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                               LEASE AGREEMENT
                                   (MSN 28869)


                                     between

                 BOULLIOUN PORTFOLIO FINANCE I, INC., as Lessor

                                       and

                    WESTERN PACIFIC AIRLINES, INC., as Lessee


                            Dated as of June 27, 1997


                      Relating to One New 737-33R Aircraft
                   Bearing Manufacturer's Serial Number 28869

























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


<PAGE>




                                    

                                TABLE OF CONTENTS

                                                                        Page

Section 1.         Definitions; Construction and Interpretation....       1

Section 2.         Lease of Aircraft...............................       1

         2.1       Agreement to Lease..............................       1
         2.2       No Right to Refuse..............................       2
         2.3       Change in Delivery Date; Limitation of Lessor's
                   Obligation to Deliver Aircraft..................       2

Section 3.         Lease Term; Rent; Payments......................       3

         3.1       Basic Lease Term................................       3
         3.2       Renewal Lease Term..............................       3
         3.3       Basic Rent and Renewal Rent.....................       4
         3.4       Supplemental Rent. .............................       4
         3.5       Payments in General.............................       4
         3.6       Illegality......................................       5

Section 4.         Security Deposit; Letter of Credit..............       6

         4.1       Payment of the Security Deposit.................       6
         4.2       Lessor's Interest in Security Deposit...........       6
         4.3       Return of Security Deposit......................       7
         4.4       Substitution of Letter of Credit................       7
         4.5       Return of Letter of Credit......................       8
         4.6       Release of Boullioun Aviation Services, Inc.....       8

Section 5.         Representations and Warranties..................       8

         5.1       Disclaimer; Representations and Warranties......       8
         5.2       Lessee's Representations and Warranties.........      11

Section 6.         General Covenants...............................      14

         6.1       Lessor's Covenants..............................      14
         6.2       Lessee's Covenants..............................      15

Section 7.         Title; Registration and Filings; Etc............      22

         7.1       Title to the Aircraft...........................      22
         7.2       Registration, Recordation, Filings, Etc.........      22
         7.3       Lessor's Cooperation............................      24



<PAGE>


Section 8.         Possession......................................      24

         8.1       Subleasing......................................      25
         8.2       Maintenance, Etc. ..............................      25
         8.3       Installation of Engines on Other Airframes......      25
         8.4       Wet Lease.......................................      25
         8.5       Civil Reserve Air Fleet Program.................      26

Section 9.         Indemnities.....................................      26

         9.1       General Indemnity...............................      26
         9.2       Exceptions to General Indemnity.................      28
         9.3       Taxes...........................................      29
         9.4       Insured Claims; Subrogation......................     29
         9.5       Scope, Survival, Etc. ..........................      29
         9.6       Indemnities Payable on After-Tax Basis..........      31

Section 10.        Risk of Loss, Destruction and Requisition, Etc..      31

         10.1      Risk of Loss....................................      31
         10.2      Event of Loss With Respect to the Aircraft......      31
         10.3      Event of Loss With Respect to an Engine.........      32
         10.4      Requisition for Use of the Aircraft by any
                   Government Entity...............................      34

Section 11.        Insurance.......................................      34

         11.1      Scope of Insurances.............................      34
         11.2      Application of Proceeds of Hull Insurance.......      36
         11.3      Continuation of Liability Insurance.............      37
         11.4      Reports, Etc. ..................................      38
         11.5      Self-Insurance..................................      38
         11.6      Change of Industry Practice.....................      38
         11.7      Change of Circumstance..........................      38
         11.8      Negative Undertakings...........................      37
         11.9      Failure to Insure...............................      39
         11.10     Additional Insurance............................      40
         11.11     Insurance Required by Airframe Manufacturer.....      40

Section 12.        Events of Default...............................      40

         12.1      Failure to Pay Scheduled Amounts................      40
         12.2      Failure to Pay Demand Amounts...................      41
         12.3      Insurance.......................................      41
         12.4      Return..........................................      41
         12.5      Certain Covenants...............................      41


<PAGE>


         12.6      Other Covenants.................................      41
         12.7      Representations and Warranties..................      41
         12.8      Voluntary Bankruptcy, Etc.......................      42
         12.9      Involuntary Bankruptcy, Etc.....................      42
         12.10     Illegality......................................      42
         12.11     Indebtedness or Lease Default...................      43
         12.12     Government Action...............................      43
         12.13     Judgments.......................................      43

Section 13.        Remedies........................................      44

         13.1      Retake Possession...............................      44
         13.2      Termination or Enforcement......................      45
         13.3      Application of Funds............................      45
         13.4      Damages.........................................      46

Section 14.        Assignment of Lease.............................      46

         14.1      Assignment by Lessor............................      46
         14.2      Assignment by Lessee............................      49
         14.3      Successors and Assigns..........................      49

Section 15.        No Setoff, Counterclaim, Etc....................      49

Section 16.        Further Assurances, Etc.........................      51

         16.1      Further Assurances..............................      51
         16.2      Lessor's Performance of Lessee's Obligations....      51
         16.3      No Implied Waivers; Rights Cumulative...........      52

Section 17.        [Intentionally Left Blank]......................      52

Section 18.        Governing Law and Jurisdiction..................      52

         18.1      New York Law....................................      52
         18.2      Nonexclusive Jurisdiction in New York...........      53
         18.3      Process Agent...................................      53
         18.4      Waiver of Immunity..............................      54
         18.5      Service of Process...............................     54

Section 19.        Miscellaneous...................................      55

         19.1      Construction....................................      55
         19.2      Amendments......................................      56
         19.3      Severability....................................      56
         19.4      Counterparts....................................      56
         19.5      Chattel Paper...................................      56


<PAGE>


         19.6      Time of the Essence.............................      56
         19.7      Notices.........................................      57
         19.8      Entire Agreement................................      57
         19.9      Documentation Costs.............................      57
         19.10     Language........................................      57

                                SCHEDULE 1
                                DEFINITIONS

Section 1.         Transaction Specific Definitions...............        1

Section 2.         Technical Definitions...........................       3

Section 3.         General Definitions.............................       9


                                SCHEDULE 2
                            OPERATIONAL MATTERS

Section 1.         Maintenance; Operation; Etc.....................       1

Section 2.         Maintenance Reserve Payments....................      14

Section 3.         Return of the Aircraft..........................      17


                                ANNEX 1 TO
                                SCHEDULE 2
                             RETURN CONDITIONS

Section 1.         Condition of Airframe and Engines...............       1

Section 2.         Aircraft Documentation..........................       6


                                SCHEDULE 3
                         CONFIDENTIAL INFORMATION

Section 1.         Definitions.....................................       1

Section 2.         Required Modifications..........................       2


                                SCHEDULE 4
                      NOTICE AND ACCOUNT INFORMATION





<PAGE>


                                SCHEDULE 5
                                TAX MATTERS

Section 1.         Lessee Liability................................       1

Section 2.         Exclusions From Lessee's Liability..............       2

Section 3.         No Reduction for Withholding, Etc...............       3

Section 4.         Reports.........................................       3

Section 5.         Payment.........................................       4

Section 6.         Contest..... ...................................       5

Section 7.         Tax Savings.....................................       6


                                SCHEDULE 6
                           CONDITIONS PRECEDENT

Section 1.         Agreements and Documents........................       1

Section 2.         First Rent Payment Made.........................       3

Section 3.         Security Deposit Paid or Letter of Credit
                   Delivered.......................................       3

Section 4.         Registration of Aircraft........................       3

Section 5.         Filings, Etc. ..................................       3

Section 6.         Authorizations..................................       3

Section 7.         No Default......................................       4

Section 8.         Section 1110....................................       4

Section 9.         Matters Related to the Novation Agreement.......       4

Section 10.        Other Matters...................................       4

EXHIBIT A          Acceptance Certificate
EXHIBIT B          Form of Certificate of Insurance
EXHIBIT C          Form of Insurance Broker's Letter
EXHIBIT D          [Intentionally Left Blank]
EXHIBIT E          [Intentionally Left Blank]
EXHIBIT F          Aircraft Status Report
EXHIBIT G          Letter of Credit
EXHIBIT H          Officer's Certificate


<PAGE>







                                 LEASE AGREEMENT
                                   (MSN 28869)

LEASE AGREEMENT (MSN 28869), dated as of June 27, 1997 (this "Lease Agreement"),
between BOULLIOUN PORTFOLIO FINANCE I, INC. ("Lessor") and WESTERN PACIFIC
AIRLINES, INC. ("Lessee").

                                    RECITALS:

Lessor has agreed,  simultaneously  herewith,  to acquire the Aircraft (this and
all other capitalized terms used herein shall have the respective meanings,  and
shall be interpreted  and construed in the manner,  set forth in Section 1) from
Airframe  Manufacturer  pursuant to the  Novation  Agreement  for the purpose of
leasing the Aircraft to Lessee.

Lessee desires, upon the terms and conditions hereof, to lease the Aircraft from
Lessor,  and Lessor is willing,  upon the terms and conditions  hereof, to lease
the Aircraft to Lessee.

                                   AGREEMENT:

In  consideration  of the  foregoing  premise,  and for other good and  valuable
consideration  the  adequacy and receipt of which are hereby  acknowledged,  the
parties hereto agree as follows:

      SECTION 1.  DEFINITIONS; CONSTRUCTION AND INTERPRETATION

      The  capitalized  terms  used in  this  Lease  Agreement  shall  have  the
respective  meanings  ascribed  thereto in Schedule 1. The rules of construction
and interpretation that apply to this Agreement are set forth in Section 19.1.

      SECTION 2.  LEASE OF AIRCRAFT

           2.1  Agreement to Lease

           Subject to satisfaction of the conditions set forth in Schedule 6 and
to the  provisions  of this  Section 2,  Lessor  hereby  agrees to  deliver  the
Aircraft to Lessee at the Delivery Location and to lease the Aircraft to Lessee,
and Lessee hereby agrees to accept the Aircraft at the Delivery  Location and to
lease the Aircraft from Lessor, in each case, on the Scheduled Delivery Date and
in the condition delivered to Lessor by Airframe Manufacturer under the Novation
Agreement,  but  otherwise in the "as is, where is"  condition of the  Aircraft,
pursuant  to the terms and  conditions  of this  Lease  Agreement  and the other
Operative  Documents,  the  commencement  of such leasing to be evidenced by the
execution  and delivery by Lessee to Lessor of, and the  confirmation  by Lessor
of, the Acceptance Certificate.

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<PAGE>

           2.2  No Right to Refuse

           Lessee  acknowledges  that Lessor has agreed to purchase the Aircraft
pursuant to the Novation  Agreement for the sole purpose of leasing the Aircraft
to Lessee  pursuant to this Lease  Agreement.  Accordingly,  Lessee shall not be
entitled for any reason  whatsoever to refuse to accept delivery of the Aircraft
under  this  Lease  once the  Aircraft  has been  accepted  by Lessor  under the
Novation Agreement and, without limiting the effect of Section 5.1, Lessor shall
not be liable for any loss or expense, or any loss of profit, resulting directly
or  indirectly  from any defect or alleged  defect in the Aircraft or failure or
alleged failure of the Aircraft to comply with the  requirements of the Novation
Agreement.  As between Lessor and Lessee,  Lessee shall have sole responsibility
for ensuring that the Aircraft is in the condition on the Delivery Date required
by the  Airframe  Manufacturer  Purchase  Agreement  (as defined in the Novation
Agreement).

     2.3 Changes in Delivery Date;  Limitation of Lessor's Obligation to Deliver
        Aircraft

           If,  owing  to (1)  any  of the  conditions  precedent  specified  in
Schedule 6 not having been met or not having been waived by Lessor in accordance
with  Schedule 6, (2) any delay in the delivery  of, or failure to deliver,  the
Aircraft to Lessor for  whatsoever  reason and/or (3) reasons of Force  Majeure,
the delivery of the Aircraft under this Lease  Agreement shall be delayed beyond
the Scheduled  Delivery Date,  then Lessee shall accept delivery of the Aircraft
on the first  Business  Day after such date on which no Force  Majeure  prevents
such delivery,  Lessor has  possession of the Aircraft at the Delivery  Location
and all of such conditions precedent have been satisfied or waived in accordance
with  Schedule 6,  provided  that if delivery of the  Aircraft  under this Lease
Agreement is delayed beyond the Commitment  Termination  Date, then either party
hereto  (so long as such  party is not in  default  hereunder)  may,  by written
notice to the other,  terminate  this Lease  Agreement and each other  Operative
Document (including the Novation Agreement), whereupon neither Lessor nor Lessee
shall have any further  obligation to the other hereunder or thereunder,  except
as otherwise  expressly  provided herein or therein and except that Lessor shall
be obligated to return the Security  Deposit and/or the Letter of Credit and any
amounts of Basic Rent paid by Lessee  prior to such  termination  (in each case,
free and clear of Liens other than Lessee Liens). In the event of any such delay
or any eventual  termination of this Lease Agreement,  neither Lessor nor Lessee
shall be responsible for any losses, including loss of profit, costs or expenses
arising  therefrom  suffered  or  incurred  by the  other.  Notwithstanding  the
foregoing,  (y) if such delay or failure  is caused by a Default,  Lessor  shall
have all the  rights and  remedies  against  Lessee  described  in  Section  13,


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<PAGE>

including the right to collect damages for Expenses in connection with any delay
in delivery of the  Aircraft,  and Lessor  shall not be  obligated to return the
Security  Deposit or the  Letter of Credit or any  amounts of Basic Rent paid by
Lessee  (except to the extent not  applied,  drawn and  applied  and/or  used as
setoff by Lessor  pursuant  hereto)  and (z) if  Lessor  shall  delay or fail to
deliver the Aircraft in breach of its  obligations  hereunder or under the other
Operative Documents, Lessee shall have all rights provided by Law arising out of
such breach, including the right to terminate this Lease Agreement and the other
Operative Documents.

      SECTION 3.  LEASE TERM; RENT; PAYMENTS

           3.1  Basic Lease Term

           The Basic Lease Term shall commence on the Delivery Date and,  unless
this Lease Agreement is terminated  earlier  pursuant to the provisions  hereof,
shall  end on the  Basic  Lease  Term  Termination  Date,  provided  that if the
scheduled last day of the Basic Lease Term shall not be a Business Day, then the
Basic Lease Term shall expire on the next preceding Business Day.

           3.2  Renewal Lease Term

           Lessee  shall  have the  option  to extend  the Lease  Term up to two
times, with each such extension to be for a one year period.  Such option may be
exercised  only by delivery  of (1) a Renewal  Rent  Determination  Request on a
timely basis (as provided below) and (2) written irrevocable notice to Lessor at
least 6 months prior to the then scheduled expiration of the Lease Term electing
to extend the Lease Term by one year, provided that Lessee may not exercise such
option at any time when an Event of Default has occurred and is continuing. Each
Renewal Lease Term shall commence on last day of the Lease Term (without  regard
to such Renewal Lease Term) and end on the Renewal Lease Term Termination  Date,
provided  that if the last day of a Renewal  Lease  Term shall not be a Business
Day,  then such Renewal Lease Term shall expire on the next  preceding  Business
Day.

           Upon written  request (a "Renewal Rent  Determination  Request") from
Lessee to Lessor at least 8 months but no more than 10 months  prior to the then
scheduled  expiration  of the Lease Term,  Lessor and Lessee shall in good faith
and acting reasonably determine the Renewal Rent Amount. If 15 days prior to the
Renewal Rent Determination  Date, Lessor and Lessee cannot determine the Renewal
Rent Amount,  then the Renewal Rent Amount shall be determined by two recognized
independent  aircraft  appraisers,  one of which shall be selected by Lessee (at
its expense) and one of which shall be selected by the Lessor (at its  expense),
or if such appraisers cannot agree, by a third  independent  appraiser chosen by
the  mutual  assent  of the first two  appraisers  (with the cost of such  third


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<PAGE>

appraiser to be shared equally by Lessor and Lessee). If either party shall fail
to appoint an appraiser at least 11 days prior to the Renewal Rent Determination
Date, or if such two  appraisers  cannot agree on the amount of the Renewal Rent
and fail to appoint a third  appraiser  at least eight days prior to the Renewal
Rent  Determination  Date,  then  Lessor and Lessee  shall  jointly  request the
American  Association of Equipment  Lessors (or any successor  organization)  to
appoint the relevant  appraiser.  Any such third  appraiser  shall determine the
amount of the Renewal Rent on or prior to the Renewal Rent Determination Date.

           3.3  Basic Rent and Renewal Rent

           Lessee  shall pay rent for the Aircraft in  installments  (1) on each
Basic Rent  Payment  Date  during  the Basic  Lease Term equal to the Basic Rent
Amount and (2) on each Renewal  Rent Payment Date during any Renewal  Lease Term
equal to the  Renewal  Rent  Amount,  in each case,  in  advance in  immediately
available Dollars.

           3.4  Supplemental Rent

           Lessee  shall pay,  or cause to be paid,  promptly  to Lessor,  or to
whomsoever shall be entitled thereto,  any and all Supplemental Rent when and as
the same  shall  become due and owing.  Lessee  also shall pay to Lessor,  or to
whomsoever shall be entitled thereto,  on demand,  as Supplemental  Rent, to the
extent  permitted by applicable  Law,  interest at the Past Due Rate on any Rent
(including any interest  accrued thereon  pursuant to this Section 3 (compounded
on a daily  basis))  not paid when due for any  period  for which the same shall
remain unpaid.

           3.5  Payments in General

                3.5.1  Timing and Place of Payment

                All payments of Rent payable to Lessor shall be made directly by
Lessee  in  Dollars  by wire  transfer  of  immediately  available  funds on the
required  date of payment and with value on such date, to the account for Lessor
specified  in Schedule  4, or to such other  account as Lessor  shall  otherwise
direct by prior notice to Lessee.

                3.5.2  Business Day Convention

                If the due date for any  payment of Rent is not a Business  Day,
then,  unless  otherwise  provided  herein,  such  payment  shall be made on the
Business Day next  preceding  such scheduled date with the same force and effect
as if made on such scheduled date and without adjustment in the amount due.

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<PAGE>

                3.5.3  Calculation of Interest

                All amounts of interest or amounts  calculated  by  reference to
interest  payable  under any of the  provisions  of this Lease  Agreement or any
other  Operative  Document shall be calculated on the basis of the actual number
of days elapsed in a 360-day year.

                3.5.4  Determination by Lessor

                Any determination by Lessor or any other payee as to any rate of
interest,  Rent,  Reserves or any other amount shall, in the absence of manifest
error, be conclusive and binding on Lessee.

                3.5.5  Payments to Lessee

                Any amount  referred to in this Agreement or any other Operative
Document  which is  payable  by  Lessor  to Lessee  or  received  by Lessee  and
expressly  retainable  by Lessee  hereunder  shall not be paid to or retained by
Lessee if at the time of such payment or receipt by Lessee a Default  shall have
occurred  and be  continuing,  but shall be held by or paid over to  Lessor,  as
security  for the  obligations  of Lessee  under  this  Agreement  and the other
Operative  Documents  to be held and applied  pursuant to Section 13 and applied
against  Lessee's  obligations  hereunder as and when due. At such time as there
shall not be continuing any Default,  such amount shall be paid to Lessee to the
extent not applied in accordance with the preceding sentence.

           3.6  Illegality

           If this Agreement  becomes  invalid,  unenforceable or illegal as the
result of any change of Law arising after the date hereof, the parties shall use
reasonable  efforts to modify or amend this  Agreement  so as to render it valid
and legal in all respects.  In the event that it is not possible so to modify or
amend this Agreement within a reasonable  period (which shall not, in any event,
exceed 60 days or such  shorter  period as may be  required  by Law)  Lessor may
terminate  this  Agreement  upon 14 days'  (or  such  shorter  period  as may be
required by Law) notice of termination to Lessee  whereupon Lessee shall deliver
the  Aircraft  to Lessor  in  accordance  with the  provisions  of  Section 3 of
Schedule 2 and, in the absence of a  prohibition  pursuant  to  applicable  Law,
Lessee shall continue to pay Basic Rent and, if applicable,  Renewal Rent to the
end of the Lease Term as specified  herein (but not Reserves or indemnities with
respect to periods after the Return of the Aircraft in accordance with Section 3
of Schedule 2). Upon  compliance by the Lessee with the foregoing,  Lessor shall


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<PAGE>

return to Lessee the  Security  Deposit  and any  amounts of Basic Rent and,  if
applicable,  Renewal  Rent paid by Lessee to the extent that Lessor has actually
received  rental from any person in respect of the Aircraft  with respect to any
period  for which such Basic Rent and,  if  applicable,  Renewal  Rent was paid.
Lessor shall use reasonable efforts to minimize the amount of Basic Rent and, if
applicable, Renewal Rent to be retained by Lessor.

