<PAGE>   1
                                                                    EXHIBIT 10.7




                                 AIRCRAFT LEASE
                                    (N751US)

                         DATED AS OF DECEMBER 30, 1996

                                    between

                           FLEET CAPITAL CORPORATION
                                   as Lessor


                                      and

                           KITTY HAWK AIRCARGO, INC.
                                   as Lessee


This is Counterpart No. 1 of a total of 3 counterparts.  Only Counterpart No.
1 shall be considered chattel paper for purposes of the Uniform Commercial Code
and a security interest may be perfected only by possession of Counterpart No.
1.

                               TABLE OF CONTENTS

<TABLE>
<S>              <C>
SECTION  1       Acceptance and Lease of Aircraft
SECTION  2       Conditions to Closing; Closing Covenants
SECTION  3       Term and Rent
SECTION  4       Acceptance
SECTION  5       Covenants and Warranties
SECTION  6       Representations, Warranties and Agreements of Lessee
SECTION  7       Net Lease
SECTION  8       Return of Aircraft
SECTION  9       Liens
SECTION  10      Taxes
SECTION  11      Registration, Maintenance and Operation; Compliance and Use; Replacement Parts;
                  Additions; Aircraft Marking
SECTION  12      Inspection
SECTION  13      Loss or Destruction
SECTION  14      Insurance
SECTION  15      Indemnification
SECTION  16      Assignment and Sublease
SECTION  17      [Intentionally Left Blank]
SECTION  18      Events of Default
SECTION  19      Remedies
SECTION  20      Performance of Obligations of Lessee by Lessor
SECTION  21      Intent
SECTION  22      Notices
SECTION  23      End of Term Options
SECTION  24      [Intentionally Left Blank]
SECTION  25      Transaction Expenses
SECTION  26      Miscellaneous
SECTION  27      Amendments
SECTION  28      Truth in Leasing
                 EXHIBIT A - Definitions
                 Lease Supplement No. 1
                   Schedule No. 1 to Lease Supplement No. 1
                   Schedule No. 2 to Lease Supplement No. 1
                   Schedule No. 2-A to Lease Supplement No. 1
                   Schedule No. 2-B to Lease Supplement No. 1
                   Schedule No. 3 to Lease Supplement No. 1
                 Lease Supplement No. 2
                 EXHIBIT B - Aircraft Bill of Sale
                 EXHIBIT C-1 - Opinion of Counsel - Lessee (with Section 1110 provisions)
                 EXHIBIT C-2 - Opinion of Counsel - Guarantor
                 EXHIBIT D - Financial Covenants Rider
</TABLE>
<PAGE>   2

                                 AIRCRAFT LEASE

         This AIRCRAFT LEASE (together with all Supplements, Exhibits and
Certificates hereto, the "Lease") is made and entered into as of the 30th day
of December, 1996 by and between Fleet Capital Corporation, a Rhode Island
corporation ("Lessor"), with a place of business at 50 Kennedy Plaza, Fifth
Floor, Providence, RI 02903-2305, and Kitty Hawk Aircargo, Inc., a Texas
corporation ("Lessee"), having its principal place of business and chief
executive office at P.O. Box 612787, 1515 W. 20th Street, DFW International
Airport, Texas 75261.  Certain capitalized terms as used in this Lease are
defined in Exhibit A hereto, and such definitions are hereby incorporated
herein and made a part hereof as though set forth herein in full.

SECTION 1.  Acceptance and Lease of Aircraft

         Subject to the satisfaction of each condition set forth in Section 2
(I) and (II), Lessor hereby agrees to purchase the Aircraft from the Lessee and
to lease the same to Lessee and Lessee hereby agrees to lease the same from
Lessor for the Basic Term hereof pursuant to the terms and conditions of this
Lease.  The sale of the Aircraft to Lessor shall include all of Lessee's right,
title and interest in and to the Aircraft.

SECTION 2.  Conditions to Closing; Closing Covenants.

          (I)  Conditions Precedent.  Lessor's obligations to purchase the
Aircraft from the Lessee and to lease said Aircraft to Lessee, shall each be
both subject to and conditioned upon all of the following conditions being
satisfied:

                 (a)  Lessor receiving on or prior to the Acceptance Date, all
of the following in form and substance satisfactory to it:

                          (i)  the Purchase Documents duly executed and
accompanied by evidence of authenticity and authority;

                          (ii)  evidence of reservation of an "N" number for
the Aircraft, together with an assignment of Lessee's rights in such "N" number
to Lessor;

                          (iii)  evidence that the Aircraft has been duly
certified as to type and airworthiness by the FAA in the form of a Standard
Airworthiness Certificate (FAA Form 8100-2) issued by the FAA;

                          (iv)  three (3) duly executed originals of the Lease,
including, Lease Supplement No. 1, Lease Supplement No. 2 and all Schedules and
Exhibits thereto;

                          (v)  a certificate or certificates, executed by the
Lessee's secretary or other authorized officer certifying: (A) resolutions of
Lessee's Board of Directors authorizing the execution, delivery and performance
of this Lease, the Purchase Documents, the applicable FAA documents and the
transactions contemplated hereby and thereby and (B) the name(s) of the
person(s) authorized to execute and deliver such documents on behalf of Lessee
together with specimen signature(s) of such person;

                          (vi)  certificate(s) of insurance as to the coverage
required under Section 14 hereof, accompanied, if requested by Lessor, by the
applicable policies and report(s) of insurance broker(s) or underwriter(s)
pursuant thereto as to the conformity of such coverage with such requirements;

                          (vii)  evidence that FAA Counsel has received in
escrow the executed FAA AC Form 8050-2 Aircraft Bill of Sale (the "Bill of
Sale" in the name of Lessor and AC Form 8050-1 Aircraft Registration
Application in the name of Lessor (the "Registration Application") (except for
the pink copy which shall be available to be placed on the Aircraft upon
acceptance thereof), releases in form and substance satisfactory to FAA
Counsel, Lessor's counsel and/or Lessor of any Liens, such other bills of sale,
in the form of FAA AC Form 8050-2 or otherwise, as are necessary, in the
opinion of Lessor's counsel and/or FAA Counsel to vest good and marketable
title to the Aircraft in the name of Lessor and executed duplicates of the
Lease and Lease Supplements No. 1 and 2, all the foregoing (except for such
Warranty Bill of Sale) being in proper form for filing with the FAA;

                          (viii) opinions of counsel for Lessee and the
Guarantors satisfactory to Lessor and substantially in the forms of Exhibits
C-1 and C-2, respectively, hereto;
<PAGE>   3
                          (ix)  certificate(s) of good standing for Lessee from
the state of its incorporation and the state(s) where the Primary Hangar
Location and Lessee's chief executive offices and principal place of business
are located;

                          (x)  UCC financing statements executed by Lessee
(and, where needed, assignment, release and/or termination statements) with
respect to the Aircraft in all places which are, in Lessor's opinion, necessary
or appropriate to protect Lessor's interest therein have been delivered to
Lessor;

                          (xi)  an opinion of FAA Counsel satisfactory to
Lessor that title to the Airframe is vested in Lessor and that the Aircraft
(including, without limitation the Airframe and Engines) is free and clear of
all liens and encumbrances of record;

                          (xii)  a Guaranty in favor of Lessor, duly executed
by each Guarantor, in form and substance satisfactory to Lessor and Lessor's
counsel, unconditionally guaranteeing, among other things, the payment and
performance by Lessee of all its obligations under the Lease;

                          (xiii)  resolutions of each Guarantor's Board of
Directors, certified by such Guarantor's Secretary, authorizing the execution,
delivery and performance of the Guaranty by such Guarantor, and an incumbency
certificate of each Guarantor, containing the names of the person(s) authorized
to execute and deliver such Guaranty on behalf of such Guarantor and, if
requested, certified copies of the organizational documents of each Guarantor;

                          (xiv) a Security Deposit Agreement, in form and
substance satisfactory to Lessor, executed by Lessee and providing for a
security deposit securing payment and performance of the obligations of Lessee
hereunder ;

                          (xv) an escrow agreement, in form and substance
satisfactory to Lessor, executed by Lessee and Fleet National Bank providing
for the deposit and possession and investment of the security deposit referred
to in the preceding paragraph; and

                          (xvi) such other documents, certificates and
opinions, and evidence of such other matters, as Lessor, Lessor's counsel or
FAA Counsel may reasonably request.

                 (b)  No material adverse change in the financial condition of
Lessee has occurred since the date of the last financial statements furnished
to Lessor as set forth on Schedule No. 2 to Lease Supplement No. 1.

                 (c)  Receipt by Lessor of a satisfactory inspection report
with respect to the Aircraft prepared by inspector(s) acceptable to Lessor.

                 (d)  Lessee's acceptance of the Aircraft on or before the 
Acceptance Date.

                 (e)  In addition to the above listed conditions precedent,
Lessee covenants and agrees that upon Lessor's acknowledgment that all the
conditions to the sale and lease as aforestated have been satisfied, Lessee
shall release from escrow to Lessor the documents held by FAA Counsel on behalf
of Lessee and shall authorize FAA Counsel to file and record all appropriate
documentation, including, without limitation, the Lease and Lease Supplements
No. 1 and No. 2, with the FAA on the Acceptance Date. Upon satisfaction of the
foregoing conditions precedent Lessor shall fund the amount of the Lessor's
Cost as instructed by Lessee.

         (II)  Conditions Subsequent.  On or subsequent to the Acceptance Date,
but not later than the date of the Aircraft's first flight under the leasehold
conveyed herein, Lessee shall provide written confirmation to Lessor that a
copy of the Registration Application has been properly placed within the
Aircraft.

         In addition, prior to the date of the Aircraft's first flight
hereunder Lessee shall provide Lessor with written confirmation that:

                 (a)  a copy of this Lease, including Lease Supplements No. 1
and No. 2, has been properly placed within the Aircraft;

                 (b)  a copy of this Lease, including Lease Supplements No. 1
and No. 2, was mailed, within 24 hours following execution thereof, to the
Flight Standards Technical Division of the FAA; and





                                       3
<PAGE>   4
                 (c)  Lessee has notified the FAA (such notification to have
been given by telephone or in person to the FAA Flight Standards District
Office, General Aviation District Office, Air Carrier District Office or
International Field Office nearest the airport where such flight will
originate) concerning the first flight of the Aircraft under this Lease.

SECTION 3.  Term and Rent.

         (a)  The leasing of the Aircraft by Lessor to Lessee shall commence on
the Acceptance Date and end on the Expiration Date each as set forth on
Schedule No. 2 to Lease Supplement No. 1, unless this Lease shall have been
terminated or extended in accordance with the terms hereof.

         (b)  Lessee shall pay to Lessor as basic rent (herein referred to as
"Basic Rent") the following:

                 (i)  on the Acceptance Date, an amount equal to the Daily
Lease Rate, multiplied by the number of days elapsed from and including the
Acceptance Date with respect to the Aircraft to but excluding the Rent
Commencement Date;

                 (ii)  on the First Basic Rent Date and on each Basic Rent Date
thereafter, to and including the Last Basic Rent Date, an amount equal to the
Basic Rent set forth on Schedule 2-A to Lease Supplement No. 1; and

                 (iii)  after the Expiration Date until the Aircraft is
returned to the Lessor in accordance with Section 8 hereof, an amount equal to
the Basic Rent which amount shall be payable each and every calendar month
immediately after the Expiration Date until the return of the Aircraft to the
Lessor as provided under this Lease on the day of the month on which Basic Rent
was payable during the Term.

         (c)  In addition, Lessee shall pay to Lessor the following amounts
(herein referred to as "Supplemental Rent" and, together with all Basic Rent,
collectively as "Rent"):  (i)  any other amount payable hereunder which Lessee
assumes the obligation to pay, or agrees to pay, under this Lease to Lessor or
others;  (ii)  on the date provided herein, any amount payable hereunder as
Casualty Value and/or any amounts due  pursuant to Section 23 hereof plus any
and all amounts regarding the same and (iii)  to the extent permitted by
applicable law, interest at the Late Payment Rate for the number of days
actually elapsed on any amount payable hereunder not paid when due, plus, as an
administrative and late charge, an amount equal to five percent (5%) of the
amount payable if not paid when due.  The expiration or other termination of
Lessee's obligation to pay Basic Rent hereunder shall not terminate, limit or
modify the obligations of Lessee with respect to Supplemental Rent, which shall
survive such expiration or other termination.

         (d)  All payments of Rent or other amounts required hereunder shall be
made to Lessor in immediately available United States funds on the date payable
hereunder at its address set forth herein or at such other address or to such
other Person as Lessor may direct by notice in writing to Lessee.

SECTION 4. Acceptance.

         The execution by Lessee of Lease Supplement No. 1 shall evidence that
the Aircraft is leased under, and is subject to all of the terms, provisions
and conditions of, this Lease and constitute Lessee's unconditional and
irrevocable acceptance of the Aircraft for all purposes of this Lease.

SECTION 5.  Covenants and Warranties.

         Lessor warrants that during the term of this Lease, so long as no
Event of Default or Default has occurred and is continuing hereunder, Lessee's
possession and quiet enjoyment of the Aircraft shall not be divested or
interfered with by Lessor or anyone claiming through or under Lessor.  This
provision shall be binding upon any assignee of Lessor pursuant to the
penultimate paragraph of Section 16 hereof.

         The warranty set forth hereinabove is in lieu of all other warranties
of Lessor, whether written, oral or implied, with respect to this Lease or the
Aircraft, and Lessor shall not be deemed to have modified in any respect the
obligations of Lessee pursuant to Section 7 hereof, which obligations are and
shall remain absolute, irrevocable and unconditional under all events and
circumstances whatsoever.  LESSEE EXPRESSLY ACKNOWLEDGES THAT IT HAS SELECTED
THE AIRCRAFT WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES AND
LESSEE EXPRESSLY AGREES THAT IT IS LEASING THE AIRCRAFT FROM LESSOR IN AN "AS
IS" CONDITION.  LESSOR SHALL NOT BE DEEMED TO HAVE MADE, AND LESSOR HEREBY
EXPRESSLY DISCLAIMS, ANY REPRESENTATION OR WARRANTY (EXCEPT FOR THE WARRANTY
CONTAINED IN THIS SECTION 5), EITHER EXPRESS OR IMPLIED, AS TO THE AIRCRAFT,
ANY PART THEREOF, ANY RECORDS, OR ANY MATTER WHATSOEVER, INCLUDING, WITHOUT
LIMITATION, THE DESIGN, CONDITION,





                                       4
<PAGE>   5
CAPACITY OR DURABILITY OF THE AIRCRAFT, ITS MERCHANTABILITY OR ITS FITNESS FOR
ANY PARTICULAR PURPOSE, USE OR OPERATION, THE QUALITY OF THE MATERIALS OR
WORKMANSHIP OF THE AIRCRAFT, ITS VALUE OR AIRWORTHINESS, TITLE, SAFETY, THE
ABSENCE OF ANY PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT OR LATENT DEFECT
(WHETHER OR NOT DISCOVERABLE BY LESSEE), COMPLIANCE OF THE AIRCRAFT WITH THE
REQUIREMENTS OF ANY LAW, RULE, REGULATION OR STANDARD PERTAINING THERETO, OR
THE CONFORMITY OF THE AIRCRAFT TO THE PROVISIONS AND SPECIFICATIONS OF ANY
PURCHASE DOCUMENT RELATING THERETO OR ANY INTERFERENCE OR ANY COURSE OF
PERFORMANCE, COURSE OF DEALING OR USAGE OF TRADE, NOR SHALL LESSOR BE LIABLE,
REGARDLESS OF ANY ACTUAL OR ALLEGED NEGLIGENCE OF LESSOR, FOR ANY DEFECTS,
EITHER PATENT OR LATENT (WHETHER OR NOT DISCOVERABLE BY LESSEE), IN THE
AIRCRAFT OR ANY PART THEREOF OR ANY DIRECT OR INDIRECT DAMAGE TO PERSONS OR
PROPERTY RESULTING THEREFROM OR FOR ANY DIRECT, INDIRECT, INCIDENTAL, SPECIAL
OR CONSEQUENTIAL DAMAGES OR FOR STRICT OR ABSOLUTE LIABILITY IN TORT.  WITHOUT
LIMITING THE GENERALITY OF THE FOREGOING, LESSEE HEREBY WAIVES ANY CLAIM
(INCLUDING ANY CLAIM BASED ON STRICT OR ABSOLUTE LIABILITY IN TORT OR
INFRINGEMENT) IT MIGHT HAVE AGAINST LESSOR FOR ANY LOSS, DAMAGE (INCLUDING,
WITHOUT LIMITATION, DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL
DAMAGE) OR EXPENSE CAUSED BY THE AIRCRAFT OR BY LESSEE'S LOSS OF USE THEREOF
FOR ANY REASON WHATSOEVER.

         Lessee acknowledges that Lessee, and not Lessor, has selected the
Aircraft, the Airframe and the Engines.  Lessee further acknowledges that the
Lessor has not manufactured or supplied the Aircraft, the Airframe, or the
Engines and that the Lessor acquired or will acquire the Aircraft and/or the
right to possession thereto in connection with this Lease.

         So long and only so long as an Event of Default or Default hereunder
shall not have occurred and be continuing, and so long and only so long as the
Aircraft shall be subject to this Lease and Lessee shall be entitled to
possession of the Aircraft hereunder, Lessor assigns to Lessee and authorizes
Lessee, at Lessee's expense, to assert for Lessor's account, all rights and
powers of Lessor under any manufacturer's, vendor's or dealer's warranty on the
Aircraft or any part thereof, (including, without limitation, any warranty of
Manufacturer).  Notwithstanding the foregoing, Lessee shall not attempt to
enforce any such performance by legal proceeding without Lessor's prior written
approval.

SECTION 6.  Representations, Warranties and Agreements of Lessee.

         Lessee represents, warrants and agrees as follows:

         (a)  Due Organization.  Lessee has the form of business organization
indicated in the caption of this Lease and is duly organized and existing in
good standing under the laws of the state listed in the caption of this Lease
and is duly qualified to do business wherever necessary to carry on its present
business and operations and to own its property including, without limitation,
the Primary Hangar Location.

         (b)  Due Authorization; No Violation.  This Lease has been duly
authorized by all necessary action on the part of Lessee consistent with its
form of organization, does not require any further shareholder, member or
partner approval, does not require the approval of, or the giving notice to,
any Federal, state, local or foreign governmental authority (including, without
limitation, the Department of Transportation and/or the FAA) and does not
contravene any law binding on Lessee or contravene any provision of, or
constitute a default or result in the creation of any Lien other than a
Permitted Lien under any certificate or articles of incorporation or
organization or by-laws or partnership certificate or agreement, or any
agreement, indenture, or other instrument to which Lessee is a party or by
which it may be bound.

         (c)  Enforceability.  This Lease has been duly executed and delivered
by authorized officers or partners of Lessee and constitutes a legal, valid and
binding obligation of Lessee enforceable in accordance with its terms.

         (d)  Financial Statements.  To the extent that separately audited
financial statements are prepared by the Lessee  or separately prepared
financial statements are filed with the Securities and Exchange Commission
("SEC"), Lessee agrees to furnish Lessor (i) as soon as available, and in any
event within one hundred twenty (120) days after the last day of each fiscal
year of Lessee, a copy of the balance sheet of Lessee as of the end of such
fiscal year, and related statements of income and retained earnings of Lessee
for such fiscal year, all in reasonable detail prepared in accordance with
generally accepted accounting principles consistently applied each on a
comparative basis with corresponding statements for the prior fiscal year; (ii)
within sixty (60) days after the last day of each fiscal quarter of Lessee
(except the last fiscal quarter of any fiscal year), a copy of the balance
sheet of Lessee as of the end of each such quarter, and statement of income and
retained earnings covering the fiscal year to date of Lessee, each on a
comparative basis with the corresponding period of the prior year, all in
reasonable detail and certified by the treasurer or principal financial officer
of Lessee and (iii) within thirty (30) days after the date on which they are
filed, all reports, forms and other filings, if any, required to be made by
Lessee to the SEC or (in





                                       5
<PAGE>   6
respect of the Aircraft or the Lease) the FAA, including, without limitation,
any SEC Form 10-Q and related reports or documents.  All credit, financial and
other information provided by Lessee or at Lessee's direction is, and all such
information hereafter furnished will be, true, correct and complete in all
material respects.

         (e)  Furnishing of Information.  Lessee agrees that it shall furnish
from time to time to Lessor such information relating to Lessee, each Guarantor
their subsidiaries and/or affiliates, financial or otherwise, as Lessor shall
reasonably request.  Lessor agrees that any such information furnished to it by
Lessee shall be held pursuant to the terms and conditions of a confidentiality
agreement executed by Lessor in connection with this Lease.

