall not be  affected  by Lessee  ceasing to be lessee of
      the Aircraft  and/or any of the  Indemnities  ceasing to have any interest
      in, or in respect of, the Aircraft.

10.8  Notwithstanding  any other provision of this Lease, Lessor and Beneficiary
      agree  to  accept,   in  lieu  of  the   insurance   required   hereunder,
      indemnification  from,  or  insurance  provided by the  government  of the
      United States (or any agency or instrumentality thereof the obligations of
      which  (including  this  indemnity)  are  supported  by the full faith and
      credit of the government of the United States), against the risks required
      to be insured  pursuant to this  Article 10 and in an amount  which,  when
      added to the amount of any such insurance  maintained by Lessee,  shall be
      at least equal to the amounts which Lessee would  otherwise be required to
      maintain  hereunder.  Such indemnity or written evidence of such insurance
      shall be provided to Lessor and  Beneficiary  at least three Business Days
      prior to the date on which such insurance would become effective as to the
      Aircraft.

10.9 APPLICATION OF INSURANCE PROCEEDS FOR AN EVENT OF LOSS.

      It is agreed  that  insurance  payments  which  arise  from any  policy of
      insurance  carried by Lessee and received as the result of the  occurrence
      of an Event of Loss shall be applied as follows:

      (i) if such  payments  are  received  with  respect  to an  Event  of Loss
      relating to the Airframe and Engines or engines installed on the Airframe,
      so much of such payments as shall not exceed the amounts due under Article
      9.1 hereof shall be paid to Beneficiary for immediate  application towards
      sums owed by Lessee, and the balance to Lessee; and

      (ii) if such  payments  are  received  with  respect  to an  Event of Loss
      relating  to an Engine  under  circumstances  contemplated  by Article 9.2
      hereof,  such payment  shall be paid over to Lessee,  provided that Lessee
      shall have fully performed or, concurrently therewith,  fully performs the
      terms of Article 9.2 hereof.

10.10 APPLICATION OF INSURANCE PROCEEDS FOR OTHER THAN AN EVENT OF LOSS.

      Except as otherwise  provided in Exhibit G hereto,  the insurance payments
      for  any  property   damage  loss  to  the  Airframe  or  any  Engine  not
      constituting  an Event of Loss, or to any Part, may be held by Beneficiary
      until Lessee  furnishes  Beneficiary with  satisfactory  evidence that the
      repairs or replacement property Lessee is required to perform or obtain in
      accordance  with the terms of Article 5 and 6 of this Lease have been made
      or an  agreement  with the  Manufacturer  or other third  person or entity
      reasonably  satisfactory  to  Beneficiary  has been  entered  into for the
      replacement  of such  damaged  item or the  completion  of the  repairs by
      Lessee. In any event, whether repairs are made by Lessee or a third party,
      Insurance  payments will be applied and made available by Beneficiary upon
      reasonable  request by Lessee in  periodic  progress  payments  as work is
      accomplished and/or replacement effected. Upon receipt of such evidence of
      repair or replacement or contract,  Beneficiary  shall pay Lessee,  if the
      repairs have been completed, or to the Manufacturer or such other repairer
      for such  repairs,  the  amount of the  insurance  payment  received  with
      respect to such loss. Any balance of insurance  proceeds  remaining  after
      such  payments  and  completion  of such  repairs,  shall be paid  over to
      Lessee.

10.11 APPLICATION IN DEFAULT.

      Any amount referred to in Article 10.9 or Article 10.10 which is otherwise
      payable  to  Lessee  shall  not be  paid to  Lessee,  or,  if it has  been
      previously paid to Lessee, shall be delivered by Lessee to Beneficiary, if
      at the time of such payment, an Event under Article 14.1(a) or an Event of
      Default shall have occurred and be  continuing.  In either case,  all such
      amounts shall be held by  Beneficiary  as security for the  obligations of
      Lessee or, at the option of  Beneficiary,  applied by  Beneficiary  toward
      payment of any of Lessee's obligations at the time due hereunder.  At such
      time as there shall not be continuing  any such Event or Event of Default,
      all such amounts at the time held by  Beneficiary in excess of the amount,
      if any, which  Beneficiary  has elected for  application as provided above
      shall be paid to Lessee.

ARTICLE 11.  MORTGAGES, LIENS, ETC.

      Lessee shall not directly or indirectly create, incur, assume or suffer to
exist any Lien on or with respect to any item of  Equipment,  any part  thereof,
title thereto or any interest  therein,  except:  (i) the  respective  rights of
Lessor and Lessee as herein  provided and the rights of any financier  under any
mortgage granted by Lessor to such financier at the request of Beneficiary, (ii)
Lessor Liens,  (iii) Liens for taxes,  fees and other charges (other than Lessor
Taxes)  either  not yet due or being  contested  in good  faith  by  appropriate
proceedings,  but only so long as such proceedings do not involve the likelihood
of the sale,  forfeiture or loss of any item of Equipment,  or interest therein,
and (iv) inchoate materialmen's,  mechanics', workmen's, repairmen's,  employees
or other like liens  arising in the ordinary  course of business and for amounts
the  payment of which is either not  delinquent  or is being  contested  in good
faith by appropriate  proceedings,  but only so long as such  proceedings do not
involve the likelihood of the sale, forfeiture or loss of any item of Equipment,
or any interest  therein (such Liens described in clauses (i) through (iv) above
being referred to herein as "Permitted  Liens").  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 any Equipment
leased hereunder.

      If any Lien (other than in favor of the  Beneficiary) is created by Lessor
or Beneficiary on the Aircraft or this Lease securing  indebtedness,  the Lessee
shall cooperate with Beneficiary,  at Beneficiary's  expense,  in perfecting the
rights of the financier and the  Beneficiary  shall cause the lender before such
Lien is effected to provide a Letter of Quiet Enjoyment to Lessee.

ARTICLE 12.  RECORDATION AND FURTHER ASSURANCES

      Lessor,  Beneficiary and Lessee will promptly and duly execute and deliver
to Lessor or Beneficiary or Lessee,  as applicable,  such further  documents and
assurances  and take such further  action as Lessor,  Beneficiary  or Lessee 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  hereunder,  including,  without
limitation, if requested by Lessor or Beneficiary, 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, or of financing statements with respect thereto for filing
in the state in which the  principal  office of Lessee is  located.  Lessee will
consent to the  assignment of this Lease to a financier if requested to do so by
Beneficiary  and will  cooperate  in amending the  insurances  to cover any such
assignee  as an  additional  assured;  provided  that no such  assignment  shall
diminish the rights and  privileges  of Lessee  hereunder  or increase  Lessee's
obligations hereunder.

ARTICLE 13.  RETURN OF AIRCRAFT AND RECORDS

13.1  RETURN.

      Except as otherwise provided herein, at the expiration of the Term for the
      Equipment or upon the sooner termination of this Lease, Lessee, at its own
      expense,  shall return the Equipment to Lessor by  delivering  the same to
      Lessor at Lessee's facilities in Colorado Springs, Colorado or at those of
      the Authorized  Maintenance Performer performing the redelivery "C" check.
      Lessee  will,  at  Beneficiary's  request,  ferry  the  Aircraft  from the
      redelivery  location to any other location within the 48 contiguous United
      States of America,  as may be designated by Beneficiary,  at Beneficiary's
      expense.  The  Aircraft,  at the time of return to Lessor,  shall be fully
      equipped  with  Engines or other  CFM56-3B2  engines  owned by Lessee (and
      complying with Article 13.3) properly installed thereon.  In addition,  on
      redelivery  the Aircraft  shall comply in all respects with the Redelivery
      Conditions stated in Exhibit "E" to this Lease.

13.2  OVERHAUL - GENERAL.

      Immediately prior to such return of the Aircraft, Lessee shall have caused
      a "C" check, to have been performed to the Airframe,  at Lessee's cost, in
      accordance with Exhibit "E" hereto.

13.3  ENGINES.

      In the event any engine not owned by Lessor  shall be  delivered  with the
      Airframe,  such engine shall be free and clear of Liens, of the same model
      (or an improved version) and Manufacturer as the replaced Engine, suitable
      for use on such Airframe and shall have a value and utility at least equal
      to, and be in substantially the same or better condition (and shall have a
      comparable  core value in the LLP stack) as, the Engine  that  should have
      been returned, assuming such Engine which should have been returned was in
      the condition and repair as required by the terms hereof immediately prior
      to  such  required  return;  and  Lessee  will,  at its  own  expense  and
      concurrently  with such  delivery,  furnish Lessor with a bill of sale, in
      form and substance reasonably satisfactory to Lessor and Beneficiary,  for
      each such  engine  and with  evidence  of  Lessee's  title to such  engine
      (including,  if requested,  an opinion of Lessee's counsel) and shall take
      such other action as Lessor or Beneficiary may reasonably request in order
      that title to such  engine  shall be duly and  properly  vested in Lessor.
      Upon full  compliance  with this Article 13.3 and passage of title to such
      engine to Lessor,  such engine shall be an Engine for all purposes of this
      Lease and Lessor will  transfer to Lessee all  Lessor's  right,  title and
      interest in an Engine  constituting  part of the  Aircraft so returned but
      not  installed on such  Aircraft at the time of such  return,  without any
      representation,  warranty or recourse of any kind  whatsoever,  express or
      implied,  except a warranty  that such  Engine is free and clear of Lessor
      Liens,  defects in title  resulting  from Lessor's acts, and all rights of
      Beneficiary.

13.4  LIENS.

      At  redelivery,  Lessee shall  warrant to Lessor that no Liens (other than
      Lessor  Liens)  exist at that  time on the  Equipment  and that  Lessee is
      current on its  payments  to relevant  authorities  and/or  suppliers  for
      landing,  handling,  fuel  navigation  and other  charges  accrued  by the
      Equipment during the Term of the Lease.

13.5  RECORDS.

      Upon the return of the  Equipment,  Lessee shall deliver to Lessor (i) all
      logs,   manuals,   certificates,   data  and   inspection,   modification,
      maintenance  and overhaul  records  required to be maintained with respect
      thereto  under  applicable  rules  and  regulations  of the  FAA or  other
      governmental  authority having  jurisdiction,  (ii) all logs,  manuals and
      catalogs  included with the Equipment on the Delivery Date  therefor,  and
      (iii) all logs, manuals, certificates, data and inspection,  modification,
      maintenance  and overhaul  records that are required to be maintained with
      respect thereto under the rules and regulations of the FAA;  provided that
      Lessee   will  not  in  any  event  be   required  to  provide  any  logs,
      certificates,  data or  records  of any  type  with  respect  to the  use,
      operation,  repair,  maintenance or overhaul of the Equipment prior to the
      Delivery  Date which were not  provided  to Lessee at the time of Lessee's
      acceptance of the Aircraft hereunder.

13.6  REDELIVERY FUEL.

      Fuel in the tanks of the  Aircraft  at  re-delivery  shall be  recorded in
      Appendix A to Lease  Supplement  No. 2. At redelivery of the Aircraft,  if
      there is more or less fuel in the tanks than at delivery, Lessee (if less)
      or Beneficiary  (if more) will pay for the difference at the price of fuel
      at the re-delivery location.

13.7  INDEMNITY.

      The Lessee shall  indemnify  and hold  harmless the  Indemnitees  from and
      against any and all liabilities,  damages and losses  (including costs and
      expenses  incidental  thereto) arising by reason of death or injury to any
      observer  or  employee  of the  Lessee,  arising  out  of,  or in any  way
      connected  with the  demonstration  flight and  inspection of the Aircraft
      conducted  pursuant to Exhibit "E" hereto or the ferry flight set forth in
      Article 13.1.

      The Lessor shall  indemnify  and hold harmless the Lessee from and against
      any and all liabilities,  damages and losses (including costs and expenses
      incidental  thereto)  arising by reason of death or injury to any observer
      or employee of the Lessor or any Indemnitee  arising out of, or in any way
      connected  with the  demonstration  flight and  inspection of the Aircraft
      conducted  pursuant to Exhibit "E" hereto or the ferry flight set forth in
      Article 13.1.