      SECTION 4.  SECURITY DEPOSIT; LETTER OF CREDIT

           4.1  Payment of the Security Deposit

           Lessor  acknowledges  to  Lessee  that it has  received  the  Initial
Security  Deposit.  Unless  Lessee  shall have  exercised  its option to provide
Lessor a Letter of Credit pursuant to Section 4.4 of the Lease Agreement, Lessee
shall pay to Lessor,  by wire transfer of immediately  available  Dollars to the
account of Lessor  specified in Schedule 4 on or before the date both Lessor and
Lessee sign this Agreement, the Documentation Security Deposit Installment.

           All such  amounts,  as held by Lessor or Security  Agent from time to
time, are referred to in this Lease Agreement and the other Operative  Documents
as the "Security Deposit."

           4.2  Lessor's Interest in Security Deposit

           The Security  Deposit shall secure the timely payment and performance
by Lessee  of (1) its  obligations  hereunder  and under  each  other  Operative
Document and (2) its  obligations  under each of the Other Leases and under each
of the "Operative Documents" (howsoever denominated) related to the Other Leases
(such   documents  and  agreements   referred  to  in  subclause  (1)  and  (2),
collectively,  the "Transaction  Documents" and such obligations  referred to in
subclause (1) and (2), collectively,  the "Secured Obligations").  Lessee hereby
assigns,  transfers  and  pledges to  Lessor,  and  hereby  grants to Lessor,  a
first-priority  security interest in the Security Deposit to secure such payment
and such  performance.  Lessee shall not assign,  transfer,  pledge or otherwise
dispose of any right,  title or interest in or to the Security Deposit except as
provided in the  preceding  sentence.  Subject only to Sections 2.3 and 4.3, the
Security  Deposit  may be  assigned  or  pledged  by Lessor to any  Person.  The
Security  Deposit may be commingled by Lessor or such other Person,  as the case
may be, with its own general or other funds during the Lease Term.  Any interest
earned on the  Security  Deposit  shall be for  Lessor's or such  Person's  sole
account.  If an Event of Default  (hereunder  or under any of the Other  Leases)
shall occur and be  continuing,  then in addition to any other rights Lessor may
have  under  applicable  Law as a  secured  party or  otherwise,  or under  this
Agreement or any other Transaction Document,  Lessor or such Person, as the case
may be,  may at any time as an agreed  remedy  set off  against,  use,  apply or
retain all or any portion of the Security Deposit in full or partial payment for


                                       6
<PAGE>

amounts constituting the Secured Obligations  (including to compensate Lessor or
such  Person,  as the  case  may be,  for any  amount  it may in its  reasonable
discretion  advance as a result of the  occurrence of any Default  (hereunder or
under any of the Other Leases),  or to apply toward Expenses arising as a result
of the occurrence of any Default (hereunder or under any of the Other Leases) or
otherwise).  If Lessor or such  Person  uses or applies  all or a portion of the
Security  Deposit,  such  application  shall not be deemed a cure by Lessee,  or
waiver by Lessor or any other Person, of any Default (hereunder and under any of
the Other  Leases),  and Lessee  shall,  within ten days after  Lessor's or such
Person's demand therefor,  pay to Lessor or such Person,  as the case may be, an
amount sufficient to restore the Security Deposit to its required total sum.

           4.3  Return of Security Deposit

           That portion, if any, of the Security Deposit that has not previously
been used or applied,  or set off against,  as provided for in this Agreement or
any other  Operative  Document,  shall be returned to Lessee  (free and clear of
Liens other than Lessee Liens) by wire transfer of immediately available Dollars
to Lessee's account  specified in Schedule 4, or to such other account as Lessee
shall  specify  in  writing  to  Lessor,  on the date  which is not more than 10
Business  Days after and  excluding the date upon which the Aircraft is returned
to Lessor in  accordance  with this Lease  Agreement so long as no Default shall
have occurred and be continuing at such time.

           4.4  Substitution of Letter of Credit

           Lessee shall have the one-time  irrevocable  option to substitute for
the Security  Deposit a letter of credit (a "Letter of  Credit"),  in respect of
all of the Secured Obligations,  with a stated amount equal to the amount of the
Security  Deposit  required as of the Delivery  Date. The Letter of Credit shall
(1)  be in the  form  of  Exhibit  G,  (2)  be  issued  or  confirmed  by a bank
satisfactory  to Lessor and (3) have an expiry date of no earlier  than the date
one month after the Scheduled Return Date (upon request of Lessee,  Lessor shall
consider  accepting a one-year (or longer period) rolling letter of credit).  In
the event that at any time during the Lease Term the bank issuing or  confirming
the Letter of Credit becomes unacceptable to Lessor, in its reasonable judgment,
Lessee shall within  fourteen days of demand  therefor by Lessor  provide Lessor
with a replacement letter of credit issued or confirmed,  as the case may be, by
a bank that is acceptable to Lessor, in its reasonable  judgment.  The Letter of
Credit may be  assigned  or pledged by Lessor to any  Person.  If for any reason
Lessor or such other Person is paid under the Letter of Credit, then in addition
to any other  rights  Lessor or such  Person may have under  applicable  Law, or
under this Lease  Agreement or any other  Transaction  Document,  Lessor or such
Person,  as the case may be,  (1) may at any time as an  agreed  remedy  set off


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<PAGE>

against,  use, apply or retain all or any portion of the amounts so paid in full
or partial payment for amounts  constituting the Secured Obligations  (including
to compensate  Lessor or such Person,  as the case may be, for any amount it may
in its  reasonable  discretion  advance  as a result  of the  occurrence  of any
Default  (hereunder  or under  any of the  Other  Leases),  or to  apply  toward
Expenses  arising as a result of the  occurrence  of any Default  (hereunder  or
under any of the Other  Leases) or  otherwise)  and/or (2) may retain all or any
portion of the  amounts so paid as  security  for the  performance  the  Secured
Obligations  (and Lessee hereby  grants  Lessor a security  interest in all such
amounts).  Any such use or application shall not,  however,  be deemed a cure by
Lessee,  or waiver by Lessor or any Person,  of any Default  (hereunder or under
any of the Other Leases).  Any interest  earned on the amounts so drawn shall be
for Lessor's or such other Person's sole account.  If for any reason,  Lessor or
such other  Person is paid under a Letter of Credit,  then Lessee shall cause an
additional  Letter of Credit  (which  shall become the "Letter of Credit") to be
issued  so that the  Lessor or such  other  Person  shall at all times  have the
benefit of a Letter of Credit for the full Security  Deposit required under this
Section 4.4.

           4.5  Return of Letter of Credit

           So long as no Default  shall have  occurred and be continuing at such
time,  the Letter of Credit,  unless  drawn by Lessor and no longer in  Lessor's
possession, and any then unapplied cash proceeds from a drawing of the Letter of
Credit shall be returned to Lessee at its address set forth in Schedule 4 on the
date which is not more than 10 Business  Days after and  excluding the date upon
which the Aircraft is returned to Lessor in accordance with this Agreement.

           4.6  Release of Boullioun Aviation Services, Inc.

           For the  benefit  of Lessor  and its  Affiliate,  Boullioun  Aviation
Services,  Inc., upon payment of the same by Boullioun Aviation Services Inc. to
Lessor,  Lessee  confirms that it shall have no further claim against  Boullioun
Aviation  Services  Inc.  for, and Lessee  hereby  releases  Boullioun  Aviation
Services,  Inc.  from any further  obligation  or  liability  in respect of, the
Initial Security Deposit Installment.

      SECTION 5. REPRESENTATIONS AND WARRANTIES

           5.1  Disclaimer; Representations and Warranties

                5.1.1  Disclaimer

           EFFECTIVE UPON  ACCEPTANCE OF THE AIRCRAFT BY LESSEE,  WHICH SHALL BE
EVIDENCED BY LESSEE'S EXECUTION AND DELIVERY OF THE ACCEPTANCE CERTIFICATE,  THE
AIRCRAFT  SHALL BE LEASED UNDER THIS LEASE  AGREEMENT  "AS IS, WHERE IS WITH ALL


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<PAGE>

FAULTS"  (LESSEE  HEREBY  CONFIRMING  THAT  IT HAS  BEEN  ADVISED  OF AND  FULLY
UNDERSTANDS THE LEGAL IMPORT AND  IMPLICATIONS OF SUCH PHRASE AND THE PROVISIONS
OF THIS SECTION 5.1 AND THAT SUCH IS  APPROPRIATE IN A TRANSACTION OF THIS KIND)
AND LESSEE  AGREES,  ACKNOWLEDGES  AND ACCEPTS  THAT NONE OF LESSOR OR ANY OTHER
INDEMNIFIED PARTY MAKES ANY WARRANTY OR REPRESENTATION WHATSOEVER CONCERNING THE
AIRCRAFT.  EFFECTIVE UPON  ACCEPTANCE OF THE AIRCRAFT BY LESSEE,  WHICH SHALL BE
EVIDENCED  BY LESSEE'S  EXECUTION  AND DELIVERY OF THE  ACCEPTANCE  CERTIFICATE,
LESSEE,  FOR THE BENEFIT OF LESSOR AND EACH  INDEMNIFIED  PARTY,  HEREBY WAIVES,
RELEASES AND RENOUNCES ALL WARRANTIES,  REPRESENTATIONS  AND OTHER  INDEMNITIES,
GUARANTIES,  OBLIGATIONS  AND  LIABILITIES  OF LESSOR AND ANY OTHER  INDEMNIFIED
PARTY AND ANY RIGHTS, CLAIMS AND REMEDIES OF LESSEE, EXPRESS OR IMPLIED, ARISING
BY LAW OR OTHERWISE, IN EACH CASE, WITH RESPECT TO THE AIRCRAFT, ANY ENGINE, ANY
PART, ANY AIRCRAFT  DOCUMENTATION OR ANY OTHER THING DELIVERED,  LEASED, SOLD OR
TRANSFERRED  UNDER  THIS  LEASE  AGREEMENT  OR  ANY  OTHER  OPERATIVE  DOCUMENT,
INCLUDING:

                5.1.1.1 ANY WARRANTY AS TO THE AIRWORTHINESS,  VALUE, CONDITION,
DESIGN OR OPERATION OF, OR THE QUALITY OF THE MATERIAL OR WORKMANSHIP IN, OR THE
ABSENCE OF ANY DEFECT IN, THE AIRCRAFT,  THE AIRFRAME, ANY ENGINE, ANY PART, ANY
AIRCRAFT  DOCUMENTATION  OR ANY  OTHER  THING  DELIVERED,  SOLD  OR  TRANSFERRED
HEREUNDER OR ANY OTHER OPERATIVE DOCUMENT.

          5.1.1.2 ANY IMPLIED WARRANTY OF  MERCHANTABILITY OR FITNESS FOR USE OR
     FOR A  PARTICULAR  PURPOSE.  5.1.1.3 ANY EXPRESS OR IMPLIED  WARRANTY AS TO
     TITLE (EXCEPT TO THE EXTENT CONTAINED IN SECTION 5.1.2.4).

          5.1.1.4  ANY IMPLIED  WARRANTY  ARISING  FROM  COURSE OF  PERFORMANCE,
     COURSE OF DEALING OR USAGE OF TRADE.  5.1.1.5 ANY  OBLIGATION  OR LIABILITY
     WITH RESPECT TO ANY ACTUAL OR ALLEGED PATENT OR OTHER INTELLECTUAL PROPERTY
     INFRINGEMENT.
          5.1.1.6 ANY  OBLIGATION,  LIABILITY,  RIGHT,  CLAIM OR REMEDY IN TORT,
     WHETHER  OR NOT IN  STRICT  OR  ABSOLUTE  LIABILITY  OR  ARISING  FROM  THE
     NEGLIGENCE OF LESSOR OR ANY INDEMNIFIED PARTY, ACTUAL OR IMPUTED, ACTIVE OR
     PASSIVE.

                5.1.1.7 ANY OBLIGATION,  LIABILITY,  RIGHT,  CLAIM OR REMEDY FOR
LOSS OR DAMAGE TO THE AIRCRAFT, ANY ENGINE, ANY PART, ANY AIRCRAFT DOCUMENTATION
OR ANY  OTHER  THING,  FOR ANY LOSS OF USE,  REVENUE  OR PROFIT OR FOR ANY OTHER
DIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES.

FOR THE AVOIDANCE OF DOUBT,  THE FOREGOING SHALL NOT AFFECT OR LESSEN IN ANY WAY
LESSEE'S  RIGHTS  AGAINST  AIRFRAME  MANUFACTURER,  ENGINE  MANUFACTURER  OR THE


                                       9
<PAGE>

MANUFACTURER  OF ANY PART  UNDER  ANY  ASSIGNMENT  BY  LESSOR  TO  LESSEE OF THE
WARRANTY  AND/OR  CUSTOMER  SUPPORT  PROVISIONS  OF  THE  AIRFRAME  MANUFACTURER
PURCHASE AGREEMENT OR OTHERWISE.

EFFECTIVE UPON ACCEPTANCE OF THE AIRCRAFT BY LESSEE, WHICH SHALL BE EVIDENCED BY
LESSEE'S  EXECUTION AND DELIVERY OF THE  ACCEPTANCE  CERTIFICATE,  TO THE EXTENT
PERMITTED  BY  APPLICABLE  LAW,  LESSEE  WAIVES ANY AND ALL RIGHTS AND  REMEDIES
CONFERRED  UPON A LESSEE BY  ARTICLE  2A OF THE  UNIFORM  COMMERCIAL  CODE AS IN
EFFECT IN THE STATE OF NEW YORK AND ANY RIGHTS NOW OR HEREAFTER CONFERRED BY ANY
OTHER STATUTE OR OTHERWISE THAT MAY LIMIT OR MODIFY LESSOR'S RIGHTS AS DESCRIBED
IN THIS LEASE AGREEMENT.

DELIVERY BY LESSEE TO LESSOR OF THE  ACCEPTANCE  CERTIFICATE  WILL BE CONCLUSIVE
PROOF AS BETWEEN  LESSOR AND LESSEE (BUT WITHOUT  PREJUDICE TO ANY CLAIMS LESSOR
OR LESSEE MAY HAVE AGAINST THE AIRFRAME MANUFACTURER, ENGINE MANUFACTURER OR ANY
VENDOR WITH RESPECT TO THE AIRCRAFT)  THAT LESSEE HAS EXAMINED AND  INVESTIGATED
THE AIRCRAFT,  THAT THE AIRCRAFT AND THE AIRCRAFT DOCUMENTATION ARE SATISFACTORY
TO LESSEE AND THAT  LESSEE HAS  IRREVOCABLY  AND  UNCONDITIONALLY  ACCEPTED  THE
AIRCRAFT FOR LEASE HEREUNDER WITHOUT ANY RESERVATIONS WHATSOEVER.

           5.1.2  Lessor's Representations and Warranties

                In order to induce Lessee to enter into this Lease Agreement and
each other  Operative  Document  and to lease the Aircraft  from Lessor,  Lessor
hereby represents and warrants to Lessee that:

                      5.1.2.1  Organization, Corporate Power, Etc.

     Lessor (1) is a  corporation  duly  organized  under the laws of the Lessor
Jurisdiction  and (2) has the corporate power and authority to own or hold under
lease its properties  wherever located or used and to enter into and perform its
obligations hereunder and under each other Operative Document.

                      5.1.2.2  Corporate Authority

     The execution,  delivery and performance by Lessor of this Lease Agreement,
the Acceptance  Certificate and each other Operative Document to which Lessor is
a party have been duly authorized by all necessary  corporate action on the part
of Lessor.

                      5.1.2.3  Legal, Valid and Binding Agreements

     This Lease  Agreement,  the Acceptance  Certificate and the other Operative
Documents  each have been (as and when  delivered to Lessee)  duly  executed and
delivered by Lessor and constitutes the legal,  valid and binding  obligation of


                                       10
<PAGE>

Lessor,  enforceable  against Lessor in accordance with its terms, except as may
be limited by (1) applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent  transfer or other laws  relating to or affecting  creditors'  rights
generally and (2) general principles of equity (regardless of whether considered
in a  proceeding  in  equity  or  at  law),  including  those  relating  to  the
availability of the remedy of specific performance or injunctive relief.

                      5.1.2.4  Right to Lease

     Lessor has the full right and power to lease the Aircraft pursuant hereto.

           5.2  Lessee's Representations and Warranties

           In order to induce Lessor to enter into this Lease Agreement and each
other Operative Document and to lease the Aircraft to Lessee:

                5.2.1  Continuing Representations and Warranties

                Lessee hereby represents and warrants to Lessor that:

                      5.2.1.1  Organization, Corporate Power, Etc.

     Lessee (1) is a corporation  duly organized  under the laws of the State of
Delaware  and (2) has the  corporate  power and  authority  to own or hold under
lease its properties  wherever located or used and to enter into and perform its
obligations hereunder and under each other Operative Document.

                      5.2.1.2  Corporate Authority

     The execution,  delivery and performance by Lessee of this Lease Agreement,
the Acceptance  Certificate and each other Operative Document to which Lessee is
a party have been duly authorized by all necessary  corporate action on the part
of Lessee.

                      5.2.1.3  Authorizations

     Lessee holds all Authorizations necessary to (1) authorize Lessee to engage
in air transport  and to carry on scheduled  passenger and cargo service in each
case as presently conducted,  (2) permit the execution and delivery by Lessee of
this Lease  Agreement,  the  Acceptance  Certificate  and each  other  Operative
Document  and  the  performance  by  Lessee  of its  obligations  hereunder  and
thereunder and (3) operate the Aircraft in compliance with applicable Law.

                                       11
<PAGE>

                      5.2.1.4  No Contravention

     Neither the execution and delivery of this Lease Agreement,  the Acceptance
Certificate  or any other  Operative  Document by Lessee nor the  performance by
Lessee  of  its  obligations  hereunder  or  thereunder  contravenes  any of the
provisions of the organizational or charter documents of Lessee.

                      5.2.1.5  Legal, Valid and Binding Agreements

     This Lease  Agreement,  the Acceptance  Certificate and the other Operative
Documents  each have been (as and when  delivered to Lessor)  duly  executed and
delivered by Lessee and constitutes the legal,  valid and binding  obligation of
Lessee,  enforceable  against Lessee in accordance with its terms, except as may
be limited by (1) applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent  transfer or other laws  relating to or affecting  creditors'  rights
generally and (2) general principles of equity (regardless of whether considered
in a  proceeding  in  equity  or  at  law),  including  those  relating  to  the
availability of the remedy of specific performance or injunctive relief.

                      5.2.1.6  [Intentionally Left Blank]

                      5.2.1.7  Pari Passu

     The  obligations  of  Lessee  under  this  Lease  Agreement  and the  other
Operative Documents are direct, general and unconditional  obligations of Lessee
and rank at least  pari  passu in right of payment  with all other  present  and
future   unsecured  and   unsubordinated   obligations   (including   contingent
obligations) of Lessee with the exception of such obligations as are mandatorily
preferred by Law and not by virtue of any contract.

                      5.2.1.8  Governing Law

     In any  proceedings  taken in the State of Colorado for the  enforcement of
this Agreement or any other Operative Document,  the choice in Section 18 of the
governing law for this Agreement and the Operative  Documents,  and any judgment
obtained in any jurisdiction referred to in Section 18, will be recognized.

                      5.2.1.9  No Violation

     Neither the execution and delivery of this Lease Agreement,  the Acceptance
Certificate  or any other  Operative  Document by Lessee nor the  performance by
Lessee of its  obligations  hereunder or thereunder  violate any Law existing on
the date hereof applicable to or binding upon the Aircraft or Lessee.

                                       12
<PAGE>

                      5.2.1.10  All Disclosures Made

     The financial and other information  furnished by Lessee in connection with
this  Agreement  or any other  Operative  Document  does not  contain any untrue
statement  or omit to state facts,  the  omission of which makes the  statements
therein,  in  the  light  of the  circumstances  under  which  they  were  made,
misleading in any material respect.

                      5.2.1.11  No Immunity

     Lessee  is  subject  to  civil  and  commercial  Law  with  respect  to its
obligations under this
Lease  Agreement  and each other  Operative  Document to which it is a party and
neither  Lessee  nor any of its  assets is  entitled  to any right of  sovereign
immunity and the entry into and  performance  of this Lease  Agreement  and each
other Operative Document by Lessee constitute private and commercial acts.

                The  representations  and  warranties  contained in this Section
5.2.1 are  continuing  representations,  warranties  and  covenants and shall be
deemed made and given throughout the Lease Term.