         (f)  Location of Chief Executive Offices; Lessee Name.  The chief
executive offices and principal place of business of Lessee is located at the
address set forth in Schedule No. 2 to Lease Supplement No. 1, and Lessee
agrees to give Lessor thirty (30) days' prior written notice of any relocation
of said chief executive offices or principal place of business from its present
location, or of any change in its name or identity. Within the previous six (6)
years Lessee has not changed its name, done business under any other names,
changed its chief place of business from its present location or merged or been
the surviving entity of any merger.

         (g)  Documents on Board.  A current and valid Registration Application
or Certificate of Aircraft Registration, and a copy of this Lease and the Lease
Supplements, will be kept on board the Aircraft at all times during the term of
this Lease.

         (h)  Selection of Aircraft.  Lessor has not selected, manufactured
or supplied the Aircraft to Lessee and has acquired the Aircraft subject hereto
solely in connection with this Lease and Lessee has received and approved the
terms of any purchase order or agreement with respect to the Aircraft.

         (i)  Litigation.  There are no proceedings pending or, so far as
the officers of Lessee know, threatened against or affecting Lessee or any of
its property before any court, administrative officer or administrative agency
which would, directly or indirectly, adversely affect or impair the title of
Lessor to the Aircraft, or which, if decided adversely affect the financial
condition or operations of Lessee or the ability of Lessee to perform its
obligations under this Lease.

         (j)  No Adverse Mortgages.  The right, title and interest of Lessor
in and to the Aircraft and the Rent will not be adversely affected or impaired
by the terms of any mortgage, loan agreement or indenture or any other
contract, agreement or instrument to which Lessee is a party, or under which it
or any of its property is or may become bound.  In addition, no mortgage, deed
of trust, or other Lien which now covers or affects, or which may hereafter
cover or affect, any property or interest therein of Lessee, now attaches or
hereafter will attach to the Aircraft, the Airframe or any Engine, or in any
manner affects or will affect adversely Lessor's right, title and interest
therein.
          
         (k)  Taxes.  Lessee has filed or caused to be filed and will continue
to file all Federal, state and local tax returns which are required to be
filed, and has paid or caused to be paid and will continue to pay all taxes
shown to be due and payable on such returns or (except to the extent being
contested in good faith and for the payment of which adequate reserves have
been provided) on any assessment received by Lessee, to the extent that such
taxes have heretofore or in the future become due and payable.

         (l)  Filing.  Except for the registration of the Aircraft with the
FAA and except for filing and recording of the applicable documents pursuant to
the Federal Aviation Act no further action, including any filing or recording
of any document (except for any financing statement under Article 9 of the UCC
of any applicable jurisdiction to be filed pursuant hereto) is necessary or
advisable in order to establish and perfect Lessor's title to and interest in,
the Aircraft, as against Lessee and/or any Person in any applicable
jurisdiction.

         (m)  Good Title.  Lessor will be the owner of the Aircraft as of the
Acceptance Date and will have good and marketable title to the Aircraft, free
and clear of all Liens other than any Liens created in favor of Lessor under
this Lease.

         (n)  Records.  Lessee has reviewed all Records with respect to the
operation and maintenance of the Aircraft prior to the Acceptance Date and such
Records have been kept in accordance with the requirements of the FAA rules and
regulations and industry standards.  Lessee shall maintain all such Records
during the Term in accordance with the requirements of the FAA, and any
manufacturer's maintenance programs or requirements as well as Sections 8 and
11 of this Lease.






                                       6
<PAGE>   7
         (o)  Claims.  Except as set forth in a letter from Lessee to Lessor
delivered contemporaneously herewith, Lessee has no pending claims, and does
not have knowledge of any facts upon which a future claim may be based, against
any prior owner, the Manufacturer of the Aircraft or of any Engine or part
thereof for breach of warranty or otherwise.

          (p)  U.S. Citizen.  The Lessee is, and for the remainder of the Term
will continue to be, a "citizen of the United States" within the meaning of the
Federal Aviation Act.

          (q)  Engines.  Each of the Engines has 750 or greater rated takeoff
horsepower or the equivalent of such horsepower.

          (r)  Due Authorization of Guarantors, No Violation.  The execution,
delivery and performance of the Guarantees have been duly authorized by all
necessary action on the part of each Guarantor consistent with its form of
organization; does not require any further shareholder, member or partner
approval or the approval of any trustee or holders of any indebtedness or
obligations of any Guarantor except such as have been duly obtained; does not
require the approval of, or the giving notice to, any Federal, state, local or
foreign governmental authority (including, without limitation, the Department
of Transportation and/or the FAA) and does not contravene any law binding on
any Guarantor or contravene any provision of, or constitute a default or result
in the creation of any Lien other than a Permitted Lien under any certificate
or articles of incorporation or organization or by-laws or partnership
certificate or agreement, or any agreement, indenture, or other instrument to
which Lessee is a party or by which it may be bound.

          (s)  Binding Obligations of Guarantors.  Each Guaranty constitutes
the legal, valid and binding obligation of the signatory Guarantor enforceable
against such Guarantor in accordance its terms.

          (t)  Litigation Regarding Guarantors.  There are no pending legal
actions or proceedings to which any Guarantor is a party, and there are no
other pending or threatened legal actions or proceedings affecting any
Guarantor of which Lessee has knowledge, before any court, arbitrator or
administrative agency, and there are no final judgments of record against any
Guarantor of which Lessee has knowledge, which, whether individually or in the
aggregate would materially and/or adversely affect the financial condition of
any Guarantor, or the ability of any Guarantor to perform its obligations under
its Guaranty.  Further, no Guarantor is in default under any material
obligation for the payment of borrowed money, for the deferred purchase price
of property, or for the payment of any rent which, either individually or in
the aggregate, would have the same such effect.

          (u)  Delivery of Further Financial Statements.  Lessee agrees to
cause Parent to furnish Lessor (i) as soon as available, and in any event
within one hundred twenty (120) days after the last day of each fiscal year of
Parent, a copy of the balance sheets of Parent as of the end of such fiscal
year, and related statements of income and retained earnings of Parent for such
fiscal year, all in reasonable detail prepared in accordance with generally
accepted accounting principles consistently applied and certified by an
independent certified public accounting firm of recognized standing and which
is reasonably acceptable to Lessor, each on a comparative basis with
corresponding statements for the prior fiscal year; (ii) within sixty (60) days
after the last day of each fiscal quarter of Parent (except the last fiscal
quarter of any fiscal year), a copy of the balance sheet as of the end of each
such quarter, and statement of income and retained earnings covering the fiscal
year to date of Parent, each on a comparative basis with the corresponding
period of the prior year, all in reasonable detail and certified by the
treasurer or principal financial officer of Parent; and (iii) within thirty
(30) days after the date on which they are filed, all reports, forms and other
filings, if any, required to be made by Parent to the SEC or (in respect of the
Aircraft or the Lease) the FAA, including, without limitation, any SEC Forms
10-K, 10-Q and related reports or documents.  All credit, financial and other
information provided by Parent or at Parent's or Lessee's direction is, and all
such information hereafter furnished will be, true, correct and complete in all
material respects. Notwithstanding anything to the contrary, Lessor agrees that
the independent certified public accounting firm currently preparing financial
statements for Parent, Ernst & Young, shall be deemed to be acceptable to
Lessor for the Term of this Lease unless and until Lessor provides notice to
Lessee that such independent certified public accounting firm is no longer
reasonably acceptable.

          (v)  Insolvency, Fair Consideration.  Lessee is not insolvent within
the meaning of any applicable state or Federal laws.  The sale of the Aircraft
by Lessee to Lessor and Lessee's undertaking of the obligations contained
herein shall not cause Lessee to be insolvent within the meaning of applicable
state and/or Federal laws.  The payment by Lessor to Lessee of the Lessor's
Cost of the Aircraft is fair consideration for the Aircraft within the meaning
of applicable state and Federal laws.




                                       7
<PAGE>   8

           (w)  Approvals, Consents and No Contravention.  Without limiting the
generality of any of the foregoing representations and warranties, the sale by
Lessee to Lessor of the Aircraft does not require any stockholder approval or
consent of any trustee or holders of any indebtedness or obligations of Lessee
and will not contravene any laws, statutes, regulations, judgments or decrees
applicable to Lessee, including, but not limited to, laws or statutes regarding
fraudulent conveyances, bankruptcy, creditors' rights or bulk transfers, or the
certificate of incorporation or by-laws of Lessee, or contravene the provisions
of, or constitute a default under, or violate any restrictive covenants or
other agreement to which Lessee is a party or by which Lessee or its assets may
be bound or affected, and any authorization, approval, license, filing or
registration with any court or governmental agency or instrumentality which is
necessary in connection with such sale has been effected and a written copy
thereof has been delivered to Lessor.  Lessee has full power, authority and
legal right to sell the Aircraft to Lessor.  The sale of the Aircraft to Lessor
has been duly authorized by all necessary corporate action and constitutes a
legal, valid and binding obligation of Lessee.

       (x) Section 1110.  Lessee holds, and for the remainder of the Term will
continue to hold, an air carrier operating certificate issued by the FAA and/or
the Secretary of Transportation pursuant to Chapter 447 of the Federal Aviation
Act for aircraft capable of carrying ten (10) or more individuals or 6,000
pounds or more of cargo within the meaning of 11 U.S.C. Section 1110 ("Section
1110"). To the best of Lessee's knowledge, Lessor and any assignee, mortgagee
or lender of the Lessor is entitled to the benefits of Section 1110 (or any
comparable or successor provision affecting protection to Lessors, mortgagees
or lenders of aircraft) with respect to the Aircraft and this Lease.  Lessee
further agrees not to take any position in connection with any bankruptcy
proceedings involving it that is inconsistent with a Lessor's (and any
assignee, mortgagee or lender of the Lessor's) rights under Section 1110 or any
comparable or successor provision affecting protection to lessors, mortgagees
or lenders of aircraft.  Lessee further agrees to take reasonable steps as
requested consistent with the terms of this Lease to permit Lessor and any
assignee, mortgagee or lender of the Lessor to maintain such rights.

SECTION 7.  Net Lease.

         This Lease is a net lease, and Lessee acknowledges and agrees that
Lessee's obligation to pay all Rent hereunder and the rights of Lessor in and
to such Rent, shall be absolute, irrevocable and unconditional and shall not be
subject to cancellation, termination, modification or repudiation by Lessee or
any abatement, reduction, setoff, defense, counterclaim or recoupment
(collectively, "Abatements") for any reason or under any circumstance
whatsoever, including, without limitation, Abatements due to any present or
future claims of Lessee against Lessor, its successors and assigns whether
under this Lease or otherwise, the Manufacturer or any other Person for
whatever reason.  Lessee hereby waives any and all existing and future claims
to any Abatement against such Rent, and agrees to pay all such Rent regardless
of any Abatement which may be asserted in connection with this Lease, the
Aircraft or otherwise.  Except as otherwise expressly provided herein, this
Lease shall not terminate, nor shall the obligations of Lessee be affected, by
reason of any defect in or damage to, or any loss or destruction of, the
Aircraft or any part thereof from whatsoever cause,  or the invalidity or
unenforceability or lack of due authorization of this Lease or lack of right,
power or authority of Lessor to enter into this Lease, or for any other cause,
whether similar or dissimilar to the foregoing, any present or future law or
regulation to the contrary notwithstanding, it being the express intention of
Lessor and Lessee that all Rent payable to Lessor hereunder shall be, and
continue to be, payable in all events unless and until the obligation to pay
the same shall be terminated pursuant to the express provisions of this Lease.
Notwithstanding the foregoing, the payment of Rent by Lessee hereunder shall
not constitute a waiver of any defense, offset or counterclaim hereunder.

SECTION 8.  Return of Aircraft.

         (a)  Condition Upon Return.  Unless purchased by Lessee, upon the
expiration or other termination of this Lease (whether following an Event of
Default, at the end of the Basic Term or any Renewal Term or otherwise),
Lessee, at its own expense, will return the Aircraft to Lessor at a location
specified by the Lessor within the continental United States or to such other
location as Lessor may reasonably request and in the condition in which the
Aircraft is required to be maintained pursuant to Section 11 hereof and any
other applicable provisions of the Lease, fully equipped with the same number,
make and model number of Engines as are set forth on Schedule No. 1 to Lease
Supplement No. 1, which shall fully comply with Section 8(g) hereof, and which,
in the opinion of Lessor, have the same or improved utility, value, useful
life, performance, and efficiency as such Engines had on the Acceptance Date
and are suitable for use on the Airframe and owned by Lessor and properly
installed thereon.  Lessee shall not be relieved of any of its duties,
obligations, covenants, or agreements under this Lease (including, without
limitation, its obligation to pay Basic Rent) prior to the return of the
Aircraft in the manner and condition required with





                                       8
<PAGE>   9
respect to such return.  The Aircraft, at Lessee's expense, upon redelivery
pursuant hereto, (i) shall be duly certified by the FAA as an airworthy
aircraft, (ii) shall be free and clear of all Liens (other than this Lease and
any Lessor's Liens), and rights of third parties under pooling, interchange,
overhaul, repair or other or similar arrangements, (iii) shall be in the same
configuration and in the same operating condition, ordinary wear and tear
excepted, as when delivered to Lessee hereunder, (iv) shall be in good
operating condition, in good physical condition and good appearance (ordinary
wear and tear excepted) with all systems operating, shall be in compliance with
Lessee's written FAA-approved maintenance program for Boeing B727-214 Advanced
Freighter series aircraft and in compliance with all applicable airworthiness
directives and shall have been maintained in a nondiscriminatory manner with
all Boeing B727-214 Advanced Freighter series aircraft in Lessee's fleet, (v)
shall be in compliance with all so-called "mandatory", "alert" and (to the
extent applicable to Lessee, or its operations and to the extent such service
bulletins relate to the safety and/or airworthiness of the Aircraft) "highly
recommended" service bulletins, Service Letters, modification kits, and similar
notices and components issued, supplied, or available by or through the
Manufacturer and/or the Manufacturer(s) of any Engine or Part with respect to
the Aircraft and all "airworthiness alerts" and Airworthiness or other
Directives, Circulars, Operator Bulletins and Instructions and all other
applicable service, maintenance, repair and overhaul regulations issued by the
FAA or similar regulatory agency having jurisdictional authority which require
compliance or termination within six (6) months after the redelivery date of
the Aircraft, (vi) shall have all logos and other identifying marks of Lessee
or others removed and the exterior of the Aircraft shall have a good overall
appearance with no material damage and (vii) shall be otherwise in the
condition and repair required under this Lease.

         In addition to any other requirements of this Section 8 or any other
applicable provisions of this Lease, the Aircraft shall be in the following
condition:

         I.      General Condition of Aircraft.

                 In addition to any other requirements of this Section 8 or any
                 other applicable provisions of this Lease, the Aircraft shall:

                 (i)      be clean by commercial airline standards;

                 (ii)     have installed the full complement of Engines and
                          Parts and accessories and loose equipment as would
                          remain installed in such Aircraft, and shall be in a
                          condition suitable for operation in commercial
                          service, all installed systems to be fully
                          operational;

                 (iii)    have in existence a valid and existing airworthiness
                          certificate with respect to the Aircraft issued by
                          the FAA;

                 (iv)     [Intentionally Left Blank];

                 (v)      all then current outstanding airworthiness directives
                          affecting such model of Aircraft issued by the FAA
                          which require compliance or termination within six
                          (6) months after the redelivery date of the Aircraft
                          shall have been accomplished, and all pilot
                          discrepancies cleared from the logbook;

                 (vi)     have installed all applicable vendors' and
                          Manufacturers' service bulletin kits theretofore
                          received by Lessee that are appropriate for the
                          Aircraft and to the extent not installed, such kits
                          shall be furnished free of charge to Lessor; and

                 (vii)    have all of the operator's markings removed in a
                          workmanlike manner and to the approval of the Lessor.

         II.     General Condition of Fuselage, Windows and Doors.

                 In addition to any other requirements of this Section 8 or any
                 other applicable provisions of this Lease,

                 (i)      all dents, abrasions or external doublers on the
                          fuselage shall meet the requirements of the
                          Manufacturer approved "Structural Repair Manual";





                                       9
<PAGE>   10
                 (ii)     all windows shall be free of delamination, blemishes,
                          crazing and shall be properly sealed; and

                 (iii)    all doors shall be free moving, correctly rigged and
                          be fitted with serviceable seals.

         III.    General Condition of Wings and Empennage.

                 In addition to any other requirements of this Section 8 or any
                 other applicable provisions of this Lease,

                 (i)      all leading edge shall be repaired in accordance with
                          Manufacturer approved "Structural Repair Manual";

                 (ii)     all control surfaces shall be painted or waxed and
                          polished, to industry standard;

                 (iii)    all unpainted cowlings and fairings shall be polished
                          to industry standard; and

                 (iv)     all wings shall be free of fuel leaks, and no
                          previous fuel leaks shall have temporary repairs.

         IV.     General Condition of Interior.

                 In addition to any other requirements of this Section 8 or any
                 other applicable provisions of this Lease,

                 (i)      all ceilings, sidewalls and bulkhead panels shall be
                          clean and free of cracks and stains;

                 (ii)     all signs and decals shall be clean, legible, and in 
                          English; and

                 (iii)    all required calendar life limited emergency
                          equipment shall have a minimum of one year life
                          remaining.

         V.      General Condition of Cockpit.

                 In addition to any other requirements of this Section 8 or any
                 other applicable provisions of this Lease,

                 (i)      all decals in the cockpit shall be clean, secure,
                          legible, and in English;

                 (ii)     all fairing and instrument panels shall be free of
                          stains and cracks, shall be clean, secure and
                          repainted as necessary;

                 (iii)    all floor coverings shall be clean;

                 (iv)     all seat covers shall be in good condition, clean and
                          shall conform to applicable FAA fire resistance
                          regulations or requirements; and

                 (v)      all seats shall be fully serviceable and frames shall
                          be repainted as necessary.

         VI.     General Condition of Cargo Compartments.

                 In addition to any other requirements of this Section 8 or any
                 other applicable provisions of this Lease,

                 (i)      all panels shall be in as good condition as on  
                          delivery; and

                 (ii)     all rollers and cargo moving mechanisms shall be
                          serviceable.





                                       10
<PAGE>   11
         VII.    General Condition of Landing Gear and Wheel Wells.

                 In addition to any other requirements of this Section 8 or any
                 other applicable provisions of this Lease,

                 (i)      all the landing gear and wheel wells shall be clean,
                          free of leaks and repaired as necessary, and coated
                          with corrosion inhibitor; and

                 (ii)     all landing gear and wheel wells decals shall be
                          clean, secure and legible.

         VIII.   Further Condition of Aircraft regarding Corrosion.

                 In addition to any other requirements of this Section 8 or any
                 other applicable provisions of this Lease,

                 (i)      the Aircraft shall meet the requirements of any then
                          existing FAA-approved corrosion control program and
                          aging aircraft corrosion control program on the date
                          of  return; and

                 (ii)     the fuel tanks of the Aircraft shall be free from
                          contamination and corrosion, and a tank treatment
                          program shall be in operation.

         IX.     Documentation.  In addition to any other requirements of this
                 Section 8 or any other applicable provisions of this Lease,
                 Lessee shall, upon the return of the Aircraft to the Lessor,
                 deliver to the Lessor all of the currently revised:

                 (i)      current Illustrated Parts Catalogue, including
                          Airframe and Engines on microfilm or hard copy;

                 (ii)     current Maintenance Manual on microfilm or hard copy;

                 (iii)    current Structural Repair Manual on microfilm or hard
                          copy;

                 (iv)     Wiring Diagram Manual on microfilm or hard copy;

                 (v)      FAA-approved Flight Manual in hard copy;

                 (vi)     Weight and Balance Manual in hard copy;

                 (vii)    Airworthiness Directives and Modifications status in
                          hard copy;

                 (viii)   Operational Specifications in hard copy;

                 (ix)     current status of all time controlled, on condition
                          and condition monitored units which are on the
                          Aircraft and Engines in hard copy;

                 (x)      cross reference list of operator's part number to
                          Manufacturer's part number microfilm (if applicable);

                 (xi)     one copy of all FAA Forms 337 required;

                 (xii)    Aircraft and Engine Time Status report; and

                 (xiii)   all existing Aircraft and Engine historical records
                          in hard copy or microfilm.