ARTICLE 14.  EVENTS OF DEFAULT

14.1 EVENTS OF DEFAULT.

      Each of the following events shall constitute an Event of Default (whether
      any such  event  shall be  voluntary  or  involuntary  or come about or be
      effected by  operation  of law or pursuant  to or in  compliance  with any
      judgment,  decree or order of any court or any order, rule,  regulation of
      any administrative or governmental body):

      (a)   if Lessee fails to pay any Rent payable under this Lease (including,
            without  limitation,  Maintenance  Reserves  or any  portion  of the
            Security  Deposit) to the  Beneficiary in the currency in which such
            sum is due within 5 days after the due date for  payment  thereof or
            if such  amount is payable on  demand,  within 15 days after  demand
            therefor; or

      (b)   if insurances on or with respect to the Equipment are not maintained
            in  accordance  with the  provisions  of Article 10; or Lessee shall
            operate the Aircraft outside of the scope of the insurance  coverage
            maintained with respect to the Aircraft; or

      (c)   if the Lessee  defaults in the due performance and observance of any
            of its  obligations  under  the  Lease  (other  than as set forth in
            Article 14.1 (a) and (b)) and such  default is not  remedied  within
            thirty (30) days of notice  from the Lessor to the Lessee  requiring
            such remedy or, if any such default is not capable by due  diligence
            of being  cured or  remedied  within  said  thirty  (30) days,  such
            default is not cured or remedied  within  sixty (60) days after such
            notice by Lessor to Lessee; or

      (d)   if any  representation,  warranty or statement  made or deemed to be
            made by the Lessee to the Lessor  and  Beneficiary  in this Lease in
            any certificate,  statement or opinion  delivered by it hereunder or
            thereunder  or in  connection  herewith or therewith  is  incorrect,
            inaccurate or misleading in any material respect when made or deemed
            to be made or repeated; or

      (e)   if all, or substantially all, of the Lessee's air transport licenses
            are revoked, or if its commercial passenger operating certificate is
            revoked, canceled or otherwise terminated; or

      (f)   if a liquidator for the winding up of the Lessee shall be appointed,
            or an  encumbrancer  shall take  possession  or a receiver  shall be
            appointed  of the  whole or  substantially  all of the  property  or
            assets of the Lessee or the Lessee  applies for, or consents to, the
            appointment   of  any  receiver  or  similar   official  for  it  or
            substantially  all of its property or assets,  or an  administrative
            receiver is  appointed of all or  substantially  all of the Lessee's
            property or assets or any similar or analogous  event shall occur in
            relation to the Lessee in any relevant  jurisdiction  including  the
            United States; or

      (g)   if Lessee 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 in any such
            proceeding,  or a petition  against Lessee 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

      (h)   if the Lessee  shall stop  payments  on its  aircraft  financing  or
            leasing  obligations  generally  or  shall  cease  to  carry  on its
            business or shall be unable to pay its debts as they become due; or

      (i)   if the Security Deposit shall be attached or rendered unavailable to
            the  Beneficiary or the  Beneficiary  shall be ordered by a court of
            competent jurisdiction to repay or return the Security Deposit prior
            to the end of the Term or the Letter of Credit  shall not be renewed
            or  replaced  prior to the third  Business  Date prior to its expiry
            date  unless  (i)  Lessee  shall  have  made  a  cash  deposit  with
            Beneficiary of $[ ]* or (ii) Beneficiary  shall have drawn under the
            Letter of Credit, on or prior to such expiry date.

ARTICLE 15.  REMEDIES

      Upon the  occurrence  of any  Event of  Default  under the  provisions  of
Article  14.1  (f)  or  (g),  all of  Lessee's  rights  hereunder  in and to the
Equipment  shall  automatically  terminate.  Upon the occurrence of any Event of
Default under any other  provision of Article 14, and at any time  thereafter so
long as the same shall be  continuing,  Lessor may, at its option,  declare this
Lease to be in default  and at any time  thereafter,  Lessor may, in addition to
any other remedies provided herein or by applicable law, exercise one or more of
the following  remedies  with respect to the  Equipment or any part thereof,  as
Lessor in its sole discretion shall elect:

(a)   Demand that Lessee, and Lessee shall upon the written demand of Lessor and
      at Lessee's expense, return promptly to Lessor the Equipment as Lessor may
      specify  in the  manner  and  condition  required  by,  and  otherwise  in
      accordance  with all of the provisions  of, Article 13 hereof  (including,
      without  limitation,  the return of all Records) as if the Equipment  were
      being returned at the end of the Term therefor;  or Lessor, at its option,
      may enter  upon the  premises  where all or any part of the  Equipment  is
      located and take  immediate  possession  of and remove the same  (together
      with any  engine  which is not an  Engine  but which is  installed  on the
      Airframe,  subject to all of the rights of the  owner,  lessor,  lienor or
      secured party of such engine,  provided,  however, that such Airframe with
      an engine  (which is not an Engine)  installed  thereon  may be flown to a
      location  within the continental  United States,  and such engine shall be
      held for the account of any such owner,  lessor,  lienor or secured  party
      or, if owned by Lessee,  may, at the option of Lessor,  be exchanged  with
      Lessee for an Engine in accordance with the terms of Article 13 hereof) by
      summary proceedings or otherwise, all without liability accruing to Lessor
      for or by reason of such entry or taking of  possession,  whether  for the
      restoration of damage to property caused by such taking or otherwise;

(b)   Whether or not Lessor shall have  exercised,  or shall  thereafter  at any
      time exercise,  any of its rights under  paragraph (a) above,  Lessor,  by
      written notice to Lessee specifying a payment date, may demand that Lessee
      pay to Beneficiary,  and Lessee shall pay to  Beneficiary,  on the payment
      date specified in such notice, as liquidated damages for loss of a bargain
      and not as a penalty (in lieu of the Basic Rent for the  Equipment due for
      the  period  commencing  after  the date  specified  for  payment  in such
      notice),  any accrued but unpaid  Basic Rent for such  Aircraft due to and
      including the payment date specified in such notice,  plus an amount equal
      to the excess of (i) the  aggregate  unpaid  Basic Rent for the  Equipment
      which would otherwise have accrued over the remainder of the Term therefor
      but for the Event of Default,  discounted  monthly to present  value as of
      the payment  date  specified  in such notice at 7% per annum over (ii) the
      Fair Rental Value of the Aircraft for the remainder of the Term discounted
      to present  value at the same rate.  The amounts  specified in such notice
      shall  continue to bear  interest at the  Incentive  Rate from the payment
      date specified in said notice until payment is made;

(c)  In the event Lessor  shall have relet the  Equipment,  Lessor,  in lieu of
      exercising  its  rights  under  paragraph  (b) above  with  respect to the
      Equipment  may, if it shall so elect,  demand that Lessee pay  Beneficiary
      and Lessee  shall pay  Beneficiary,  as  liquidated  damages for loss of a
      bargain and not as a penalty (in lieu of the Basic Rent for the  Equipment
      due for the period commencing after the date of reletting) any accrued but
      unpaid Basic Rent for the  Equipment  due up to and  including the date of
      reletting or sale plus the excess of: (i) the aggregate  unpaid Basic Rent
      for the  Equipment  which  would  otherwise  have become due over the Term
      therefor  discounted  monthly to present value as of the date of reletting
      at 7% per annum over (ii) the  aggregate  basic rental  payments to become
      due under the reletting  from the date of such  reletting to the date upon
      which the Term would have  expired but for  Lessee's  default,  discounted
      monthly to present value as of the date of the reletting at 7% per annum;

(d)   Proceed by appropriate  court action or actions to enforce  performance by
      Lessee of the  applicable  covenants of this Lease and to recover  damages
      for the breach hereof;

(e)   Terminate  this  Lease  as  to  any  or  all  items  of  Equipment,  which
      termination shall be effective immediately upon Lessor having given notice
      of termination to Lessee, whereupon Lessee's right to possess and use such
      items of Equipment shall immediately cease.

Except as otherwise specifically provided above, Lessee shall also be liable for
all unpaid Rent due hereunder before, during or after the exercise of any of the
foregoing remedies with respect thereto, including all technical and remarketing
expenses,  legal fees and other costs and  expenses  incurred  by Lessor  and/or
Beneficiary  by reason of the occurrence of any Event of Default or the exercise
of Lessor's remedies with respect thereto and all costs and expenses incurred in
connection  with the  return of the  Aircraft  in  accordance  with the terms of
Article  13  hereof,   or  in  placing  such   Aircraft  in  the  condition  and
airworthiness as required by such Article.

Except as otherwise  expressly  provided  above,  no remedy  referred to in this
Article  is  intended  to be  exclusive,  but each  shall be  cumulative  and in
addition to any other remedy referred to above or otherwise  available to Lessor
at law or in equity;  and the exercise or beginning of exercise by Lessor of any
one or more of such  remedies  shall  not  preclude  the  simultaneous  or later
exercise by Lessor of any or all of such other  remedies.  No express or implied
waiver by Lessor  of any  Event or Event of  Default  shall in any way be, or be
construed to be, a waiver of any future or subsequent Event or Event of Default.

ARTICLE 16.  [Intentionally Omitted]

ARTICLE 17.  LETTER OF CREDIT

      As required by Section 3.3,  Lessee shall  deliver to  Beneficiary  as the
Security  Deposit an irrevocable  standby Letter of Credit ("L/C") in the amount
of $[ ]*.  Such L/C shall be  substantially  in the form of Exhibit H hereto and
otherwise in form and substance and from a bank  satisfactory to Beneficiary and
shall provide,  among other things,  that the L/C is  irrevocable  until 90 days
after  the end of the  Term,  the  L/C may be  drawn  upon by  Beneficiary  upon
presentation to the issuing bank of a certificate of Beneficiary stating that an
Event of Default has occurred and is continuing  under the Lease.  Lessee agrees
that in an Event of Default,  Beneficiary  may, at its option,  immediately draw
under  such L/C and apply the same  towards  any or all  amounts  due under this
Lease,  whether such amounts due  constitute  Basic Rent  payments,  damages for
breach  of  this  Lease  or  other  Rent  payments,  all in  Beneficiary's  sole
discretion.  Partial drawings will be permitted. If the L/C expires prior to the
date set forth  above,  Beneficiary  may draw the L/C in full if Lessee  has not
caused it to be  renewed  prior to the third  Business  Date prior to its expiry
date.

ARTICLE 18.  MISCELLANEOUS

18.1  CONSTRUCTION AND APPLICABLE LAW.

      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
      such provisions  hereof, and any such prohibition or enforceability in any
      jurisdiction  shall not invalidate or render  unenforceable such provision
      in any other  jurisdiction.  To the extent  permitted by  applicable  law,
      Lessee  hereby  waives any  provision of law which  renders any  provision
      hereof prohibited or unenforceable in any respect. No term or provision of
      this Lease may be changed,  waived,  discharged or terminated  orally, but
      only by an  instrument  in writing  signed by the party  against  whom the
      enforcement  of the change,  waiver,  discharge or  termination is sought.
      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 Engine except as a lessee only. The captions in this Lease
      are for convenience of reference only and shall not define or limit any of
      the terms or  provisions  hereof.  This  Lease  shall in all  respects  be
      governed by, and  construed in accordance  with,  the laws of the State of
      New York, United States of America, including all matters of construction,
      validity  and  performance,  without  regard to the conflict of laws rules
      thereof.

18.2  NOTICES.

      All notices,  demands and other  communications  required  under the terms
      hereof shall be in writing, and any such notice shall be deemed given when
      received (if personally delivered) or, if sent by recognized international
      courier,  three Business Days after being sent, prepaid,  addressed to the
      appropriate  party at its address set forth below,  or at such other place
      as such  party may from time to time  hereafter  designate  to such  other
      parties in writing:

      If to Lessee:

      Western Pacific Airlines, Inc.
      2864 South Circle Drive
      Suite 1100
      Colorado Springs, Colorado  80906

            Attention:  Chief Financial Officer
            Telephone:  (719) 527-7394
            Telecopy:         (719) 527-7480

      with a copy to:

      Smith, Gambrell & Russell, LLP
      1230 Peachtree Street
      Suite 3100
      Atlanta, Georgia 30309
            Attention:  Howard E. Turner, Esq.
            Telephone:  (404) 815-3594
            Telecopy:   (404) 815-3509

      If to Lessor:

      First Security Bank, National Association
      79 South Main Street
      Salt Lake City, Utah 84111
            Attention:  Corporate Trust Department
            Telephone:  (801) 246-5630
            Telecopy:   (801) 246-5053

      With a copy to Beneficiary:

      KG Aircraft Leasing Co., Ltd.
      3 Adelaide Court
      Adelaide Road
      Dublin 2, Ireland
            Attention:  Managing Director
            Telephone:  353-1-475-7373
            Telecopy:   353-1-475-7378

      and with a copy to:

      Winthrop, Stimson, Putnam & Roberts
      One Battery Park Plaza
      New York, New York  10004-1490
            Attention:  C. Payson Coleman
            Telephone:  212-858-1426
            Telecopy:  212-858-1500

      All such notices,  demands and other  communications  may also be given by
      telefax.  In such event,  such notice,  demand or  communication  shall be
      deemed given on the  Business Day  following  actual  transmission  to the
      recipient  party of the  telefax.  Changes in the  addresses  for  notices
      hereunder  may be made by written  notice to the other  parties  mentioned
      above.