                5.2.2  Initial Representations and Warranties

                Lessee hereby  represents  and warrants to Lessor as of the date
hereof and as of the Delivery Date (unless,  in each case,  such  representation
and warranty is expressly applicable on and as of another date or dates) that:

                      5.2.2.1  Litigation

     There are no  pending  or, to  Lessee's  knowledge,  threatened  actions or
proceedings  before  any court or  administrative  agency (1) in respect of this
Lease  Agreement  or  any  other  Operative  Document  or  the  Aircraft  or the
performance by Lessee of its obligations  hereunder or under any other Operative
Document or (2) which may reasonably be expected to materially  adversely affect
the ability of Lessee to perform its obligations under the Operative Documents.

                      5.2.2.2  Registration, Recordation and Filing

     Except for the registrations, recordations and filings described in Section
7, each of which will be duly made and  effected  by Lessor and  Lessee,  as the
case may be, on or prior to the Delivery Date, no further action,  including the
registration,  recordation  or filing of any instrument or document is necessary
or  advisable  under  the  Laws  of  the  State  of  Registration,   the  Lessee
Jurisdiction, or any jurisdiction in which the Aircraft is currently operated by


                                       13
<PAGE>

Lessee  (1) in  order  for  this  Lease  Agreement  to  constitute  a valid  and
enforceable lease of record relating to the Aircraft, (2) to authorize or permit
Lessee to perform  its  obligations  hereunder  or under  each  other  Operative
Document or (3) fully to protect, establish, perfect and preserve Lessor's title
to,  and  Lessor's  rights and  interests  in, the  Aircraft  and the  Operative
Documents as against Lessee and any other Person.

                      5.2.2.3  Financial Condition

     The  Quarterly  Financial  Report of Lessee for the period  ended March 31,
1997, a copy of which has been furnished to Lessor fairly presents the financial
condition of Lessee as at such date and the results of  operations of Lessee for
the  period  ended on such  date,  all in  accordance  with  GAAP,  consistently
applied.

                      5.2.2.4  [Intentionally Left Blank]

                      5.2.2.5  Taxes

     Lessee has filed or caused to be filed all tax returns  which are  required
to be filed  and has paid or  caused  to be paid all  Taxes  shown to be due and
payable on such returns and (except to the extent being  contested in good faith
and by  appropriate  proceedings,  but only as long as such  proceedings  do not
involve any material danger of the sale,  forfeiture,  confiscation,  seizure or
loss  (including  loss of use) of the  Aircraft  or any  interest  therein or of
criminal or civil  liability of Lessor) on any assessment  received by Lessee to
the extent that such Taxes have become due and payable.

                5.2.3  No Prejudice

                Unless  expressly waived by Lessor pursuant to Section 19.2, the
rights and remedies of Lessor in relation to any  misrepresentation or breach of
warranty on the part of Lessee shall not be prejudiced by any  investigation  by
or on behalf of Lessor into the affairs of Lessee,  by the  performance  of this
Lease  Agreement  or any other  Operative  Document or by any other act or thing
which may be done or omitted to be done by Lessor under this Lease  Agreement or
any other Operative  Document or any related  document and which would or might,
but for this provision, prejudice such rights and remedies.

      SECTION 6.  GENERAL COVENANTS

           6.1  Lessor's Covenants

           In order to induce Lessee to enter into this Lease Agreement and each
other Operative Document and to lease the Aircraft from Lessor:

                                       14
<PAGE>

                6.1.1  Quiet Enjoyment

                Lessor  hereby  covenants  to Lessee that so long as no Event of
Default  shall  have  occurred  and be  continuing,  except as may be  expressly
provided in this Lease Agreement or any other Operative Document, neither Lessor
nor any Person claiming by or through Lessor shall take or cause to be taken any
action  inconsistent  with Lessee's right of quiet enjoyment of, or otherwise in
any  way  interfere  with  or  interrupt,  the  continuing  use,  operation  and
possession  of the  Aircraft by Lessee.  The  foregoing,  however,  shall not be
construed  or deemed to modify or condition  in any respect the  obligations  of
Lessee pursuant to Section 15, which obligations are absolute and unconditional.

                6.1.2  No Claims by Lessor

                For the benefit of each  lessor of an airframe or engine  leased
to Lessee, each seller of an airframe or engine purchased by Lessee subject to a
conditional sale and each holder of a security interest in an airframe or engine
owned by Lessee under a security  agreement,  Lessor  hereby  covenants  that it
shall not acquire or claim, as against such lessor,  seller or security interest
holder,  any right,  title or interest in any engine  covered by any such lease,
conditional  sale  or  security  agreement,  which  engine  is  attached  to the
Airframe, provided that such agreement of Lessor shall not be for the benefit of
any lessor, seller or security interest holder of any such airframe, unless such
lessor, seller or security interest holder has expressly agreed (which agreement
may  be  contained  in  such  lease,  conditional  sale  agreement  or  security
agreement)  that  neither it nor its  successors  or assigns  will  acquire,  as
against  Lessor,  any right,  title or interest in an Engine as a result of such
Engine's being installed on such airframe.

           6.2  Lessee's Covenants

           Lessee  covenants  and agrees with Lessor,  at Lessee's sole cost and
expense, that:

                6.2.1  Continuing Business; Merger, Consolidation, Etc.

                Lessee shall not:

                      6.2.1.1  Discontinue Business

                      Permanently  discontinue  its  business  as  a  commercial
passenger or cargo air carrier.

                                       15
<PAGE>

                      6.2.1.2  Suspend Operations

     Voluntarily  suspend all or  substantially  all of its  commercial  airline
operations (Lessor
and Lessee agree that a labor stoppage or strike or any suspension of operations
due to FAA regulations or orders not  specifically  directed at Lessee shall not
in itself constitute a discontinuance of business).

                      6.2.1.3  Consolidation, Merger, Etc.

     Consolidate with or merge into any other  corporation,  or permit any other
corporation to  consolidate  with or merge into Lessee,  or convey,  transfer or
lease  substantially  all of  Lessee's  assets  as an  entirety  to any  Person,
provided that Lessee may consolidate  with or merge into any other  corporation,
or permit any other  corporation to consolidate  with or merge into Lessee,  and
Lessee may convey,  transfer or lease substantially all of Lessee's assets as an
entirety to any Person if:

     6.2.1.3.1 The  corporation  formed by such  consolidation  or merger or the
Person which acquires by conveyance,  transfer or lease substantially all of the
assets of Lessee as an entirety  (each such  corporation  and such Person  being
hereinafter called the "Successor") shall be a corporation under the laws of the
United  States or any state  thereof  or  District  of  Columbia  and shall be a
"citizen of the United States" as defined in the U.S. Aviation Laws and shall be
a U.S. Air Carrier.

     6.2.1.3.2  Such  Successor (if not the Lessee) shall execute and deliver to
Lessor an  agreement in form and  substance  reasonably  satisfactory  to Lessor
containing an assumption by such  Successor of the due and punctual  performance
of each  covenant  and  condition  of Lessee  under  this Lease  Agreement,  the
Acceptance  Certificate and all other  Operative  Documents and shall reissue or
reproduce  the  documents  required  under  Schedule 6, in each case,  with such
changes as necessary to reflect the change to such Successor.

     6.2.1.3.3  Immediately  after  giving  effect to such  transaction,  (1) no
Payment/Bankruptcy Default under this Lease Agreement shall have occurred and be
continuing  and (2) the  Tangible Net Worth of the  Successor  shall not be less
than the Tangible Net Worth of Lessee at March 31, 1997.

     6.2.1.3.4  Lessee shall have delivered to Lessor an officer's  certificate,
and an opinion of counsel reasonably  satisfactory to Lessor,  each stating that
(1) such consolidation, merger, conveyance, transfer or lease and the assumption
agreement  required by Section  6.2.1.3.2 comply with this Section 6.2.1.3,  (2)
all conditions  precedent  herein provided for relating to such action have been
complied  with and (3) the  agreement  described in Section  6.2.1.3.2 is valid,
binding and enforceable against the Successor.

                                       16
<PAGE>

     Upon any consolidation or merger,  or any conveyance,  transfer or lease of
substantially all of the assets of Lessee as an entirety in accordance with this
Section 6.2.1.3, the Successor shall succeed to, and be substituted for, and may
exercise  every right and power of,  Lessee under this Lease  Agreement  and the
other  Operative  Documents  with the same effect as if such  Successor  or such
Person had been named as Lessee herein and therein. No such conveyance, transfer
or lease of substantially  all of the assets of Lessee as an entirety shall have
the effect of releasing  Lessee,  or any Successor which shall  theretofore have
become such in the manner prescribed in this Section 6.2.1.3, from its liability
hereunder  or under any other  Operative  Document  to which  Lessee is a party.
Nothing  contained herein shall permit any lease,  sublease or other arrangement
for the use,  operation or possession of the Aircraft  except in compliance with
the applicable provisions of this Lease Agreement.

                6.2.2  Reporting Requirements

                      6.2.2.1  Financial Reports

                      Lessee shall furnish to Lessor:

     6.2.2.1.1  Monthly  Reports  Within 30 days  after  the end of each  month,
copies of unaudited monthly financial reports detailing revenues,  expenses, net
income,  cash  position,  operating  statistics  and other similar  information,
prepared by Lessee that Lessee makes available for review by other creditors.

                           6.2.2.1.2  Quarterly Reports

                           Within 45 days after the close of each fiscal quarter
of Lessee (other than the last
fiscal   quarter  in  each  fiscal  year  of   Lessee),   copies  of   unaudited
(consolidated,  if prepared)  financial  statements  (including a balance sheet,
statement of cash flows and a profit and loss statement)  prepared in Dollars in
accordance with GAAP.

                           6.2.2.1.3  Annual Reports

     Within 120 days after the close of each  fiscal  year of Lessee,  copies of
audited consolidated  financial statements (including a balance sheet, statement
of cash flows and a profit and loss statement) prepared in Dollars in accordance
with GAAP, all in reasonable  detail and setting forth in  comparative  form the
respective  figures  as of the  end of and  for  the  preceding  fiscal  year as
certified  by  Lessee's   independent   public   accountants,   including  their
certificate and accompanying comments.



                                       17
<PAGE>

                           6.2.2.1.4  Other Information

     Such other information  respecting the business and properties,  operations
or condition  (financial or otherwise) of Lessee as Lessor may from time to time
reasonably  request,  including  copies of all  regular,  periodic  and  special
reports,  that  Lessee  makes  available  for  review  by the  public  or  other
creditors.

                      6.2.2.2  Notice of Loss or Damage

     Lessee shall notify Lessor  promptly of any loss or damage  (whether or not
constituting  an Event of Loss) of or to the  Aircraft  or the  Airframe  or any
Engine for which the cost of correction or repairs may reasonably be expected to
exceed the Damage Notice  Threshold and, if not  constituting  an Event of Loss,
shall provide a proposal for carrying out the correction or repair. If after its
receipt of such  proposal,  Lessor does not  reasonably  believe  that  Lessee's
proposal  complies with the provisions  hereof or applicable  Law,  Lessor shall
promptly  notify  Lessee of such  disagreement.  Lessee  and  Lessor  shall then
consult  with  Airframe  Manufacturer,  Engine  Manufacturer  or other  relevant
manufacturer,  as  appropriate,  and  Lessee  and  Lessor  agree  to  accept  as
conclusive,  and be bound by, such Person's  directions or recommendations as to
the manner in which to carry out such repairs.  In connection with any repair of
such  damage for which the cost of  correction  or  repairs  may  reasonably  be
expected to exceed the Damage Notice Threshold, Lessee shall provide Lessor with
the information required in Section 1.2.3.2 of Schedule 2.

                      6.2.2.3  Notice of Material Adverse Effect or Default

     Lessee shall (1) promptly provide notice in writing to Lessor of any event,
happening or circumstance  which could reasonably be expected to have a Material
Adverse Effect,  including the commencement of any action, suit or proceeding by
or before any Government Entity that, if adversely determined,  could reasonably
be expected to have a Material Adverse Effect, and (2) provide notice in writing
to Lessor  immediately  after an  officer  of Lessee  obtains  knowledge  of the
occurrence of a Default.




                                       18
<PAGE>



                      6.2.2.4  Information Regarding Aircraft or Lessee

     From time to time,  Lessee shall promptly provide such other information as
Lessor may  reasonably  request  concerning  the  location,  condition,  use and
operation of the Aircraft or the financial condition and business of Lessee.

                      6.2.2.5  Monthly Aircraft Status Report

     Lessee shall provide  Lessor on the  fifteenth  day of each calendar  month
during the Lease Term with a completed and duly executed  Aircraft Status Report
substantially in the form of Exhibit F.

                      6.2.2.6  Principal Place of Business

     Lessee shall give at least 30 days' prior  written  notice to Lessor of any
change of its  principal  place of business or chief  executive  office or major
executive office, in each case, as set forth in Schedule 4.

                      6.2.2.7  Government Filings

     Lessee shall promptly on request furnish or cause to be furnished to Lessor
such  information  in the  possession  and under the control of Lessee as may be
required to enable  Lessor to file on a timely basis any reports  required to be
filed by Lessor with any Government Entity because of Lessor's rights, title and
interests  in and to the  Aircraft  or under  the Lease  Agreement  or any other
Operative Document.

                      6.2.2.8  Periodic Certification

                      Upon not less than 10 Business Days' prior written request
by Lessor (but not more than four
times in any 12-month period) execute, acknowledge and deliver to Lessor, or any
intended  successor or permitted assign of Lessor, a statement in writing (which
may be  conclusively  relied upon by Lessor or any such  intended  successor  or
permitted assign):

                           6.2.2.8.1  Certifying  that this Lease and each other
Operative Document (together with any amendments and modifications) are  in full
force and effect.

                           6.2.2.8.2  Certifying  that there are not any uncured
Defaults,  or if any such Default is then existing,  stating  the nature of such
Default or Defaults and the action that Lessee is then taking, or then  proposes
to take,  to cure such Default or Defaults.

                                       19
<PAGE>

                            6.2.2.8.3  In   connection   with  any   transaction
 described in  Section 14.1,  certifying (1) that there has been no amendment or
 modification of this Lease Agreement or any other Operative Document, or if any
 such amendment or  modification  has been  effected,  stating the nature of all
 such amendments or modifications,  (2) the date to which Basic or Renewal Rent,
 as the case may be,  has been paid,  (3) that  Lessee is not aware of any claim
 against  Lessor  by  reason  of the  condition  of the  Aircraft  or under  the
 Operative  Documents (or specifying such claim), (a) as of the Delivery Date or
 (b) arising  subsequent thereto and (4) the amount of the Reserves (by account)
 as of the date of the certificate.

     Lessee's failure to deliver such statement within such time shall be deemed
to constitute a material misrepresentation under Section 12.7.

                6.2.3  Liens

                      6.2.3.1  No Liens

     Lessee shall not directly or indirectly create,  incur, assume or suffer to
exist,  or  agree to  create  or  assume,  any  Lien on or with  respect  to the
Aircraft,  any Engine or any Part or any  Operative  Document,  or in any right,
title or interest in any of the foregoing, except:

                           6.2.3.1.1  Liens of the Operative Documents

     The rights of Lessor and Lessee  provided in this Lease  Agreement  and the
other Operative Documents.

                           6.2.3.1.2  Permitted Transfer of Possession

     The  rights  of others  under  agreements  or  arrangements  to the  extent
permitted by the terms of Sections 6.1.2 and 8 and Section 1.4.6 of Schedule 2.

                           6.2.3.1.3  Lessor Liens

                           Lessor Liens.

                           6.2.3.1.4  Certain Tax Liens

     Liens for Taxes of Lessee arising in the ordinary course of business either
not yet due or being contested in good faith by appropriate  proceedings so long
as such contest does not involve any  material  danger of the sale,  forfeiture,
seizure or loss (including loss of use) of the Airframe,  any Engine or any Part
or any interest therein or of any criminal or civil liability of Lessor.

                                       20
<PAGE>

                           6.2.3.1.5  Mechanics' Liens

     Materialmen's, mechanics', workmen's, repairmen's, employees' or other like
Liens  arising by operation of Law in the ordinary  course of Lessee's  business
(including  those  arising  under  maintenance  agreements  entered  into in the
ordinary course of business)  securing  obligations  that are not yet due or are
being contested in good faith by appropriate proceedings so long as such contest
does not involve any material danger of the sale,  forfeiture or loss (including
loss of use) of the Airframe,  any Engine or any Part or any interest therein or
of any criminal or civil liability of Lessor.

                      6.2.3.2  Obligation to Discharge

     Lessee will promptly, at its own expense,  take, or cause to be taken, such
actions  as may be  necessary  to  discharge  any Lien not  excepted  under this
Section 6.2.3 that may at any time arise,  exist or be levied upon the Airframe,
any Engine, any Part or in this Lease Agreement or any other Operative Document,
or in any right, title or interest in any of the foregoing.

                      6.2.3.3  Protection

     Without  limiting  the  foregoing  or any  other  provision  of this  Lease
Agreement or any other  Operative  Document,  Lessee will not do or permit to be
done  anything  which may  reasonably  be expected to expose the Aircraft or any
part thereof to penalty,  forfeiture,  seizure, arrest, impoundment,  detention,
confiscation, taking in execution, attachment, appropriation or destruction, nor
abandon the Aircraft or any Part or which may  reasonably  be expected to expose
Lessor to any criminal or civil liability.

                6.2.4  Section 1110

                Lessee  shall be a "citizen of the United  States" as defined in
the U.S.  Aviation  Laws and  shall  be a U.S.  Air  Carrier  and  Lessee  shall
otherwise  continue to be certified,  qualified and/or  registered to the extent
necessary  to fall within the purview of, and to provide to Lessor the  benefits
contemplated by, 11 U.S.C.  Section 1110 or any analogous section of the federal
bankruptcy laws, as amended from time to time.

                6.2.5  Taxes

                Lessee shall file or cause to be filed all tax returns which are
required to be filed and shall pay or cause to be paid all Taxes shown to be due
and payable on such  returns and (except to the extent  being  contested in good
faith and by appropriate  proceedings,  but only as long as such  proceedings do
not involve any material danger of the sale, forfeiture,  confiscation,  seizure


                                       21
<PAGE>

or loss  (including  loss of use) of the Aircraft or any interest  therein or of
criminal or civil  liability of Lessor) on any assessment  received by Lessee to
the extent that such Taxes have become due and payable.

      SECTION 7.  TITLE; REGISTRATION AND FILINGS; ETC.

           7.1  Title to the Aircraft

                7.1.1  Lessor as Owner

                Lessee  acknowledges  that  title to the  Aircraft  shall at all
times be and remain solely and exclusively  vested in Lessor and that this Lease
Agreement  and the  other  Operative  Documents  constitute  for  all  purposes,
including  tax  purposes,  an  agreement  to lease the  Aircraft  to Lessee and,
accordingly,  Lessee  shall have no right,  title or  interest  in the  Aircraft
except the right to use the Aircraft as provided herein.

                7.1.2  Lessee Not Owner

                Lessee will not at any time  represent or hold out Lessor or any
Financing  Party as carrying  goods or passengers on the Aircraft or as being in
any way connected or associated with any operation of the Aircraft or, except as
expressly provided herein or the Novation Agreement, attempt, or hold itself out
as having any power, to sell, charge,  lease or otherwise dispose of or encumber
the Aircraft, the Engines or any Part.

                7.1.3  Title Vis a Vis Third Parties

                On all occasions  when the ownership of the Aircraft or any part
of it is  relevant,  Lessee will make clear to third  parties  that title to the
same is held by Lessor.

           7.2  Registration, Recordation, Filings, Etc.

                7.2.1  Register Aircraft

                Prior to delivery of the Aircraft  pursuant to Section 2, Lessor
shall,  at Lessor's  expense,  procure that the Aircraft is duly registered with
the Aviation  Authority  in the name of Lessor as owner,  and  thereafter  shall
maintain, or procure the maintenance of, such registration  throughout the Lease
Term. At no time during the Lease Term shall Lessee take any action to interfere
with such registration.

                7.2.2  Recordation of Lease

                Upon  delivery  of the  Aircraft  pursuant  to Section 2, Lessor
shall,  at Lessor's  expense,  cause the recordation of this Lease Agreement and


                                       22
<PAGE>

the Acceptance  Certificate with the Aviation  Authority.  At no time during the
Lease Term shall Lessee take any action to interfere with such recordation.