         (b)  Overhaul-General.  At the time of such return, (i) the Airframe
(including, without limitation, the landing gear on the Aircraft) shall not
have been operated more than one-half of the allowable time between major
airframe overhauls or major block maintenance before the next major airframe
overhaul or major block maintenance, whichever shall then apply, in accordance
with Lessee's then approved overhaul and/or maintenance program authorized by
and performed to FAA requirements applicable to Lessee, and shall have no less
than half life (as measured by reference to calendar, phase and/or periodic
maintenance and/or inspection standards) remaining on any life limited Airframe
part or component (including, without





                                       11
<PAGE>   12
limitation, the landing gear on the Aircraft) before overhaul or replacement
and (ii) each Engine shall not have been operated more than one-half of the
allowable time remaining before overhaul (both hot and cold sections as
measured by reference to calendar, phase and/or periodic maintenance and/or
inspection standards) and all cycle limited parts or time controlled components
of each Engine shall not have been operated more than one-half of the allowable
cycles or time remaining before replacement; said Engine overhaul and Engine
parts and components replacement to be performed in accordance with Lessee's
then approved engine overhaul and parts and components replacement program
authorized by and performed to FAA requirements applicable to Lessee.  In
addition to the requirements set forth in clauses (i) and (ii) above, all
inspections and scheduled maintenance required to be performed on the Airframe,
Engines and all life limited parts and components within one hundred twenty
(120) days and/or one hundred hours (100) shall have been performed by Lessee.

         (c)  Overhaul-Airframe.  In the event that Lessee does not meet the
conditions in clause (i) and/or the final sentence of Section 8(b) hereof with
respect to the Airframe, Lessee shall pay Lessor a dollar amount computed by
multiplying (i) Lessor's then current cost for such major overhaul or major
block maintenance as the case may be (such cost being the then current rates
charged by an airframe overhaul facility approved by the Manufacturer of the
Airframe and acceptable to Lessor, together with all costs associated with such
overhaul), by (ii) a fraction of which (x) the numerator shall be the excess of
the number of hours since the last such major overhaul or major block
maintenance, as the case may be, over fifty percent (50%) of the number of
hours of allowable time between major overhauls or major block maintenance and
(y) the denominator shall be the total number of hours of such allowable time.

         In the event the life limited parts or components requirement
contained in clauses (i) or (ii) and/or the final sentence of Section 8(b)
hereof are not met, Lessee shall pay to Lessor with respect to each part or
component for which said requirement is not met the dollar amount obtained by
multiplying (i) the ratio that the life expended in excess of half-life bears
to the total allowable life for such part or component by (ii) Lessor's cost of
replacement of such part or component.  Lessor's cost of replacement of a part
or component shall include Lessor's then current cost of purchasing the part or
component itself and all of Lessor's then current costs associated with the
replacement.

         (d)  Overhaul-Engine.  In the event that Lessee does not meet the
conditions in clause (ii) and/or the final sentence of Section 8(b) hereof with
respect to the Engines, Lessee shall pay to the Lessor with respect to each
Engine for which said conditions are not met the dollar amount per Engine
obtained by multiplying (i) the ratio that the time accumulated since half time
bears to the time allowable between overhaul by (ii) Lessor's cost for such
overhaul of such Engine; Lessor's cost referred to in this clause (ii) being
the then current rates charged by an engine overhaul facility approved by the
Manufacturer of the Engines and acceptable to Lessor, together with all costs
associated with such overhaul.

         In the event the foregoing Engine cycle limited part and time
controlled component requirement set forth in clause (ii) and/or the final
sentence of Section 8(b) hereof are not met, Lessee shall pay to Lessor with
respect to each Engine for which said requirement is not met the dollar amount
per part (or per component) obtained by multiplying (i) the ratio that the time
(or cycles) accumulated since half time (or one-half of the allowable cycles)
bears to the time (or cycles) accumulated since half time (or one-half of the
allowable cycles) bears to the time (or cycles) allowable between replacements
by (ii) Lessor's cost of replacement of the part (or component).  Lessor's cost
of replacement of a part or component shall include Lessor's then current cost
of purchasing the part or component itself and all of Lessor's then current
costs associated with  the replacement.

         (e)  Fuel; Records.  Upon the return of the Aircraft in accordance
with this Section; (i) each fuel tank shall contain the same quantity of fuel
as was contained in such tank when the Aircraft was delivered to Lessee on the
Acceptance Date (which shall be presumed to be fifty percent (50%) of full
capacity, unless otherwise specified in the Purchase Documents) or, in the case
of differences in such quantity, an appropriate adjustment will be made at the
then current market price of fuel, and (ii) Lessee shall deliver





                                       12
<PAGE>   13
all Records to Lessor.  In the event any Records are missing or incomplete,
Lessor shall have the right to cause any such Records to be reconstructed at
the expense of Lessee.

         (f)  Storage.  Upon the expiration or other termination of the Lease,
Lessee will, if requested by Lessor, permit Lessor to store the Aircraft at the
Primary Hangar Location as described in Schedule No. 2 to Lease Supplement No.
1, at Evergreen Air Center, Inc., Pinal Air Park, Marana, AZ 85653 or at some
other location mutually acceptable to the Lessor and Lessee.  During such
storage period Lessee will, at its own cost and expense, keep the Aircraft
properly hangared or tied down, and will permit Lessor or any person designated
by Lessor, including the authorized representative or representatives of any
prospective purchaser, lessee or user of the Aircraft to inspect the same.
Lessee shall not be liable, except in the case of negligence or intentional
misconduct of Lessee or of its employees or agents, for injury to, or the death
of, any person exercising, either on behalf of Lessor or any prospective
purchaser, Lessee or user, the rights of inspection granted hereunder.  Lessee
shall bear the risk of loss and shall pay any and all expenses connected with
insuring and maintaining the Aircraft during such storage period.

         (g)  Return of Engines.  In the event that any engine not owned by
Lessor shall be installed on the returned Airframe as set forth in paragraph
(a) of this Section, then Lessee will, concurrently with such delivery, at its
own expense and not at any cost to Lessor, furnish Lessor with a full warranty
bill of sale, in form and substance satisfactory to Lessor, with respect to
each such engine and with a written opinion of FAA Counsel to the effect that,
upon such return, Lessor will acquire good and marketable title to such engine,
free and clear of all Liens (except Lessor's Liens).  Thereupon, unless a
Default or Event of Default shall have occurred and be continuing, Lessor will
transfer to Lessee, without recourse or warranty of any kind whatsoever (except
as to Lessor's Liens) on an "AS-IS, WHERE-IS" BASIS WITHOUT ANY REPRESENTATION
BY, OR RECOURSE OR WARRANTY TO, LESSOR, all of Lessor's right, title and
interest in and to any Engine not installed on the Airframe at the time of the
return of such Airframe.

         (h)  Inspection Prior to Return.  Not more than ninety (90) days prior
to the expiration of the Lease, upon the written request of Lessor, Lessee
shall, at its expense, review the maintenance records of the Aircraft to
determine if the Aircraft is in the condition required by Section 8(a).
Following such review, Lessee shall certify to Lessor that such Aircraft is in
the condition required by Section 8(a) according to the maintenance records for
such Aircraft, or, if the maintenance records so indicate, indicate what
maintenance or repair is needed to bring the Aircraft to the specified
condition.

         (i)  Survival.  The provisions of this Section 8 shall survive the
expiration or other termination of this Lease and the return of the Aircraft
for any reason whatsoever.

         (j)  Injunctive Relief.  Without limiting any other terms or
conditions of this Lease, the provisions of this Section 8 are of the essence
of this Lease, and upon application to any court of equity having jurisdiction,
Lessor shall be entitled to a decree against Lessee requiring specific
performance of the covenants of Lessee set forth in this Section 8.

SECTION 9.  Liens.

         Lessee will not directly or indirectly, voluntarily or involuntarily,
create, incur, assume or suffer to exist any Liens on or with respect to the
Aircraft or any part thereof, Lessor's title thereto or any interest of Lessor
therein (and Lessee will promptly, at its own expense, take such action as
Lessor deems necessary or advisable to duly discharge any such Lien), except
Permitted Liens.  In the event that Lessee fails to take action to discharge or
remove any such Lien, Lessor may take such action as it deems necessary or
appropriate to discharge or remove such Lien.  Lessee shall reimburse Lessor on
demand for any costs incurred by Lessor in connection with such action together
with interest at the Late Payment Rate.  Lessor's rights hereunder are in
addition to, and not in derogation of, any other rights which Lessor may have
hereunder, at law or in equity.

SECTION 10.  Taxes.

     Lessee agrees to (i) report, to the extent legally permissible (or if such
reporting by Lessee is not legally permissible, then to prepare reports for
filing by Lessor), (ii) pay when due and (iii) to defend and indemnify Lessor
against liability for all license and registration fees, assessments, and
sales, use, property, excise, privilege and other taxes (including any related
interest or penalties) or other charges or fees now or hereafter imposed by any
governmental body or agency upon the Aircraft, or with respect to landing,
airport use, manufacturing, ordering, shipment, purchase, ownership, delivery,
installation, leasing, operation, possession, use, return, or other disposition
thereof or the rentals hereunder (other than taxes on or measured solely by the
net income of Lessor)("Impositions").  Any fees, taxes or other





                                       13
<PAGE>   14
lawful charges paid by Lessor upon failure of Lessee to make such payments
shall at Lessor's option become immediately due from Lessee to Lessor.
Notwithstanding the foregoing, Lessee shall pay, indemnify Lessor for, and hold
Lessor harmless on a net after-tax basis from and against, all Impositions on
or measured by the net income of Lessor imposed against Lessor by any local or
foreign government or other taxing authority if and to the extent that Lessor
would not have incurred such Impositions but for the operation or presence of
the Aircraft within the jurisdiction asserting an Imposition.

SECTION 11.  Registration, Maintenance and Operation; Compliance and Use;
             Replacement Parts; Additions; Aircraft Marking.

         (a)  Registration, Maintenance and Operation.  During the Term,
Lessee, at its own cost and expense, shall (i) cause the Aircraft to be duly
registered in the name of the Lessor under the Federal Aviation Act at all
times; (ii) maintain, inspect, service, repair, overhaul and test the Airframe
and each Engine in accordance with Lessee's FAA approved and Manufacturer's
recommended maintenance programs; (iii) maintain (in the English language) all
Records and (iv) promptly furnish to Lessor such information as may be required
to enable Lessor to file any reports required by any governmental authority as
a result of Lessor's ownership of the Aircraft.  All maintenance procedures
required by Section 11, subparagraph (a)(ii) or any other provision of this
Lease shall be performed in accordance with all FAA and Manufacturer's
standards and procedures by properly trained, licensed, and certified
maintenance sources and maintenance personnel utilizing replacement parts
approved by the FAA and the Manufacturer, so as to keep the Airframe and each
Engine in good operating condition, ordinary wear and tear alone excepted, and
to enable the airworthiness certificate of the Aircraft to be continually
maintained.

         (b)  Compliance and Use.  Lessee shall operate the Aircraft solely in
the conduct of its business and/or for commercial purposes (and not for
consumer, personal, home or family purposes) and in a cargo configuration for
which Lessee is duly authorized by the FAA and it will not operate or permit
the Aircraft to be operated at any time or in any geographic area when or where
insurance required by the provisions of Section 14 hereof shall not be in
effect, or in a manner, for any time period, such that Lessor or a third party
shall be deemed to have "operational control" of the Aircraft. At all times the
Aircraft will be operated only by duly qualified, currently certificated pilots
as required by the insurance policies required under this Lease.  IN ADDITION,
EXCEPT AS EXPRESSLY PERMITTED BY THE FOLLOWING PARAGRAPH OR AS SPECIFICALLY
CONSENTED TO IN WRITING BY LESSOR, THE AIRCRAFT SHALL NOT BE OPERATED, USED OR
LOCATED OUTSIDE THE CONTINENTAL UNITED STATES.

         Notwithstanding the foregoing, Lessor agrees that the Aircraft may be
flown temporarily to any country in the world in connection with the conduct of
Lessee's business; provided, however, that in no event may the Aircraft
temporarily fly, be operated, used or located in, or to any such country or
area (1) which is excluded from coverage by any insurance policy in effect with
respect to such Aircraft or by any insurance policy required by the terms of
Section 14 hereof or any country or area not specifically and fully covered by
such insurance; (2) in a recognized or threatened area of hostility unless
fully covered to Lessor's satisfaction by hull, political, expropriation,
hijacking and war risk insurance or (3) to Libya, Iraq, Cuba (other than the
United States government facility at Guantanamo Bay), North Korea, or such
other country or countries as Lessor shall set forth pursuant to written notice
to Lessee from time to time.  Lessee further agrees that it shall not operate
the Aircraft, or permit the Aircraft to be operated in any manner unless the
insurance coverages set forth in Section 14 hereof are in full force and
effect.

         (c)  Replacement Parts.  Except as otherwise provided in the
succeeding paragraph (d) of this Section, Lessee, at its own cost and expense,
will promptly replace all Parts which may from time to time become worn out,
lost, stolen, taken, destroyed, seized, confiscated, requisitioned, damaged
beyond repair or permanently rendered or declared unfit for use for any reason
whatsoever. (such substituted Parts hereinafter called "Replacement Parts").
In addition, in the ordinary course of maintenance, service, repair, overhaul
or testing, Lessee may, at its own cost and expense, remove serviceable Parts,
provided that Lessee shall, at its own cost and expense, replace such
serviceable Parts as promptly as practicable.  All Replacement Parts (i) shall
be free and clear of all Liens, (ii) be in an airworthy condition and of at
least equivalent model and modification status and service bulletin
accomplishment status, be fully interchangeable as to form, fit and function
and shall be in a good operating condition as, and shall have a value, useful
life and utility at least equal to, the Parts replaced assuming such replaced
Parts were in the condition and repair required to be maintained by the terms
hereof, (iii) have a current "serviceable tag" of the Manufacturer or
maintenance facility providing such items to Lessee, indicating that such Parts
are new, serviceable or overhauled, (iv) if overhauled, have all overhaul
records, (v) if a life limited Part, have continuous records since the date of
manufacture or the date of the last overhaul, and (vi) shall not in any manner
alter or adversely affect the Aircraft's airworthiness certificate.  All Parts
at any time removed from the Airframe or any Engine shall remain the property
of Lessor, no matter where located, until such time as such





                                       14
<PAGE>   15
Parts shall be replaced by Parts which have been incorporated or installed in
or attached to the Airframe or such Engine and which meet the requirements for
Replacement Parts specified above.  Immediately upon any Replacement Part
becoming incorporated or installed in or attached to the Airframe or such
Engine as above provided, without further act, (i) title to the removed Part
shall thereupon vest in Lessee, on an AS IS, WHERE IS BASIS WITHOUT ANY
REPRESENTATION BY, OR RECOURSE OR WARRANTY TO, LESSOR, free and clear of all
rights of Lessor and Lessor's Liens and shall no longer be deemed a Part
hereunder, (ii) title to such Replacement Part shall thereupon vest in the
Lessor, and (iii) such Replacement Part shall become subject to this Lease and
be deemed part of the Airframe or Engine, as the case may be, for all purposes
hereof to the same extent as the Parts originally incorporated or installed in
or attached to the Airframe or such Engine.

         (d)  Additions.  Lessee shall be entitled from time to time during the
Term to acquire and install on the Aircraft at Lessee's own cost and expense
(and Lessor hereby appoints Lessee to be Lessor's agent for such purpose, so
long as no Event of Default has occurred and is continuing), any additional
accessory, device or equipment as may be available at such time ("Additions")
but only so long as such Additions (i) are ancillary to the Aircraft, (ii) are
not required to render the Aircraft complete for its intended use by Lessee,
(iii) will not impair the originally intended function or use of the Aircraft
or diminish the value of the same and (iv) can be readily removed without
causing material damage to the Aircraft.  Title to Additions which are not
removed by Lessee prior to the return of the Aircraft to Lessor shall vest in
Lessor upon such return.  Lessee shall repair all damage to the Aircraft
resulting from such installation and removal of Additions so as to restore the
Aircraft to its condition prior to installation, ordinary wear and tear
excepted.

         (e)  Aircraft Marking.  Lessee agrees, at its own cost and expense, to
(i) cause the Airframe and the Engines to be kept numbered with the
identification or serial number therefor as specified in Schedule No. 1 to
Lease Supplement No. 1 hereof; (ii) prominently display on the Aircraft that
"N" number, and only that "N" number, specified in Schedule No. 1 to Lease
Supplement No. 1 or such other "N" number as has been approved in writing by
the Lessor and duly recorded with the FAA; (iii) notify Lessor in writing
thirty (30) days prior to making any change in the configuration (other than
changes in configuration mandated by the FAA), appearance or coloring of the
Aircraft from that in effect at the time the Aircraft is accepted by Lessee
hereunder, and in the event of such change or modification of configuration,
coloring or appearance, at the request of Lessor to restore the Aircraft to the
configuration, coloring and/or appearance in effect on the Acceptance Date or,
at Lessor's option to pay to Lessor an amount equal to the reasonable cost of
such restoration and (iv) affix and maintain in the Airframe adjacent to the
airworthiness certificate and on each Engine a metal nameplate bearing the
Aircraft Marking specified in Lease Supplement No. 2 and such other markings as
from time to time may be required by law or otherwise deemed necessary or
advisable by Lessor in order to protect the title of Lessor to the Aircraft and
the rights of Lessor under this Lease.  Lessee will not place the Aircraft in
operation or exercise any control or dominion over the same until such Aircraft
Markings have been placed thereon.  Lessee will replace promptly any such
Aircraft Marking which may be removed, defaced or destroyed.

         (f)     Pooling of Parts.  Any Part removed from the Airframe or any
Engine as provided in Section 11(c) hereof may be subjected by Lessee (or any
Permitted Sublessee) to normal pooling arrangements customary in the airline
industry entered into in the ordinary course of Lessee's (or any Permitted
Sublessee's) business with a U.S. Air Carrier; provided that the Part replacing
such removed Part shall be incorporated or installed in or attached to the
Aircraft in accordance with Section 11(c) hereof immediately upon the removal
of such removed Part. In addition, any Replacement Part when incorporated or
installed in or attached to the Aircraft in accordance with Section 11(c)
hereof may be owned by another U.S. Air Carrier subject to such a normal
pooling arrangement; provided that Lessee (or any Permitted Sublessee) ensures
that the Part so removed remains the property of Lessor, and that Lessee (or
any Permitted Sublessee), at its expense, immediately thereafter either (x)
causes title to such Replacement Part to vest in Lessor free and clear of all
Liens and rights of others in accordance with Section 11(c) hereof, or (y)
replaces such Replacement Part by incorporating or installing in or attaching
to the Aircraft a further Replacement Part owned by Lessee (or any Permitted
Sublessee) free and clear of all Liens and rights of others (except for any
Lessor Liens) by causing title to such further Replacement Part to vest in
Lessor in accordance with Section 11(c) hereof.


SECTION 12.  Inspection.

         (a)     During the Term of this Lease, Lessee shall furnish to Lessor
such information concerning the location, condition, use and operation of the
Aircraft (or any component thereof including, the Airframe and any Engine or
Part), as Lessor may reasonably request.  Lessor or its authorized
representatives or agents shall have the right, at any reasonable time and from
time to time and wherever located, to inspect the Aircraft and its condition,
use, and operation, and the Records, and to travel on the flight deck as





                                       15
<PAGE>   16
observers at any such inspection.  Lessor shall not have any duty to make any
such inspection nor shall Lessor incur any liability or obligation of any kind
whatsoever by reason of not making any such inspection. Without limiting the
generality of the foregoing or any other term of this Lease, Lessor or its
authorized representatives or agents shall have the right to inspect the
Aircraft during any "C" and/or "D" checks (as such checks are determined and/or
defined by the Manufacturer or the Lessee's FAA-approved maintenance program)
or their respective equivalent (such checks collectively the "Major Checks"),
performed by or on behalf of Lessee during the Term of this Lease, and Lessee
shall inform Lessor of any such Major Check schedule by providing written
notice as to time and location of all said Major Checks.  During any Major
Checks, Lessee agrees to provide sufficient manpower to allow Lessor or its
authorized representatives or agents to inspect, during the course of any Major
Check, any area of the Aircraft which Lessor requests to inspect and which 
would normally be required during any such Major Check.