18.3  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 of its
      agreements  contained  herein in each case,  beyond any  applicable  grace
      period,  Lessor or Beneficiary may itself,  after such prior  consultation
      with  Lessee as shall be  reasonable  under the  circumstances,  make such
      payment or perform or comply with such  agreement,  and the amount of such
      payment  and the  amount  of the  reasonable  expenses  of  Lessor  and/or
      Beneficiary incurred in connection with such payment or the performance of
      or  compliance  with such  agreement,  as the case may be,  together  with
      interest thereon at the Incentive Rate, shall be deemed Supplemental Rent,
      payable by Lessee upon demand.

18.4  CORPORATE EXISTENCE; MERGER.

      Lessee will  preserve  and maintain its  corporate  existence  and all its
      rights,  privileges  and  franchises  in every  jurisdiction  in which the
      character of its property or the nature of its business makes licensing or
      qualification necessary. Lessee will not merge or consolidate with or into
      any  person  or  entity  or sell,  lease or  otherwise  dispose  of all or
      substantially  all of its  properties,  unless the  surviving  corporation
      expressly assumes in a manner  reasonably  satisfactory to Beneficiary all
      of Lessee's obligations hereunder.

18.5  QUIET ENJOYMENT.

      Lessor  covenants  that as long as no Event of Default has occurred and is
      continuing,  neither  Lessor nor any person  claiming by, through or under
      Lessor shall interfere during the Lease Term with the use,  possession and
      quiet enjoyment of the Aircraft by the Lessee or the exercise by Lessee of
      its rights and privileges hereunder.

18.6  ASSIGNMENT.

      Except as specifically set forth in Article 5.1, this Lease and all or any
      part of Lessee's rights and obligations hereunder shall not be assigned or
      transferred by Lessee  without  Lessor's  prior written  consent,  and any
      purported  assignment or transfer shall be void. Subject to the foregoing,
      this  Lease  shall  inure  to  the  benefit  of and be  binding  upon  the
      respective successors and assigns of the parties hereto, including but not
      limited  to any  corporation  into which  Lessee  may merge,  or which may
      succeed to all or  substantially  all of the  assets of  Lessee,  and such
      corporation shall expressly assume the liability created hereunder.

      Lessor's and  Beneficiary's  interest in this Lease  Agreement  and in the
      Aircraft and in the trust created under the Trust Agreement are assignable
      and  alienable  by Lessor  and  Beneficiary  in whole but not in part upon
      receipt of  Lessee's  consent  (which  will not be required if an Event of
      Default has occurred  and is  continuing)  which will not be  unreasonably
      withheld or delayed, and upon such assignment Lessor and Beneficiary shall
      be discharged  from all further  obligations  hereunder in respect of such
      interest  or  Equipment  assigned  and the  assignee or  transferee  shall
      succeed  to  all of  Lessor's  and  Beneficiary's  rights,  interests  and
      obligations  in respect  thereof as though such assignee or transferee had
      been the initial owner or lessor,  as the case may be, in respect thereof.
      Lessee shall at Beneficiary's  expense comply with all reasonable requests
      of Lessor and/or  Beneficiary,  their successors and assigns in respect of
      the assignment so long as Lessee's obligations hereunder are not increased
      and Lessee's rights and privileges are not reduced thereby (including,  if
      requested, execution of a lease agreement on terms substantially identical
      to this  Lease  Agreement  substituting  the  name of  such  successor  or
      assignee for Lessor and/or  Beneficiary).  For the avoidance of doubt, the
      foregoing  shall not (i)  restrict  Lessor's  and  Beneficiary's  right to
      finance the  Aircraft  and create a security  interest  therein and in the
      Lease without  Lessee's  consent,  or (ii) change  Lessee's  obligation to
      cooperate as and to the extent provided in Article 11.

18.7  EXPENSES.

      Each party shall bear its own expenses in  connection  with  entering into
      this Lease except that Beneficiary shall be responsible for Lessor's costs
      and expenses and Lessee and Beneficiary  will split FAA counsel's fees and
      expenses evenly.  The prevailing party in any action or proceeding between
      Lessor, Beneficiary and/or Lessee to enforce the terms of this Lease shall
      be  entitled to recover  from the other party all its costs and  expenses,
      including reasonable  attorneys' fees incurred by such prevailing party in
      such action or proceeding.

18.8  SURVIVAL.

      The representations, warranties, indemnities and agreements of the parties
      provided for in this Lease, and each party's obligations under any and all
      provisions  hereof,  shall  survive the  delivery of the  Aircraft and the
      expiration or other  termination  of this Lease and are expressly made for
      the benefit of, and shall be enforceable by the applicable party and their
      respective successors and assigns.

18.9  ENGLISH LANGUAGE.

      All Records  shall be kept and  maintained  in the English  language  with
      respect to entries  made  therein  pertaining  to the  operation,  repair,
      maintenance or overhaul of the Equipment  during the Lease Term. All other
      information, notices, communications,  opinions, reports, records, and the
      like required to be given, kept or maintained by Lessee or to be delivered
      to Lessor hereunder, if not in the English language,  shall be accompanied
      by an English translation;  provided, however, that the English version of
      all such information,  notices,  communications,  opinions,  reports,  and
      records and other  documents,  including  this Lease,  shall govern in the
      event of any conflict with the non-English version thereof.

18.10 JURISDICTION.

      The Lessor,  Beneficiary and Lessee each irrevocably agrees that any state
      or Federal Court in the State of New York shall have  jurisdiction to hear
      and determine any suit, action or proceeding,  and to settle any disputes,
      which may arise out of or in connection  with this Agreement and, for such
      purposes,  irrevocably  submits to the  jurisdiction  of such courts.  The
      Lessor,  Beneficiary and Lessee each (i) irrevocably  waives any objection
      which it might now or  hereafter  have to the  courts  referred  to in the
      above  provisions of this Article being nominated as the forum to hear and
      determine  any suit,  action or  proceeding,  and to settle any  disputes,
      which may arise out of or in connection with this Agreement and agrees not
      to claim that any such court is not a convenient or appropriate  forum and
      (ii)  KNOWINGLY,  VOLUNTARILY AND  INTENTIONALLY  WAIVES ANY RIGHTS IT MAY
      HAVE TO A TRIAL BY JURY IN  RESPECT OF ANY  LITIGATION  BASED  HEREON,  OR
      ARISING  OUT OF,  UNDER,  OR IN  CONNECTION  WITH  THIS  AGREEMENT  OR THE
      TRANSACTIONS  CONTEMPLATED  HEREBY,  OR ANY COURSE OF  CONDUCT,  COURSE OF
      DEALING,  STATEMENTS (WHETHER ORAL OR WRITTEN),  OR ACTIONS OF ANY PARTIES
      HERETO OR THERETO.

      The submission to the  jurisdiction of the courts referred to in the above
      provisions of this Article shall not (and shall not be construed so as to)
      limit the right of the Lessor,  Lessee or Beneficiary to take  proceedings
      against the Lessee,  Lessor or  Beneficiary,  as applicable,  in any other
      court of competent jurisdiction nor shall the taking of proceedings in any
      one or more jurisdictions  preclude the taking of proceedings in any other
      jurisdiction, whether concurrently or not.

      Lessee,  Lessor and  Beneficiary,  each  hereby  appoints  CT  Corporation
      System,  New York,  N.Y., as its agent for service of process  relating to
      any  proceedings  before  the New York  courts  in  connection  with  this
      Agreement  and agrees to maintain a process  agent in New York  throughout
      the Term.  Lessee  agrees to service of process by mail to its address set
      forth herein.

18.11 CURRENCY.

      If for the  purpose of  obtaining  judgment in any court in any country it
      becomes  necessary  to  convert  the  amount due under this Lease into the
      currency  of such  country,  then the  conversion  shall be at the rate of
      exchange  prevailing on the day on which the court judgment is given.  For
      this  purpose,  "rate  of  exchange"  means  the  rate  at  which  Lessor,
      Beneficiary  or Lessee,  as  applicable,  is able on the relevant  date to
      purchase  Dollars with such  currency in such  country.  In the event that
      there is a change in the rate of  exchange  prevailing  between the day on
      which the  judgment  is given and the date of payment  of the amount  due,
      Lessee,  Lessor or Beneficiary,  as applicable,  shall pay such additional
      amount as may be  necessary to ensure that the amount paid on such date is
      the amount in the currency of such country  which,  when  converted at the
      rate of exchange prevailing on the date of payment, is the amount then due
      under this Lease in Dollars. Any amount due from Lessee under this Article
      18.11  shall  be due as a  separate  debt and  shall  not be  affected  by
      judgment being obtained for any other sums due under or in respect of this
      Lease.

18.12 INTEGRATION.

      This Lease Agreement  incorporates and supersedes all prior agreements and
      understandings between the parties hereto including the Letter of Intent.

      This Agreement may not be amended,  waived or modified orally, but only in
      a written supplement hereto signed by the parties hereto.

18.13 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  that this  Agreement  constitutes  chattel  paper under the
      Uniform Commercial Code of any relevant jurisdiction, no security interest
      in this Agreement may be perfected except by possession of the counterpart
      marked  "ORIGINAL" and  containing  the executed  receipt on the signature
      page hereof.  Any other  counterpart of this Agreement shall  constitute a
      duplicate but shall not be the chattel paper counterpart.

18.14 BANKRUPTCY - SECTION 1110

      It is the  intention  of the  parties  that the  provisions  of 11  U.S.C.
      Section 1110 or any analogous  section of the Federal  bankruptcy laws, as
      amended from time to time,  shall be  applicable  to the  interests of the
      Lessor and  Beneficiary in the Aircraft and to any right of the Lessor and
      Beneficiary  to take  possession of the Aircraft in  compliance  with this
      Agreement. This Agreement is intended to be a lease for Federal income tax
      purposes.


<PAGE>


      IN WITNESS  WHEREOF,  Lessor,  Beneficiary and Lessee and have each caused
this Lease to be duly executed by their authorized  officers or  representatives
as of the day and year first above written.

                                    WESTERN PACIFIC AIRLINES, INC.



                                    By:___________________________

                                    Title:________________________



                                    KG AIRCRAFT LEASING CO., LTD.



                                    By:___________________________

                                    Title:________________________

      Receipt of the  chattel  paper  counterpart  marked  "ORIGINAL"  is hereby
acknowledged.


                                    KG AIRCRAFT LEASING CO., LTD.



                                    By:___________________________

                                    Title:________________________


<PAGE>


                                   EXHIBIT "A"

                              LEASE SUPPLEMENT NO.1

      THIS LEASE SUPPLEMENT NO. 1, dated  _______________,  1997,  between FIRST
SECURITY BANK,  NATIONAL  ASSOCIATION,  not in its individual capacity except as
set forth  herein but as Trustee for and on behalf of KG Aircraft  Leasing  Co.,
Ltd.,  pursuant  to Trust  Agreement  dated , 1997 (the  "Lessor"),  KG AIRCRAFT
LEASING CO., LTD., an Irish limited liability company ("KG") and Western Pacific
Airlines, Inc., a Delaware corporation (the "Lessee").

      KG and Lessee have  heretofore  entered into a Lease Agreement dated as of
May , 1997,  (herein the "Lease  Agreement" and the terms defined  therein being
herein used with the same  meaning),  which  Lease  Agreement  provides  for the
execution and delivery from time to time of Lease  Supplements,  under the Lease
Agreement.

      KG and Lessee,  by their execution  hereof agree that First Security Bank,
National  Association  will be the Lessor under the Lease  Agreement  and Lessor
agrees to be bound by the terms thereof.

      The Lease Agreement  relates to the Airframe and Engines  described below,
and a  counterpart  of the Lease  Agreement  is attached  hereto and made a part
hereof and this Lease Supplement,  together with such attachment, is being filed
for  recordation  on the  date  hereof  with  the  relevant  authorities  as one
document.

