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                           DATED AS OF MARCH 26, 1997








                 WILMINGTON TRUST COMPANY, AS OWNER TRUSTEE          (1)

                                     LESSOR

                                       and


                       WESTERN PACIFIC AIRLINES, INC.                (2)

                                     LESSEE



                            AIRCRAFT LEASE AGREEMENT
                                       for
                           One Boeing 737-300 Aircraft
                       Manufacturer's Serial Number 28868




            To the extent, if any, that this Aircraft Lease Agreement
            constitutes chattel paper (as such term is defined in the
             Uniform Commercial Code as in effect in any applicable
           jurisdiction), no security interest in this Aircraft Lease
           Agreement may be created through the transfer or possession
               of any counterpart other than the original executed
            counterpart, which shall be identified as the counterpart
          containing the receipt therefor executed by the secured party
                or the Beneficiary on the signature page thereof.


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<PAGE>


                                     

                                    CONTENTS


CLAUSE  HEADING                                                          PAGE

1.      Definitions......................................................  1

2.      Representations and Warranties................................... 13

3.      Term of Lease.................................................... 18

4.      Conditions....................................................... 18

5.      Delivery and Acceptance.......................................... 20

6.      Lessor's Warranties and Manufacturer's Warranties................ 25

7.      Rent............................................................. 26

8.      Payments, Interest and Calculations.............................. 27

9.      Costs and Indemnities............................................ 28

10.     Taxation......................................................... 33

11.     General Undertakings............................................. 44
        11.1    ..........................................................44
               (a)    Consents and Authorizations........................ 44
               (b)    Preparation of Accounts............................ 45
               (c)    Supply of Accounts and Officer's Certificate....... 45
               (d)    Lessee Financial Information....................... 45
        11.2    ..........................................................45
               (a)    Status Report...................................... 45
               (b)    Information Concerning the Aircraft................ 46
               (c)    Inspection......................................... 46
               (d)    No Operational Interest............................ 47
               (e)    Compliance with Insurances......................... 47
               (f)    Air Traffic Control Information and
                      Third Party Information............................ 47
               (g)    Status of the Lessee............................... 47
               (h)    Certificated Air Carrier........................... 47
               (i)    Citizen of the United States....................... 47
        11.3    ..........................................................48
               (a)    Disposal and Encumbrance of the Aircraft........... 48
               (b)    Prevention of Arrest............................... 48

<PAGE>

               (c)    No Pledging of Credit.............................. 48
               (d)    Protection of Rights in the Aircraft............... 48

12.     Sub-Leasing...................................................... 49

13.     Operations and Maintenance....................................... 50
        13.1    ..........................................................50
               (a)    Certificates and Licenses.......................... 50
               (b)    Operation and Use.................................. 51
               (c)    Base of Operations................................. 52
               (d)    Maintenance........................................ 52
               (e)    Replacement of Engines and Parts................... 54
               (f)    Removal of Parts................................... 55
               (g)    Installation of Engines and Parts.................. 55
               (h)    Non-installed Engines.............................. 55
               (i)    Nameplates......................................... 55
               (j)    Alterations........................................ 56
               (k)    Changes to Approved Maintenance Programme.......... 56
        13.2   Temporary Installation of Parts........................... 56
        13.3   Interchange of Engines.................................... 57
        13.4   Maintenance Accruals...................................... 60
        13.5    ..........................................................63

14.     Manuals and Technical Records.................................... 63

15.     Title and Registration........................................... 64

16.     Insurance........................................................ 65

17.     Loss and Damage.................................................. 69

18.     Requisition or Grounding......................................... 71

19.     Re-delivery...................................................... 72

20.     Termination Events............................................... 76

21.     Lessor's Rights Following a Termination Event.................... 79

22.     Notices.......................................................... 81

23.     Assignment....................................................... 83

24.     Miscellaneous.................................................... 84

25.     Law and Jurisdiction............................................. 86
<PAGE>

26.     Section 1110..................................................... 86

27.     True Lease....................................................... 87

SCHEDULE

1       Part 1  ..........................................................89
        Part 2  ..........................................................91
        Part 3  ..........................................................93
        Part 4  ..........................................................95

2       Acceptance Certificate........................................... 98

3       Insurance Requirements...........................................102

4       Return Conditions................................................106

5       Form of Brokers' Letter of Undertaking...........................112

6       Form of Letter of Quiet Enjoyment................................114

7       Form of Status Report............................................117

8       Officer's Certificate............................................121






<PAGE>

                                            





A LEASE AGREEMENT dated as of March 26, 1997, and made BETWEEN:


1)      WILMINGTON TRUST COMPANY, a Delaware banking  corporation with its chief
        executive  office  at  Rodney  Square  North,  1100  N.  Market  Street,
        Wilmington,  Delaware,  19890,  USA, not in its individual  capacity but
        solely as Owner Trustee under the Trust Agreement (the "LESSOR"); and

(2)     WESTERN PACIFIC  AIRLINES,  INC., a Delaware  corporation with its chief
        executive  office at 2864  South  Circle  Drive,  Suite  1100,  Colorado
        Springs, Colorado 80906, USA (the "LESSEE").

BY WHICH IT IS AGREED as follows:

1.      DEFINITIONS


1.1     In this Agreement, unless the context otherwise requires:

        "ACCEPTANCE CERTIFICATE" means an Acceptance Certificate in the form set
        out in Schedule 2 to be signed by the Lessee and delivered to the Lessor
        on the Delivery Date pursuant to Clause 5.1 (Delivery and Acceptance);

        "ACCRUAL  PERIOD" means (except for the last Accrual Period) each period
        of one (1) month  during  the Lease  Period,  the first  Accrual  Period
        commencing  on the  Delivery  Date and each  subsequent  Accrual  Period
        commencing  on the  expiry of the  previous  Accrual  Period;  provided,
        however,  that,  notwithstanding the foregoing,  the last Accrual Period
        shall end upon the expiry or earlier termination of the Lease Period;

        "ADVANCE  PAYMENT  DATE"  means the date on which the  Lessor  makes the
        advance  payments for the Aircraft to the  Manufacturer  pursuant to the
        Purchase Assignment.

        "AGREED VALUE" as of any date means,  with respect to the Aircraft,  the
        Airframe  and any  Engine,  the  applicable  amounts set forth in Letter
        Agreement No. 1 with respect to such date;

        "AGREEMENT"  means this Lease  Agreement  and Letter  Agreement No. 1 as
        they may from time to time be supplemented or amended;

        "AIRCRAFT" means the Airframe  together with the Engines (whether or not
        any of the Engines may from time to time be installed  on the  Airframe)

<PAGE>

        and,  where the context  permits,  references  to the  "AIRCRAFT"  shall
        include the Manuals and Technical Records and, unless otherwise provided
        herein, shall mean the Aircraft as a whole and any portion thereof;

        "AIRCRAFT COMMITMENT FEE" means such sums as shall be paid by the Lessee
        to the  Lessor (or the  Lessor's  order)  pursuant  to Clause 7.3 in the
        amounts,  and at the times, set forth in paragraph 1 of Letter Agreement
        No. 1;

        "AIRFRAME"  means the new Boeing  737-300  aircraft with  manufacturer's
        serial number 28868 and the United States  Registration Number set forth
        in the  Acceptance  Certificate  (excluding  the Engines or engines from
        time to time installed thereon), and all Parts installed at Delivery, or
        installed  on the  Airframe  thereafter,  or which  having been  removed
        therefrom  remain  the  property  of the Head  Lessor  pursuant  to this
        Agreement,  and all  replacements,  renewals and  additions  made to the
        foregoing in accordance with this Agreement;

        "AIRLINE  STANDARDS" means the  interpretation  applied to assessing the
        cleanliness  and general  appearance  of the Aircraft and as a benchmark
        standard  should be considered  as the standards  acceptable to a United
        States scheduled airline ex- C Check, external wash and/or interior deep
        clean;

        "APPROVED  MAINTENANCE  PERFORMER" means, as the context so admits,  the
        Lessee  or any of  the  independent  maintenance  performers  listed  in
        Schedule  I to Letter  Agreement  No. 1 engaged by the Lessee to perform
        major  maintenance  work on the  Aircraft  or,  as the case may be,  the
        Engine  Manufacturer or the independent  engine overhaul shops listed in
        Schedule  I to Letter  Agreement  No. 1 engaged by the Lessee to perform
        engine  repair and  overhaul  work on the Engines;  additional  airframe
        and/or  engine  maintenance  performers  may be  added  to the  list  in
        Schedule I to Letter Agreement No.1 subject only to the Lessor receiving
        notification  of the  addition  30 days  prior to  first  use of the new
        maintenance performer and such maintenance performer being appropriately
        licensed  or approved  by the FAA.  No Lessor  approval  of  maintenance
        performers  or engine  overhaul  shops shall be required for overhaul of
        components, rotables or Parts other than the Landing Gear and APU.

        "APPROVED  MAINTENANCE  PROGRAMME" means the Aviation Authority approved
        maintenance  programme for the Aircraft  approved by the Lessor prior to
        the  Delivery  Date,  as  subsequently  amended from time to time by the
        Lessee  as  approved  by the  FAA,  encompassing  scheduled  maintenance
        (including  block  maintenance),  condition  monitored  maintenance  and
        on-condition maintenance of Airframe,  Engines and Parts of the Aircraft
        including,   but  not  limited  to,   servicing,   testing,   preventive
        maintenance,  repairs, structural inspections, system checks, overhauls,
        approved   modifications,   service   bulletins,   engineering   orders,
        Airworthiness Directives, Corrosion Control, inspections and treatments,
        in each case as described in the MPD;
<PAGE>

        "APU" means the  auxiliary  power unit  installed on the Aircraft on the
        Delivery Date or any  substitute  or  replacement  auxiliary  power unit
        installed  in  accordance  with this  Agreement  title to which has been
        transferred to the Head Lessor;

        "ASSIGNMENT"  means the  assignment  of the Lessor's  rights,  title and
        interest  in and under this  Agreement  granted  or, as the  context may
        require,  to be granted by the Lessor in favor of the Head Lessor or the
        Lenders;

        "AVIATION AUTHORITY" means the FAA and/or any Government Entities which,
        under  the  laws  of  the  State  of  Registration  or,  to  the  extent
        applicable,  any other  jurisdiction  in which the Aircraft is operated,
        have control over civil aviation or the  registration,  airworthiness or
        operation of aircraft;

        "BANKING  DAY"  means each day  (other  than a Saturday  or a Sunday) on
        which banks are open for business in London,  the State of Colorado and,
        (if payment is required to be made on such day) in New York City;

        "BENEFICIARY"   means  ORIX   Aviation   Systems   Limited,   a  company
        incorporated  under the laws of Ireland and having its registered office
        at 2nd Floor,  IFSC  House,  International  Financial  Services  Centre,
        Custom House Docks, Dublin 1, Ireland;

        "CERTIFICATED  AIR CARRIER"  means any Person  (except the United States
        Government)  domiciled  in the United  States of America  and  holding a
        Certificate of Convenience  and Necessity  issued under Section 41101 of
        Title 49 of the United States Code by the  Department of  Transportation
        or any predecessor or successor  agency  thereto,  or, in the event such
        Certificates  shall no longer be issued,  any Person  (except the United
        States Government) domiciled in the United States of America and legally
        engaged in the business of transporting  for hire passengers or cargo by
        air predominately to, from or between points within the United States of
        America, and, in either event, operating commercial jet aircraft,  which
        also is certificated so as to fall within the purview of Section 1110 of
        Title 11 of the United States Code or any analogous statute;

        "CITIZEN OF THE UNITED  STATES"  shall have the meaning given in Section
        40102(a)(15) of Title 49 of the United States Code;

        "COMPULSORY  ACQUISITION"  means  compulsory  acquisition,  requisition,
        appropriation,  expropriation,  deprivation or  confiscation of title or
        ownership of the Aircraft for any reason by any Government Entity of the
        State  of  Registration  or by any  other  Government  Entity  or  other
        competent  authority,  whether  de jure or de facto,  but shall  exclude
        requisition  for use or hire  not  involving  requisition  of  title  or
        ownership;
<PAGE>

        "COURTS"  means the courts of the State of New York  located in New York
        City and any United States District Court located in New York City;

        "CYCLE" means one take-off and landing of the Aircraft or, in respect of
        any Engine or Part temporarily installed on another aircraft, that other
        aircraft  and for this purpose  "take-off  and  landing"  shall  include
        "touch and go" take-offs and landings;

        "DELIVERY"  means the time at which the  Aircraft  is  delivered  to and
        accepted by the Lessee pursuant to the terms of this Agreement;

        "DELIVERY DATE" means the date on which Delivery shall occur, which date
        shall be the date of the Acceptance  Certificate delivered to the Lessor
        by the Lessee pursuant to Clause 5 of this Agreement;

        "DELIVERY  LOCATION"  means  the  Manufacturer's  facility  in  Seattle,
        Washington,  USA or such other location mutually agreed to by Lessor and
        Lessee;

        "DOLLARS"  and "$" mean the  lawful  currency  of the  United  States of
        America and in respect of all  payments to be made under this  Agreement
        in Dollars, mean funds which are for same day settlement in the New York
        Clearing House Interbank  Payments System (or such other US dollar funds
        as  may at  the  relevant  time  be  customary  for  the  settlement  of
        international   banking   transactions   denominated  in  United  States
        dollars);

        "ENCUMBRANCE"  means any mortgage,  charge  (whether fixed or floating),
        pledge,  lien,  hypothecation,   assignment,  security  interest,  title
        retention  or other  encumbrance  of any  kind  securing,  or any  right
        conferring  a priority of payment in respect of, any  obligation  of any
        person;

        "ENGINE"  means  either  of the  CFM  International  CFM56-3C-1  engines
        specified  in the  Acceptance  Certificate  as  being  installed  on the
        Airframe at Delivery,  or any other similar engine substituted  therefor
        in  accordance  with  Clauses  13.1(e)  and  13.(g)  from  time  to time
        installed on the Airframe thereafter title to which has been transferred
        to the Head Lessor  pursuant to this  Agreement,  or any Removed  Engine
        which  remains  the  property  of  the  Head  Lessor  pursuant  to  this
        Agreement,  together  with all  Parts  from time to time  belonging  to,
        installed in or appurtenant to any such engine;

        "ENGINE  LIFE LIMITED  PARTS"  means those Parts,  defined by the engine
        manufacturer in the CFM International  Engine Shop Manual,  Revision 43,
        or as the same may be  further  revised  from time to time,  or  through
        airworthiness directive action,  requiring retirement and replacement on
        a  mandatory  basis  prior  to or  upon  the  expiration  of the  engine
        manufacturer's  stated  life,  such  life  being  expressed  in terms of
        Cycles, Flight Hours, landings or calendar time;
<PAGE>

        "ENGINE MANUFACTURER" means CFM International, Inc.

        "ENGINE  SHOP  VISIT"  means  the work  carried  out on an  Engine by an
        Approved Maintenance Performer of refurbishment, restoration or overhaul
        following  normal  in-service  deterioration  of the  Engine to  restore
        performance to the workscope  standard developed by Lessee and agreed by
        Lessor, Lessor's agreement not to be unreasonably withheld, at each shop
        visit event, and based upon the CFM 56-3 Workscope Planning Guide (WPG3)
        and Engine Shop Manual  involving  separation  of pairs of major  mating
        engine  flanges other than (1) work for the purposes of  transportation;
        and/or  (2)(a)  inspections  at which no  maintenance  and/or  repair is
        required  and/or (b)  repairs of foreign  object  damage or  operational
        mishandling  (being an  operation  or event on the  ground or in the air
        whereby,  due to negligence,  the tolerances,  limits and/or recommended
        maximums and minimums and/or other operation matters as specified in the
        Aircraft flight, operational, maintenance and other relevant manuals and
        documents are not complied with by any person) of the Engine save to the
        extent such repairs and/or associated  refurbishment  carried out during
        the shop visit result in  refurbishment or "betterment" of the Engine to
        the  standard  specified  for an Engine Shop Visit (as herein  defined);
        and/or (c) maintenance and repair of spare engines and associated engine
        build-up units;  and/or (d) the removal,  installation,  maintenance and
        repair  of  QEC  (Quick  Engine  Change)  kits;  and/or  (e)  repair  or
        modification of external engine line repairable units;

        "EXPECTED  DELIVERY  DATE"  means May 12, 1997 or such other date as the
        Aircraft is scheduled to be  delivered by the  Manufacturer  pursuant to
        the Purchase Agreement, as advised by the Manufacturer;

        "FAA" means the Federal Aviation  Administration of the United States of
        America, the Administrator  thereof and any agency or instrumentality of
        the United States government succeeding to their functions;

        "FAR" means the Federal  Aviation  Regulations  set forth in Title 14 of
        the United States Code of Federal  Regulations,  as amended and modified
        from time to time;

        "FEDERAL  AVIATION ACT" means the United States Federal  Aviation Act of
        1958,  as amended and as  recodified  in Subtitle VII of Title 49 of the
        United States Code, or any similar  legislation  of the United States of
        America enacted in substitution or replacement thereof;

        "FINANCING   STATEMENTS"   means  Uniform   Commercial   Code  Financing
        Statements  in respect of the  Aircraft  and Engines  leased  hereunder,
        prepared in a form acceptable for filing with the applicable  Government
        Entities in the State in which the chief executive  office of the Lessee
        is located and, in the case of a sublessee,  such other jurisdictions as
        the Lessor shall reasonably require;
<PAGE>

        "FLIGHT  HOUR" shall mean each hour or part  thereof of operation of the
        Aircraft  elapsing  from the moment at which the wheels of the  Aircraft
        (or  other  aircraft  in the  case of  temporarily  installed  Parts  or
        Engines)  leave the ground on the  take-off of such  aircraft  until the
        wheels of such aircraft touch the ground on the landing of such aircraft
        following such take-off;  for the purpose of all calculations under this
        Agreement  measured in Flight  Hours,  such hours,  including  fractions
        thereof measured to one decimal place,  shall be accumulated  throughout
        each Accrual Period; Lessee will record sector flight times in hours and
        minutes in the aircraft  flight logs and  historical  records unless the
        FAA specifically requires otherwise;

        "FUNDING  AGREEMENT" means the agreement or agreements,  if any, entered
        or to be entered  into  between the Head Lessor and the Lenders  whereby
        the Lenders will agree, on the terms and conditions  therein  contained,
        to make finance available for the purchase or continued ownership of the
        Aircraft;

        "GOVERNING LAW" means the laws of the State of New York;

        "GOVERNMENT  ENTITY" means and includes (whether having a distinct legal
        personality or not) any national or local government  authority,  board,
        commission,  department,  division,  organ,  instrumentality,  court  or
        agency and any association,  organization or institution of which any of
        the foregoing is a member or to whose  jurisdiction any of the foregoing
        is subject or in whose activities any of the foregoing is a participant;

        "HEAD LEASE" means the Aircraft  Lease  Agreement  entered into or to be
        entered into between the Head Lessor, as lessor, and the Beneficiary, as
        lessee, relating to the Aircraft;

        "HEAD  LESSOR"  means,  if  applicable,  such company or entity that the
        Lessor may notify to the Lessee from time to time and, in the absence of
        such  notification,  references  to Head  Lessor  shall be  deemed to be
        references to the Lessor;

        "INDEBTEDNESS"  means any  obligation  for the payment or  repayment  of
        money, whether as principal or as surety, and whether present or future,
        actual or contingent;

        "INDEMNITEES"  means  the  Head  Lessor,  the  Beneficiary,  the  Lessor
        individually  and as trustee and the Lenders or any of them and, in each
        case, their respective shareholders,  affiliates,  directors,  officers,
        servants, agents and employees;

        "INSURANCES"  means any and all  contracts or policies of insurance  and
        reinsurance required to be effected and maintained under this Agreement;

        "LANDING GEAR" means the landing gear assembly of the Aircraft;
<PAGE>

        "LEASE PERIOD" means, save as otherwise provided in this Agreement,  the
        Lease  Term and any  period  during  which  the  Lessee  shall  have the
        possession of the Aircraft  pursuant to this Agreement and/or shall have
        failed to redeliver the Aircraft to the Lessor in the condition required
        by this  Agreement  following  expiry  of the Lease  Term  and,  for the
        avoidance  of doubt,  shall  include  (i) any  period  during  which the
        Aircraft  is  requisitioned  for  hire  by  any  governmental  or  other
        competent  authority;  and (ii) any period  prior to the  payment of the
        Agreed  Value  in  accordance  with  Clauses  17.3(a)  and  Clause  17.4
        following  a Total  Loss which  occurs  prior to the  redelivery  of the
        Aircraft to the Lessor;

        "LEASE TERM" means the period commencing on the Delivery Date and ending
        on 31 March 2007 except as otherwise provided in this Agreement;

        "LENDERS" means the banks,  financial  institutions and other parties to
        the Funding Agreement other than the Head Lessor and the Lessor;

        "LENDERS DOCUMENTS" means the Funding Agreement,  the Assignment and the
        Mortgage and any other Security  Documents or similar documents referred
        to in the Funding Agreement;

        "LESSEE'S  COUNTRY"  means the United  States of America  or,  where the
        context so admits, the State of Colorado;

        "LESSEE  DOCUMENTS"  means this Agreement,  Letter  Agreement No. 1, the
        Purchase  Assignment and other agreements to which the Lessee is a party
        to be issued pursuant to or in connection with any of the foregoing;

        "LESSEE'S  INTEREST" means that portion of the Requisition  Compensation
        equal to the  excess,  if any,  of (i) an  amount  equal to the  present
        value,  discounted  at a rate  equal to the rate in  effect  for  United
        States  Treasury  obligations  with  a term  most  nearly  equal  to the
        remaining Lease Term, of fair market rentals,  determined by independent
        appraisal,  for the  Aircraft for the balance of the Lease Term from the
        date  of the  Compulsory  Requisition  minus  (ii)  the  present  value,
        discounted at the same U.S.  Treasury  rate, of the future rent payments
        due under this Agreement for the balance of the Lease Term from the date
        of the Compulsory Requisition;

        "LESSOR'S ENCUMBRANCE" means:

               (a)    any  Encumbrance  arising out of the Lender  Documents and
                      any other Encumbrance whatsoever from time to time created
                      by or through any  Indemnitee in connection  with any such
                      Indemnitee's  financing,   transfer  or  purchase  of  the
                      Aircraft;

               (b)    any other  Encumbrance  in respect of the  Aircraft  which
                      results  from  acts  of  or  claims  against  any  of  the

<PAGE>

                      Indemnitees not related to the  transactions  contemplated
                      by or permitted  under this  Agreement or which arise as a
                      result  of any  obligation  of any  Indemnitee  under  the
                      Lessee Documents or Lender Documents;

               (c)    Encumbrances  in respect of the Aircraft for Taxes imposed
                      against  any  Indemnitee  not  indemnified  by the  Lessee
                      pursuant to this Agreement; and

               (d)    any Encumbrance arising out of a voluntary transfer by any
                      Indemnitee  of an  interest  in the  Aircraft  unless such
                      transfer is made pursuant to an exercise of remedies after
                      the occurrence and during the continuance of a Termination
                      Event;

        "LETTER OF QUIET  ENJOYMENT"  means a letter of quiet  enjoyment  in the
        form attached hereto as Schedule 6;

        "LETTER  AGREEMENT  NO. 1" means that  certain  Letter  Agreement  No. 1
        between the Lessor and the Lessee,  relating to the Aircraft,  and dated
        as of the date of this Agreement;

        "LIBOR" means the rate which is either

        (a)    the rate quoted by Citibank  on the  display  designated  as page
               "LIBO" on the Reuters Monitor Rates Service; or

        (b)    if the  required  rate  is not  displayed  and  ascertainable  in
               accordance  with paragraph (a) above,  the rate quoted by Bank of
               America in the London inter-bank market;

        for  acquiring  deposits in Dollars for a period of six (6) months at or
        about 11.00 a.m. (London time) on the fifth (5th) Banking Day before the
        date as to which,  or the  commencement of any period for which LIBOR is
        required to be calculated;

        "MAJOR  CHECK"  means  any of the  heavy  maintenance  visits  for which
        Airframe  Maintenance  Accruals  have been  accrued  which  comprise the
        Structural  Inspection  tasks as defined  in Section 7 of the MPD,  Hard
        Time Components  requiring  overhaul at 22,400 Flight Hours (as the same
        may be  revised  from time to time in the MPD in  respect of any of such
        items) as defined in Section 6 of the MPD and/or  Zonal  Inspection  and
        Related  Corrosion  Prevention and Protection  Program  requirements  as
        defined in Section 10 of the MPD;

        "MANUALS AND TECHNICAL RECORDS" means all such records,  logs,  manuals,
        technical data,  serviceable parts tags (including JAA Form 1 and/or FAA
        8130 Tags) and other  materials and  documents  relating to the Aircraft
        and required to be kept for Lessee to operate the Aircraft  lawfully and

<PAGE>

        in compliance with any regulation of the Aviation Authority,  including,
        but not  limited  to,  those  listed  in Part 1 of the  appendix  to the
        Acceptance Certificate and the Technical Publications;

        "MANUFACTURER" means The Boeing Company of Seattle, Washington, USA;

        "MINOR DEFECTS" shall have the meaning given in Clause 19.4(a) hereof;

        "MONTH" means a period beginning in one (1) calendar month and ending in
        the next following  calendar month on the day immediately  preceding the
        day numerically  corresponding to the day of the calendar month on which
        it started;  provided that (i) if the period started on the last Banking
        Day in a calendar month or if there is no such numerically corresponding
        day,  it  shall  end on the  last  Banking  Day in such  next  following
        calendar month and (ii) if such numerically  corresponding  day is not a
        Banking Day, the period shall end on the next  following  Banking Day in
        the same calendar month but if there is no such Banking Day it shall end
        on the  immediately  succeeding  Banking Day and "months" and  "monthly"
        shall be construed accordingly;

        "MORTGAGE" means an aircraft  mortgage relating to the Aircraft in favor
        of the  Lenders  or a trustee  on behalf of the  Lenders  or such  other
        security over the Aircraft as may be created by the  Beneficiary  or the
        Head  Lessor  in  connection  with the  Beneficiary's  or Head  Lessor's
        financing of the Aircraft from time to time;

        "MPD" means the Manufacturer's  maintenance planning data with reference
        number D6-38278,  revision 4 dated July 1996 relating to Boeing 737-300,
        -400 and -500 aircraft,  as the same may be revised from time to time by
        the Manufacturer;

        "PART" means all appliances, parts, accessories,  auxiliary power units,
        instruments,  navigational and  communications  equipment,  furnishings,
        modules,  components  and other items of equipment  (other than complete
        Engines or engines);

        "PAYMENT  DATE" means,  subject to Clause 8.2, the Delivery Date and the
        dates  falling  at  successive  one  (1)  monthly  intervals  thereafter
        throughout the Lease Period;

        "PERMITTED LIEN" means in respect of the Aircraft or any Engine:

        (a)    the Mortgage and any other Lessor Encumbrance;


<PAGE>



        (b)    any  Encumbrance  for  Taxes  either  not  yet  assessed  or,  if
               assessed,  not yet due and  payable  or being  contested  in good
               faith by  appropriate  proceedings  (and for the payment of which
               adequate  reserves  have  been  set  aside)  so long as any  such
               proceedings or the continued existence of such Encumbrance do not
               involve the likelihood of the sale,  forfeiture or loss of, or of
               any interest in, the Aircraft or any Engine;

        (c)    airport hangar keepers',  mechanics',  material men's, carriers',
               employees' or other similar  Encumbrances arising in the ordinary
               course of business by statute or by  operation  of law in respect
               of obligations which are not overdue or which are being contested
               in good faith by appropriate  proceedings (and for the payment of
               which adequate  reserves have been set aside) so long as any such
               proceedings or the continued existence of such Encumbrance do not
               involve the likelihood of the sale,  forfeiture or loss of, or of
               any interest in, the Aircraft or any Engine;

        "PERSON"  means  and  includes  any  individual   person,   corporation,
        partnership,  firm, joint stock company,  joint venture,  trust, estate,
        unincorporated   organization,   association,   Government   Entity   or
        organization  or  association of which any of the above is a member or a
        participant;

        "PURCHASE  AGREEMENT"  means the" Purchase  Agreement" as defined in the
        Purchase Assignment;

        "PURCHASE  ASSIGNMENT" means the Purchase  Agreement  Assignment of even
        date herewith among the Lessor,  Lessee and  Manufacturer  in respect of
        the Lessee's right,  title and interest in and to the Purchase Agreement
        to the extent  relating to the  Aircraft  (but  excluding  certain  side
        letters  thereto to the extent  specified  in such  assignment)  and the
        Manufacturer's Consent and Agreement thereto;

        "REDELIVERY LOCATION" means such airport in the United Kingdom as may be
        specified by the Lessor or such other location as the Lessor may agree;

        "RELEVANT EVENT" means any Termination Event or any event which with the
        giving  of  notice  or lapse of time or the  satisfaction  of any  other
        condition (or any  combination  thereof) would  constitute a Termination
        Event;

        "RELEVANT RATE OF INTEREST" means:

        (a)    for  amounts due but unpaid for a period not  exceeding  ten (10)
               days,  two per cent (2%) per annum above the United States Dollar
               Prime Rate offered by Citibank,  N.A. (or if not  available,  the
               United  States  Dollar  Prime Rate offered by Bank of America) on
               the first date in the  period in  respect  of which the  Relevant
               Rate of Interest falls to be determined; or


<PAGE>



        (b)    for amounts due but unpaid for a period  exceeding ten (10) days,
               four per cent (4%) per annum above the United States Dollar Prime
               Rate offered by Citibank,  N.A. (or if not available,  the United
               States Dollar Prime Rate offered by Bank of America) on the first
               date in the  period  in  respect  of which the  Relevant  Rate of
               Interest falls to be determined;

        "REMOVED ENGINE" means an Engine which is not installed on the Airframe.

        "REQUISITION  COMPENSATION"  means all moneys or other compensation from
        time to time  payable in respect of the  Compulsory  Acquisition  of the
        Aircraft;

        "SECURITY DOCUMENTS" means the Assignment and the Mortgage and any other
        document or  agreement  entered or to be entered into between any of the
        Lessor,  the  Beneficiary,  the  Head  Lessor  and the  Lenders  and all
        notices, consents, certificates and other documents and agreements to be
        issued pursuant to the foregoing;

        "SERVICEABLE"  means that a system  operates in full compliance with the
        Aircraft Maintenance Manual specifications and limitations,  disallowing
        consideration   for  any  Minimum   Equipment  List  or  other  form  of
        dispensation.  In the case of an individual  component  part or assembly
        serviceable  means the item is in such a state of repair  that it is fit
        for its intended use and purpose and complies with the applicable  rules
        and  regulations  of the  FAA  and,  if not  specified  in the  Aircraft
        Maintenance  Manual,  otherwise  conforms to the  specifications  in the
        relevant Manufacturer's component maintenance manual;

        "STATE OF REGISTRATION" means the United States of America or such other
        jurisdiction  in which the Aircraft is from time to time registered with
        the consent of the Lessor and the Lenders;

        "SUBSIDIARY"  of a person  means  any  company  or  entity  directly  or
        indirectly  controlled by such person for which purpose  "CONTROL" means
        either  ownership of more than fifty per cent. (50%) of the voting share
        capital (or equivalent right of ownership) of such company or entity, or
        power to direct its  policies  and  management  whether by  contract  or
        otherwise;

        "TAXES" includes all present and future taxes, levies, imposts,  duties,
        fees or charges of whatever nature, including,  without limitation,  any
        value  added or similar tax at the rate  applicable  for the time being,
        imposed by any national or local taxing authority or any other agency or
        government,  together with any interest thereon and penalties imposed in
        respect thereof and "TAXATION" shall be construed accordingly;

        "TECHNICAL  PUBLICATIONS" means the technical  publications  relating to
        the  Aircraft  listed  in  Part 2 of  the  appendix  to  the  Acceptance
        Certificate;

        "TERMINATION EVENT" shall have the meaning given in Clause 20;

        "THRESHOLD AMOUNT" means, when used in Clauses 6.3 and 11.2, $[ ]*, and,
        when used in Schedule 3, $[ ]*;

        "TOTAL LOSS" means any of the following events:

        (a)    the actual or constructive total loss of the Aircraft  (including
               any  damage  to  the  Aircraft  which  results  in  an  insurance
               settlement on the basis of a total loss, or  requisition  for use
               or hire of the Aircraft which results in an insurance  settlement
               on the basis of a total loss);


<PAGE>



        (b)    the  Aircraft  being   destroyed,   damaged  beyond  repair,   or
               permanently   rendered  unfit  for  normal  use  for  any  reason
               whatsoever;

        (c)    the Compulsory Acquisition of the Aircraft; or

        (d)    the  hijacking,  theft,  condemnation,   confiscation,   capture,
               detention,  seizure  or  requisition  for  use  or  hire  of  the
               Aircraft,  other  than  where  the  same  amounts  to  Compulsory
               Acquisition  of the Aircraft,  which deprives the operator of the
               use of the Aircraft for more than ninety (90) days, but excluding
               requisition  for use or hire by the  government  of the  State of
               Registration;

        "TRUST  AGREEMENT"  means the Master Trust Agreement dated as of 22 June
        1992 between the Beneficiary, as beneficiary, and the Lessor, as amended
        and supplemented from time to time.


1.2     Clause  headings and the Index are inserted for convenience of reference
        only and shall be ignored in the interpretation of this Agreement.

1.3     In this Agreement, unless the context otherwise requires:

        (a)    references  to  Clauses  and  Schedules  are to be  construed  as
               references to the Clauses of, and  Schedules  to, this  Agreement
               and references to this Agreement include its Schedules;

        (b)    references to (or to any specified  provision of) this  Agreement
               or any other  document  shall be construed as  references to this
               Agreement,  that  provision or that  document as in force for the
               time being and as amended in accordance  with the terms hereof or
               thereof,  or as the  case  may  be,  with  the  agreement  of the
               relevant parties and (where such consent is, by the terms of this
               Agreement or the relevant  document  required to be obtained as a
               condition to such  amendment  being  permitted) the prior written
               consent of the Lessor;

        (c)    words  importing  the plural shall  include the singular and vice
               versa;
<PAGE>

        (d)    references to a person shall be construed as  including,  without
               limitation,   references  to  an   individual,   firm,   company,
               corporation,  unincorporated  body of persons and any  Government
               Entity; and

        (e)    references to the Beneficiary,  the Lessor or the Lessee shall be
               construed as including any successor in title to the Beneficiary,
               the  Lessor or the  Lessee  respectively  and  references  to the
               Beneficiary,  the Lessor or the  Lenders  shall be  construed  as
               including   any   permitted   assignee  or   transferee   of  the
               Beneficiary, the Lessor or the Lenders respectively.