         (b)     No later than five (5) days prior to the date the Aircraft is
to be returned, Lessee shall make the Aircraft available to Lessor for a
detailed inspection by a qualified FAA designated airworthiness representative
or any other authorized representative or agent of the Lessor in order to
verify that the condition of the Aircraft complies with all of the requirements
of this Lease, including, without limitation, Section 8 hereof, (any such
inspection the "Final Inspection").  Such Final Inspection may be scheduled at
an appropriate maintenance facility of the Lessee or a FAA authorized
maintenance performer then performing maintenance on such Aircraft.  Lessor
shall use its best efforts to conduct such Final Inspection during operational
downtime of the Aircraft.  The Lessee shall provide the Lessor not less than
sixty (60) days prior written notice of the location and commencement date of
the Final Inspection.  The Final Inspection, at Lessor's sole option, shall
also include a two hour operational test flight of the Aircraft ("Test
Flight"). Any such Test Flight shall be conducted by Lessee at its sole cost
and expense using the Lessee's approved test flight procedures. Lessor shall be
permitted to have a minimum of two (2) authorized representatives attend the
Final Inspection. In the event that the Lessee has exercised its Sale Option
pursuant to Section 23 (c) and the Aircraft has either not been sold within
ninety (90) days of the then current Expiration Date or the proposed sale price
is less than the then current Maximum Lessor Risk, the Lessee shall be required
to open any areas of the Aircraft reasonably requested to be opened by the
Lessor or its authorized representatives or agents in order to verify any
aspect of the Aircraft's condition or any item or component thereof, including,
without limitation, the lower cargo compartment bilges, and borescoping of the
Engines.  Without limiting the generality of the foregoing or any other term of
this Agreement, all Engines shall, upon the request of Lessor, have had within
the thirty (30) day period immediately preceding the Final Inspection an
"engine trim run" and a "combustion chamber" inspection performed in
conformance with the Manufacturer's recommended procedures.  All Records shall
be provided to the Lessor or its authorized representatives or agents at the
Final Inspection.

         (c)     The cost and expense of the Test Flight and Final Inspection
shall be paid by the Lessee.

SECTION 13.  Loss or Destruction.

         (a)  Event of Loss with Respect to the Aircraft.  Upon the occurrence
of any Event of Loss with respect to the Aircraft, Lessee shall notify Lessor
of any such Event of Loss within five (5) days of the date thereof.  On the
next Basic Rent Date following the date of such notice (or, if such Event of
Loss occurs after the Last Basic Rent Date, within thirty (30) days after such
notice), Lessee shall pay to Lessor any Rent then due, plus the Casualty Value
of the Aircraft determined as of the Basic Rent Date immediately following the
date of such Event of Loss, together with interest at the Late Payment Rate for
the period (if any) from the Basic Rent Date following the date of such notice
through the date of payment.  Upon making such payment and all Rent due and
owing, Lessee's obligation to pay further Basic Rent for the Aircraft
subsequent to such payment shall cease, but Lessee's obligation to pay
Supplemental Rent as well as any other amounts due under this Lease, if any,
for the Aircraft shall remain unchanged.  Except in the case of loss, permanent
disappearance, destruction or Return to Manufacturer, Lessor shall be entitled
to recover possession of the Aircraft, unless possession thereof is required to
be delivered to a third party insurance carrier in order to settle an insurance
claim.  Lessor shall be entitled to any salvage value in excess of the Casualty
Value paid to Lessor.  Lessor shall be under no duty to Lessee to pursue any
claim against any Person in connection with an Event of Loss, but Lessee may at
its own cost and expense and with Lessor's prior written consent pursue the
same on behalf of Lessor in such manner as may be acceptable to Lessor.

         Following the payment of the Casualty Value of the Aircraft in
accordance with the provisions of this subsection, Lessee, if possible, shall,
as agent for Lessor, dispose of the Aircraft as soon as it is able to do so for
the best price obtainable.  Any such disposition shall be on an AS-IS, WHERE-IS
BASIS WITHOUT ANY REPRESENTATION BY, OR RECOURSE OR WARRANTY TO, LESSOR, of any
kind whatsoever.  Lessee may, after paying Lessor the amounts specified in this
subsection, retain all amounts of such price up to the Casualty Value of the
Aircraft actually paid by Lessee, together with Lessee's reasonable costs and
expenses of disposition attributable thereto and any excess shall be paid over
to, and retained by, Lessor.  In the event of a Return to Manufacturer, Lessor
agrees that Lessee shall receive and retain all amounts payable to Lessor by
the Manufacturer up to the amount, if any, of the Casualty Value actually paid
by Lessee hereunder, but any





                                       16
<PAGE>   17
excess shall be retained by Lessor.  With respect to a Requisition of Use,
Lessor agrees that Lessee shall receive and retain all amounts paid by any
governmental authority up to the Casualty Value actually paid by Lessee
hereunder, and any excess shall be paid over to, and retained by, Lessor.

         (b)  Event of Loss with Respect to an Engine.  Upon an Event of Loss
with respect to any Engine under circumstances in which there has not occurred
an Event of Loss with respect to the Airframe upon which such Engine was
installed or upon the occurrence of an Event of Loss of an Engine not then
installed on the Airframe, Lessee shall give Lessor prompt written notice
thereof and shall within thirty (30) days after the occurrence of such Event of
Loss, duly convey to Lessor title to a similar engine of the name, make and
model number as that suffering the Event of Loss.  Such engine shall be free
and clear of all Liens, have a value, utility, and useful life at least equal
to, and (ii) be in as good an operating condition as, the Engine with respect
to which such Event of Loss has occurred, assuming such Engine was of the value
and utility and in the condition and repair required by the terms hereof
immediately prior to the occurrence of such Event of Loss.  Lessee, at its own
cost and expense, shall furnish Lessor with such documents to evidence such
conveyance as Lessor shall request.  Upon full compliance by Lessee with the
terms of this paragraph, Lessor will transfer to Lessee, without recourse,
representation or warranty of any kind whatsoever, all of Lessor's right, title
and interest, if any, in and to the Engine with respect to which such Event of
Loss has occurred.  SUCH TRANSFER SHALL BE "AS-IS, WHERE-IS" AND LESSOR SHALL
NOT BE DEEMED TO HAVE MADE, AND LESSOR HEREBY DISCLAIMS, ANY REPRESENTATION OR
WARRANTY, EITHER EXPRESS OR IMPLIED, AS TO THE ENGINE SO TRANSFERRED TO LESSEE
other than that the Engine is free and clear of Lessor's Liens.  Each such
replacement engine shall, after such conveyance shall be deemed an "Engine" as
defined herein and shall be deemed part of the same Aircraft as was the Engine
replaced thereby.  No Event of Loss with respect to an Engine shall result in
any reduction or delay in the payment of Basic Rent or relieve Lessee of any
obligation under this Lease.

         (c)  Risk of Loss; no Release of Obligations.  Except as provided in
this Section 13, Lessee shall bear the risk of loss and shall not be released
from its obligations hereunder in the event of any damage to the Aircraft or
any part thereof or any Event of Loss relating thereto.

SECTION 14.  Insurance.

         (a)  Aircraft Liability and Property Damage Insurance.  Lessee shall
maintain at its own cost and expense for the entire Term with insurers
satisfactory to Lessor, (i) comprehensive aircraft and general public liability
insurance against bodily injury and property damage claims including, without
limitation, contractual liability, premises damage, public liability, personal
property liability, personal injury liability, death and property damage
liability, public and passenger legal liability coverage in an amount not less
than $200,000,000.00 for each single occurrence and (ii) such other property
damage insurance with respect to the Aircraft as is of the type and in the
amounts usually carried by companies engaged in the same or a similar business
as Lessee and which covers risks of the kind customarily insured against by
such companies.  Lessee shall also provide worker's compensation insurance with
all-states coverage for the Aircraft's crew and maintenance personnel.

         (b)  Insurance Against Loss or Damage to the Aircraft.  Lessee shall
maintain at its own cost and expense for the entire Term with insurers
satisfactory to Lessor, all-risk ground and flight aircraft hull insurance
covering the Aircraft, including foreign object damage, fire and explosion
coverage, cargo, environmental, ingestion and lightning and electrical damage
and comparable insurance with respect to any Engines or Parts while removed
from the Aircraft, and with respect to any engines or parts while temporarily
installed on the Aircraft, provided that such insurance shall at all times be
in an amount not less than the Casualty Value of the Aircraft (such amount
determined at the Rent Commencement Date and at each annual renewal date of the
insurance policies provided hereunder for the next succeeding year throughout
the Term).  Lessee shall maintain in effect hijacking (air piracy) insurance
with respect to the Aircraft in a face amount of not less than the Casualty
Value of the Aircraft (determined as described herein), which shall be in full
force and effect worldwide throughout any geographical areas at any time
traversed by the Aircraft.  Such insurance shall also include war risk,
governmental confiscation and expropriation and related insurance.

         (c)  Lessor as Additional Insured; Notice.  Any policies of insurance
carried in accordance with this Section and any policies taken out in
substitution or replacement or any such policies (i) shall be amended to name
Lessor as the owner of the Aircraft and as additional insured as its interests
may appear, (ii) with respect to insurance carried in accordance with paragraph
(b) of this Section 14 covering the Aircraft, shall provide that any amount
payable thereunder which exceeds $100,000.00 in the aggregate shall be paid
directly to Lessor as sole loss payee and not to Lessor and Lessee jointly
(and, so long as no Event of Default has occurred, such amounts shall be
disbursed by Lessor to Lessee or other appropriate Persons in payment of the
costs actually incurred with respect to repairs made to the Aircraft so as to
restore it to the operating condition required by Section 11 hereof, or shall
be disbursed by Lessor as otherwise required by the Lease), and that, provided
no Default or Event of Default has occurred and is continuing, any amount(s) of
less than $100,000.00 in the aggregate shall be paid to Lessee (and such
amounts shall be applied by Lessee to pay the costs of such repairs), (iii)
shall provide for thirty (30) days, or in the case of war risk insurance, seven 




                                       17
<PAGE>   18
(7) days, written notice by such insurer of cancellation, change, non-renewal
or reduction and (iv) shall provide that in respect of the interests of Lessor
in such policies, the insurance shall not be invalidated by any action or
inaction of Lessee regardless of any breach or violation of any warranties,
declarations or conditions contained in such policies by or binding upon
Lessee.  Each shall be primary insurance, not subject to any co-insurance
clause and shall be without right of contribution from any other insurance.
Lessee shall arrange for appropriate certification as to the satisfaction of
the requirements set forth above in this Section 14 to be delivered to Lessor
not later than the Acceptance Date by each such insurer or underwriter
therefor, which certification shall specifically acknowledge that the insurance
is in conformity with this Section 14.  Notwithstanding the foregoing, Lessee
shall promptly provide Lessor with a copy of each policy of insurance required
hereunder if it so requests.

         (d)  Reports, etc.  Annually on the anniversary of the Acceptance
Date, Lessee shall furnish to Lessor a report describing in reasonable detail
the insurance then carried and maintained on the Aircraft and certifying that
such insurance complies with the terms hereof and, if Lessor shall so request,
a copy of each applicable policy.  In the event Lessee shall fail to maintain
insurance as herein provided, Lessor may, at its option, provide such
insurance, and Lessee shall, upon demand, reimburse Lessor for the cost
thereof, together with interest at the Late Payment Rate from the date of
payment through the date of reimbursement.

         (e)  Agreed Value.  Anything herein to the contrary notwithstanding,
at all times while the Aircraft is subject to this Lease, the insurance
required hereunder shall be for an amount on an "agreed value" basis not less
than the lower of the Casualty Value or the Lessor's Cost.

         (f)  No Right To Self-Insure.  Lessee shall not self-insure (by
deductible, premium adjustment, or risk retention arrangement of any kind) the
insurance required to be maintained hereunder, except to the extent of
deductibles usually and customarily maintained by companies engaged in the same
or similar business as Lessee and operating the same or similar aircraft, but
in no event shall any deductible exceed the Permitted Deductible amount on
Schedule No. 2-A  to Lease Supplement No. 1.  Lessee hereby irrevocably
appoints Lessor as Lessee's attorney-in-fact to file, settle or adjust, and
receive payment of claims under any such insurance policy and to endorse
Lessee's name on any checks, drafts or other instruments on payment of such
claims.  Lessee further agrees to give Lessor prompt notice of any damage to or
loss of, the Aircraft, or any part thereof.

         (g)  Attorney-in Fact.  Lessee irrevocably appoints Lessor (and any
assignee, mortgagee and/or lender of the Lessor) its attorney-in-fact to act in
Lessee's name and on its behalf to make, execute, deliver and file any
instruments or documents, settle, receive payment, make claim or proof of loss
and to take any action as Lessor (and any such assignee, mortgagee and/or
lender) deems necessary or appropriate to carry out the intent of this Section
14 or any agreements, documents or instruments related thereto.  To the extent
appropriate or permissible under applicable law, such appointment is coupled
with an interest, shall be irrevocable and shall terminate only upon payment in
full of the obligations set forth in this Lease and/or any agreements,
documents or instruments related thereto.  Notwithstanding the foregoing, to
the extent that no Default or Event of Default has occurred and is continuing,
Lessor agrees that it shall not exercise its powers as attorney in fact with
respect to amounts of less than $100,000.00 payable under such policies of
insurance as are provided for hereunder.

SECTION 15.  Indemnification.

         Lessee assumes liability for, and hereby agrees to indemnify, protect,
save, defend and keep harmless Lessor, its agents, employees, officers,
directors, shareholders, subsidiaries, affiliates, successors and assigns
(collectively "Lessor"), on a net after-tax basis, from and against any and all
liabilities, obligations, losses, damages, penalties, claims (including,
without limitation, claims involving or alleging product liability or strict or
absolute liability in tort), actions, suits, demands, costs, expenses and
disbursements (including, without limitation, legal fees and expenses) of any
kind and nature whatsoever (other than Impositions, the indemnification against
which is set forth in Section 10 hereof) ("Claims") which may be imposed on,
incurred by or asserted against Lessor, whether or not Lessor shall also be
indemnified as to any such Claim by any other Person, in any way relating to or
arising out of this Lease or any documents contemplated hereby, or the
performance or enforcement of any of the terms hereof or thereof, or in any way
relating to or arising out of the assertion or enforcement of any
manufacturer's, vendor's or dealer's warranties on the Aircraft or any part
thereof, (including, without limitation, any warranty of any Manufacturer), the
manufacture, inspection, construction, purchase, pooling, interchange,
acceptance, rejection, ownership, titling or re-titling, delivery, lease,
sublease, possession, use, operation, maintenance, condition, registration or
re-registration, sale, return, removal, repossession, storage or other
disposition of the Aircraft or any part thereof or any accident in connection
therewith (including, without limitation, latent and other defects, whether or
not discoverable, and any Claim for patent, trademark or copyright
infringement).

         Notwithstanding the foregoing, Lessee shall not be required to
indemnify Lessor for (a) any Claim caused by the gross negligence or willful
misconduct of the Lessor, (b) any Claim caused by the failure of





                                       18
<PAGE>   19
Lessor to comply with any regulatory requirements which non-compliance is
caused solely and directly by Lessor, negligence or willful misconduct or (c)
any Claim in respect of the Aircraft arising from acts or events which occur
after (x) possession of the Aircraft has been redelivered to Lessor (which
return and delivery shall be in full and complete compliance with the terms of
this Lease, including, without limitation, Section 8) and (y) any and all other
obligations of any kind whatsoever of the Lessee under this Lease which have
been fully paid and/or performed, including, without limitation pursuant to
Section 10 hereof, as the case may be, unless any such Claims were caused by
Lessee (or any stockholder, director, officer, employee, successor, assignee,
agent or servant of the Lessee) or resulted or arose, directly or indirectly,
from any acts, events or omissions of any kind whatsoever during the Term of
this Lease.

         WITHOUT LIMITING THE GENERALITY OF THE TERMS OF THIS LEASE, LESSEE
AGREES THAT LESSOR SHALL NOT BE LIABLE TO LESSEE FOR ANY CLAIM CAUSED DIRECTLY
OR INDIRECTLY BY THE INADEQUACY OF THE AIRCRAFT OR ANY PART THEREOF FOR ANY
PURPOSE OR ANY DEFICIENCY OR DEFECT THEREIN OR THE USE OF MAINTENANCE THEREOF
OR ANY REPAIRS, SERVICING OR ADJUSTMENTS THERETO OR ANY DELAY IN PROVIDING OR
FAILURE TO PROVIDE ANY OF THE SAME OR ANY INTERRUPTION OR LOSS OF SERVICE OR
USE THEREOF OR ANY LOSS OF BUSINESS, OR PROFITS ALL OF WHICH SHALL BE THE SOLE
RISK AND RESPONSIBILITY OF LESSEE.

         The liability of Lessee to make indemnification payments pursuant to
this Section 15 shall, notwithstanding any expiration or other termination
(whether voluntary, as the result of Default or Event of Default, or otherwise)
of this Lease, continue to exist until such indemnity payments are irrevocably
made by Lessee in full and received by Lessor.  If any Claim is made against
Lessee or Lessor, the party receiving notice of such Claim shall promptly
notify the other, but the failure of the party receiving notice to so notify
the other shall not relieve Lessee of any obligation hereunder.

SECTION 16.  Assignment and Sublease.

         EXCEPT AS EXPRESSLY SET FORTH HEREIN OR AS MAY BE OTHERWISE CONSENTED
TO IN WRITING BY LESSOR, LESSEE SHALL NOT SELL, TRANSFER, ASSIGN, SUBLEASE,
CONVEY, PLEDGE, MORTGAGE OR OTHERWISE ENCUMBER ITS OR LESSOR'S INTEREST IN AND
TO THE LEASE OR THE AIRCRAFT, AND ANY SUCH SALE, TRANSFER, ASSIGNMENT,
SUBLEASE, CONVEYANCE, PLEDGE, MORTGAGE, OR ENCUMBRANCE, WHETHER BY OPERATION OF
LAW OR OTHERWISE, WITHOUT THE PRIOR WRITTEN CONSENT OF LESSOR SHALL BE NULL AND
VOID.  IN ADDITION, LESSEE SHALL NOT RELINQUISH POSSESSION OF THE AIRFRAME OR
ANY ENGINE OR INSTALL ANY ENGINE OR PART, OR PERMIT ANY ENGINE OR PART TO BE
INSTALLED, ON ANY AIRFRAME OTHER THAN THE AIRFRAME LEASED HEREUNDER EXCEPT AS
EXPRESSLY SET FORTH HEREIN.  No acceptance, assignment, subletting,
relinquishment or installation shall in any event relieve Lessee of primary,
absolute and unconditional liability for its duties and obligations under this
Lease.  In no event may the Aircraft be subleased to a Person who is not a
"citizen of the United States" within the meaning of the Federal Aviation Act.
Notwithstanding anything to the contrary set forth herein, nothing herein shall
prohibit Lessee from entering into any contract or arrangement with any third
party so long as Lessee maintains operational control of the Aircraft and the
rights, title and interests of such third party are subject and subordinate to
the rights, title and interests of Lessor hereunder.

         (a)  Notwithstanding the foregoing, provided that, so long as no
Default or Event of Default shall have occurred hereunder and be continuing,
and Lessee shall continue to comply with the provisions of Sections 11 and 14,
Lessee (and any Permitted Sublessee except that any Permitted Sublessee shall
not have the right to sublease or lease the Aircraft to any other Person) may,
without the prior written consent of Lessor:

                 (i)      subject the Airframe, the Engines or engines then
installed thereon to normal interchange agreements or any Engine to normal
pooling or similar arrangements, in each case customary in the airline industry
and entered into by Lessee (or any Permitted Sublessee) in the ordinary course
of its business with a U.S. Air Carrier or any other air carrier approved by
Lessor; provided that (A) no transfer of registration of the Airframe or any
Engine shall be effected in connection therewith and the terms of this Lease
shall be observed; (B) no such agreement or arrangement contemplates or
requires the transfer of title to the Airframe or any Engine and (C) if
Lessor's title to any Engine shall be divested under any such agreement or
arrangement, such divestiture shall be deemed to be an Event of Loss with
respect to such Engine and Lessee shall comply with Section 13(b) hereof in
respect thereof;

                 (ii)     deliver possession of the Airframe or any Engine to
the manufacturer thereof or to any organization for testing, service, repair,
maintenance or overhaul work on the Airframe, Engine or any part thereof or for
alterations or modifications in or additions to such Airframe or Engine to the
extent required or permitted by the terms of Section 11 hereof;

                 (iii) install an Engine on an airframe owned by Lessee (or any
Permitted Sublessee) which airframe is free and clear of all Liens, except:
(A) Permitted Liens and those which apply only to the engines (other than
Engines), appliances, parts, instruments, appurtenances, accessories,
furnishings and other equipment (other than Parts) installed on such airframe
(but not to the airframe as an entirety), (B) the rights of third parties under
interchange agreements which would be permitted under clause (i)





                                       19
<PAGE>   20
above, provided that Lessor's title to such Engine shall not be divested as a
result thereof and (C) mortgage Liens or other security interests, provided,
that (as regards this clause (C)), such mortgage Liens or other security
interests provide that such Engine  shall not become subject to the lien of
such mortgage or security interest, notwithstanding the installation thereof on
such airframe;

                 (iv) install an Engine on an airframe leased to Lessee (or any
Permitted Sublessee) or purchased by Lessee subject to a conditional sale or
other security agreement, provided that (x) such airframe is free and clear of
all Liens, except:  (A) the rights of the parties to the lease or conditional
sale or other security agreement covering such airframe, or their assignees,
and (B) Liens of the type permitted by subparagraph (iii) of this paragraph (b)
and (y) such lease, conditional sale or other security agreement provides that
such Engine shall not become subject to the lien or security interest of such
lease, conditional sale or other security agreement, notwithstanding the
installation thereof on such airframe;

                 (v) transfer possession of the Airframe or any Engine to the
United States of America or any instrumentality or agency thereof pursuant to
the Civil Reserve Air Fleet Program for a period that does not extend beyond
the end of the Term so long as Lessee (or any Permitted Sublessee) shall (A)
promptly notify Lessor upon subjecting the Airframe or any Engine to the Civil
Reserve Air Fleet Program and provide Lessor with the name and address of the
Contracting Office Representative for the Military Aircraft Command of the
United States Air Force, and (B) promptly notify Lessor upon transferring
possession of the Airframe or any Engine to the United States of America or any
agency or instrumentality thereof pursuant to such program; or

                 (vi) transfer possession of the Airframe or any Engine to the
United States of America or any agency or instrumentality thereof pursuant to a
contract, a copy of which shall be provided to Lessor, provided that the terms
of such contract shall not be inconsistent with the terms hereof (including,
without limitation, that no such contract shall extend beyond the end of the
Term).