      NOW,  THEREFORE,  in  consideration  of the  premises  and other  good and
sufficient consideration, Lessor and Lessee hereby agree as follows:

1.    Lessor hereby delivers and leases to Lessee, and Lessee hereby accepts and
      leases from Lessor,  under the Lease  Agreement,  the following  described
      Boeing Model 737-353 airframe:

      (i)   Airframe:         U.S. Registration:  N957WP;
                              Manufacturer's Serial No. 24060; and

      (ii)  Engines:          Two CFM International CFM56-3B2 engines bearing
                              respectively manufacturer's serial numbers
                              722139 and 723130

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

3.    The Term for the Aircraft shall commence on the date hereof.

4.    Lessee's duly  appointed and authorized  technical  experts have inspected
      the Aircraft and Lessee accepts the Aircraft for all purposes of the Lease
      Agreement,  [subject to rectification of any discrepancies detected during
      the Test Flight and set forth on the list attached hereto].

5.    Lessee  hereby  confirms  its  agreement  to pay Lessor Rent and any other
      amounts  with  respect to the  Aircraft  throughout  the Term  therefor in
      accordance with the terms of the Lease Agreement.

6.    Lessee  hereby  confirms to Lessor that the Airframe and Engines have been
      duly marked as showing Lessor's title thereto in accordance with the terms
      of the Lease Agreement.

7.    The Aircraft is insured in accordance with the terms of Lease.

8.    No Event of Default is subsisting and the  representations  and warranties
      contained  in Article 4.2 of the Lease are, by  reference to the facts and
      circumstances existing today, true and accurate in all respects.

9.    To the best of Lessee's  knowledge and belief,  the Lessee has no right of
      set-off,  deduction,   withholding  or  counterclaim  against  the  Lessor
      whatsoever as of the date hereof except with respect to the discrepancies,
      if any, set forth on the list attached hereto.

10.   All of the  terms and  provisions  of this  Lease  Supplement  are  hereby
      incorporated  by reference into the Lease  Agreement to the same extent as
      if fully set forth therein. Appendices A, B and C to this Lease Supplement
      and any attachments  thereto are to be read together and form part of this
      Lease Supplement.

      IN  WITNESS  WHEREOF,  Lessor  and  Lessee  have each  caused  this  Lease
Supplement to be duly executed by their authorized  officers or  representatives
as of the day and year first above written.


FIRST SECURITY BANK, NATIONAL ASSOCIATION, in its individual capacity but solely
as Owner Trustee under the Trust Agreement dated , 1997.

By: _______________________

Title: ____________________



WESTERN PACIFIC AIRLINES, INC.





By:_______________________

Title:____________________


<PAGE>




KG AIRCRAFT LEASING CO., LTD.

By: _______________________

Title: ____________________


<PAGE>


                                   APPENDIX A

                            Aircraft Hours and Cycles

                       as of                    , 19___

U.S. Registration Mark:  N957WP Serial Number 24060

A.    AIRFRAME

      Aircraft Total Time (Hours)                     _______

      Aircraft Total Landings (Cycles)                _______

      Lessee Service Check - Time to next Check       _______

      Lessee 'A' Check  - Time to next Check    _______

      Lessee 'C' Check - Time to next Check           _______

B.    CFM International CFM56-3B2 Engine

            Serial                  Hours/Cycles
Position    Number      TCSN  TTSN   TTSV/TCSV  to Next Limit

1
2

C.    Auxiliary Power Unit

Serial      Total                                   Hours/Cycles
Number      Hour/Cycles       TTSV  TTSOH           to Next Limit



D.    Landing Gear
                        Hours       Cycles
Nos.  Hours/Cycles      Remaining   Remaining

      NLG
      Rt Main Gear
      Lt Main Gear

E.    Fuel Remaining in Tanks

-----

Key:

TCSN:             Total Cycles Since New
TTSN:             Total Time Since New
TTSV/TCSV:        Total Time Since Shop Visit/Total Cycles Since Shop Visit
TTSOH:            Total Time Since Last Overhaul


<PAGE>


                                   APPENDIX B

                         DOCUMENTATION DELIVERY RECEIPT


      Western Pacific  Airlines,  Inc. (the "Lessee"),  and First Security Bank,
N.A., as Owner Trustee (the "Lessor")  hereby confirm the delivery by the Lessor
and  receipt  by the  Lessee  of  the  Technical  Records  as  described  on the
Attachment 1 hereto and a part hereof, on __________________, 19__, in ________,
at _________ time.



WESTERN PACIFIC AIRLINES, INC.      FIRST SECURITY BANK, NATIONAL
                                         ASSOCIATION,
                                          as Owner Trustee


By ________________________         By _______________________

Its _______________________         Its ______________________



<PAGE>


                                  ATTACHMENT 1

                          TECHNICAL RECORDS AT DELIVERY

                                 MANUALS LISTING
                           (ALL HARDCOPY UNLESS NOTED)


The  Aircraft  will be  re-delivered  with  the same  number  of  copies  of the
documents listed below as were delivered to Lessee at delivery.

1.    AD's and SB compliance  records  (Airframe and Engines) - information must
      include  method of  compliance,  date of  accomplishment  and signature of
      person accomplishing work.

2.    Engine  Records - record of last (major  inspection)  overhaul,  disc part
      numbers, cycle/hour limits.

3.    Records of life limited parts,  life limited parts history since new (both
      Engine and Airframe) and hours/cycles used.

4.    Complete  record  of last  Airframe  ("D"  check or  equivalent)  overhaul
      information must include both routine and non-routine data.

5.    Landing gear overhaul records (including shop report).

6.    Copies of  engineering  orders  relating to  repairs/modifications  of the
      Airframe, components or systems.

7.    If applicable, stress analysis and material certification date relating to
      major interior modifications, i.e., galley installations, overhead and bin
      enclosures if no STC available.

8.    Ground  proximity  warning  system-certification  details and installation
      information, including part numbers of major components.

9.    Time  control  records - engine  TSO,  TSEHM,  TSHSI and  similar  data on
      time-controlled components under operator's approved program.

10.   Approved flight manual, IPC,  maintenance manual,  wiring manuals,  galley
      manuals and passenger seat manuals.

11.   Record of last weighing.

12.   Copy of current  weight and balance  (loading  system) for  passenger  and
      cargo loading.

13.   Aircraft weight and balance manual (MFG's).

14.   Approved Interior arrangement drawing.

15.   Records of last "A" check "B" check and "C" check.

16.   Log book pages (1 year).

17.   Letter certifying Aircraft status relating to accident or incidents.

18.   Avionics equipment list (must include flight data recorder information).

19.   Flight data recorder calibration sheet, if applicable.

20.   Last calibration  information on altimeters,  airspeed  indicators and ATC
      transponder test, including date of accomplishment.

21.   Operators current maintenance program document, if permitted.

22.   Part 36 compliance information.

23.   List of approved overhaul agencies, if permitted.

24.   Record of last APU overhaul.

25.   Records of last  overhaul of hard time limited  component as controlled by
      operator's maintenance program.

26.   List of all emergency equipment with part numbers.

27.   Aircraft Maintenance Manual - Microfilm.

28.   Illustrated parts Catalogue - Microfilm.

29.   Wiring Diagram Manual - Microfilm.

30.   System Schematics Manual - Hard copy.

31.   Structural Repair Manual - Microfilm.

32.   Bite Manual - Hard Copy.

33.   Boeing Service Letters - Microfilm.

34.   Boeing Service Letters Index - Microfilm.

35.   Boeing Service Bulletins - Microfilm.

36.   Boeing Service Bulletins Index - Microfilm.

37.   Boeing Service Activities Report - Hard Copy.

38.   Component Maintenance/OVHL Manual - Microfilm.

39.   Illustrated Parts Catalogue - Hard Copy.

40.   Dispatch Deviation Procedures

41.   Power Plant Build-up Manual.

42.   Aircraft Operations Manual.

43.   Quick Reference Handbook - Hardcopy, if available.


<PAGE>


                                   APPENDIX C

                            LOOSE EQUIPMENT SCHEDULE


EQUIPMENT
1.    4 Emergency Flashlights, DME Corp
2.    PBE, S/N 01860, PB Corp.
3.    PBE, S/N 0819, PB Corp.
4.    Scott 5500 Oxygen bottle
5.    Scott 5500 Oxygen bottle
6.    Scott 5500 Oxygen bottle
7.    Scott 5500 Oxygen bottle
8.    ACR Electronics EM-1 Megaphone (2)
9.    General Halon 1211 Fire Extinguisher
10.   General Halon 1211 Fire Extinguisher
11.   Kidde Liquid Fire Extinguisher
12.   Zee First Aid Kits (2)

DOCUMENTS
1.    Boeing 737-300 Quick Reference Handbook
2.    CFM 56 Performance Card
3.    737 Exterior Inspection Card
4.    737 Adjusted Weight Tables Card
5.    Pilots Rider Reference Card
6.    737 Operations Manual Volumes 1, 2, 3
7.    737 Airplane Flight Manual Volumes 1, 2, 3, 4
8.    PBE S/N 02703



<PAGE>


                                   EXHIBIT "B"

                        FORM OF LETTER OF QUIET ENJOYMENT


From:  _______________________  (the "undersigned")

To:   WESTERN PACIFIC AIRLINES, INC. (the "Lessee")

In Re:      One Boeing 737-300 Aircraft Manufacturer's Serial Number 24060
            (the "Aircraft")/Aircraft Lease Agreement (the "Lease") dated
            ____________, 1997 between KG Aircraft Leasing Co., Ltd. (the
            "Lessor") and the Lessee

Dear Sirs:

1. In  consideration of $10 and other good and valuable  consideration  received
from  Lessee  and/or  Lessor  the  receipt of which is hereby  acknowledged,  we
confirm to you that we will not interfere  with the quiet  possession and use of
the  Aircraft  by the  Lessee or the  exercise  by the  Lessee of its rights and
privileges  under the Lease throughout the term of the Lease, but subject to the
terms of the Lease so long as no Event of Default  (as defined in the Lease) has
occurred and is continuing.

2. The foregoing undertaking is not to be construed as restricting the rights of
the  undersigned  to dispose of its interest in the Aircraft to such persons and
on such terms as it considers appropriate. However, if the undersigned exercises
such rights  during the term of the Lease and  provided  that at or prior to the
time of such  disposal  the  Lessor  has not issued a  termination  notice  with
respect to an Event of Default (as defined in the Lease)  which has occurred and
is continuing at the time such notice was issued,  the undersigned will (subject
to any  requirements or  restrictions  imposed by applicable law) dispose of the
Aircraft expressly subject to the Lease and on terms that the purchaser issues a
written  undertaking  to you in form and substance  satisfactory  to you that it
will not interfere with your quiet possession and use of the Aircraft throughout
the remaining  term of the Lease,  so long as no Event of Default (as defined in
the Lease) has occurred and is continuing.

3.  The  undersigned  hereby  represents  to  Lessee  that  (i) it is a  company
incorporated  and validly  existing  under the laws of [ ] and has the corporate
power to enter into and  perform  its  obligations  under  this  letter of quiet
enjoyment  and to own its  assets and carry on its  business  as it is now being
conducted  and (ii)  this  letter of quiet  enjoyment  is the  legal,  valid and
binding obligation of the undersigned.

4. This  Letter of Quiet  Enjoyment  shall be  governed  by,  and  construed  in
accordance with, the internal laws of the State of New York.

Please  countersign  this letter to confirm your  agreement to the  arrangements
contained herein.




                                          [Lessor and Beneficiary]





                                          For and on behalf of
                                                [                 ]



Agreed and accepted:





For and on behalf of WESTERN PACIFIC AIRLINES, INC.