                7.2.3  Other Registration, Recordation and Filing

                Lessee shall,  at Lessee's  expense  (except with respect to the
Financing Security  Documents,  then at Lessor's expense),  take, or cause to be
taken,  such  action  with  respect  to  the  registration,  recording,  filing,
reregistering,  rerecording  and  refiling  of this Lease  Agreement,  any other
Operative  Document,  any  Financing  Security  Document or other  documents  or
instruments as necessary or reasonably  advisable under the Laws of the State of
Registration, the Lessee Jurisdiction, or any jurisdiction in which the Aircraft
will be operated by Lessee, and such other actions:

                       7.2.3.1 In order for this Lease Agreement to constitute a
valid and enforceable lease of
record relating to the Aircraft.

                       7.2.3.2 To  authorize  or permit  Lessee to  perform  its
obligations hereunder and under each
other Operative Document.


                       7.2.3.3 Fully to protect, establish, perfect and preserve
  Lessor's  title  to,  and  Lessor's  and each  Financing  Party's  rights  and
  interests  in, the  Aircraft,  this  Agreement  and under the other  Operative
  Documents as against Lessee and any other Person.

                If,  notwithstanding  the  foregoing,  Lessor or Security  Agent
notifies  Lessee that it wishes to take any such  action  itself,  Lessee  shall
cooperate  with and  assist  Lessor or  Security  Agent,  as the case may be, in
taking,  and  reimburse  to Lessor or  Security  Agent,  as the case may be, the
reasonable  expenses  of taking,  such  action.  With  respect to the  Financing
Security Documents, Lessor shall notify Lessee of the requirement of such filing
before Lessee has any obligations under this Section 7.2.3.

                At Lessor's or Security Agent's  reasonable request from time to
time, Lessee shall, at Lessee's expense, furnish to Lessor and Security Agent an
opinion of counsel  and/or  other  evidence  satisfactory  to Lessor of any such
registration,  recording, filing, reregistering,  rerecording, refiling or other
action.

                7.2.4  Geneva Convention

                Without limiting the effect of the foregoing, Lessee shall do or
cause to be done any and all acts and things which are required  under the terms
of the  Convention  for the  International  Recognition  of Rights in  Aircraft,
signed at Geneva, Switzerland, on June 18, 1948, to protect, establish,  perfect


                                       23
<PAGE>

and preserve  Lessor's title to, and Lessor's and each Financing  Party's rights
and interests in, the Aircraft  within the  jurisdiction  of any signatory state
that has ratified such Convention,  and Lessee shall also do or cause to be done
at its own expense any and all acts and things  which may be required  under the
terms of any  other  agreement,  treaty,  convention,  pact or by any  practice,
custom or understanding  involving any jurisdiction in which Lessee may operate,
and any and all acts and things  which Lessor or Security  Agent may  reasonably
request,  to protect,  establish,  perfect and preserve  Lessor's  title to, and
Lessor's and each  Financing  Party's  rights and interests in, the Aircraft and
the Operative Documents.

                7.2.5  Transfer of Interest in Aircraft, Etc.

                Without  limiting the  provisions  of Section 14, Lessee will do
all acts and  things  (including  making  any  filing or  registration  with the
Aviation Authority or any Governmental  Entity) and executing and delivering all
documents (including any amendment of this Lease Agreement) as may be reasonably
required by Lessor  following any change or proposed  change in the ownership of
the Aircraft or the equity and/or debt  financing of the  Aircraft,  but in each
case at Lessor's expense and subject,  where appropriate,  to the conditions set
out in Section 14.

           7.3  Lessor's Cooperation

                Lessor shall  execute and deliver  such  documents as Lessee may
reasonably request in order to permit Lessee to comply with Lessee's obligations
under this Section 7.

      SECTION 8.  POSSESSION

      Lessee  will not,  without  the prior  written  consent of Lessor,  in any
manner deliver,  transfer or relinquish possession of the Aircraft,  Airframe or
an Engine or any Part,  or install an  Engine,  or permit any such  Engine to be
installed,  on an airframe other than the Airframe covered hereby, provided that
so  long  as  (1) no  Payment/Bankruptcy  Default  shall  have  occurred  and be
continuing,  (2) the action to be taken shall not adversely  affect,  or be of a
nature that could  reasonably be expected to adversely  affect,  Lessor's or any
Financing Party's right,  title and interest in and to the Aircraft or Airframe,
or any  Engine or Part,  or under this Lease  Agreement  or any other  Operative
Document  (including  any  impairment of title to or the  registration  with the
Aviation Authority of, the Aircraft),  (3) all applicable approvals,  if any, of
the Aviation Authority and any other Government Entity having jurisdiction shall
have been  obtained,  and (4) the insurance  provisions of Section 11 shall have
been complied with, then:

                                       24
<PAGE>

           8.1  Subleasing

           NOTWITHSTANDING THE FOREGOING OR ANY OTHER PROVISION OF ANY OPERATIVE
DOCUMENT,  LESSEE  SHALL NOT SUBLEASE THE AIRCRAFT AT ANY TIME WITHOUT THE PRIOR
WRITTEN CONSENT OF LESSOR WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD.

           8.2  Maintenance, Etc.

           Without the prior  consent of Lessor,  Lessee may deliver or cause to
be  delivered  possession  of the  Airframe  or an  Engine  or any  Part  to the
manufacturer  thereof or to any  Approved  Maintenance  Performer  for  testing,
service, repair, maintenance or overhaul work or for alterations,  modifications
or additions to the extent required or permitted by the terms hereof.

           8.3  Installation of Engines on Other Airframes

           Without the prior consent of Lessor,  Lessee may install an Engine on
any  Airframe  Manufacturer  model  737-300  or -500  airframe  (other  than the
Airframe) owned or leased by Lessee or subject to a conditional  sales agreement
where Lessee is the conditional vendee if (1) such airframe is free and clear of
all Liens  except  the  rights of the  parties  to any  security  agreement  and
Permitted Liens,  lease or conditional sale agreement covering such airframe and
(2) Lessee shall have  obtained  from any security  interest  holder,  lessor or
conditional  seller of such  airframe  a  written  agreement  (which  may be the
security agreement, lease or conditional sale agreement),  whereby such security
interest holder,  lessor or conditional  seller expressly and effectively agrees
that neither it nor its  successors  or assigns will acquire or claim any right,
title or interest in any Engine by reason of such  Engine's  being  installed on
such airframe at any time while such Engine is owned by Lessor.

           8.4  Wet Lease

           Without  the prior  consent of  Lessor,  Lessee may enter into one or
more arrangements  whereby Lessee agrees to operate the Aircraft for the benefit
of a third party under a "wet lease" arrangement, pursuant to which the Aircraft
(1) shall at all times  remain in the sole  possession,  dominion and control of
Lessee,  and  shall at all  times  maintain  its  registration  in the  State of
Registration  without any amendment or  modification  as a  consequence  of such
arrangement,  (2) shall be operated in all respects solely by regular  employees
of Lessee, and (3) shall be maintained, insured and otherwise operated by Lessee
in accordance  with the  requirements of this Agreement and each other Operative
Document.



                                       25
<PAGE>

           8.5  Civil Reserve Air Fleet Program

           Lessee may subject the  Aircraft,  the  Airframe or any Engine to the
Civil Reserve Air Fleet  Program and transfer  possession of the Airframe or any
Engine to the United States, or any agency or instrumentality thereof,  pursuant
to the Civil  Reserve Air Fleet  Program,  so long as (1) Lessee shall  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
appropriate  Contracting Officer Representative for the Military Airlift Command
of the United States Air Force,  (2) Lessee shall promptly  notify Lessor of any
such  transfer,  and (3) the period of such  transfer does not extend beyond the
end of the Lease Term. Lessor shall reasonably cooperate with Lessee in Lessee's
participation  in such  program,  provided  that Lessor shall not be required to
provide  any such  cooperation  to the  extent  such  cooperation  would  have a
material adverse effect on Lessor's or any Financing Party's rights hereunder or
under any other Operative  Document or such  cooperation by Lessor is prohibited
by the Financing Security Documents.

The  rights of any  Person  who  receives  possession  by  reason of a  transfer
permitted  by this  Section 8 shall be  effectively  and  expressly  subject and
subordinate  to all the  terms  of  this  Agreement  and  each  other  Operative
Document, including the covenants contained in this Section 8 and Section 11 and
the  rights  of Lessor  to  repossession  pursuant  to  Section  13 and to avoid
transfer upon such possession. No sublease, wet lease or other relinquishment or
transfer of possession of the Aircraft or Airframe, or any Engine or Part, shall
in any way release,  discharge  or  otherwise  limit or diminish any of Lessee's
obligations   to  Lessor  or  any   Financing   Party  (it  being   agreed  that
notwithstanding  any  such  sublease  or other  transfer  or  relinquishment  of
possession,  Lessee shall continue to be primarily  liable and  responsible  for
performance  of all of its  obligations  under  this  Agreement  and each  other
Operative Document), or constitute a waiver of Lessor's or any Financing Party's
rights or remedies hereunder or affect the registration of the Aircraft with the
Aviation Authority.

      SECTION 9.  INDEMNITIES

           9.1  General Indemnity

           Subject  only to the  exceptions  set forth in  Section  9.2,  Lessee
hereby  assumes  liability for and hereby agrees to indemnify  each  Indemnified
Party against,  and agrees to protect,  save and keep harmless each  Indemnified
Party from,  any and all Expenses from time to time (whether  before,  during or
after  the  Lease  Term)  imposed  on,  incurred  by  or  asserted  against  any
Indemnified Party in any way relating to or arising out of:

                                       26
<PAGE>

                9.1.1 The Aircraft, the Airframe, any Engine or engine installed
on the Aircraft,  Part or Aircraft  Documentation  or any other thing  delivered
under this Lease Agreement or any other Operative Document.

                9.1.2   The   acceptance,    rejection,   delivery,   ownership,
nondelivery,  lease, sublease,  charter,  transport,  subcharter,  registration,
deregistration  (after the  occurrence of an Event of Default),  reregistration,
possession,  repossession,  presence,  operation,  location,  condition,  use or
non-use, control,  airworthiness,  overhaul,  replacement,  existence,  storage,
preparation,   installation,   testing,   manufacture,   design,   modification,
alteration,  maintenance,  repair,  re-lease,  sale (after the  occurrence of an
Event of Default), return, transfer,  exportation,  importation,  abandonment or
other  disposition  (after the  occurrence  of an Event of  Default)  of, or the
imposition of any Lien (or the incurrence of any liability to refund or pay over
any amount as the result of any such Lien) on, the Aircraft,  the Airframe,  any
Engine or engine or Part or any other thing delivered under this Lease Agreement
or any other  Operative  Document or interest  therein (or the incurrence of any
liability  to refund  or pay over any  amount  as the  result of any such  Lien)
(including any claim for patent, trademark or copyright infringement,  any claim
or penalty  arising out of violations of  applicable  Laws by Lessee,  including
environmental control,  noise and pollution  regulations,  any liability for any
injury to or death of any Person or loss of or damage to any  property or to the
environment, latent or other defects, whether or not discoverable and whether or
not any of the  foregoing  shall  arise as a result of the  action or  inaction,
negligent or otherwise, of Lessee, any Indemnified Party or any other Person).

                9.1.3 This Agreement or any of the Operative  Documents,  any of
the transactions contemplated hereby or thereby or the enforcement of any of the
terms hereof or thereof, including the enforcement of this Section 9.

                9.1.4 Any breach or  noncompliance  by Lessee with any covenant,
term, agreement, condition, undertaking or obligation under this Lease Agreement
or under any other Operative  Document or agreement entered into or furnished by
Lessee in connection herewith or therewith,  or the falsity or inaccuracy of any
representation  or  warranty  of Lessee  set forth  herein  or  therein,  or the
occurrence of any other  Default,  including any Expenses  incurred,  assumed or
suffered by Lessor or any other Person as a consequence  of Lessee's  failure to
return the  Aircraft  in  accordance  with this Lease  Agreement  and each other
Operative Document on any date specified or required herein.

                                       27
<PAGE>

           9.2  Exceptions to General Indemnity

           The  indemnity  provided for in Section 9.1 will not extend to any of
the following Expenses of any Indemnified Party (but without limiting any rights
of Lessor under Section 13):

                9.2.1  Expenses  incurred  as the  result of the  decline in the
market value of the  Aircraft,  except to the extent that such decline is due to
any Default by Lessee.

                9.2.2  Expenses   solely  and  directly   caused  by  the  gross
negligence or willful misconduct of any Indemnified Party (other than negligence
imputed to any Indemnified Party by reason of its interest in the Aircraft).

                9.2.3  Expenses  solely and  directly  caused by a breach by any
Indemnified  Party of any covenant or inaccuracy or falsity of a  representation
or  warranty  made by any  Indemnified  Party  in this  Lease  Agreement  or the
documents and agreements delivered by such party to Lessee.

                9.2.4 Taxes or loss of Tax benefits,  it being  understood  that
Section 9.6 and Schedule 5 sets forth Lessee's entire obligation with respect to
Taxes.

                9.2.5 Expenses  attributable  solely to acts of any  Indemnified
Party or the Follow-On  Operator,  or events which occur, in either case,  after
this Lease  Agreement  has  terminated  or expired and Lessee has  returned  the
Aircraft to Lessor in the condition and manner required by this Lease Agreement.

                9.2.6 Expenses  attributable  to any financing or refinancing of
the Aircraft by Lessor or any other transfer by Lessor or any Financing Party of
any interest in the Aircraft  (without  limiting  Lessor's  rights under Section
13).

                9.2.7  Expenses  that Lessor has  expressly  agreed to pay under
this Lease Agreement or any other Operative Document.

                9.2.8  Expenses  constituting  ordinary  and usual  operating or
overhead expenses (without limiting Lessor's rights under Section 13).

                9.2.9 Expenses attributable to any Lessor Lien (without limiting
Lessor's rights under Section 13).

                9.2.10  Expenses to the extent  arising after the Return and the
satisfaction  of all of  Lessee's  obligations  then  due  under  the  Operative
Documents.

                9.2.11  Expenses  payable by Lessee under any other provision of
Operative Documents.

                                       28
<PAGE>

           9.3  Taxes

           Lessee's tax indemnity and other related  agreements are contained in
Schedule  5,  which  schedule  is hereby  incorporated  in this  Section  9.3 by
reference.

           9.4  Insured Claims; Subrogation

                9.4.1  Insured Claims

                In the case of any Expense  indemnified  by Lessee under Section
9.1  that is  covered  by a policy  of  insurance  maintained  by  Lessee,  each
Indemnified  Party making a claim  agrees to cooperate  with the insurers in the
exercise of their rights to  investigate,  defend or compromise  such Expense to
the extent  required to retain the  benefits of such  insurance  with respect to
such Expense.

                9.4.2  Subrogation

                If and only if an Expense  indemnified  by Lessee under  Section
9.1 is in fact paid in full (as  required  under  the  Operative  Documents)  by
Lessee  and/or an insurer  under a policy of insurance  maintained by Lessee and
provided that no Default has occurred and is continuing,  (1) Lessee and/or such
insurer,  as the case may be, shall be  subrogated to the rights and remedies of
the  Indemnified  Party on whose behalf such Expense was paid (other than rights
of  such  Indemnified  Party  under  insurance  policies  maintained  at its own
expense)  to the extent of, and with  respect to the event  giving rise to, such
Expense (other than such rights and remedies against any Indemnified  Party) and
(2) should an  Indemnified  Party  receive any payment from any party other than
Lessee or its insurers,  in whole or in part, with respect to such Expense, such
Indemnified  Party  shall  promptly  pay the  amount  paid (but not an amount in
excess of the amount  Lessee or any of its  insurers has paid in respect of such
Expense) over to Lessee.

           9.5  Scope, Survival, Etc.

                9.5.1  Lessee  shall  be  obligated  under  this  Section  9 and
Schedule 5 as a primary  obligor  irrespective  of whether an Indemnified  Party
shall also be indemnified, guaranteed or insured with respect to the same matter
under any of the Operative  Documents or otherwise by any other Person, and such
Indemnified  Party may proceed  directly  against  Lessee  under this  Section 9
and/or  Schedule  5  without  first  resorting  to  any  such  other  rights  of
indemnification, guarantee or insurance.
                9.5.2 All  indemnities,  obligations,  adjustments  and payments
provided  for in this  Section 9 and  Schedule  5 shall,  to the  extent  herein
provided,  survive  and remain in full  force and  effect,  notwithstanding  the
expiration or  termination  of the Lease Term or of this Lease  Agreement or any
other Operative  Documents and the payment in full of all sums payable under the


                                       29
<PAGE>

Operative  Documents.   The  obligations  of  Lessee  in  respect  of  all  such
indemnities,  obligations,  adjustments  and payments are expressly made for the
benefit of, and shall be enforceable by, the Indemnified Party entitled thereto,
without  declaring this Lease  Agreement to be in default or taking other action
under this Lease Agreement or any other Operative Document.

                9.5.3 Lessee  acknowledges that the Indemnified  Parties, or any
of them,  may authorize  Lessor,  by notice in writing to Lessor and Lessee,  to
make  claims  and  demands  under  any  indemnity  hereunder  or under any other
Operative  Document on behalf of such Indemnified  Parties,  and Lessee shall be
obligated to make all payments  pursuant to any such indemnity to Lessor, to the
extent  claimed  by  Lessor  on behalf  of such  Indemnified  Parties  (it being
understood  that Lessee is entitled  to, and shall,  conclusively  rely upon the
instructions  of Lessor  with  respect to the  payment  of amounts  owing to any
Indemnified Party under the indemnities).

                9.5.4 Each Indemnified Party and Lessee will give prompt written
notice one to the other of any  liability of which such party has  knowledge for
which Lessee is, or may be, liable under  Section 9.1,  provided that failure to
give such notice will not prejudice or otherwise affect any of the rights of the
Indemnified Parties under Section 9.1.

                9.5.5  This  Agreement,  insofar  as it  provides  rights  to an
Indemnified  Party or Tax  Indemnitee,  constitutes  a separate  agreement  with
respect to each such Person and is enforceable directly by each such Person.

                9.5.6 Lessee will provide the relevant  Indemnified Party or Tax
Indemnitee with such information not within the control of such Person, as is in
Lessee's  control or is  reasonably  available to Lessee,  which such Person may
reasonably request and Lessee will otherwise cooperate with such Person so as to
enable such Person to defend any action, suit or proceeding brought against such
Person for which  Lessee is  responsible  under this  Section 9,  provided  that
nothing  contained  in this Section 9 shall be deemed to require any such Person
to  contest  any  Expense  or to assume  responsibility  for or  control  of any
judicial proceeding with respect thereto.

                9.5.7 The  obligations of Lessee in respect of all  indemnities,
obligations,  adjustments  and payments in this Section 9 are expressly made for
the benefit of, and shall be enforceable  by, the Indemnitee  entitled  thereto,
without declaring the Lease to be in default or taking other action hereunder.

                                       30
<PAGE>

           9.6  Indemnities Payable on After-Tax Basis

           Lessee  agrees  that,  with respect to any payment or indemnity to an
Indemnified Party or Tax Indemnitee under this Section 9 or Schedule 5, Lessee's
payment or indemnity  obligations shall be increased by an amount, if any, which
shall be necessary to hold such  Indemnified  Party or Tax  Indemnitee  harmless
from all Taxes required to be paid by such  Indemnified  Party or Tax Indemnitee
with respect to the receipt or accrual of such  payment or indemnity  (including
any payment by such Indemnified  Party or Tax Indemnitee of any Taxes in respect
to any  indemnity  payments  received  or  receivable  under  this  Section 9 or
Schedule 5).

      SECTION 10.  RISK OF LOSS, DESTRUCTION AND REQUISITION, ETC.

           10.1  Risk of Loss

           Throughout the Lease Term and until the Return, Lessee shall bear all
risk of loss,  damage,  theft or destruction of, or any other Event of Loss with
respect to, the Aircraft, the Airframe, each Engine and each Part.

           10.2  Event of Loss With Respect to the Aircraft

                10.2.1 Upon the  occurrence  of an Event of Loss with respect to
the Airframe or the Airframe and Engines,  Lessee shall  forthwith  (and, in any
event,  within three days after such  occurrence) give Lessor and Security Agent
written  notice of such Event of Loss.  By the  earlier of (1) 60 days after the
occurrence  of  such  Event  of Loss or (2) the  date on  which  the  applicable
insurance or requisition proceeds are paid, Lessee shall pay or cause to be paid
to Lessor in immediately  available funds the Stipulated Loss Value (but only to
the extent the full amount of the  Stipulated  Loss Value was not  obtained  and
applied by Lessor  pursuant  to Section  11.2.1 or  received  by Lessor from the
relevant Government Entity in connection with any requisition).