2.      REPRESENTATIONS AND WARRANTIES

2.1     The Lessee  acknowledges that the Lessor has entered into this Agreement
        in full reliance on the representations and warranties in this Clause 2,
        and the Lessee represents and warrants to the Lessor that:

        (a)    the Lessee is duly  incorporated  and  validly  existing  in good
               standing under the laws of the State of Delaware as a corporation
               and  has  power  to  carry  on its  business  as it is now  being
               conducted and to own its property and other assets;

        (b)    the  Lessee  has the  corporate  power to  execute,  deliver  and
               perform  its  obligations  under  the  Lessee  Documents  and all
               necessary corporate,  shareholder and other action has been taken
               to authorize the execution, delivery and performance by Lessee of
               the  same  and  the  transactions   contemplated  by  the  Lessee
               Documents;

        (c)    the Lessee Documents have been duly entered into and delivered by
               the  Lessee  and  constitute  or will,  upon  execution  thereof,
               constitute  valid and legally  binding  obligations of the Lessee
               enforceable in accordance with their respective terms,  except as
               such  enforcement  may be  affected  by  bankruptcy,  insolvency,
               reorganization  or other  laws of general  application  affecting
               creditors or Lessor's rights and except for general principles of
               equity;

        (d)    the execution and delivery of, the performance of its obligations
               under,   and  compliance  with  the  provisions  of,  the  Lessee
               Documents  by the Lessee  will not (i)  contravene  any  existing
               applicable law,  statute,  rule or regulation,  or, to the extent
               known to  Lessee,  any  judgment,  decree  or permit to which the
               Lessee is subject, (ii) conflict with, or result in any breach of
               any of the terms of, or constitute a default under, any agreement
               or other  instrument to which the Lessee is a party or is subject
               or by  which  it or  any of  its  property  is  bound,  or  (iii)
               contravene  or  conflict  with  any  provision  of  the  Lessee's
               constituent documents;
<PAGE>

        (e)    no litigation, arbitration or administrative proceeding is taking
               place,  pending or, to the best  knowledge of the officers of the
               Lessee,  threatened  against the Lessee which may  reasonably  be
               expected  to have a  material  adverse  effect  on the  business,
               assets or  financial  condition  of the Lessee or its  ability to
               perform its obligations under the Lessee Documents;

        (f)    the consolidated  audited financial  statements of the Lessee and
               its  Subsidiaries  in  respect  of the  financial  year  ended on
               December 31, 1995 as delivered to the Lessor,  and the  quarterly
               financial  statements of the type  referred to in Clause  11.1(c)
               and  previously  delivered by Lessee to Lessor have been prepared
               in accordance with generally accepted  accounting  principles and
               practices  in the  United  States  which  have been  consistently
               applied and present fairly in accordance with such principles the
               consolidated   financial   position   of  the   Lessee   and  its
               Subsidiaries as at such date and the results of the operations of
               the Lessee and the consolidated  results of the operations of the
               Lessee and its  Subsidiaries  respectively for the financial year
               ended on such  date,  and the  unaudited  consolidated  financial
               statements  in respect of each  quarter  delivered  to the Lessor
               have been  prepared  on the same basis as the  annual  statements
               except  as to  absence  of  footnotes  and  subject  to  year-end
               adjustments;

        (g)    except for  registration  of the  Aircraft and the filing of this
               Agreement   with  the  FAA  and  the  filing  of  the   Financing
               Statements, it is not necessary to ensure the legality, validity,
               enforceability   or  admissibility  in  evidence  of  the  Lessee
               Documents that any of them or any other  instrument be notarized,
               filed,  recorded,  registered  or enrolled  in any court,  public
               office or elsewhere in Lessee's Country;

        (h)    the choice of the Governing Law to govern this  Agreement and the
               submission  by the Lessee to the  jurisdiction  of the Courts are
               valid and  binding and not subject to  unilateral  revocation  by
               Lessee;

        (i)    the Lessee is subject to civil and commercial law with respect to
               its obligations  under the Lessee  Documents and the transactions
               contemplated  thereby constitute private and commercial acts done
               for private and  commercial  purposes  and neither the Lessee nor
               any of its assets is entitled  to any  immunity on the grounds of
               sovereignty  from any legal  actions or  proceeding  (which shall
               include, without limitation,  suit, attachment prior to judgment,
               execution or other enforcement);

        (j)    the Lessee's chief  executive  office (as that term is defined in
               Article  9 of the  Uniform  Commercial  Code as in  effect in the
               State of Colorado) is located at 2864 South Circle  Drive,  Suite
               1100, Colorado Springs, Colorado, 80906, USA;
<PAGE>

        (k)    the Lessee is a Certificated  Air Carrier and the Lessor,  as the
               lessor of the Aircraft to the Lessee,  is entitled to the benefit
               of  Section  1110 of  Title 11 of the  United  States  Code  with
               respect to the Aircraft;

        (l)    the Lessee is a Citizen of the United States; and

        (m)    the Purchase  Agreement is in full force and effect,  neither the
               Manufacturer,  to Lessee's knowledge and belief, nor Lessee is in
               breach of any of its  obligations  thereunder and Lessor has been
               given a full and complete copy thereof.

2.2     The Lessee further represents and warrants to the Lessor that:

        (a)    there has been no  material  adverse  change in the  consolidated
               financial  position of the Lessee and its Subsidiaries  from that
               set  forth in the  unaudited  consolidated  financial  statements
               delivered to the Lessor and  Beneficiary  for the quarter  ending
               December 31, 1996;

        (b)    except for  registration  of the  Aircraft and the filing of this
               Agreement   with  the  FAA  and  the  filing  of  the   Financing
               Statements, every consent, authorization, license or approval of,
               or registration  with, or declaration to,  governmental or public
               bodies  or  authorities  or  courts  required  by the  Lessee  to
               authorize,  or required  by the Lessee in  connection  with,  the
               execution,  delivery,  validity or  enforceability  of the Lessee
               Documents  or the  performance  by the Lessee of its  obligations
               under the Lessee  Documents  has been  obtained or made and is in
               full  force and  effect,  and there  has been no  default  in the
               observance of the conditions or restrictions (if any) imposed in,
               or in connection with, any of the same;

        (c)    the  obligations  of the Lessee  under the Lessee  Documents  are
               direct and  general  obligations  of the Lessee and rank at least
               pari  passu  with all other  present  and  future  unsecured  and
               unsubordinated  obligations (including contingent obligations) of
               the  Lessee  with  the  exception  of  such  obligations  as  are
               mandatorily preferred by law and not by contract;

        (d)    the  Lessee is not (nor  would with the giving of notice or lapse
               of  time  or  both  be) in  breach  of or in  default  under  any
               agreement  relating to  Indebtedness to which it is a party or by
               which it may be bound;

        (e)    the information,  exhibits and reports furnished by the Lessee to
               the Lessor in connection  with the matters  contemplated  by this
               Agreement  or  with  the  negotiation  and  preparation  of  this
               Agreement are true and accurate in all material respects;

        (f)    no Relevant Event has occurred and is continuing; and
<PAGE>

        (g)    as of the date of this  Agreement,  the Lessee  does not hold any
               contract or other  obligation  to operate the  Aircraft to any of
               the countries  designated  under the United States  Foreign Asset
               Control Regulations (31 C.F.R. Parts 500 - 599), including, as of
               the date of this Agreement,  Cuba, Iraq,  Libya,  North Korea and
               the Federal Republic of Yugoslavia (Serbia and Montenegro).

2.3     The  representations  and  warranties  in  Clauses  2.1 and 2.2 shall be
        deemed to be repeated by the Lessee on the Advance  Payment  Date and on
        the  Delivery  Date  as  if  made  with   reference  to  the  facts  and
        circumstances then existing.

2.4     The   rights  and   remedies   of  the   Lessor  in   relation   to  any
        misrepresentation  or breach of warranty on the part of the Lessee shall
        not be prejudiced by any investigation by or on behalf of the Lessor.

2.5     The Lessor  acknowledges that the Lessee has entered into this Agreement
        in full reliance on the  representations  and  warranties in this Clause
        2.5, and the Lessor represents and warrants to the Lessee that:

        (a)    the Lessor is a banking corporation duly incorporated and validly
               existing under the laws of Delaware and has the power to carry on
               its business as it is now being conducted and to own its property
               and other assets;

        (b)    the Lessor has the power and  authority  to execute,  deliver and
               perform its obligations under the Lessee Documents to which it is
               a party and all necessary corporate, shareholder and other action
               has  been  taken  to  authorize  the   execution,   delivery  and
               performance of the same and the transactions  contemplated by the
               Lessee Documents to which it is a party;

        (c)    the  Lessee  Documents  to which  it is a party  have  been  duly
               entered into and delivered by the Lessor and  constitute or will,
               upon  execution  thereof,  constitute  valid and legally  binding
               obligations of the Lessor  enforceable  in accordance  with their
               respective terms (subject to applicable bankruptcy, insolvency or
               other laws affecting  creditor's  rights generally and to general
               principles of equity from time to time in effect);

        (d)    the execution and delivery of, the performance of its obligations
               under,   and  compliance  with  the  provisions  of,  the  Lessee
               Documents  to  which  it is a party  by the  Lessor  will not (i)
               contravene  any  existing   applicable  law,  statute,   rule  or
               regulation  of the State of Delaware or any federal law,  statute
               or  regulation  of the  United  States of America  governing  the

<PAGE>

               banking or trust power of the Lessor, or any judgment,  decree or
               permit to which the Lessor is subject;  (ii)  conflict  with,  or
               result in any  breach of any of the  terms  of, or  constitute  a
               default  under,  any  agreement or other  instrument to which the
               Lessor  is a party  or is  subject  or by  which it or any of its
               property  is bound;  or (iii)  contravene  or  conflict  with any
               provision of the Lessor's constituent documents;

        (e)    no litigation, arbitration or administrative proceeding is taking
               place,  pending  or,  to the  knowledge  of the  officers  of the
               Lessor, threatened against the Lessor which could have a material
               adverse effect on the Lessor's ability to perform its obligations
               under the Lessee Documents to which it is a party;

        (f)    the Lessor is subject to civil and commercial law with respect to
               its obligations under the Lessee Documents to which it is a party
               and the transactions  contemplated thereby constitute private and
               commercial  acts done for private  and  commercial  purposes  and
               neither  the  Lessor  nor any of its  assets is  entitled  to any
               immunity  on the grounds of  sovereignty  or  otherwise  from any
               legal  actions  or  proceeding  (which  shall  include,   without
               limitation,  suit,  attachment  prior to  judgment,  execution or
               other enforcement);

        (g)    the  Lessor is a citizen  of the  United  States  as  defined  in
               Section 40102 of Title 49 of the United States Code;

        (h)    every  consent,   authorization,   license  or  approval  of,  or
               registration  with, or  declaration  to,  governmental  or public
               bodies  or  authorities  or  courts  required  by the  Lessor  to
               authorize,  or required  by the Lessor in  connection  with,  the
               execution,  delivery,  validity or  enforceability  of the Lessee
               Documents  has been  obtained  or made and is in full  force  and
               effect,  and there has been no default in the  observance  of the
               conditions or restrictions  (if any) imposed in, or in connection
               with, any of the same;

        (i)    the Head  Lessor  shall hold at  Delivery  whatever  title to the
               Aircraft as shall have been  conveyed  to it by the  Manufacturer
               and shall hold whatever title to any  replacement  Engine or Part
               as shall have been conveyed to Head Lessor by or on behalf of the
               Lessee during the Lease Term  pursuant to the  provisions of this
               Agreement; and

        (j)    the choice of the Governing Law to govern this  Agreement and the
               submission  by the Lessor to the  jurisdiction  of the Courts are
               valid and  binding and not subject to  unilateral  revocation  by
               Lessor.
<PAGE>

2.6     The   rights  and   remedies   of  the   Lessee  in   relation   to  any
        misrepresentation  or breach of warranty on the part of the Lessor shall
        not be prejudiced by any investigation by or on behalf of the Lessee.




3.      TERM OF LEASE

3.1     The Lessor shall lease and the Lessee shall take on lease the  Aircraft,
        subject to the terms and  conditions  of this  Agreement,  for the Lease
        Term.

4.      CONDITIONS

4.1     The  obligation  of the Lessor to lease the Aircraft to the Lessee under
        this  Agreement is subject to the condition  that,  not later than three
        (3) Banking Days prior to the Expected  Delivery  Date, the Lessor shall
        have received the documents and evidence specified in Part 1 of Schedule
        1 in form and substance reasonably satisfactory to the Lessor.

4.2     The  obligation  of the Lessor to lease the Aircraft to the Lessee under
        this  Agreement  is  subject to the  further  condition  that,  prior to
        Delivery,  the Lessor  shall have  received the  documents  and evidence
        specified  in Part 2 of  Schedule  1 in form  and  substance  reasonably
        satisfactory to the Lessor.

4.3     The  obligation  of the Lessor to lease the Aircraft to the Lessee under
        this Agreement is subject to the further conditions that:

        (a)    the Manufacturer  shall have delivered the Aircraft in accordance
               with the Purchase Agreement and Purchase Assignment;

        (b)    all necessary  governmental and regulatory consents and approvals
               required to permit the Lessor to lease the Aircraft to the Lessee
               and  the  Lessor  to  register  the  Aircraft  in  the  State  of
               Registration  shall have been  received by the Lessor  and/or the
               Lessee as appropriate;

        (c)    the representations and warranties set out in Clauses 2.1 and 2.2
               shall be true and  correct  as if each were made with  respect to
               the facts and  circumstances  existing  immediately  prior to the
               time when Delivery is to take place;

        (d)    no Relevant  Event shall have occurred and be continuing or would
               arise by reason of Delivery taking place;

        (e) the Lessee shall have executed and  delivered the Lessee  Documents;
            and

        (f)    the  conditions  precedent  to the  Lessor's  obligations  in the
               Purchase  Assignment in Sections 7(a) and 7(c) thereof shall have
               been satisfied.
<PAGE>

4.4     The obligation of the Lessor to execute and deliver the Lessee Documents
        and to make the advance  payments for the  Aircraft to the  Manufacturer
        pursuant  to the  Purchase  Assignment  on the Advance  Payment  Date is
        subject to the following conditions:

        (a)    the  Lessor  shall  have  received  the  documents  and  evidence
               specified  in  Part  3  of  Schedule  1  in  form  and  substance
               reasonably satisfactory to the Lessor;

        (b)    the representations and warranties set out in Clauses 2.1 and 2.2
               shall be true and  correct  as if each were made with  respect to
               the facts and  circumstances  existing  immediately  prior to the
               time when Lessor makes such advance payments;

        (c)    no Relevant  Event shall have occurred and be continuing or would
               arise by reason of Lessor  executing  and  delivering  the Lessee
               Documents or making such advance payments; and

        (d) the Lessee shall have executed and delivered the Lessee Documents.

4.5     The  conditions  specified in Clauses 4.1, 4.2, 4.3 and 4.4 are inserted
        for the sole benefit of the Lessor and may be waived in whole or in part
        and with or without conditions by the Lessor. If any of those conditions
        are not  satisfied on the Delivery  Date and the Lessor (in its absolute
        discretion)  nonetheless  agrees to make the advance payments or deliver
        the  Aircraft  to  the  Lessee,   the  Lessee  will  ensure  that  those
        outstanding  conditions  are fulfilled  within such period as the Lessor
        may reasonably require.

4.6     The obligation of the Lessee to lease the Aircraft from the Lessor under
        this Agreement is subject to the conditions that:

        (a)    the Manufacturer  shall have delivered the Aircraft in accordance
               with the Purchase Agreement and Purchase Assignment;

        (b)    the Lessor  shall have  registered  the  Aircraft in the State of
               Registration;

        (c)    the representations and warranties set out in Clause 2.5 shall be
               true and  correct as if each were made with  respect to the facts
               and  circumstances  existing  immediately  prior to the time when
               Delivery is to take place; and

        (d)    the  Lessor  shall  have   executed  and   delivered  the  Lessee
               Documents.

4.7     The conditions specified in Clause 4.6 are inserted for the sole benefit
        of the  Lessee and may be waived in whole or in part and with or without
        conditions by the Lessee.  If any of those  conditions are not satisfied
        on the  Delivery  Date  and  the  Lessee  (in its  absolute  discretion)
        nonetheless  agrees to accept  delivery of the Aircraft from the Lessor,
        the Lessor will ensure that those  outstanding  conditions are fulfilled
        within such period as the Lessee may reasonably require.
<PAGE>

5.      DELIVERY AND ACCEPTANCE

5.1     Subject to Clauses 4 and 5.8 hereof,  the Aircraft shall be delivered to
        and  accepted  by  the  Lessee  at  the  Delivery   Location   when  the
        Manufacturer  delivers  the  Aircraft in  compliance  with the  Purchase
        Agreement.  The Lessee  and  Lessor  shall  jointly  determine  when the
        Aircraft has been delivered in accordance  with the Purchase  Agreement,
        as further set out in the Purchase Assignment.  If the Lessee and Lessor
        jointly  determine  that the  Aircraft  does  not  meet  the  conditions
        required  at  delivery  under  the  Purchase  Agreement  or  there  is a
        disagreement between the Lessee and Lessor as to whether such conditions
        have been met,  Clauses 5.7 through 5.8 (as  applicable)  shall  govern.
        Upon such delivery and acceptance,  the Aircraft shall become subject to
        and be governed by this  Agreement,  the Lease Period shall commence and
        the Lessee shall thereupon sign and deliver to the Lessor the Acceptance
        Certificate.  After  Delivery,  the Aircraft and every part thereof will
        be, in every  respect,  at the sole risk of the Lessee who will bear all
        risk of loss,  theft,  damage or  destruction  to the Aircraft  from any
        cause whatsoever.  Prior to Delivery, the risk of loss, theft, damage or
        destruction to the Aircraft shall be borne by the Manufacturer  pursuant
        to the Purchase Agreement.

5.2     The Lessor shall not be responsible for any loss or expense, or any loss
        of  profit,  arising  from any delay in the  delivery  of, or failure to
        deliver,  the  Aircraft to the Lessee under this  Agreement  unless such
        delay or  failure  arises  as a direct  consequence  of the  default  or
        failure of the Lessor to perform its obligations hereunder or to pay the
        advance payments and aircraft price for the Aircraft to the Manufacturer
        when it is obligated to do so under the Purchase  Assignment and (to the
        extent provided in the Purchase Assignment) the Purchase Agreement.

5.3     (a)    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 the Purchase
               Agreement.

        (b)    The Lessor shall  indemnify  and hold harmless the 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 the Purchase Agreement.

5.4     (a)    If by reason of a default by the Manufacturer (including, but not
               limited to,  failure to tender the  Aircraft  for delivery in the
               condition required by the Purchase Agreement), the Aircraft shall

<PAGE>

               not  have  been  delivered  to  and  accepted  by the  Lessee  in
               accordance  with Clause 5.1 by August 31, 1997,  (i) the Lessor's
               obligation  contained in this  Agreement to lease the Aircraft to
               the Lessee and the Lessee's obligation to lease the Aircraft from
               the Lessor shall expire and (ii) not later than fifteen (15) days
               after  August 31,  1997,  Lessee  shall repay  Lessor all advance
               payments  theretofore  made  by  Lessor  for  the  Aircraft  plus
               interest  thereon at an  interest  rate of LIBOR plus one percent
               (1.0%) (net of any interest  paid to Lessor by the  Manufacturer)
               from the date of  payment  through  the day  prior to the date of
               repayment  by Lessee  and,  upon  such  repayment,  the  Purchase
               Assignment  shall  terminate.  Concurrent  with  receipt  of  the
               advance  payments  and  interest  as  provided  in the  preceding
               sentence, Lessor shall deliver written notice to the Manufacturer
               and Lessee pursuant to the terms of the Purchase  Assignment that
               such Purchase  Assignment has terminated.  If Lessee fails to pay
               such repayments fully when due, the Purchase Assignment shall not
               terminate and,  notwithstanding  anything to the contrary in this
               Clause 5, Lessor will be entitled to pursue remedies  against the
               Manufacturer  with  respect to the advance  payments  made by it.
               Nothing in this  Clause 5.4 (a) is intended to or shall be deemed
               to waive any rights and  remedies  which either the Lessor or the
               Lessee  may have  against  the  Manufacturer  under the  Purchase
               Assignment or Purchase Agreement.

        (b)    If by reason of a Relevant  Event the  Aircraft  is not leased to
               the Lessee and such  Relevant  Event is or becomes a  Termination
               Event,  the  Lessor's  obligation  to lease the  Aircraft  to the
               Lessee hereunder shall expire and the Lessor shall be entitled to
               accept delivery of the Aircraft from the Manufacturer as provided
               in the  Purchase  Assignment,  in  each  case  without  adversely
               affecting  any  right of  Lessor  to  pursue  remedies  available
               against  Lessee  hereunder,  under the Purchase  Assignment or at
               law.

        (c)    The Lessee agrees to diligently perform its obligations under the
               Purchase   Assignment   and  Purchase   Agreement   and  to  take
               commercially  reasonable  steps  within its  control to cause the
               Aircraft to be  delivered  in May 1997 or as soon  thereafter  as
               possible,  subject,  in all cases,  to the terms of the  Purchase
               Agreement.

        (d)    If by reason of a failure by the Lessor to make advance  payments
               or pay the net aircraft  purchase price to the Manufacturer  when
               the Lessor is  obligated to do so under the terms of the Purchase
               Assignment,  the  Aircraft  is  not  leased  to the  Lessee  when
               tendered by the  Manufacturer  in  accordance  with the  Purchase
               Agreement,  following a return to Lessor of any advance  payments
               previously  made by it,  the  Lessee's  obligation  to lease  the
               Aircraft  from  the  Lessor   hereunder  shall  expire  and  this
               Agreement  and  the  Purchase  Assignment  shall  terminate,  but

<PAGE>

               without  adversely  affecting  any  right of any  party to pursue
               remedies available hereunder, under the Purchase Assignment or at
               law against other parties thereto. Concurrent with receipt of the
               advance  payments as provided in the preceding  sentence,  Lessor
               shall  deliver  written  notice to the  Manufacturer  and  Lessee
               pursuant  to the  terms  of the  Purchase  Assignment  that  such
               Purchase Assignment has terminated.

5.5     (a)    The  Lessee  shall (i)  indemnify  the  Lessor in  respect of any
               reasonable  out-of-pocket costs or expenses,  if any, incurred by
               the Lessor as a  consequence  of any delay in the  delivery of or
               non-delivery of the Aircraft to the Lessee,  or non-acceptance of
               the Aircraft by the Lessee under this Agreement (collectively,  a
               "Delay") and (ii) without  duplication  of any payment made under
               the preceding clause (i), pay the Lessor interest on the advanced
               payments made to the Manufacturer  under the Purchase  Assignment
               as provided in Clause 5.5(b),  in either such case, if and to the
               extent  that such  Delay  arises as a direct  consequence  of the
               failure of the Lessee to perform  its  obligations  hereunder  or
               under the Purchase  Assignment or any Relevant  Event,  provided,
               however,  that nothing in this Clause 5.5 is intended to or shall
               be  deemed to waive any  other  right or remedy  provided  to the
               Lessor in this  Agreement  and in the Purchase  Assignment in the
               event of such failure by the Lessee,  including,  but not limited
               to Clause 5.4(b).

        (b)    The  interest  payable by Lessee  pursuant  to Clause  5.5(a)(ii)
               shall  accrue on a daily basis  beginning on the first day of the
               Delay and ending on the earlier of the day prior to (i)  Delivery
               of the  Aircraft  hereunder  or (ii)  expiration  of the Lessor's
               obligation to lease the Aircraft hereunder pursuant to Clause 5.4
               hereof on the full  amount of the  outstanding  advance  payments
               made by  Lessor at an  interest  rate of LIBOR  plus one  percent
               (1.0%).  Such interest  shall be payable upon the earlier of such
               delivery  or  expiration  and/or if the Delay  exceeds one month,
               monthly.

5.6     (a)    If (i) there is an  Excusable  Delay (as defined in the  Purchase
               Agreement)  and as a result thereof the Aircraft is not delivered
               by August 31,  1997 or (ii) the  Manufacturer  estimates  that by
               reason of an Excusable  Delay, the Aircraft will not be delivered
               until  after  August 31,  1997,  the Lessor may elect,  by notice
               delivered  to the Lessee  and the  Manufacturer,  to require  the
               Lessee to repay  within  fifteen  (15) days of  delivery  of such
               notice all advance  payments  theretofore  made by Lessor for the
               Aircraft plus interest  thereon at an interest rate of LIBOR plus
               one  percent  (1%)  (net  of  any  interest  paid  to  Lessor  by
               Manufacturer)  from the date of payment  through the day prior to
               the date of repayment  by Lessee and,  upon such  repayment,  the
               Purchase  Assignment shall terminate and the Lessor's  obligation
               to  lease  the  Aircraft  to  Lessee   hereunder   shall  expire.
               Concurrent  with receipt of the advance  payments and interest as
               provided in the preceding sentence,  Lessor shall deliver written
               notice to the  Manufacturer  and Lessee  pursuant to the terms of
               the  Purchase   Assignment  that  such  Purchase  Assignment  has
               terminated.
<PAGE>

        (b)    If by reason of an  Excusable  Delay or for any other  reason the
               Aircraft is not delivered by the Manufacturer  under the Purchase
               Agreement by November 30, 1997,  the Lessor may elect,  by notice
               delivered  to the Lessee  and the  Manufacturer,  to require  the
               Lessee to repay  within  fifteen  (15) days of  delivery  of such
               notice all advance  payments  theretofore  made by Lessor for the
               Aircraft plus interest  thereon at an interest rate of LIBOR plus
               one  percent  (1.0%)  (net  of any  interest  paid to  Lessor  by
               Manufacturer)  from the date of payment  through the day prior to
               the date of repayment  by Lessee and,  upon such  repayment,  the
               Purchase  Assignment shall terminate and the Lessor's  obligation
               to  lease  the  aircraft  to  Lessee   hereunder   shall  expire.
               Concurrent  with receipt of the advance  payments and interest as
               provided in the preceding sentence,  Lessor shall deliver written
               notice to the  Manufacturer  and Lessee  pursuant to the terms of
               the  Purchase   Assignment  that  such  Purchase  Assignment  has
               terminated.

        (c)    If  Lessee  fails to repay  the  advance  payments  and  interest
               thereon  when  required  to do so by  Lessor  pursuant  to Clause
               5.6(a) or (b), the Purchase  Assignment  shall not terminate and,
               notwithstanding anything to the contrary in this Clause 5, Lessor
               will be entitled  to pursue  remedies  against the Lessee  and/or
               Manufacturer  with  respect to the advance  payments  made by it.
               Nothing in this  Clause 5.6 is  intended to or shall be deemed to
               waive any rights and  remedies  which the Lessor may have against
               the Lessee and  Manufacturer  under this Agreement,  the Purchase
               Assignment or Purchase Agreement.

5.7     (a)    If the  Manufacturer  tenders the Aircraft for delivery under the
               Purchase  Agreement and the Lessor and Lessee mutually agree that
               the  Aircraft  does not meet the  conditions  required  under the
               Purchase Agreement for such delivery, the Lessee shall not accept
               delivery of the  Aircraft  under the  Purchase  Agreement or this
               Agreement  and,  at its  expense  (except as provided in the last
               sentence  of  this  Clause  5.7),  shall  pursue  diligently  all
               commercially  reasonable actions  (including,  but not limited to
               litigation if necessary) to cause the Manufacturer to deliver the
               Aircraft as soon as practicable in the condition  required by the
               Purchase  Agreement.  The Lessee shall keep the Lessor advised of
               the actions that it is taking to obtain  delivery of the Aircraft
               in the required condition and shall consult with the Lessor prior
               to taking such actions to the extent  practicable.  If the Lessee
               reasonably  elects,  in  the  pursuit  of  remedies  against  the
               Manufacturer, to pursue litigation against the Manufacturer,  the
               parties  shall  mutually  agree on an  equitable  sharing  of the
               expenses of such  litigation  (including  prelitigation  expenses
               reasonably incurred,  regardless of whether a lawsuit is actually

<PAGE>

               filed) and any recoveries therefrom, provided, however, that such
               agreement  shall include  whatever  provisions  may be reasonably
               requested by Lessor to ensure that the litigation is conducted by
               Lessee to the reasonable  satisfaction  of Lessor with due regard
               to Lessor's interest in the Aircraft.

        (b)    Notwithstanding anything in Clause 5.7(a) to the contrary, if the
               Lessor's obligation to lease the Aircraft to Lessee expires under
               Clause 5.4(a) or 5.6 hereof,  the Lessor may directly  pursue any
               remedies that it elects to pursue against the Manufacturer  under
               the  Purchase   Assignment   and  Purchase   Agreement.   Without
               limitation of the foregoing, the Lessee and Lessor will cooperate
               with each other to the extent reasonably  requested in any effort
               or pursuit of remedies to obtain  return of the advance  payments
               made by Lessor to the  Manufacturer  and any  reasonable  damages
               sought by the Lessor and/or Lessee with respect thereto.

5.8     (a)    If, following mutual consultation, the Lessee reasonably believes
               that the  Manufacturer  has tendered the Aircraft for delivery in
               the condition  required by the Purchase  Agreement and the Lessor
               disagrees,  the Lessee  shall,  at its  option,  either  elect to
               concur  in  the  Lessor's  position  and  attempt  to  cause  the
               Manufacturer to deliver the Aircraft as provided in Clause 5.7 or
               accept delivery of the Aircraft under the Purchase  Agreement and
               this  Agreement,  in which case Clause 5.8(b) shall apply. If the
               Lessee  accepts  delivery  of the  Aircraft  as  provided  in the
               preceding  sentence,  subject  to  satisfaction  or waiver of the
               conditions  in Clause 4 (other  than Clause  4.3(a)),  the Lessor
               shall pay the aircraft  price to the  Manufacturer  and lease the
               Aircraft to the Lessee under this Agreement.

        (b)    If the Lessee elects to accept delivery of the Aircraft under the
               circumstances  described  in Clause  5.8(a),  the Lessor shall be
               entitled  to  require  that  a   determination   be  made  by  an
               arbitration  panel  as  to  (i)  whether  the  Aircraft  met  the
               conditions  required  by  the  Purchase  Agreement  when  it  was
               accepted  for  delivery by the Lessee and (ii) if not, the amount
               by which the value of the  Aircraft was  diminished  by virtue of
               its  deficient   condition  (the   "Deficiency   Amount").   Such
               determination shall be obtained by arbitration in the City of New
               York,  pursuant  to the  rules  then  obtaining  of the  American
               Arbitration  Association or any written agreement of the parties.
               Such  determination  shall  be  rendered  by  a  panel  of  three
               arbitrators each of recognized  expertise in aircraft  valuation,
               one  arbitrator  to be chosen by each of the  Lessor  and  Lessee
               within twenty (20) days of written  request  therefore being made
               by the Lessor to the Lessee and the third arbitrator to be chosen
               by the other two arbitrators within ten (10) days thereafter.  If
               the  arbitration  panel  decides that the Aircraft was not in the
               condition required by the Purchase Agreement when accepted by the
               Lessee  and  that the  Deficiency  Amount  is $[ ]* or more,  the
               Lessee shall pay the Lessor the Deficiency Amount within ten (10)
               days after the  determination  of such amount by the  arbitration

<PAGE>

               panel  and  shall  pay the  Lessor's  reasonable  legal and other
               out-of-pocket  costs  associated  with the  arbitration  promptly
               after the Lessor submits invoices or other reasonable evidence of
               such costs to the Lessee.  If the arbitration  panel decides that
               the  Aircraft  was  in the  condition  required  by the  Purchase
               Agreement  when  accepted  by the  Lessee  or,  if not,  that the
               Deficiency  Amount is less than $[ ]*, the  Lessor  shall pay the
               Lessee's   reasonable   legal  and  other   out-of-pocket   costs
               associated with the arbitration promptly after the Lessee submits
               invoices or other reasonable evidence of such costs to the Lessor
               and the Lessee shall have no  obligation  to pay such  Deficiency
               Amount.

6.      LESSOR'S WARRANTIES AND MANUFACTURER'S WARRANTIES

6.1     The Lessor  warrants that as long as no  Termination  Event has occurred
        and is  continuing,  neither  the  Lessor nor the Head  Lessor,  nor any
        person  claiming  by,  through  or under  Lessor or Head  Lessor,  shall
        interfere  during the Lease  Period with the use,  possession  and quiet
        enjoyment  of the Aircraft  (including,  but not limited to, the Manuals
        and  Technical  Records) by the Lessee or the  exercise by Lessee of its
        rights and privileges hereunder.

6.2     THE LESSEE EXPRESSLY AGREES AND ACKNOWLEDGES THAT, SAVE ONLY AS PROVIDED
        IN CLAUSE 6.1 AND CLAUSE 2.5, NO WARRANTY OR  REPRESENTATION OF ANY KIND
        IS OR HAS BEEN  GIVEN BY OR ON BEHALF OF THE  LESSOR IN  RESPECT  OF THE
        AIRCRAFT OR ANY PART THEREOF AND, ACCORDINGLY,  THE LESSEE CONFIRMS THAT
        IT HAS NOT, IN ENTERING INTO THIS  AGREEMENT,  RELIED ON ANY WARRANTY OR
        REPRESENTATION  BY THE  LESSOR  OR ANY  PERSON ON THE  LESSOR'S  BEHALF,
        EXPRESS OR IMPLIED,  WHETHER  ARISING BY LAW OR OTHERWISE IN RELATION TO
        THE  AIRCRAFT  OR  ANY  PART  THEREOF,  INCLUDING,  WITHOUT  LIMITATION,
        WARRANTIES  OR  REPRESENTATIONS  AS TO THE  DESCRIPTION,  AIRWORTHINESS,
        MERCHANTABILITY,  FITNESS FOR ANY PURPOSE, VALUE,  CONDITION,  DESIGN OR
        OPERATION OF ANY KIND OR NATURE OF THE AIRCRAFT OR ANY PART THEREOF, AND
        THE  BENEFIT OF ANY SUCH  WARRANTY  OR  REPRESENTATION  BY THE LESSOR IS
        HEREBY  IRREVOCABLY  AND  UNCONDITIONALLY  WAIVED BY THE LESSEE.  TO THE
        EXTENT  PERMISSIBLE  UNDER APPLICABLE LAW, THE LESSEE HEREBY ALSO WAIVES
        ANY RIGHTS  WHICH IT MAY HAVE IN TORT IN  RESPECT OF ANY OF THE  MATTERS
        REFERRED TO ABOVE AND  IRREVOCABLY  AGREES THAT THE LESSOR SHALL HAVE NO
        GREATER  LIABILITY  TO LESSEE IN TORT IN RESPECT OF ANY SUCH MATTER THAN
        IT WOULD HAVE IN CONTRACT  AFTER TAKING  ACCOUNT OF ALL OF THE FOREGOING
        EXCLUSIONS.  NO  THIRD  PARTY  MAKING  ANY  REPRESENTATION  OR  WARRANTY
        RELATING TO THE  AIRCRAFT OR ANY PART THEREOF IS THE AGENT OF THE LESSOR
        NOR HAS ANY SUCH  THIRD  PARTY  AUTHORITY  TO BIND THE  LESSOR  THEREBY.

<PAGE>

        NOTWITHSTANDING  ANYTHING  CONTAINED ABOVE,  NOTHING CONTAINED HEREIN IS
        INTENDED  TO  OBVIATE,  REMOVE OR WAIVE ANY RIGHTS OF  WARRANTY OR OTHER
        CLAIMS RELATING  THERETO WHICH THE LESSEE OR THE LESSOR MAY HAVE AGAINST
        THE  MANUFACTURER  OR SUPPLIER OF THE AIRCRAFT  (INCLUDING ANY ENGINE OR
        PART THEREOF) OR ANY THIRD PARTY.