                 (vii) sublease the Aircraft to any Permitted Sublessee,
provided, however, that

                  A.      Lessee shall provide to the Lessor prior written
                 notice of any proposed sublease and a copy of such sublease
                 prior to entering into said sublease.

                  B.      Any sublease shall provide that it shall terminate at
                 the option of Lessor, upon the expiration or earlier
                 termination of this Lease and the term of such sublease shall
                 not exceed the then remaining Term of this Lease (including,
                 any Renewal Term as to which the option to renew has been
                 irrevocably exercised).

                 C.       Any sublease shall be a true lease and not a lease
                 intended as "security" as such term is used in Section 1-201
                 (37) of the UCC.

                  D.      With respect to any sublease, to the extent that it
                 has not already done so, Lessee agrees to assign, and does
                 hereby assign, as collateral security, and grant, and does
                 hereby grant, to Lessor a security interest in (i) the
                 sublease, (ii) all amounts payable thereunder, (iii) all
                 proceeds of insurance payable to Lessee pursuant to the
                 sublease, and (iv) all rights and remedies of Lessee under the
                 sublease and proceeds from the exercise thereof all to secure
                 payment and performance of all of Lessee's liabilities,
                 obligations and indebtedness under this Lease.  Lessor's
                 security interest which is created hereby, if Lessor so
                 elects, may be perfected by possession of the sublease rather
                 than filing, as provided in the UCC.  Until the occurrence of
                 a Default or an Event of Default hereunder, Lessee shall have
                 the right to collect and receive, in accordance with the terms
                 hereof, rent and other sums payable under such sublease and to
                 retain, use and enjoy the same.  The filing of this Lease with
                 the FAA shall constitute notice to all third parties of the
                 security interest of Lessor in any such subleases without the
                 need for the filing of a specific assignment thereof.

                 E.       Lessee shall deliver to the Lessor a fully executed
                 copy of each and every sublease, which are, and will be, the
                 only copies of such sublease marked "Secured Party's
                 Original."  All copies of the sublease shall bear the
                 following legend: "To the extent, if any, this instrument
                 constitutes chattel paper under the UCC, no security interest
                 herein may be created through the transfer and/or possession
                 of any counterpart other than the counterpart marked 'Secured
                 Party's Original.'"  All copies of each sublease, other than
                 the "Secured Party's Original" shall bear the following
                 legend: "'Copy.' No interest herein may be





                                       20
<PAGE>   21
                 created or the aircraft subject hereto through the transfer
                 and/or possession hereof."

                 F.       Any sublease shall be expressly subject and
                 subordinate to this Lease and the rights of Lessor hereunder
                 and in and to the Aircraft.  No amendment, termination, waiver
                 or modification of any of the terms and/or conditions of such
                 sublease shall be effective unless consented to in writing in
                 advance by Lessor, provided, however, that Lessor's consent
                 shall not be necessary with respect to any amendment or
                 modification of such sublease which increases the amount of
                 the monthly rentals under such sublease or with respect to any
                 renewal of such sublease provided that the term of such
                 sublease, upon effecting such renewal ends on or before the
                 then current Term of this Lease.

                 G.       Lessee shall deliver to Lessor a consent and
                 acknowledgment executed by Lessee and Permitted Sublessee in
                 the form and substance satisfactory to Lessor along with such
                 other instruments (including, without limitation, FAA
                 recording documents and UCC financing statements) as Lessor
                 may reasonably require.  Lessee shall agree to take such other
                 actions as are deemed necessary by Lessor to effect the terms
                 and conditions of this Section.

                  H.      Lessee shall provide evidence, satisfactory to
                 Lessor, that Lessor shall have the benefits of Section 1110
                 (as set forth in Section 6 (x) of this Lease) after giving
                 effect to such sublease.

                  I.      Such other terms and conditions as Lessor deems
                  necessary and appropriate.

                  Notwithstanding anything to the contrary set forth herein,
                  nothing in this subparagraph (vii) shall prohibit Lessee from
                  entering into any contract or arrangement with any third party
                  so long as Lessee maintains operational control of the
                  Aircraft and the rights, title and interests of such third
                  party are subject and subordinate to the rights, title and
                  interests of Lessor hereunder.

         Without limiting the generality of the foregoing, the rights of any
Permitted Sublessee or other transferee who receives possession by reason of a
transfer permitted by this Section 16 (other than the transfer of an Engine
which is deemed an Event of Loss) shall be subject and subordinate to, and any
sublease permitted by this Section 16, shall expressly provide that it is
subject and subordinate to, all the terms of this Lease, including, without
limitation, the covenants contained in Section 8 hereof and Lessor's rights,
powers and remedies hereunder, including the right to repossession pursuant to
Section 19 hereof and to avoid such sublease upon such repossession and each
sublease shall expressly require any Permitted Sublessee to forthwith deliver
the Aircraft to Lessor upon any rightful demand therefor pursuant to Section 19
hereof, and the terms of any such sublease shall (A) not permit any Permitted
Sublessee to take any action not permitted to be taken by Lessee in this Lease
with respect to the Aircraft, (B) be consistent with the requirements of this
Lease, (C) not permit any further subleasing or leasing of the Aircraft by the
Permitted Sublessee or otherwise, (D) include appropriate provisions for the
continued registration and maintenance of the Aircraft in accordance with FAA
standards, and compliance with the terms and conditions hereof, including,
without limitation, use and operation, insurance with an appropriate insurance
certificate to be furnished to Lessor prior to Lessee's entry into any such
sublease, (E) provide that the Lessor may, at its option, void or terminate
such sublease following an Event of Default or Default hereunder, (F) provide
that in the event that Lessor declares the Lease to be in default pursuant to
Section 18 hereof, any Permitted Sublessee's rights under such sublease shall,
at the option of Lessor, automatically be deemed to be assigned to Lessor (to
the extent not already assigned to the Lessor), and (G) that the Permitted
Sublessee shall not transfer possession of or any other rights to the Airframe
or any Engine to any Person, except as expressly permitted herein.

         No pooling agreement, sublease or other relinquishment of possession
of the Airframe or any Engine shall in any way whatsoever discharge or diminish
any of Lessee's obligations to Lessor (and any assignee, mortgagee and lender
of the Lessor) hereunder, discharge or diminish the obligations of the
Guarantor under the Guaranty or constitute a waiver of Lessor's (or any such
assignee, mortgagee or lender of the Lessor's) rights or remedies hereunder and
all of the obligations of Lessee hereunder shall be and remain primary and
shall continue in full force and effect as the obligations of a principal and
not of a guarantor or surety.

         Lessor, may at any time, with or without notice to Lessee, mortgage,
grant a security interest in or otherwise transfer, sell or assign all or any
part of its interest in this Lease or the Aircraft or any Rent or other sums
due or to become due hereunder and Lessee shall perform all of its obligations
under this Lease for the benefit of such assignee, lender, creditor, mortgagee,
transferee or Person except that the interest of any such assignee, lender,
creditor, mortgagee, transferee or Person shall be subject to Lessee's rights





                                       21
<PAGE>   22
of use and possession, renewal rights, and purchase options, if any, hereunder,
so long as no Default or Event of Default has occurred and is continuing
hereunder.  Lessee agrees that the rights hereunder of any such assignee,
lender, creditor, mortgagee, transferee or Person shall not be subject to any
defense, setoff, recoupment, abatement, reduction, claim or counterclaim
(collectively the "Defenses") that Lessee has or may at any time have against
Lessor for any reason whatsoever and Lessee hereby waives any right to assert
at any time any of the foregoing Defenses against any such assignee, lender,
creditor, mortgagee, transferee or Person.  Lessee further agrees that any such
assignee, lender, creditor, mortgagee, transferee or Person shall have all of
Lessor's rights hereunder, but none of the Lessor's obligations or duties.
Lessee acknowledges that any such assignment, transfer or sale will not
materially change its duties or materially increase its burdens or risks
hereunder and that any such assignment, transfer or sale shall be permitted
even if the assignment, transfer or sale would be deemed to materially affect
the Lessee's interests hereunder.  Lessee further agrees, if so directed in
writing, to, among other things, pay all sums due or to become due hereunder
directly to the assignee, lender, creditor, mortgagee, transferee or Person or
any other party designated in writing by Lessor or any such assignee, lender,
creditor, mortgagee, transferee or Person.  Upon the request of Lessor or any
assignee, lender, creditor, mortgagee, transferee or Person, Lessee also agrees
(i) to promptly execute and deliver to Lessor or to such assignee, lender,
creditor, mortgagee, transferee or Person an acknowledgment of assignment in
form and substance satisfactory to the requesting party which, among other
things, reaffirms the basic terms and conditions of this Lease and (ii) to
comply with the reasonable demands of any such assignee, lender, creditor,
mortgagee, transferee or Person in order to perfect any such assignment or
transfer.

         This Lease, including all agreements, covenants, representations and
warranties, shall be binding upon and inure to the benefit of, and may be
enforced by (a) Lessor and its successors, assigns (including, without
limitation, all parties referred to in Section 16), agents and servants and (b)
Lessee and its successors and, to the extent expressly permitted by Lessor,
assigns.

SECTION 17.      [Intentionally Left Blank]

SECTION 18.  Events of Default.

         The term "Event of Default", wherever used herein, shall mean any of
the following events or circumstances (whatever the reason for such Event of
Default and whether it shall be voluntary or involuntary, or come about or be
effected by operation of law, or be pursuant to or in compliance with any
judgment, decree or order of any court or any order, rule or regulation or any
administrative or governmental body):

         (a)  Lessee shall fail to make any payment of Rent, Casualty Value
and/or any amount due pursuant to Section 23 hereof within ten (10) days after
any or all of the same shall become due and payable, or, upon demand, any other
amount required to be paid herein or under any other agreement with Lessor; or

         (b)  Lessee shall fail to keep in full force and effect any of the
insurance required under this Lease, or shall operate the Aircraft at a time
when, or at a place in which, such insurance shall not be in effect; or

         (c)  Lessee shall fail to perform or observe any covenant, condition
or agreement, (other than those specifically referred to in this Section 18)
required to be performed or observed by it under this Lease or any agreement,
document or certificate delivered by or on behalf of Lessee in connection
herewith, and such failure shall continue for (I) ten (10) days after written
notice thereof from Lessor to Lessee and (II) provided that Lessee is
diligently pursuing a cure of such default to the satisfaction of Lessor, for
forty-five (45) days thereafter; or

         (d)  Lessee shall default in the payment or performance of any
indebtedness or obligation to Lessor or any affiliated person, firm or entity
controlling, controlled by or under common control with Lessor, under any loan,
note, security agreement, lease, guaranty, title retention or conditional sales
agreement or any other instrument or agreement evidencing such indebtedness
with Lessor or such other affiliated person, firm or entity affiliated with
Lessor; or

         (e)  any representation or warranty made by Lessee herein or in any
certificate, agreement, statement or document hereto or hereafter furnished to
Lessor in connection herewith, including without limitation, any financial
information disclosed to Lessor, shall prove to be or to have been false or
incorrect in any material respect; or

         (f)  the commencement of any bankruptcy, insolvency, arrangement,
reorganization, receivership, liquidation or other similar proceeding by or
against Lessee or any of its properties or businesses, the appointment of a
trustee, receiver, liquidator or custodian for Lessee or any of its properties
of business, if Lessee suffers the entry of an order for relief under Title 11
of the United States Code or the making by Lessee of a general assignment or
deed of trust for the benefit of creditors; or





                                       22
<PAGE>   23
         (g) Lessee defaults in any payment or other obligation to any third
party which default gives rise to a right on behalf of such third party to
accelerate such obligation and such obligation is either accelerated by the
third party or paid in full by the Lessee during the continuance of such 
default; or
         
         (h)  Lessee (I) sells, transfers or disposes of all or substantially
all of its respective stock, assets or property and after giving effect to such
sale, transfer or disposition the Lessee's tangible net worth does not equal or
exceed its tangible net worth immediately preceding such occurrence, or (II)
merges with or into any other entity and the surviving entity after giving
effect to such merger does not comply with all of the terms and conditions of
this lease, including, without limitation, the terms and conditions of the
Financial Covenants Rider hereto; or

         (i)  if M. Tom Christopher shall cease to own a minimum of 25% of
Parent's voting capital stock issued and outstanding from time to time; or if
Parent shall cease to own 100% of Lessee's or any Guarantor's (other than
Parent's) voting capital stock issued and outstanding from time to time; or if
M. Tom Christopher shall no longer serve as chairman of the board or chief
executive officer of Parent; or any major automobile manufacturer; or

         (j)  there shall be a change in the ownership of Parent's stock such
that Parent is no longer subject to the reporting requirements of the
Securities Exchange Act of 1934 or no longer has a class of equity securities
registered under Section 12 of the Securities Act of 1933; or

         (k) Lessee shall fail to return the Aircraft to Lessor at the end of
the Term in accordance and in compliance with Section 8 hereof unless Lessee is
diligently pursuing compliance with such Section to the satisfaction of Lessor;
or

         (l)  Lessee shall or shall attempt to remove, sell, transfer, convey,
pledge, mortgage, encumber, part with possession of, assign or sublet the
Aircraft or any part thereof (except as expressly permitted by the provisions
of this Lease or such use by the United States Government pursuant to the Civil
Reserve Air Fleet Program), use the Aircraft for an illegal purpose or permit
the same to occur or Lessee shall create, incur, assume or suffer to exist any
Lien (other than Permitted Liens) with respect to the Aircraft, this Lease or
Lessor's interests thereunder; or

         (m)  any event or condition set forth in subsections (b) through (j)
of this Section 18 shall occur with respect to any guarantor or other person
responsible, in whole or in part, for payment or performance of this Lease; or

         (n)  any event or condition set forth in subsections (d) through (j)
of this Section 18 shall occur with respect to any affiliated person, firm or
entity controlling, controlled by or under common control with Lessee.

         Lessee shall promptly notify Lessor of the occurrence of any Default
or Event of Default.

SECTION 19.  Remedies.

         (a)  Upon the occurrence of any Event of Default and so long as the
same shall be continuing, Lessor may, at its option, declare this Lease to be
in default (provided that no such declaration shall be a condition to any suit
against Lessee for specific performance of a defaulted covenant or for damages
in respect of such default upon such occurrence or at any time thereafter), and
at any time thereafter, whether or not such Event of Default shall be
continuing, Lessor may exercise any one or more of the following remedies, as
Lessor in its sole discretion shall lawfully elect:

                 (i)  Proceed by appropriate court action, either at law or in
equity, to enforce performance by Lessee of the applicable covenants of this
Lease or to recover damages for breach thereof.

                 (ii)  By notice terminate this Lease, whereupon all rights of
Lessee to the use of the Aircraft or any part thereof shall absolutely cease
and terminate but Lessee shall remain liable as hereinafter provided and
thereupon Lessee, if so requested by Lessor, shall (a) at its expense promptly
return the Aircraft to the possession of Lessor at such place as Lessor shall
designate and in the condition required upon the return thereof pursuant to and
in accordance with the terms of this Lease, (b) Lessor, at its option, may
enter upon the premises where the Aircraft is located and take immediate
possession of and remove the same, together with any Engines and Parts by
self-help, summary proceedings or otherwise without any liability of any kind
whatsoever on the part of Lessor for or by reason of such entry or taking of
possession and Lessee hereby waives any cause of action it may have arising
from, or in connection with, the foregoing or (c) Lessee will provide storage
as set forth in this Lease.  In addition, upon the written request of Lessor,
Lessee, at its expense, will replace any engine installed on the Airframe with
an Engine. Lessee shall, without further demand, forthwith pay to Lessor an
amount equal to any unpaid Rent due and payable for all periods up to and
including the Basic Rent Date following the date on which Lessor has





                                       23
<PAGE>   24
declared this Lease to be in default, plus, as liquidated damages for loss of a
bargain and not as a penalty, an amount equal to the Casualty Value of the
Aircraft, computed as of the Basic Rent Date immediately following the date on
which Lessor has declared this Lease to be in default (plus all costs, charges
and expenses including, legal fees and disbursements incurred by Lessor by
reason of the occurrence of any Event of Default or the exercise of any of
Lessor's remedies with respect thereto or otherwise).  Following the return of
the Aircraft to Lessor pursuant to this subparagraph (ii), Lessor shall proceed
at its option to sell or otherwise dispose of the Aircraft by public or private
sale, with or without notice, and without having the Aircraft present at the
place of sale and in such manner as it shall deem appropriate, provided that
Lessor, if it so elects, may purchase the Aircraft at such sale for a price not
less than the highest bona fide bid given by a Person unrelated to Lessee.
Lessee waives all its rights under laws governing such sale to the extent
permitted by law.  Lessor may apply any deposit or other cash collateral or
sale or remarketing proceeds of the Aircraft at any time to reduce any amounts
due to Lessor.  Notwithstanding the foregoing, Lessor may at its option and in
its sole discretion keep idle, lease, or use or operate all or part of the
Aircraft without any liability whatsoever and may use Lessee's premises for
storage pending lease or sale or for holding a sale without liability for rent
or costs or any other matter whatsoever.  The net proceeds of such sale or
lease as provided above shall be applied by Lessor (x) first, to pay all costs,
charges and expenses, including the cost of discharging all Liens, on the
Aircraft and all legal fees and disbursements incurred by Lessor as a result of
the Event of Default and/or the exercise of its remedies with respect thereto,
(y) second, to pay to Lessor an amount equal to any unpaid Rent due and payable
and the Casualty Value, to the extent not previously paid and (z) third, to
reimburse Lessee for the Casualty Value to the extent paid by Lessee as
liquidated damages.  Any surplus remaining thereafter shall be retained by
Lessor.  To the extent that all Rent then due and payable with respect to the
Aircraft and the Casualty Value have not been previously paid, Lessee shall
forthwith pay upon demand to Lessor the sum of (A) the amount by which (1) the
sum of (aa) all Rent then due and payable with respect to the Aircraft, (bb)
the Casualty Value or portion thereof not theretofore paid and (cc) the amount
payable under clause (x) of the preceding sentence exceeds (2) the net proceeds
of the sale or lease of the Aircraft actually received by the Lessor and (B)
interest at the Late Payment Rate on the full amount of said Casualty Value and
Rent then due and unpaid, computed from the date such sums are due until the
same are paid by Lessee.  For purposes of computing liquidated damages under
this subparagraph (ii) only, the proceeds of any releasing of the Aircraft
shall be determined by discounting to present value, at the rate of twelve and
one-half percent (12.5%) per annum, the periodic rentals which are payable to
Lessor pursuant to such re-lease, up to and including the Expiration Date.

         (b)  Lessee shall be liable for all costs, charges and expenses,
including legal fees and disbursements, incurred by Lessor by reason of the
occurrence of any Event of Default, the exercise of any of Lessor's rights or
remedies with respect thereto or otherwise.