                10.2.2 Until the date on which the Stipulated Loss Value is paid
in full,  Lessee  shall be  obligated  to pay all Basic Rent and Renewal Rent as
scheduled and shall continue to perform all of its other  obligations  hereunder
and  under  the  other  Operative  Documents,  except  to  the  extent  rendered
impossible by the  occurrence of such Event of Loss or rendered,  in the opinion
of Lessor,  unnecessary.  If the  Stipulated  Loss Value is paid on a date other
than a Rent Payment Date,  Lessor shall refund or cause to be refunded to Lessee
any paid (but  unaccrued on such date) Basic Rent or Renewal Rent.  Upon receipt
of the full  amount of the  Stipulated  Loss  Value by Lessor  pursuant  to this
Section  10.2,  and if Lessee has paid all other amounts then due and payable by
Lessee under this Lease  Agreement and the other Operative  Documents,  then (1)


                                       31
<PAGE>

Lessor shall,  upon the joint  written  request of Lessee and each insurer which
contributed to the payment of the Stipulated Loss Value,  transfer to the Person
designated in such request title to the Aircraft  (including the Engines and all
Parts)  without  recourse  or  warranty  (except  as to absence of all rights of
Lessor and all Lessor Liens) and subject to the  disclaimer set forth in Section
5.1, (2) Lessor shall return to Lessee the Security Deposit or Letter of Credit,
as applicable, and any insurance, requisition,  condemnation or similar proceeds
received  after and  related to such  Event of Loss in excess of the  Stipulated
Loss Value and all Reserves previously paid by Lessee in respect of the Aircraft
(in each case, to the extent not previously applied in accordance with the terms
hereof) and (3) Lessee  shall be relieved  of its  obligations  under this Lease
Agreement  and the other  Operative  Documents  except those that are  expressly
stated to survive termination hereof and thereof.

           10.3  Event of Loss With Respect to an Engine

                10.3.1 Upon the  occurrence  of an Event of Loss with respect to
an Engine under  circumstances  in which there has not occurred an Event of Loss
with respect to the Airframe,  Lessee shall promptly (and, in any event,  within
three days after such  occurrence) give Lessor and Security Agent written notice
thereof  and  shall,  promptly  and,  in any  event,  within  90 days  after the
occurrence  of such Event of Loss (or,  if  earlier  the date of  expiration  or
termination of the Lease Term) and upon five days' prior written notice,  convey
or cause to be conveyed to Lessor, as replacement for the Engine with respect to
which such Event of Loss occurred, title to a Replacement Engine, free and clear
of all Liens (other than Permitted  Liens).  For all purposes hereof,  each such
Replacement Engine shall, after such conveyance,  be deemed part of the property
leased hereunder, and shall be deemed an "Engine."

                10.3.2  Prior  to  or  at  the  time  of  any  conveyance  of  a
Replacement  Engine,  Lessee shall, at its own expense,  comply with each of the
following requirements:

                      10.3.2.1 Furnish Lessor with a full warranty bill of sale,
in form and substance
satisfactory to Lessor, conveying to Lessor such Replacement Engine.

                      10.3.2.2 Execute one or more lease supplements  subjecting
such Replacement Engine to this
Lease Agreement.

     10.3.2.3  Without  limiting the  obligations of Lessee under Section 7.2.3,
cause the filing of such  instruments,  in form and  substance  satisfactory  to
Lessor,  as are necessary or advisable to establish and protect the interests of
Lessor  and the  Financing  Parties  in any such  Engine  (including  such lease
supplements).

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<PAGE>

                      10.3.2.4 Furnish Lessor with such evidence of the transfer
of title to such Replacement
Engine  to  Lessor  as  Lessor  may  reasonably  request,  including  that  such
Replacement Engine is free and clear of all Liens,  except Permitted Liens, such
evidence  to  include,  without  limitation,  an  opinion  of  Lessee's  counsel
addressed  to Lessor and opining  that such title has been so conveyed  and that
such Replacement Engine has been duly subjected to this Lease Agreement.

     10.3.2.5   Furnish  Lessor  with  such  evidence  of  compliance  with  the
provisions  of Sections 1.5 and 1.7 of Schedule 2 and Section 11 with respect to
such Replacement Engine as Lessor may reasonably request.

                      10.3.2.6  [Intentionally Left Blank]

     10.3.2.7  Assign to Lessor the benefit of all  manufacturers'  and vendors'
warranties with respect to such Replacement  Engine pursuant to an assignment in
form and substance reasonably acceptable to both parties.

                      10.3.2.8  [Intentionally Left Blank]

                      10.3.2.9  Furnish  Lessor with a  certificate  signed by a
duly authorized officer of Lessee
certifying that, upon  consummation of such  replacement,  no Default will exist
hereunder.

                      10.3.2.10 Furnish Lessor with an appraisal satisfactory to
Lessor which shall establish,
and a  certificate  of an aircraft  engineer  (who may be an employee of Lessee)
certifying,  that  such  Replacement  Engine  complies  with the  definition  of
"Replacement  Engine"  for  purposes  of this  Lease  Agreement  and each  other
Operative Document.

                10.3.3 Upon  compliance by Lessee with the  requirements of this
Section  10.3,  if no  Payment/Bankruptcy  Default  shall  have  occurred  or be
continuing,  Lessor  shall,  upon the joint  written  request of Lessee and each
insurer which contributed to the payment of any insurance  proceeds with respect
to the lost Engine,  transfer to the Person  designated in such request title to
such Engine without  recourse or warranty (except as to absence of all rights of
Lessor and all Lessor Liens) and subject to the  disclaimer set forth in Section
5.1, and such Engine shall thereupon cease to be an Engine leased hereunder.

                10.3.4 No Event of Loss with  respect to an Engine  shall result
in any reduction in Rent.

                Other than as provided in this  Section  10.3,  Lessee shall not
have the right to substitute any engine for an Engine.

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<PAGE>

           10.4  Requisition for Use of the Aircraft by any Government Entity

           In the  event  of the  requisition  for use of the  Airframe  and the
Engines  or  engines  installed  on the  Airframe  during  the Lease Term by any
Government  Entity not  constituting  an Event of Loss,  Lessee  shall  promptly
notify Lessor and the Security  Agent of such  requisition,  and all of Lessee's
obligations  under this Lease Agreement and each other  Operative  Document with
respect to the Aircraft shall continue to the same extent as if such requisition
had not occurred. All payments received by Lessor or Lessee from such Government
Entity for the use of such Airframe and Engines or engines during the Lease Term
shall be paid over to, or retained by,  Lessee if no Default shall have occurred
and be  continuing  and all  payments  received  by Lessor  or Lessee  from such
Government  Entity for the use of such Airframe and Engines or engines after the
end of the Lease  Term  shall be paid over to, or  retained  by,  Lessor (to the
extent they do not relate to the Lease Term).

      SECTION 11.  INSURANCE

           11.1  Scope of Insurances

           At all times  during  the Lease  Term,  and  until  the  Aircraft  is
returned to Lessor in the condition and manner  required by this Lease Agreement
and  each  other  Operative  Document,  Lessee  shall  maintain  or  cause to be
maintained  with  respect to the  Aircraft,  at its own expense,  the  following
described insurances:

                11.1.1  Liability Coverage

                Worldwide  (subject to standard  insurance  market  geographical
limits) aircraft liability and comprehensive  general  liability,  bodily injury
(including passengers),  property damage, non-owned aircraft liability, personal
injury,  cargo, mail, baggage,  hangarkeepers  liability,  comprehensive general
liability   (including   premises,   products,   and  completed  operations  and
contractual)  insurance (exclusive of Airframe  Manufacturer's product liability
insurance),  (1) in an amount not less than the  greater  of (a) the  amounts of
comprehensive  airline  liability  insurance  from  time to time  applicable  to
aircraft owned or leased and operated by Lessee of the same type as the Aircraft
and (b) the Stipulated Liability Coverage, provided that if Lessor, on the basis
of advice  received  from an  independent  insurance  advisor  of  international
reputation,  believes that such limit should be revised upwards based on amounts
then  customary in the industry  generally,  it shall be replaced by such higher
limit, if any, as such independent  insurance advisor may consider  appropriate,
(2) of the type and  covering  the same risks  usually  carried  by first  class
United  States air carriers  operating  similar  aircraft and engines on similar


                                       34
<PAGE>

routes and covering risks of the kind  customarily  insured  against by such air
carriers  with  respect to such  aircraft  operating  on such  routes,  (3) with
insurers of recognized  reputation,  responsibility  and  substantial  financial
capacity  reasonably  acceptable to Lessor and (4) that names each Insured Party
as an additional  insured and otherwise complies with the requirements set forth
in, and is  consistent  with the  issuance of a valid  Certificate  of Insurance
issued in the form of, Exhibit B.

                11.1.2  Hull Coverage

                Worldwide  (subject to standard  insurance  market  geographical
limits)  all-risk  ground  and  flight  aircraft  hull  insurance  covering  the
Aircraft,  and  all-risk  spares  insurance  covering  Engines  and Parts  while
temporarily  removed from the Aircraft  (including  while in transit) (1) for an
agreed value not less than the Stipulated Loss Value in respect of all-risk hull
insurance,  (2) for the full  replacement  value,  in respect of all-risk spares
insurance,  (3) of the type and covering the same risks usually carried by first
class  United  States air  carriers  operating  similar  aircraft and engines on
similar  routes with respect to such  aircraft  operating  on such  routes,  (4)
confirming  that the  insurers  shall not be entitled to replace the Aircraft or
Airframe upon the  occurrence of an insured Event of Loss with respect  thereto,
(5) with  insurers of  recognized  reputation,  responsibility  and  substantial
financial capacity reasonably  acceptable to Lessor and (6) that names Lessor or
the Security Agent, as designated from time to time by Lessor,  as the sole loss
payee for all amounts up to the Stipulated Loss Value,  names each Insured Party
as an additional insured,  provides that claims shall be adjusted and/or settled
only  with  the  consent  of  Lessor  (and  the  Security  Agent  if one is then
designated) and otherwise  complies with the  requirements  set forth in, and is
consistent with the issuance of a valid  Certificate of Insurance in the form of
Exhibit B.

                11.1.3  War Hull and Liability Coverage

                Worldwide  (subject to standard  insurance  market  geographical
limits) coverage of war-risk, hijacking and related perils insurance of the type
and covering  the same risks  usually  carried by first class United  States air
carriers  operating  similar  aircraft  and engines on similar  routes (1) in no
event in an amount less than (a) the Stipulated  Liability Coverage with respect
to  liability  coverage and (b) the  Stipulated  Loss Value with respect to hull
coverage and (c) full  replacement  value with respect to spares  coverage,  (2)
covering the perils of (a) war, invasion,  acts of foreign enemies,  hostilities
(whether   war  be  declared  or  not),   civil  war,   rebellion,   revolution,
insurrection,  martial law,  military or usurped power or attempts at usurpation
of power, (b) strikes,  riots, civil commotions or labor  disturbances,  (c) any
act of one or more  Persons,  whether or not agents of a  sovereign  power,  for
political  or  terrorist  purposes  and  whether  the loss or  damage  resulting


                                       35
<PAGE>

therefrom  is  accidental  or  intentional,  (d)  any  malicious  act  or act of
sabotage,  (e) confiscation,  nationalization,  seizure,  restraint,  detention,
appropriation,  requisition  for  title  or use by or  under  the  order  of any
government  (whether civil,  military or de facto) or public or local authority,
and (f) hijacking,  or any unlawful  seizure or wrongful  exercise of control of
any  aircraft  or crew in flight  (including  any  attempt  at such  seizure  or
control) made by any Person or Persons on board any aircraft  acting without the
consent of the insured  (including if committed by Persons  engaged in a program
of irregular  warfare for terrorist  purposes),  (3) with insurers of recognized
reputation,   responsibility  and  substantial   financial  capacity  reasonably
acceptable  to Lessor  and (4) that names each  Insured  Party as an  additional
insured and,  for hull and spares  coverage  only,  names Lessor or the Security
Agent, as designated from time to time by Lessor, as the sole loss payee for all
amounts  up to the  Stipulated  Loss Value and  provides  that  claims  shall be
adjusted  and/or settled only with the consent of Lessor (and the Security Agent
if one is then  designated),  and otherwise  complies with the  requirements set
forth  in,  and is  consistent  with  the  issuance  of a valid  Certificate  of
Insurance in the form of Exhibit B.

           11.2  Application of Proceeds of Hull Insurance

                11.2.1  Event of Loss

                All proceeds of hull  insurance  maintained in  compliance  with
this Section 11 and received as the result of the occurrence of an Event of Loss
shall be applied as follows:

                      11.2.1.1  Aircraft Event of Loss

     If such proceeds are received with respect to the Airframe (or the Airframe
and the Engines or engines installed thereon):

                           11.2.1.1.1   To  pay  all  amounts  owing  by  Lessee
hereunder (other than Stipulated Loss
Value) and under the other Operative Documents, including all expenses and costs
of Lessor due under Section 9 to Lessor in connection with such Event of Loss.

     11.2.1.1.2 In reduction of the  Stipulated  Loss Value payable by Lessee to
the extent not already paid by Lessee.

     11.2.1.1.3 With the remaining  amount,  if any, of such proceeds to be paid
to, and retained by, Lessee.



                                       36
<PAGE>

                      11.2.1.2  Engine Event of Loss

     If  such  proceeds  are  received  with  respect  to an  Engine  under  the
circumstances contemplated by Section 10.3:

     11.2.1.2.1 To pay all amounts owing by Lessee hereunder and under the other
Operative  Documents,  including  all  expenses  and costs of  Lessor  due under
Section 9 to Lessor in connection with such Event of Loss.

     11.2.1.2.2 With the remaining  amount,  if any, of such proceeds to be paid
to, and retained by,  Lessee,  provided  that Lessee  shall have  replaced  such
Engine with a Replacement Engine and otherwise complied with all of the terms of
Section 10.3.

                11.2.2  Damage

                All proceeds of hull  insurance  maintained in  compliance  with
this  Section 11 and  received  with respect to damage to or loss of any part of
the Aircraft not  constituting  an Event of Loss with respect to the Airframe or
an Engine shall be applied as follows:

     11.2.2.1 To pay all amounts  owing by Lessee  hereunder and under the other
Operative  Documents,  including  all  expenses  and costs of  Lessor  due under
Section 9 to Lessor in connection with such damage or loss.

     11.2.2.2 To  reimburse  Lessee for or pay  directly the cost of the related
repair  or  replacement,  where  such  repair or  replacement  is  performed  in
accordance with the terms hereof.

     11.2.2.3 With the remaining amount, if any, of such proceeds to be paid to,
and retained by, Lessee.

           11.3  Continuation of Liability Insurance

           For a period of two years after the last day of the Lease  Term,  and
at Lessee's cost, Lessee shall carry the following insurance coverage:

                11.3.1 During such portion of the two-year period following such
expiration or  termination  that Lessee is the owner or operator of the Aircraft
or any Engine (whether resulting from the purchase of the Aircraft or any Engine
from Lessor or otherwise), Lessee shall carry or cause to be carried, at its own
expense, liability insurance of the types and in the amounts required under this
Section 11 and providing that each Insured Party shall be named as an additional
insured thereunder.

                                       37
<PAGE>

                11.3.2 During each portion of the two-year period that Lessee is
not the owner or operator of the  Aircraft or any Engine,  Lessee shall carry or
cause to be carried  products  liability  insurance in the amount required under
this  Section 11 and  providing  that each  Insured  Party  shall be named as an
additional insured thereunder.

           11.4  Reports, Etc.

           Lessee shall  furnish,  or cause to be  furnished,  to Lessor and the
Security  Agent, if one is then  designated,  on or before the Delivery Date and
not later than the renewal date of any insurance,  and otherwise upon reasonable
request,  (1) a letter from the Insurance Brokers,  substantially in the form of
Exhibit C, and (2) a certificate  of insurance  issued by the Insurance  Brokers
substantially in the form of Exhibit B.

           11.5  Self-Insurance

           Lessee may not  self-insure  the risks required to be insured against
pursuant to this  Section 11,  provided  that Lessee may  self-insure  the risks
covered by the hull insurance  maintained in compliance  with this Section 11 by
way of deductible  (except in connection  with a total loss), in such amounts as
are customarily  self-insured with respect to aircraft of the same type and used
in the same manner as the  Aircraft by other  similar  air  carriers,  but in no
event in an amount  greater than the Stipulated  Deductible  Amount per aircraft
per occurrence.

           11.6  Change of Industry Practice

           In the  event  that  there  is a  material  change  in the  generally
accepted industry-wide practice with regard to the insurance of similar aircraft
or any material  change with respect to the insurance of similar  aircraft based
or  operated  in any  jurisdiction  in which the  Aircraft  may then be based or
operated (whether  relating to all or any of the types of insurance  required to
be effected  under this  Section 11),  such that Lessor,  on the basis of advice
received from an  independent  insurance  advisor of  international  reputation,
shall be of the reasonable  opinion that the insurance required pursuant to this
Section 11 is insufficient to protect the respective  interests of Lessor and/or
any other Insured Parties, the insurance  requirements set forth in this Section
11 shall be amended so as to include such  additional or varied  requirements as
Lessor (upon the advice of such  independent  insurance  advisor) may reasonably
consider appropriate.

           11.7  Change of Circumstance

           If at any  time,  Lessor  reasonably  considers  that any  change  in
circumstances is likely to occur, or has occurred and is continuing, which would


                                       38
<PAGE>

materially  affect or is  materially  affecting the insurance of the Aircraft or
Airframe,  then Lessor shall be entitled (without  prejudice to any other rights
which it may  have or  acquire  under  this  Agreement  or any  other  Operative
Document by reason of such change in  circumstances)  to require the Aircraft or
Airframe,  as the case may be, to remain at any  airport  or to  proceed  to and
remain at any airport  designated  by Lessor on the routes flown by Lessee until
Lessee  shall have  supplemented  or  replaced,  or  implemented  any  necessary
amendments to the terms of, such  insurance,  and  implemented  any  operational
changes,  which Lessor  reasonably  considers are required as the result of such
change in  circumstances.  Except in the case of exigent  circumstances,  Lessor
shall give Lessee notice prior to exercising its rights under this section.

           11.8  Negative Undertakings

           Lessee  shall not act or fail to act,  or cause,  permit or suffer an
act or failure to act,  whereby any insurance  required by this Section 11 would
or might  reasonably  be  expected to be limited or rendered in whole or in part
invalid,  unenforceable or otherwise not in full force and effect (including any
limitation  resulting  from  inaccuracy  of any  representation  or  warranty of
Lessee, or any illegal use of the Aircraft).

           11.9  Failure to Insure

           If at any time Lessee fails to maintain  insurance in compliance with
this  Section 11, each of Lessor and  Security  Agent shall be entitled  but not
bound to do any of the following (without prejudice to any other rights which it
may have under this Lease Agreement or any other Operative Document by reason of
such failure):

                11.9.1  To pay any  premiums  due or  effect  or  maintain  such
insurance or otherwise  remedy such failure in such manner as Lessor or Security
Agent, as the case may be,  considers  appropriate (and Lessee shall upon demand
reimburse  Lessor  or  Security  Agent,  as the  case  may be,  in full  for any
reasonable amount so expended) and/or

                11.9.2 At any time while such failure is continuing, require the
Aircraft  to remain at any airport  or, as the case may be,  upon  provision  by
Lessor or Security Agent, as the case may be, of insurance coverage satisfactory
to Lessee, proceed to and remain at any airport designated by Lessor or Security
Agent,  as the case may be,  until such  failure is  remedied  to  Lessor's  and
Security Agent's satisfaction.




                                       39
<PAGE>



           11.10  Additional Insurance

           Lessee  acknowledges  that  Lessor has an  insurable  interest in the
Aircraft.  Lessor shall have the right to obtain  insurance in its own name with
respect to such  insurable  interest.  Lessee will render Lessor all  reasonable
assistance  requested by Lessor in order that Lessor may adequately protect such
insurable  interest.  Lessee agrees that the maximum amounts payable to it or to
others for its account or to be applied in discharge of its  obligations  by any
underwriter or carrier of insurance  maintained by Lessee upon the occurrence of
an Event of Loss with respect to the Aircraft shall be limited to the Stipulated
Loss Value unless the  maintenance  of any such insurance in an amount in excess
of such Stipulated Loss Value in respect of Lessee's  insurable  interest in the
Aircraft does not prejudice  Lessor's  interests under the insurances  otherwise
required by this Section 11, or prevent Lessor from obtaining such insurances as
it requires,  in which event nothing  herein shall prevent Lessee from effecting
such additional insurance for its account. At Lessor's request, Lessee will have
any such additional  insurance coverage for the Aircraft amended so as to cover,
in addition,  Lessor's insurable interest therein, provided that Lessor, in such
case,  reimburses  Lessee in the amount of the  additional  premium  required to
provide such coverage for such insurable interest of Lessor.