6.3     The Lessor agrees to assign to the Lessee the benefit of all  assignable
        warranties and  indemnities,  product support and  operational  benefits
        given by the  Manufacturer  pursuant to the Purchase  Agreement (as same
        have been assigned to the Lessor pursuant to the Purchase Assignment) or
        supplier  of any  part  of the  Aircraft  as  provided  in the  Purchase
        Assignment.  The Lessee acknowledges that any such assignment is subject
        to the prior written consent of the Manufacturer or supplier of any part
        of the Aircraft  and each party hereto  agrees to execute and deliver to
        the other party such notices of  assignment  of warranties as such other
        party  may  reasonably   request.   The  Lessee  agrees  to  the  extent
        commercially reasonable to pursue by reasonable procedures such warranty
        claims in respect of the Aircraft as to its  knowledge  may arise having
        taken reasonable steps to ascertain such claims and to notify the Lessor
        of all such claims in excess of the Threshold Amount.

6.4     The Lessee agrees to assign or re-assign to the Lessor or its nominee at
        the time of redelivery of the Aircraft or thereafter, the benefit of all
        remaining  warranties and  indemnities,  product support and operational
        benefits  that are given to the Lessee  during  the Lease  Period by the
        Manufacturer  or supplier of any part of the Aircraft and any person who
        has   repaired   the   Aircraft  or  any  part  thereof  to  the  extent
        transferable.

7.      RENT

7.1     During the Lease  Period  the Lessee  shall pay to the Lessor (or to the
        Lessor's  order)  installments  of rent  for  the  Aircraft  monthly  in
        advance, each such instalment being of the amount specified in paragraph
        2 of Letter Agreement No. 1 opposite the relevant Payment Date and being
        payable on such Payment Date.

7.2     The  Lessee's  obligation  to  pay  rent  and  make  other  payments  in
        accordance  with this  Agreement  shall be  absolute  and  unconditional
        irrespective of any contingency  whatsoever  including,  but not limited
        to, (i) any right of set-off, counterclaim, recoupment, defence or other
        right which either  party  hereto may have  against the other,  (ii) any
        unavailability  of the  Aircraft  for  any  reason,  including,  but not
        limited to, any lack or  invalidity  of title or any other defect in the
        title,   airworthiness,   merchantability,   fitness  for  any  purpose,
        condition,  design,  or operation of any kind or nature of the Aircraft,
        or the ineligibility of the Aircraft for any particular use or trade, or
        for  registration  or  documentation  under  the  laws  of any  relevant
        jurisdiction,  or the Total Loss of, or any  damage  to,  the  Aircraft,
        (iii) any failure or delay on the part of either party  hereto,  whether

<PAGE>

       with or without fault on its part,  in performing or complying  with any
        of the  terms or  conditions  of this  Agreement,  (iv) any  insolvency,
        bankruptcy, administration, reorganization, arrangement, readjustment of
        debt, dissolution,  liquidation or similar proceedings by or against the
        Lessor, the Lessee or any permitted  sub-lessee,  or (v) any lack of due
        authorization  of,  or  other  defect  in,  this  Agreement,  excluding,
        however,  any period in which the Lessee cannot operate the Aircraft due
        to a breach by the Lessor of Clause 6.1 hereof.

7.3     In  addition to all other  payments to be made by the Lessee  under this
        Agreement, the Lessee shall pay to the Lessor (or to the Lessor's order)
        an Aircraft  Commitment  Fee in the amount,  and in accordance  with the
        schedule, set forth in paragraph 1 of Letter Agreement No. 1.

               8.     PAYMENTS, INTEREST AND CALCULATIONS

8.1     All payments to be made by the Lessee under this Agreement shall be made
        (unless specifically otherwise provided in this Agreement) without prior
        demand and in full, without any set-off or counterclaim  whatsoever and,
        subject as  provided in Clause  10.3  (Taxation),  free and clear of any
        deductions  or,  to the  extent  provided  in  Clauses  10.2  and  10.3,
        withholdings  in Dollars for value on the day on which payment is due to
        such bank and  account as the Lessor may from time to time notify to the
        Lessee in writing.

8.2     When any payment under this  Agreement  would  otherwise be due on a day
        which is not a Banking Day,  the due date for payment  shall be extended
        to the next  following  Banking Day unless such Banking Day falls in the
        next  calendar  month  in  which  case  payment  shall  be  made  on the
        immediately preceding Banking Day.

8.3     If the Lessee fails to pay any sum payable to any Indemnitee  (including
        without limitation,  any sum payable pursuant to this Clause 8.3) on its
        due date for payment  under this  Agreement the Lessee shall pay to such
        Indemnitee on demand  interest on such sum from the due date through the
        day prior to the date of actual  payment  (as well  after as before  any
        relevant judgment) at the Relevant Rate of Interest.

8.4     All interest under this Agreement shall accrue from day to day and shall
        be  calculated  on the basis of the actual  days  elapsed  and a 365 day
        year.

8.5     Any  certificate  or  determination  of the  Lessor  as to any  rate  of
        interest or any other amount payable under this Agreement  shall, in the
        absence of manifest  error,  be entitled to a rebuttable  presumption of
        correctness.

8.6     If any sum due from the Lessee  under this  Agreement or under any order
        or judgment  given or made in relation  thereto has to be converted from
        the currency  ("the first  currency") in which the same is payable under

<PAGE>

        this  Agreement or under such order or judgment  into  another  currency
        ("the second  currency") for the purpose of (i) making or filing a claim
        or proof against the Lessee,  (ii) obtaining an order or judgment in any
        court or other  tribunal or (iii)  enforcing any order or judgment given
        or made in relation to this  Agreement,  the Lessee shall  indemnify and
        hold  harmless the Lessor from and against any loss suffered as a result
        of any difference between (a) the rate of exchange used for such purpose
        to convert the sum in question  from the first  currency into the second
        currency  and (b) the rate or rates of  exchange at which the Lessor may
        in the ordinary course of business  purchase the first currency with the
        second  currency  upon receipt of a sum paid to it in  satisfaction,  in
        whole or in part,  of any such  order,  judgment,  claim or  proof.  Any
        amount  due from the  Lessee  under  this  Clause  8.6 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  Agreement  and the term
        "rate of exchange" includes any premium and costs of exchange payable in
        connection  with the  purchase  of the first  currency  with the  second
        currency.

9.      COSTS AND INDEMNITIES

9.1     The Lessee shall pay  promptly all costs or expenses  incurred by Lessee
        in connection  with the  performance of the Lessee's  obligations  under
        this Agreement,  including, but not limited to, the pre-Delivery testing
        by the Lessee,  the delivery of the Aircraft to Lessee, the registration
        of the Aircraft and filing of the Agreement at the FAA,  including,  but
        not limited to, the fees and expenses of special FAA counsel. During the
        Lease  Period,  Lessee will pay (or cause a permitted  sublessee to pay)
        promptly all costs and expenses of  registration,  possession,  control,
        use, operation, leasing, sub-leasing,  insurance,  maintenance,  repair,
        refurbishment,  overhaul, modification,  alteration, damage, storage and
        re-delivery of the Aircraft.

9.2     Whether or not the Aircraft is delivered to the Lessee  pursuant to this
        Agreement, the Lessee shall pay to the Lessor:

        (a)    no later than the date of this  Agreement,  the sum of $[ ]* as a
               contribution  towards the legal  costs  incurred by the Lessor in
               connection  with the  negotiation  and  preparation of the Lessee
               Documents and the Security Documents;

        (b)    on demand, all out-of-pocket expenses (including reasonable legal
               fees  and  expenses)   reasonably  incurred  by  the  Lessor  and
               Beneficiary in connection  with any amendment or extension of, or
               the  granting  of any waiver or  consent  under any of the Lessee
               Documents or the Security  Documents  requested by the Lessee and
               all out-of-pocket  expenses (including  reasonable legal fees and
               expenses)  reasonably  incurred  by the  Lessor  and  Beneficiary
               resulting from (i) the  enforcement  of, or  preservation  of any
               rights under,  any of the Lessee Documents in any such case after

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               the occurrence and during the continuance of a Termination  Event
               or  (ii)  breach  of  any  representation,   warranty,  covenant,
               agreement,   condition  or  stipulation  by  the  Lessee  therein
               contained.

        All  expenses  payable  pursuant to this Clause 9.2 shall be paid in the
        currency in which the same are incurred.

9.3     The Lessee shall  indemnify and hold harmless the  Indemnitees,  without
        prejudice  to any of the  Indemnitees'  other  rights  under  any of the
        Lessee  Documents,  from and  against  any costs or  expenses  which the
        Lessee  has  agreed  to pay in  any  Lessee  Document  but  which  shall
        nevertheless  be  claimed  from  or  assessed  against  or  paid  by any
        Indemnitee   (after  prior   consultation  with  Lessee  to  the  extent
        practicable  as reasonably  determined  by the Lessor),  and against any
        liability  incurred by any  Indemnitee by reason of any delay or failure
        of the Lessee to pay any such costs or expenses.

9.4     Without  prejudice to the Lessee's  obligations under Clauses 9.1 to 9.3
        inclusive (Costs and Indemnities), the Lessee agrees at all times during
        or  after  the  Lease  Period,   to  indemnify  and  hold  harmless  the
        Indemnitees  from and against all costs,  expenses,  payments,  charges,
        losses, demands, liabilities,  claims, actions, proceedings,  penalties,
        fines, damages, judgements,  orders or other sanctions (in this Clause 9
        together  referred to as "Losses")  which may be incurred by, or made or
        asserted against such Indemnitee at any time:

        (a)    relating to, or arising  directly or  indirectly in any manner or
               for  any  cause  or  reason   whatsoever   out  of,  the  design,
               manufacture,  testing,  delivery,  import, export,  registration,
               ownership,   possession,   control,   use,  operation,   leasing,
               sub-leasing,   insurance,   maintenance,  repair,  refurbishment,
               condition, service, overhaul,  modification,  change, alteration,
               loss, damage, removal, storage, re-delivery, sale or disposal of,
               in or to the  Aircraft,  or  otherwise  in  connection  with  the
               Aircraft,  or relating to loss or destruction of or damage to any
               property,  or death or  injury  of, or other  loss of  whatsoever
               nature suffered by, any person caused by, relating to, or arising
               from or out of (in each case whether  directly or indirectly) any
               of the foregoing matters; or

        (b)    on  the  grounds  that,  as the  result  of  any  alterations  or
               modifications  of the Aircraft,  any Engine or any Part after the
               Delivery Date, any design, article or material in the Aircraft or
               the  operation  or use thereof  constitutes  an  infringement  of
               patent,   intellectual   property   right  or  any  other   right
               whatsoever.

9.5     Any Loss is excluded from Lessee's agreement to  indemnify  under Clause
        9.4 to the extent such Loss:

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        (a)    Is attributable to acts or events occurring after the Aircraft is
               redelivered  to Lessor or its  designee  or to the Head Lessor or
               the Lenders, as the case may be, in compliance with Clause 19 and
               Schedule 4 hereof;

        (b)    Is a Tax, whether or not Lessee is required to indemnify therefor
               under Clause 10 hereof;

        (c)    Arises as a result of a Lessor Encumbrance;

        (d)    Is attributable to the gross negligence or willful  misconduct of
               any  Indemnitee  or the  breach by any  Indemnitee  of any of its
               representations or obligations under any of the Lease Documents;

        (e)    Is a cost or expense  imposed on Lessor or any  Indemnitee by the
               terms of any of the Lessee Documents or incurred by Lessor or any
               Indemnitee in performing its  obligations to Lessee  hereunder or
               thereunder;

        (f)    Consists of a cost, fee or expense arising out of the transfer by
               Lessor  or  transfer  or  acquisition  by any  Indemnitee  of any
               interest in the  Aircraft or Lessee  Documents  at a time when no
               Termination Event has occurred and is continuing;

        (g)    Arises out of or results from the acts of any Indemnitee prior to
               the date of this Agreement;

        (h)    Consists of any cost, fee or other expense incurred in connection
               with  preparing  or  negotiating  any  Lenders  Document  and any
               amendment  to or  restructuring  of any Lenders  Document  unless
               Lessee  has  expressly  agreed to pay such  cost,  fee or expense
               under any Lessee Document or such Lender Document or amendment or
               restructuring  results from the occurrence  and  continuance of a
               Termination Event;

        (i)    With  respect to a Loss  incurred  under Clause  9.5(b) only,  is
               indemnified by the Manufacturer under the Purchase Agreement;

        (j)    With  respect to any  Indemnitee,  arises  from  acts,  events or
               omissions by such  Indemnitee  in such  Indemnitee's  capacity as
               designer,  manufacturer  of  or  maintenance  performer  for  the
               Aircraft or any Part;

        (k)    Consists of costs,  fees or expenses  related to the negotiation,
               preparation or execution of the Lessee Documents in excess of the
               $[ ]* specified in Clause 9.2(a);

        (l)    Arises out of any default under any Lenders  Document that is not
               a Relevant Event hereunder; or
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        (m)    Consists of costs,  fees and/or  expenses  incurred in connection
               with  the  establishment,  maintenance  or  restructuring  of the
               financing  or  refinancing  of the Aircraft  (including,  without
               limitation,  the Head Lease) or any Indemnitee's  interest in the
               Trust Estate  established under the Trust Agreement or any action
               or dispute between or among the parties to any Lenders  Document,
               in each case not resulting from the occurrence and continuance of
               a Relevant Event hereunder;

9.6     In the case of any Loss  indemnified by Lessee under Clause 9.4 which is
        covered by a policy of insurance maintained by Lessee pursuant to Clause
        16  and  Schedule  3  of  this   Agreement,   as  a  condition  to  such
        indemnification,  each  Indemnitee  shall  agree to  cooperate  with the
        insurers  in the  exercise  of their  rights to  investigate,  defend or
        compromise  such Loss as may be required to retain the  benefits of such
        insurance with respect to such Loss.

9.7     An  Indemnitee  shall  promptly  notify  Lessee  of any Loss as to which
        indemnification is sought,  provided that failure to provide such notice
        promptly  shall not affect  Lessee's  obligation  to indemnify  any Loss
        hereunder  except to the extent that such failure  materially  adversely
        affects the ability of the Lessee to contest  such Loss.  Subject to the
        rights of insurers  under policies of insurance  maintained  pursuant to
        Section 16 and Schedule 3 this Agreement, Lessee shall have the right to
        contest  and  defend  any  Loss,  in its own  name or in the name of the
        applicable  Indemnitee,  and shall be entitled to assume  responsibility
        for and  control  of the  defense  of any Loss in  respect  of which any
        Indemnitee makes or intends to make a claim against Lessee for indemnity
        pursuant to this Clause 9 (other than a Loss or claim arising out of any
        Relevant Event)  PROVIDED THAT (a) the legal counsel  retained by Lessee
        for such  purpose  is  reasonably  acceptable  to Lessor  and (b) Lessee
        pursues  such  contest  diligently  and in  good  faith  and,  upon  the
        reasonable  request of the  Indemnitee,  provides  the  Indemnitee  with
        reasonable  details of the status of the contest and copies of all legal
        briefs, court filings and, subject to applicable considerations of legal
        privilege,  counsel's  memoranda relevant to such contest;  and provided
        further,  that if Lessee is legally precluded from pursuing such contest
        or  defense  itself  or from  impleading  any  party  which  the  Lessee
        reasonably  believes  is  ultimately  responsible  for such Loss or from
        asserting any defense, cross-claim reasonably deemed required by Lessee,
        the applicable  Indemnitee  shall, upon Lessee's request and at Lessee's
        expense (with respect to  reasonable  out-of-pocket  costs and expenses)
        and if legally able to do so and fully  indemnified by Lessee hereunder,
        diligently and in good faith pursue such contest, defense,  impleader or
        cross-claim  and  provide  Lessee   information  and  documents  thereon
        comparable to that described  above. In the event that (1) a Termination
        Event has occurred and is  continuing  or (2) the Lessee fails to comply
        with the foregoing  requirements in any material respect, the applicable
        Indemnitee  may  assume  responsibility  for and  control  the  relevant
        contest. To the extent Lessee is entitled to defend any claim hereunder,
        the Indemnitee shall cooperate with all reasonable requests of Lessee in

<PAGE>

        connection with such defense.  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,  and such participation shall not constitute a waiver of the
        indemnification provided in Clause 9.4. Except as above provided in this
        Clause 9.7, an  Indemnitee  shall not be required to contest any Loss or
        to assume  responsibility for or control of any judicial proceeding with
        respect thereto.

9.8     (a)    To the extent that a Loss  indemnified by Lessee under Clause 9.4
               is in fact  paid in full by  Lessee  and/or  an  insurer  under a
               policy of insurance  maintained  by Lessee  pursuant to Clause 16
               and Schedule 3 of this Agreement,  Lessee and/or such insurer, as
               the case may be, shall be  subrogated  to the rights and remedies
               of the Indemnitee on whose behalf such Loss was paid with respect
               to the  transaction or event giving rise to such Loss.  Should an
               Indemnitee  receive any refund, in whole or in part, with respect
               to any Loss paid by Lessee  hereunder  and no Relevant  Event has
               occurred  and is  continuing,  it shall  promptly  pay the amount
               refunded  (but not an amount in excess of the  amount  Lessee has
               paid in respect of such Loss plus interest  attributable  thereto
               in an amount  reasonably  determined by the  Indemnitee and in no
               event will the amount  paid by the  Indemnitee  exceed the amount
               refunded  to the  Indemnitee)  over to  Lessee  less  any net tax
               detriment  realized by such Indemnitee as a result of the receipt
               or accrual of such refund  plus any net tax  savings  realized by
               such Indemnitee as a result of such payment. If the Indemnitee is
               later  required  to  repay  all or  part  of  such  refund,  such
               repayment  shall be a Loss and the  Lessee  shall  indemnify  the
               Indemnitee  against  such  Loss in  accordance  with the terms of
               Clause 9.

        (b)    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 the Lessee,  which consent shall not be
               unreasonably  withheld or delayed,  unless such Indemnitee waives
               its rights under this Clause 9 with  respect to such Losses.  The
               entering  into any  such  settlement  or  compromise  or  consent
               without the prior  written  consent of Lessee shall  constitute a
               waiver by such  Indemnitee  of all its rights of  indemnification
               with respect to the Loss which is the subject of such  settlement
               or compromise or consent.

9.9     In the event  Lessee is required to  indemnify  any  Indemnified  Person
        under Clause 9.4, Lessee shall pay to such Indemnified  Person an amount
        which, after deduction of all taxes actually required to be paid by such
        Indemnified  Person in respect of the receipt of such  amount  under the
        applicable laws of any government or taxing  jurisdiction  (after giving
        credit  for any  saving  in  respect  of any  such  taxes by  reason  of
        deductions,  credits or  allowances  related to the  payment of the Loss
        indemnified against and the payment of related taxes), shall be equal to

<PAGE>

        the amount of the indemnification required.

9.10    The general indemnification provisions of Clauses 9.4 through Clause 9.9
        are not intended to waive or supersede  any specific  provisions of this
        Agreement to the extent such provisions apply to any Loss.

9.11    The Lessee's  obligations  under  Clause 9  shall survive the end of the
        Lease Period.

10.     TAXATION

10.1    (a)    Sums  payable  to  the  Indemnitees  by  the  Lessee  under  this
               Agreement  by  way  of  indemnity  or   reimbursement   shall  be
               calculated  on an  after-tax  basis.  Accordingly,  if and to the
               extent that any such sum payable to any  Indemnitee is taxable in
               the hands of such Person (as the  auditors of such Person  acting
               as experts  and not as  arbitrators  shall  certify  from time to
               time)  such sum  shall be  increased  to an amount  which  (after
               subtracting  any Taxes  suffered by such Person in respect of the
               receipt  of  such  amount  and  after  taking  into  account  any
               deduction,  credit or other  benefit for Tax  purposes  for Taxes
               available in the same taxable year as such sum is taxable to such
               Person  in  respect  of  the  discharge  by  such  Person  of any
               corresponding  liability to a third party) shall equal the amount
               which such Person would have  received had the sum payable by the
               Lessee not been taxable in the hands of such  Person.  If the sum
               payable by the Lessee is  initially  paid on the basis that it is
               not taxable in the hands of any Indemnitee and it is subsequently
               determined  to be taxable or vice versa,  subject to the terms of
               Clause 10.9 hereof,  such  adjustment  and payment  shall be made
               between  such  Person  and the  Lessee  as the  auditors  of such
               Indemnitee  (acting  as  experts  and not as  arbitrators)  shall
               certify as appropriate to restore the after-tax  position of such
               Person to that  which it would have been had the  adjustment  not
               been necessary.

        (b)    If  and  to  the  extent  that  any  sum  (the  "indemnity  sum")
               constituting   (directly  or  indirectly)  an  indemnity  to  any
               Indemnitee  but paid by the Lessee to any person  other than such
               Indemnitee,  shall  properly be treated under  applicable  law as
               taxable in the hands of such Indemnitee,  the Lessee shall pay to
               such  Person  such  sum  (the   "compensating   sum")  as  (after
               subtracting  any Taxes  incurred by such Person in respect of the
               compensating  sum and after taking into  account any  deductions,
               credits  and  other  Tax  benefits  currently  available  to such
               Indemnitee in respect of the payment of the indemnity sum to such
               third   person  for  the  benefit  of,  or  on  behalf  of,  such
               Indemnitee)   shall  reimburse  such  Indemnitee  for  any  Taxes
               incurred by it in respect of the indemnity sum.

        (c)    For the purposes of this Clause  10.1(a) a sum shall be deemed to
               be taxable in the hands of an Indemnitee if it is required  under
               applicable  law to be taken into account in computing the taxable

<PAGE>

               profits or gains of such  Indemnitee,  and if so such  Indemnitee
               shall be deemed to have  suffered  Taxes  thereon  at the rate of
               taxation  applicable  to such  Person's  profits or gains for the
               period in which  the  payment  is so  required  to be taken  into
               account for the purposes of such taxation,  and any associated or
               resulting  deduction,  credit  or  other  benefit  to the  extent
               realized  in the  same  taxable  year as the sum  referred  to in
               Clause  10.1(a) or 10.1(b) is deemed to be taxable shall be taken
               into account.  Each Indemnitee shall use good faith in filing its
               Tax returns and in dealing with taxing  authorities to the extent
               required to seek and claim Tax  benefits  which would  reduce the
               amount of any indemnity  payment required pursuant to this Clause
               10, it being understood and agreed,  however,  that no Indemnitee
               will be under any  obligation  to take any such actions which are
               not consistent  with the Tax reporting  practices and policies of
               such Indemnitee without regard to this transaction.

        (d)    If any Indemnitee shall actually recognize (as determined in good
               faith by the relevant  Indemnitee) a tax benefit by reason of any
               Tax paid or indemnified against by Lessee pursuant to this Clause
               10 or a Loss indemnified  against by Lessee pursuant to Clause 9,
               (whether  such tax  benefit  shall be by means of a  foreign  tax
               credit, depreciation or cost recovery deduction or otherwise) not
               otherwise   taken  into  account  in  computing  any  payment  or
               indemnity by Lessee under this Agreement,  such Indemnitee  shall
               pay to Lessee an amount  equal to such tax  benefit  plus any tax
               benefit  recognized as the result of any payment made pursuant to
               this  sentence;  PROVIDED,  that  such  Indemnitee  shall  not be
               required to make any payment  pursuant to this sentence if and so
               as long as  Termination  Event of a monetary  nature has occurred
               and is continuing; provided, FURTHER, that payments to the Lessee
               by an  Indemnitee  hereunder  shall not exceed (i) the  aggregate
               amount  of all  prior  payments  (plus  any  interest  reasonably
               attributable  thereto in an amount  reasonably  determined by the
               Indemnitee) with respect to such Tax or Loss by the Lessee to the
               Indemnitee  LESS (ii) the aggregate  amount of all prior payments
               with respect to such Tax or Loss by the  Indemnitee to the Lessee
               pursuant  to this Clause  10.1(d).  Any Taxes that are imposed on
               any  Indemnitee  as a result  of the  disallowance  or  reduction
               (including  the  expiration  of  any  tax  credit  carryovers  or
               carrybacks  of such  Indemnitee  that  would not  otherwise  have
               expired) of any reduction in Taxes or refund  referred to in this
               Clause  10.1(d),  as to which (and to the extent) such Indemnitee
               has made any  payment to the  Lessee  required  hereby,  shall be
               treated as a Tax for which the Lessee is  obligated  to indemnify
               such  Indemnitee  pursuant to the provisions of Clause 10 without
               regard to the exclusions set forth in Clause 10.4 hereof.

10.2    WITHHOLDING. If at any time any applicable law, regulation or regulatory
        requirement,  or any governmental authority,  monetary agency or central
        bank requires the Lessee to make any deduction or withholding in respect

<PAGE>

        of Taxes from any payment due to the Lessor or the Beneficiary under the
        Lease  Documents as a result of any change  occurring  after the date of
        this Agreement in applicable law, regulation, treaty or ruling:

        (1)    the sum due from the Lessee in respect of such  payment  shall be
               increased  to the  extent  necessary  to ensure  that,  after the
               making of such deduction or withholding, each Indemnitee receives
               on the due date for such payment a net sum equal to the sum which
               it would have received had no such deduction or withholding  been
               required to be made; PROVIDED, HOWEVER, that the Lessee shall not
               be required to pay any such additional  amount to the extent that
               such Tax would not have been  imposed but for (x) Taxes in effect
               on the  date  of a  voluntary  transfer  by a  Indemnitee  of any
               interest  in the  Aircraft or any of the Lease  Documents  (other
               than any such  transfer  that  occurs  after the  occurrence  and
               during the  continuance  of a Termination  Event) which would not
               have  been  imposed  had  such  Indemnitee  not  transferred  its
               interest  in the  Aircraft or the Lease  Documents  or (y) in the
               case of the Beneficiary,  failure to deliver a properly completed
               Internal Revenue Service Form 1001 (or any substitute form) under
               the applicable United States income tax convention (i) initially,
               on or  prior  to the due  date of the  first  payment  due to the
               Lessor under this  Agreement,  or (ii) after the form referred to
               in clause (i) has expired, after a request by the Lessee for such
               form,  unless it shall no longer be entitled to deliver such form
               due to a change in law, regulation ruling or such convention;

        (2)    the Lessee shall pay to the relevant  authority within the period
               for payment  permitted by  applicable  law the full amount of the
               deduction or withholding (including, but without prejudice to the
               generality of the foregoing,  the full amount of any deduction or
               withholding  from any  increased  amount  paid  pursuant  to this
               Clause 10.2); and

        (3)    the Lessee shall furnish to the  appropriate  Indemnitee  written
               evidence of payment to the relevant  authority  within the period
               for payment  permitted by applicable law, of all amounts deducted
               or withheld as aforesaid.

10.3    TAXES INDEMNIFIED. The Lessee agrees to indemnify and hold harmless each
        Indemnitee  against and agrees to protect,  save and keep  harmless each
        Indemnitee  against,  all Taxes that may be imposed upon or with respect
        to any Indemnitee,  the Lessee, this Agreement, the Lease Documents, the
        Aircraft,  the Airframe,  any Engine, or any Part or any interest in any
        of the foregoing, upon, based upon, measured by, in whole or in part, or
        with respect to:

        (a)    the Aircraft,  the Airframe, any Engine, any Part or any interest
               in or with respect to the foregoing;
<PAGE>

        (b)    the   delivery,   location,   ownership,   manufacture,   design,
               importation,  exportation,  transfer of title,  return,  storage,
               leasing,   operation,  use,  maintenance,   repair,   alteration,
               location,  subleasing,  ownership,  purchase, sale, registration,
               presence,  re-registration,  subleasing,  hire, conditional sale,
               delivery,   redelivery,   nondelivery,   acceptance,   rejection,
               transport,  modification,   substitution,  replacement  or  other
               disposition  of or other  action  or event  with  respect  to the
               Aircraft,  the Airframe,  any Engine or Part or any interest with
               respect to the foregoing;

        (c)    rent,  including  all  installments  of rent,  payable under this
               Agreement;

        (d)    this  Agreement  and the other Lease  Documents or  amendments or
               supplements thereto and any other documents  contemplated thereby
               or the transactions  contemplated  thereby or resulting therefrom
               or the  exercise  of any  rights or  remedies  thereunder  or the
               enforcement thereof; or

        (e)    otherwise with respect to or in connection with the  transactions
               contemplated by this Agreement or the other Lease Documents.

10.4    TAXES  EXCLUDED.  The indemnity  provided for in Clause 10.3 above shall
        not apply to, and the  Lessee  shall have no  indemnity  liability  with
        respect to, any of the following:

        (a)    Taxes  (other than Taxes in the nature of sales,  use,  property,
               rental,  value-added,  goods and  services,  transfer or turnover
               taxes or, in the case of Taxes  imposed by any  jurisdiction,  to
               the extent  such Taxes are  required  pursuant to Clause 10.1 for
               the  computation of amounts payable by the Lessee on an after-tax
               basis) on,  based on,  measured by or with  respect to the net or
               gross  income,  capital  or net  worth,  net or  gross  receipts,
               franchises,  excess  profits  or  conduct  of  business  of  such
               Indemnitee (including,  without limitation,  capital gains taxes,
               minimum taxes,  alternative  minimum taxes,  branch profits taxes
               and accumulated earnings taxes) imposed by (A) any federal, state
               or local government, political subdivision or taxing authority in
               the  United  States  other  than (x) any such  Taxes  imposed  by
               withholding  on or with  respect  to amounts  payable  under this
               Agreement by any federal,  state or local  government,  political
               subdivision or taxing authority in the United States by reason of

<PAGE>

               a change of law, regulation, treaty or ruling as in effect on the
               date  hereof and (y) any such Taxes that are imposed by any state
               or local  government,  political  subdivision or taxing authority
               thereof in the United  States  (other than any state in which the
               applicable  Indemnitee is organized,  has its principal  place of
               business  or is  otherwise  subject  to  taxation  as a result of
               transactions  unrelated to the transactions  contemplated  hereby
               (unless such  Indemnitee  would not have been subject to taxation
               by such taxing authority but for leasing  transactions  involving
               aircraft in which the Lessor is the owner or the  Beneficiary  is
               the  owner or  beneficial  owner of such  aircraft)  or any local
               government or political  subdivision  or taxing  authority in any
               such  state) to the extent  that such  Taxes  would not have been
               imposed but for (1) the registration,  operation, location or use
               of  the  Aircraft,  Airframe,  any  Engine  or  any  Part  in the
               jurisdiction  imposing such Tax or (2) the activities or presence
               of any of the Lessee,  any  affiliate of the Lessee or any Person
               in possession of the Aircraft,  Airframe,  any Engine or any Part
               (other than the Lessor or the Beneficiary) (each referred to as a
               "Lessee  Person") in or any payment  under this  Agreement  being
               made by a Lessee Person from the jurisdiction  imposing such Tax,
               (B) any government or taxing  authority of or in any jurisdiction
               (other than the United  States or any  political  subdivision  or
               taxing  authority  thereof or therein)  other than Taxes that are
               imposed as a result of the registration,  operation,  location or
               use of the  Aircraft,  Airframe,  any  Engine or any Part in, the
               existence  of an office,  fixed place of  business  or  permanent
               establishment  of a Lessee  Person  in, a  Lessee  Person  making
               payments from or other  activities or presence of a Lessee Person
               in  the  jurisdiction   imposing  the  Tax,   provided  that  the
               applicable  Indemnitee  is  not  organized,  does  not  have  its
               principal  place of  business  and is not  otherwise  subject  to
               taxation  in such  jurisdiction  as the  result  of  transactions
               unrelated to the  transactions  contemplated  hereby (unless such
               Indemnitee would not have been subject to taxation by such taxing
               authority  but for  leasing  transactions  involving  aircraft in
               which the Lessor is the owner or the  Beneficiary is the owner or
               beneficial  owner of such aircraft),  or (C) any taxing authority
               in Ireland;

        (b)    Taxes  to the  extent  resulting  from  (1) any  voluntary  sale,
               assignment,  transfer  or  other  voluntary  disposition  by such
               Indemnitee of the Aircraft,  Airframe,  any Engine or any Part or
               interest  with  respect  to the  foregoing,  (2) any  involuntary
               transfer  by  such  Indemnitee  of the  Aircraft,  Airframe,  any
               Engine,  any  Part,  the  rent,  the trust on behalf of which the
               Lessor is  acting  or any  interest  with  respect  to any of the
               foregoing  resulting from any bankruptcy or other  proceeding for
               the relief of debtors in which such Indemnitee is the debtor,  or
               (3) any involuntary  transfer by such Indemnitee of the Aircraft,
               Airframe,  any Engine or any Part or interest with respect to the
               foregoing  resulting from a default by such Indemnitee  under any
               secured financing  transaction  relating to the Aircraft (unless,
               in each  preceding  case,  such  sale,  assignment,  transfer  or
               disposition occurs pursuant to the exercise of remedies after the
               occurrence and during the continuance of a Termination Event);

        (c)    Taxes that are imposed on a transferee  from an Indemnitee to the
               extent of the excess of such Taxes imposed under  applicable  law
               in effect on the date of transfer, over the amount of Taxes which
               would have been  imposed  had there not been a sale,  assignment,
  
<PAGE>

            transfer or other  disposition  to such  transferee,  unless such
               sale,  assignment,  transfer or other disposition occurs pursuant
               to an exercise of remedies  hereunder  after a Termination  Event
               has occurred and while such  Termination  Event is continuing (it
               being  understood  and agreed that this Clause  10.4(c) shall not
               apply to the calculation of the amount  necessary for any payment
               required to be made on an after-tax basis);

        (d)    Taxes  imposed in respect of any period after the  expiration  or
               earlier  termination  of this  Agreement in  accordance  with its
               terms,  except to the extent such Taxes are imposed  with respect
               to the  receipt by an  Indemnitee  of any  amounts  due under the
               Lease  Documents  after such  expiration  or  termination  of the
               Lease, it being  understood that the exception from indemnity set
               forth in this  Clause  10.4(d)  shall  not  apply to Taxes to the
               extent such Taxes relate to events  occurring or matters  arising
               prior  to  or  simultaneously  with  the  time  of  the  earliest
               occurrence of the events covered by this Clause 10.4(d);

        (e)    Taxes imposed upon the Lessor that are on, based on,  measured by
               or with  respect to any fees,  commissions  or  compensation  for
               services  rendered by the Lessor in its capacity as trustee under
               the  Trust  Agreement,   or  fees,  commissions  or  compensation
               received by the Head Lessor or any Lender;

        (f)    Without  affecting  the  Lessee's  rights and  obligations  under
               Clauses 10.2 and 10.6,  Taxes for so long as such Taxes are being
               contested  in  accordance  with the  provisions  of  Clause  10.6
               hereof;

        (g)    Taxes  that  would  not  have  been  imposed  with  respect  to a
               Indemnitee but for any failure of such  Indemnitee  (after timely
               written  notice  from  the  Lessee   accompanied  by  a  properly
               completed draft form of any such  requirement  prepared by Lessee
               at  Lessee's  expense,  other than the Form 1001 to be  delivered
               prior to the date the first  payment is due to the  Lessor  under
               this  Agreement)  to  comply  with  certification,   information,
               documentation, reporting or other similar requirements concerning
               the  nationality,   residence,   identity,  connection  with  the
               jurisdiction  imposing such Taxes or any other  matters,  that is
               required by law as a condition  to  exemption or the relief from,
               or  reduction  of,  such Tax (but only if and to the extent  that
               such  compliance  may be  effected  by  such  Indemnitee  without
               materially  increasing such  Indemnitee's risk of exposure to any
               Tax in the  applicable  jurisdiction,  related  expenses or other
               adverse consequences not indemnified by the Lessee hereunder);

        (h)    Taxes to the extent that such Taxes  would not have been  imposed
               on or with respect to a Indemnitee but for the willful misconduct
               or gross negligence of any Indemnitee thereof;
<PAGE>

        (i)    Taxes which an Indemnitee  would be required to contest  pursuant
               to Clause 10.6 and which such Indemnitee has failed to contest as
               and to the extent required by clause 10.6 and any other Taxes for
               which a successful  contest is foreclosed because of such failure
               of the  Indemnitee,  provided that such failure by the Indemnitee
               has a  material  adverse  effect on the  ability of the Lessee to
               contest such Tax or if and to the extent such failure  results in
               an increase in the amount of any penalties, interests or addition
               to such Tax  (unless  any such  failure by an  Indemnitee  is the
               result of a failure  by the  Lessee to  fulfill  its  obligations
               under Clause 10.6);

        (j)    Taxes imposed on any Indemnitee  resulting from such Indemnitee's
               original  purchase  or other  acquisition  of the  Aircraft,  any
               Engine or any Part or any interest in any thereof;

        (k)    Taxes  imposed  with  respect to any period prior to the Delivery
               Date;

        (l)    Taxes  which  have been  included in the cost of the Aircraft; or

        (m)    Taxes, to the extent that (1) such Taxes  constitute  interest or
               penalties  relating to a Tax (but not the underlying Tax) and (2)
               such  interest  or  penalties  result from the failure to file or
               late  filing of any Tax  return by any  Indemnitee,  unless  such
               failure by the  Indemnitee to file or late filing  results from a
               failure of the Lessee to fulfill its obligation under clause 10.7
               or any other provision of this Agreement compliance with which by
               Lessee is  necessary in order for such  Indemnitee  to be able to
               file such Tax return.