<PAGE>


                                   EXHIBIT "C"

                    MAINTENANCE RESERVES ADJUSTMENT FORMULA


                  Flight Hour/                  Rates
                    Cycle Ratio

                  2.5  -  2.59                 $[  ]*
                  2.4  -  2.49                  [  ]*
                  2.3  -  2.39                  [  ]*
                  2.2  -  2.29                  [  ]*
                  2.1  -  2.19                  [  ]*
                  2.0  -  2.09                  [  ]*
                  1.9  -  1.99                  [  ]*
                  1.8  -  1.89                  [  ]*
                  1.61 -  1.79                  [  ]*
                  1.51 -  1.6[  ]*
                  1.41 -  1.5[  ]*
                  1.31 -  1.4[  ]*
                  1.21 -  1.3[  ]*
                  1.11 -  1.2[  ]*
                  1.01 -  1.1[  ]*
                   .91 -  1.0[  ]*



<PAGE>



                                   EXHIBIT "D"

                        ADDITIONAL DELIVERY REQUIREMENTS


      In addition to the delivery conditions defined in Article 2.1.3(i) of this
Agreement,  the following  additional  conditions shall apply on delivery of the
Aircraft to Lessee at Beneficiary's cost:



<PAGE>


1.    The Aircraft will be in 142 seat all economy configuration (or as
      otherwise agreed by Lessee);

2.    The Aircraft will be painted in Philippine Airlines ("PAL") livery;

3.    The Aircraft shall be in condition to meet the minimum conditions required
      to  operate  the  Aircraft  under FAR Part  121;  provided  that  Lessee's
      FAA-approved  maintenance  personnel  shall be in  attendance  at Lessee's
      expense  for the  entire "C" check in Manila so that they can sign off the
      work cards;

4.    The Aircraft shall be in good operating  condition  airworthy and with all
      systems operational and within manufacturers' manual limits,  irrespective
      of deviations or variations authorized by the Minimum Equipment List (MEL)
      or Configuration Deviation List (CDL);

5.    The Aircraft shall have been cleaned  externally within the last two weeks
      and have had its interior  deep cleaned  immediately  prior to delivery in
      accordance with Lessee's deep clean  specification and in conformance with
      major airline standards. The seat covers shall be in good condition;

6.    The  Aircraft  shall  comply  with the  Manufacturer's  specification,  as
      revised from time to time by the  incorporation  of certain  airworthiness
      directives,   service  bulletins  and  modifications   which  enhance  the
      Aircraft's operational capability;

7.    The Aircraft shall have had accomplished  thereon on a terminating  action
      basis  and  be  in  compliance  with  all  outstanding  mandatory  orders,
      directives,  FARs and instructions affecting the Aircraft as issued by the
      FAA or the  Manufacturer  which have a  compliance  deadline  prior to the
      first anniversary of the Delivery Date.

8.    All damage to the Aircraft which is not within the applicable limits shall
      have been  permanently  repaired  and  certified  in  accordance  with the
      requirements of the FAA and the Manufacturer. External repairs will, where
      applicable,  be flushed or otherwise permanently repaired and certified in
      accordance with the requirements of the FAA and the Manufacturer;

9.    Lessor shall  provide one full set of all  technical  documents in English
      relating to the Aircraft as listed on the  Attachment to Appendix B to the
      form of Lease  Supplement No. 1 attached hereto as Exhibit "A",  including
      copies of all  engineering  orders,  complete  records  of AD and  Service
      Bulletin  compliance and copies of manufacturer's  manuals relating to the
      Airframe,  Engines,  interior  configurations,  components and APU, all in
      compliance  with FAA  regulations.  All  records  necessary  for Lessee to
      comply with its  obligations  under the Lease and to operate the  Aircraft
      under  FAR Part 121 shall be  delivered  to Lessee at the same time as the
      Aircraft and shall be in English;

      The  Records   shall  be  delivered   with  the   Aircraft,   except  that
      documentation relating to the pre-delivery "C" Check shall be delivered as
      soon as  practicable  but in any  event,  within 15 days from the date the
      Aircraft is  delivered  to Lessee.  At the time of delivery of the Records
      for the Aircraft to Lessee,  Lessee and Lessor  shall  execute an aircraft
      documentation  return  receipt  (the  "Aircraft   Documentation   Delivery
      Receipt") in the form attached as Appendix B to Lease Supplement No. 1;

10.   Cleaning and treating of minor or moderate corrosion and correction of all
      severe or exfoliated  corrosion deferred by the prior operator or found by
      the Lessee during the Lessee's ground  inspection shall be accomplished by
      the Beneficiary in accordance with FAA approved data prior to delivery;

11.   The Aircraft shall have all deferred  maintenance items and pilot log book
      reports rectified on a terminating action basis;

12.   The  Aircraft  shall be capable of  certificated,  full rated  performance
      without limitations throughout the entire operating envelope as defined in
      the Airplane Flight Manual. Performance compliance will be demonstrated at
      the time of the pre-delivery  test flight and/or by inspection and testing
      of the powerplants (engines,  nacelles and accessories) in accordance with
      the Engine Maintenance Manual, at Lessee's option;

13.   The  Aircraft  (including  the Records and other  related  documents to be
      delivered  therewith in  accordance  with Appendix B hereto) shall be made
      available  to Lessee  for  ground  inspection  by  Lessee at the  delivery
      location.  Records will be made available to Lessee at least 15 days prior
      the  date  of  delivery.   Such  inspection  shall  commence  as  soon  as
      Beneficiary  begins its performance of the pre-delivery  check referred to
      below. The areas of the Aircraft  required to perform the checks described
      in these delivery conditions,  shall be opened and Beneficiary shall allow
      Lessee  to  accomplish  its  inspection  in  order to  determine  that the
      Aircraft  (including  the Records) is in the  condition  required  herein.
      During such checks,  Lessee  personnel shall not have the right to request
      that  adjacent  additional  panels  or areas be  opened  to allow  further
      inspection.  Beneficiary,  at its own expense,  shall promptly correct all
      deficiencies  affecting  airworthiness  and  any  discrepancies  from  the
      condition  required by the  provisions  of this Lease  which are  observed
      during  such  inspection  and are  communicated  in  writing  by Lessee to
      Beneficiary. All repairs shall be classified as permanent;

14.   The  Aircraft  shall be test  flown by PAL for  approximately  two  hours,
      during which Lessee's and Beneficiary's representatives shall be on board,
      in Manila and then,  following correction of any defects identified during
      such test flight, ferried by PAL to the Delivery Location. Up to three (3)
      of the  Lessee's  representatives  (or  more  if  consented  to by PAL and
      Beneficiary)  may  participate in such test flight as observers.  The test
      flight  shall be flown using  Boeing's  standard  operational  test flight
      procedures.  Upon completion of the test flight,  the  representatives  of
      Lessee and Beneficiary  shall agree in writing upon any  discrepancies  in
      such Aircraft  required to be corrected by  Beneficiary in order to comply
      with the provisions of this Lease and  Beneficiary  shall,  or shall cause
      PAL, to promptly  correct any such  discrepancies.  Lessee may be on board
      for the ferry flight,  but not for the purpose of  discovering  additional
      defects.  There will be no additional test flight  following any work done
      at the Delivery Location and prior to acceptance of the Aircraft; provided
      that  the  Aircraft  will be  flown  at the  Delivery  Location  by PAL or
      Beneficiary to the extent required to prove that any defect  discovered on
      the ferry flight by Beneficiary which requires proving has been corrected.

      All flights  pursuant to this clause above shall be made at  Beneficiary's
      (or PAL's)  expense,  except that Lessee  shall  provide its  observers at
      Lessee's expense;

15. The condition of the Airframe upon delivery shall be as follows:

      a.    The  Airframe  shall  have  accomplished,  in  accordance  with  the
            Manufacturer's  Maintenance Planning Document,  immediately prior to
            the test flight in Manila a "C" Check.  All routine and  non-routine
            maintenance  items  will be  corrected  during  the "C" Check and no
            carry-over items will exist at delivery;

      b.    the  installed  main  landing gear and nose landing gear shall be in
            good operating condition and shall have at least half-time remaining
            prior to removal from the Aircraft for overhaul or sampling;

16. The condition of installed systems upon delivery shall be as follows:

      a.    CONTROLLED COMPONENTS

            Aircraft and engine hour and/or cycle controlled  components at time
            of  delivery  to Lessee  shall have  remaining  as a minimum,  3,000
            Flight Hours and/or 1200 Cycles,  whichever is applicable  until the
            next   scheduled   removal  for   overhaul,   test,   inspection  or
            disassembly.  All  components  controlled on a calendar  basis shall
            have remaining,  as a minimum,  twelve (12) months before  scheduled
            removal for testing,  inspection  or overhaul.  Such  hour/cycle  or
            calendar  controlled  components are defined as those components for
            which hours and/or cycles and/or calendar times are controlled under
            the maintenance program. However, if a component or part has a life,
            overhaul or check  interval limit that is less than the above stated
            hours, cycles or calendar time limit requirement,  such component or
            part shall have as a minimum 90 per cent of the  interval  remaining
            to removal for replacement or overhaul. Beneficiary will not install
            life-limited  or rotable  components on the Aircraft for the purpose
            of depleting the value of the Aircraft;

      b.    CONDITION OF MONITORED COMPONENTS

            Aircraft and engine  systems,  components  or parts  maintained  "on
            condition"  or  condition  monitored  shall be within  the  relevant
            manufacturer's  specified  or  recommended  limits  with no  adverse
            trends;

17.   Each of the Engines  and each module and part  thereof at time of delivery
      to  Lessee  shall  be in good  operating  condition  and  shall  meet  the
      following requirements:

      a.    TIME SINCE REFURBISHMENT

            Each Engine shall have remaining no less than three thousand (3,000)
            Flight  Hours to its  next  scheduled  shop  visit  pursuant  to the
            manufacturer's engine management program policy recommendation,  and
            shall not meet the delivery  condition  if any Engine has  remaining
            less than such Flight Hours;

      b.    LIFE LIMITED PARTS

            Life limited parts shall have  remaining at least 3,000 Cycles until
            next scheduled removal for replacement of life limited parts;

      c.    BOROSCOPE INSPECTION

            Both the hot and  cold  sections  of the  Engines  and APU  shall be
            boroscoped  in accordance  with  Manufacturer's  recommendations  at
            Beneficiary's expense at delivery,  and Beneficiary will correct all
            discrepancies   that  exceed   Manufacturer's   maintenance   manual
            limitations at its expense.  Beneficiary shall provide Lessee with a
            written  report and video tape of such  boroscope and Lessee will be
            entitled  to be present  at any such  boroscope.  Beneficiary  shall
            conduct a maximum power  assurance run on each Engine to ensure that
            each Engine has an EGT  temperature  margin of 21 degrees or higher.
            Satisfactory  evidence  shall be provided to Lessee  reflecting  the
            correction of any discrepancies found during such inspection;

      d.    TREND MONITORING

            All  Engine  parameters  shall be within the  Manufacturer's  Engine
            Maintenance  Program limits with no adverse trends.  If the Aircraft
            engine  historical and maintenance  records and/or trend  monitoring
            data indicate a rate of acceleration in performance deterioration or
            oil  consumption of any Engine and/or the Auxiliary Power Unit (APU)
            which is higher than normal,  Beneficiary  shall, prior to delivery,
            correct or cause to be  corrected  such  conditions  to meet  normal
            manufacturer's tolerances;

18.   The condition of the Auxiliary Power Unit upon return shall be as follows:

      The  installed  APU at the time of  delivery  to  Lessee  shall be in good
      operating  condition,  shall  have  remaining  at  least  one  half of the
      interval time remaining before the next scheduled hot section inspection;

19.   Upon completion of the ferry flight from Manila and after  Beneficiary has
      corrected the discrepancies as required to comply with all of the delivery
      conditions set forth in this  Schedule,  the Aircraft  condition  shall be
      technically accepted by Lessee's  representatives at the delivery location
      by the  execution  of a technical  acceptance  certificate  in the form of
      Lease Supplement No. 1.

20.   The Aircraft  shall have  installed  all optional no charge  vendors,  and
      manufacturers'  service  bulletin  kits  theretofore  received by previous
      operator for the Aircraft  and to the extent  received but not  installed,
      such kits shall be furnished free of charge to Lessee (and properly packed
      and loaded on the Aircraft as cargo at delivery);

21.   At a minimum,  and without  limitation of any more stringent  requirements
      set forth herein,  the Aircraft and all Aircraft records shall be at least
      in  condition  upon  delivery  as Lessee  would be  required to return the
      Aircraft and Aircraft  records upon  redelivery  and Lessee shall have all
      such rights with respect to noncompliance as Lessor would have upon return
      of the Aircraft and Aircraft records.