           11.11  Insurance Required by Airframe Manufacturer

           Without  limiting  any other  provision  of this  Section 11,  Lessee
hereby assumes and undertakes to perform (to the exclusion of Lessor), and shall
comply with, the indemnity obligations of "Buyer" and the insurance requirements
applicable  to "Buyer"  under Part E to Exhibit C of the  Airframe  Manufacturer
Purchase Agreement as if Lessee were originally named "Buyer" therein.

      SECTION 12.  EVENTS OF DEFAULT

      A  fundamental  term and  condition of this  Agreement is that none of the
following  events shall occur during the Lease Term and that the  occurrence  of
any of the following events shall constitute an "Event of Default"  (whether any
such event shall be  voluntary  or  involuntary  or come about or be effected by
operation of Law or pursuant to or in compliance  with any  judgment,  decree or
order of any court or any order, rule or regulation of any Government Entity):

           12.1  Failure to Pay Scheduled Amounts

           Lessee shall have failed to make any periodic or scheduled payment in
accordance with this Lease Agreement or any other Operative Document  (including
any payment of Basic Rent or Renewal Rent) within three  Business Days after the
date the same shall have become due.

                                       40
<PAGE>

           12.2  Failure to Pay Demand Amounts

           Lessee  shall have  failed to make any demand  payment in  accordance
with this Lease Agreement or the other  Operative  Documents when the same shall
have become due after  demand and such  failure  shall  continue for 20 Business
Days.

           12.3  Insurance

                12.3.1 Lessee shall have failed to carry and maintain,  or cause
to be carried and maintained,  on or with respect to the Aircraft, any insurance
required to be maintained in accordance with the provisions of Section 11.

                12.3.2 The Aircraft shall be operated at a time in contravention
of any requirements or conditions of any insurance required under Section 11.

           12.4  Return

           Lessee  shall have  failed to return the  Aircraft  at the end of the
Lease Term as and in the condition required by Section 3 of Schedule 2.

           12.5  Certain Covenants

           Lessee shall have failed to comply with its obligations under Section
2.1, 4, 6.2.1,  6.2.3,  8 or 14.2, or Section 1.4, 1.6, 1.9.2 or 3.1 of Schedule
2.

           12.6  Other Covenants

           Lessee  shall have failed to comply  with,  observe or  perform,  and
shall fail to cause to be complied  with,  observed  and  performed,  any of its
covenants,  agreements  or  obligations  hereunder or under any other  Operative
Document,  except to the  extent  provided  above in this  Section  12, and such
failure shall  continue for 30 days after the earlier of (1) the date of written
notice thereof to Lessee or (2) the date Lessee assuming  exercise of reasonable
diligence, should have known of such failure.

           12.7  Representations and Warranties

           Any  representation or warranty made by Lessee herein or in any other
Operative  Document  shall have  proven to have been  incorrect,  inaccurate  or
untrue in any material  respect as of the time made and (i) such  incorrectness,
inaccuracy  or untruth  shall be  material  at any  relevant  time and (ii) with
respect to any  incorrectness,  inaccuracy  or untruth  that is capable of cure,
such  incorrectness,  inaccuracy or untruth shall have continued for a period of


                                       41
<PAGE>

30 days after the earlier of (y) the date of written notice thereof to Lessee or
(z) the date Lessee,  assuming  exercise of  reasonable  diligence,  should have
known of the same.

           12.8  Voluntary Bankruptcy, Etc.

           Lessee shall have (1) commenced any  proceeding or filed any petition
seeking  relief  under  any  applicable  bankruptcy,  insolvency,   liquidation,
administration,   receivership  or  other  similar  Law,  (2)  consented  to  or
acquiesced  in the  institution  of,  or failed to  contravene  in a timely  and
appropriate manner, any such proceeding or the filing of any such petition,  (3)
applied for or consented to the appointment of a receiver,  trustee,  custodian,
sequestrator  or similar  official for itself or for a  substantial  part of its
property or assets, (4) filed an answer admitting the material  allegations of a
petition filed against it in any such  proceeding,  (5) proposed or entered into
any  composition or other  arrangement,  or made a general  assignment,  for the
benefit of creditors or declared a  moratorium  on the payment of  indebtedness,
(6) become  insolvent or suspended  payments on, become  unable to,  admitted in
writing its inability to or failed generally to pay, any material portion of its
debts as they  become  due,  (7)  sought  its own  liquidation,  reorganization,
dissolution  or  winding  up or (8)  taken any  corporate  action  (including  a
petition, proposal or convening of a meeting by the shareholders or directors of
Lessee) for the purpose of effecting any of the foregoing.

           12.9  Involuntary Bankruptcy, Etc.

           A proceeding  shall have been commenced or a petition shall have been
filed, in either case, without the consent or application of Lessee, seeking (1)
relief in respect of Lessee or of a  substantial  part of its property or assets
under  any  applicable  bankruptcy,  insolvency,  liquidation,   administration,
receivership  or  similar  Law,  (2) the  appointment  of a  receiver,  trustee,
custodian, sequestrator or similar official for Lessee or for a substantial part
of its property or assets or (3) the liquidation, reorganization, dissolution or
winding up of Lessee; and such proceeding or petition shall continue undismissed
for 60 days or an order or decree  approving  or ordering  any of the  foregoing
shall be issued and shall not immediately be stayed.

           12.10  Illegality

           The  validity,  legality or  enforceability  of Lessee's  obligations
under this Agreement or any other Operative  Document is challenged by Lessee or
any other Person claiming by or through Lessee.

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<PAGE>

           12.11  Indebtedness or Lease Default

           (1)  Lessee  shall  have  failed to pay any  amount in respect of any
Indebtedness,  or any  interest  or  premium  thereon,  when due  (whether  by a
scheduled maturity, required prepayment,  acceleration, demand or otherwise), or
Lessee shall fail to perform or to comply with any other covenant,  agreement or
condition   contained  in  any   agreement  or   instrument   relating  to  such
Indebtedness,  and such failure to pay,  perform or comply shall  continue after
the applicable  grace period,  if any,  specified in the agreement or instrument
relating to such Indebtedness, if, as a result of any such failure, the maturity
of such  Indebtedness  is  capable  of being  accelerated  and if the  aggregate
outstanding amount of all such Indebtedness  exceeds,  in the aggregate together
with any other  Indebtedness  in respect of which  Lessee has failed to make any
payment or in respect of which Lessee has otherwise failed to perform or comply,
US$[ ]* (or the equivalent  thereof),  (2) Lessee shall breach or otherwise fail
to perform or comply  with any  representation,  warranty or covenant of any two
aircraft  leases and such  breaches  or  failures  to  perform  or comply  shall
continue after the applicable grace periods,  if any,  specified in such leases,
if, as a result of such breaches or failures, one or more aircraft lessors shall
have the  contractual  or other  legal  right to  terminate  the  leasing of the
relevant  aircraft or repossess,  or order the  redelivery of, such aircraft and
the  remaining  term of each such lease is greater  than six months,  or (3) any
"Event of  Default"  shall occur and be  continuing  under and as defined in any
Other Lease.

           12.12  Government Action

           Except as permitted  under Section 8.5, any Government  Entity or any
Person acting or purporting to act under governmental authority shall have taken
any action to condemn, seize or appropriate, or to assume custody or control of,
or to levy or sue out upon any distress or other execution  involving,  all or a
material part of the property of Lessee.

           12.13  Judgments

           One or more  judgments  are rendered  against  Lessee that either (1)
imposes or impose on Lessee an  obligation  or  obligations  for the  payment of
money in excess of US$[ ]* (or the  equivalent  thereof) in the aggregate or (2)
grants or grant to any Person  equitable  relief of any nature  that  could,  if
enforced,  be reasonably  expected to have a Material Adverse Effect and, in the
case of any such judgment or judgments, the same shall remain undischarged for a
period of 30 days or more,  during  which time  execution  of such  judgment  or
judgments  shall not be effectively  stayed nor adequate  bonding fully covering
such judgment or judgments exist.

                                       43
<PAGE>

      SECTION 13.  REMEDIES

      Upon the  occurrence of any Event of Default and so long as the same shall
be continuing,  Lessor shall have the right, effective upon notice to Lessee, to
terminate this Lease Agreement and each other Operative Document and at any time
thereafter  Lessor may do all or any of the following,  at its option and in its
sole  discretion (in addition to such other rights and remedies which Lessor may
have under applicable Law):

           13.1  Retake Possession

           Upon the  written  demand of Lessor and at  Lessee's  expense,  cause
Lessee to return promptly,  and Lessee shall return  promptly,  the Airframe and
Engines  or such part of the  Aircraft  as Lessor may so demand to Lessor or its
order in the manner and condition  required by, and otherwise in accordance with
all the  provisions  of, Section 3 of Schedule 2 as if such Airframe and Engines
or such part of the Aircraft were being  returned at the expiration of the Lease
Term, or Lessor at its option, may enter upon the premises where the Airframe or
an Engine, or such part of the Aircraft is located and take immediate possession
of and remove  the same  (together  with any  engine  which is not an Engine but
which is  installed  on the  Airframe,  subject  to all the rights of the owner,
lessor,  lienor or secured  party of such engine,  and such engine shall be held
for the account of any such owner, lessor,  lienor or secured party or, if owned
by Lessee,  may, at the option of Lessor, be exchanged with Lessee for an Engine
as if the original Engine had suffered an Event of Loss) by summary  proceedings
or otherwise,  and Lessee waives any right it may have under applicable Law to a
hearing prior to  repossession  of the Aircraft,  Airframe or any Engine or part
(and/or, at Lessor's option,  store the same at Lessee's premises until disposal
thereof by Lessor),  all without liability (except for Lessor's gross negligence
or  willful  misconduct)  accruing  to Lessor  for or by reason of such entry or
taking of  possession  or  removing  whether  for the  restoration  of damage to
property caused by such action or otherwise, and Lessor is hereby irrevocably by
way of security for Lessee's  obligations  under this Lease Agreement  appointed
attorney  for Lessee in causing the  redelivery  or in  directing  the pilots of
Lessee or other pilots to fly the Aircraft to the  designated  location and will
have all the powers and  authorizations  necessary  for taking that  action.  It
shall  be  deemed  to be an  "unlawful  act,"  under  Article  3(2) of the  Rome
Convention,  for Lessee to retain  possession of the  Aircraft,  Airframe or any
Engine or part after Lessor  shall have issued any written  demand for Lessee to
return the same pursuant to this Section 13.1.




                                       44
<PAGE>



           13.2  Termination or Enforcement

           Rescind  this  Lease  Agreement  and any  other  Operative  Document,
terminate this Lease Agreement and any other Operative  Document and/or exercise
any other right or remedy which may be available to it under  applicable  Law or
proceed by appropriate  court action to enforce the terms hereof and/or exercise
any other power,  right or remedy which may be available to Lessor  hereunder or
under  applicable Law.  Without  limiting the generality of the foregoing Lessor
shall have the right,  without need of any consent,  authorization  or action of
Lessee, to cause the Aircraft to be deregistered by the Aviation Authority,  and
to be made ready for export and to be exported  out of the Lessee  Jurisdiction,
and to cause all  rights of Lessee in  respect  of the  Aircraft  and this Lease
Agreement  and each other  Operative  Document  under or in  connection  with or
resulting  from the  registration  of the  Aircraft  or the  recordation  of the
Operative  Documents  with  the  Aviation  Authority  or  otherwise  under or in
connection  with or  resulting  from any Law in the Lessee  Jurisdiction,  to be
terminated and  extinguished.  In furtherance of the foregoing,  Lessor shall be
entitled  and  empowered to act in the name and in the place of Lessee as may be
necessary or desirable,  in Lessor's sole discretion,  including with respect to
the  execution  of documents  and  instruments,  to effect such  deregistration,
derecordation,   exportation,  termination  and  extinguishment.  Lessee  hereby
irrevocably  and by  way of  security  for  its  obligations  under  this  Lease
Agreement   appoints   Lessor  as  its  attorney  to  execute  and  deliver  any
documentation  and to do any  act or  thing  required  in  connection  with  the
foregoing.

           13.3  Application of Funds

           Without  limiting any other  provision of this Lease  Agreement or of
any other  Operative  Document (but subject to Sections 4.3 and 4.5),  Lessor or
Security  Agent shall have the right to continue  to hold the  Security  Deposit
and/or Letter of Credit,  as the case may be, and any other amounts  received or
held as  security  for  Lessee's  obligations  hereunder  and  under  any  other
Operative  Document,  and to withhold  or set off against all amounts  otherwise
payable  to  Lessee  hereunder  or under any other  Operative  Document  (all as
security for Lessee's obligations and liabilities under this Lease Agreement and
the other  Operative  Documents) and to use and apply in whole or in part any or
all of such amounts,  withholdings  and setoffs to and against such  obligations
and liabilities of Lessee (in whatever order and according to whatever  priority
Lessor or  Security  Agent,  as the case may be may  choose),  and any such use,
application or setoff shall be absolute, final and irrevocable.

                                       45
<PAGE>

           13.4  Damages

           In  addition to Lessor's  rights  under  Section  9.1,  recover  from
Lessee, and Lessee shall on demand pay damages to equal the sum of:

                13.4.1 All accrued and unpaid Rent payable  hereunder in respect
of any period  prior to Return of the  Aircraft to Lessor in the  condition  and
otherwise in the manner required under Section 3 of Schedule 2.

                13.4.2 All Expenses  incurred by Lessor in connection  with such
Event of Default or the  exercise of Lessor's  remedies  with  respect  thereto,
including  (1) all costs and expenses  incurred in  connection  with  recovering
possession  of the Airframe or any Engine or in placing such  Airframe or Engine
in the  configuration,  condition and repair required by Section 3 of Schedule 2
and all lost Rent payments during such recovery and  reconditioning  and (2) all
damages  incurred by Lessor in connection with such Event of Default,  including
all losses  (including  reasonable  lost profits)  suffered by Lessor because of
Lessor's  inability to place the Aircraft on lease with another  lessee on terms
as favorable to Lessor as this Lease Agreement or because  whatever use, if any,
to which  Lessor is able to put the Aircraft  upon its return to Lessor,  or the
amount received by Lessor upon a sale or other disposal of the Aircraft,  is not
as profitable to Lessor as leasing the Aircraft in accordance  with the terms of
this Lease Agreement would have been, including in each case, lost Rent payments
during any remarketing period.

      SECTION 14.  ASSIGNMENT OF LEASE

              14.1  Assignment by Lessor

              14.1.1  Right to Assign

                Lessor (and any  subsequent  permitted  assignee or  transferee)
shall  have the  right at any time to  transfer,  assign  (including  assign  as
security),  mortgage,  grant  participations in, or otherwise dispose of, all or
any portion of its right,  title and interest in and to this Lease Agreement and
any other  Operative  Document  and the  Aircraft  to any Person  (including  in
connection  with any conversion of the lease  transaction  contemplated  by this
Lease  Agreement to a  "leveraged  lease"  structure  or a  "headlease-sublease"
structure  with a new  headlease  which may be either a  "leveraged  lease" or a
"single-investor  lease").  The foregoing  right of Lessor is subject (1) in the
case of an Absolute Transfer (as defined below), to Lessor's compliance with the
requirements of Section 14.1.3 or absent such compliance, to receipt of Lessee's
consent (such consent not to be unreasonably  withheld) and (2) in all cases, to
Lessee  receiving from the transferee or assignee a covenant of quiet  enjoyment
substantially in the form of Section 6.1.1.

                                       46
<PAGE>

                14.1.2  Cooperation and Limitations

                Lessee shall comply,  at Lessor's  expense,  with all reasonable
requests of Lessor in connection with any such transfer,  assignment,  mortgage,
grant or other  disposition  (including in connection with any such conversion),
including the execution of all consents and  amendments in connection  therewith
and the reissuance of any insurance certificates,  broker's letters and broker's
acknowledgment required in connection therewith and otherwise, the reissuance or
reproduction of the documents required under Schedule 6, in each case, with such
changes as necessary to reflect such transfer,  assignment,  mortgage,  grant or
other disposition.

                14.1.3  Absolute Transfer

                In connection  with the transfer of Lessor's  entire interest in
this Lease  Agreement  (other  than as security  and other than with  respect to
indemnities  and  third-party   liability  insurance)  as  provided  herein  (an
"Absolute Transfer"):

     14.1.3.1  Lessor's  obligations  under this Lease  Agreement  and the other
Operative  Documents  shall  be  assumed  by the  transferee  or  assignee  (and
thereupon  the assigning  Lessor shall be released  from all of its  obligations
hereunder).

     14.1.3.2  Lessor  shall  transfer  (1) any cash  constituting  the Security
Deposit or (2) the Letter of Credit to such transferee or assignee.

     14.1.3.3 (1) Lessee's  rights under the  Operative  Documents  shall not be
materially adversely affected by such Absolute Transfer and (2) Lessee shall, as
an immediate consequence of such Absolute Transfer, incur no additional material
obligations  or  additional  material  (over  $[  ]*  in  the  aggregate)  costs
(financial or otherwise) hereunder or under any other Operative Document (unless
Lessor agrees to indemnify Lessee  therefor),  provided that neither a change in
the  Person or  Persons  to whom,  or for whose  benefit,  Lessee  performs  its
obligations under the Operative Documents,  nor an increase in the number of, or
change in the nature of, beneficiaries under any  indemnification,  insurance or
other obligation shall, in each case, constitute by itself or in the aggregate a
material  increase in the  obligations of Lessee under the Operative  Documents.
Notwithstanding   any  provision  to  the  contrary,   Lessor  agrees  that  the
requirements of this Section 14.1.3.3 shall also apply to any transfer by Lessor
of any part of its interest in this Lease Agreement.

                                       47
<PAGE>

     14.1.3.4 Such  transferee or assignee  shall make for the benefit of Lessee
all of the Lessor's representations set forth herein.

     14.1.3.5  Such  transferee  or  assignee  shall be a "citizen of the United
States" as defined in 49 U.S.C.  40102(a)(15)  and shall execute and record with
the Aviation Authority all such documents and instruments as may be necessary or
appropriate in order to preserve  without  interruption  the registration of the
Aircraft.

     14.1.3.6  Such  transferee  or  assignee  shall not be the  subject  of any
bankruptcy,  reorganization or similar  proceeding and shall have a Tangible Net
Worth not less than US$[ ]*.

     14.1.3.7 Such  transferee or assignee shall not be an air carrier that is a
competitor of Lessee.

Without  prejudice to any rights of any Indemnified Party hereunder or under any
other  Operative  Document in effect on or after the  occurrence  of an Absolute
Transfer, for a period of two years after such Absolute Transfer and at Lessee's
cost, if any,  Lessee shall comply with the terms and conditions of Section 11.3
with respect to the "Lessor" and each other  "Indemnified  Party" (as determined
immediately  prior to such Absolute  Transfer) as if the effective  date of such
Absolute Transfer were the last day of the Lease Term.

                14.1.4  Transfer as Security

                Without limiting the generality of Section 14.1.2, in connection
with any transfer, assignment, mortgage, grant, novation or other disposition as
security (a "Security Transaction") by Lessor of its interests hereunder,  under
the other Operative Documents or in the Aircraft,  to any Security Agent, Lessee
shall, at Lessor's expense:

     14.1.4.1 Enter into  documentation  customary for Security  Transactions of
the type so contemplated, and shall make such filings, and take such actions, as
may be requested by Lessor in connection therewith.

     14.1.4.2  Lessee and Lessor shall amend and/or  restate this  Agreement and
any relevant Operative Document to reflect the Security  Transaction,  including
(1) an  amendment  to the  definition  of  Operative  Documents  to include  the
documents and instruments to be entered into and/or delivered in connection with
the Security  Transaction,  and, in the case where the Security  Transaction  is
consummated   on  the  Delivery  Date,  the  inclusion  of  such  documents  and
instruments  in Section 1 of Schedule 6, and (2) amendments to the insurance and
indemnity  provisions  and  definitions,  in each case,  in order to provide the
Financing Parties with customary rights and protections.

                                       48
<PAGE>

           14.2  Assignment by Lessee

           Except  as  otherwise  expressly  provided  herein,  Lessee  may not,
without the prior  written  consent of Lessor,  which consent may be withheld in
Lessor's sole discretion,  assign (by express assignment,  merger, consolidation
or otherwise) any of its rights or delegate any of its obligations  hereunder or
under any other Operative Document.

           14.3  Successors and Assigns

           Subject  to the  foregoing,  the terms and  provisions  of this Lease
Agreement and each other  Operative  Document shall be binding upon and inure to
the benefit of Lessor and Lessee and their respective  permitted  successors and
assigns.