10.5    PAYMENTS.  Each Indemnitee  shall promptly forward to Lessee any written
        notice,  bill  or  advice  received  by it  from  any  taxing  authority
        concerning any Tax for which it seeks  indemnification under this clause
        10. The Lessee shall pay any Tax for which it is liable pursuant to this
        Clause 10 directly to the  appropriate  taxing  authority when due or to
        the Indemnitee within 30 days after receipt of a written demand therefor
        from such Indemnitee  accompanied by a written  statement  describing in
        reasonable  detail the Taxes which are the subject of and basis for such
        indemnity and the computation of the amount so payable, but not prior to
        the  later  of (i) in the  case of  Taxes  paid to an  Indemnitee,  five
        Business  Days prior to the date payment of such Taxes is due, or in the
        case of Taxes paid directly to the  appropriate  taxing  authority,  the
        date such  Taxes are due,  in each  case,  provided  Lessee  has  actual
        knowledge  of the date  such  Tax is due or (ii) in the case of  amounts
        which  are  being  contested,  within  30  Business  Days  after a Final

<PAGE>

        Determination  (as  defined  below).  For  purposes of this Clause 10, a
        "Final  Determination"  shall mean (I) a decision,  judgment,  decree or
        other order by any court of competent  jurisdiction that occurs pursuant
        to the provisions of Clause 10.6,  which decision,  judgment,  decree or
        other order has become final and unappealable,  (II) a closing agreement
        or settlement  agreement  entered into in accordance with Clause 10 that
        has  become  binding  and is not  subject  to  further  review or appeal
        (absent fraud,  misrepresentation,  etc.),  or (III) the  termination of
        administrative   proceedings   and  the   expiration  of  the  time  for
        instituting a claim in a court  proceeding,  in each case, in accordance
        with Clause 10.6.

10.6    CONTESTS; REFUNDS. If a written claim is made against any Indemnitee for
        any  Taxes  that the  Lessee  could be  required  to  indemnify  against
        pursuant to this Clause 10, such  Indemnitee  shall promptly  notify the
        Lessee in writing  (and shall take no action with  respect to such claim
        to the extent  reasonably  practicable for a period of 30 days following
        such notice to the  Lessee),  but the failure to give such notice  shall
        not  diminish the Lessee's  obligation  hereunder,  except to the extent
        that the Lessee's  ability to contest such Tax is  materially  adversely
        affected or if and to the extent such failure  results in the imposition
        of or an increase in the amount of any penalties,  interest or additions
        to such Tax. If  requested  by the Lessee in writing,  within 30 days of
        receipt of such notice from the  Indemnitee,  such  Indemnitee  shall in
        good faith contest  (including  pursuing all judicial appeals other than
        appeals to the  United  States  Supreme  Court),  at the  expense of the
        Lessee,  in the name of such Indemnitee (or the Indemnitee,  in its sole
        discretion,  may permit the Lessee,  if  permitted by law, to contest in
        the name of the Lessee or such  Indemnitee) the validity,  applicability
        and  amount  of such  Taxes by (in the  sole  discretion  of the  Person
        conducting such contest) (i) resisting payment thereof,  (ii) not paying
        the same except under  protest,  if protest is necessary and proper,  or
        (iii) if payment shall be made,  seeking a refund thereof in appropriate
        administrative  and  judicial  proceedings;  PROVIDED  that (u) prior to
        taking such action,  the Lessee shall have agreed to pay such Indemnitee
        all  reasonable  out-of-pocket  costs and expenses that such  Indemnitee
        incurs in connection  with and reasonably  allocable to contesting  such
        claim,  including,  without  limitation,  all  reasonable  out-of-pocket
        legal,  accountants' and investigatory  fees and  disbursements,  (v) if
        such contest is to be initiated by the payment of, and the claiming of a
        refund for, such Taxes, then  notwithstanding  Clauses 10.4 or 10.5, the
        Lessee  shall  provide  such  Indemnitee  with  sufficient  funds (on an
        interest-free  basis and at no  additional  net  after-tax  cost to such
        Indemnitee)  to make such payment,  (w) such  proceedings do not involve
        (A) the  likelihood  of the sale,  forfeiture  or loss of the  Aircraft,
        Airframe any Engine or any Part,  unless the Lessee shall have  provided
        security for the Lessee's  obligations under this Clause 10 with respect
        to  such  claim  reasonably  satisfactory  to  such  Indemnitee  and the
        Beneficiary,  or (B) any  material  risk of the  imposition  of criminal
        penalties  arising from the proper conduct of such  proceeding,  (x) the
        Lessee shall have provided to the  Indemnitee an opinion of the Lessee's
        independent tax counsel (such counsel to be reasonably acceptable to the
        Indemnitee) to the effect that a reasonable basis, within the meaning of
        ABA Formal  Opinion  No.  85-352,  exists for such  contest,  and (y) no
        Termination  Event shall have  occurred  and be  continuing,  unless the
        Lessee shall have provided  security for the Lessee's  obligations under
        this  Clause  10  with  respect  to  such  claim  satisfactory  to  such
        Indemnitee.  In any contest  conducted by a Indemnitee,  the  Indemnitee
        shall  consult in good faith with the Lessee  concerning  the method and
        the forum for such  contest  and shall  permit  the Lessee to review and
  
<PAGE>

        comment  upon all written  claims and  submissions,  but the  Indemnitee
        shall have ultimate control over all aspects of such contest. The Lessee
        shall keep the Indemnitee  fully informed as to the nature,  conduct and
        results  of any  contest  conducted  by the  Lessee  in the name of such
        Indemnitee.  Any  Indemnitee  may elect not to contest  pursuant to this
        Clause 10.6,  or to settle any contest,  but such  election to settle or
        not to contest  without the  written  consent of Lessee  (which  consent
        shall not be unreasonably  withheld)  shall  constitute a waiver by such
        Indemnitee  of any right to  indemnification  pursuant to this Clause 10
        with respect to the claim which was the subject of such proposed contest
        or  settlement,  as the  case may be (and  any  other  claim or Tax with
        respect to which a  successful  contest is  foreclosed  as the result of
        such  settlement  or  election  not to  contest)  and, if the Lessee has
        theretofore  provided  such  Indemnitee  with the funds to pay the Taxes
        that are the subject of such proposed contest or settlement, as the case
        may be, such Indemnitee shall promptly repay such funds.

        Notwithstanding  anything  contained in this Clause 10 to the  contrary,
        the Indemnitee shall not be required to contest any claim if the subject
        matter thereof shall be of a continuing nature and shall have previously
        been decided adversely by a court of competent  jurisdiction pursuant to
        the contest provisions of this Clause 10.6, unless there shall have been
        a change in law (or  interpretation  thereof) or a change in facts after
        the date with  respect to which such  previous  contest  shall have been
        decided,  and  the  Indemnitee  shall  have  received,  at the  Lessee's
        expense,  an opinion of independent  tax counsel  selected by the Lessee
        and  reasonably  acceptable  to such  Indemnitee to the effect that as a
        result of such change in law (or interpretation  thereof) or a change in
        facts,  it is more likely than not that the  Indemnitee  will prevail in
        such contest.

        If any Indemnitee  shall obtain a refund or credit of all or any part of
        any Taxes that the Lessee, pursuant to this Clause 10.6, shall have paid
        for or advanced to such  Indemnitee  or for which the Lessee  shall have
        reimbursed such  Indemnitee,  such Indemnitee  shall, at such time as no
        Termination Event shall have occurred and be continuing, promptly pay to
        the Lessee an amount which,  after the  subtraction of the amount of any
        further net tax savings actually realized by such Indemnitee as a result
        of the payment  under this  paragraph,  and the  addition of any net tax
        detriment  realized  by such  Indemnitee  as a result of the  receipt or
        accrual of such  refund  and any  interest  received  or accrued by such
        Indemnitee  on such  refund,  is equal to the  amount of such  refund or
        credit,  plus  any  interest  actually  received  or  credited  by  such
        Indemnitee on such refund or credit that is fairly  attributable  to any
        Taxes paid by the Lessee to or for such  Indemnitee;  PROVIDED that such
        Indemnitee  shall not be  obligated  to make any  payment  to the Lessee
        pursuant to this  sentence  (other than on account of interest  actually
        received  or  credited)  to the extent  that the amount of such  payment
        would exceed (x) the amount of all prior  payments made by the Lessee to
        such  Indemnitee  pursuant  to this Clause 10 less (y) the amount of all
        prior payments by such Indemnitee to the Lessee (other than that portion

<PAGE>

        of  such  payments  attributable  to  interest  payable  to  the  Lessee
        hereunder)  pursuant  to this  Clause 10 (and the  amount of any  excess
        described  in this  proviso  shall  reduce PRO TANTO the amount that the
        Lessee is  subsequently  obligated  to pay  pursuant  to this  Clause 10
        hereof).  If it is later determined that the Indemnitee was not entitled
        to such refund and such refund would not otherwise  have been  available
        as a credit against a tax liability of such  Indemnitee not  indemnified
        by the Lessee  hereunder,  the  portion of such  refund  that is repaid,
        recaptured or  disallowed  will be treated as Taxes for which the Lessee
        must indemnify the Indemnitee  pursuant to this Clause 10 without regard
        to Clause 10.4. If the Indemnitee  receives an award of attorney's  fees
        in a contest  for which  Lessee  has paid an  allocable  portion  of the
        contest  expenses,   such  Indemnitee  shall  pay  to  Lessee  the  same
        proportion   of  the  amount  of  such  award  as  the  amount  of  such
        Indemnitee's  attorney's  fees paid or reimbursed by Lessee bears to the
        total amount of the attorneys' fees actually  incurred by the Indemnitee
        in conducting such contest.

10.7    REPORTS.  The  Lessee  will  provide  (at  the  Lessee's  expense)  such
        information as is within its control and reasonably requested in writing
        by an Indemnitee that is required or reasonably necessary to enable such
        Indemnitee to fulfill its tax filing,  audit or litigation  requirements
        with respect to the transactions contemplated by the Lease Documents. In
        case any  report,  return or  statement  is required to be made or filed
        with respect to Taxes for which the Lessee has an  indemnity  obligation
        under this Clause 10, the Lessee shall promptly notify the Indemnitee of
        such requirement and shall take the appropriate  action specified in the
        next  succeeding  sentence,  PROVIDED  that such  Indemnitee  shall have
        furnished the Lessee at the Lessee's expense (with respect to reasonable
        out-of-pocket  costs and expenses only) with such information  requested
        by the  Lessee,  not within the  control  of the  Lessee,  as is in such
        Indemnitee's control reasonably necessary to file such report, return or
        statement.  The Lessee shall  either (i) to the extent  permitted by law
        (except for any such  report,  return or  statement  which the  affected
        Indemnitee  has  notified  the Lessee  that such  Indemnitee  intends to
        prepare and file in its own name) or  required  by law,  file in its own
        name any report,  return or statement  required to be filed with respect
        to Taxes for which the Lessee  has an  indemnity  obligation  under this
        Clause  10,  so as to show the  beneficial  ownership  of the  Aircraft,
        Airframe and Parts in the  Beneficiary and furnish the Indemnitee with a
        copy of such report, return or statement, (ii) where such report, return
        or  statement  is  required  to be in  the  name  of or  filed  by  such
        Indemnitee or the Indemnitee otherwise requests that such report, return
        or  statement  be filed in its name,  if  permitted  by  applicable  law
        prepare and deliver such report,  return or statement  (in each case, at
        the  expense of the Lessee  (with  respect to  reasonable  out-of-pocket
        costs and expenses  only)) to the  Indemnitee in such manner as shall be
        reasonably satisfactory to the Indemnitee within a reasonable time prior
        to the time such  report,  return or statement is to be filed (but in no
        event  later than  fifteen  (15) days prior to the due date  thereof) or

<PAGE>

        (iii)  where such  report,  return or  statement  is required to reflect
        items in addition to Taxes imposed on or indemnified  against under this
        Clause 10 as determined by such Indemnitee, provide such Indemnitee with
        information  with  respect to such  indemnified  Taxes  within  Lessee's
        control  and  required  for the  completion  of such  report,  return or
        statement  within a reasonable  time,  sufficient to permit such report,
        return or statement  to be properly  made and timely  filed.  Nothing in
        this Agreement  shall require the Lessee or an Indemnitee to violate any
        law, regulation or administrative pronouncement of any taxing authority.

10.8    FORMS. Each Indemnitee agrees to furnish from time to time to the Lessee
        or to such other  person as the Lessee may  designate,  at the  Lessee's
        written  request  and  expense  (limited  to  reasonable   out-of-pocket
        expenses of such Indemnitee),  such duly executed and properly completed
        forms or other documentation as may be necessary or appropriate in order
        to claim any reduction of or exemption from any withholding or other Tax
        which the Lessee may be required to  indemnify  against  hereunder  (but
        only if and to the extent  such (x)  Indemnitee  is legally  entitled to
        furnish  such forms or other  documentation  and (y) such forms or other
        documentation may be filed by such Indemnitee  without the imposition of
        any Tax or related expense not indemnified by the Lessee hereunder).  If
        and to the extent that an  Indemnitee  fails to file or provide any such
        form or other  documentation  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 form or other  documentation  been filed
        or provided, Lessee's obligation to make the increased payment otherwise
        required by Clause  10.2(a)  hereof shall be limited to the amount which
        would have been required if such  Indemnitee  had filed or provided such
        form or other documentation.

10.9    VERIFICATION.  At  the  Lessee's  written  request,  the  amount  of any
        indemnity  payment by the Lessee to any  Indemnitee or any payment by an
        Indemnitee  to the Lessee  pursuant to Clause 10 shall be reviewed by an
        internationally   recognized   independent   accounting   firm  mutually
        acceptable to the  Indemnitee  and the Lessee.  In the case of indemnity
        payments by the Lessee to an  Indemnitee,  such written  request must be
        received  within ninety (90) days of receipt of the written demand under
        Clause 10.5. In the case of payments by an Indemnitee to the Lessee, (i)
        such  written  request  must be received  within  ninety (90) days after
        payment by an  Indemnitee  of any amounts  due to the Lessee  under this
        Clause  10  (or,  if  later,   ten  (10)  days  after   receipt  of  the
        certification from the Indemnitee's firm of outside auditors,  described
        below,  provided that the Indemnitee's firm of outside auditors receives
        such  request  within  ninety  (90)  days  after  such  payment  by  the
        Indemnitee), and (ii) within such notice period, the Lessee (or its firm
        of  outside  auditors)  has set forth in  writing  to the  Indemnitee  a
        reasonable basis to assert that the amount of the payment was erroneous.
        The Lessee may, at its sole cost and  expense,  request that the firm of
        independent  outside  auditors of the Indemnitee  certify to the firm of
        independent outside auditors of the Lessee the basis for the computation
        of such payment by the Indemnitee; PROVIDED that both auditing firms and
        the  Lessee  agree to  treat  such  matter  on a  confidential  basis in
        accordance with the confidentiality provisions set forth below, and that
        the Lessee will have no right to review or inspect such certification or
        any information referred to therein. The verifying accounting firm shall

<PAGE>

        be asked to verify, after consulting with the Lessee and the Indemnitee,
        whether the  Indemnitee's  computations  are correct,  and to report its
        conclusions  simultaneously to both the Lessee and the Indemnitee.  Each
        Indemnitee and the Lessee hereby agree to provide such  accountants with
        all  information  and  materials  as shall be  reasonably  necessary  or
        desirable  in  connection  herewith.   The  fees  and  expenses  of  the
        accountants in verifying a payment  amount  pursuant to this Clause 10.9
        shall be paid by the Lessee, unless the accountants shall determine that
        the amount  calculated by the Indemnitee is (i) more than 105 percent of
        the  correct  amount in the case of a payment  due from the Lessee to an
        Indemnitee,  or (ii) less than 95 percent of the  correct  amount in the
        case of a payment  made by an  Indemnitee  to the  Lessee.  In all other
        cases,  such fees and expenses of the  accountants  shall be paid by the
        Lessee.   Such   accounting   firm  shall  be   requested  to  make  its
        determination  within 30 days. In the event such  accounting  firm shall
        determine that such  computations  are  incorrect,  then such firm shall
        determine  what  it  believes  to  be  the  correct  computations.   The
        computations  of  the  accounting  firm  shall  be  final,  binding  and
        conclusive upon the Lessee and the  Indemnitee,  as the case may be. Any
        information  provided to such accountants by any Indemnitee shall be and
        remain the  exclusive  property of and shall be deemed by the parties to
        be (and the accountants will confirm in writing in a manner satisfactory
        to the Indemnitee that they will treat such information as) the private,
        proprietary and confidential property of such Indemnitee,  and shall not
        be disclosed by the  accountants to any Person for any purpose,  and all
        such materials  shall be returned to such  Indemnitee.  The Lessee shall
        have no right to  inspect  the  books,  records,  tax  returns  or other
        documents  of or  relating  to the  Indemnitee,  as the case may be. The
        Lessee  and each  Indemnitee  agree  that  the  accounting  firm's  sole
        responsibility  shall be to verify the amount of any  payment,  and that
        matters of  interpretation of the terms of this Agreement are not within
        the scope of such firm's responsibilities.

10.10   SURVIVAL.  The  rights and  obligations  of each  Indemnitee  and of the
        Lessee  under  this  Clause 10 shall  survive  the  expiration  or other
        termination of this Agreement and the other Lease Documents.

11.     GENERAL UNDERTAKINGS

11.1    The Lessee undertakes with the Lessor,  until redelivery of the Aircraft
        to the Lessor in accordance  with this  Agreement and  thereafter  until
        satisfaction  of all  outstanding  obligations  of the Lessee under this
        Agreement, that it will:
<PAGE>

        (a)    CONSENTS AND AUTHORIZATIONS

               without prejudice to paragraph 4 of Schedule 1, Part 1, obtain or
               cause to be  obtained,  maintain  in full  force and  effect  and
               comply  in  all  material   respects  with  the   conditions  and
               restrictions  (if any) imposed in, or in connection  with,  every
               consent,  authorization,  license or approval of  governmental or
               public  bodies or  authorities  or courts  which are from time to
               time  reasonably  necessary  to enable the Lessee to perform  its
               obligations hereunder and under the Lessee Documents;

        (b)    PREPARATION OF ACCOUNTS

               cause to be  prepared  in each  financial  year  and  cause to be
               certified by its auditors consolidated financial statements which
               are prepared in accordance  with  generally  accepted  accounting
               principles  and  practices in Lessee's  Country,  which have been
               consistently applied (save as disclosed in the relevant financial
               statements)and   correctly   present  in  accordance   with  such
               principles the consolidated  financial position of the Lessee and
               its Subsidiaries as at the end of the relevant financial year;

        (c)    SUPPLY OF ACCOUNTS AND OFFICER'S CERTIFICATE

               deliver to the Lessor and  Beneficiary  as soon as available  but
               not in any event later than sixty (60) days after the last day of
               each of the first three financial  quarters of the Lessee, a copy
               of  its  quarterly  report  on  Form  10-Q,  as  filed  with  the
               Securities and Exchange Commission;  and as soon as available but
               not in any event later than one hundred  twenty  (120) days after
               the last day of each financial year of the Lessee,  a copy of its
               annual  report on Form  10-K,  as filed with the  Securities  and
               Exchange  Commission and, together with such report, an officer's
               certificate,  in the form  attached  hereto as Schedule 8, from a
               responsible  officer of the Lessee certifying that he is familiar
               with the terms of this  Agreement and that no  Termination  Event
               has occurred  and is  continuing  hereunder;  and a copy of every
               report,  notice or like document issued by it to its shareholders
               or  creditors  generally  (in each  case at or about  the time of
               issue thereof);

        (d)    LESSEE FINANCIAL INFORMATION

               as promptly as practicable,  provide the Lessor on a confidential
               basis  with such  financial,  operational  and other  information
               concerning the Lessee and its affairs and (where  relevant to the
               Aircraft   operations)  its  Subsidiaries  and  their  respective
               affairs as the Lessor may from time to time reasonably request in
               writing.

11.2 The Lessee further undertakes with the Lessor that it will:
<PAGE>

        (a)    STATUS REPORT

               provide to the Lessor (aa) no later than the fifteenth (15th) day
               after the expiration of each Accrual  Period;  (bb) no later than
               the date  falling  within  fifteen  (15)  days  after the date of
               expiry or  termination  of the Lease  Period;  and (cc)  whenever
               reasonably  requested  by the  Lessor,  a  status  report  on the
               Aircraft  and the  Engines  in the  form  set out in  Schedule  7
               containing or  indicating,  inter alia, (i) the serial numbers of
               the  engines,  then  installed  on the Aircraft and the owners of
               such engines, (ii) the serial numbers,  condition and whereabouts
               of any Engines not then  installed on the Aircraft,  (iii) Engine
               and  Airframe  utilization  in  Flight  Hours  and  Cycles,  (iv)
               scheduled and unscheduled  engine changes,  (v) any variations in
               the  Approved  Maintenance  Programme  for the  Airframe  and the
               Engines,  (vi) any material  deferred  items carried  forward and
               (vii) any damage reports in excess of the Threshold Amount;

        (b)    INFORMATION CONCERNING THE AIRCRAFT

               provide  the  Lessor  as  promptly  as   practicable   with  such
               information  regarding the location,  operation,  use, insurance,
               maintenance  and condition of the Aircraft as the Lessor may from
               time to time reasonably  request in writing,  including,  without
               limitation,  copies of any agreement  relating to the Aircraft in
               the Lessee's possession.  The Lessee will provide the Lessor with
               a forecast of the major  scheduled  maintenance  events  (such as
               Engine scheduled  repairs,  C Checks or their equivalent) so that
               the Lessor may plan to be present during such events;

        (c)    INSPECTION

               throughout  the Lease Period  permit the Lessor and/or its agents
               or representatives to inspect the Aircraft at any reasonable time
               upon  giving  the  Lessee  reasonable  prior  written  notice and
               provide them with  appropriate  temporary access to an office and
               telephone. The Lessee will permit the Lessor to have the Lessor's
               designated  representatives  present  during  any C Check  or its
               equivalent  or major check or  unscheduled  repair or overhaul of
               the Aircraft and will provide  reasonable  notice of such C Check
               or   equivalent   or  major  check  or  (as  soon  as  reasonably
               practicable) a major repair to enable Lessor's representatives to
               be  present.  The cost of such  inspections  shall be paid by the
               Lessor in respect of the Lessor's annual inspection and survey of
               the Aircraft and by the Lessee in respect of any  inspection  and
               survey  carried out by the Lessor as a result of any  maintenance
               failure by Lessee  constituting a Relevant Event.  All time taken
               in  respect  of such  inspections  shall  form  part of the Lease
               Period. The Lessor shall have no duty or liability  whatsoever to
               carry out or take any  action  arising  out of any such  visit or
               inspection.  Any such  inspections  by the Lessor of the Aircraft
               shall  not  interfere   with  the  Lessee's   commercial   flight
               operations or delay the completion of any maintenance and will be
               relevant to the work being  accomplished  on the  Aircraft at the

<PAGE>

               time of inspection  and any such  inspection by Lessor 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,  provided that such limitations  shall not apply
               to inspections occurring (i) under Clause 19 hereof except to the
               extent  expressly  provided  therein or (ii) within a  reasonable
               time  following a maintenance  failure by Lessee  constituting  a
               Relevant Event;

        (d)    NO OPERATIONAL INTEREST

               not represent in any way that any Indemnitee is carrying goods or
               passengers  on the  Aircraft or engaging in any  operation of the
               Aircraft or caring for,  repairing  or having any  responsibility
               for the condition of the Aircraft;

        (e)    COMPLIANCE WITH INSURANCES

               comply with the terms and conditions of the  Insurances,  and not
               do,  consent  to,  or  permit  any act or  omission  which  would
               invalidate or render  unenforceable  the whole or any part of the
               Insurances;

        (f)    AIR TRAFFIC CONTROL INFORMATION AND THIRD PARTY INFORMATION

               where relevant when the Aircraft is under sublease,  procure that
               the Aviation  Authority,  Eurocontrol  and any other relevant air
               traffic control  authority or airport shall furnish to the Lessor
               upon  the  Lessor's  request  from  time to time,  statements  of
               account of all sums due by the sub-lessee to such  authorities or
               airports in respect of all aircraft  (including,  but not limited
               to, the Aircraft)  operated by the  sub-lessee  and shall provide
               and, if applicable,  procure that any sub-lessee shall provide to
               the Lessor a letter substantially in the form of Schedule 8;

        (g)    STATUS OF THE LESSEE

               not,  without  giving the Lessor  thirty (30) day's prior notice,
               change  its chief  executive  office  (as such term is defined in
               Article  9 of the  Uniform  Commercial  Code as in  effect in the
               State of  Colorado)  from 2864 South  Circle  Drive,  Suite 1100,
               Colorado Springs, Colorado 80906, USA;

        (h)    CERTIFICATED AIR CARRIER
<PAGE>

               remain a  Certificated  Air Carrier and maintain its status so as
               to fall  within the  purview  of Section  1110 of Title 11 of the
               United  Status Code or any  analogous  statute  which may replace
               such statute and then be applicable;

        (i)    CITIZEN OF THE UNITED STATES

               remain a Citizen of the United States.

11.3 The Lessee further undertakes with the Lessor that it will:

        (a)    DISPOSAL AND ENCUMBRANCE OF THE AIRCRAFT

               not  attempt  or hold  itself  out as  having  any power to sell,
               charge,  lease or  otherwise  encumber or dispose of the Aircraft
               (save as provided in Clause 12 (Sub-Leasing)),  nor create, incur
               or suffer to exist any Encumbrance  over the Aircraft (other than
               Permitted Liens);

        (b)    PREVENTION OF ARREST

               not do, and will use its best  reasonable  endeavors  to prevent,
               any act  which  could  reasonably  be  expected  to result in the
               Aircraft being arrested, confiscated, seized, taken in execution,
               impounded,  forfeited, detained in exercise or purported exercise
               of any possessory lien or other claim or otherwise taken from the
               possession  of the Lessee and, if any such arrest,  confiscation,
               seizure, taking, impounding,  forfeiture or detention occurs, the
               Lessee will give the Lessor immediate notice thereof and will use
               its best efforts to procure the prompt release of the Aircraft;

        (c)    NO PLEDGING OF CREDIT

               not pledge nor allow any  operator of the  Aircraft to pledge the
               credit of any Indemnitee for any maintenance,  service,  repairs,
               overhauls of, or modifications  to, or changes or alterations in,
               the Aircraft or for any other purpose whatsoever;

        (d)    PROTECTION OF RIGHTS IN THE AIRCRAFT

               The  Lessee  will do all acts and  things  which the  Lessor  may
               reasonably request to protect and preserve the title,  rights and
               interest of the Head Lessor, the Beneficiary,  the Lessor and the
               Lenders  (and to  protect  or  perfect  their  rights  under  the
               Security   Documents)   to  and  in  the   Aircraft   within  the
               jurisdiction  of any State of Registration or in any territory in
               which the  Aircraft  is or may be based or  operated.  The Lessee
               shall do such acts and things at its own cost and expense  except
               that,  unless a Termination Event has occurred and is continuing,

<PAGE>

               the  Lessor  shall  pay  the  reasonable  out-of-pocket  expenses
               incurred  by Lessee in doing such acts and things to protect  and
               preserve  the  rights  and  interest  of  the  Head  Lessor,  the
               Beneficiary  or the  Lenders.  No action  which may  otherwise be
               required by this Clause 11.3(d) shall deprive Lessee of any right
               or  privilege  or  result  in the  incurrence  by  Lessee  of any
               additional  obligations  except as otherwise  expressly  provided
               herein.

12.     SUB-LEASING

12.1    The Lessee will not at any time,  without the prior  written  consent of
        the  Lessor,  sub-lease,  charter,  hire  or  otherwise  part  with  the
        possession or  operational  control of the Aircraft;  provided that this
        Clause shall not prevent the Lessee from:

        (a)    putting the Aircraft in the  possession of any  qualified  person
               for the purpose of maintenance,  service, repair or overhaul work
               or any modifications, changes or alterations permitted under this
               Agreement being carried out thereon;

        (b)    entering  into and carrying  out any charter,  wet lease or other
               agreement  with  respect to the  Aircraft  on terms  whereby  the
               Aircraft  will at all times be operated  by air crew  employed by
               and subject to the  operational  control of the Lessee;  provided
               that any such  charter or other  agreement  shall be permitted by
               the laws of the Lessee's  Country and shall be subordinate in all
               respects to this  Agreement  and will not in any event be capable
               of extending beyond the end of the Lease Period.

        The consent of the Lessor to any approved  sub-lease to another aircraft
        operator shall not be unreasonably withheld or delayed but may be based,
        among other things, on the criteria that:

        (i)    any such sub-lease does not extend beyond the Lease Term;

        (ii)   any such  sub-lease  does not  allow  such  operator  to take any
               action  that the  Lessee  is not  permitted  to take  under  this
               Agreement,  is  consistent  with the terms of this  Agreement and
               permits discharge of all of the Lessee's  undertakings under this
               Agreement;

        (iii)  any such sub-lease  shall be subject to and subordinate to all of
               the  terms  of  this  Agreement  and  the   Sub-Lessee   signs  a
               subordination and undertaking in favor of the Lessor and the Head
               Lessor;

        (iv)   the  Aircraft  remains  registered  in the State of  Registration
               unless the consent of the Lessor to  re-register  the Aircraft in
               the state where any proposed  Sub-Lessee has its principal  place
               of business has been obtained and the Lessee pays all  reasonable
               out-of-pocket  expenses  incurred  by  Lessor,  Head  Lessor  and
               Lenders  (including,  but not  limited  to legal  fees and filing
               expenses) in connection with such re-registration;
<PAGE>

        (v)    such operator is not subject to proceedings of the type described
               in  clauses   20.1(b),   20.1(i),   20.1(j)  or  20.1(k)  at  the
               commencement of any such sub-lease;

        (vi)   no such  operator  shall have any right to further  sub-lease the
               Aircraft;

        (vii)  the  country in which the  principal  place of  business  of such
               operator is located maintains  diplomatic relations with Ireland,
               Japan,  the United  Kingdom and the United  States of America and
               there are no  hostilities  or any imminent  threat of hostilities
               between such country and the aforementioned countries;

        (viii) the Lessee  shall,  regardless of any sublease  remain  primarily
               liable for all obligations under this Agreement;

        (ix)   the Lessee  shall  provide the Lessor with a copy of any proposed
               sub-lease  for review  twenty  (20) days prior to delivery of the
               Aircraft  thereunder  together  with  such  financial  and  other
               information in relation to the proposed  Sub-Lessee as the Lessor
               may  reasonably  request and the Lessee  shall  provide  evidence
               reasonably requested by the Lessor of the ability of the proposed
               Sub-Lessee  to  perform  its   obligations   under  the  proposed
               sub-lease;

        (x)    the  Lessee  shall  assign  any such  sub-lease  to the Lessor as
               security for the Lessee's obligations hereunder; and

        (xi)   the Lessee adequately  indemnifies the Lessor and the Head Lessor
               in respect of any  out-of-pocket  costs  incurred  or adverse tax
               consequences  arising resultant upon such proposed  sub-lease and
               pays their reasonable out-of-pocket fees and expenses (including,
               but not limited to legal fees) reasonably  incurred in connection
               with such proposed sublease.