<PAGE>


                                   EXHIBIT "E"

                              REDELIVERY CONDITION


      The condition of the Aircraft on redelivery shall be as follows:


1.    The Aircraft shall be in good operating  condition  airworthy and with all
      systems operational and within manufacturers' manual limits,  irrespective
      of deviations or variations authorized by the Minimum Equipment List (MEL)
      or Configuration Deviation List (CDL);

2.    The Aircraft shall have been cleaned  externally within the last two weeks
      and have had its interior deep cleaned  immediately prior to redelivery in
      accordance with Lessee's deep clean  specification and in conformance with
      major airline standards. The seat covers shall be in good condition;

3.    The Aircraft  shall comply with the  Manufacturer's  specification  at the
      original  delivery date, as revised from time to time by the incorporation
      of certain airworthiness  directives,  service bulletins and modifications
      which enhance the Aircraft's operational capability. The Aircraft shall be
      in the same  configuration  and  condition as it was in when  delivered to
      Lessee by Lessor under this Lease,  excepting only ordinary wear and tear,
      replacements  and local  modifications,  substitute parts and equipment of
      equal or enhanced value as may have been properly made by Lessee  pursuant
      to this Lease and as specifically otherwise set forth herein;

4.    The Aircraft shall have had accomplished thereon and be in compliance with
      all  outstanding  mandatory  orders,  directives,  FARs  and  instructions
      affecting the Aircraft as issued by the FAA which have a known  compliance
      deadline  during the Term.  In the event that Lessee has obtained a waiver
      or  deviation  from the FAA from having to comply with any such  mandatory
      orders, directives,  FARs and instructions,  Lessee shall, irrespective of
      such  waiver  or  deviation,   comply  with  all  such  mandatory  orders,
      directives and  instructions  covered by such waiver or deviation prior to
      return of the Aircraft to Lessor on a  terminating  action basis under the
      directive,  order,  FARs  or  instruction.  The  airworthiness  directives
      required by Article 5.3 shall also have been accomplished;

5.    The Aircraft shall have an Export  Certificate of Airworthiness  issued by
      the FAA to the country of Beneficiary's  choice or, if Beneficiary desires
      to keep the  Aircraft  on the same  register,  a  current  Certificate  of
      Airworthiness under FAR Part 121;

6.    Lessee  shall,  at  Beneficiary's  expense,  take  all  action  reasonably
      requested  to assist  Lessor  and  Beneficiary,  to  accomplish  immediate
      deregistration  and  export  of  the  Aircraft  from  the  United  States,
      including  signing a lease  termination  certificate  for recording at the
      FAA;

7.    All damage to the Aircraft which is not within the applicable limits shall
      have been  permanently  repaired  and  certified  in  accordance  with the
      requirements of the FAA and the Manufacturer. External repairs will, where
      applicable, be flushed or otherwise permanently repaired to such standard.

8.    The Aircraft  shall have  installed  all  optional no charge  vendors' and
      manufacturers'  service bulletin kits  theretofore  received by Lessee for
      the Aircraft and to the extent received but not installed, such kits shall
      be furnished free of charge to Beneficiary (and properly packed and loaded
      on the Aircraft as cargo at redelivery);

9.    Lessee shall provide one full set of all technical  documents  relating to
      the  Aircraft  as listed  under  "Technical  Documentation"  in Appendix A
      hereto and Lease  Supplement  No. 2, including  copies of all  engineering
      orders,  complete records of AD and Service Bulletin compliance and copies
      of  manufacturer's  manuals  relating to the Airframe,  Engines,  interior
      configurations,   components   and  APU,  all  in   compliance   with  FAA
      regulations;

      The  Records  shall  be  redelivered   with  the  Aircraft,   except  that
      documentation  relating  to the "C"  Check  shall be  returned  as soon as
      practicable but in any event, within 15 days from the date the Aircraft is
      returned to Lessor.  At the time of return of the Records for the Aircraft
      to Lessor,  Lessee  and Lessor  shall  execute an  aircraft  documentation
      return receipt (the "Aircraft  Documentation  Return Receipt") in the form
      attached as Appendix B to Lease Supplement No. 2;

      In the event Lessor's Tech Rep requires copies of any of the Records prior
      to the  return of the  Aircraft  to Lessor in order for  Lessor to plan or
      accomplish   modifications,   recertification,   sale,   lease   or  other
      disposition  of or  utilization  of the Aircraft upon such return,  Lessee
      shall,  as soon as practicable  upon receipt of each such Lessor  request,
      provide one advance copy of such  Records as  requested  by Lessor's  Tech
      Rep, at Beneficiary's expense;

10.   Prior  to  redelivery  the  Lessee  shall  either  rubdown  or  strip  (as
      appropriate  in the  reasonable  opinion  of  Beneficiary)  and  paint the
      Aircraft  in an  all-white  color  scheme;  the  method  of  painting  and
      selection  of paint shop shall be agreed  upon with the  Beneficiary.  For
      this purpose, a qualified representative of the Beneficiary may be present
      during the painting  operation.  After painting,  the Lessee shall balance
      all  control  surfaces,  if  appropriate,  in  accordance  with the Boeing
      Maintenance Manual or Structural Repair Manual;

11.   Name plates  shall be removed from  Airframe and Engines,  if requested by
      Beneficiary;

12.   Up to the  date  of  redelivery  of the  Aircraft  the  Lessee's  approved
      maintenance  program  shall  include  a  corrosion  program  based  on the
      corrosion  prevention,  treatment and correction  criteria  established by
      Boeing as set  forth in the  corrosion  prevention  and  control  document
      ("CPCP") and the Structural Repair Manual.  Cleaning and treating of minor
      or moderate corrosion and correction of all severe or exfoliated corrosion
      deferred   by  the  Lessee  or  found  by  the   Beneficiary   during  the
      Beneficiary's  ground  inspection  shall be  accomplished by the Lessee in
      accordance with FAA approved data prior to redelivery;

13.   The Aircraft shall have all deferred  maintenance items and pilot log book
      reports rectified on a terminating action basis;

14.   The  Aircraft  shall be capable of  certificated,  full rated  performance
      without limitations throughout the entire operating envelope as defined in
      the Airplane Flight Manual. Performance compliance will be demonstrated at
      the time of the redelivery test flight and/or by inspection and testing of
      the powerplants (engines, nacelles and accessories) in accordance with the
      Engine Maintenance Manual, at Beneficiary's option;

15.   The  Aircraft  (including  the Records and other  related  documents to be
      returned  therewith in  accordance  with  Appendix B hereto) shall be made
      available to  Beneficiary  for ground  inspection  by  Beneficiary  at the
      Redelivery  Location.  The Records will be made available to Lessor's Tech
      Rep at least 15 days prior the date of redelivery.  Such inspection  shall
      commence as soon as Lessee begins its performance of the Redelivery  Check
      referred to in Article 19(a)  hereunder.  Lessee shall remove the Aircraft
      from commercial  service and open the areas of the Aircraft as required to
      perform the checks described in these return  conditions,  and shall allow
      Beneficiary  to accomplish  its  inspection in order to determine that the
      Aircraft  (including  the Records) is in the  condition  required  herein.
      During  such  checks,  Beneficiary  personnel  shall not have the right to
      request  that  adjacent  additional  panels  or areas be  opened  to allow
      further inspection. Lessee, at its own expense, shall promptly correct all
      deficiencies  affecting  airworthiness  and  any  discrepancies  from  the
      condition  required by the  provisions  of this Lease  which are  observed
      during such  inspection and are  communicated in writing by Beneficiary to
      Lessee. All repairs shall be classified as permanent;

16.   The Aircraft shall be test flown by Lessee,  using  qualified  flight test
      personnel,  for not more than one  hundred  twenty  (120)  minutes  in the
      vicinity of the redelivery  location for the purpose of  demonstrating  to
      Beneficiary the satisfactory  operation of the Aircraft and its equipment.
      During such test flight command, care, custody and control of the Aircraft
      shall  at  all  times  remain  with  Lessee.   Up  to  three  (3)  of  the
      Beneficiary's  representatives  (or more if  consented  to by Lessee)  may
      participate in such flight as observers.  Beneficiary's  designated  pilot
      shall occupy either the pilot's or co-pilot's seat during such operational
      test  flight.   Such  flight  shall  be  flown  using  Boeing's   standard
      operational  test flight  procedures.  Upon completion of such operational
      flight testing the representatives of Lessee and Beneficiary participating
      in such  testing  shall agree in writing  upon any  discrepancies  in such
      Aircraft  required to be  corrected  by Lessee in order to comply with the
      provisions  of this  Lease and  Lessee  shall  promptly  correct  any such
      discrepancies.

      All flights pursuant to the clause above shall be made at Lessee's expense
      and Lessee shall pay for or reimburse  Beneficiary  for any costs incurred
      by Beneficiary associated with such flights including, but not limited to,
      costs for fuel,  oil,  airport  fees,  insurance,  take-off/landing  fees,
      airway   communication   fees  and  ground  handling  fees,   except  that
      Beneficiary shall provide its observers at Beneficiary's expense;

17. The condition of the Airframe upon return shall be as follows:

      a.    The  Airframe  shall  have  accomplished,  in  accordance  with  the
            Lessee's  approved   maintenance   program  (or  if  Beneficiary  so
            requires, in accordance with the Manufacturer's Maintenance Planning
            Document),  immediately  after  removal  from  service  and prior to
            return to Lessor, a "C" Check or, if Lessee's terminology for checks
            or its  approved  maintenance  program has changed  during the Term,
            Lessee's  equivalent of the complete applicable C check. All routine
            and non-routine  maintenance  items will be corrected during the "C"
            check and no carry-over items will exist upon re-delivery;

      b.    the  installed  main  landing gear and nose landing gear shall be in
            good operating condition and shall have at least half-time remaining
            prior to the next  scheduled  removal from the Aircraft for overhaul
            or sampling;

18. The condition of installed systems upon return shall be as follows:

      a.    CONTROLLED COMPONENTS

            Aircraft and engine hour and/or cycle controlled  components at time
            of  redelivery  to Lessor shall have  remaining as a minimum,  3,000
            Flight Hours and/or 1200 Cycles,  whichever is applicable  until the
            next   scheduled   removal  for   overhaul,   test,   inspection  or
            disassembly.  All  components  controlled on a calendar  basis shall
            have remaining,  as a minimum,  twelve (12) months before  scheduled
            removal for testing,  inspection  or overhaul.  Such  hour/cycle  or
            calendar  controlled  components are defined as those components for
            which hours and/or cycles and/or calendar times are controlled under
            the Maintenance Program. However, if a component or part has a life,
            overhaul or check  interval limit that is less than the above stated
            hours, cycles or calendar time limit requirement,  such component or
            part shall have as a minimum 90 per cent of the  interval  remaining
            to removal  for  replacement  or  overhaul.  Lessee will not install
            life-limited  or rotable  components on the Aircraft for the purpose
            of depleting the value of this Aircraft.

      b.    CONDITION OF MONITORED COMPONENTS

            Aircraft and engine  systems,  components  or parts  maintained  "on
            condition"  or  condition  monitored  shall be within  the  relevant
            manufacturer's  specified  or  recommended  limits  with no  adverse
            trends.  Each component,  at all times during the Lease,  shall have
            been maintained and monitored in accordance with the requirements of
            the FAA.

19.   Each of the Engines and each module and part thereof at time of redelivery
      to  Lessor  shall  be in good  operating  condition  and  shall  meet  the
      following requirements:

      a.    TIME SINCE REFURBISHMENT

            Each Engine shall have remaining no less than three thousand (3,000)
            Flight  Hours to its  next  scheduled  shop  visit  pursuant  to the
            manufacturer's engine management program policy recommendation,  and
            shall not meet the return condition if any Engine has remaining less
            than such Flight Hours ;

      b.    LIFE LIMITED PARTS

            Life limited parts shall have  remaining at least 3,000 Cycles until
            next scheduled removal for replacement of life limited parts.

      c.    BOROSCOPE INSPECTION

            Both the hot and  cold  sections  of the  Engines  and APU  shall be
            boroscoped in accordance with Lessee's Approved  Maintenance Program
            and   manufacturer's   recommendations   at   Lessee's   expense  at
            redelivery,  and Lessee will correct all  discrepancies  that exceed
            Manufacturer's maintenance manual limitations at its expense. Lessee
            shall provide  Beneficiary  with a written  report and video tape of
            such  boroscope and Lessor's Tech Rep will be entitled to be present
            at  any  such  boroscope.  Lessee  shall  conduct  a  maximum  power
            assurance  run on each  Engine to ensure that each Engine has an EGT
            temperature  margin of 21 degrees or higher.  Satisfactory  evidence
            shall be provided to  Beneficiary  reflecting  the correction of any
            discrepancies found during such inspection;

      d.    TREND MONITORING

            The Engines shall have been  maintained  and monitored for condition
            in accordance  with Lessee's  approved  Engine  Maintenance  Program
            (EMP); all Engine parameters shall be within the  Manufacturer's and
            Lessee's EMP limits with no adverse trends,  determined  through the
            provision by Lessee of the last 20  monitoring  reports or as agreed
            mutually by Lessee and Beneficiary;

            If the Aircraft  engine  historical and  maintenance  records and/or
            trend monitoring data indicate a rate of acceleration in performance
            deterioration  or oil consumption of any Engine and/or the Auxiliary
            Power Unit (APU) which is higher than normal, Lessee shall, prior to
            return,  correct or cause to be corrected  such  conditions  to meet
            normal manufacturer's tolerances;

20.   The condition of the Auxiliary Power Unit upon return shall be as follows:

      The  installed  APU at the  time of  return  to  Lessor  shall  be in good
      operating condition,  shall have no more than 1,000 Flight Hours since its
      last overhaul,  at the time of return.  If the Flight Hours on the APU are
      more or less than the Flight Hours  accumulated  on the APU since overhaul
      at delivery as set forth in Lease Supplement No. 1 (the "Baseline"), there
      will be a financial adjustment payable by Lessee or Beneficiary in respect
      of the Flight Hours above or below the  Baseline,  and the relevant  party
      shall pay to the other the pro rata portion of the cost of an APU overhaul
      based  on the  cost of the last APU  overhaul  prior to  re-delivery  (the
      "Cost") determined by multiplying the Cost by a fraction, the numerator of
      which is the  number  of  Flight  Hours  on the APU more or less  than the
      Baseline,  and the  denominator  of  which  is the  Flight  Hours  between
      overhauls of the APU;

21.   At redelivery,  if requested by Lessor, Lessee shall return the Aircraft's
      interior  (seats,  lavs and  galleys) to its Delivery  Date  configuration
      unless Beneficiary has previously agreed to accept a revised configuration
      on  return.   If   Beneficiary   has  agreed  to  accept  such  a  revised
      configuration  on return equipment the removed interior items shall become
      the property of Lessee and the replacement items the property of Lessor.