         (c)  Lessee hereby waives, to the maximum extent now or hereafter
permitted by applicable law, for itself and for its successors or assigns any
and all rights Lessee or Lessee's successors or assigns may have following an
Event of Default under any bankruptcy, insolvency or similar laws, rules or
regulations with respect to the continued possession or use of the Aircraft or
relief from the payment of Rent therefor or otherwise with respect to this
Lease.  Rejection of this Lease by any bankruptcy trustee or
debtor-in-possession shall entitle Lessor to the immediate return of the
Aircraft and to liquidated damages calculated in the manner provided for in
Section 19(a)(ii) above with respect to an Event of Default.

         (d)  No right or remedy referred to herein is intended to be
exclusive, but each shall be cumulative and in addition to any other right or
remedy referred to above or otherwise available to Lessor at law or in equity,
including, without limitation, such rights and/or remedies as are provided for
in the UCC.  No express or implied waiver by Lessor of any Default or Event of
Default hereunder shall in any way be, or be construed to be, a waiver of any
future or subsequent Default or Event of Default.  The failure or delay of
Lessor in exercising any rights granted it hereunder upon the occurrence of any
of the contingencies set forth herein shall not constitute a waiver of any such
right upon the continuation or reoccurrence of any such contingencies or
similar contingencies, and any single or partial exercise of any particular
right by Lessor shall not exhaust the same or constitute a waiver of any other
right provided for or otherwise referred to herein.

         (e)  To the extent permitted by applicable law, Lessee hereby waives
any rights now or hereafter conferred by statute or otherwise which may require
Lessor to sell, lease or otherwise use the Aircraft in mitigation of Lessor's
damages as set forth in this Section 19 or which may otherwise limit or modify
any of Lessor's rights or remedies under this Section 19.  To the extent
permitted by applicable law, Lessee waives any and all rights and remedies
conferred upon a lessee by Section 2A-508 to 2A-522 (inclusive) of the UCC,
including, without limitation, any rights of Lessee (a) to cancel or repudiate
this Lease or any supplement or any document relating thereto, (b) to reject or
evoke acceptance of the Aircraft or any component thereof and (c) to recover
from Lessor any general or consequential damages, for any reason whatsoever.





                                       24
<PAGE>   25
SECTION 20.  Performance of Obligations of Lessee by Lessor.

         If any Default or Event of Default occurs or if Lessee fails to
perform or comply with any of its agreements contained herein, Lessor shall
have the right, but shall not be obligated, to effect such performance or
compliance and the amount of any out-of-pocket expenses and other reasonable
expenses of Lessor incurred in connection with the performance of or compliance
with such agreements, as the case may be, together with interest thereon at the
Late Payment Rate, shall be payable by Lessee promptly upon demand and any such
action by Lessor shall not be deemed a cure or waiver of any Default or Event
of Default hereunder.

SECTION 21.  Intent

         Title to the Aircraft shall at all times remain in Lessor and at no
time during the Term shall title become vested in Lessee.  Lessee shall acquire
no right, title or interest in or to the Aircraft except the right to use the
same pursuant to the terms of this Lease.  Notwithstanding anything to contrary
contained herein or otherwise, (i) should a court of competent jurisdiction
determine that this agreement is one intended as security, and (ii) to secure
the prompt and full payment and performance as and when due of any and all
obligations and indebtedness of Lessee to Lessor, now existing or hereafter
created of any kind whatsoever, including, without limitation any other
aircraft lease executed contemporaneously with this Lease, Lessee hereby grants
and conveys to, Lessor a security interest and lien in this Lease, the
Aircraft, any subleases relating to the Aircraft or any part thereof and any
and all proceeds (including insurance proceeds) of any or all of the foregoing.
The security interest granted herein shall survive the termination or
expiration of this Lease by any Event of Default or Default or otherwise and
shall remain in full force and effect until such time as Lessee has no further
obligations of any kind whatsoever under this Lease.

SECTION 22.  Notices.

         All communications and notices provided for herein shall be in writing
and shall become effective upon hand delivery or upon delivery to an overnight
delivery service or two (2) Business Days after being deposited in the United
States mail with proper postage for first-class mail prepaid, sent by
registered or certified mail, return receipt requested, and addressed to Lessor
or Lessee at their respective addresses set forth under the signatures hereto
or such other address as either party may hereafter designate by written notice
to the other.

SECTION 23.  End of Term Options.

         (a)  If no Event of Default (or event or condition which, with the
passage of time or giving of notice, or both, would become such an Event of
Default) has occurred and is continuing, on each Expiration Date, Lessee shall
have the option to: (i) purchase the Aircraft pursuant to paragraph (b) below
(the "Purchase Option"), (ii) sell the Aircraft pursuant to paragraph (c) below
(the "Sale Option") or (iii) on any Expiration other than the Final Expiration
Date, to renew the Term of the Lease for an additional one year period on the
same terms and conditions as are set forth herein except that the amount of
Basic Rent payable during such Renewal Term shall be as set forth for such
Renewal Term on Schedule 2-A to Lease Supplement No. 1 (the "Renewal Option").
Subject to the foregoing limitations on exercise of the Renewal Option, Lessee
shall give Lessor 180 days irrevocable written notice (the "Option Notice")
prior to each Expiration Date if Lessee intends to exercise the Purchase
Option, the Sale Option or the Renewal Option.  If Lessee does not provide a
timely Option Notice, then the Lessee shall be irrevocably deemed to have
exercised (x) the Renewal Option as of the then current Expiration Date
provided that the then current Expiration Date is not the Final Expiration
Date, or (y) the Purchase Option as of the then current Expiration Date if the
then current Expiration Date is Final Expiration Date.

         (b)  Upon exercise of the Purchase Option, Lessee shall pay to Lessor
on the applicable Expiration Date an amount equal to:  (i) all Rent then due
and owing under the Lease; plus (ii) all taxes, assessments and other charges
due or payable in connection with the sale of the Aircraft to Lessee; plus
(iii) the Purchase Option Price as of such Expiration Date.  Upon receipt of
the amounts set forth in the preceding sentence, Lessor shall convey all of
Lessor's right, title and interest in and to the Aircraft to Lessee on an
"AS-IS," "WHERE-IS" BASIS WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, and without recourse to Lessor, except that the Aircraft shall be free
and clear of all liens created by Lessor.

         (c)  Upon exercise of the Sale Option, Lessee shall place the Aircraft
in the condition required by Section 8 of the Lease and shall obtain bids for
the Aircraft and market such Aircraft in a commercially reasonable manner to
the highest qualified bidder on or before the Expiration Date, at Lessee's sole
cost and expense; provided, however, that no sale shall occur without Lessor's
prior written consent.  Lessor agrees that, if so requested by Lessee and upon
performance of and compliance with the other terms and conditions of this
Section 23 by Lessee, it shall consent to any bona fide offer to purchase the
Aircraft, including, any offer to purchase the Aircraft made by Lessee, which
equals or exceeds the Maximum Lessor Risk.  Lessor may also offer to purchase
the Aircraft pursuant to this Section 23 and/or solicit and/or obtain bids for
the Aircraft, provided, however, that Lessor shall be under no duty to so act.





                                       25
<PAGE>   26
         If the Aircraft is sold pursuant to the exercise of a Sale Option on
or before the applicable Expiration Date, then, on the earlier of such
Expiration Date or the date on which the proceeds from such sale are paid by
the purchaser of the Aircraft (the "Termination Date"), Lessor shall receive
all proceeds of such sale and Lessee shall pay to Lessor: (i) all Rent due and
owing under the Lease through and including the Expiration Date; plus (ii) all
taxes, assessments and other charges due or payable in connection with the sale
of the Aircraft; plus (iii) the amount by which the net proceeds of such sale
are less than the Purchase Option Price as of the Expiration Date, if any, but
in no event more than the Maximum Lessee Risk, as of the Expiration Date.  In
the event that the sale price is greater than the Purchase Option Price,
together with the amounts set forth in (i) and (ii) above to the extent that
such amounts have not already been paid by Lessee, any excess of such sales
price  shall be remitted to Lessee. Upon receipt of the amounts set forth in
the preceding sentence, Lessor shall convey all of Lessor's right, title and
interest in and to the Aircraft to the purchaser thereof on an "AS-IS,"
"WHERE-IS" BASIS WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, and
without recourse to Lessor, except that the Aircraft shall be free and clear of
all liens created by Lessor.

         If the Aircraft is not sold pursuant to the exercise of a Sale Option
on or before such Expiration Date, then, on such Expiration Date, Lessee shall
return the Aircraft to Lessor under the terms and in the condition required by
Section 8 of the Lease, and shall pay to Lessor an amount equal to:  (i) all
Rent then due and owing under the Lease through and including such Expiration
Date; plus (ii) the applicable Purchase Option Price. Lessor's actual out-of-
pocket costs and expenses incurred in removing, storing, repairing and selling
the Aircraft during the period between the date the Aircraft is returned and
the actual sale thereof shall be payable to Lessor by Lessee upon presentation
of Lessor's invoice therefor.  Upon sale of the Aircraft, the net proceeds
thereof shall be allocated:  FIRST, to Lessor in an amount equal to:  (i) to
the extent that such amounts have not already been paid by Lessee, all Rent
then due and owing under the Lease through and including such Expiration Date,
plus (ii) to the extent that such amounts have not already been paid by Lessee,
Lessor's actual out-of-pocket costs and expenses incurred in removing, storing,
repairing and selling the Aircraft, plus (iii) all taxes, assessments and other
charges due or payable in connection with the sale of the Aircraft, plus (iv)
to the extent that such amount has not already been paid by Lessee the Purchase
Option Price and SECOND, the excess, if any, to Lessee.

SECTION 24.  Intentionally Left Blank.

SECTION 25.  Transaction Expenses.

         Lessee shall pay all actual and reasonable fees, costs and expenses
incurred by Lessor in connection with this Lease, whether or not the
transactions contemplated hereby are consummated, including, without
limitation, appraisal fees, Lessor's in-house counsel expenses and fee of
$15,000.00, FAA Counsel fees and expenses, and FAA and UCC title and lien
searches, reports, filing and recording fees, charges and taxes. Lessee also
agrees to pay all fees and expenses of Lessor's counsel, FAA Counsel and all
other third parties who are engaged by Lessor to enforce Lessor's rights and/or
remedies hereunder, to update any FAA or UCC title and/or lien reports and/or
to review, file and record any and all documents and instruments as required by
Lessor or the FAA during and after the Term of this Lease.

SECTION 26.  Miscellaneous.

         (a)  All agreements, indemnities, representations, covenants and
warranties contained in this Lease or any agreement, document or certificate
delivered pursuant hereto or thereto or in connection herewith or therewith
shall survive the execution and delivery of this Lease and the expiration or
other termination of this Lease for any reason whatsoever.

         (b)  Any provision of this Lease which may be determined to be
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.  To the extent
permitted by applicable law, Lessee hereby waives any provision hereof
prohibited or unenforceable in any respect.

         (c)  This Lease, and each related instrument, document, agreement and
certificate, collectively constitute, and are intended to collectively
constitute, the complete and exclusive statement of the terms of the agreement
between Lessor and Lessee with respect to the purchase and leasing of the
Aircraft and cancel and supersede any and all prior or contemporaneous oral or
written understandings, memoranda, negotiations, communications and agreements
with respect thereto including, without limitation, any proposal letter,
commitment letter and/or term sheet delivered to the Lessee by Lessor.

         (d)  This Lease may be executed in any number of counterparts and by
the different parties hereto on separate counterparts.  Each counterpart of the
Lease bears the following legend on the face and execution pages thereof:
"This is Counterpart No. 1 of a total of 3 counterparts.  Only Counterpart No.
1 shall be





                                      26
<PAGE>   27
considered chattel paper for purposes of the Uniform Commercial Code and a
security interest may be perfected only by possession of Counterpart No. 1."
To the extent, if any, that this Lease constitutes chattel paper (as such term
is defined in the UCC as in effect in any applicable jurisdiction) no security
interest in this Lease may be created through the transfer or possession of any
counterpart other than the counterpart marked "Counterpart No. 1".

         (e)  The division of this Lease into sections, the provision of a
table of contents and the insertion of headings are for convenience of
reference only and shall not affect the construction or interpretation of this
Lease.

         (f)  The actual dates of execution hereof by the parties hereto are
respectively the dates set forth under the signatures hereto, however this
Lease shall be effective as of the date first above written.

         (g)  Lessee will promptly and duly execute and deliver to Lessor and
any assignee, mortgagee and/or lender of the Lessor, such other documents and
assurances, including, without limitation, such amendments to this Lease as may
be required by Lessor (and by any assignee, mortgagee and/or lender of the
Lessor), and UCC financing statements and continuation statements, and will
take such further action as Lessor or any such assignee, mortgagee and/or
lender may from time to time request in order to carry out more effectively the
intent and purposes of this Lease and to establish and protect the rights and
remedies created or intended to be created in favor of Lessor and of any such
assignee, mortgagee and/or lender.  Lessee irrevocably appoints Lessor (and any
assignee, mortgagee and/or lender of the Lessor) its attorney-in-fact to act in
Lessee's name and on its behalf to make, execute, deliver and file any
instruments or documents and to take any action as Lessor (and any such
assignee, mortgagee and/or lender) deems necessary or appropriate to carry out
the intent of this Lease or any agreements, documents or instruments related
thereto.  To the extent appropriate or permissible under applicable law, such
appointment is coupled with an interest, shall be irrevocable and shall
terminate only upon payment in full of the obligations set forth in this Lease
and/or any agreements, documents or instruments related thereto.

         (h)  Time is of the essence in the payment and performance of all of
Lessee's obligations under the Lease.  This Lease shall be deemed to have been
executed in Rhode Island by virtue of the Lessor having countersigned and
accepted the Lease in Rhode Island and shall be deemed to be performed in Rhode
Island by virtue of the payment of Rent to be made to Lessor in Rhode Island,
and this Lease shall be delivered for closing purposes in Lessor's office at 50
Kennedy Plaza, Providence, Rhode Island.  This Lease shall in all respects be
governed by, and construed in accordance with, the laws of the State of Rhode
Island, without giving effect to principles of conflicts of law or choice of
law, including all matters of construction, validity and performance. Lessee
hereby irrevocably consents and agrees that any legal action, suit or
proceeding arising out of or in any way in connection with this Agreement may
be instituted or brought in the courts of the State of Rhode Island or the
United States District Court for the District of Rhode Island, as Lessor may
elect, and by execution and delivery of this Lease, Lessee hereby irrevocably
accepts and submits to, for itself and in respect of its property, generally
and unconditionally, the non-exclusive jurisdiction of any such court, and to
all proceedings in such courts.   To the extent permitted by applicable law,
this Lease shall be deemed a "finance lease" under Section 2A-103(g) of the
UCC.  LESSEE ACKNOWLEDGES AND AGREES THAT THIS LEASE IS A COMMERCIAL
TRANSACTION.  LESSEE ALSO HEREBY KNOWINGLY AND FREELY WAIVES ALL RIGHTS TO
TRIAL BY JURY IN ANY LITIGATION ARISING HEREFROM OR IN RELATION HERETO.  Any
action by Lessee against Lessor for any cause of action relating to this Lease
shall be brought within one year after any such cause of action first arises.

[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]





                                       27
<PAGE>   28

SECTION 27.  AMENDMENTS.

         NO TERM OR PROVISION OF THIS LEASE MAY BE AMENDED, ALTERED, WAIVED,
DISCHARGED OR TERMINATED ORALLY, EXCEPT IN A WRITING SIGNED BY A DULY
AUTHORIZED OFFICER OF THE PARTY AGAINST WHOM THE ENFORCEMENT OF THE AMENDMENT,
ALTERATION, WAIVER, DISCHARGE OR TERMINATION IS SOUGHT.

                                      RRW
                               _________________
                               LESSEE'S INITIALS

SECTION 28.  Truth in Leasing.

         THE AIRCRAFT, AS EQUIPMENT, BECAME SUBJECT TO THE MAINTENANCE
REQUIREMENTS OF PART 121 OF THE FEDERAL AVIATION REGULATIONS ("FARS") UPON THE
REGISTRATION OF THE AIRCRAFT WITH THE FAA.  LESSOR CERTIFIES THAT DURING THE 12
MONTHS (OR PORTION THEREOF DURING WHICH THE AIRCRAFT HAS BEEN SUBJECT TO U.S.
REGISTRATION) PRECEDING THE EXECUTION OF THIS LEASE, THE AIRCRAFT HAS BEEN
MAINTAINED AND INSPECTED UNDER PART 121 OF THE FARS.  LESSEE CERTIFIES THAT THE
AIRCRAFT WILL BE MAINTAINED AND INSPECTED UNDER PART 121 OF THE FARS FOR
OPERATIONS TO BE CONDUCTED UNDER THE LEASE.  UPON EXECUTION OF THIS LEASE, AND
DURING THE TERM HEREOF, THE LESSEE, WHOSE NAME AND ADDRESS ARE SET FORTH
IMMEDIATELY BELOW, ACTING BY AND THROUGH THE SIGNATORY HERETO, WHO EXECUTES
THIS SECTION SOLELY IN HIS CAPACITY OF THE LESSEE SET FORTH BELOW HIS
SIGNATURE, CERTIFIES THAT THE LESSEE SHALL BE RESPONSIBLE FOR THE OPERATIONAL
CONTROL OF THE AIRCRAFT UNDER THE LEASE, UNLESS, THE AIRCRAFT IS SUBLEASED TO
AN AIR CARRIER OR AIR TAXI OPERATOR CERTIFICATED UNDER PART 121 OR PART 135,
RESPECTIVELY, OF THE FARS. THE LESSEE FURTHER CERTIFIES THAT IT UNDERSTANDS ITS
RESPONSIBILITIES FOR COMPLIANCE WITH APPLICABLE FARS, PROVIDED HOWEVER, THAT
THE LESSEE SHALL NOT BE DEEMED TO BE RESPONSIBLE FOR THE OPERATIONAL CONTROL OF
THE AIRCRAFT FOR SO LONG AS THE AIRCRAFT IS IN POSSESSION OF ANY SUBLESSEE THAT
IS CERTIFICATED UNDER PART 121 OR PART 135 OF THE FARS.  AN EXPLANATION OF
FACTORS BEARING ON OPERATIONAL CONTROL AND PERTINENT FARS CAN BE OBTAINED FROM
THE NEAREST FEDERAL AVIATION FLIGHT STANDARD DISTRICT OFFICE, GENERAL AVIATION
DISTRICT OFFICE OR AIR CARRIER DISTRICT OFFICE.

         IN WITNESS WHEREOF, the parties hereto have caused the Lease to be
duly executed by the respective officers thereunto duly authorized.

Lessor:                                   Lessee:
Fleet Capital Corporation                 Kitty Hawk Aircargo, Inc.
                                       
                                       
By: /s/ PATRICE S. KANE                   By: /s/ RICHARD R. WADSWORTH
    -------------------------                 ----------------------------
Print Name: Patrice S. Kane               Print Name: Richard R. Wadsworth
Title: Vice President                     Title: Vice President and CFO

Date: December 26, 1996                  Date: December 27, 1996
                                       
Address:  50 Kennedy Plaza, 5th Fl.       Address:    P.O. Box 612787
          Providence, RI  02903                       1515 W. 20th Street
                                                      DFW International Airport,
                                                      Texas 75261

This is Counterpart No. 1 of a total of 3 counterparts.  Only Counterpart No.
1 shall be considered chattel paper for purposes of the Uniform Commercial Code
and a security interest may be perfected only by possession of Counterpart No.
1.





                                       28
<PAGE>   29
                                   EXHIBIT A

                                  Definitions

         (a)  All References in the Lease to designated Sections and other
subdivisions are to such designated Sections and other subdivisions only, and
the words "herein," "hereof" and "hereunder" and other words of similar import
refer to the Lease as whole and not to any particular Section or other
subdivision.

         (b)  Except as otherwise indicated, all the agreements and instruments
defined herein or in the Lease shall mean such agreements and instruments as
the same may from time to time be supplemented or amended, or as the terms
thereof may be waived or modified to the extent permitted by, and in accordance
with, the terms thereof.

         (c)  The terms defined herein and in the Lease shall, for purposes of
the Lease and all Lease Supplements, Schedules and Exhibits thereto, have the
meanings assigned to them and shall include the plural as well as the singular
as the context requires.

         (d)  Unless otherwise specified, all financial terms used in this
Lease shall be defined in accordance with GAAP and shall be determined on a
consolidated basis for Parent.

         (e)  The following terms shall have the following meanings for all
purposes of the Lease:

         Basic Rent Date, Daily Lease Rate, Expiration Date, First Basic Rent
Date, Last Basic Rent Date, Maximum Lessee Risk, Maximum Lessor Risk, Permitted
Deductible, Primary Hangar Location, Purchase Option Price and Rent
Commencement Date shall have the meanings set forth in Schedules 2, 2-A and 2-B
to Lease Supplement No. 1 to the Lease.