13.     OPERATIONS AND MAINTENANCE

13.1    The Lessee further  undertakes with the Lessor that throughout the Lease
        Period it will at its own cost and expense:

        (a)    CERTIFICATES AND LICENSES

               obtain  and  maintain  in full  force and  effect  all  necessary
               certificates,  licenses,  permits and authorizations required for
               the use and  operation of the  Aircraft,  including,  but without
               limitation, an Air Carrier's Certificate,  a standard Certificate
    
<PAGE>

          of  Airworthiness  with  respect  to the  Aircraft  in the public
               transport  passenger  category  issued by the Aviation  Authority
               (subject to Clause 18) and such  certificates  of  maintenance as
               are required for the Aircraft to be used for the public transport
               of passengers or cargo in the State of Registration;

        (b)    OPERATION AND USE

               (i)  procure that the Aircraft is used,  operated and  controlled
                    in  accordance  with  applicable  laws,  ordinances,  rules,
                    regulations,   orders  or   requirements  of  the  State  of
                    Registration  (and of any country or territory  to, from, in
                    or over which the Aircraft  may be flown) and in  accordance
                    with    applicable    certificates,    licenses,    permits,
                    authorizations  and registrations  relating to the Aircraft,
                    and  regardless  of the person upon whom any of the same are
                    by their terms imposed;

               (ii) use the Aircraft  solely in commercial  or other  operations
                    for which the Lessee is duly  authorized  by the laws of the
                    State of Registration  and/or any jurisdiction to whose laws
                    the  Lessee's  operation  of the Aircraft is subject and the
                    Lessee shall  procure that the Aircraft will not be used for
                    any  purpose  for  which it is not  designed  or  reasonably
                    suited,  or outside the tolerances and limitations for which
                    the  Aircraft  was  designed  (provided  that  any  such use
                    resulting  from a nonrecurring  circumstance  not within the
                    control  of the Lessee  shall not be deemed to violate  this
                    provision)  and so as not to invalidate  any  manufacturer's
                    warranties  and  will be  operated  in  accordance  with the
                    Manuals and Technical  Records.  The Lessee shall, and shall
                    procure  that,  the Aircraft is not used for the carriage of
                    (A)  whole  animals,  living  or dead,  except  in the cargo
                    compartments  according to IATA regulations,  and except for
                    domestic  pets carried in a suitable  container  designed to
                    prevent  the escape of any liquid and to ensure the  welfare
                    of the animal and  handicap  passenger  help  animals in the
                    passenger  cabin,  or  (B)  acids,  toxic  chemicals,  other
                    corrosive materials, explosives, nuclear fuels, waste or any
                    nuclear  assemblies or  components,  except as permitted for
                    passenger aircraft under the "Restriction of Goods Schedule"
                    issued by IATA,  or (C) any other goods,  materials or items
                    which would  reasonably  be expected to cause  damage to the
                    Aircraft  and which would not be  adequately  covered by the
                    Insurances,  and,  save for the  benefit of the  Lessee's or
                    sublessee's  cockpit personnel,  the Lessee shall, and shall
                    procure that,  the Aircraft is not utilized for the purposes
                    of  training,  qualifying  or  re-confirming  the  status of
                    cockpit personnel,  and then only if the use of the Aircraft
                    for such purpose is not reasonably  disproportionate  to the
                    use for such  purpose  of other  Aircraft  of the same  type
                    operated by the Lessee;
<PAGE>

               (iii)  procure that the Aircraft will not be used for any purpose
                      or in any manner not fully covered by the  Insurances,  or
                      outside any geographical  limit imposed by the Insurances,
                      or for any illegal purpose or in an illegal manner;

               (iv)   ensure that the crew and engineers  employed by the Lessee
                      in connection  with the  maintenance  and operation of the
                      Aircraft  shall  have  such  qualifications  and hold such
                      valid  licenses as are required by the Aviation  Authority
                      and all applicable laws and regulations;

               (v)    not cause or permit the  Aircraft to proceed to, or remain
                      at,  any   location   which  is  then  the  subject  of  a
                      prohibition  order (or any  similar  order or  directive),
                      sanctions or restriction by or under the US  International
                      Economic  Emergency  Powers  Act  or  the  United  Nations
                      Security Council;

        (c)    BASE OF OPERATIONS

               except with the prior written consent of the Lessor,  ensure that
               the Aircraft shall be based in and operated from Lessee's Country
               and that it will not be located  outside  Lessee's  Country for a
               period of more than  fourteen (14)  consecutive  days or, in each
               case (if longer),  the term of a permitted  sublease,  charter or
               wet lease or for the time required to accomplish any Major Check,
               repair or overhaul;

        (d)    MAINTENANCE

               ensure that the Aircraft is  maintained,  serviced,  repaired and
               overhauled  by the Lessee or, in the case of Major  Checks by the
               Approved Maintenance  Performer,  in accordance with the Approved
               Maintenance  Programme  and in full  compliance  with  the  tasks
               required by the MPD by properly qualified personnel acceptable to
               the Aviation Authority so as to:

               (i)  keep the Aircraft in good repair,  condition and appearance,
                    airworthy   so  as  to   maintain   the  FAA   airworthiness
                    certificate on the Aircraft (subject to Clause 18), clean by
                    Airline Standards,  in as good operational condition as when
                    delivered to the Lessee on the Delivery Date,  fair wear and
                    tear  excepted  and to at least the same  standard  as other
                    aircraft which it owns or operates, PROVIDED, HOWEVER, that,
                    with respect to inspections and modifications not subject to
                    clause  13.1(d)(ii),  if no Relevant Event has then occurred
                    and is  continuing,  during the last year of the Lease Term,
                    the Lessee shall not be obligated to perform an  alteration,
                    modification  or addition to the Aircraft  solely because it
                    has performed such  modification,  alteration or addition on
                    other  aircraft  which  it owns  or  operates  if (aa)  such
                    modification,   alteration  or  addition  is  not  otherwise

<PAGE>

                    required by the terms of this Clause 13.1(d)(i) or any other
                    provision   of  this   Agreement,   (bb)  such   alteration,
                    modification  or  addition  is not  the  incorporation  of a
                    service bulletin or, if it is such  incorporation,  costs in
                    excess  of $[ ]* in  April  1997  Dollars  and  (cc)  Lessee
                    provides Lessor with written notice as soon as is reasonably
                    practicable but, in any event, not later than 6 (six) months
                    prior to the end of the Lease  Term of its  decision  not to
                    perform any such alteration, modification or addition on the
                    Aircraft;

               (ii) comply with all  airworthiness  directives  or similar alert
                    advisory  requirements   affecting   airworthiness  and  all
                    mandatory    inspection   and   modification    requirements
                    applicable  to the  Aircraft or any Part  issued  during the
                    Lease Term and/or having a compliance  date during the Lease
                    Term or within three  hundred and sixty (360) days after the
                    redelivery  of the  Aircraft  and which are  required by the
                    Aviation  Authority and/or the FAA or by any manufacturer of
                    the Aircraft or any Engine or Part. If the Lessee applies to
                    or  canvasses   the  Aviation   Authority  to  postpone  any
                    compliance  date noted in this Clause and such  postponement
                    would  affect  the  condition  of the  Aircraft  when  it is
                    redelivered under Clause 19 hereof,  then Lessee,  not later
                    than the end of the Lease Term,  shall, if such  application
                    was  granted  by  the  Aviation   Authority  (as  reasonably
                    evidenced in writing to Lessor), pay the out-of-pocket costs
                    to Lessor (as reasonably estimated by Lessor) to comply with
                    such requirement unless such application or canvass (aa) was
                    also  made by other  U.S.  airlines  similarly  situated  to
                    Lessee with respect to Boeing 737-300  aircraft and (bb) was
                    made by Lessee  with  respect  to other  applicable  737-300
                    aircraft operated by Lessee;

               (iii)  comply  with  all  applicable  laws,  ordinances,   rules,
                      regulations,  orders  and  requirements  of the  State  of
                      Registration   and   other   aviation   authorities   with
                      jurisdiction  over the Lessee or the  Aircraft or any Part
                      or to, from, or over which the Aircraft may be flown;

               (iv)   maintain  in  good  standing  a  current   certificate  of
                      airworthiness (in the appropriate  category for the nature
                      of the operations of the Aircraft) for the Aircraft issued
                      by the Aviation  Authority (subject to Clause 18) and will
                      from time to time provide to the Lessor a copy on request;

               (v)    if required by the Aviation Authority,  maintain a current
                      certification as to maintenance  issued by or on behalf of
                      the Aviation Authority in respect of the Aircraft and will

<PAGE>

                      from time to time provide to the Lessor a copy on request;

               (vi) maintain,  inspect,  function check,  protect and repair the
                    Aircraft in accordance with the Approved Maintenance Program
                    to the  same  standards,  with the  same  care  and  without
                    discrimination  to other  aircraft  owned or  leased  by the
                    Lessee and perform in  accordance  with the MPD, each of the
                    Structural   Inspection,    Zonal   Inspection,    Corrosion
                    Protection/Prevention  tasks during the Lease Period. In the
                    event  that the  Lessee  operates  a  structural  inspection
                    sampling program in respect of the Aircraft during the Lease
                    Period,   such  program   shall  be  operated   strictly  in
                    accordance  with the MPD.  The Lessee shall  accomplish  all
                    service  bulletins  that the Lessee  generally  incorporates
                    into aircraft in its fleet of Boeing 737 aircraft;

               (vii)  maintain the Aircraft in  accordance  with Part 121 of the
                      FAR and any other Rules and  Regulations of the FAA as may
                      be applicable to passenger  category  aircraft,  except to
                      the  extent  that  they   conflict   with  the  rules  and
                      regulations of the Aviation Authority;

               (viii) remedy any damage or defect  shown to be  required  by any
                      inspection    effected    pursuant   to   Clause   11.2(c)
                      (Inspection)  and as  otherwise  required  by the terms of
                      this Agreement; and

               (ix)   comply with the return conditions referred to in Clause 19
                      (Redelivery)  at the end of the  Lease  Period or when the
                      Aircraft is required to be redelivered  pursuant to Clause
                      21;

        (e)    REPLACEMENT OF ENGINES AND PARTS

               ensure that any Engine or any Part  installed  in the Airframe or
               any  Engine   which  has  become  worn  out,   lost,   destroyed,
               confiscated,  unserviceable, time expired, or otherwise unfit for
               use or  which  the  Lessee  is  required  to  replace  under  any
               provision  of this  Agreement  other than this  Clause  13.(e) is
               promptly  replaced  with an item of the same make and model or an
               improved  or advanced  version  thereof,  of at least  equivalent
               value (having  regard to service  bulletin  modification  status,
               shop visit history  (other than Flight Hours or Cycles since last
               Engine Shop Visit in respect of time on the Engine at such Engine
               Shop Visit),  Engine Life Limited Parts status and component hard
               time life status,  but otherwise  without regard to the hours and
               cycles  on such  replacement  engine or part,  provided  that the
               applicable  credits are  adjusted  as provided in Clause  13.4(d)
               hereof),  which  is  suitable  for  installation  and  use on the
               Airframe  or Engine  without  diminishing  the  value or  utility
               thereof and, if such  replacement  occurs at the end of the Lease
               Period, such replacement engine or part shall meet the applicable
               requirements of Clause 19 and Schedule 4;
<PAGE>




        (f)    REMOVAL OF PARTS

               subject to Clause 13.2 (Temporary  Installation of Parts), ensure
               that any Part  installed  in the Airframe or any Engine is not at
               any time removed  therefrom  otherwise  than during the course of
               maintaining,  servicing,  repairing,  overhauling  or testing the
               Airframe or such Engine, or making such modifications, changes or
               alterations to the Airframe or such Engine as are permitted under
               this Agreement,  and then only if it is promptly reinstalled,  or
               promptly  replaced or  substituted  by an item complying with the
               provisions of Clause 13.1(e) and 13.1(g);

        (g)    INSTALLATION OF ENGINES AND PARTS

               ensure that,  save in  accordance  with Clause 13.2 and 13.3,  no
               engine is  installed  in the Airframe and no Part is installed in
               the  Airframe  or any  Engine,  whether  by way of  substitution,
               replacement, renewal, mandatory improvement or addition unless it
               meets the  requirements  of Clause 13.3(e) and it is (i) then the
               property of the Head Lessor or the Beneficiary and subject to the
               Mortgage or (ii) is such that on  installation in the Airframe or
               Engine  title  thereto  shall vest in the Head  Lessor and become
               subject to the charge  created by the  Mortgage  but be otherwise
               free from  Encumbrances  (other than Permitted  Liens),  in which
               case the Lessee shall  ensure that there is promptly  recorded in
               the Manuals and Technical Records an  acknowledgement  that title
               thereto  does so vest in the  Head  Lessor  as  aforesaid,  which
               acknowledgement  in the  case of any  Engine  shall  specify  the
               manufacturer's  serial number of the  substitute  or  replacement
               Engine,  and the Lessee shall ensure that as soon as  practicable
               thereafter  a  notification  that  title does so vest in the Head
               Lessor is delivered to the Lessor;

        (h)    NON-INSTALLED ENGINES

               ensure that any Engine which is not  installed on the Aircraft or
               any other  aircraft  pursuant  to the  provisions  of Clause 13.3
               (otherwise  than  during  the course of  maintaining,  servicing,
               repairing,  overhauling  or testing any such  Engine) is properly
               and safely  stored in  accordance  with its relevant  maintenance
               manual and kept free from Encumbrances other than Permitted Liens
               and that  appropriate  insurance  cover is effected in respect of
               any  Engine  or  Parts  belonging  to  the  Head  Lessor  or  the
               Beneficiary  which  are  not  installed  on the  Airframe  or any
               Engine;
<PAGE>

        (i)    NAMEPLATES

               ensure that there is affixed and kept a  fireproof  nameplate  of
               not less than 10cm x 7cm in a  reasonably  prominent  position on
               the  flightdeck  or  cockpit  of the  Aircraft  stating  that the
               Aircraft is the  property of the Head  Lessor,  is subject to the
               Trust  Agreement,  is leased to the  Lessor and is subject to the
               Mortgage,  and  that  there  is  affixed  and  kept  a  fireproof
               nameplate of not less than 10cm x 7cm in a  reasonably  prominent
               position on each Engine  stating that the relevant  Engine is the
               property of the Head Lessor,  is subject to the Trust  Agreement,
               is leased to the Lessor and is  subject  to the  Mortgage  and in
               each case will  ensure  that the same is not  covered  or painted
               over;

        (j)    ALTERATIONS

               procure that no  modification  to or change or  alteration in the
               Aircraft is made which will have the effect of reducing the value
               or  airworthiness  of the Aircraft  except as (i)  necessary  for
               compliance with the provisions of this Agreement or (ii) required
               by the Manufacturer or (iii) required by the Aviation Authority;

        (k)    CHANGES TO APPROVED MAINTENANCE PROGRAMME

               the Lessee  shall  provide  to the  Lessor,  in  advance  for its
               approval, a copy of the Lessee's Approved  Maintenance  Programme
               and all subsequent  revisions  adopted by the Lessee and approved
               by the  Aviation  Authority  as and when  the  same  are  issued,
               approved  and  incorporated  and in no event  shall the  Approved
               Maintenance  Programme  be  amended  by the  Lessee in any manner
               which  would have a  material  adverse  effect on the  redelivery
               provisions of this Agreement  and/or on the residual value of the
               Aircraft without the prior written  approval of the Lessor,  such
               approval not to be unreasonably withheld.

13.2    TEMPORARY INSTALLATION OF PARTS

        Provided  that  no   Termination   Event  shall  have  occurred  and  be
        continuing,  the Lessee  shall be  entitled  to install  any part on the
        Airframe  or  any  Engine  by  way  of   substitution   or   replacement
        notwithstanding  that such installation is not in accordance with Clause
        13.1(e) and Clause  13.1(g) if such  substitute or  replacement  part is
        suitable  for  installation  and use on the  Airframe  or Engine and (a)
        there shall not have been available to the Lessee at the time and in the
        place that such part was required to be installed on the Airframe or any
        Engine a substitute or replacement  Part complying with the requirements
        of Clause 13.1(e) and Clause 13.1(g),  and (b) it would have resulted in
        an  unreasonable  disruption of the operation of the Aircraft and/or the
        business of the Lessee as an airline to have grounded the Aircraft until

<PAGE>

        such time as a Part  complying with the  requirements  of Clause 13.1(e)
        and Clause 13.1(g) became  available for installation in the Airframe or
        any Engine,  and (c) as soon as practicable  after  installation  of the
        same on the  Airframe or any Engine,  the Lessee  shall  ensure that any
        such Part not  complying  with the  requirements  of Clause  13.1(e) and
        Clause  13.1(g)  is  removed  and  replaced  or  substituted  by a  Part
        complying with the requirements of Clause 13.1(e) and Clause 13.1(g).

13.3    INTERCHANGE OF ENGINES

        (a)    GENERAL PRINCIPLES

               (i) The  Lessee  shall not at any time  during  the Lease  Period
        remove an Engine from the  Airframe or install any engine  other than an
        Engine  (complying with the provisions of Clause 13.1(e) and 13.1(g)) on
        the Airframe except (aa) for purposes of engine management,  maintenance
        or repairs to an Engine permitted by this Agreement or (bb) as expressly
        permitted by this Clause 13.3.

               (ii) If an Engine is at any time  removed  from the  Airframe for
        purposes of maintenance  or repairs,  the Lessee shall complete the same
        or  procure  that  same  are  completed,  as soon as  practicable  after
        removal.

               (iii) Except in accordance  with Clause  13.3(c) or 13.3(d),  the
        Lessee shall not at any time during the Lease  Period  install a Removed
        Engine on an airframe other than the Airframe.

               (iv) If an Engine is at any time  removed  from the  Airframe for
        any reason whatsoever,  title to such Removed Engine shall remain vested
        in the Head  Lessor  at all  times  (other  than as  provided  in Clause
        13.1(e)  and  Clause  13.1(g)),  subject  to the Head  Lease,  the Trust
        Agreement,  this  Agreement  and the  Mortgagee and the Lessee shall not
        take any steps which may  reasonably be expected to (aa)  jeopardize the
        Head  Lessor's  ownership  rights  in the  Removed  Engine  or (bb) lead
        reasonable  third  parties to  believe  that the  Removed  Engine is the
        property of any person other than the Head Lessor or (cc) create,  incur
        or suffer to exist any Encumbrance other than a Permitted Lien over such
        Removed Engine.

        (b)    TEMPORARY REMOVAL OF ENGINES

               Except as provided in Clause  13.3(c),  if an Engine shall become
        unserviceable at any time or if scheduled maintenance works are required
        to be performed  on such Engine,  the Lessee shall be entitled to remove
        such Engine from the Airframe and to install an engine owned or operated
        by the Lessee and  suitable  for  installation  and use on the  Airframe
        provided that the following conditions are satisfied:
<PAGE>

               (i) it would have resulted in an  unreasonable  disruption of the
        operation  of the  Aircraft  and/or  the  business  of the  Lessee as an
        airline  to have  grounded  the  Aircraft  until  such time as a Removed
        Engine became available for re-installation on the Airframe;

               (ii) the Lessee  shall have  notified  the Lessor prior to or, in
        the case of urgency  as soon as  practicable  after,  the making of such
        substitution; and

               (iii) as soon as practicable  after  installation  of the same on
        the Airframe (and in any event no later than 120 days  thereafter),  the
        Lessee shall move the installed engine and re-install a Removed Engine.

        (c)    POOLING OF ENGINES WITHIN THE LESSEE'S FLEET

               (i) In this Clause  13.3(c),  "Fleet  Aircraft"  means any Boeing
        737-300 aircraft from time to time operated by the Lessee.

               (ii) The  Lessee  shall be  entitled,  so long as no  Termination
        Event shall have  occurred and be  continuing,  to remove an Engine from
        the Airframe and to install on the Airframe an engine provided that:

                      (aa) such  engine is  leased  to the  Lessee  with a Fleet
        Aircraft,  is owned by the Lessee or otherwise  leased to the Lessee and
        is suitable for installation and use on the Airframe;

                      (bb)  the  Removed   Engine  is,   during  the  period  of
        substitution,  either being safely  housed and  sheltered in  accordance
        with  Manufacturer's  recommendations  and this Agreement or repaired or
        maintained in accordance with this Agreement, or is installed on a Fleet
        Aircraft in compliance with Clause 13.3(c)(iii) hereof;

                      (cc) the Lessee  maintains  insurance  cover in accordance
        with this  Agreement  for the  Engine  Agreed  Value in  respect  of the
        Removed  Engine at all times while it is installed on a Fleet  Aircraft;
        and

                      (dd) prior to the  expiration or  termination of the Lease
        Period, such engine is removed from the Airframe and the Removed Engine,
        or,  at the end of the  Lease  Period,  an  Engine  complying  with  the
        provisions of Clause 13.1(e) and 13.1(g), is installed on the Airframe.

               (iii) The  Lessee  will be  entitled,  so long as no  Termination
        Event shall have occurred and be  continuing,  to install an Engine on a
        Fleet Aircraft:

                      (aa)   owned and operated by Lessee free from any Liens;or
<PAGE>

                      (bb)  leased to Lessee on a  long-term  basis and on terms
        whereby Lessee has full operational control of the aircraft or purchased
        by Lessee  subject to a  conditional  sale or other  security  agreement
        PROVIDED  THAT:  (1) the  terms  of any  such  lease,  conditional  sale
        agreement or security interest will not have the effect of impairing the
        title and interests of Lessor as owner and lessor of the Engine; and (2)
        the lessor  under such lease,  the seller  under such  conditional  sale
        agreement or the holder of such security  interest,  as the case may be,
        has  confirmed  and  acknowledged  in  writing,  in form  and  substance
        reasonably satisfactory to Lessor, that it will respect the interests of
        Lessor as owner and  lessor of that  Engine and that it will not seek to
        exercise any rights  whatever in relation  thereto (it being  understood
        that such agreement may be in the form described in Clause  13.3(c)(iv),
        in which case such agreement need not be provided to Lessor).

               (iv) In the event the Lessee shall have  received from the lessor
        or  secured  party of any  Fleet  Aircraft  leased to Lessee or owned by
        Lessee  subject  to a  conditional  sale or other  security  interest  a
        written agreement complying with Clause  13.3(c)(iii)(bb)  hereof (which
        agreement  may be  contained  in the  lease,  conditional  sale or other
        security  interest  covering  such  Fleet  Aircraft)  and such  lease or
        conditional sale or other security interest covering such Fleet Aircraft
        also covers an engine or engines owned by the lessor under such lease or
        subject to a security  interest in favor of the secured party under such
        conditional  sale or other security  interest,  Lessor hereby agrees for
        the benefit of such lessor or secured party that Lessor will not acquire
        or claim, as against such lessor or secured party,  any right,  title or
        interest in any such engine as the result of such engine being installed
        on the  Airframe at any time while such engine is subject to such lease,
        conditional sale or other security  interest and owned by such lessor or
        subject to a security interest in favor of such secured party.

               (d)    POOLING OF ENGINES WITH OTHER OPERATORS

                      the  Lessee  may,  with the prior  written  consent of the
        Lessor (such consent not to be unreasonably withheld) lease, let or hire
        or  charter or  otherwise  part with  possession  of an Engine (on terms
        conferring no more than a  contractual  right against the Lessee but not
        rights against the Engine) pursuant to pooling arrangements to which the
        Lessee is a party and which either:

                      (i)  are  arrangements  involving   responsible,   solvent
        scheduled  Certificated Air Carriers;

                      (ii) do not  contemplate  transfer  of title to any pooled
        Engine (or if title is so  transferred,  such transfer will be deemed an
        event of loss under Clause 13.1(e)); and
<PAGE>

                      (iii) either  provide that  the Lessor (or at the Lessor's
        direction, any of the Indemnitees) will be sole loss payee in respect of
        any loss or  damage to such  Engine  for the  Engine  Agreed  Value,  or
        provide for the Head Lessor to acquire title to a substitute engine free
        from Encumbrances satisfying the conditions set out in Clause 13.1(e) if
        the Engine is a Total Loss.


13.4    MAINTENANCE ACCRUALS

        (a)    In addition to rent,  with  respect to each Accrual  Period,  the
               Lessee shall pay to the Lessor maintenance accruals ("MAINTENANCE
               ACCRUALS") as follows:

               (i)  in respect of airframe  maintenance accrual, an amount equal
                    to (a) the  applicable  amount set forth in  paragraph  3 of
                    Letter  Agreement  No. 1;  MULTIPLIED  BY (b) the  number of
                    Flight Hours  operated by the  Aircraft  during such Accrual
                    Period  ("AIRFRAME  MAINTENANCE  ACCRUAL") (as adjusted from
                    time to time); and

               (ii) in respect of an engine maintenance  accrual,  in respect of
                    each Engine an amount equal to (a) the applicable amount set
                    forth in paragraph 3 of Letter  Agreement No. 1;  MULTIPLIED
                    BY (b) the number of Flight  Hours  operated  by such Engine
                    during such Accrual Period  ("ENGINE  MAINTENANCE  ACCRUAL")
                    (as adjusted from time to time); and

               (iii)in respect of Engine Life Limited Parts maintenance  accrual
                    in  respect  of each  Engine,  an  amount  equal  to (a) the
                    applicable  amount  set  forth  in  paragraph  3  of  Letter
                    Agreement  No.  1;  MULTIPLIED  BY (b) the  number of Cycles
                    operated by each Engine during such Accrual Period  ("ENGINE
                    LIFE LIMITED  PART  MAINTENANCE  ACCRUAL" (as adjusted  from
                    time to time); and

               (iv) in respect of Landing Gear  accrual,  an amount equal to (a)
                    the  applicable  amount set forth in  paragraph  3 of Letter
                    Agreement  No.  1;  MULTIPLIED  BY (b) the  number of Flight
                    Hours  operated by the Aircraft  during such Accrual  Period
                    ("LANDING GEAR MAINTENANCE  ACCRUAL") (as adjusted from time
                    to time).

               The Airframe  Maintenance  Accrual,  Engine Maintenance  Accrual,
        Engine  Life  Limited  Part  Maintenance   Accrual,   and  Landing  Gear
        Maintenance  Accrual accruing in any Accrual Period shall be paid by the
        Lessee to the Lessor not later than  fifteen  (15) days after the expiry
        of such Accrual  Period (other than the final  Accrual  Period) with the
        amount  payable in respect of the final Accrual Period being paid on the
        date of the end of the  Lease  Period.  Concurrently  with  the  payment
        thereof,  the Lessee  shall  deliver  the  status  report  specified  in
        Schedule 7 duly completed.

        (b)     The rates of Airframe  Maintenance  Accrual,  Engine Maintenance
                Accrual,  Engine  Life  Limited  Part  Maintenance  Accrual  and

<PAGE>

                Landing Gear  Maintenance  Accrual will be subject to adjustment
                annually by  reference  to the formula  contained in Schedule 1,
                Part 4 to take  account  of  movements  in the cost of  relevant
                labor or materials.

        (c)     Payments by way of Maintenance  Accruals  received by the Lessor
                shall be credited, in the proportions corresponding to the rates
                specified in Clause 13.4(a),  to separate credits to be known as
                the  "Airframe  Maintenance  Credit",  "No.1 Engine  Maintenance
                Credit",  "No.2 Engine Maintenance Credit" (there being one such
                Engine  Maintenance  Credit for each Engine),  "No. 1 Engine LLP
                Maintenance  Credit", No. 2 Engine LLP Maintenance Credit (there
                being one such Engine LLP  Maintenance  Credit for each  Engine)
                and "Landing Gear Maintenance Credit" which credits shall reduce
                as monies are paid to the Lessee with respect to the  applicable
                credit in accordance with Clause  13.4(d).  The credits shall be
                solely for the purpose of  determining  the  amounts  payable by
                Lessor to Lessee  pursuant to Clause  13.4(d)  and Lessor  shall
                have no  obligation  to  place  the  Maintenance  Accruals  in a
                segregated  account or to account  for them to the Lessee in any
                way other than  through  its payment  obligations  to the Lessee
                under Clause 13.4(d).

        (d)     Upon  submission  by the  Lessee  to  the  Lessor  of  certified
                invoices or receipts  evidencing  the  performance in accordance
                with the  provisions of this Agreement by or at the direction of
                the Lessee of:

               (i)  with  respect to the  Airframe,  the  accomplishment  of the
                    Major  Check  tasks in  accordance  with the MPD  ("AIRFRAME
                    MAINTENANCE"); or

               (ii) with  respect to any Engine,  the  performance  of an Engine
                    Shop Visit ("ENGINE MAINTENANCE"); or

              (iii) with respect to Engine Life Limited Parts,  the  replacement
                    of any Engine Life Limited Part during  off-the-wing  Engine
                    shop visit  maintenance or repair other than replacement (a)
                    arising  as  a  result  of  foreign   object   damage,   or,
                    operational  mishandling (being an operation or event on the
                    ground  or in  the  air  whereby,  due  to  negligence,  the
                    tolerances,  limits and/or recommended maximums and minimums
                    and/or other operation  matters as specified in the Aircraft
                    flight, operational,  maintenance and other relevant manuals
                    or documents  are not  complied  with by any person) save to
                    the extent such replacement  results in the refurbishment or
                    "betterment"  of  the  Engine;  or (b)  following  premature
                    failure  except that in the event of the  premature  failure
                    leading to the replacement of any Engine Life Limited Part a
                    drawing  will be  permitted by the Lessor in respect of such
                    replacement,  however,  the amount of the  drawing  shall be
                    reduced by the amount of any available  warranty  claim with
                    respect to such  premature  failure  and capped at the funds
                    available  in  the  Engine  LLP  Maintenance   Credit,   any
                    shortfall  being for the account of the  Lessee;  and/or (c)
                    maintenance  and  repair  of spare  engines  and  associated
                    engine  build up units  and/or  the  removal,  installation,
                    maintenance  and repair of QEC (Quick  Engine  Change)  kits
                    ("ENGINE LLP REPLACEMENT"); or
<PAGE>

              (iv)  with respect to Landing Gear,  the  performance of scheduled
                    overhaul  in  accordance   with  the  Approved   Maintenance
                    Programme ("LANDING GEAR MAINTENANCE");

                    the Lessor shall,  provided that a Relevant  Event shall not
                    have  occurred  and be  continuing,  pay to  the  Lessee  or
                    directly  to  the   relevant   maintenance   performer   (as
                    appropriate)  within fifteen (15) Banking Days of receipt of
                    the  documentation   sufficient  to  enable  the  Lessor  to
                    determine the amounts owed as provided in Clause 13.4(e), in
                    the case of Airframe  Maintenance,  to be deducted  from the
                    Airframe  Maintenance  Credit  and,  in the  case of  Engine
                    Maintenance,  from the applicable Engine  Maintenance Credit
                    relating   to  the  Engine  the   subject  of  such   Engine
                    Maintenance  and, in the case of Engine LLP Replacement from
                    the  applicable  Engine LLP  Maintenance  Credit and, in the
                    case of Landing  Gear  Maintenance,  from the  Landing  Gear
                    Maintenance  Credit,  a sum  equal to the  aggregate  amount
                    evidenced by such invoices or receipts,  to the extent there
                    is sufficient credit in such Airframe  Maintenance Credit or
                    relevant  Engine  Maintenance  Credit or relevant Engine LLP
                    Maintenance  Credit or Landing Gear Maintenance  Credit.  To
                    the  extent  that  there  is  insufficient  credit  in  such
                    Airframe  Maintenance  Credit,  relevant Engine  Maintenance
                    Credit or relevant Engine LLP Maintenance  Credit or Landing
                    Gear Maintenance  Credit, the Lessee shall be liable to, and
                    shall   forthwith,   pay  the   shortfall  to  the  relevant
                    maintenance  performer.  Lessor shall have no  obligation to
                    make any  payments or otherwise to account to Lessee for any
                    credits remaining in the aforementioned  maintenance credits
                    at the  expiration or other  termination of the Lease Period
                    except that Lessor  shall pay Lessee an amount  equal to the
                    outstanding  amount of such  credits if the Lease Period has
                    terminated pursuant to Clause 17.4 hereof and the Lessor has
                    received the Agreed Value for the Aircraft.

        (e)     The Lessor  shall not be required to pay moneys to the Lessee or
                directly to the relevant maintenance  performer (as appropriate)
                as provided  for by this Clause 13.4 until such time as it shall
                have received reasonable  documentation adequate to enable it to
                determine  the  amount  to be  paid  (in  which  case,  for  the
                avoidance of doubt, it must pay such amounts  pursuant to Clause
                13.4(d)  within  fifteen  (15)  Banking  Days  thereafter).  The
                documentation  delivered by the Lessee to the Lessor  evidencing
                the  incurring  of expenses  shall  include an  invoice,  a shop
                workscope,  a shop  visit or  maintenance  visit  report  and if
                reasonably requested any additional substantiating data from the
                person that performed such  maintenance  or, if performed by the
                Lessee,   a  statement  of  completion   thereof  together  with
                completed work cards or other documents  requested by the Lessor
                and a  certificate  from  an  authorized  representative  of the
                Lessee that the amounts and other  information set forth in such
                statement  and invoice are  correct.  Any overhaul or other work
                performed  by the  Lessee  or by any  affiliated  or  associated
                company of the Lessee  shall be invoiced at the Lessee's or such
                affiliated  or  associated  company's  actual  cost of  material
                without  mark-up  or profit  and its fully  burdened  labor cost
                capped at 130% of Lessee's  internal  manhour rate of performing
                such  work   without  any  mark-up  or  profit  (as   reasonably
                demonstrated by documentation delivered to Lessor).
<PAGE>

        (f)     If an Engine is replaced as provided in Clauses  13.1(e) and (g)
                hereof,  at the time of such  replacement the applicable  Engine
                Credit and LLP Maintenance Credit will be adjusted either upward
                by payment by Lessee of Engine Maintenance Accrual and/or Engine
                Life Limited Part Accrual with respect of such Engine in amounts
                determined as provided in Clause  13.4(a)  hereof or downward by
                payments by Lessor to Lessee if the amount of the current amount
                of the  credits  is too  high.  Specifically,  the  value of any
                Engine  Maintenance  Accrual Credit will be determined by direct
                comparison of prior Engine Shop Visit  history,  work scopes and
                histories of the  relevant  engines.  The Lessee  shall  provide
                Lessor   with   documentation   adequate,   in  the   reasonable
                determination  of the  Lessor,  to enable  Lessor to verify  the
                amounts of such adjustments.

13.5    The  Lessor  shall  have no  duty to  determine  whether  the  Aircraft,
        Airframe,  Engine or any Part requires  overhaul or  maintenance,  or to
        observe,  or  inspect  the  overhaul  or  maintenance  of the  Aircraft,
        Airframe,  any Engine or any Part,  and the  Lessor  shall not incur any
        liability  or  obligation  to Lessee by  reason  of the  failure  of the
        Aircraft to be properly  overhauled  or  maintained  or by reason of the
        Lessor's election to observe or inspect or not to observe or inspect any
        overhaul or maintenance.

14.     MANUALS AND TECHNICAL RECORDS

14.1    Throughout  the Lease  Period the Lessee shall keep,  and shall  procure
        that  there are kept,  accurate,  complete  and  current  records of all
        flights made by the Aircraft, and of all maintenance and repairs carried
        out to the  Airframe  and each  Engine,  and shall  maintain,  and shall
        procure that there are maintained, all other records, logs and documents
        including,  but not  limited  to,  JAA Form 1 and/or  FAA 8130  Tags and
        repair  or  overhaul  shop  visit  reports  which  are  required  to  be
        maintained  in respect of the  Aircraft by the Aviation  Authority,  and
        shall allow the Lessor and/or its agents or  representatives  to examine
        and take  copies of such  records  at any  reasonable  time upon  giving
        notice to the Lessee.

14.2    The records so kept shall conform with the regulations from time to time
        in force of the  Aviation  Authority,  and with the normal  practices of
        public air transport  operators,  and shall disclose the  whereabouts of
        all Engines and Parts not installed on the Airframe.

14.3    The  records so kept shall be in  English,  shall be part of the Manuals
        and  Technical  Records  and shall be the  property  of the  Lessor  and
        subject to the Mortgage and, at the end of the Lease Period,  the Lessee
        shall deliver the same to the Lessor,  provided that the Lessee shall be
        entitled to make and retain copies thereof.

14.4    The Lessee shall (save as hereinafter provided) keep all the Manuals and
        Technical  Records  on  the  Aircraft  or in  its  possession  or in the
        possession of the Approved Maintenance  Performer,  and shall not permit
        any other person  (other than a person  entitled to have  possession  or
        control  of the  Aircraft  under  the terms of this  Agreement)  to have
        possession of or control over the Manuals and  Technical  Records or any
        of them, except with the prior written consent of the Lessor.
<PAGE>

14.5    The Lessee will  compensate the Lessor (a) for overhaul cost and/or life
        limited part replacement cost, if any, reasonably incurred in respect of
        the Aircraft resultant upon the failure to maintain adequate  historical
        records by the Lessee  during the Lease Term as required by the Aviation
        Authority;  and (b) for all recertification costs incurred in respect of
        any Parts resultant upon the failure by the Lessee to maintain JAA Forms
        1 and/or FAA 8130 Tags in respect of each Part.

15.     TITLE AND REGISTRATION

15.1    Title to the Aircraft shall remain vested in the Head Lessor, subject to
        this  Agreement,  the Head  Lease,  the Trust  Agreement,  the  Security
        Documents  and any  assignments,  charges  or other  disposals  the Head
        Lessor or the Beneficiary  and/or the Lessor may make in accordance with
        Clause 23 (Assignment).