      SECTION 15.  NO SETOFF, COUNTERCLAIM, ETC.

      This Lease Agreement is a net lease and Lessee's obligation to pay Rent is
and shall be  absolute  and  unconditional  and shall not be abated,  suspended,
diminished,   reduced,  delayed,  discontinued  or  otherwise  affected  by  any
condition,  circumstance, act or event of any kind whatsoever,  including any of
the following:  (1) any right of setoff,  deduction,  counterclaim,  recoupment,
defense,   suspension,   deferment  or  other  right  (including  any  right  of
reimbursement)  which Lessee may have  against  Lessor,  Airframe  Manufacturer,
Engine  Manufacturer,  any Insured Party, any Inspecting  Party, any Indemnified
Party or any other Person for any reason whatsoever,  including any claim Lessee
may  have  for  the  foregoing,  any  present  or  future  Law to  the  contrary
notwithstanding, (2) the unavailability, interruption or cessation in use of the
Aircraft  for  any  reason,   including  (a)  any  requisition  thereof  or  any
restriction,   prohibition  or  curtailment  of,  interference  with,  or  other
restriction  against,  Lessee's  use,  operation or  possession  of the Aircraft
(whether by Law,  any  Government  Entity or other  Person  (other than  Lessor,
except as permitted by this Lease Agreement or any other  Operative  Document or
by law) or otherwise) and (b) any damage to or loss or destruction (including an
Event of Loss) of or to the Aircraft  and (c) the removal of the  Aircraft  from
service  to permit  the Final  Inspection,  Final  Maintenance  or Return of the
Aircraft, (3) any defect in the title, airworthiness,  merchantability,  fitness
for any purpose,  condition,  design,  specification or operation of any kind or
nature of the Aircraft,  or the ineligibility of the Aircraft for any particular
use or  trade  or for  registration  or  certification,  (4)  any  amendment  or
modification of or supplement to any of the Operative Documents,  any agreements
relating to any thereof or any other  instrument or agreement  applicable to the
Aircraft,  the  Airframe or any  Engine,  or any  assignment  or transfer of any
thereof,  or any  furnishing or acceptance of any  additional  security,  or any


                                       49
<PAGE>

failure or inability to perfect any security,  (5) any  insolvency,  bankruptcy,
reorganization,  arrangement,  readjustment of debt,  dissolution,  liquidation,
receivership,  administration  or  similar  proceedings  by or  against  Lessee,
Lessor,  any  Indemnified  Party  or  any  other  Person,  (6)  the  invalidity,
unenforceability  or impossibility  of performance of this Lease Agreement,  any
other  Operative  Document or any of the terms  hereof or  thereof,  the lack of
power or  authority  of Lessee to enter into this Lease  Agreement  or any other
Operative  Document,  or any other  defect in this Lease  Agreement or any other
Operative Document, (7) any breach by Lessor, any Indemnified Party or any other
Person of any representation,  warranty or covenant, express or implied, made or
alleged  to be made  to  Lessee,  or any  right,  claim,  bill,  action  or suit
whatsoever by or against or on the part of Lessee, including whether arising out
of legal action or otherwise, at law or in equity, whether affirmative, negative
or  defensive  in  nature  for  or  on  account  of  the   legality,   validity,
enforceability  or otherwise  arising as a result of (a) this Lease Agreement or
any  other  Operative  Document  or any of the  terms or  conditions  hereof  or
thereof,  (b) any express or implied warranty or (c) any contract,  agreement or
transaction  between  Lessee and Lessor or any other Person,  whether  direct or
indirect,   written  or  oral,  (8)  any  waiver,  consent,  change,  extension,
indulgence or any action or inaction under or in respect of any such  instrument
or agreement  or any  exercise or  nonexercise  of any right,  remedy,  power or
privilege in respect of any such instrument or agreement or this Lease Agreement
or any other Operative Document,  (9) any transfer of any interest in this Lease
Agreement  or any other  Operative  Document or in the Aircraft by Lessor or any
change of  ownership  of Lessor,  or (10) any other  circumstance,  happening or
event  whatsoever,  whether or not similar to the foregoing,  which but for this
provision  would or might  have the  effect of  terminating  or in any other way
affecting any obligation of Lessee hereunder,  it being the express intention of
Lessor and Lessee that all Rent and other amounts payable by Lessee hereunder or
under any other  Operative  Document shall be payable in all events,  unless the
obligation  to pay  the  same  shall  be  terminated  pursuant  to  the  express
provisions of this Lease Agreement.

      Lessee hereby waives,  to the extent  permitted by applicable Law, any and
all rights  which it may have or which at any time  hereafter  may be  conferred
upon Lessee, by Law or otherwise,  to terminate,  cancel, quit or surrender this
Lease Agreement or any other Operative Document,  or to abate,  suspend,  defer,
reduce or  otherwise  fail to comply in full with any  obligation  imposed  upon
Lessee hereunder or thereunder or in relation hereto, except termination of this
Lease Agreement in accordance  with the express  provisions  hereof.  If for any
reason  whatsoever  this Lease  Agreement is  terminated  in whole or in part by
operation of Law or otherwise,  except as specifically  provided herein,  Lessee
nonetheless  agrees to pay  Lessor an amount  equal to each Rent  payment at the


                                       50
<PAGE>

time such payment would have become due in accordance  with this Lease Agreement
and each other  Operative  Document had this Lease Agreement not been terminated
in whole or in part until  Return of the  Aircraft to Lessor.  Each Rent payment
made by Lessee  shall be final,  and Lessee shall not seek to recover all or any
part of any such payment for any reason whatsoever.

      Nothing in this  Section 15 shall be  construed  to limit any right Lessee
may have to  independently  pursue any claim it may have  against  Lessor or any
Indemnified Party under this Lease Agreement, applicable Law or otherwise.

      SECTION 16.  FURTHER ASSURANCES, ETC.

           16.1  Further Assurances

           Without  limiting the other  obligations  and  liabilities  of Lessee
under this Lease Agreement and the other Operative  Documents,  Lessee agrees to
promptly  and duly  execute  and deliver to Lessor such  further  documents  and
assurances  and take  such  further  action  as  Lessor  may  from  time to time
reasonably  request in order to effectively  carry out the intent and purpose of
this Lease Agreement and the other Operative Documents and to establish, perfect
and protect the rights and  remedies  created or intended to be created in favor
of Lessor and each Financing  Party  hereunder and thereunder and if applicable,
any Security Agent under any Security Transaction.

           16.2  Lessor's Performance of Lessee's Obligations

           If Lessee  fails to make any  payment  of Rent or fails to perform or
comply with any  agreement,  covenant or obligation  contained  herein or in any
other Operative Document, Lessor or Security Agent shall have the right, but not
the  obligation,  at its  election  and  without  waiver of any of its rights or
remedies against Lessee,  to perform or comply with such covenant,  agreement or
obligation  and/or  pay such  amount,  and the  amount of such  payment  and any
Expenses incurred by Lessor or Security Agent, as the case may be, in connection
with such  payment or the  performance  of or  compliance  with such  agreement,
covenant or obligation,  as the case may be,  together with interest at the Past
Due Rate,  shall be payable by Lessee to Lessor or Security  Agent,  as the case
may be, upon demand as Supplemental  Rent. The taking of any action by Lessor or
Security  Agent,  as the case may be,  pursuant to this  Section  16.2 shall not


                                       51
<PAGE>

constitute a waiver or release of any  obligation  of Lessee  hereunder or under
any other Operative  Document nor a waiver of any Default which may arise out of
Lessee's nonperformance of such obligation,  nor an election or waiver by Lessor
or  Security  Agent,  as the case may be, of any right or  remedy  available  to
Lessor  under or in  relation  to this Lease  Agreement  or any other  Operative
Document.

           16.3  No Implied Waivers; Rights Cumulative

                16.3.1 No failure  on the part of Lessor or any other  Person to
exercise and no delay in exercising any right,  power, remedy or privilege under
any  Operative  Document  or  provided  by  statute  or at Law or in  equity  or
otherwise  shall  impair,  prejudice  or  constitute a waiver of any such right,
power,  remedy or  privilege or be construed as a waiver of any Event of Default
or as an acquiescence  thereto,  nor shall any single or partial exercise of any
such right, power,  remedy or privilege impair,  prejudice or preclude any other
or further exercise thereof or the exercise of any other right, power, remedy or
privilege. No acceptance of partial payment or performance shall, whether or not
expressly  stated,  be or be deemed to be a waiver of any Event of Default  then
existing or a waiver or release of full payment and performance. No notice to or
demand on Lessee shall in any case entitle Lessee to any other or further notice
or demand in other or similar  circumstances or constitute a waiver of the right
of  Lessor  or  any  other  Person  to  any  other  or  further  action  in  any
circumstances without notice or demand.

                16.3.2 Each and every  right,  power,  remedy and  privilege  of
Lessor  and any other  Person  under  the  Operative  Documents  (1) shall be in
addition to and not in limitation of, or in  substitution  for, any other right,
power,  remedy or privilege under any Operative Document or at law or in equity,
(2) may be  exercised  from time to time or  simultaneously  and as often and in
such order as may be deemed expedient by Lessor and such Person and (3) shall be
cumulative  and not  mutually  exclusive,  and the  exercise of one shall not be
deemed a waiver of the right to exercise any other.

      SECTION 17.  [INTENTIONALLY LEFT BLANK]

      SECTION 18.  GOVERNING LAW AND JURISDICTION

           18.1  New York Law

           THIS  LEASE  AGREEMENT  AND EACH  OTHER  OPERATIVE  DOCUMENT,  UNLESS
OTHERWISE  EXPRESSLY  PROVIDED  THEREIN,  SHALL IN ALL  RESPECTS,  INCLUDING ALL
MATTERS OF CONSTRUCTION,  VALIDITY AND PERFORMANCE, BE GOVERNED BY AND CONSTRUED
AND  ENFORCED  IN  ACCORDANCE  WITH THE  INTERNAL  LAWS OF THE STATE OF NEW YORK
APPLICABLE  TO  CONTRACTS  ENTERED INTO IN THAT STATE  BETWEEN  CITIZENS OF THAT
STATE AND TO BE  PERFORMED  WHOLLY  WITHIN THAT STATE  WITHOUT  REFERENCE TO ANY
RULES GOVERNING CONFLICTS OF LAWS.

                                       52
<PAGE>

           18.2  Nonexclusive Jurisdiction in New York

           Lessee and Lessor each  hereby  irrevocably  consents  that any legal
action or proceeding  against it or any of its assets arising out of or relating
to this Lease  Agreement or any other  Operative  Document may be brought in any
jurisdiction  where it or any of its assets  may be found,  in the courts of the
United States of America for the Southern  District of New York or in the courts
of the State of New York located in Manhattan, as the party bringing such action
or proceeding may elect,  and by execution and delivery of this Lease  Agreement
each of Lessor and Lessee hereby irrevocably  submits to and accepts with regard
to any such  action or  proceeding,  for itself  and in  respect of its  assets,
generally and  unconditionally,  the  jurisdiction  of the aforesaid  courts and
irrevocably agrees to be bound by any judgment rendered thereby.  Nothing herein
shall limit the right of Lessor and Lessee  from  bringing  any legal  action or
proceeding or obtaining  execution of judgment against Lessee or Lessor,  as the
case may be, in any other appropriate  jurisdiction or concurrently in more than
one  jurisdiction.  Lessee and Lessor further agree that a final judgment in any
action or proceeding  arising out of or relating to this Lease  Agreement or any
other  Operative  Document  shall be conclusive and may be enforced in any other
jurisdiction  within or  outside  the  United  States of  America by suit on the
judgment,  a certified or exemplified copy of which shall be conclusive evidence
of the fact and the amount of the indebtedness or liability  therein  described,
or in any other  manner  provided  by Law.  Each of  Lessee  and  Lessor  hereby
irrevocably  waives, to the fullest extent permitted by Law, any objection which
it may now or  hereafter  have to the  laying  of venue of any  suit,  action or
proceeding  arising  out of or  relating  to this Lease  Agreement  or any other
Operative  Document  brought  in any court in or of the  State of New York,  and
hereby  further  irrevocably  waives  any claim  that any such  suit,  action or
proceeding  brought in any court in or of the State of New York has been brought
in an inconvenient forum.

           LESSEE  AND  LESSOR  HEREBY  WAIVE  TRIAL  BY  JURY  IN ANY  JUDICIAL
PROCEEDING  TO WHICH THEY ARE PARTIES  INVOLVING,  DIRECTLY OR  INDIRECTLY,  ANY
MATTER  ARISING  OUT OF OR  RELATING TO THIS  AGREEMENT  OR ANY OTHER  OPERATIVE
DOCUMENT.

           18.3  Process Agent

           18.3.1 Lessee shall  maintain the process  agent  specified for it in
Section 18.5, or such other Person  located  within the State of New York as may
be acceptable to Lessor, as its agent for service of process in the State of New
York during the Lease Term and six months thereafter,  at Lessee's sole cost and
expense.

                                       53
<PAGE>






           18.3.2 Lessor shall  maintain the process  agent  specified for it in
Section 18.5, or such other Person  located  within the State of New York as may
be acceptable to Lessee, as its agent for service of process in the State of New
York during the Lease Term and six months thereafter,  at Lessor's sole cost and
expense.

           18.4  Waiver of Immunity

           Each of Lessor and Lessee irrevocably and unconditionally agrees that
if Lessee or Lessor,  respectively,  brings legal proceedings  against it or its
assets in relation to this  Agreement  no immunity  from such legal  proceedings
(which  will be deemed to include  suit,  attachment  prior to  judgment,  other
attachment,  the obtaining of judgment,  execution or other enforcement) will be
claimed by or on behalf of itself or with respect to its assets.  Each of Lessor
and Lessee further  irrevocably and unconditionally (1) waives any such right of
immunity  which it or its assets now have or may in the future  acquire  and (2)
consents  generally  in  respect  of any such  proceedings  to the giving of any
relief  or the  issue  of any  process  in  connection  with  such  proceedings,
including the making,  enforcement or execution against any property  whatsoever
(irrespective  of its use or intended use) of any order or judgment which may be
made or given in such proceedings.

           18.5  Service of Process

                18.5.1  Lessee  hereby  irrevocably  designates,   appoints  and
empowers CT Corporation, as its authorized agent to receive on its behalf and on
behalf of its property  service of copies of the summons and  complaint  and any
other process which may be served in any action or proceeding  arising out of or
relating to this Lease Agreement or any other Operative  Document.  Such service
may be made by  mailing  or  delivering  a copy of such  process  in care of the
appropriate  process  agent  set  forth  above  and  Lessee  hereby  irrevocably
authorizes  and directs its  designated  process agent to accept such service on
its behalf.  Lessee further agrees that failure by a process agent  appointed in
accordance  with the  foregoing  terms to notify Lessee of the process shall not
invalidate  the proceeding  concerned.  Notwithstanding  the foregoing,  nothing
herein  shall  affect the rights of either  party to serve  process in any other
manner permitted by Law.

                18.5.2  Lessor  hereby  irrevocably  designates,   appoints  and
empowers National Corporate Research, Ltd. as its authorized agent to receive on
its behalf and on behalf of its  property  service of copies of the  summons and
complaint  and any other process which may be served in any action or proceeding
arising  out of or  relating  to this  Lease  Agreement  or any other  Operative
Document.  Such  service  may be made by  mailing or  delivering  a copy of such
process  in care of the  appropriate  process  agent set forth  above and Lessor
hereby irrevocably authorizes and directs its designated process agent to accept


                                       54
<PAGE>

such  service on its behalf.  Lessor  further  agrees that  failure by a process
agent  appointed in accordance  with the foregoing terms to notify Lessor of the
process shall not  invalidate  the  proceeding  concerned.  Notwithstanding  the
foregoing,  nothing  herein  shall  affect the  rights of either  party to serve
process in any other manner permitted by Law.

      SECTION 19.  MISCELLANEOUS

              19.1  Construction

              19.1.1  In  this  Lease   Agreement  and  each  other  Operative
Document, unless expressly provided otherwise, a reference to:

     19.1.1.1 Each of "Lessor" or "Lessee" or any other Person includes, without
prejudice  to the  provisions  of this Lease  Agreement  or any other  Operative
Document, any successor in interest to it and any permitted assignee and, in the
case of any Government Entity, any Government Entity succeeding to all or any of
its functions.

     19.1.1.2 The word  "including"  shall be construed as  "including,  without
limitation."

     19.1.1.3 Words importing the plural include the singular and vice versa.

     19.1.1.4  Any  document  includes  that  document as  amended,  modified or
supplemented  from time to time in accordance  with its terms,  and any document
entered into in substitution or replacement therefor.

     19.1.1.5 The words "this Lease," "this  Agreement," "this Lease Agreement,"
"hereby,"  "herein,"  "hereto,"  "hereof" and  "hereunder"  and words of similar
import  when used in this Lease  Agreement  refer to this Lease  Agreement  as a
whole  including the Schedules and Exhibits,  and all Annexes,  Attachments  and
Supplements  thereto,  and  not to  any  particular  provisions  of  this  Lease
Agreement.

     19.1.1.6 A Section or an Exhibit or a Schedule is a reference  to a section
of, or an exhibit or a schedule to, this Lease Agreement.

     19.1.2  Headings  used in this Lease  Agreement  and each  other  Operative
Document  are  for  convenience  only  and  shall  not in  any  way  affect  the
construction  of, or be taken into  consideration  in  interpreting,  this Lease
Agreement or such Operative Document.

                                       55
<PAGE>

           19.2  Amendments

           No provision of this Lease Agreement or any other Operative  Document
may be amended,  changed, waived or discharged orally, but only by an instrument
in writing specifying the provision intended to be amended,  changed,  waived or
discharged and signed by each party hereto or thereto;  and no provision of this
Lease Agreement or any other Operative Document shall be varied, contradicted or
explained  by any oral  agreement,  course of  dealing or  performance  or other
matter not  specifically set forth in an agreement in writing and signed by each
party hereto or thereto.

           19.3  Severability

           If any provision  hereof or of any Operative  Document should be held
invalid,  illegal or unenforceable in any respect in any jurisdiction,  then, to
the extent  permitted by Law (1) all other  provisions  hereof or thereof  shall
remain in full force and effect in such  jurisdiction  and (2) such  invalidity,
illegality  or  unenforceability  shall not affect  the  validity,  legality  or
enforceability of such provision in any other jurisdiction.

           19.4  Counterparts

           This Lease  Agreement,  any  Operative  Document and any  amendments,
waivers, consents or supplements hereto or thereto may be executed in any number
of  counterparts,  each of  which  when so  executed  shall be  deemed  to be an
original,  and all of which counterparts,  taken together,  shall constitute one
and the same instrument.

           19.5  Chattel Paper

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

           19.6  Time of the Essence

           Subject only to the periods of grace  referred to herein,  time shall
be of the essence as regards the performance by Lessee of its obligations  under
this Lease Agreement and each other Operative Document.

                                       56
<PAGE>

           19.7  Notices

           All notices,  requests and other communications to Lessee,  Lessor or
any other Person  hereunder or under any other  Operative  Document  shall be in
writing (for this purpose,  "writing"  includes  telecopy or similar  electronic
transmissions),  shall refer  specifically to this Lease Agreement or such other
Operative  Document,  as the case may be, and shall be  personally  delivered or
sent by telecopy or other similar electronic facsimile transmission,  or sent by
overnight  courier  service  (e.g.,  Federal  Express),  in  each  case  to  the
respective  address and  telecopy  number  specified in Schedule 4 or such other
address or telecopy number as such Person may hereafter specify by notice to the
other  party or to the  parties  hereto.  Each  such  notice,  request  or other
communication  shall be effective  when  received or, if by  telecopier or other
similar  electronic  transmission,  when  "confirmed" by the sending telecopy or
similar  machine and written  evidence of such  confirmation is produced by such
machine.

           19.8  Entire Agreement

           This Lease  Agreement  constitutes the entire  agreement  between the
parties  concerning  the subject  matter  hereof,  and  supersedes  all previous
proposals, agreements,  understandings,  negotiations and other written and oral
communications in relation hereto. The parties  acknowledge that there have been
no representations,  warranties,  promises, guarantees or agreements, express or
implied, except as set forth herein.

           19.9  Documentation Costs

           Whether or not the transactions  contemplated hereby are consummated,
each of Lessor and Lessee  shall bear and be  responsible  for its own costs and
expenses incurred in connection with the negotiation, preparation, execution and
delivery  of this Lease  Agreement  and the other  Operative  Documents  and the
consummation of the transactions  contemplated  hereby and thereby,  and neither
Lessor or Lessee shall have any right of  reimbursement  or  indemnity  for such
costs and expenses as against each other.