22.   To the  extent  that,  at the time of  redelivery,  the  condition  of the
      Aircraft  and records  does not comply  with the  provisions  hereof,  the
      Lessee at its own expense shall cause such rectification to be carried out
      as soon as possible.  In the event that such rectification  extends beyond
      the end of the Term and provided that unless and until such  rectification
      is  effected  the  Beneficiary  would not be able  immediately  to put the
      Aircraft   into   commercial   operation   in  the   required   redelivery
      configuration,  the Term  shall,  at the  option  of the  Beneficiary,  be
      extended and the provisions of this Agreement  shall remain in force until
      such  rectification has been  accomplished;  provided,  HOWEVER,  that the
      Beneficiary  shall  have the  right,  after the end of the  Term,  to take
      possession of the Aircraft and demand  compensation  for costs  reasonably
      incurred by the  Beneficiary  in  connection  with such  repossession  and
      ensuring compliance with these return conditions.

23.   Upon  completion  of the  operational  test flight  pursuant to Article 18
      hereto and after Lessee has  corrected  the  discrepancies  as required to
      comply with all of the  redelivery  conditions set forth in this Schedule,
      the Aircraft  condition  shall be  technically  accepted by  Beneficiary's
      representatives at the redelivery location by the execution of a technical
      acceptance certificate in the form of Lease Supplement No. 2.


<PAGE>


                                   APPENDIX A

                        REDELIVERY OF TECHNICAL DOCUMENTS


1.    Original copy of U.S.  Export  Certificate  of  Airworthiness  or standard
      Certificate of Airworthiness as requested by Lessor.

2.    AD's and SB compliance  records  (Airframe and Engines) - information must
      include  method of  compliance,  date of  accomplishment  and signature of
      person accomplishing work.

3.    Engine  Records - record of last (major  inspection)  overhaul,  disc part
      numbers, cycle/hour limits.

4.    Records of life limited parts,  life limited parts history since new (both
      Engine and Airframe) and hours/cycles used.

5.    Complete  record  of last  Airframe  ("D"  check or  equivalent)  overhaul
      information must include both routine and non-routine data.

6.    Landing gear overhaul records (including shop report).

7.    Copies of  engineering  orders  relating to  repairs/modifications  of the
      Airframe, components or systems.

8.    If applicable, stress analysis and material certification date relating to
      major interior modifications, i.e., galley installations, overhead and bin
      enclosures if no STC available.

9.    Ground  proximity  warning  system-certification  details and installation
      information, including part numbers of major components.

10.   Time  control  records - engine  TSO,  TSEHM,  TSHSI and  similar  data on
      time-controlled components under operator's approved program.

11.   Approved flight manual, IPC,  maintenance manual,  wiring manuals,  galley
      manuals and passenger seat manuals.

12.   Record of last weighing.

13.   Copy of current  weight and balance  (loading  system) for  passenger  and
      cargo loading.

14.   Aircraft weight and balance manual (MFG's).

15.   Approved Interior arrangement drawing.

16.   Records of last "A" check and "C" check.

17.   Log book pages (1 year).

18.   Letter certifying Aircraft status relating to accident or incidents.

19.   Avionics equipment list (must include flight data recorder information).

20.   Flight data recorder calibration sheet, if applicable.

21.   Last calibration  information on altimeters,  airspeed  indicators and ATC
      transponder test, including date of accomplishment.

22.   Operators current maintenance program document, if permitted.

23.   Part 36 compliance information.

24.   List of approved overhaul agencies, if permitted.

25.   Record of last APU overhaul.

26.   Records of last  overhaul of hard time limited  component as controlled by
      operator's maintenance program.

27.   List of all emergency equipment with part numbers.

28.   Aircraft Maintenance Manual - Microfilm.

29.   Illustrated parts Catalogue - Microfilm.

30.   Wiring Diagram Manual - Microfilm.

31.   System Schematics Manual - Hard copy.

32.   Structural Repair Manual - Microfilm.

33.   Bite Manual - Hard Copy.

34.   Boeing Service Letters - Microfilm.

35.   Boeing Service Letters Index - Microfilm.

36.   Boeing Service Bulletins - Microfilm.

37.   Boeing Service Bulletins Index - Microfilm.

38.   Boeing Service Activities Report - Hard Copy.

39.   Component Maintenance/OVHL Manual - Microfilm.

40.   Illustrated Parts Catalogue - Hard Copy.

41.   Dispatch Deviation Procedures

42.   Power Plant Build-up Manual.

43.   Aircraft Operations Manual.

44.   Quick Reference Handbook - Hardcopy, if available.

45.   FAA form 337 or equivalent,  covering major mods, to airframe, components,
      engines.



<PAGE>


                                   EXHIBIT "F"

                             LEASE SUPPLEMENT NO. 2

      THIS LEASE SUPPLEMENT NO. 2, dated _______________,  199___, between FIRST
SECURITY BANK, NATIONAL ASSOCIATION, not in its individual capacity except asset
forth herein but as Trustee for and on behalf of KG Aircraft  Leasing Co., Ltd.,
pursuant to Trust  Agreement,  dated , 1997 (the "Lessor"),  and Western Pacific
Airlines, Inc., a Delaware corporation (the "Lessee").

      Lessor and Lessee have heretofore  entered into a Lease Agreement dated as
of April , 1997  (herein the "Lease  Agreement"  and the terms  defined  therein
being herein used with the same meaning), which Lease Agreement provides for the
execution and delivery from time to time of Lease  Supplements,  under the Lease
Agreement.

      NOW,  THEREFORE,  in  consideration  of the  premises  and other  good and
sufficient consideration, Lessor and Lessee hereby agree as follows:

1.    Lessee hereby  delivers to Lessor,  and Lessor hereby accepts from Lessee,
      under the Lease Agreement, the following described Boeing 737-353 aircraft
      and engines:

      (i)   Airframe:         Registration:  N957WP;

                              Manufacturer's Serial No. 24060; and

      (ii)                    Engines:    Two   CFM56-3B2    engines    bearing,
                              respectively  manufacturer's serial numbers 722139
                              and 723130

2.    The redelivery  date of the Aircraft is the date of this Lease  Supplement
      set forth in the opening paragraph hereof.

3.    The Term for the Aircraft shall terminate on the date hereof.

4.    Lessor's duly  appointed and authorized  technical  experts have inspected
      the  Aircraft  to ensure  that the  Aircraft  conforms  to the  redelivery
      conditions  in Article 13 and Exhibit E of the Lease  Agreement and Lessor
      accepts the Aircraft for all purposes of the Lease Agreement.

5.    Lessee and Lessor each hereby  confirms its  agreement to pay to the other
      any amounts with  respect to the Aircraft  that may have become due during
      the Term in accordance with the terms of the Lease Agreement and that such
      payments  will be made no later  than 10 days after the date of this Lease
      Supplement No. 2.

6.    All of the  terms and  provisions  of this  Lease  Supplement  are  hereby
      incorporated  by reference into the Lease  Agreement to the same extent as
      if fully set forth  therein.  Appendices A and B to this Lease  Supplement
      and any attachments  thereto are to be read together and form part of this
      Lease Supplement.

      IN  WITNESS  WHEREOF,  Lessor  and  Lessee  have each  caused  this  Lease
Supplement to be duly executed by their authorized  officers or  representatives
as of the day and year first above written.


FIRST SECURITY BANK, NATIONAL                WESTERN PACIFIC AIRLINES, INC.
ASSOCIATION, in its individual
capacity but solely as Owner 
Trustee under the Trust
 Agreement dated
           , 1997.



By: _______________________                  By:_______________________  
                                                                         
Title: ____________________                  Title:____________________  
                                                                         
                                             

 

KG AIRCRAFT LEASING CO., LTD.

By: _______________________

Title: ____________________


<PAGE>


                                   APPENDIX A

                            Aircraft Hours and Cycles

                      as of                      , 19___

Registration Mark:  N         Serial Number 24060

A.    AIRFRAME

      Aircraft Total Time (Hours)                     _______

      Aircraft Total Landings (Cycles)                _______

      Lessee Service Check - Time to next Check       _______

      Lessee 'A' Check  - Time to next Check          _______

      Lessee 'C' Check - Time to next Check           _______

B.    CFM56-3B2 engines

            Serial                   Hours/Cycles
Position    Number      TCSN  TTSN   TTSV/TCSV  to Next Limit

1
2

C.    AUXILIARY POWER UNIT

Serial      Total                               Hours/Cycles
Number      Hour/Cycles       TTSV  TTSOH       to Next Limit

-----

D.    LANDING GEAR
                        Hours       Cycles
Nos.  Hours/Cycles      Remaining   Remaining

      NLG
      Rt Main Gear
      Lt Main Gear

E.    FUEL REMAINING IN TANKS

-----

Key:

TCSN:             Total Cycles Since New
TTSN:             Total Time Since New
TTSV/TCSV:        Total Time Since Shop Visit/Total Cycles Since Shop Visit
TTSOH:            Total Time Since Last Overhaul


<PAGE>


                                   APPENDIX B

                        DOCUMENTATION REDELIVERY RECEIPT


      Western Pacific  Airlines,  Inc. (the "Lessee"),  and First Security Bank,
N.A., as Owner Trustee (the "Lessor")  hereby confirm the delivery by the Lessee
and receipt by the Lessor of the Technical Records  pertaining to Boeing 737-300
Serial  24060  as  described  on  Attachment  1  hereto  and a part  hereof,  on
_______________, 19___, in ________________________, at _____ time.




FIRST SECURITY BANK, NATIONAL         WESTERN PACIFIC AIRLINES, INC.
ASSOCIATION,  not in its  individual  capacity but solely as Owner Trustee under
the Trust Agreement dated , 1997.

                                         
By: _______________________            By:___________________________
                                                                    
Title: ____________________            Title:________________________
                           





<PAGE>


                                  ATTACHMENT 1

                         TECHNICAL RECORDS AT REDELIVERY

                                 MANUALS LISTING



<PAGE>


                                   EXHIBIT "G"

                             INSURANCE REQUIREMENTS

The Insurance required to be maintained shall be as follows:

(a)   HULL ALL RISKS of Loss or Damage  whilst  flying  and on the  ground  with
      respect to the Aircraft  for the Agreed  Value and with a  deductible  not
      exceeding   US$750,000,   or  such  other  amount  agreed  by  Lessee  and
      Beneficiary  from  time to time  other  than in the case of a total  loss,
      arranged total loss and total losses arising from War and Allied Perils.

(b)   HULL WAR AND ALLIED  PERILS,  being such risks  excluded from the Hull All
      Risks Policy  (mentioned in (a) above) by the terms of the War,  Hijacking
      and Perils  Exclusion  Clause AVN 48B. Such insurance shall, if and to the
      extent available to Lessee as an addback to the Hull War and Allied Perils
      coverage at no extra expense,  include  confiscation and requisition under
      any order of any Government  Entity of or within the United States for the
      Agreed  Value but in no event  shall the Lessee be  required  to cover the
      risks excluded by paragraph (b) of AVN 48B or its equivalent.