        15.2 (a) Subject to Clause 13.3,  the Lessee agrees that all Engines and
Parts  installed on the Airframe or any Engine at Delivery shall be the property
of the Head  Lessor,  subject to the Head Lease,  the Trust  Agreement  and this
Agreement  and that,  subject  to Clause  13.1(f),  13.2 and  Clause  13.3,  all
replacements,  renewals or substitutions  thereof shall be made with engines or,
as the case may be, parts which comply with the  requirements  of Clause 13.1(e)
and Clause 13.1(g).

               (b) Any Engine or Part at any time  removed  from the Airframe or
any Engine  shall remain the property of the Head Lessor and subject to the Head
Lease, the Trust Agreement, this Agreement and the Mortgage until such time as a
replacement  or  substitute  shall have been  installed  (other than pursuant to
Clause  13.1(f),  Clause 13.2 or Clause  13.3) on the  Airframe or the  relevant
Engine in accordance with this Agreement and, in particular,  complying with the
requirements of Clause 13.1(e) and Clause 13.1(g).

               (c) Upon  installation  in  accordance  with  Clause 13.1 (e) and
Clause 13.1(g) but subject to Clauses 13.2 and 13.3, title to any replacement or
substitute  engine or part shall thereupon  without further act vest in the Head
Lessor subject to the Head Lease, the Trust Agreement and this Agreement and the
same shall become subject to the Mortgage for all purposes as though it had been
installed  in or  attached to the  Airframe or an Engine at Delivery  and become
subject to the Head Lease, the Trust Agreement, this Agreement and the Mortgage,
and subject thereto, title to the Engine or Part replaced or substituted (if not
replaced or substituted by an engine or part which at the time of replacement or
substitution  belonged to the Head Lessor or the Beneficiary)  shall vest in the
Lessee free of the  Mortgage  and such  replaced or  substituted  Engine or Part
shall no longer form part of the Aircraft, Airframe or any Engine and references
herein to the Aircraft, Airframe or Engine shall be construed accordingly.
<PAGE>

               (d) The Lessee shall,  without prejudice to the Head Lessor,  the
Beneficiary  or the Lessor,  promptly and duly execute and do and deliver to the
Lessor all such acts, deeds, assurances or things as may be reasonably requested
in writing by the Head Lessor and/or the Lessor and/or the Beneficiary to ensure
that all replacement or substitute  engines or parts installed in or attached to
the  Airframe or any Engine  (other than  pursuant to Clauses  13.1(f),  13.2 or
13.3) shall  satisfy the  requirements  of Clause  13.1(e) and become and remain
part of the Airframe or the relevant  Engine and the property of the Head Lessor
subject to the Head Lease, the Trust Agreement,  this Agreement and the Security
Documents and, without limiting the foregoing, the Lessee shall, if requested by
and without cost to the Lessor, (i) produce evidence reasonably  satisfactory to
the Lessor that all such replacement or substitute engines meet the requirements
of Clause 13.1(e),  (ii) produce evidence satisfactory to the Lessor (including,
but not limited to, legal opinions and bills of sale) that all such  replacement
or  substitute  engines or parts have  become the  property  of the Head  Lessor
subject to the Head Lease, the Trust Agreement,  this Agreement and the Security
Documents and (iii) in the case of replacement or substitute engines,  make such
filings as reasonably requested by Lessor (including, but not limited to filings
at the FAA and filings of Financing  Statements) to perfect any of the interests
referred to in clause (ii).

15.3    Throughout the Lease Period the Lessee shall (a) at its own cost, ensure
        that the Aircraft is registered in the name of the Lessor subject to the
        Head Lease,  the Trust  Agreement and this Agreement or, if not possible
        or  required  by  applicable  law,  in the  name  of the  Lessee  (or if
        applicable  any  permitted  sublessee)  under  the laws of the  State of
        Registration,  such  registration  to reflect (so far as is permitted by
        applicable  law)  the  respective  interests  of the  Head  Lessor,  the
        Beneficiary,  the Lessor,  the Lessee, any Sublessee (if applicable) and
        the Lenders under the Security  Documents;  and (b) ensure that the Head
        Lease (if requested by the Lessor and a copy is provided to the Lessee),
        this Agreement and the Mortgage (so far as permitted by applicable  law)
        are kept,  filed,  registered and recorded in such office or offices and
        on such  registers  in the State of  Registration  (and,  to the  extent
        applicable,  any other state where the Aircraft is based or operated) as
        may be necessary  to ensure the full  legality,  validity,  priority and
        enforceability  thereof  and the  Lessee  shall  not do any act or thing
        which  may   reasonably   be  expected  to   prejudice  or  cancel  such
        registration  PROVIDED  THAT (i) any filing or other  action  undertaken
        with  respect to the  Agreement by Lessee under this clause (b) shall be
        at Lessee's own cost and (ii) the Lessor shall pay the reasonable out-of
        pocket  costs  incurred  by  Lessee  (unless  such  filing  or action is
        undertaken in  connection  with the  occurrence of a Termination  Event)
        with respect to any filing or other action  undertaken  by the Lessee at
        Lessor's  request with respect to the Head Lease or Mortgage  under this
        clause (b).
<PAGE>

16.     INSURANCE


16.1    On or before  Delivery and  throughout  the Lease Period and  thereafter
        until the Aircraft is redelivered to the Lessor the Lessee shall obtain,
        maintain and keep in full force and effect insurance with respect to the
        Aircraft and liability insurance with respect to the Aircraft reasonably
        satisfactory  to the  Lessor.  Such  insurances  shall  comply  with the
        provisions  of this Clause 16 and  Schedule 3, and shall be in such form
        and  carried  with such  insurers  and where  appropriate  through  such
        brokers,  and subject to such  exclusions  and  deductibles in each case
        carried with insurers of internationally  recognised  responsibility and
        financial  standing who normally  participate in  international  airline
        insurance  programmes  with respect to aircraft  and through  brokers of
        international  repute,  recognised  in the  aviation  market and of good
        standing.   The  Lessee  shall  provide  to  the  Lessor  a  listing  of
        participating insurers showing the relevant percentage underwritten with
        each  certificate  of insurance  provided to the Lessor.  Subject to the
        satisfaction  of the above criteria,  the insurances  shall be deemed by
        the Lessor to have  satisfied the  requirement of the Lessor with regard
        to the standing of any broker or insurer.

16.2    Throughout  the  Lease  Period  and  thereafter  until the  Aircraft  is
        redelivered  to the  Lessor  the  Lessee  shall  ensure  that all  legal
        requirements  as to the insurance of the Aircraft which may from time to
        time be  imposed by the laws of the State of  Registration  or any state
        to,  from or over which the  Aircraft  shall be flown are duly  complied
        with.

16.3    On or before  Delivery,  the Lessee  shall  provide  the  Lessor  with a
        certificate  of  insurance  prepared in  accordance  with normal  market
        practice and complying  with the  provisions of this Agreement and shall
        procure  that  brokers  issue a letter of  undertaking  addressed by the
        Lessee's  insurance  brokers to the Lessor either in the form set out in
        Schedule 6 or otherwise in form and substance reasonably satisfactory to
        the  Lessor)  that the  Insurances  are and will  continue in full force
        after  Delivery for the balance of the policy year  (subject in the case
        of War Risks policies to usual termination or cancellation  rights). Not
        less than five (5) (or such  later  period  prior to  renewal  as may be
        practicable having regard to the circumstances)  Banking Days before the
        date of  expiration of any of the  Insurances,  the Lessee shall procure
        that its  brokers  shall  give a report  to the  Lessor  specifying  the
        current status of renewal negotiations.  Not less than five (5) (or such
        later period prior to renewal as may be practicable having regard to the
        circumstances)  Banking Days prior to date of such expiration the Lessee
        shall  procure that its brokers  shall  confirm in writing to the Lessor
        that the  Insurances  have been renewed and that all premiums in respect
        thereof as are due upon  renewal  have been paid.  At least two (2) days
        (or such  later  period,  but prior to  renewal,  as may be  practicable
        having  regard  to the  circumstances)  prior  to the  renewal  date the
        renewal  certificates  and letters of  undertaking  with  respect to the
        Insurances  shall be  furnished  to the Lessor.  In addition  the Lessee
        shall upon request  furnish to the Lessor,  as and when  required by the
        Lessor,  relevant  appropriate  extracts of policies  (where there is an
        insurance  issue in  dispute,  coverage  or a claim is  denied) or other
        evidence satisfactory to the Lessor that the requirements of this Clause
        16 and  Schedule 3 are being  complied  with and letters of  undertaking
        from the Lessee's insurance brokers in the form set out in Schedule 6 or
        in such other form as the Lessor may from time to time require.
<PAGE>

16.4    The Lessee shall not,  without the prior written  consent of the Lessor,
        take out insurances,  or permit the Lessee or any Indemnitee to be named
        assured in  insurances  with respect to the Aircraft or any Engine other
        than as required under this Agreement  where such insurances will or may
        prejudice the Insurances or recovery  thereunder  (excluding  insurances
        carried by the  Indemnitees).  The Lessee  shall not create or permit to
        exist  any  Encumbrance  (other  than  any  Encumbrance  created  by the
        Indemnitees)  over the  Insurances,  or its  interest  therein,  save as
        constituted by this Agreement and the other Lessee Documents.

16.5    If the  Insurances  are  not  kept  in  full  force  and  effect  and in
        accordance  with the  provisions of this  Agreement the Lessor,  without
        prejudice  to any  other  rights  it may  have  on the  occurrence  of a
        Termination Event, shall be entitled (but not bound):

        (a)    at any time  while  such  failure is  continuing  to require  the
               Aircraft to remain at an airport  or, as the case may be,  (after
               taking out new  insurances  pursuant to  paragraph  (b) below) to
               proceed  to and  remain at an  airport  designated  by the Lessor
               until the Insurances are in full force and effect; and/or

        (b)    to  pay  the  premiums  due  or to  take  out  and  maintain  new
               insurances  complying  with the  requirements  of this Clause 16,
               including an owner's  interest  policy in such form as the Lessor
               may  reasonably  require,  and any sums so expended by the Lessor
               shall  become  immediately  due and  payable to the Lessor by the
               Lessee  together  with  interest  thereon at the Relevant Rate of
               Interest  from the date of  expenditure  by the Lessor  until the
               date of  reimbursement  thereof  by the Lessee  (both  before and
               after any relevant judgment).

16.6    The Lessor shall be  entitled,  after the expiry or  termination  of the
        Lease  Period,  to require the Lessee at the Lessee's  expense to effect
        and to maintain insurance,  if available,  with respect to its liability
        under the  indemnities set forth in Clause 9.5(a) for such period (which
        shall  not  exceed  two (2)  years  from  the  date of  such  expiry  or
        termination) as the Lessor may reasonably  require (having regard to the
        potential  exposure of the Lessor  and/or the other  Indemnitees  to the
        liabilities   indemnified   against  pursuant  to  Clause  9.5(a))  such
        insurance  to provide  for the Lessor  and the other  Indemnitees  to be
        named as additional insured thereunder to the extent of their respective

<PAGE>

        interests under the said  indemnities,  and the obligation of the Lessee
        to effect the same to continue  notwithstanding the Lessee ceasing to be
        the user or operator of the  Aircraft  and/or any of the Engines  and/or
        the Lessor ceasing to be the owner of the Aircraft.

16.7    If at any time the  Lessor  (acting  reasonably  and  having  regard  to
        internationally  recognised insurance principles and practices generally
        accepted)  considers that either (a) the Insurances effected or procured
        by the Lessee  hereunder do not adequately  protect the interests of the
        Lessor and/or the other Indemnitees, or (b) there has otherwise been any
        significant and material  change in  circumstances  (including,  without
        limitation,  any  change  in the  terms  and  conditions  available  for
        insurances  of the type of the  Insurances  in  relevant  markets  or in
        generally accepted market practice), the Lessor shall be entitled acting
        reasonably  and only where same could have a material  adverse effect on
        the Indemnitees  interests in the Insurances  (without  prejudice to any
        other rights which it may have or acquire under any Lessee  Document) to
        require  the  Lessee to  procure  that the terms and  conditions  of the
        Insurances be changed as soon as is reasonably practicable having regard
        to the  circumstances  and in such a way as the  Lessor  may  reasonably
        require, again having regard to the criteria set out above.

16.8    If the  Insurances  required  by this  Clause 16 and  Schedule 3 are not
        effected and  maintained  through  internationally  recognised  aviation
        markets or in any other  insurance  markets  as the  Lessor may  approve
        (such approval not to be unreasonably withheld) the Lessee shall procure
        that  the   relevant   insurers   maintain  in  full  force  and  effect
        reinsurances with reinsurers of recognised standing in the international
        aviation insurance market.  Such reinsurances shall be on the same terms
        as the original  insurances and shall include,  where  appropriate,  the
        provisions set out in Schedule 3.

        The Lessee  shall use  reasonable  business  efforts as evidenced to the
        reasonable  satisfaction  of the Lessor to have included a "cut through"
        clause in the following  terms or otherwise  reasonably  satisfactory to
        the Lessor in respect of reinsurances noted above:-

        (a)    "The  reinsurers  hereby  agree  that in the  event of any  claim
               arising  under the  reinsurances  in  respect  of a Total Loss or
               other claim where, as provided by the Lease,  such claim is to be
               paid to the  person  named as sole loss payee  under the  primary
               insurances,  the  reinsurers  shall  in  lieu of  payment  to the
               reassured,  its  successors  in interest and assigns,  pay to the
               person  named as sole loss  payee  under the  primary  insurances
               effected  by the Assured  that  portion of any loss due for which
               the  reinsurers  would  otherwise be liable to pay the  reassured
               (subject to proof of loss),  it being  understood and agreed that
               any such payment by the  reinsurers  shall (to the extent of such
               payment) fully  discharge and release the reinsurers from any and
               all further liability in connection therewith"; and
<PAGE>

        (b)    provide in case of any  bankruptcy,  liquidation,  dissolution or
               similar  proceedings  of or  affecting  the  reassured  that  the
               reinsurers'  liability  shall be to make such  payments  as would
               have  fallen  due under the  relevant  policy of  reinsurance  in
               accordance with the  cut-through  Clause referred to above if the
               reassured had (immediately  before such bankruptcy,  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.

16.9    Unless and until a Relevant Event shall occur,  the Lessor will not give
        any direction to the insurers as contemplated by paragraph  1.2(b)(2) of
        Schedule 3.

16.10   If any of the  Insurances  referred  to in  paragraphs  1.1(a) or (c) of
        Schedule 3 are subject to an annual  aggregate limit and that, by reason
        of any claims  made  thereunder  during the course of any policy year in
        respect of any property subject to such policy,  the aggregate amount of
        coverage  available  thereunder in respect of the balance of such policy
        year shall have been reduced;

        (a)    the Lessee shall forthwith notify the Lessor of the amount of any
               such claim; and

        (b)    the Lessor  shall be  entitled  to require the Lessee to increase
               the aggregate  limit under the relevant  policy to such amount as
               the Lessor may require.

17.     LOSS AND DAMAGE

17.1    Notwithstanding  Clause  6.1  (Lessor's  Warranties  and  Manufacturer's
        Warranties),  throughout the Lease Period the Lessee shall bear the full
        risk  of  any  loss,  destruction,   hijacking,   theft,   condemnation,
        confiscation, seizure or requisition of or damage to the Aircraft and of
        any other  occurrence of whatever kind which shall deprive the Lessee or
        the operator of the  Aircraft for the time being of the use,  possession
        or enjoyment thereof.

17.2    (a)    The Lessee shall give the Lessor  prompt notice in writing of any
               such  occurrence  as is  referred  to in Clause  17.1  other than
               repairable  damage the likely cost of rectification of which will
               not exceed in aggregate $[ ]*, or, in relation to any Engine,  $[
               ]* in aggregate.

        (b)    The Lessee shall supply to the Lessor all necessary  information,
               documentation and assistance which may be reasonably requested by
               the  Lessor  in  connection  with  making  any  claim  under  the
               Insurances.

17.3    (a)    If the  Aircraft  shall  become a Total  Loss  during  the  Lease
               Period,  the Lessee shall pay, or procure that the insurers  pay,
               to either  the Head  Lessor,  the Lessor or the  Lenders  (as the
               Lessor  may  direct  in  writing)  being  loss  payee  under  the
               Insurances  within ninety (90) days (or such longer period as may
               be  agreed)  of the date on which the Total  Loss  occurred,  the
               Agreed  Value  together  with all  amounts  of rent and any other
               amounts then due and payable under this Agreement.
<PAGE>

        (b)    For the  purposes of this  Agreement a Total Loss shall be deemed
               to have occurred:

               (i)  in the case of an actual total loss,  at noon (London  time)
                    on the actual date the Aircraft was lost or, if such date is
                    not  known,  noon  (London  time)  on the day on  which  the
                    Aircraft was last heard of;

              (ii)  in the case of any of the events  described in sub-paragraph
                    (a) of the  definition  of Total Loss  (other than an actual
                    total loss),  upon the date that notice claiming the loss of
                    the Aircraft is given to the relevant  insurers,  unless the
                    insurers do not forthwith admit such claim,  when such Total
                    Loss shall be deemed to have  occurred  at the date and time
                    at which either a total loss is subsequently admitted by the
                    insurers or a competent court or arbitration tribunal issues
                    a judgment to the effect that a total loss has occurred;

              (iii) in the case of any of the events  described in  subparagraph
                    (b) of the  definition  of  Total  Loss,  upon  the  date of
                    occurrence of such destruction, damage or rendering unfit;

              (iv)  in the case of  Compulsory  Acquisition,  upon the date upon
                    which the relevant  requisition of title or other compulsory
                    acquisition,  requisition,   appropriation,   expropriation,
                    deprivation or confiscation occurs; and

              (v)   in the case of any of the events  described in sub-paragraph
                    (d) of the definition of Total Loss,  upon the expiry of the
                    period of ninety (90) days referred to in such  subparagraph
                    (d) after the date upon which the relevant hijacking, theft,
                    condemnation,  confiscation,  capture, detention, seizure or
                    requisition for use or hire occurred.

17.4    The Lessee  shall  continue  to pay rent on the days and in the  amounts
        required under this Agreement  notwithstanding  any Total Loss; provided
        always that no further  installments  of rent shall become due after the
        date on which all sums due under Clause  17.3(a) shall have been paid in
        full, and the Lease Period shall  terminate on the date of such payment.
        Upon such  termination of the Lease Period and following  payment of the
        Agreed  Value,  the  Lessor  shall  make a payment  to the Lessee in the
        amount  described in paragraph 5 of Letter Agreement No.1. to the extent
        that Lessor received insurance proceeds or Requisition Compensation with
        respect to such Total Loss in excess of the amounts  required to be paid
        by Lessee under Clause  17.3(a) and, for the avoidance of doubt,  Lessor
        shall be entitled to apply such excess insurance proceeds or Requisition
        Compensation for the purpose of making such payment.
<PAGE>


17.5    In the event of repairable damage to the Aircraft or any of the Engines,
        or the  loss or  destruction  of any  Engine  (when  no  Total  Loss has
        occurred),  the Lessor or the Lenders as loss payee under the Insurances
        shall  either pay any  insurance  moneys  received  by it or them to the
        Lessee  upon the Lessee  furnishing  evidence  to the  Lessor  that such
        damage has been made good or  repaired  or put in hand for repair or, in
        the case of the loss or destruction of any Engine,  utilize the relevant
        insurance moneys in the purchase of a replacement Engine provided always
        that if a Relevant  Event has  occurred  and is  continuing,  the Lessor
        shall be entitled to require that such insurance moneys be applied in or
        towards  settlement  of any  amounts  owing by the  Lessee to the Lessor
        under this Agreement.

17.6    In the event of repairable damage to the Aircraft or any of the Engines,
        or the  loss or  destruction  of an  Engine  (when  no  Total  Loss  has
        occurred),  and if the  insurance  moneys  paid in respect  thereof  are
        insufficient  to pay  the  cost or  estimated  cost  of  making  good or
        repairing  such damage or the cost of purchasing a  replacement  Engine,
        the Lessee will pay the deficiency.

17.7    Any  Requisition  Compensation  on account of a  Compulsory  Acquisition
        received  at any time by  Lessor  or by  Lessee  from  any  governmental
        authority or any other source will be directed or paid to Lessor (if not
        already  received by Lessor)  and  applied by Lessor as follows:  (a) so
        much of such  payments  as shall not exceed  the Agreed  Value and other
        amounts  payable  by the  Lessee  pursuant  to Clause  17.3(a)  shall be
        applied in reduction of Lessee's obligation to make such payments to the
        extent not already  paid by Lessee and, to the extent such  payments are
        fully  paid by such  application  or have  already  been made in full by
        Lessee,  to reimburse  the Lessee;  (b) the remaining  balance,  if any,
        shall be paid to the Lessee up to an amount  equal to Lessee's  Interest
        (if any) minus any amount  paid by Lessor to Lessee  pursuant  to Clause
        17.4.  and (c) any amount  remaining  thereafter  shall be  retained  by
        Lessor.

18.     REQUISITION OR GROUNDING

18.1    If the Aircraft is  requisitioned  for hire by any governmental or other
        competent  authority during the Lease Period then,  unless and until the
        Aircraft  becomes a Total Loss following such requisition and the Lessee
        shall have made payment of all sums due pursuant to Clause 17.3(a),  the
        lease of the Aircraft to the Lessee under this Agreement  shall continue
        in full force and effect  (subject always to the provisions of Clause 21
        (Lessor's  Rights  Following a Termination  Event)) and the Lessee shall
        remain fully responsible for the due compliance with all its obligations
        under this  Agreement  other than such  obligations  which the Lessee is
        unable to comply with solely by virtue of such requisition.

18.2    If the Lessee  shall duly  comply  with all its  obligations  under this
        Agreement, save as mentioned in Clause 18.1, the Lessee shall during the
        Lease Period,  be entitled to all requisition hire paid to the Lessor or
        to the Lessee on account of such requisition.
<PAGE>

18.3    The Lessee shall as soon as practicable after the end of any requisition
        for hire,  cause the Aircraft to be put into the  condition  required by
        this Agreement,  and where that requisition  shall end after the date on
        which the Lease Period would  otherwise  have expired or terminated  but
        for such  requisition,  the Lessee shall, as soon as practicable,  cause
        the Aircraft to be put into the redelivery  condition required by Clause
        19, allowance being made for fair wear and tear in respect of the period
        from the date on which the Lease Period would  otherwise have expired or
        terminated  but  for  such  requisition   until  the  actual  expiry  or
        termination of the Lease Period.

18.4    The Lessor shall be entitled to all  compensation  payable in respect of
        any change in the structure,  state or condition of the Aircraft arising
        during the period of  requisition  for hire. The Lessor shall apply such
        compensation  in  reimbursing  the Lessee for the cost of complying with
        its obligation under Clause 18.3,  provided always that if a Termination
        Event has  occurred and is  continuing,  the Lessor shall be entitled to
        apply such compensation in or towards settlement of any amounts owing by
        the Lessee under this Agreement.

18.5    If the Aviation  Authority  has grounded the Aircraft and other  similar
        U.S.   registered  Boeing  737  aircraft  for  reasons  related  to  the
        airworthiness  of such  aircraft  and the  Lessee  has  been  diligently
        attempting  since such  grounding to correct the cause of such grounding
        and,  notwithstanding  such  effort,  the  grounding  continues:  (a) no
        Termination  Event  shall  arise  hereunder  solely  as a result  of the
        Aircraft not holding a currently effective  Certificate of Airworthiness
        due to such grounding and (b) if such grounding continues after the date
        on which the Lease Period would otherwise have expired or terminated but
        for such  grounding,  the lease of the Aircraft to the Lessee under this
        Agreement  shall  continue in full force and effect and the Lessee shall
        remain fully responsible for the due compliance with all its obligations
        under this Agreement and the Lessee shall, as soon as practicable  after
        the cause of such  grounding is corrected,  cause the Aircraft to be put
        into the  redelivery  condition  required  by Clause 19 and  Schedule 4,
        allowance  being  made for fair wear and tear in  respect  of the period
        from the date on which the Lease Period would  otherwise have expired or
        terminated  but  for  such  requisition   until  the  actual  expiry  or
        termination of the Lease Period.

19.     RE-DELIVERY

19.1    At the end of the Lease Period  (other than  following a Total Loss) the
        Lessee at its own expense shall  redeliver the Aircraft to the Lessor at
        the Re-delivery  Location,  and the Lessee shall provide such assistance
        as  the  Lessor  may   reasonably   request  in   connection   with  the
        de-registration   and  export  of  the   Aircraft   from  the  State  of
        Registration.
<PAGE>

19.2    On  re-delivery,  the Lessee shall ensure that (i) the Aircraft shall be
        maintained and repaired in compliance  with Clause 13.1(d) and all other
        requirements  of this  Agreement,  (ii)  the  Engines  installed  on the
        Aircraft at Delivery (or,  replacement or substitute Engines pursuant to
        Clause 13.1(e) or Clause  13.3(c)(ii)(dd)  and, in either event, meeting
        the  requirements  of Clause 13.1(e),  Clause  13.1(g),  Clause 15.2 and
        Schedule 4, paragraph 3, shall be installed on the Aircraft; (iii) there
        shall be a current  Certificate of  Airworthiness  (and the Lessee shall
        cooperate,   where  requested  by  the  Lessor,   to  obtain  an  export
        certificate of  airworthiness)  issued in respect of the Aircraft by the
        Aviation Authority in the public transport (passenger) category and such
        current  certificates of maintenance  issued as shall allow the Aircraft
        to be used for the public  transport  of  passengers  or cargo under the
        regulations of the Aviation  Authority;  (iv) the Aircraft shall be in a
        condition qualifying for immediate certification of airworthiness by the
        Aviation  Authority  and the  FAA;  (v) the  Aircraft  shall be clean by
        Airline  Standards  (vi)  all  applicable  vendor's  and  manufacturer's
        service bulletin kits received by the Lessee or any Sub-Lessee  relating
        to the Aircraft  shall be installed on the Aircraft at no cost to Lessor
        or delivered  separately (with reasonable advance notice to Lessor) at a
        charge to the Lessor not to exceed Lessee's direct cost of procuring and
        delivering  such kits to the Lessor in a serviceable  condition with all
        relevant  documentation  attached  thereto  provided that the Lessor may
        decline (with  reasonable  advance  notice to Lessee) to accept any such
        noninstalled kits; (vii) the livery, insignia and markings of the Lessee
        or any  operator  of the  Aircraft  shall  have been  stripped  from the
        Aircraft which shall have been rubbed down and repainted at the Lessee's
        cost in neutral  white or such  other  base  colour as is advised by the
        Lessor prior to redelivery;  (viii) the Aircraft shall be free and clear
        of all Encumbrances other than Lessor's Encumbrances;  (ix) the Aircraft
        shall  have  no  deferred   maintenance,   repair  or  inspection  items
        outstanding;  and (x) all Aircraft  repairs shall be permanent and where
        commercially feasible flush type repairs (provided that the flush repair
        does not require  substantial rework of adjacent airframe structures and
        a nonflush repair achieves  equivalent  technical  standards) and in any
        event be in accordance with the Manufacturer's  structural repair manual
        or as otherwise  approved by the FAA and the Aircraft  shall comply with
        the Return Conditions set out in Schedule 4.

19.3    During  the  period of  thirty  (30) days  prior to  re-delivery  of the
        Aircraft,  the Lessee, at no cost to the Lessor, shall, if the Lessor so
        requests, make the Manuals and Technical Records available to the Lessor
        and during the entire  period of the C check  required  upon  redelivery
        make the Aircraft  available  for such  detailed  inspection in order to
        verify that the condition of the Aircraft  complies with the  provisions
        hereof. During such periods, the Lessor may accomplish the following:

        (a)    inspection of the Manuals and Technical Records;
<PAGE>

        (b)    appropriate  functional  testing  of the  Aircraft,  Engines  and
               Parts,  including without limitation,  a boroscope inspection,  a
               spectrographic   oil  analysis  programme  (SOAP)  sample  and/or
               magnetic chip detection inspection of the Engines;

        (c)    up to a two hour test  flight with the  Lessor's  representatives
               (up to two) as  observers,  including an engine  condition run on
               each Engine; and


        (d)    The  detailed   inspections  and  checks  during  the  redelivery
               procedures   specified  in  this  Clause  shall  be  commercially
               reasonable  in manner and  extent and will be carried  out by the
               Lessor  solely so as to  enable  the  Lessor  to verify  that the
               Aircraft  complies with the provisions of this Agreement and such
               inspections and checks will be appropriate and reasonable  having
               regarded to: (i) the age of the  Aircraft;  (ii) the  maintenance
               history  of the  Aircraft;  and (iii) any then  current  aviation
               industry issues regarding such model of Aircraft. Opening of bays
               and  panels  may  not  be  required   unless  Lessor   reasonably
               demonstrates  a  requirement  therefor and in no event shall such
               panels or bays be opened arbitrarily or unnecessarily.

19.4    (a)    If  on  re-delivery  the  Aircraft  (including  the  Manuals  and
               Technical  Records)  shall not be in the  condition  required  by
               Clause  19.2,  the Lessor shall be entitled to require the Lessee
               at the Lessee's expense to rectify any defects or deficiencies in
               the  Aircraft  when  it is  redelivered,  and  the  Lessee  shall
               promptly  comply  with any such  requirement.  To the extent that
               such rectification  extends beyond the Lease Term, the Lessor may
               at its sole  discretion (i) remedy such defects and  deficiencies
               and  recover on demand  from the  Lessee  the costs so  incurred,
               together  with interest at the Relevant Rate of Interest from the
               date of  expenditure  and demand for payment by the Lessor of the
               relevant  cost  through  the day  prior to the  date of  recovery
               thereof  from the  Lessee  (both  before  and after any  relevant
               judgment),  or (ii)  continue  the  Lease  Period on a day to day
               basis until such  non-compliance  is rectified by the Lessee with
               rent  being  payable  by the Lessee at the rate at which rent was
               payable at the date on which  re-delivery  would  otherwise  have
               occurred,  PROVIDED,  HOWEVER,  that if  (aa)  such  defects  and
               deficiencies  are Minor Defects,  (bb) the Aircraft is capable of
               being placed in immediate  commercial  use  notwithstanding  such
               Minor Defects and (cc) no Relevant Event has then occurred and is
               continuing other than such Minor Defects, the Lessor shall accept
               re-delivery  of the  Aircraft  as  provided in clause (i) of this
               sentence   subject  to  such  Minor  Defects.   The  Lessee  will
               compensate the Lessor for loss of value to the Aircraft where any
               damage  has  resulted  in  permanent  structural  changes  to the
               Aircraft's  type  design  excluding  fair  wear and  tear.  Minor
               Defects means defects or  deficiencies  in the Aircraft which the
               Lessee  was unable to correct by the end of the Lease Term or any
               extension of the Lease Period pursuant to the preceding  sentence
               of this Clause through commercially  reasonable efforts and which

<PAGE>

               (1) in no single  case or in the  aggregate  will cost the Lessor
               more than $[ ]*, as reasonably estimated by the Lessor, to remedy
               (2) can be  remedied  by the Lessor or the next  operator  of the
               Aircraft within thirty (30) days of re-delivery to Lessor, (3) do
               not  prevent  the  Aircraft   from  holding  a  fully  valid  and
               unconditional standard Certificate of Airworthiness issued by the
               FAA,  (4) will not  prevent  the  Aircraft  from being  granted a
               standard   Certificate   of   Airworthiness   in  the   State  of
               Registration  to which it is being exported (if any) and (5) does
               not  constitute  a  commercially  reasonable  basis  for the next
               operator of the Aircraft to refuse to accept delivery thereof.

        (b)    Prior to the  re-delivery  of the  Aircraft and upon the Lessor's
               request,  the Lessee  will  ensure  that there is provided to the
               Lessor or its agent reasonable access to the Approved Maintenance
               Programme  and the  Manuals  and  Technical  Records  in order to
               facilitate  the  Aircraft's   integration   into  any  subsequent
               operator's  fleet.  The Lessee will upon  return of the  Aircraft
               deliver to the Lessor a certified  true current and complete copy
               of  the  Approved  Maintenance  Programme  which  shall  be  kept
               confidential  and promptly  returned to Lessee  together with all
               copies  thereof  after any use of such  Maintenance  Programme by
               Lessor  which  shall  be  solely  for  bridging  to a  subsequent
               operator's maintenance programme.

19.5    Upon  re-delivery of the Aircraft to the Lessor,  an adjustment shall be
        made in respect of fuel on board the  Aircraft  at the time of  Delivery
        and at the time of  re-delivery  at the price  prevailing at the time of
        re-delivery at the Re-delivery Location.

19.6    Upon  re-delivery  of the Aircraft  provided that (i) no Relevant  Event
        shall have occurred or be continuing;  and (ii) the Lessee has satisfied
        all of its obligations then due under this Agreement (including, without
        limitation,  its obligation to redeliver the Aircraft in accordance with
        this Clause 19 and  Schedule  4), the Lessor shall make a payment to the
        Lessee in the amount described in paragraph 5 of Letter Agreement No. 1.
        Notwithstanding the foregoing,  if the Aircraft is re-delivered  subject
        to Minor Defects as provided in Clause 19.4(a) and no Relevant Event has
        then occurred and is continuing other than such Minor Defects, upon such
        re-delivery,  the Lessor shall make a payment to the Lessee in an amount
        equal to the amount  described in paragraph 5 of Letter  Agreement No. 1
        less an amount (the "Remedy Amount")  reasonably  estimated by Lessor to
        be sufficient to pay for its costs to remedy such Minor  Defects.  If in
        fact it costs  Lessor  less than the Remedy  Amount to remedy such Minor
        Defects,  the  Lessor  shall  make a payment  to the Lessee in an amount
        equal to the difference between the Remedy Amount and such actual costs.
        If such actual costs exceed the Remedy Amount,  the Lessee shall pay the
        Lessor such deficiency as provided in Clause 19.4(a).
<PAGE>

19.7    Notwithstanding  anything  to the  contrary  in Clause 19 or Schedule 4,
        unless a Termination Event has occurred and is continuing (in which case
        this Clause 19.7 shall not apply),  the C Check and all other procedures
        and inspections required by Schedule 4 will be performed at the Lessee's
        principal  maintenance facility in the United States and the inspections
        and test  flight  set  forth in Clause  19.3  shall  take  place at such
        location. Following such procedures, inspections and test flight, either
        the  Aircraft  will be in the  condition  required by Clause 19.2 or the
        provisions of Clause 19.4 (a) will apply  (collectively the "Predelivery
        Requirements").  After the Predelivery Requirements have been satisfied,
        the Lessee shall ferry the Aircraft to the Redelivery  Location with the
        Lessor's  representatives  (up to two) as observers.  At the  Redelivery
        Location, the Aircraft shall be re-delivered by the Lessee in compliance
        with all terms of Clause 19 and Schedule 4.  Following  the ferry flight
        to the Redelivery  Location,  the Lessor shall conduct engine  boroscope
        inspections  and an  external  walkaround  inspection  and Lessee  shall
        correct any deficiencies and defects discovered.  If the Aircraft is not
        in the  condition  required by Clause  19.2,  the  provisions  of Clause
        19.4(a) will apply.

19.8    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 ferry flight set forth in Clause 19.7.

19.9    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,  arising out of, or in any connected
        with the ferry flight set forth in Clause 19.7.