         Abatements shall have the meaning set forth therefor in Section 7 of 
the Lease.

         Acceptance Date shall mean the date (which date shall be no later than
the date designated as the "Last Acceptance Date" on Schedule No. 2 to Lease
Supplement No. 1) on which Lessee has irrevocably and unconditionally accepted
the Aircraft for lease under the Lease as evidenced by the execution and
delivery of Lease Supplement No. 1 relating thereto dated such date.

         Additions shall have the meaning set forth in Section 11 of the Lease.

         Aircraft shall mean (i) the Airframe, (ii) the Engines, and (iii) to
the extent applicable, the Records.

         Aircraft Marking shall mean the marking described on Lease Supplement
No. 2.

         Airframe shall mean (i) the Aircraft described in Schedule No. 1 to
Lease Supplement No. 1, and, unless the context requires otherwise, shall not
include the Engines and (ii) any and all Parts from time to time incorporated
in, installed on or attached to such Aircraft and any and all Parts removed
therefrom so long as title thereto shall remain vested in Lessor in accordance
with the applicable terms of this Lease after removal from the Aircraft.

         Basic Rent shall have the meaning set forth in Section 3 of the Lease.

         Basic Term shall mean the number of months set forth in Schedule No. 2
to Lease Supplement No. 1.

         Bill of Sale shall have the meaning set forth in Section 2 of the
Lease.

         Business Day shall mean any day other than a Saturday, Sunday or other
day on which banks located in Providence, Rhode Island are closed or are
authorized to close.

         Casualty Value shall have the meaning set forth in Schedule No. 3 to
Lease Supplement No. 1 to the Lease except that, in the case of an Event of
Loss covered by the insurance required to be maintained by Lessee pursuant to
Section 14(b) of the Lease (or which would have been covered by such insurance,
had such insurance been maintained as required), Casualty Value shall mean the
higher of fair market sales value (as determined by the Lessor in its sole
discretion) or the value determined in accordance with Schedule No. 3 to Lease
Supplement No. 1.





                                       29
<PAGE>   30
         Civil Reserve Air Fleet Program shall mean the Civil Reserve Fleet
Program administered by the United States Government pursuant to Executive
Order No. 11490, as amended, or any substantially similar program.

         Claims shall have the meaning set forth in Section 15 of the Lease.

         Default shall mean an event or circumstance which, after the giving of
notice or lapse of time, or both, would become an Event of Default.

         Defenses shall have the meaning set forth in Section 16 of the Lease.

         Engine shall mean (i) each of the engines described and listed by
manufacturer's serial numbers in Schedule No.  1 to Lease Supplement No. 1 and
originally installed on the Airframe covered by such Lease Supplement whether
or not thereafter installed on such Airframe or any other airframe from time to
time; (ii) any engine which may from time to time be substituted, pursuant to
the applicable terms of this Lease, for an Engine leased hereunder and (iii) in
each case set forth in clauses (i) and (ii) hereof, with any and all Parts
incorporated in or installed on or attached to such Engine or engine or any and
all Parts removed therefrom so long as title thereto shall remain vested in
Lessor in accordance with the applicable terms of this Lease after removal from
such Engine.  The term "Engines" means, as of any date of determination, all
Engines leased hereunder.

         Event of Default shall have the meaning set forth in Section 18 of the
Lease.

         Event of Loss with respect to the Aircraft, the Airframe or any Engine
shall mean any of the following events with respect to such property (i) loss
of such property or the use thereof due to theft, disappearance, destruction,
damage beyond repair or rendition of such property permanently unfit for normal
use for any reason whatsoever; (ii) any damage to such property which results
in an insurance settlement with respect to such property on the basis of a
total loss or constructive total loss; (iii) the condemnation, confiscation or
seizure of, or requisition of title to or use of, such property by the act of
any government (foreign or domestic) or of any state or local authority or any
instrumentality or agency of the foregoing other than use by the United States
Government pursuant to the Civil Reserve Air Fleet Program where such use is in
express compliance with the terms and conditions of this Lease ("Requisition of
Use"); (iv) as a result of any rule, regulation, order or other action by any
government (foreign or domestic) or governmental body (including, without
limitation, the FAA or any similar foreign governmental body) having
jurisdiction, the use of such property shall have been prohibited, or such
property shall have been declared unfit for use, for a period of six (6)
consecutive months, unless Lessee, prior to the expiration of six-month period,
shall have undertaken and, in the opinion of the Lessor, shall be diligently
carrying forward all steps which are necessary or desirable to permit the
normal use of such property by Lessee or, in any event, if use shall have been
prohibited, or such property shall have been declared unfit for use, for a
period of twelve (12) consecutive months; (v) with respect to an Engine, the
removal thereof from the Airframe for a period of six (6) months or longer,
whether or not such Engine is operational other than as expressly permitted by
Sections 11 (f) or 13(b) hereof, or (vi) such property shall be returned to the
Manufacturer, other than for modification in the event of patent infringement
or for repair or replacement (any such return being herein referred to as a
"Return to Manufacturer").  The date of such Event of Loss shall be the date of
such theft, disappearance, destruction, damage, Requisition of Use,
prohibition, unfitness for use for the stated period, removal for the stated
period or Return to Manufacturer.  An Event of Loss with respect to the
Aircraft shall be deemed to have occurred if an Event of Loss occurs with
respect to the Airframe.  An Event of Loss with respect to any Engine shall
not, without loss of the Airframe, be deemed an Event of Loss with respect to
the Aircraft.

         FAA shall mean the United States Federal Aviation Administration
and/or the Administrator of the Federal Aviation Administration and the
Department of Transportation, or any person, governmental department, bureau,
authority, commission or agency succeeding the functions of any of the
foregoing.

         FAA Counsel shall mean Messrs. Daugherty, Fowler & Peregrin, 204 North
Robinson, 900 City Place, Oklahoma City, Oklahoma 73102, or such other counsel
as Lessor may designate.

         Federal Aviation Act shall Subtitle VII of Title 49 of the United
States Code, as amended and recodified.

         Final Inspection  shall have the meaning set forth therefor in Section
12 of the Lease.





                                       30
<PAGE>   31
         Financial Covenants Rider shall mean the Financial Covenants Rider set
forth as Exhibit D hereto.

         GAAP shall mean generally accepted accounting principles, applied on a
consistent basis, as set froth in Opinions of the Accounting Principles Board
of the American Institute of Certified Public Accountants and/or in statements
of the Financial Accounting Standards Board and/or their respective successors
and which are applicable in the circumstances as of the date in question.
Accounting principles are to be applied on a "consistent basis" when the
accounting principles applied in a current period are comparable in all
material respects to those accounting principles applied in a preceding period.

         Guarantor shall mean each of Kitty Hawk, Inc., a Delaware corporation,
Aircraft Leasing, Inc., a Texas corporation and Kitty Hawk Charters, Inc. a
Texas corporation.

         Guaranty shall mean the Guaranty described in Section 2 (I)(a)(xii) of
the Lease.
         
         Impositions shall have the meaning set forth in Section 10 of the
Lease.

         Late Payment Rate shall mean the lesser of a rate equal to 1.5% per
month or the highest rate permitted by applicable law.  The Late Payment Rate
shall be computed on the basis of a 360 day year and a 30 day month.

         Lease Supplement shall mean a supplement to the Lease to be entered
into on the Acceptance Date by Lessor and Lessee, which supplement shall be
substantially in the form as attached to the Lease and identified as either
Lease Supplement No. 1 or Lease Supplement No. 2 both of which are attached to
the Lease and made a part thereof.

         Lessor's Cost shall have meaning set forth in Schedule No. 2 to Lease
Supplement No. 1 to the Lease.

         Lessor's Liens shall mean any Liens created or granted by Lessor with
respect to Lessor's purchase or financing of the Aircraft or resulting from
claims against Lessor not related to Lessor's ownership of the Aircraft.

         Liens shall mean all liens, charges, security interests, and
encumbrances of every nature and description whatever, including, without
limitation, liens, charges, security interests and encumbrances with respect to
Impositions, (other than Lessor's Liens) and rights of third parties under
management, pooling, interchange, overhaul, repair or other similar agreements
or arrangements.

         Major Checks shall have the meaning set forth therefor in Section 12 
of the Lease.

         Manufacturer shall mean the manufacturers identified on Lease
Supplement No. 2 and their respective successors and assigns.

         Option Notice shall have the meaning set forth therefor in Section 23 
of the Lease.

         Parent shall mean Kitty Hawk, Inc., a Delaware corporation.

         Parts shall mean all appliances, avionics, parts, instruments,
appurtenances, accessories, furnishings and other equipment of whatever nature
(other than Additions or complete Engines), which may from time to time be
incorporated or installed in or attached to the Airframe or any Engine or so
long as title thereto shall be vested in Lessor in accordance with the
applicable terms of this Lease.

         Permitted Liens shall mean (a) the respective rights of others under
agreements or arrangements to the extent expressly provided by the terms of
Section 16 of the Lease, (b) Lessor's Liens and (c) Liens for taxes either not
yet due or being contested by Lessee in good faith and inchoate materialmen's,
mechanic's, workmen's, repairmen's, employee's or other like Liens arising in
the ordinary course of business of Lessee for sums not yet delinquent or being
contested in good faith (and for the payment of which adequate assurances
and/or security have, in Lessor's sole judgment, been provided to Lessor) with
due diligence and by appropriate proceedings, if counsel for Lessor shall have
determined in his sole opinion that the nonpayment of any such tax or Lien or
the contest of any such payment in such proceedings does not and will not
adversely affect the title, property or rights of Lessor.





                                       31
<PAGE>   32
         Permitted Sublessee shall mean any person, firm or entity controlling,
controlled by or under common control with Lessee (or such other Person
consented to in writing by Lessor, which consent shall be given, if at all, in
the sole discretion of Lessor) which is (i) a U.S. Air Carrier, (ii) is not the
subject of a petition, proceeding or final order under any bankruptcy,
insolvency, liquidation or reorganization laws, or subject to any receivership
or custodian proceedings or appointments under laws, or any other similar laws,
in effect on the date any permitted sublease is entered into pursuant to this
Lease, and (iii) which enters into a sublease in accordance with, and contains
all the terms and conditions of, Section 16 hereof.

         Person shall mean any individual, partnership, corporation, trust,
association, joint venture, joint stock company, limited liability company,
limited liability partnership or non-incorporated organization or government or
any department or agency thereof, or any other entity of any kind whatsoever.

         Purchase Documents shall mean the documents identified on Lease
Supplement No. 2 and such other documents as Lessor shall consider necessary or
advisable in order to convey to Lessor title to the Aircraft as contemplated
under the Lease, which documents shall be in form and substance satisfactory to
Lessor.

         Purchase Option shall have the meaning set forth therefor in Section
23 of the Lease.

         Records means any and all logs, manuals, certificates, date and
inspection, modification, maintenance, engineering, technical and overhaul
records (including all computerized data, records and materials of any kind
whatsoever) with respect to the Aircraft, including, without limitation, all
records required to be maintained by the FAA or any other governmental agency
or authority having jurisdiction with respect to the Aircraft or any
Manufacturer of the Aircraft (or any part thereof) with respect to the
enforcement of warranties or otherwise, which Records shall be at all times the
property of the Lessor after the Acceptance Date.

         Renewal Term shall have the meaning set forth in Section 23 of the
Lease.

         Rent shall have the meaning set forth in Section 3 of the Lease.

         Replacement Parts shall have the meaning set forth in Section 11 of 
the Lease.

         Requisition of Use shall have the meaning set forth in the Event of
Loss definition contained herein.

         Renewal Option shall have the meaning set forth therefor in Section 23
of the Lease.

         Return to Manufacturer shall have the meaning set forth in the Event
of Loss definition contained herein.

         Sale Option shall have the meaning set forth therefor in Section 23 of
the Lease.

         Section 1110 shall have the meaning set forth in Section 6 of the 
Lease.

         Supplemental Rent shall have the meaning set forth in Section 3 of the
Lease.

         Termshall mean the Basic Term together with any Renewal Term entered
into pursuant to Section 23 of the Lease.

         Termination Date shall have the meaning set forth therefor in Section
23 of the Lease.

         Test Flight shall have the meaning set forth therefor in Section 12 of
the Lease.

         UCC shall mean the Uniform Commercial Code as in effect in the
applicable jurisdiction.





                                       32
<PAGE>   33
         U.S. Air Carrier means any United States air carrier as to which there
is in force exemption authority under Part 298 issued by the U.S. Department of
Transportation or a certificate issued pursuant to Section 401 of the Federal
Aviation Act, and as to which there is in force an air carrier operating
certificate issued pursuant to Part 121 of the regulations under such Federal
Aviation Act, or which may operate as an air carrier by certification or
otherwise under any successor or substitute provisions therefor or in the
absence thereof.

         Warranty Bill of Sale shall mean a warranty bill of sale in the form
of Exhibit B hereto.

                                        Initials:

                                        Lessee: RRW
                                                __________________

                                        Lessor: PSK
                                                __________________





                                       33
<PAGE>   34
                             LEASE SUPPLEMENT NO. 1

                                     under

         AIRCRAFT LEASE dated as of December 30, 1996, by and between Fleet
Capital Corporation, as lessor ("Lessor"), and Kitty Hawk Aircargo, Inc., as
lessee ("Lessee").

         (a)  The Aircraft.

         Lessee hereby acknowledges, agrees and certifies that the Aircraft as
set forth and described in Schedule No. 1 hereto is in Lessee's possession, has
been inspected by Lessee to its complete satisfaction, has been found to be in
good working order, repair and condition and fully equipped to operate as
required under applicable law for its purpose, is of a size, design, capacity
and manufacture selected by Lessee and suitable for Lessee's purposes, and is,
as of the date set forth below, unconditionally, irrevocably and fully accepted
by Lessee for lease under the Lease.  Lessee hereby further unconditionally and
irrevocably reaffirms its acknowledgments and agreements in the Lease. All
capitalized terms used herein which are not otherwise defined herein shall have
the meanings given to such terms in the Lease.

         (b)  Representations by Lessee.

         Lessee hereby represents and warrants to Lessor that on the date
hereof:

         (1)  The representations and warranties of Lessee set forth in the
Lease and all certificates and opinions delivered in connection therewith were
true and correct in all respects when made and are true and correct as of the
date hereof, with the same force and effect as if the same had been made on
this date.

         (2)  Lessee has satisfied or complied with all conditions precedent
and requirements as set forth in the Lease and Lease Supplements which are
required to be or to have been satisfied or complied with on or prior to the
date thereof.

         (3)  No Default or Event of Default under the Lease has occurred and
              is continuing on the date hereof.

         (4)  Lessee has obtained, and there are in full force and effect, such
insurance policies with respect to the Aircraft, as such term is defined in the
Lease, as are required to be obtained under the terms of the Lease.

         (5)  Lessee has furnished no equipment for the Aircraft other than as
stated on Schedule No. 1 hereto or permitted as an Addition thereto pursuant to
the Lease.

         (6)  The facts, terms, information, description and costs set forth in
the attached schedules hereto are true, complete, accurate and correct.

         (7)  The Lease shall be deemed a "finance lease" under Section 2A-103
              (g) of the UCC.

         Date of unconditional, irrevocable and final acceptance by Lessee:

         December __, 1996.

         IN WITNESS WHEREOF, Lessee has caused this Lease Supplement No. 1 to
be duly executed by its officer thereunto duly authorized.


                                           Kitty Hawk Aircargo, Inc.


                                           By: /s/ RICHARD R. WADSWORTH
                                               --------------------------------

                                           Title: Vice President and CFO
                                                  -----------------------------

                                           Date: December 27, 1996





                                       34
<PAGE>   35
                                 SCHEDULE NO. 1

                                       TO

                             LEASE SUPPLEMENT NO. 1


Description of Aircraft

1978 Boeing B727-214 Advanced Freighter aircraft which consists of the
following components:

         (a)  Airframe bearing FAA Registration Mark 751US and manufacturer's
serial number 21513.

         (b)  three (3) Pratt & Whitney JT8D-15A engine(s) bearing
manufacturer's serial numbers 708336, 708393  and 657572, (each of which has 
750 or more rated takeoff horsepower or the equivalent of such horsepower).

         (c)  Standard accessories and optional equipment and such other items
fitted or installed on the Aircraft and as may be more particularly described
hereinafter:

         See Schedule A which is attached hereto and made a part hereof.

         (d)  Those items of Lessee furnished equipment described in a bill of
sale or bills of sale therefor (copies of which may be appended hereto),
delivered by Lessee to Lessor which constitute appliances and equipment which
will be installed on the Aircraft.




                                      Initials:                Lessee: RRW
                                                                       ---------


                                                               Lessor: PSK 
                                                                       ---------





                                       35
<PAGE>   36
                                 SCHEDULE NO. 2

                                       TO

                            LEASE SUPPLEMENT NO. 1

Financial Terms                           
                                            
Rent Commencement Date:                 February 1, 1997
                                        
Basic Term:                             twelve months commencing
                                        January 1, 1997 and through
                                        and including December 31,
                                        1997
                                        
Basic Rent Dates:                       The first day of each and
                                        every calendar month from and
                                        including February 1, 1997
                                        through January 1, 1998.
                                        (Upon each exercise by Lessee
                                        of its Renewal Option
                                        pursuant to Section 23 of the
                                        Lease, the Basic Rent Dates
                                        shall include the first day
                                        of each of the twelve
                                        calendar months commencing
                                        with the first day of
                                        February after the then
                                        current Expiration Date
                                        through the next January 1)
                                        
First Basic Rent Date:                  February 1, 1997
                                        
Last Basic Rent Date:                   January 1, 1998 (upon each
                                        exercise by Lessee of its
                                        Renewal Option pursuant to
                                        Section 23 of the Lease, the
                                        definition of Last Basic Rent
                                        Date shall be amended by
                                        adding one calendar year to
                                        the Last Basic Rent Date then
                                        in effect.)
                                        
Expiration Date:                        December 31, 1997 (upon each
                                        exercise by Lessee of its
                                        Renewal Option pursuant to
                                        Section 23 of the Lease, the
                                        definition of Expiration Date
                                        shall be amended by adding
                                        one calendar year to the then
                                        current Expiration Date.)
                                        
                                        
Final Expiration Date:                  December 31, 2002
                                        
Renewal Terms:                          a series of five additional
                                        and consecutive twelve month
                                        terms commencing on the 12th,
                                        24th, 36th, Basic Rent Dates
                                        
Primary Hangar Location:                DFW International Airport,
Texas                                   
                                        
Lessee's Chief Executive Offices        P.O. Box 612787
and Principal Place of Business:        1515 W. 20th Street
                                        DFW International Airport, Texas 75261
                                        
Acceptance Date:                        December __, 1996
                                        
Last Acceptance Date:                   December 31, 1996
                                        
Date of Last Financial Statements:      August 31, 1996
                                        
Lessor's Cost:                          $9,070,191.00
                                        
                                        Initials:
                                        
                                        Lessee: RRW
                                                _________
                                        
                                        Lessor: PSK
                                                _________





                                       36
<PAGE>   37
                                SCHEDULE NO. 2-A

                                       TO

                             LEASE SUPPLEMENT NO. 1

Financial Terms (continued)



Basic Rent:

         Basic Rent Dates 1 to 12           $124,054.47
Basic Rent Dates 13 to 36                   $124,054.47 (during any applicable
Renewal Term)
Basic Rent Dates 37 to 72                   $101,494.11 (during any applicable
Renewal Term)

Permitted Deductible:                       $500,000.00 per occurrence



                                            Initials:
                   
                                            Lessee: RRW
                                                    --------------------


                                            Lessor: PSK
                                                    --------------------





                                       37
<PAGE>   38
                                SCHEDULE NO. 2-B
                                       TO
                             LEASE SUPPLEMENT NO. 1


         "Maximum Lessee Risk" shall mean an amount equal to the percentage of
the Lessor's Cost of the Aircraft set forth below for each of the following
Expiration Dates:

    Expiration Date:        Amount: (expressed as a percentage of Lessor's Cost)
    ----------------        -------

    December 31, 1997       79.52%
    December 31, 1998       71.28%        
    December 31, 1999       62.33%
    December 31, 2000       55.72% 
    December 31, 2001       48.18%
    December 31, 2002       40.00%

         "Maximum Lessor Risk" shall mean an amount equal to the percentage of
the Lessor's Cost of the Aircraft set forth below for each of the following
Expiration Dates:

    Expiration Date:        Amount: (expressed as a percentage of Lessor's Cost)
    ----------------        -------

    December 31, 1997       14.20%
    December 31, 1998       13.17%        
    December 31, 1999       12.07%
    December 31, 2000       10.87% 
    December 31, 2001        9.94%
    December 31, 2002        6.67%

         "Purchase Option Price" shall mean an amount equal to the percentage
of the Lessor's Cost of the Aircraft set forth below for each of the following
Expiration Dates:

    Expiration Date:        Amount: (expressed as a percentage of Lessor's Cost)
    ----------------        -------

    December 31, 1997       93.72%
    December 31, 1998       84.45%        
    December 31, 1999       74.40%
    December 31, 2000       66.59% 
    December 31, 2001       58.12%
    December 31, 2002       46.67%





                                       38
<PAGE>   39
                            SCHEDULE NO. 3 TO LEASE

                                SUPPLEMENT NO. 1

                                CASUALTY VALUES

         The Casualty Value of the Aircraft for any Basic Rent Date shall be
the amount set forth opposite such Basic Rent Date.