(c)   ALL RISKS  (INCLUDING  WAR AND ALLIED  RISKS)  property  insurance  on all
      Engines and Parts when not installed on the Aircraft on an "agreed  value"
      basis,  in respect of the Engines,  and on a repair or replace  basis,  in
      respect of any Parts.

(d)   AIRCRAFT THIRD PARTY,  LIABILITY,  PROPERTY  DAMAGE,  PASSENGER,  BAGGAGE,
      CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING  PRODUCTS) LEGAL
      LIABILITY  for a Combined  Single Limit  (Bodily  Injury/Property  Damage)
      $350,000,000 (three hundred fifty million Dollars),  combined single limit
      any one occurrence. War and Allied Risks are also to be covered under this
      Policy to the extent such  insurance  is  customarily  available  in World
      Aviation Insurance Markets for this type policy.

(e)   All required hull and spares  insurance  (as specified in paragraphs  (a),
      (b), and (c) above), so far as it relates to the Aircraft shall:-

            (i)   name Lessor,  the Beneficiary their respective  successors and
                  assigns as additional assureds for their respective rights and
                  interests in the Aircraft,  warranted, each as to itself only,
                  no operational interest;

            (ii)  provide  that (a) any loss  which  results in a payment on the
                  basis of a total  loss,  constructive  total loss or  arranged
                  total  loss shall be settled  with the  Beneficiary  and shall
                  name  the  Beneficiary  as sole  loss  payee  up to but not in
                  excess of Agreed Value, (b) any loss that does not exceed U.S.
                  $750,000  will be settled  with and paid to the Lessee  unless
                  and until the  Beneficiary  has  notified  the insurer that an
                  Event of Default has occurred and is continuing in which event
                  the loss payee shall be the Beneficiary and (c) any loss which
                  exceeds the policy  deductible of U.S.  $750,000 up to but not
                  in excess of Agreed  Value but is less than a total loss shall
                  name the  Beneficiary as sole loss payee for amounts up to the
                  Agreed  Value.  Insurance  proceeds in excess of Agreed  Value
                  shall be settled with and payable to Lessee.

            (iii) provide  that,  in  relation to the  interests  of each of the
                  additional   assureds,   the   Insurance   (A)  shall  not  be
                  invalidated  by any act or  omission  by  Lessee  or any other
                  person other than the respective  additional  assured  seeking
                  protection  provided that the additional  assured so protected
                  has not caused,  contributed to or knowingly condoned the said
                  act or omission and (B) shall insure the  interests of each of
                  the additional  assureds regardless of any breach or violation
                  by Lessee of any warranty,  declaration or condition contained
                  in such insurance;

            (iv)  if separate  Hull "All Risks" and "War  Risks"  insurance  are
                  arranged,  include a 50/50 provision in accordance with market
                  practice (AVS. 103 is the current market language);

            (v)   confirm  that the  insurers  are not  entitled  to replace the
                  Aircraft in the event of an insured Event of Loss.

(f)   All  required   liability   insurance  shall  (it  being  understood  that
      endorsement  of  AVN  67B  to  the  policy  shall  satisfy  the  following
      requirements):

            (i)   include  Lessor  and  the  Beneficiary  and  their  respective
                  successors  and  assigns  and their  respective  shareholders,
                  subsidiaries,  directors,  officers,  agents and  employees as
                  additional assureds for their respective rights and interests,
                  warranted, each as to itself only, no operational interest;

            (ii)  provide  that,  in  relation to the  interests  of each of the
                  additional  assureds,  its  directors,   officers,  employees,
                  agents and Indemnities,  the liability  insurance shall not be
                  invalidated by any act or omission by Lessee,  the Lessor, the
                  Beneficiary  or any other  person  other  than the  respective
                  additional   insured  seeking  indemnity   provided  that  the
                  additional   insured   seeking   indemnity   has  not  caused,
                  contributed to or knowingly condoned the said act or omission,
                  and  shall  insure  the  interests  of each of the  additional
                  assureds,  its  directors,   officers,  servants,  agents  and
                  employees  regardless of any breach or violation by Lessee, of
                  any  warranty,  declaration  or  condition  contained  in such
                  insurance;

            (iii) include a Severability  of Interest Clause which provides that
                  the  insurance  shall  operate to give each  assured  the same
                  protection  as if there was a separate  policy  issued to each
                  assured but shall not increase  the overall  limit of coverage
                  afforded;

            (iv)  contain a  provision  confirming  that the  policy is  primary
                  without  right  of  contribution  and  the  liability  of  the
                  insurers shall not be affected by any other insurance of which
                  Lessor,  the Beneficiary,  or Lessee have the benefit so as to
                  reduce the amount payable on behalf of the additional assureds
                  under such policies.

(g)   All insurance  (as  specified in paragraphs  (a), (b), (c) and (d) above),
      shall (it being understood that endorsement of AVN 67B to the policy shall
      satisfy the requirements of clauses (iii) - (v) below):-

            (i)   be  in   accordance   with   normal   industry   practice   of
                  organizations   operating   a  similar   aircraft  in  similar
                  circumstances;

            (ii)  provide cover denominated in U.S. dollars;

            (iii) acknowledge  the  insurer  is aware of this Lease and that the
                  Aircraft  is owned by Lessor  and  Beneficiary  and  leased to
                  Lessee;

            (iv)  provide that the  insurers  shall waive any rights of recourse
                  and/or  subrogation  against Lessor and the Beneficiary,  (and
                  additionally,   in  respect  of  liability  insurance,   their
                  respective directors, officers, employees and agents);

            (v)   provide  that  Lessor  and the  Beneficiary  and in respect of
                  liability  insurance,  their respective  directors,  officers,
                  employees,  agents and Indemnities shall have no obligation or
                  responsibility  for  the  payment  of any  premiums  due  (but
                  reserve  the right to pay the same should any of them elect so
                  to do) and that the  insurers  waive any right of  set-off  or
                  counter-claim  in  respect  of any  premium  due  against  the
                  respective  interests  of such parties (and in the case of the
                  liability  insurance  their  respective  directors,  officers,
                  employees, agents and indemnities);

            (vi)  provide  that,  if such  insurance  is canceled for any reason
                  whatever, or any material change is made in the coverage which
                  adversely  affects the interest of the additional  insureds or
                  if such  insurance  is  allowed  to lapse for  non-payment  of
                  premium,  such  cancellation,  change  or lapse  shall  not be
                  effective as to the  additional  assureds for thirty (30) days
                  (but seven (7) days, or such lesser period as may from time to
                  time be available in accordance with policy conditions, in the
                  case of any war risk and allied perils coverage) after written
                  notice of such  cancellation,  change or lapse shall have been
                  sent to broker who shall upon  receipt  pass on such notice to
                  the Beneficiary and Lessor at the following address:

                  Notice  will not  however be given in  respect of the  natural
                  expiry of the policy or of any non-renewal of the policy;

            (vii) if reinsurance  is a requirement in accordance  with the terms
                  of Article  10.1,  such  reinsurance  shall (i) be on the same
                  terms  as  the  original  insurance  (and  shall  include  the
                  provisions  of this  appendix),  (ii)  provide  in case of any
                  bankruptcy,  insolvency,liquidation,  dissolution  or  similar
                  proceedings  of or  affecting  the  original  insurer that the
                  reinsurers'  liability shall be to make such payments as would
                  have fallen due under the relevant  policy of  reinsurance  if
                  the original insurer had (immediately  before such bankruptcy,
                  insolvency,  liquidation,  dissolution or similar proceedings)
                  discharged   its   obligations  in  full  under  the  original
                  insurance  policies  in  respect  of which  the then  relevant
                  policy of reinsurance  has been effected;  and (iii) contain a
                  "cut-through"  clause  in the  following  form  (or  otherwise
                  satisfactory to Beneficiary):

                  "The  Reinsurers  and the  Reassured  hereby agree that in the
                  event of any valid claim arising hereunder within the original
                  policy coverage limitations and conditions, and written notice
                  of such claim being given to the  Reinsurers  by the  original
                  Assured and/or any Additional  Assured,  then Reinsurers shall
                  in lieu of payment to the Reassured, its successor in interest
                  and assigns pay that portion of any loss due to the Additional
                  Assureds for which Reinsurers would otherwise be liable to pay
                  the  Reassured,  it being  understood and agreed that any such
                  payment by  Reinsurers  directly to said  Additional  Assureds
                  shall fully  discharge and release the Reinsurers from any and
                  all further liability in connection therewith. For the purpose
                  of this  Reinsurance  the above  clause  shall  only  apply in
                  respect  of the  interest  of  Additional  Assureds  under the
                  original  policy.  It  is  mutually  agreed  that  the  rights
                  conferred upon Additional Assureds and Reinsurers by the above
                  clause form an integral  part of the policy.  Agreement to the
                  above shall be subject to Reinsurers reserving their rights to
                  set off  against  any claim  payable  under this  clause,  any
                  outstanding premiums applicable to the Aircraft the subject of
                  the Lease  Agreement.  Such set off shall be first  applied to
                  any financial interest of Lessee in the Aircraft involved. Any
                  payment due under this clause  shall not  contravene  any law,
                  statute or decree of the United States.

                  In the case of liquidation, bankruptcy, dissolution or similar
                  proceedings  of or affecting the  Reinsured,  the  Reinsurers'
                  liability  shall be to make such  payments  hereunder as would
                  have fallen due if the Reinsured had (immediately  before such
                  liquidation,  bankruptcy,  dissolution or similar  proceeding)
                  discharged  its  obligations  in full  under the  Policies  in
                  respect to which the Reinsurance Policies were effected.

          (viii)  contain  a  provision  entitling  Beneficiary  or any  insured
                  party to initiate a claim under any policy in the event of the
                  wrongful refusal or failure of Lessee to do so;



<PAGE>


                                   EXHIBIT "H"


                 Irrevocable Standby Letter of Credit No. ____


KG Aircraft Leasing Co., Ltd.
3 Adelaide Court
Adelaide Road
Dublin 2, Ireland

      RE:  WESTERN PACIFIC AIRLINES, INC. (THE "ACCOUNT PARTY")

Dear Sirs:

            1. We hereby establish our Irrevocable  Standby Letter of Credit No.
____ in your favor for the  account of the  Account  Party in the  aggregate  of
U.S.$470,000  (the  "Credit  Limit")  available  by sight  draft at our New York
office in an amount not exceeding the Credit Limit  accompanied by a certificate
signed by an officer of your  Company  confirming  that an event of default  has
occurred and is continuing  under the Lease  Agreement  between  First  Security
Bank, National Association, not in its individual capacity but solely as Trustee
pursuant  to the  Trust  Agreement  dated  as of ,  1997,  and  Western  Pacific
Airlines, Inc. relating to one Boeing 737-300 aircraft, MSN 24060.

            2.    Partial drawings are permitted.

            3. We confirm to you that all drafts  drawn under and in  compliance
with the terms of this credit will be duly  honored on the delivery of documents
as specified in paragraph 1 above if presented on or before the expiration date.

            4.    This Letter of Credit expires on              .

            5. This  Letter of Credit is  subject  to the  Uniform  Customs  and
Practices for  Documentary  Credits,  1993  Revision,  International  Chamber of
Commerce  Publication  No. 500 (the  "Uniform  Customs").  This Letter of Credit
shall be  deemed to be made  under the laws of the State of New York,  including
Article 5 of the Uniform  Commercial Code, and shall, as to matters not governed
by the Uniform Customs, be governed by the laws of the State of New York.

                                          Very truly yours,

                                          [Name of bank]
                                          Letter of Credit Department


                                          By:___________________________
                                          Name:
                                          Title:


<PAGE>


                                   EXHIBIT "I"

                                  CERTAIN TERMS

      "Agreed  Value" means,  with respect to the Aircraft,  $25,000,000  on the
Delivery  Date and shall  decline on the same day as the  Delivery  Date in each
third month  following such date (or, if there is no such day in such month,  on
the last day of such  month) by  $250,000  to a minimum  of  $15,000,000  at the
Expiration  Date of the Basic  term and by  $250,000  each  quarter  during  any
Renewal Term.

      "Basic Rent" means $235,000.

      "Basic Term Expiration" means the tenth (10th) anniversary of the
       Delivery Date.

      "Damage Notification Threshold" means $1,000,000.

      Maintenance Reserve rates for Article 5.4(iv) are:

      (a)   For the Airframe, $65 per Airframe Flight Hour;

      (b)   For each Engine,  $70 per Engine Flight Hour for off-wing  scheduled
            maintenance; and

      (c) For each Engine, $55 per Engine Cycle for LLP replacement.



<PAGE>