20.     TERMINATION EVENTS

20.1    Any of the following events shall constitute a "Termination Event":

        (a)    the  Lessee  fails  to pay  any  sum  payable  by it  under  this
               Agreement  when due within  three (3) Banking Days of a scheduled
               payment and, in the case of a nonscheduled payment,  within three
               (3) Banking Days after notice  thereof has been  delivered to the
               Lessee; or

        (b)    (i) the Lessee fails to obtain and/or  maintain the Insurances or
               (ii) any  insurer  or  reinsurer  in  respect  of any part of the
               Insurances  cancels any part of the  Insurances  or  disclaims or
               repudiates   liability  by  reason,   in  either  case,   of  any
               mis-statement in any proposal for the Insurances or for any other
               failure or default on the part of the Lessee  and, in the case of
               this clause (ii),  if the  Insurances  continue in full force and
               effect as to Lessor,  Beneficiary,  Head Lessor and Lenders, (aa)
               such cancellation, disclaimer or repudiation is not withdrawn and
               (bb) the Insurances  which are the subject of such  cancellation,
               disclaimer or  repudiation  are not replaced  with  Insurances in
               full compliance  with the terms of this  Agreement,  in each case
               within  ten (10)  days of the  occurrence  of such  cancellation,
               disclaimer or repudiation; or
<PAGE>

        (c)    the Lessee  commits  any breach of or omits to observe any of the
               obligations or  undertakings  expressed to be assumed by it under
               this Agreement  (other than those referred to in sub-clauses  (a)
               and (b)  above)  or any of the other  Lessee  Documents  and,  in
               respect of any such  breach or  omission  which in the opinion of
               the Lessor is capable  of remedy,  such  action as the Lessor may
               require  shall not have been taken within thirty (30) days of the
               Lessor  notifying the Lessee of such default and of such required
               action  or,  if any  such  breach  or  omission  is not  cured or
               remedied  within said thirty (30) days  notwithstanding  diligent
               efforts by Lessee to effect such cure or remedy, Lessee continues
               such diligent efforts and such breach or omission is not cured or
               remedied within sixty (60) days of such notice; or

        (d)    any  representation  or  warranty  made or  deemed  to be made or
               repeated  by the  Lessee  in or  pursuant  to  any of the  Lessee
               Documents  is or  proves  to have  been  untrue  in any  material
               respect when made or deemed repeated and continues to be material
               at the time relied upon by Lessor for purposes of  establishing a
               Termination Event; or

        (e)    Lessee  shall  default in the payment of any  obligation  for the
               payment of borrowed  money,  for the deferred  purchase  price of
               property  or for the  payment of rent under any lease which has a
               principal  amount of [ ]* Dollars ($[ ]*) or more  determined  in
               the case of borrowed  money by the amount  outstanding  under the
               agreement pursuant to which such borrowed money was borrowed,  in
               the case of a deferred  purchase  price by the remaining  balance
               and in the case of a lease by the present discounted value of the
               remaining  rent or hire  payable  thereunder  (ignoring  any fair
               market  renewal)  when the same  becomes  due if such  nonpayment
               results  in an  acceleration  of such  indebtedness  or an  early
               termination or declaration of default under such lease, or Lessee
               shall default in the performance of any other term, agreement, or
               condition  contained in any agreement or  instrument  under or by
               which any such  obligation is created,  evidenced or secured,  if
               the effect of such default is to cause such  obligation to become
               due prior to its  stated  maturity  or to cause  such lease to be
               early terminated or declared in default or;
<PAGE>

        (f)    a "Termination Event," "Event of Default" or other default (after
               the lapse of any  applicable  grace period) shall occur under any
               other aircraft lease  agreement  between a lessor acting as owner
               trustee under a trust in which the Beneficiary is the beneficiary
               and the Lessee; or

        (g)    any   consent,   authorization,   license  or   approval   of  or
               registration with or declaration to governmental or public bodies
               or  authorities  or  courts  required  by the  Lessee in order to
               perform its obligations  under any of the Lessee Documents is not
               granted  or is  revoked  or  terminated  or  expires  and  is not
               replaced or  reinstated  in full force and effect  within  thirty
               (30) days thereafter; or

        (h)    a creditor attaches or takes possession of a material part of the
               assets or  revenues  of the  Lessee  and such  attachment  is not
               discharged within sixty (60) days; or

        (i)    the  Lessee  suspends  payment  of its  debts  or  becomes  or is
               judicially  determined to be insolvent or unable to pay its debts
               as they fall due or  commences  negotiations  with its  creditors
               generally with a view to the  re-adjustment  or  re-scheduling of
               all or part of its  indebtedness  or  proposes or enters into any
               composition or other arrangement for the benefit of its creditors
               generally  or any  class of  creditors  commence  proceedings  in
               relation to the Lessee  under any law,  regulation  or  procedure
               relating to  reconstruction or readjustment of debts and the same
               are not contested by Lessee; or

        (j)    the Lessee  shall file a voluntary  petition in  bankruptcy  or a
               voluntary   petition   seeking   protection   from  creditors  or
               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 the Lessee in any such
               proceedings,  or Lessee shall by voluntary  petition,  answer, or
               consent seek relief under the  provisions  of any  bankruptcy  or
               other similar law providing for the  reorganization or winding-up
               of  corporations,  or consents to the  appointment of a receiver,
               trustee,  liquidator  of  itself  or a  substantial  part  of its
               assets; or

        (k)    an order,  judgment  or decree is entered  by any court,  with or
               without the consent of the Lessee, appointing a receiver, trustee
               or liquidator  for Lessee of all or any  substantial  part of its
               property,  or all or any substantial  part of the property of the
               Lessee is sequestered,  and any such order, judgment or decree of
               appointment  or  sequestration  remains in  effect,  undismissed,
               unstayed or  unvacated  for a period of sixty (60) days after the
               date of entry thereof; or

        (l)    a  petition   against  the  Lessee  in  a  proceeding  under  any
               bankruptcy, insolvency or other similar laws (as now or hereafter
               in effect) shall be filed, or if, under the provisions of any law

<PAGE>


<PAGE>

               providing for  reorganization or winding-up of corporations which
               may apply to Lessee  any court of  competent  jurisdiction  shall
               assume  jurisdiction,  custody or control of the Lessee, and such
               petition is not voluntarily or otherwise  dismissed  within sixty
               (60) days after the filing thereof; or

        (m)    the Lessee  suspends or ceases or threatens in writing to suspend
               or cease to carry on its business such that the ability of Lessee
               to  perform  its  obligations  under  the  Lessee  Documents  may
               reasonably be expected to be materially adversely affected; or

        (n)    all or substantially  all of the assets or revenues of the Lessee
               are seized,  nationalized,  expropriated or compulsorily acquired
               by or under the authority of any government; or

        (o)    the Lessee  threatens to dispose of all or  substantially  all of
               its assets,  whether by one or a series of transactions,  related
               or  not,  other  than  for the  purpose  of a  reconstruction  or
               amalgamation  the  terms  of which  have  received  the  previous
               consent in writing of the Lessor and such disposition  would have
               a material adverse effect on the ability of the Lessee to perform
               its obligations under the Lessee Documents;

        (p)    the Lessee ceases to be a  Certificated  Air Carrier or ceases to
               hold a United  States Air Carrier  License or  Certificate  under
               Part 121 of the FAR (or any successor  provision) or  Certificate
               under Section 41101 of Title 49 of the United States Code (or any
               successor provision); or

        (q)    delivery of the Aircraft by the  Manufacturer  under the Purchase
               Agreement  does not occur or is delayed by more than  thirty days
               beyond the scheduled date of delivery by reason of failure of the
               Lessee to meet its obligations  under the Purchase  Assignment or
               Purchase Agreement; or

        (r)    Lessee  enters  into  any  amendment,  modification,  supplement,
               cancellation  or  termination  of  the  Purchase  Agreement  with
               respect  to  the   Aircraft  or  grants  any  waiver  or  consent
               thereunder with respect to the Aircraft or enters into any change
               order  thereunder  with  respect  to the  Aircraft,  in each case
               without the prior written consent of Lessor,  provided,  however,
               that if, in any such case,  such  consent  has been  unreasonably
               withheld or delayed, such case shall not constitute a Termination
               Event under this Clause 20.1(r).

21.     LESSOR'S RIGHTS FOLLOWING A TERMINATION EVENT

21.1    Upon the occurrence of any Termination  Event and at any time thereafter
        so long as the same shall be continuing,  the Lessor may, at its option,
        declare by written  notice to the Lessee this Agreement to be in default
        (provided,  however,  that in the  case  of a  Termination  Event  under

<PAGE>

        Clauses  20.1(i),  (j), (k), (l) and (m) the Lessor need not declare the
        Agreement to be in default); and at any time thereafter,  the Lessor may
        do, and the Lessee shall comply with,  one or more of the following with
        respect  to all or any  part of the  Airframe  and the  Engines,  as the
        Lessor in its sole discretion  shall elect, to the extent  permitted by,
        and subject to compliance with any mandatory requirements of, applicable
        law then in effect:

        (a)    Cause the Lessee,  upon the  written  demand of the Lessor and at
               the Lessee's expense,  to, and the Lessee shall,  promptly return
               all or such part of the  Airframe  or the  Engines  as Lessor may
               demand  to Lessor  at such  location  in the  United  Kingdom  or
               elsewhere  as  selected  by Lessor in the  manner  and  condition
               required  by,  and  otherwise  in  accordance  with  all  of  the
               provisions  of, Section 19 and Schedule 4 hereof;  or Lessor,  at
               its option, may enter upon the premises where the Airframe or any
               or all  Engines  are  located or  believed to be located and take
               immediate  possession  of and  remove  such  Airframe  or Engines
               without the necessity for first  instituting  proceedings,  or by
               summary proceedings or otherwise (and, at Lessor's option,  store
               the same at the  Lessee's  premises  until  disposal  thereof  by
               Lessor),  and the Lessee  shall  comply  therewith,  all  without
               liability  to Lessor  for or by  reason  of such  entry or taking
               possession or storage,  whether for the  restoration or damage to
               property caused by such taking or storage 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
               with  respect  to all or any  part of the  Aircraft,  Lessor,  by
               written  notice  to the  Lessee  specifying  a  payment  date not
               earlier  than ten (10)  days  from the date of such  notice,  may
               demand  that the  Lessee  pay to  Lessor,  and  Lessee  shall pay
               Lessor,  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  installments of rent due on the Aircraft,  Airframe,
               Engine or Part  thereof  for periods  commencing  on or after the
               payment date in such notice), any unpaid installments of rent due
               for periods prior to the period  commencing with the payment date
               specified in such notice plus an amount  equal to the excess,  if
               any, of the present value of the remaining  installments  of rent
               during the Lease Term over the  present  value of the fair market
               rental value of the Aircraft,  Airframe,  Engine or Part thereof,
               for the  remainder  of such  Lease  Term,  using  in each  case a
               discount  rate  of the  amount  of  interest  then  paid  on U.S.
               Treasury Bills of similar maturity;

        (c)    Terminate  the Lease Term and/or the  leasing of the  Airframe or
               any or all of the Engines,  or exercise any other right or remedy
               which  may  be  available  under  applicable  law or  proceed  by
               appropriate  court  action  to  enforce  the  terms  hereof or to
               recover damages for the breach hereof.
<PAGE>

21.2    In addition to the amounts  set forth in Clause  21.1,  Lessee  shall be
        liable for any and all unpaid amounts due hereunder  before or after any
        termination hereof and for all costs and expenses (including  reasonable
        attorneys' fees and disbursements) incurred by Lessor and Beneficiary in
        connection with or as a result of any  Termination  Event or exercise of
        remedies  hereunder,  including,  but not  limited to, (i) all costs and
        expenses  incurred in connection  with the return of the Airframe or any
        Engine in accordance  with the terms of Section 19 and Schedule 4 hereof
        and/ or in connection with restoring the Aircraft or any portion thereof
        to the  condition  required  by  Section  19 and  Schedule  4 hereof and
        remarketing  the Aircraft,  (ii) any loss,  premium,  penalty or expense
        which may be incurred in repaying  funds  raised to finance the Aircraft
        or in  unwinding  any swap,  forward  interest  rate  agreement or other
        financial  instrument  relating in whole or in part to the Head Lessor's
        or the Beneficiary's financing of the Aircraft and (iii) interest at the
        Relevant Rate on any amount not paid when due under this Agreement,  and
        all such obligations  shall survive any termination of this Agreement or
        the leasing of the Aircraft or any portion thereof hereunder.  All costs
        and expenses  referred to in the preceding  sentence shall be payable by
        Lessee  upon  demand  by the  Lessor  or  Beneficiary  unless  otherwise
        specified  in this  Agreement.  Except as otherwise  expressly  provided
        above,  no  remedy  referred  to in this  Clause  21 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.  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 such  other  remedies.  No  express or
        implied waiver by Lessor of any Termination Event hereunder shall in any
        way be,  or be  construed  to be, a waiver of any  future or  subsequent
        Termination Event.

21.3    For the purposes of Subclause  21.1 (b) above,  the "fair market  rental
        value" of the  Aircraft,  Airframe,  any Engine or Part thereof shall be
        the  rental  value,  net of all costs and  expenses  of  recovering  the
        Aircraft,  Airframe  or any Engine or Part  thereof  and  restoring  its
        condition to the condition required  hereunder,  which would be obtained
        in an arm's-length  transaction  between an informed and willing lessee,
        under no compulsion to lease, and an informed and willing lessor,  based
        upon the actual condition and location of the Aircraft,  Airframe or any
        Engine of Part  thereof,  which value shall be determined by a reputable
        firm of aircraft appraisers selected by Lessor or Beneficiary.  The cost
        of such appraisal shall be borne by Lessee.

21.4    If the Lessee  fails to comply  with any of its  obligations  under this
        Agreement the Lessor may, without being in any way obliged so to do, and
        without being  responsible  for so doing,  and without  prejudice to the
        ability  of the  Lessor to treat that  non-compliance  as a  Termination
        Event,  effect  compliance  on the  Lessee's  behalf,  and if the Lessor
        incurs any  expenditure in effecting such compliance the Lessor shall be

<PAGE>

        entitled  (without  prejudice  to Clause 21.1 or Clause 21.2) to recover
        such  expenditure  from the Lessee together with interest thereon at the
        Relevant  Rate of Interest  from the date on which such  expenditure  is
        incurred by the Lessor  until the date of  reimbursement  thereof by the
        Lessee (both before and after any relevant judgment).

21.5    The Lessee's obligations under this Clause 21 shall survive  the end of
        the Lease Period.

22.     NOTICES

22.1    Every notice, request,demand or other communication under this Agreement
        shall:

        (a)    be in writing  delivered  personally  or by prepaid  first  class
               airmail letter or by Federal Express or similar courier  service,
               or facsimile  transmission  (confirmed in the case of a facsimile
               transmission,  by such  courier  service  sent within 24 hours of
               despatch but so that the non-receipt of such  confirmation  shall
               not affect in any way the validity of the facsimile  transmission
               in question);

        (b)    be deemed to have been received, subject as otherwise provided in
               this Agreement, in the case of a facsimile  transmission,  at the
               time of despatch with  confirmation  that the  communication  was
               well  received  (provided  that,  in  the  case  of  a  facsimile
               transmission,  if the date of despatch  is not a business  day in
               the  country  of the  addressee  it shall be  deemed to have been
               received at the  opening of  business  on the next such  business
               day), in the case of a courier service, when received and, in the
               case of a  letter,  when  delivered  personally  or five (5) days
               after being put in the post; and

        (c)    be sent:

               (1)    to the Lessor to:

                      Wilmington Trust Company
                      Rodney Square North
                      1100 N. Market Street
                      Wilmington, Delaware 19890
                      USA

                      Fax:  001-302-651-8882
                      (Attention: Corporate Trust Administration);
                      Telephone:  302-651-1428

                      WITH A COPY TO THE BENEFICIARY
<PAGE>

               (2)    to the Beneficiary to:

                      ORIX Aviation Systems Limited
                      2nd Floor
                      IFSC House
                      International Financial Services Centre
                      Custom House Docks
                      Dublin 1
                      Ireland

                      Fax:  353-1-670-0644
                      (Attention: Company Secretary/Assistant Director -
                      Legal Affairs)
                      Telephone: 011-353-1-670-0633; or


               (3)    to the Lessee to:-

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

                      Fax: 001 -719-527-7480
                      (Attention:  Chief Financial Officer)
                      Telephone:  719-527-7394

        or to such other address or facsimile number as is notified by one party
        to the others under this Agreement.

23.     ASSIGNMENT

23.1    (a)   The  Lessee may not assign  or,  except as herein  provided  with
               respect to  subleases,  otherwise  transfer  any of its rights or
               obligations  under  this  Agreement  without  the  prior  written
               consent of the Lessor.

        (b)    The  Lessor may assign or  otherwise  transfer  any or all of its
               rights  under,  and the benefit of,  this  Agreement  at any time
               during the Lease  Period  with the  consent of the  Lessee,  such
               consent not to be unreasonably denied,  provided,  however,  that
               the consent of the Lessee  shall not be required  with respect to

<PAGE>

               any  assignment  (i) to the Head  Lessor or Lenders as  otherwise
               contemplated  herein, (ii) to any affiliate of the Lessor that is
               a  Citizen  of  the  United  States,  (iii)  to  any  financially
               responsible  company  or  person  (as  reasonably  determined  by
               Lessor)  that is a Citizen  of the  United  States  and is not an
               airline that competes  directly with Lessee on specific routes or
               (iv) to any assignment that occurs after a Termination  Event has
               occurred and is continuing  which is made in  consequence of such
               Termination  Event.  Except  in  the  case  of an  assignment  or
               transfer that occurs after a  Termination  Event has occurred and
               is  continuing  (including  at the  time  of such  assignment  or
               transfer),  each assignee or transferee under this Clause 23.1 or
               under  Clause  23.2  shall  deliver,   as  a  condition  to  such
               assignment or transfer, a Letter of Quiet Enjoyment to the Lessee
               at or before such assignment or transfer.  Under no circumstances
               shall Lessee be obligated to pay any assignee or  transferee  any
               greater amount or incur any greater obligation than that which it
               would have been obligated to pay or incur under this Agreement if
               no  assignment  or  transfer  had taken  place nor shall any such
               assignment impair any right of the Lessee under this Agreement or
               impose any additional obligation on Lessee.

23.2    It is  understood  that the Head  Lessor,  the  Beneficiary,  the Lessor
        and/or  the  Lenders  may from  time to time  effect,  amend,  modify or
        replace the security  arrangements  in respect of the  financing  of, or
        refinance the Aircraft;  the Lessee agrees to cooperate  with the Lessor
        in connection  therewith and in connection with the Security  Documents,
        any mortgage and any  assignment  or transfer by the Lessor  pursuant to
        Clause 23.1 and to execute and deliver to the Lessor such  documents  as
        are reasonably requested by the Head Lessor, the Beneficiary, the Lessor
        or the Lenders  relating  thereto  provided no such documents impair any
        right granted to Lessee hereunder or impose any additional obligation on
        Lessee not otherwise  required by this  Agreement.  The Lessee agrees to
        change  the  nameplates  referred  to in  Clause  13.1  and to give  all
        reasonable  assistance  as may be  reasonably  requested  in  writing by
        Lessor for the perfection and  acknowledgement of the rights of the Head
        Lessor,  the  Beneficiary,  the  Lessor  and/or the  Lenders  and/or any
        mortgagee  hereunder or thereunder.  The Lessor shall pay the reasonable
        out-of-pocket   expenses   incurred  by  the  Lessee  in  executing  and
        delivering  documents  or  otherwise  cooperating  at the request of the
        Lessor  in   connection   with  any   assignment  or  transfer  made  as
        contemplated  by Clause 23.1 and Clause 23.2.  Nothing in Clause 23.1 or
        23.2 shall restrict the right of the  Beneficiary to assign the Aircraft
        and  Lease to a  successor  trustee  pursuant  to the terms of the Trust
        Agreement  provided  that such  successor  trustee  is capable of making
        substantially  the same  representations  of the Lessor as in clause 2.5
        hereof.

23.3    The agreements, covenants, obligations and liabilities contained in this
        Agreement, including, but not limited to all obligations to pay rent and
        indemnify  the  Lessor,  are made for the  benefit  of the  Lessor,  any
        assignee or transferee of the Lessor and their respective successors and
        assigns.
<PAGE>

24.     MISCELLANEOUS

24.1    This  Agreement  (together  with  Letter  Agreement  No. 1 and any other
        related side letters)  contains the entire agreement  between the Lessor
        and the Lessee  relating to the leasing of the  Aircraft,  and the terms
        and conditions of this Agreement  shall not be varied  otherwise than by
        an  instrument  in writing of even date  herewith or  subsequent  hereto
        executed by or on behalf of the Lessor and the Lessee.

24.2    No failure  or delay on the part of the  Lessor or Lessee in  exercising
        any right,  power or remedy  under  this  Agreement  shall  operate as a
        waiver thereof nor shall any single or partial exercise by the Lessor or
        Lessee of any such right,  power or remedy preclude any other or further
        exercise  thereof or the exercise of any other  right,  power or remedy.
        The rights and remedies  provided in this  Agreement are  cumulative and
        are not exclusive of any rights and remedies provided by law.

24.3    Subject to the periods of grace  referred to in Clause 20, time shall be
        of the  essence as regards the  performance  by the Lessee and Lessor of
        their respective obligations under this Agreement.

24.4    The Lessee and Lessor  shall from time to time do and perform such other
        and  further  acts and  execute  and  deliver  any and all such  further
        instruments  as may be required by law or  reasonably  requested  by the
        other to establish,  maintain and protect the rights and remedies of the
        Head Lessor, the Beneficiary,  the Lessor, the Lenders or the Lessee and
        to carry out and  effect  the  intent  and  purposes  of this  Agreement
        provided  that no party shall be required  under this Clause to take any
        action or  execute  and  deliver  any  document  that  would  materially
        increase the  obligations  or impair the rights of such party under this
        Agreement.

24.5    This  Agreement  may be  executed  by the  parties  hereto  in  separate
        counter-parts,  each of which, when so executed and delivered,  shall be
        an original,  and both  counter-parts  shall constitute one and the same
        instrument.

24.6    If any  provision of this  Agreement  shall become  invalid,  illegal or
        unenforceable  in any respect under any law, the validity,  legality and
        enforceability  of the remaining  provisions of this Agreement shall not
        in any way be affected or impaired.

24.7    The Lessor is  entering  into this  Agreement  in its  capacity as Owner
        Trustee and not in its  individual  capacity as such.  The Lessor in its
        individual  capacity shall not be liable to the Lessee for or on account
        of any statements, representations, warranties, covenants or obligations
        stated to be those of the Lessor hereunder.  The Lessor may exercise its
        rights  and  remedies  hereunder  and under the other  Lessee  Documents
        through agents and representatives,  including,  but not limited to, the
        Beneficiary and its agents and representatives.
<PAGE>

24.8    Any amount  which the terms of this  Agreement  provide  that the Lessor
        shall pay to the Lessee but for the occurrence of a Termination Event or
        Relevant Event shall,  unless application of such amount is provided for
        elsewhere in this Agreement and such amount has been so applied, be paid
        by Lessor to Lessee  at such time as no  Termination  Event or  Relevant
        Event (as the case may be) has occurred and is continuing.

24.9    All  obligations   under  this  Agreement  are  continuing   obligations
        throughout  the  Lease  Period.  The end of the Lease  Period  shall not
        prejudice  or  otherwise  limit the  accrued  or  surviving  rights  and
        obligations  of the  parties  hereunder  of  under  any  of  the  Lessee
        Document.

25.     LAW AND JURISDICTION

25.1    This Agreement is governed by and shall be construed in accordance  with
        the Governing Law.

25.2    For the benefit of the Lessor and Lessee, the parties  irrevocably agree
        that any legal action or proceedings  in connection  with this Agreement
        may be brought in the Courts,  which shall have  jurisdiction  to settle
        any disputes  arising out of or in connection with this  Agreement.  The
        parties  hereto hereby  irrevocably  and  unconditionally  submit to the
        jurisdiction of the Courts.  The submissions to such jurisdiction  shall
        not (and shall not be construed so as to) limit the rights of the Lessor
        and Lessee to take  proceedings  against the other in any other court of
        competent  jurisdiction,  nor shall the  taking  of  proceedings  by the
        Lessor or Lessee in any one or more jurisdictions preclude the taking of
        proceedings by the Lessor or Lessee in any other  jurisdiction,  whether
        concurrently  or not.  The  Lessee  and  Lessor  irrevocably  waives any
        objection  it may now or  hereafter  have to the  laying of venue of any
        action or  proceeding in any court and any claim it may now or hereafter
        have that any action or proceeding  has been brought in an  inconvenient
        forum. The Lessee hereby irrevocably  designates,  appoints and empowers
        CT Corporation System at present of 1633 Broadway,  New York, N.Y. 10019
        to receive for it and on its behalf service of process issued out of the
        Courts in any legal action or proceeding arising out of or in connection
        with this Agreement and/or any other Lessee Document.  The Lessor hereby
        irrevocably  designates,  appoints and empowers ORIX USA  Corporation at
        present of 780 Third Avenue, 48th Floor, New York, N.Y. 10017 to receive
        for it and on its behalf  service of process issued out of the Courts in
        any legal action or proceeding arising out of or in connection with this
        Agreement and/or any other lessor document.

25.3    The Lessee and Lessor  agrees  that in any legal  action or  proceedings
        against it or its assets in connection with this Agreement,  no immunity
        from  legal  action  or  proceedings   (which  shall  include,   without
        limitation,  suit, attachment prior to judgment,  other attachment,  the
        obtaining of judgment,  execution or other enforcement) shall be claimed
        by or on behalf of the Lessee or with respect to its assets, irrevocably
        waives any such right of immunity which it or its assets now have or may
        hereafter  acquire  or which may be  attributed  to it or its assets and

<PAGE>

        consents generally in respect of any such legal action or proceedings to
        the giving of any relief or the issue of any process in connection  with
        such action or proceedings  including,  without limitation,  the making,
        enforcement or execution against any property  whatsoever  (irrespective
        of its use or intended  use) of any order of judgment  which may be made
        or given in such action or proceedings.

26.     SECTION 1110

        The Lessee acknowledges that the Lessor would not have entered into this
        Agreement  unless it had  available to it the benefits of a lessor under
        Section 1110 of Title 11 of the United States Code. The Lessee covenants
        and agrees with the Lessor that,  to better ensure the  availability  of
        such  benefits,  the  Lessee  shall  support  any  motion,  petition  or
        application  filed  by the  Lessor  with  any  bankruptcy  court  having
        jurisdiction  over the  Lessee,  whereby  the Lessor  seeks  recovery of
        possession of the Aircraft  under said Section 1110 and shall not in any
        way  oppose  such  action by the Lessor  unless  the  Lessee  shall have
        complied with the  requirements  of said Section 1110 to be fulfilled in
        order to  entitle  the Lessee to  continued  use and  possession  of the
        Aircraft hereunder.  In the event said Section 1110 is amended, or if it
        is repealed and another  statute is enacted in lieu thereof,  the Lessor
        and the Lessee agree to amend this  Agreement and take such other action
        not  inconsistent  with this  Agreement as the Lessor  reasonably  deems
        necessary  so as to afford to the Lessor the rights and benefits as such
        amended or  substituted  statute  confers  upon  owners  and  lessors of
        aircraft similarly situated to the Lessor.

        It is  expressly  agreed  that the  title  of Head  Lessor  to,  and the
        interest of the Lessor and the  Beneficiary  to, and the interest of the
        Lessor and the Beneficiary in, the Aircraft, and any right of the Lessor
        and the  Beneficiary  to take  possession  of the Aircraft in compliance
        with the provisions of this Agreement, shall not be affected by Sections
        362, 363 and 1129 of the Federal Bankruptcy Code.

27.     TRUE LEASE

        THIS  AGREEMENT  SHALL  CONSTITUTE  AN  AGREEMENT OF LEASE AND IS A TRUE
        OPERATING  LEASE AND NOTHING  HEREIN  SHALL BE CONSTRUED AS CONVEYING TO
        THE LESSEE ANY RIGHT, TITLE OR INTEREST IN THE AIRCRAFT OR ANY ENGINE OR
        PART EXCEPT AS A LESSEE ONLY. WITHOUT LIMITING THE FOREGOING, THE LESSEE
        WILL  NOT  FILE  A  TAX  RETURN  OR  TAKE  ANY  OTHER  ACTION  WHICH  IS
        INCONSISTENT WITH THE FOREGOING.


<PAGE>


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


                                    WILMINGTON   TRUST   COMPANY,   not  in  its
                                    individual  capacity  but  solely  as  Owner
                                    Trustee under the Trust Agreement, as Lessor


                                    By:

                                    Title:



                                    WESTERN PACIFIC AIRLINES, INC., as Lessee


                                    By:

                                    Title:





     * Receipt of this original  counter-part  of the foregoing  Aircraft  Lease
       Agreement is hereby acknowledged on this        day of         , 199  .



                                    [                                      ]



                                    As Beneficiary/Secured Party


                                    By:

                                    Title:


*       This language is to be inserted in the original counter-part only.


<PAGE>


                                   SCHEDULE 1

                                     PART 1

                         LIST OF DOCUMENTS AND EVIDENCE


1.      A copy  certified by the Secretary of the Lessee to be a true,  complete
        and up to date copy, of the constituent documents of the Lessee.

2.      A copy,  certified by the Secretary of the Lessee to be a true copy, and
        as being in full  force and  effect and not  amended  or  rescinded,  of
        resolutions of the board of directors of the Lessee:

               (i)  approving  the  transactions   contemplated  by  the  Lessee
                    Documents; and

              (ii)  authorizing  a person or persons to execute  and  deliver on
                    behalf of the Lessee of the Lessee  Documents to which it is
                    a party  and any  notices  or  other  documents  to be given
                    pursuant thereto

        together  with  a  copy  of  the  power(s)  of  attorney  issued  to the
        authorized person(s) pursuant to said board resolutions.

3.      (i) Specimen signatures, authenticated by the Secretary of the Lessee of
        each of the authorized  signatories  referred to in sub-clause  2(ii) of
        this Schedule 1 and (ii) a good standing certificate.

4.      An   officer's   certificate   of  the   Lessee   certifying   that  the
        representations  and  warranties  given  by the  Lessee  in  the  Lessee
        Documents are true and accurate as of the Delivery and no Relevant Event
        has occurred.

5.      Evidence  that the  Aircraft  Commitment  Fee has been  received  by the
        Lessor's designated bank.

6.      Draft  opinion(s)  (the  "OPINION(S)")  to be obtained  at the  Lessee's
        expense of Smith,  Gambrell & Russell, LLP, legal counsel to Lessee, and
        , FAA counsel,  each in form and substance reasonably  acceptable to the
        Lessor and Beneficiary.

7.      Receipt by the Lessor of such information and documents  relating to the
        proposed  maintenance  programme  for the  Aircraft  as the  Lessor  may
        reasonably require and the Lessor having agreed the proposed maintenance
        programme in its sole discretion on or prior to the Delivery Date.
<PAGE>

8.      A  certificate  signed  by the Chief  Technical  Officer  of the  Lessee
        certifying  that the provisions of Clause 13 have been read by, and will
        be  distributed  to, the  relevant  engineers  of the  Lessee  following
        Delivery.

9. Such other documents or evidence as the Lessor may reasonably request.
<PAGE>


                                   SCHEDULE 1


                                     PART 2



        1.     (a)  Originals or certified copies of certificates evidencing the
               insurance and reinsurance  required to be maintained  pursuant to
               Clause 16, and Schedule 3; and

               (b)  a letter addressed to the Head Lessor, the Beneficiary,  the
               Lessor and the Lenders by a recognized firm of aviation insurance
               brokers reasonably satisfactory to the Lessor confirming that the
               insurance  required  to be  maintained  pursuant to Clause 16 and
               Schedule 3 adequately  protects the interests of the Head Lessor,
               the Beneficiary, the Lessor and the Lenders; and

               (c)  a letter of  undertaking  addressed to the Head Lessor,  the
               Beneficiary,  the  Lessor  and  the  Lenders  from  the  Lessee's
               insurance  brokers  substantially  in the form of  Schedule  5 or
               otherwise acceptable to Lessor.

        2.    A certified copy of each of the Certificate of  Airworthiness  in
               the public transport  (passenger) category issued by the Aviation
               Authority  with respect to the  Aircraft,  such  certificates  of
               maintenance  as are  required for the Aircraft to be used for the
               public   transport  of  passengers  or  cargo,  the  current  air
               transport  license,  air  operator's  certificate  issued  by the
               Aviation  Authority to the Lessee with respect to the aircraft of
               the type of the Aircraft, the current Certificate of Registration
               for the  Aircraft  in the  name  of the  Head  Lessor  and of the
               application  made by the Lessee for  registration of the Aircraft
               with the Aviation Authority.

        3.     Legal opinion of Smith,  Gambrell & Russell,  LLP obtained at the
               Lessee's expense in form and substance  reasonably  acceptable to
               the Lessor .

        4.     A legal opinion of FAA counsel acceptable to the Lessor as to the
               filing for recordation of this Agreement, due registration of the
               Aircraft in the name of the  Lessor,  to the effect that title to
               the  Aircraft  is  held  by the  Lessor  free  and  clear  of any
               Encumbrances other than this Agreement and otherwise satisfactory
               to Lessor in form and substance.

        5.     Evidence  that the plaque  required to be affixed to the Airframe
               and Engines by virtue of Clause 13.1 has been duly affixed.

        6.     Execution copies of each of the Lessee Documents duly executed by
               the parties thereto, other than the Lessor.

        7.     Evidence  that,  on the  Delivery  Date,  the  Aircraft  has been
               validly  registered  under the laws of the State of Registration,
               that the Agreement  has been filed with the FAA for  recordation,

<PAGE>

               that  supplement(s)  to the Trust  Agreement have been filed with
               the FAA (if applicable),  that the Financing Statements have been
               duly filed and that all filings,  registrations,  recordings  and
               other  actions have been or will be taken which are  necessary or
               advisable   to   ensure   the   validity,    effectiveness    and
               enforceability  of this  Agreement and to protect the  respective
               interests of the Head Lessor, the Beneficiary, the Lessor and the
               Lenders in the Aircraft.

        8.     A full  warranty  bill of sale and FAA form  bill of sale for the
               Aircraft delivered by the Manufacturer to the Lessor.

        9.     Evidence that no sales,  use,  doing business or other Taxes will
               be payable by any Person as a result of delivery of the  Aircraft
               by the  Manufacturer  to Lessee under the Purchase  Agreement and
               delivery  of the  Aircraft  by the  Lessor to Lessee  under  this
               Agreement.

        10.    Such other  documents  and evidence as the Lessor may  reasonably
               require.

<PAGE>

                                   SCHEDULE 1


                                     PART 3


1.      A copy certified by the Secretary of the Lessee  to be a  true, complete
        and  up to  date  copy,  of the  constituent  documents of  the  Lessee.

2.      A copy,  certified by the Secretary of the Lessee to be a true copy, and
        as being in full  force and  effect and not  amended  or  rescinded,  of
        resolutions of the board of directors of the Lessee:

               (i)  approving  the  transactions   contemplated  by  the  Lessee
                    Documents; and

              (ii)  authorizing  a person or persons to execute  and  deliver on
                    behalf of the Lessee of the Lessee  Documents to which it is
                    a party  and any  notices  or  other  documents  to be given
                    pursuant thereto

        together  with  a  copy  of  the  power(s)  of  attorney  issued  to the
        authorized person(s) pursuant to said board resolutions.