<TABLE>
<CAPTION>
   BASIC                                                   BASIC
   RENT                            CASUALTY                 RENT       CASUALTY
   DATE                             VALUE                   DATE       VALUE
   ----                             -----                   ----       -----
<S>                                  <C>                    <C>         <C>


</TABLE>







                                            Initials:
                   
                                            Lessee: _________



                                            Lessor: _________




                                       39
<PAGE>   40
                             LEASE SUPPLEMENT NO. 2
                                     under

       AIRCRAFT LEASE dated as of December 30, 1996, by and between Fleet
Capital Corporation, as lessor ("Lessor"), and Kitty Hawk Aircargo, Inc., as
lessee ("Lessee").

       Manufacturer of Airframe: Boeing
       Manufacturer of Engines:  Pratt & Whitney

Purchase Documents:

       1.      Aircraft Purchase Agreement between Aircraft Leasing, Inc.
("ALI") and First Security Bank National Association ("First Security").

       2.      First Security's Warranty Bill of Sale to ALI.

       3.      First Security's FAA Bill of Sale to ALI.

       4.      ALI's Warranty Bill of Sale to Lessee dated December __, 1996.

       5.      ALI's FAA Bill of Sale to Lessee dated December __, 1996.

       6.      Lessee's Warranty Bill of Sale to Lessor dated December __, 1996
               in the form of Exhibit B hereto.

       7.      FAA Bill of Sale transferring title to the Aircraft from Lessee 
to Lessor.

       8.      Invoices for the Aircraft, including the Engines, showing ALI
and/or Lessee as the purchasers thereof, all other above referenced contracts
and evidence that such invoices have been are paid in full.

Aircraft Marking (Referenced in Section 11 of the Lease):

Two-inch by four-inch plaque to be maintained in cockpit and affixed in
conspicuous position stating:

               "This property is Owned by and Leased from Fleet Capital
Corporation, 50 Kennedy Plaza, Fifth Floor, Providence, Rhode Island 02903.
Any removal, alteration, disposal or other change in the condition or location
of this property must be approved by the Owner-Lessor."

Similar markings to be permanently affixed to each Engine.

       IN WITNESS WHEREOF, the parties hereto have each caused this Lease
Supplement No. 2 to be duly executed by their respective officers, thereunto
duly authorized.

                                        FLEET CAPITAL CORPORATION,
                                        AS LESSOR
                                        
                                        By: /s/ PATRICE S. KANE
                                           ----------------------------------
                                        Name: Patrice S. Kane
                                        Title: Vice President
                                        
                                        Date: December 26, 1996
                                        
                                        KITTY HAWK AIRCARGO, INC.,
                                        AS LESSEE
                                        
                                        By: /s/ RICHARD R. WADSWORTH
                                            ---------------------------------
                                        
                                        Name: Richard R. Wadsworth         
                                              -------------------------------
                                        
                                        Title: Vice President and CFO           
                                               ------------------------------
                                        
                                        Date: December 27, 1996




                                       40
<PAGE>   41
                     EXHIBIT B TO AIRCRAFT LEASE AGREEMENT

                             WARRANTY BILL OF SALE


       Kitty Hawk Aircargo, Inc. (the "Seller"), in consideration of the sum of
__________________________________ and __/100 Dollars ($____________) paid by
Fleet Capital Corporation (the "Buyer"), receipt of which is acknowledged,
hereby grants, sells, assigns, transfers and delivers to Buyer the aircraft
described below together with the engines installed thereon and all appliances,
parts, instruments, appurtenances, accessories, furnishings, avionics,
components and other equipment of whatever nature installed on said aircraft
and all logbooks, manuals, certificates, data and inspection, modification,
maintenance, engineering, technical, overhaul and all other books and records
(including all computerized data, records and materials) as pertain to the
operation and maintenance of such aircraft (all of the foregoing hereinafter
collectively referred to as the "Aircraft"), along with whatever claims and
rights Seller may have against the manufacturer and/or vendor of the Aircraft
(collectively, the "Vendor"), including, but not limited to, all warranties and
representations. At Buyer's request, Seller will cause the Vendor to execute an
Acknowledgment in form and substance satisfactory to Buyer in its sole
discretion.

                            DESCRIPTION OF AIRCRAFT

Boeing B727-214 Advanced Freighter aircraft bearing FAA Registration Mark
N_____ and manufacturer's serial number _____ and three (3) Pratt & Whitney
JT8D-____ engines, respectively, bearing manufacturer's serial numbers. ____,
______ and

(See also Schedule A attached hereto and made a part hereof for further
description of the Aircraft.)

       Seller represents, warrants and agrees to Buyer that (1) Seller is the
lawful owner of the full title to the Aircraft and that Buyer will acquire by
the terms of this Bill of Sale good and full title to the Aircraft free and
clear of all mortgages, leases, security interests, claims, charges, liens and
encumbrances of any kind whatsoever; (2) Seller has the right to sell the
Aircraft as aforesaid; (3) Seller shall warrant and defend title to the
Aircraft and indemnify Buyer against the claims of any person, party, firm,
corporation or entity of any kind whatsoever and (4) the Aircraft had been
delivered to Seller, and has been delivered to Buyer, in good order and
condition and conforms to the specifications and the requirements and standards
applicable thereto.

       Seller agrees to save and hold harmless Buyer from and against any and
all foreign, Federal, state, municipal and local license fees and taxes of any
kind or nature, including, without limiting the generality of the foregoing,
any and all excise, personal property, privilege, use and sales taxes, and from
and against any and all liabilities, obligations, losses, damages, penalties,
claims, actions and suits, including, without limitation, attorney's fees,
resulting therefrom and imposed upon, incurred by or asserted against Buyer as
a consequence of the sale of the Aircraft to the Buyer.

       Seller agrees and acknowledges that the terms and conditions of this
Bill of Sale, including, without limitation, all representations, warranties
and agreements for the benefit of Buyer, shall survive the delivery of the
Aircraft and the delivery, execution and recording of this or any Federal
Aviation Administration Bill of Sale.

       IN WITNESS WHEREOF, Seller has executed this Bill of Sale this
_______day of December, 1996


                                           SELLER: Kitty Hawk Aircargo, Inc.

                                           By:                          
                                              -------------------------

                                           Title:                       
                                                 ----------------------





                                       41
<PAGE>   42
                         EXHIBIT C-1 TO AIRCRAFT LEASE

                                 OPINION LETTER
                                    (Lessee)


December __, 1996

Fleet Capital Corporation
50 Kennedy Plaza
Providence, Rhode Island 02903


Re:  Aircraft Lease

Gentlemen:

         We have acted as counsel for ____________________ (hereinafter called
the "Lessee"), a ____________________ corporation, in connection with the
transaction between the Lessee and Fleet Capital Corporation, a Rhode Island
corporation (hereinafter called "Lessor"), whereby the Lessee will lease from
the Lessor, a _______________ aircraft, Model No. ______________, Serial No.
_______________, FAA Registration No. N _______, equipped with ______________
(_) __________ engines, Model No. __________, manufacturer's serial numbers
__________ and __________, (hereinafter collectively called the "Aircraft")
under an Aircraft Lease between the Lessee and the Lessor dated as of
_______________, 19 ___, (said Aircraft Lease together with all Lease
Supplements and Exhibits thereto from time to time collectively referred to as
the "Lease"), upon and subject to the terms and conditions of the Lease. All
capitalized terms used herein which are not otherwise defined herein shall have
the meanings assigned to such terms in the Lease.

         (Please insert a paragraph setting forth in detail the relationship
and length of association of Counsel with the Lessee and a description of the
review conducted by Counsel which shall, list among other things, the items
reviewed and the inquiries and investigations involved in making the
representations listed below.)

         It is our opinion that:

         1.    Lessee is a corporation duly organized, validly existing and in
good standing under the laws of the State of ____________, and is qualified to
do business in each jurisdiction in which such qualification is necessary in
order for Lessee to carry on its business and to perform its obligations under
the Lease, and is in good standing under the laws of each jurisdiction in which
it is so qualified.

         2.    Lessee has the corporate power and authority to execute, deliver
and perform the Lease and to lease the Aircraft from Lessor thereunder.

         3.    The leasing of the Aircraft from Lessor by Lessee, the execution
and delivery of the Lease, the applicable FAA documents, Purchase Documents and
other related instruments, documents and agreements, and the compliance by the
Lessee with the terms thereof, and the payment and performance by Lessee of all
of its obligations thereunder (a) have been duly and legally authorized by
appropriate corporate action taken by Lessee (b) are not in contravention of,
and will not result in a violation or breach of, any of the terms of Lessee's
certificate of incorporation (or equivalent document) its by-laws, or of any
provisions relating to shares of the capital stock of Lessee, and (c) will not
violate or constitute a breach of any provision of law, any order of any court
other governmental body, agency, authority or instrumentality or any indenture,
agreement or other instrument to which Lessee is a party, or by or under which
Lessee or any of Lessee's property is bound, or be in conflict with, result in
a breach of, or constitute (with due notice and/or lapse of time) a default
under any such indenture, agreement or any instrument, or result in the
creation or imposition of any Lien upon any of Lessee's property or assets.

         4.    The Lease, the Purchase Documents, the applicable FAA documents
and related instruments, documents and agreements with respect thereto and the
Aircraft have been executed by the duly authorized officer or officers of
Lessee and delivered to Lessor, and constitute the 


                                      42
<PAGE>   43

legal, valid and binding obligations of Lessee enforceable in accordance with
the respective terms thereof.

         5.    Neither the execution and delivery of the Lease, the Purchase
Documents, the applicable FAA documents and related instruments, documents and
agreements with respect thereto and the Aircraft, nor the payment and
performance by Lessee of all of its obligations under the foregoing documents,
require the consent or approval of, the giving of notice to, or the
registration, filing or recording with, or the taking of any other action in
respect of, the Federal Aviation Administration, the Department of
Transportation or any other federal, state, local or foreign government or
governmental authority or agency, except for the registration, recording and
filing referred to herein.

         6.    No mortgage, deed of trust, or other Lien which now covers or
affects, or which may hereafter cover or affect, any property or interest
therein of Lessee, now attaches or hereafter will attach to the Aircraft, the
Airframe or any Engine, or in any manner affects or will affect adversely
Lessor's right, title and interest therein.

         7.    There is no litigation or other proceedings now pending, or to
the best of our knowledge, threatened, against the Lessee, in any court or
before any regulatory commission, board or other administrative governmental
agency, authority, body or instrumentality which would directly or indirectly
adversely affect or impair the title of Lessor to the Aircraft, or which, if
decided adversely to Lessee, would materially adversely affect the business
operations or financial condition of Lessee.

         8.    Except for the (I) registration of the Aircraft pursuant to the
Federal Aviation Act, (II) the filing and recording of (a) the Lease and (b)
the Bill of Sale for the Aircraft from the Lessee, as seller of the Aircraft to
Lessor pursuant to the Federal Aviation Act and (III) the filing of the Uniform
Commercial Code Financing Statements executed by Lessee in connection with the
execution of the Lease, no further action, including any filing or recording of
any other documents, is necessary or advisable in order to establish and
perfect Lessor's title to and interest in, the Aircraft as against Lessee
and/or third parties in any applicable jurisdiction.

         9.    Lessee is a "citizen of the United States" within the meaning of
the Federal Aviation Act.

         10.   Lessor will acquire title to the Aircraft to be sold and leased
back free and clear of all liens and encumbrances and claims of any present or
future creditors of the Lessee. The Bills of Sale covering the Aircraft will
grant and convey to Lessor full legal title and ownership in and to the
Aircraft. Without limiting the generality of the foregoing, the retention of
possession by the Lessee of the Aircraft following the sale of the Aircraft to,
and the lease back of the Aircraft from, Lessor, shall not be deemed fraudulent
or void as against any present or future creditor of the Lessee under the laws
of the jurisdiction in which the Aircraft is now, or will at the time of such
sale and leaseback be, located, nor would any subsequent bona fide purchaser
from the Lessee of the Aircraft, in the event of any attempted subsequent sale
thereof by the Lessee, acquire any title to or rights in the Aircraft superior
to Lessor's title to and rights in the Aircraft.

                                        Very truly yours,





                                       43
<PAGE>   44

                         EXHIBIT C-2 TO AIRCRAFT LEASE

                                 OPINION LETTER
                                  (Guarantor)


December __, 1996

Fleet Capital Corporation
50 Kennedy Plaza
Providence, Rhode Island  02903

         RE:  ___________________

Gentlemen:

         We have acted as general counsel for ________, a ________ corporation,
("Guarantor"), an affiliate of Kitty Hawk Aircargo, Inc. ("Obligor"), in
connection with the preparation, execution, and delivery of the Guaranty
Agreement ("Guaranty"), by Guarantor and which Guaranty will be delivered in
connection with the Aircraft Lease dated December __, 1996 between Fleet
Capital Corporation ("Fleet"), as lessor, and Obligor, as lessee, (the
"Agreement") and the related transactions contemplated thereby.  Terms not
otherwise defined herein shall have the defined meanings set forth in the
Agreement.

         We are familiar with the Guarantor, its affairs, and its charters,
by-laws, and corporate records.  We have examined originals or copies,
certified or otherwise identified to our satisfaction, of such records,
instruments, decisions, certificates, and documents, have made such inquiries
as to questions of fact of officers and representatives of and Guarantor and
have made such examinations of laws, rules, regulations, orders, decrees,
writs, judgments, awards, injunctions, and the like, as are necessary and
appropriate for purposes of giving the opinions hereinafter expressed.

         Based upon the foregoing, it is our opinion:

         1.      That Guarantor is duly organized, validly existing and in good
standing under the laws of _________.  Guarantor has the necessary authority
and power to own its assets and to transact the business in which it is
engaged.  Guarantor is fully licensed and duly qualified to do business in each
jurisdiction in which the conduct of its business and the ownership of its
assets requires such qualification,  including every jurisdiction where such
licensing or qualification is or will be required for the purpose of enforcing
Fleet's rights under the Guaranty.

         2.      That Guarantor has full power, authority, and legal right to
execute and deliver the Guaranty and to perform its obligations thereunder.

         3.      That no consent of any other party (including any
stockholders, trustees or holders of indebtedness), and no consent, license,
approval or authorization of, exemption by, or registration or declaration
with, any governmental body, authority, bureau or agency is required in
connection with the execution, delivery or performance by Guarantor of the
Guaranty or the validity or enforceability of the Guaranty.

         4.      That (A) the execution, delivery and performance by Guarantor
of the Guaranty do not and will not violate any provision of any applicable law
or regulation or of any judgment, award, order, writ or decree of any court or
governmental instrumentality, will not violate any provision of its charter or
by-laws and will not violate any provision of, or cause a default under, any
mortgage, indenture, contract, agreement or other undertaking to which
Guarantor is a party, or which purports to be binding upon Guarantor or upon
any of its assets; and (B) the execution, delivery, and performance by
Guarantor of the Guaranty will not result in the creation or imposition of any
lien or other encumbrance on any of the assets of Guarantor.

         5.      That the Guaranty has been duly authorized, executed, and
delivered by Guarantor and constitutes a legal, valid, and binding obligation
of Guarantor enforceable in accordance with its terms.


                                      44
<PAGE>   45

         6.      That there is no action, suit, investigation or proceeding
(whether or not purportedly on behalf of Guarantor) pending or threatened
against or effecting Guarantor or any of its assets (A) which involves the
Guaranty or any of the Engines or any of the transactions contemplated by the
Agreement or (B) if which adversely determined could have an adverse effect
upon the Guaranty or any of the Engines or any of the transactions contemplated
by the Agreement or a material adverse effect on the business, operations, or
financial condition of Guarantor.

         7.      That (A) the Guarantor has received reasonably equivalent
value and adequate and sufficient consideration in exchange for the giving of
the Guaranty (B) the Guarantor was not insolvent on the date of the execution
by Guarantor of the Guaranty and did not become insolvent as a result of the
execution by Guarantor of the Guaranty, (C) the Guarantor has sufficient
capital to perform its obligations under the Guaranty and (D) the performance
of the obligations by Guarantor under the Guaranty will not cause the Guarantor
to exceed its ability to pay its debts as they mature.

                                        Very truly yours,








                                       45
<PAGE>   46
                          EXHIBIT D TO AIRCRAFT LEASE
                      (To be omitted from FAA filing copy)

FINANCIAL COVENANTS RIDER

         Throughout the Term, the following minimum financial ratios shall be
met by the Parent on a consolidated basis.  Each of the following ratios shall
be calculated at the end of each fiscal quarter of the Parent for the then
previous four fiscal quarters of Parent.

         A.      Debt Service Coverage Ratio shall be equal to or greater than 
                 1.25 to 1.00.

         B.      Leverage Ratio shall be less than or equal to 3.25 to 1.00.

         C.      Senior Debt to Cash Flow Ratio shall be less than or equal to
                 5.00 to 1.00.

Lessee shall provide Lessor with written notice of any change, modification,
amendment, extension, renewal, transfer, compromise or discharge to the "Senior
Debt to Cash Flow Ratio," "Debt Service Coverage Ratio" or  "Leverage Ratio"
set forth in the Credit Agreement ("Credit Modification"). Any such Credit
Modification which raises any or all of the above referenced ratios in the
Credit Agreement shall, for purposes of this Lease, automatically raise the
corresponding Debt Service Coverage Ratio, Leverage Ratio and/or Senior Debt to
Cash Flow Ratio set forth above to the levels then set forth in the Credit
Agreement.  Lessee hereby authorizes Lessor to take such actions as are
necessary to document the foregoing amendments to the above referenced ratios
without the need for Lessee's signature or consent thereto.

ADDITIONAL DEFINITIONS:

         Credit Agreement shall mean that certain Amended and Restated Credit
Agreement dated as of August 14, 1996 among Lessee and Guarantors, as borrowers
and guarantors, as the case may be, Skyfreighters, Inc. , as a party, and Wells
Fargo Bank (Texas), National Association and certain other lenders named
therein.

         Currently Maturing Long Term Debt shall mean that portion of Debt which
is payable within twelve (12) months of Parent's last fiscal quarterly or
annual financial statement, as the case may be.

         Debt shall mean Parent's (a) indebtedness, liabilities and obligations
for borrowed money and/or capitalized leases, (b) indebtedness, liabilities and
obligations evidenced by bonds, notes, debentures or other similar instruments
and (c) indebtedness, liabilities and obligations to pay the deferred purchase
price of goods or services, except trade accounts payable arising in the
ordinary course of business that are note past due by more than ninety (90)
days.

         Debt Service Coverage Ratio shall mean Parent's net income plus
depreciation plus amortization plus the taxable equivalent of non-recurring
items divided by Currently Maturing Long Term Debt.  For purposes of this
definition, the term "taxable equivalent of non-recurring items" shall mean the
pre-tax expenses of non-recurring accounting changes and restructuring charges
multiplied by Parent's then current combined effective tax rate.

         Debt to Cash Flow Ratio shall mean Parent's Senior Debt divided by
EBITDA.

         EBITDA shall mean Parent's earnings before interest, taxes,
depreciation and amortization.

         Leverage Ratio shall mean the ratio of Parent's total liabilities
divided by Parent's tangible net worth , which calculation shall be made in
accordance wit GAAP.

         Senior Debt shall mean that portion of Parent's (a) indebtedness,
liabilities and obligations for borrowed money and/or capitalized leases and
(b) indebtedness, liabilities and obligations evidenced by bonds, notes,
debentures or other similar instruments which mature by their terms on a date
more than one year after the original creation thereof, including, without
limitation, any debt evidenced by the Credit Agreement or which would be
classified as "long-term indebtedness" on the balance sheet of Parent in
accordance with GAAP.





                                       46