3.      Specimen  signatures,  authenticated  by the  Secretary of the Lessee of
        each of the authorized  signatories  referred to in sub-clause  2(ii) of
        this Part 3.

4.      A good standing certificate of Lessee.

5.      Opinion  of   Smith,Gambrell   &  Russell  LLP  in  form  and  substance
        satisfactory to Lessor and Beneficiary.

6.      Evidence that the portion of the Aircraft  Commitment Fee payable by the
        Advance Payment date has been paid.

7.      Evidence  that the Lessor has been  assigned all of the Lessee's  rights
        under the  Purchase  Agreement  to the extent  provided in the  Purchase
        Assignment  free  and  clear  of any  Encumbrances,  including,  but not
        limited to, a release from Newcourt Capital.

8.      A copy of the Purchase  Agreement  certified by an officer of the Lessee
        to be complete and accurate.

9.      Each  of the Lessee Documents shall have been executed and delivered by 
        the Lessee.

10.     The  Consent and  Agreement has been  executed  and  delivered  by  the
        Manufacturer.
<PAGE>

11.     Opinion of  in-house  counsel  of  Manufacturer,  in form and  substance
        reasonably satisfactory to Lessor and Beneficiary.

12.     An invoice from the  Manufacturer  to be  delivered  upon receipt of the
        advance payments for the Aircraft (it being understood that such invoice
        will not be delivered until the closing occurs).

13.     Such  other  documents and  evidence as  may be reasonably  requested by
        Lessor.



<PAGE>




                                   SCHEDULE 1

                                     PART 4


AIRFRAME MAINTENANCE ACCRUAL ADJUSTMENT FORMULA




1.      BASE RATE

        The base rate per Flight Hour as set forth in Letter Agreement No. 1 and
        as such rate shall be adjusted from time to time in accordance  with the
        provisions  of Clause  13.4(b) is subject to  adjustment  for changes in
        economic  conditions as measured by data obtained from the US Department
        of  Labor,  Bureau  of  Labor  statistics,  and in  accordance  with the
        provisions of paragraph 3 hereof.

2.      INDEXES:

        LABOR INDEX : "Aircraft and Parts"  Standard  Industrial  Classification
        372 - Average Hourly Earnings  (hereinafter referred to as "HE Sic 372")
        as published in "Employment and Earnings".

        MATERIAL INDEX:"Industrial Commodities (hereinafter referred to as "IC")
        as published in "Producer Prices and Price indexes".

3.      REVISION FORMULA

        A      = B * ((0.75 HEa/HEb) + (0.25 ICa/ICb))

        A      The adjusted airframe maintenance accrual

        B      Base accrual as per contract

        HEa The  arithmetic  average of the HE-Index Sic 372 for the 10th,  11th
        and 12th month prior to the adjustment calculation date.

        HEb The  arithmetic  average of the HE-Index Sic 372 for the 10th,  11th
        and 12th  month  prior  to the  month of the  aircraft  delivery  to the
        Beneficiary.

        ICa The arithmetic  average of the IC-Index for the 10th,  11th and 12th
        month prior to the adjustment calculation date.

        ICb  The arithmetic average of the IC-Index  for the 10th, 11th and 12th
        month  prior to the  month of the aircraft  delivery to the Beneficiary.
       
<PAGE>


 ENGINE AND ENGINE LIFE LIMITED PARTS MAINTENANCE ACCRUAL ADJUSTMENT FORMULA


1.      BASE RATE

        The base rate per Flight  Hour per  Engine  for the  Engine  Maintenance
        Accrual  and the base rate per  Cycle per  Engine  for the  Engine  Life
        Limited Parts Maintenance  Accrual,  in each case as set forth in Letter
        Agreement No. 1 and as such rates shall be adjusted from time to time in
        accordance  with  the  provisions  of  Clause  13.4(b)  are  subject  to
        adjustment  for  changes in  economic  conditions  as  measured  by data
        obtained from the US Department  of Labor,  Bureau of Labor  statistics,
        and in accordance with the provisions of paragraph 3 hereof.

2.      INDEXES:

        Labor Index :  "Aircraft  Engine and  Engine  Parts" Standard Industrial
        Classification  3724 - Average Hourly Earnings  (hereinafter referred to
        as "HE Sic 3724") as  published in "Employment and Earnings".

        Material Index:"Metals and Metal Products" Code 10 (hereinafter referred
        to as "MMP") as published in "Producer Prices and Price indexes".

3.      REVISION FORMULA

        A      = B * ((0.75 HEa/HEb) + (0.25 MMPa/MMPb))

        A      The adjusted maintenance accrual

        B      Base accrual as per contract

               HEa The arithmetic average of the HE-Index Sic 3724 for the 10th,
11th and 12th month prior to the adjustment calculation date.

               HEb The arithmetic average of the HE-Index Sic 3724 for the 10th,
11th  and  12th  month  prior  to the  month  of the  aircraft  delivery  to the
Beneficiary.

               MMPa The arithmetic  average of the MMP-Index for the 10th,  11th
and 12th month prior to the adjustment calculation date.

               MMPb The arithmetic  average of the MMP-Index for the 10th,  11th
and 12th month prior to the month of the aircraft delivery to the Beneficiary.

<PAGE>


                      LANDING GEAR MAINTENANCE ACCRUAL ADJUSTMENT FORMULA

1.      BASE RATE

        The base rate per  Flight  Hour for the  landing  gear,  as set forth in
        Letter  Agreement  No. 1 and as such rate shall be adjusted from time to
        time in accordance with the provisions of Clause 13.4(b),  is subject to
        adjustment  for  changes in  economic  conditions  as  measured  by data
        obtained from the US Department  of Labor,  Bureau of Labor  statistics,
        and in accordance with the provisions of paragraph 3 hereof.

2.      INDEXES

        Labor Index:"Aircraft Parts and Auxiliary Equipment" Standard Industrial
        Classification 3728 - Average Hourly Earnings (hereinafter  referred to 
        as "HE Sic 3728") as published in "Employment and Earnings".

        Material Index:"Metals and Metal Products" Code 10 (hereinafter referred
        to as "MMP") as published in "Producer Prices and Price indexes".

3.      REVISION FORMULA

        A      = B * ((0.75 HEa/HEb) + (0.25 MMPa/MMPb))

        A      The adjusted maintenance accrual

        B      Base accrual as per contract

               HEa The arithmetic average of the HE-Index Sic 3728 for the 10th,
11th and 12th month prior to the adjustment calculation date.

               HEb The arithmetic average of the HE-Index Sic 3728 for the 10th,
11th  and  12th  month  prior  to the  month  of the  aircraft  delivery  to the
Beneficiary.

               MMPa The arithmetic  average of the MMP-Index for the 10th,  11th
and 12th month prior to the adjustment calculation date.

               MMPb The arithmetic  average of the MMP-Index for the 10th,  11th
and 12th month prior to the month of the aircraft delivery to the Beneficiary.

<PAGE>


                                   SCHEDULE 2

                             ACCEPTANCE CERTIFICATE


This  Acceptance  Certificate  is delivered,  on and as of the Delivery Date set
forth  below by [ [ (the  "Lessee")  to  Wilmington  Trust  Company,  not in its
individual capacity, but solely as Owner Trustee (the "Lessor"),  pursuant to an
Aircraft  Lease  Agreement  dated as of [ ] and made  between the Lessor and the
Lessee (the "Agreement").

DETAILS OF ACCEPTANCE

The Lessee hereby confirms to the Lessor, its successors and  assigns, that the
Lessee has at       hours ([           ] time) on this [              ] day  of 
[       ] at [                      ] accepted the following in accordance with 
the provisions of the Agreement:

(a)     Airframe: One (1) Boeing 737-300 jet  airframe  bearing  Manufacturer's 
        Serial No. [   ] and United States Registration Number                 ;

        Hours since new:      
        Cycles since new:       

(b)     Engines:  Two (2) Model CFM  International  CFM56-3C-1  Engines  bearing
        Manufacturer's Serial Numbers [ ] and [ ].

        Hours since new:            Engine No. 1:         Engine No. 2:
        Cycles since new:           Engine No. 1:         Engine No. 2:

CONFIRMATION OF UNDERTAKINGS

The  capitalised  terms  used  in  this  Acceptance  Certificate  shall,  unless
otherwise defined, have the meaning given to such terms in the Agreement.

The Lessee  confirms that as at hours ([ ] time) today,  being the Delivery Date
as defined in the Agreement:

(i)     the  Aircraft  was duly  accepted by the Lessee in  accordance  with and
        subject to all of the terms and  conditions  contained in the  Agreement
        and the execution and delivery of this  Acceptance  Certificate  further
        confirms the  acceptance  of the Aircraft by the Lessee for all purposes
        of the Agreement;

(ii)    the Lease Period  commenced and the Lessee became  obliged to pay to the
        Lessor the amounts  provided  for in the  Agreement  with respect to the
        Aircraft;
<PAGE>

(iii)   the Aircraft is insured in accordance with the Agreement;

(iv)    the  representations  and  warranties  made by it under  Clause 2 of the
        Agreement  remain,  and if made at the date  hereof,  would be, true and
        correct in all respects;

(v)     solely as between  the Lessor  and  Lessee  the Lessee  agrees  that the
        Aircraft  for all  purposes of the  Agreement  conforms to the  Lessee's
        requirements;

(vi)    affixed to the Aircraft and Engines are the fireproof  plaques required 
        by the Agreement;

(vii)   fuel on board is [    ] kgs;

(viii) no Relevant Event has occurred or will result from Delivery taking place;

(ix)    [the  Manuals and  Technical  Records  listed in Part 1 of the  attached
        appendix,  the Technical  Publications  listed in Part 2 of the attached
        appendix  and the  loose  equipment  listed  in  Part 3 of the  attached
        appendix have been received by the Lessee in proper order and condition]
        [as per the Purchase Agreement];

IN WITNESS  WHEREOF  the Lessee has caused  this  Acceptance  Certificate  to be
executed in its name, by its duly authorized officer on the Delivery Date.




                                            ,
as the Lessee


By:

Title:

<PAGE>


                             APPENDIX TO SCHEDULE 2
                                     PART 1
                       LIST OF DOCUMENTS TO BE DELIVERED WITH MSN [    ]



        DESCRIPTION                                              QUANTITY


                            [To be as provided as per
                             the Purchase Agreement]

<PAGE>



                                     PART 2


                             TECHNICAL PUBLICATIONS

                             [to be provided as per
                             the Purchase Agreement]
















                                     Part 3

                           LOOSE EQUIPMENT DELIVERED WITH MSN [   ]

                         [as per the Purchase Agreement]


<PAGE>



                                   SCHEDULE 3

                             INSURANCE REQUIREMENTS


1       INSURANCE WITH RESPECT TO THE AIRCRAFT

1.1     The Lessee shall obtain and maintain:

        (a)    "All-Risks"  hull  insurance  on the Aircraft and each Engine (as
               appropriate)  therefor  including  all flight and ground risks in
               such amount in Dollars as is equal to the Agreed  Value as at the
               time the Insurance is placed or renewed.

        (b)    "All-Risks" insurance on any Engine, Parts,  components or spares
               when not  installed on the  Aircraft  for their full  replacement
               value and including engine test and running risks.

        (c)    "War Risks" hull  insurance  which  shall  include  confiscation,
               requisition (including by the State of Registration),  hijacking,
               strikes,  riots,  malicious  damage and civil  commotion  and any
               other risks excluded from the "All Risks" insurance  described in
               Clause  1.1(a)  above  (other  than any  peril  which  cannot  be
               insured) by any exclusion  therein of these and/or  similar risks
               in such amount in Dollars as is equal to the Agreed  Value of the
               Aircraft  and each  Engine  (as  appropriate)  as at the time the
               insurance is placed or renewed.

1.2     The insurances  required under paragraphs (a), (b) and (c) of Clause 1.1
        of this Schedule 3 shall be provided on an agreed value basis,  and each
        of the policies  related to the insurances  required under Clause 1.1 of
        this Schedule 3 shall:

        (a)    include  the  Lessor  and  each  of  the  other   Indemnitees  as
               additional  named  assured  for  their   respective   rights  and
               interests;

        (b)    include a loss payee clause which  provides  that (i) any payment
               in  respect of a Total Loss shall be payable to the Lessor or its
               designated  assigns for the account of all interests and (ii) any
               payment  other  than in  respect of a Total Loss shall be paid by
               insurers in or towards the cost of repairs or replacement,  or if
               the insurers do not, for whatever  reason,  pay any such proceeds
               to  the  relevant  repairers  or  suppliers  in  respect  of  any
               replacement, then the following shall apply:

               (1)    unless the Lessor or its  designated  assignee  shall have
                      directed  to the  contrary,  any payment in respect of any
                      damage or loss (other than in respect of a Total Loss) not
                      in excess of $[ ]*  inclusive of any  deductible  shall be
                      payable directly to Lessee or its order; and
<PAGE>

               (2)    (A)    any  payment in  respect of any  damage or loss in 
                             excess of $[   ]*, or

                      (B)    following a direction to the Insurers by the Lessor
                             or its  designated  assignee any amount  payable in
                             respect of any loss or damage,

                      shall be payable directly to the Lessor or its designated 
                      assignee as loss payee  for the  account of all interests;

        (c)         provide that the insurance shall not be invalidated,  so far
                    as concerns the Lessor or any other  Indemnitee,  by any act
                    or omission (including non-disclosure and misrepresentation)
                    by the Lessee or any other  person,  and insure the interest
                    of the Lessor and each other  Indemnitee  regardless  of any
                    breach or violation by the Lessee or any other person of any
                    term,  condition  or  warranty  contained  in such  policies
                    provided  that the Lessor or, as the case may be, such other
                    Indemnitee  has  or  have  not  caused,  contributed  to  or
                    knowingly condoned the said act or omission;

        (d)    have  deductibles  of no more than (i) $[ ]* with  respect to the
               Aircraft and $[ ]* with respect to any Engine or Part;

        and the  certificate of insurance  issued by the relevant  brokers shall
        confirm, in the event of separate insurances being arranged to cover the
        "All-Risks"  hull  insurance and the "War Risks" and related  insurance,
        that the  underwriters  subscribing to such insurance have agreed in the
        terms of AVS 103 (or equivalent)  that in the event of any dispute as to
        whether a claim is covered  by the "All  Risks" or "War  Risks"  policy,
        such claim shall be settled on a 50/50 claim funding basis.

(1)     LIABILITY INSURANCE

2.1     The Lessee  shall obtain and maintain  aircraft  third party,  passenger
        (including  personal  injury),  baggage (checked and unchecked),  cargo,
        mail and airline  general  third party  liability  (including  premises,
        hangers and products liability) insurance for a combined single limit of
        not less than $[ ]* for any one accident.

2.2     The policies evidencing the insurances required under Clause 2.1 of this
        Schedule 3 shall:
<PAGE>

        (a)    include the Lessor and each other Indemnitee and their respective
               officers, directors, employees, agents, successors and designated
               assignees (together the "Liability Additional Named Assureds") as
               additional  named  assured  for  their   respective   rights  and
               interests;

        (b)    provide by means of a Severability  of  Interests/Cross-Liability
               clause  that all the  provisions  thereof,  except  the limits of
               liability, shall operate to give each assured the same protection
               as if there were a separate policy issued to each named assured;

        (c)    be primary and without right of contribution from other insurance
               which  may  be  available  to  the  Liability   Additional  Named
               Assureds; and

        (d)    provide that the insurance  shall not be  invalidated,  so far as
               concerns any Liability  Additional  Named Assured,  by any act or
               omission (including  non-disclosure and misrepresentation) by the
               Lessee or any other  person  and  insure  the  interests  of each
               Liability  Additional  Named Assured  regardless of any breach or
               violation  by  the  Lessee  or any  other  person  of  any  term,
               condition or warranty contained in such policy, provided that the
               relevant  Liability  Additional  Named  Assured  has not  caused,
               contributed to or knowingly condoned the said act or omission.

(2)     PROVISIONS RELATING TO ALL INSURANCES

3.1     The  policies evidencing  the insurances required  under Clause 1.1 and 
        Clause 2.1 of this Schedule 3 shall:

        (a)    specifically  reference  the Head Lease, this  Agreement and, if 
               applicable, the Mortgage;

        (b)    provide for worldwide  coverage  (subject only to such exceptions
               as the Lessor may agree in writing);

        (c)    provide  that the insurers  shall waive any right of  subrogation
               against the Lessor and each other Indemnitee;

        (d)    provide that neither the Lessor nor any other Indemnitee shall be
               liable for any premiums in respect thereof, and that the insurers
               shall not  exercise any right of set-off or  counterclaim  (other
               than in respect of unpaid  premiums with respect to the Aircraft)
               against the interests of the Lessor or such other Indemnitee; and

        (e)    provide that the brokers  will be promptly  notified in the event
               of cancellation or of any material change in the Insurances or in
               the event that any premium or  instalment of premium shall not be
               paid when due and that the Insurances  shall  continue  unaltered
               for the  benefit of the  Lessor,  each other  Indemnitee  and its
               successors and designated assigns,  directors,  officers,  agents
               and  employees  for at least  thirty (30) days after issue by the
               insurers  of any  such  notification,  except  in the case of War
               Risks for which seven (7) days' notice (or such lesser  period as
               may be  customarily  available  in respect of War Risks or Allied
               Perils)  will be given,  or in the case of war between any of the
               five great  powers,  or Nuclear  Peril for which  termination  is
               automatic.

<PAGE>


                                   SCHEDULE 4

                                RETURN CONDITIONS



On redelivery of the Aircraft,  the following  Return  Conditions shall apply in
addition to those specified in Clauses 19.2 and 19.3.


1.      GENERAL CONDITION

               (a) The Aircraft  shall have  installed  the full  complement  of
engines and Parts as is normally  installed in such Aircraft,  and shall be in a
condition suitable for operation in commercial service, all installed systems to
be fully operational;

               (b) The Aircraft  shall comply with the  Manufacturer's  original
specifications  as defined in the Boeing Detail  Specification  Document No. [ ]
and the Manuals and Technical  Records  delivered with the Aircraft and modified
by the  incorporation  of all  airworthiness  directives  and  approved  service
bulletins and engineering orders which are accepted by the Lessee up to the date
of redelivery;

               (c) Have  undergone,  immediately  prior to redelivery  (save for
such  additional  Flight  Hours as are  required  to conduct the test flight and
ferry flight  referred to in Clause 19.7),  a C Check  performed by the Approved
Maintenance performer in accordance with the Approved Maintenance Programme;

               (d)  All   outstanding   airworthiness   directives,   Structural
Inspection  requirements  and mandatory  orders affecting such model of Aircraft
issued by the Manufacturer of the Aircraft or the Aviation  Authority and/or the
FAA which require compliance or termination within three hundred and sixty (360)
days  following  redelivery  of the  Aircraft  or until  the next C Check of the
Aircraft  following  redelivery of the Aircraft,  whichever is the later,  shall
have  been  accomplished  and all  maintenance  discrepancies  cleared  from the
logbook;

               (e) A Spectrographic Oil Analysis Programme ("SOAP") sample shall
be taken of the oil in each  Engine and  auxiliary  power  unit and the  results
shall meet the requirements of the appropriate maintenance manual; and

               (f) The Aircraft shall be in the same seating configuration as at
Delivery or,  subject to Lessor  receiving in a serviceable  condition  with FAA
8130 Tags  attached  the  removed  seats from the  delivery  configuration,  the
seating  configuration  used by Lessee at the time of  redelivery  inclusive  of
associated documentation.
<PAGE>

2.      COMPONENTS

               (a) Each and every  life-limited  component  shall  have not less
than 12 months, 4,000 hours and 2,500 cycles, whichever is the more limiting, of
the total approved life remaining to the next scheduled  removal,  in accordance
with the Approved Maintenance Programme;

               (b) Each and every calendar-limited component shall have not less
than 12 months of actual life remaining to the next scheduled  removal (with the
exceptions  at 6(e)  (emergency  equipment),  in  accordance  with the  Approved
Maintenance Programme;

               (c) "On-condition" and "Condition  Monitored" components shall be
Serviceable and subject to inspection  including,  but not limited to, boroscope
and visual inspection and examination of magnetic chip detectors, and shall meet
the requirements of the appropriate maintenance manual;

               (d) The APU shall be in serviceable  condition and shall have the
same part number as at  Delivery  with a  modification  status at least equal to
that of the other  APUs  operated  by the  Lessee  but in no event less than the
modification  status of the APU at Delivery  with no more than 500 Flight  Hours
since its last Hot Section Inspection shop visit; and

               (e) The Lessee shall have completed,  contemporaneously with such
return, an inspection of the APU including a hot and cold section boroscope; any
discrepancies  detected during such inspection that are required to be corrected
by the  Manufacturer's  maintenance manual shall be corrected in accordance with
those  procedures.  For the avoidance of doubt,  the APU shall not be subject to
any programme of additional inspection, i.e., "on watch".

3.      ENGINES

               (a) The Engines  shall be  Serviceable  and the Lessee shall have
completed,  contemporaneously  with such return,  an on-wing  inspection of each
Engine  (including a hot and cold section  boroscope and a power  assurance run)
and engine condition runs; trend analysis should not indicate near-term failure;
and any  discrepancies  detected  during such inspection that are required to be
corrected  by the  Manufacturer's  maintenance  manual  shall  be  corrected  in
accordance with those procedures. For the avoidance of doubt, no Engine shall be
subject to any programme of additional inspection, i.e., "on watch";

               (b) All Engine Life  Limited  Parts shall have a minimum of 3,000
cycles of life  remaining  at  re-delivery.  If fewer than 3,000  cycles of life
remain then the Lessee shall  reimburse  the Lessor a pro rata amount based upon
the  total  life of  each  Part  and the  cost of the  Part  (as  determined  by
manufacturer's  list  price)  as  at  the  time  of  re-delivery  less  relevant
maintenance accrual payments in respect of such cycles, provided,  however, that
in no event shall an Engine be returned with less than 1500 cycles  remaining on
Engine Life Limited Parts;
<PAGE>

               (c) In any case where oil  consumption of each installed  Engine,
measured within 100 Flight Hours prior to  re-delivery,  shall not be within the
limits set forth in the approved Aircraft  Maintenance  Manual, the Lessee shall
take corrective action to meet the approved Aircraft Maintenance Manual; and

               (d) Any installed  Engine at re-delivery  shall have at least ten
(10) degrees  Centigrade  Exhaust Gas Temperature margin remaining in accordance
with the  Aircraft  Maintenance  Manual  performance  charts,  such margin being
measured  by the  trend  monitoring  system  with the  Engine  installed  on the
Airframe during flight.

4.      FUSELAGE, WINDOWS AND DOORS

               (a)  Fuselage  shall  be  free  of  major  dents  and  abrasions,
temporary repairs and loose, pulled or missing rivets;

               (b) Windows shall be Serviceable in accordance  with the approved
Aircraft  Maintenance  Manual,  free of  delamination,  blemishes,  crazing that
affects clear vision and shall be properly sealed; and

               (c) Doors shall be free  moving,  correctly  rigged and be fitted
with Serviceable seals.

5.      WINGS AND EMPENNAGE

               (a) All  leading  edges  shall be free from damage that should be
repaired  in  accordance   with  the   structural   repair  manual   ("SRM")  or
Manufacturer's FAA approved repair scheme where an [SRM] repair does not exist;

               (b) All  control  surfaces  shall be  clean  and  serviceable  to
industry standard;

               (c) All  unpainted  cowlings  and  fairings  shall be polished to
industry standard; and

               (d) The  Aircraft  shall  be  shown  to be free of fuel  leaks by
topping  off the fuel tanks for twelve  (12)  hours and no  previous  fuel leaks
shall have temporary repairs.

6.      INTERIOR

               (a) Ceilings,  sidewalls  and bulkhead  panels shall be clean and
free of damage, cracks and stains beyond fair wear and tear;
<PAGE>

               (b) All  carpets  and seat  covers  shall  be in good  condition,
steamed or scrubbed clean (as appropriate),  seat covers and aisle carpets shall
be stain free and meet FAA fire resistance regulations;

               (c) All seats,  including seatbelts,  shall be Serviceable,  with
frames  repainted  and trim  repaired or replaced as necessary and meet FAA fire
resistance regulations;

               (d) All signs and decals shall be clean, legible and in English;

               (e) All emergency  equipment  having a calendar life shall have a
minimum of one (1) year or one  hundred per cent.  (100%) of its total  approved
life, whichever is less, remaining; and

               (f) All galleys and  lavatories  shall be clean and free of leaks
and corrosion beyond applicable  maintenance  manual limits,  with all equipment
operational and all damages assessed and properly repaired as necessary.

7.      COCKPIT

               (a)    All decals shall be clean, secure, legible and in English;

               (b) All  fairing  and  instrument  panels  shall be  Serviceable,
clean, secure and touch-up painted as necessary;

               (c)  Floor  coverings  shall be  steamed  or  scrubbed  clean (as
appropriate) and effectively sealed;

               (d) Seat covers shall be in Serviceable condition,  steamed clean
and shall conform to FAA fire resistance regulations; and

               (e) Seats, including seatbelts, shall be Serviceable and shall be
repainted as necessary.

8.      CARGO COMPARTMENTS

               (a)  All  panels (including  floor panels)  shall be  Serviceable
condition; and

               (b)  All nets shall be installed and in Serviceable condition.

9.      LANDING GEAR AND WHEEL WELLS

               (a) The  Landing  Gear and wheel  wells  shall be clean,  free of
leaks, repaired if necessary and coated with corrosion inhibitor;
<PAGE>

               (b) All decals shall be clean, secure and legible;

               (c) Each tyre and brake  shall have not less than fifty per cent.
(50%) life remaining in accordance with the Manufacturer's recommendation; and

               (d) The  Landing  Gear  shall  have not less than  fifty per cent
(50%) life remaining on  re-delivery.  If on re-delivery the Landing Gear has no
more than 2,000  hours in excess of fifty per cent (50%) life  remaining  to the
next overhaul or removal,  the Lessee shall compensate the Lessor for such usage
by  payment to the Lessor of the sum of US$[ ]* per  additional  Flight  Hour or
utilization (as adjusted in accordance with the provisions of Schedule 1, Part 4
hereto and Appendix B to Letter  Agreement No. 1 as applied over the life of the
Lease Period), payable on the re-delivery date.

10.     CORROSION

               (a) The Aircraft shall fully comply with the Corrosion Protection
Corrosion  Prevention (CPCP) Programme  referred to in the Approved  Maintenance
Programme and on redelivery  the external  surface of the Aircraft shall be free
from untreated corrosion; and

               (b) Fuel tanks shall be subject to a tank treatment  programme in
accordance with the Manufacturer's  maintenance  manual, the requirements of the
FAA and the Approved Maintenance Programme.

11.     TEST FLIGHT/GROUND RUN

               (a) All  systems  must be  shown  to be  Serviceable  within  the
tolerances specified in the appropriate maintenance manuals;

               (b)  The  Engines  must  meet  the  tolerances  and   performance
requirements  specified in the appropriate  maintenance manual for engine ground
runs; and

               (c) The  Aircraft  must be free of  fuel,  hydraulic,  pneumatic,
water or waste  systems  leaks  as  assessed  in  accordance  with the  Aircraft
Maintenance  Manual and this is to be  demonstrated by topping off the tanks and
reservoirs and executing a functioning check on all systems.

12.     DOCUMENTS

               (a) All historical  Aircraft records  inclusive of Component Tags
(JAA Form 1 / FAA  81-30) and a full and  completely  amended  set of  technical
publications  relating  to the  Aircraft  shall be  certified  as correct by the
Approved Maintenance Performer;
<PAGE>

               (b)  All   Aircraft   Technical   Publications   issued   by  the
Manufacturers  and  provided  by the Lessor  relating to the  Aircraft  shall be
amended to latest revised status and redelivered with the Aircraft; and

               (c) At the  redelivery  date,  the Lessee shall  redeliver to the
Lessor all the  documents  listed in Part 2 and Part 3 to the form of Acceptance
Certificate  set out in Schedule 2, such  documents,  to the extent  applicable,
complying with the requirements of sub-paragraph (a) above.

<PAGE>


                                   SCHEDULE 5


ORIX Aviation Services (Lessor)

Re:     Western Pacific Airlines
        Lease Agreement
        For One B737-3B7 Aircraft, N___WP

As the insurance  broker for Western Pacific  Airlines (the  "Client"),  we have
been requested to provide you with this letter with respect to certain insurance
placed by us on the Client's behalf.

In  connection  with this letter,  we have read Article 16 and Schedule 3 of the
Aircraft  Lease  Agreement  between  the  Client  and  you  dated   ____________
("Agreement"),  dealing with insurance requirements, a copy of which is attached
(the  "Insurance  Covenant").  We have not read or  reviewed  the balance of the
Agreements,  including  without  limitation any  provisions  thereof which might
relate to or influence the meaning of the language in the Insurance Covenant.

We  have  placed  the  insurance  which  is the  subject  of this  letter  after
consultation with the Client and based upon the Client's instructions, which may
not have  contemplated or reflected the Insurance  Covenant.  Terms of coverage,
including limits and deductibles are based upon  information  furnished to us by
the Client, which information we have not independently verified.

On the basis of the foregoing and subject to the other qualifications  stated in
this letter, we are pleased to confirm the following:

1.      The insurance policy(ies) listed on Exhibit A hereto (the "Policies") is
        (are) in full force and effect as of the date hereof.

2.      As of this date,  we have not  received  any notice of  cancellation  or
        non-renewal  with  respect  to the  Policies  and are not  aware  of any
        circumstances which would make the giving of such a notice by an insurer
        likely.

3.      In our  view,  based  upon  our  understanding  of the  language  of the
        Insurance  Covenant,  the  Policies  are  consistent  with  the  minimum
        requirements of the Insurance Covenant.

4.      Based upon our experience as insurance  brokers,  the coverages provided
        by the Policies are consistent with those normally provided to companies
        similarly situated to the Client.
<PAGE>

5.      We will endeavor to advise Lessor of Notice of  Cancellation by Insurers
        as soon as  practicable  upon  receiving  the advice from the  insurance
        carrier.

6.      We will endeavor to advise Lessor if the Client does not provide us with
        renewal instructions 14 days prior to expiration.

7.      We will  endeavor to advise  Lessor if we (MMI) cease to be the Client's
        appointed broker as soon as practicable.

We express no view and  assume no  liability  with  respect to the  solvency  or
future  ability to pay of any of the insurance  companies  which have issued the
Policies.

We assume no obligation to advise you of any developments regarding the Policies
subsequent to the date hereof.  This letter is given on the  condition  that you
forever waive any liability  against us based upon the placement of the Policies
and/or the statements made herein with the exception only of gross negligence or
fraud.

This letter may not be republished by you or used for any other purpose  without
our prior written consent.

Very truly yours,

                        [SUBJECT TO CONFIRMATION BY ORIX]

<PAGE>



                                   SCHEDULE 6

                        FORM OF LETTER OF QUIET ENJOYMENT


From:                                            (the "undersigned")

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


                                                                   [Date]

In Re:  One Boeing 737-300 Aircraft, Manufacturer's Serial Number 28868 (the
        "Aircraft")\Aircraft Lease Agreement (the "Lease") dated March 26, 1997,
         between Wilmington Trust  Company, as Owner Trustee (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  possession  and use of the
Aircraft by the Lessee or the rights of the Lessee under the Lease, in each case
throughout the term of the Lease, but subject to the terms of the Lease, so long
as no  Termination  Event  (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 no Termination  Event
(as defined in the Lease) has  occurred  and is  continuing  at the time of such
disposal,  the  undersigned  will (subject to any  requirements  or restrictions
imposed by  applicable  law) dispose of such interest  expressly  subject to the
Lease and on terms that the  purchaser  issues a written  undertaking  to you in
substantially  the form of this  letter  that it will not  interfere  with  your
possession  and use of the Aircraft  throughout the remaining term of the Lease,
so long as no  Termination  Event (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.  It is being
delivered to you for your benefit and may be relied upon and enforced by you.



[Assignee/Transferee]
<PAGE>




                                    SCHEDULE


                            ORIX Aircraft Corporation
                                ORIX Corporation
                           Export Import Bank of Japan

<PAGE>



                                   SCHEDULE 7

                              FORM OF STATUS REPORT

                 MONTHLY AIRCRAFT UTILIZATION AND STATUS REPORT

Report Date                                        Report Period

Aircraft type                                      Engine No. 1 Original ESN
               

Aircraft msn                                       Engine No. 2 Original ESN
              
Aircraft reg   



Aircraft Status


1.  A/C Total Time Since New

2.  A/C Total Cycles Since New

3.  Total Block Hours During Period

4.  Total Cycles During Period

5.  Total Flight Hours During Period

6.  Non-Revenue Cycles

7.  Non-Revenue Flight Hours

8.  Serial No's of Engines Currently Installed   Engine 1

                                                 Engine 2


9.  Serial Numbers of Engines Removed and Installed During Period

 ESN    Reason for Removal    Current Location   Date Removed     Date Installed







<PAGE>



Engine Status


                         Orig. Engine No 1     Orig. Engine No 2    Other Engine

10. Engine Total Time Since New



11. Engine Total Cycles Since New



12. Current Location



13. Owner of Engine



14. Total Block Hours During Period



15. Total Cycles During Period



16. Total Flight Hours During Period



17. Thrust Bump Utilization (Yes/No)



   If Yes, Give Reason







Other Information


18.  AMS Revised (Yes/No - If Yes, See Attachment)

19.  Material Deferred Items (Yes/No - If Yes, See Attachment)

20.  APU Change (Yes/No - If Yes, See Attachment)
<PAGE>

21.  Damage Report (Yes/No - If Yes, See Attachment)

22.  Warranty Claim Advice (Yes/No - If Yes, See Attachment



Compiled By:                                           Date:



<PAGE>
                                       


                                   SCHEDULE 8

                              OFFICER'S CERTIFICATE



        Pursuant to Section 11.1(c) of the Aircraft Lease Agreement, dated as of
February 1, 1997, between Wilmington Trust Company,  as Owner Trustee, as Lessor
(the "Lessor"),  and Western Pacific  Airlines,  Inc., as Lessee (the "Lessee"),
with respect to one Boeing 737-300 aircraft bearing manufacturer's serial number
28868 (the "Lease"),  the undersigned,  [responsible  officer] of Lessee, hereby
certifies to Lessor and ORIX Aviation Systems Limited that:

        1.     I am the duly elected, qualified and acting [officer] of Lessee.

        2. Unless  otherwise  defined  herein,  terms defined in the Lease shall
have the same meanings in this Certificate.

        3. I have  reviewed  and am  familiar  with the terms of the Lease and I
have reviewed in reasonable  detail the transactions and financial  condition of
Lessee during the accounting  period covered by the enclosed Form 10-K which was
filed with the Securities and Exchange Commission. Such review has not disclosed
the existence during or at the end of such accounting period, and as at the date
hereof the undersigned does not have knowledge,  of any condition or event which
constitutes a Termination Event or would, with the giving of notice, the passage
of time, or both, give rise to a Termination Event.

        IN  WITNESS  WHEREOF, th  undersigned  has executed  this Certificate on
 this __ day of          .



                                    ----------------------------------
                                    Name:
                                    Title:

<PAGE>