           19.10  Language

           All  notices to be given  under this Lease  Agreement  and each other
Operative  Document  shall be in  English.  All  documents  delivered  to Lessor
pursuant to this Lease  Agreement and each other  Operative  Document will be in
English,  or if not in  English,  will be  accompanied  by a  certified  English
translation.  The  language  of this Lease  Agreement  and each other  Operative
Document, and the language of its interpretation, is English. If there is any


                                       57
<PAGE>

inconsistency  between the English version of this Lease Agreement or any other
Operative Document and any version in any other language, whether or not such 
other version is executed by Lessor, Lessee, the English version will prevail 
for all purposes.


                     [This space intentionally left blank.]




                                       58
<PAGE>



Lessee and Lessor  have  caused  this Lease  Agreement  to be  executed by their
respective  officers as of the day and year first above written and is delivered
in New York State.

BOULLIOUN PORTFOLIO FINANCE I, INC.



By:
    Title:


WESTERN PACIFIC AIRLINES, INC.



By:
    Title:


               [THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.]

               [RECEIPT  OF THIS ORIGINAL  COUNTERPART  OF THE  FOREGOING  LEASE
               AGREEMENT IS HEREBY ACKNOWLEDGED ON THIS ____ DAY OF _____, 1997.


BOULLIOUN PORTFOLIO FINANCE I, INC.



By:
    Title:




<PAGE>




                                                                      Schedule 1
                                                                     Definitions
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                   SCHEDULE 1
                                   DEFINITIONS
                                   (MSN 28869)


This Schedule is a schedule to the Lease Agreement (MSN 28869), dated as of June
27, 1997 (the "Lease  Agreement"),  between Boullioun  Portfolio Finance I, Inc.
and Western Pacific Airlines, Inc. and is divided into three sections, the first
section  containing   transaction  specific  definitions,   the  second  section
containing the majority of the  definitions  affecting the technical  aspects of
this Lease Agreement  (e.g.,  the maintenance and operation of the Aircraft) and
the third section containing the remainder of the definitions used in this Lease
Agreement.

      Section 1.  Transaction Specific Definitions

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

      "Airframe Manufacturer" shall mean The Boeing Company.

      "Airframe  Manufacturer  Purchase  Agreement"  shall have the  meaning set
forth in Section 1 of the Novation Agreement.

      "Airframe  Reserve  Amount" shall have the meaning set forth in Schedule 3
to the Lease Agreement.

      "APU Reserve Amount" shall have the meaning set forth in Schedule 3 to the
Lease Agreement.

      "Assumed Hour-to-Cycle Ratio" shall mean 1.7:1.

     "Aviation  Authority" shall mean the U.S.  Federal Aviation  Administration
and any Person succeeding to all or any of its functions.

      "Basic Lease Term  Termination  Date" shall mean the tenth  anniversary of
the Delivery Date.

      "Basic Rent Amount"  shall have the meaning set forth in Schedule 3 to the
Lease Agreement.

      "Business Day" shall mean a day (other than a Saturday or Sunday) on which
banks are not required or  authorized to close in Denver or Seattle or one other
jurisdiction (in the United States or England),  if any, designated to Lessee by
Lessor in writing from time to time.

                                       1
<PAGE>

      "Commitment Termination Date" shall mean July 31, 1997.

      "Damage Notice  Threshold"  shall have the meaning set forth in Schedule 3
to the Lease Agreement.

      "Delivery  Location"  shall  mean  a  Boeing  facility  in  the  State  of
Washington or such other  location,  if any, as Lessor and Lessee shall agree in
writing.

      "Documentation  Security Deposit  Installment"  shall have the meaning set
forth in Schedule 3 to the Lease Agreement.

      "Engine Life Limited Part Reserve Amount" shall have the meaning set forth
in Schedule 3 to the Lease Agreement.

      "Engine Manufacturer" shall mean CFM International, Inc.

      "Engine  Overhaul  Reserve  Amount"  shall have the  meaning  set forth in
Schedule 3 to the Lease Agreement.

      "Initial Security Deposit Installment" shall have the meaning set forth in
Schedule 3 to the Lease Agreement.

      "Insurance  Brokers"  shall mean Marsh  McLennan or any other  independent
firm of internationally  recognized  insurance brokers reasonably  acceptable to
Lessor.

      "Landing Gear Reserve Amount" shall have the meaning set forth in Schedule
3 to the Lease Agreement.

      "Lessee  Jurisdiction"  shall mean the United States,  which shall include
the  nation  and  national  government  of,  any  Government  Entity  affiliated
therewith  or  subordinate  thereto,  any  political  subdivision  thereof,  any
regional or local  government  authority  therewithin or any  Government  Entity
affiliated  with or  subordinate  to any such  political  or  regional  or local
government authority.

      "Lessor Jurisdiction" shall mean the State of Washington, U.S.A.

      "Permitted  Jurisdiction"  shall  mean  any  country  (1)  that is not the
subject of sanctions under the U.S.  International  Economic  Emergency Partners
Act or under any UN  Security  Council  directives,  (2) that is not  restricted
under the U.S.  Trading with the Enemy Act and (3) the operation of the Aircraft
to or from  which is not a  violation  of any Law  applicable  to the  Aircraft,
Lessee or Lessor.

                                       2
<PAGE>

      "Renewal Lease Term  Termination  Date" shall mean the eleventh or twelfth
anniversary  of the Delivery Date,  depending upon whether Lessee  exercises its
option to extend the Lease Term once or twice.

      "Renewal  Rent  Amount"  shall  mean  the  amount  determined  as  such in
accordance  with  Section 3.2 of the Lease  Agreement,  which shall be the fixed
monthly cash rental reasonably  achievable by Lessor in the worldwide  operating
lease market (1) on the Renewal Rent  Determination  Date, (2) for the Aircraft,
(3) from a lessee in a similar  financial  condition  to Lessee's  then  current
financial  condition  and  otherwise  similar to  Lessee,  (4) for such one year
renewal period and (5) in an arms-length  transaction between an informed lessee
under no  compulsion  to lease and an informed  lessor  under no  compulsion  to
lease, and shall be determined assuming that the Aircraft has been maintained in
compliance with the  requirements of the Lease Agreement and the other Operative
Documents  and complies  with all Return  requirements  of the Lease  Agreement,
including the requirements of Annex 1 to Schedule 2 to the Lease Agreement.

      "Reserve Inflation Rate" shall have the meaning set forth in Schedule 3 to
the Lease Agreement.

      "Return Location" shall mean the location of the Final Maintenance or such
other location chosen by Lessor and reasonably acceptable to Lessee.

      "Scheduled  Delivery  Date" shall mean the date Airframe  Manufacturer  is
ready,  willing  and able to  deliver  the  Aircraft  pursuant  to the  Airframe
Manufacturer  Purchase  Agreement (local time at the Delivery  Location),  which
delivery date is scheduled, as of the date hereof, for June 1997.

      "State of Registration" shall mean the United States.

      "Stipulated  Loss Value" shall have the meaning set forth in Schedule 3 to
the Lease Agreement.

      "Stipulated  Deductible  Amount"  shall  have  the  meaning  set  forth in
Schedule 3 to the Lease Agreement.

      "Stipulated  Liability  Coverage"  shall  have the  meaning  set  forth in
Schedule 3 to the Lease Agreement.

      Section 2.  Technical Definitions

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

                                       3
<PAGE>

      "AD" shall mean any  airworthiness  directive or other  requirement of the
Aviation  Authority  applicable to the Airframe,  either Engine, any Part or the
Aircraft Documentation.

      "Aircraft Documentation" shall mean the documentation described in Section
1.5 of Schedule 2 to the Lease Agreement.

      "Airframe"  shall mean,  collectively,  (1)  Airframe  Manufacturer  Model
737-33R  airframe  (except only  Engines or engines from time to time  installed
thereon),  bearing Airframe  Manufacturer's  serial number 28869 and (2) any and
all Parts so long as the same shall be  incorporated or installed in or attached
to such  airframe,  and any and all Parts removed  therefrom so long as title to
such removed Parts shall remain vested in Lessor in accordance with the terms of
Section 1.3 of Schedule 2 to the Lease Agreement and all Loose Equipment.

      "Airframe Cycle" shall mean one takeoff and landing of the Airframe.

      "Airframe  Flight Hour" shall mean each hour or part thereof elapsing from
the  moment  the wheels of the  Airframe  leave the ground on takeoff  until the
wheels of the Airframe touch the ground on landing  following  such flight.  For
purposes of all calculations under the Operative  Documents measured in Airframe
Flight Hours,  such Airframe Flight Hours (or parts thereof) shall be rounded to
the nearest one-tenth of an hour.

      "Airframe  7C/SI Check" shall mean a "7C/SI  Check,"  including  all lower
level checks, CPCP checks, typical component overhaul, repairs and overhauls and
inspections  normally included at the 7C/SI interval (as defined in the Airframe
Manufacturer's  Maintenance  Planning Document),  all non-recurring work, flight
deck and Cabin interior refurbishment and typical cleaning and cosmetic repairs.

      "Airworthiness Certificate" shall mean a valid, current transport category
airworthiness  certificate  issued in respect of the  Aircraft  by the  Aviation
Authority.

      "Approved  Maintenance  Performer" shall mean Lessee,  TRAMCO,  Inc., G.E.
Struthers and any  maintenance  performer  having a valid repair station license
and  otherwise  approved by the  Aviation  Authority  and approved in writing in
advance by Lessor.

      "Approved   Maintenance   Program"   shall  mean  the  Lessee's   Aviation
Authority-approved written block maintenance,  inspection and repair program and
schedule for Airframe Manufacturer 737-300 aircraft,  designed and maintained in
accordance  with Airframe  Manufacturer's  Maintenance  Planning  Document as in
effect from time to time and in accordance with Engine  Manufacturer's and Parts
manufacturers' respective maintenance planning documents and maintenance manuals
as in effect from time to time,  including Lessee's current approved maintenance


                                       4
<PAGE>

schedule and the CPCP, as such  maintenance,  inspection  and repair  program is
approved by Lessor pursuant to Section 1.10 of Schedule 6 of the Lease Agreement
and as amended from time to time in accordance with the Lease Agreement, or such
other written maintenance,  inspection and repair program, if any, as Lessor and
Lessee shall agree in writing, in either case, as in effect from time to time.

      "APU" shall mean (1) the auxiliary power unit identified by manufacturer's
serial number in the  Acceptance  Certificate  and (2) any auxiliary  power unit
substituted  for  such  auxiliary  power  unit  in  accordance  with  the  Lease
Agreement.

      "APU  Basic  Shop  Visit"  shall  mean,  with  respect  to the APU, a core
overhaul as defined by the APU manufacturer.

      "APU Hour" shall mean each hour or part thereof from the moment the APU is
started until the APU is turned off. For purposes of all  calculations  measured
in APU hours (or parts thereof) shall be rounded to the nearest  one-tenth of an
hour.

      "Cabin"  shall  mean the  passenger  compartment  and all doors  (interior
only),  windows,  interior panels,  storage bins,  lights,  seats,  seat covers,
carpets, lavatories, galleys, galley equipment, closets, flight attendant seats,
passenger communications and entertainment systems (with respect to which Lessor
has or should,  in accordance with the Lease Agreement,  have title),  emergency
and miscellaneous equipment, seat tracks and floor areas.

      "CPCP"  shall  mean  a  Corrosion  Prevention  and  Control  Program  that
establishes minimum  requirements for the Aircraft,  incorporating,  among other
things, the recommendations of Airframe  Manufacturer as described in the Boeing
Maintenance Planning Document and the mandatory requirements  established by FAA
AD 90-25-01 and Airframe Manufacturer document D6-38528.

     "Delivery  Documentation"  shall have the meaning set forth in Section 1 of
the Novation Agreement.

      "Engine" shall mean (1)(a) either of Engine  Manufacturer Model CFM56-3C-1
engines  listed  by  Engine  Manufacturer's  serial  numbers  in the  Acceptance
Certificate and originally  installed on the Airframe at the time of delivery to
Lessee  hereunder  whether or not from time to time thereafter  installed on the
Airframe or installed on any other airframe and (b) any Replacement Engine which
may from time to time be substituted,  pursuant to the terms hereof,  for either
of such  Engines,  and (2) in each  case,  any  and all  Parts  incorporated  or
installed in or attached thereto or any and all Parts removed  therefrom so long
as title thereto  shall remain vested in Lessor in accordance  with the terms of


                                       5
<PAGE>

Section 1.3 of Schedule 2 to the Lease Agreement after removal from such Engine,
provided  that at such time as an engine  shall be deemed  part of the  property
leased  hereunder in  substitution  for an "Engine,"  pursuant to the applicable
provisions hereof, the replaced Engine shall cease to be an "Engine"  hereunder.
The term "Engines" shall mean, as of any date of determination, all Engines then
leased  hereunder.  Each  Engine  has 750 or more  rated  takeoff  power  or its
equivalent.

      "Engine Basic Shop Visit" shall mean, with respect to any Engine, any shop
visit, as defined by Engine Manufacturer that is based on an approved program of
condition monitoring and trend monitoring of performance deterioration requiring
complete  disassembly,  inspection  and repair of any module of such Engine or a
whole Engine that results in a minimum of 3,500 cycles of operation remaining on
each of the life  limited  Parts in such  Engine  and with an attempt to restore
performance to a level consistent with Engine Manufacturer's specifications upon
the completion of the shop visit.

      "Engine  Cycle" shall mean,  with  respect to any Engine,  one takeoff and
landing of the airframe  (including  the  Airframe) on which such Engine is then
installed.

      "Engine  Flight Hour" shall mean each hour or part thereof  elapsing  from
the moment the wheels of the  airframe  (including  the  Airframe) on which such
Engine is then  installed  leave the ground on takeoff  until the wheels of such
airframe touch the ground on landing following such flight.  For purposes of all
calculations under the Operative Documents measured in Engine Flight Hours, such
Engine  Flight  Hours  (and  parts  thereof)  shall be  rounded  to the  nearest
one-tenth of an hour.

      "External Repair" shall mean any repair to a penetration,  scratch or dent
of the exterior  surface of the Airframe  accomplished  in  conformity  with the
Structural  Repair Manual or approved by Airframe  Manufacturer  or the Aviation
Authority.

      "FAA  Condition"  shall  mean,  in  respect  of the  Aircraft,  being in a
condition  suitable  for (upon due  application)  immediate  issuance  of an FAA
Standard  Certificate  of  Airworthiness  for  Transport  Category  Aircraft and
operation by a U.S. Part 121 operator.

      "Final Inspection" shall mean the inspection of the Aircraft by Lessor and
any other  Inspecting  Parties during any part of the inspections,  checks,  and
test flights required pursuant to Sections 3.3, 3.4 and 3.5 of Schedule 2 to the
Lease Agreement or otherwise performed in connection with the Return,  which, in
each case,  shall be at Lessee's risk, cost and expense (other than the cost and
expense of Lessor's and each other Inspecting Party's personnel).

                                       6
<PAGE>

      "Final Maintenance" shall mean the work to be performed by Lessee in order
to cause  the  Aircraft  to meet the  requirements  of  Schedule  2 to the Lease
Agreement, including Annex 1 thereto.

      "Flight Charges" shall mean all flight charges,  route navigation charges,
navigation  service charges and all other fees, charges or Taxes payable for the
use of or for  services  provided  at any  airport or  otherwise  payable to any
airport,  airport  authority,  navigation  or flight  authority or other similar
entity or for any services provided in connection with the operation, landing or
navigation of aircraft.

      "Follow-On Operator" shall mean any Person acquiring title to or the right
to use the Aircraft  after the end of the Lease Term (whether or not such Person
is an airline or other operator).

     "Inspecting Party" has the meaning set forth in Section 3.3.1 of Schedule 2
to the Lease Agreement.

      "Landing  Gear" shall mean (1) the  landing  gear  assemblies  (LH, RH and
nose)  of the  Aircraft  identified  by the  respective  serial  numbers  in the
Acceptance  Certificate  and (2) any landing gear assembly  substituted  for any
such identified landing gear assembly in accordance with the Lease Agreement.

      "Landing Gear  Overhaul"  shall mean any full overhaul of any Landing Gear
to essentially full manufacturer specification and operating condition, and, for
the  avoidance of doubt,  "full  overhaul"  does not mean only the  replacement,
repair or overhaul of any rotable  components,  any cleaning or  replacement  of
seals, any repair of brakes,  wheels or tires,  brake rods, struts or braces, in
each case, that occurs any more frequently than a full overhaul.

      "Loose  Equipment" shall mean that equipment  identified as such by Lessor
and Lessee on or prior to the Delivery Date.

      "Major  Checks"  shall mean any Airframe  "C" check,  multiple "C" checks,
Airframe 7C/SI Check,  systems/zonal,  structure (or equivalent) or annual heavy
maintenance visit or segment thereof  recommended for commercial aircraft of the
same  model  as the  Aircraft  by  Airframe  Manufacturer  or as set  out in the
Approved Maintenance Program.

      "Major  Modifications"  shall  include,  but shall not be  limited  to (1)
changes that alter the  fundamental  nature of the  Aircraft as a passenger  and
cargo  carrying  aircraft  or Cabin  modifications  that  materially  change the
interior  layout of the  Aircraft,  (2)  changes to the  Aircraft  structure  or
performance   of   the   Aircraft,    (3)   changes   that   adversely    affect
interchangeability  or  replaceability  of Parts, (4) changes that invalidate or
impair any  warranty  with  respect to the  Aircraft or any Engine or Part,  (5)


                                       7
<PAGE>

changes  that  adversely  affect the  eligibility  of the  Aircraft to obtain an
airworthiness  certificate  from the  Aviation  Authority,  (6) any changes that
result in a variation from the original type  certificate for the Aircraft,  but
shall exclude changes pursuant to ADs and SBs and all Required  Modifications or
(7) modifications that are irreversible.

      "Modification" shall mean any modification,  addition, alteration, removal
or  other  change  (including  performance  of ADs and SBs  and the  removal  of
Obsolete Parts) to the Airframe, any Engine or any Part.

      "Modification  Parts" shall mean those Parts  installed on the Aircraft in
connection with a Modification.

      "Obsolete  Parts"  shall  mean Parts that  Lessee  has  determined  in its
reasonable  judgment  to be no longer  suitable  or  appropriate  for use on the
Airframe or such Engine.

      "Parts" shall mean any and all  appliances,  parts,  components,  modules,
navigation,  avionics  and  communications  equipment,  computers,  instruments,
appurtenances,  accessories,  furnishings and other equipment (including certain
buyer furnished equipment designated in a bill of sale from Lessee to Lessor and
delivered to Lessor after the Delivery Date) of whatever  nature  (including the
APU and the Landing Gear but excluding  complete  Engines or engines)  which may
from time to time be incorporated or installed in or attached to the Airframe or
any  Engine,  so long as  title  thereto  shall  remain  vested  in  Lessor,  in
accordance  with the terms of Section 1.3 of Schedule 2 to the Lease  Agreement,
and Loose Equipment.

      "Replacement  Engine" shall mean an Engine  Manufacturer  Model CFM56-3C-1
engine (or an improved model having a modification status,  value, thrust rating
and  utility  at least  equal to such an Engine  Manufacturer  Model  CFM56-3C-1
engine) (including all warranty rights with respect to such engine) (1) which is
suitable for installation and use on the Airframe without impairing the value or
utility  of the  Aircraft  and  (2)  which  has a  modification  status,  value,
condition and utility (in each case,  taking into  account,  among other things,
the age of the Engine and the accumulated Engine Flight Hours and Engine Cycles)
at least equal to the Engine it is replacing  (assuming such Engine was at least
in the  modification  status,  condition and repair required by the terms hereof
immediately prior to being replaced).

     "Required  Modifications"  has the  meaning  set forth in Section  1.2.1 of
Schedule 2 to the Lease Agreement.

      "Reserves"  shall mean all amounts payable by Lessee pursuant to Section 2
of Schedule 2 to the Lease Agreement.

                                       8
<PAGE>

      "Return"  shall mean the return of the Aircraft by Lessee to Lessor at the
Return  Location (or such other  location as may be agreed by Lessor and Lessee)
in the  condition  and manner  required by Section 3 of Schedule 2 and the other
provisions  of the  Lease  Agreement  and  the  other  Operative  Documents,  as
evidenced by the  execution by Lessor,  and the delivery to Lessee,  of a return
receipt.

      "Technical Acceptance  Certificate" shall mean the acceptance  certificate
to be delivered by Lessor to Lessee pursuant to Section 3.6 of Schedule 2 to the
Lease  Agreement  in the form of  Attachment  2 to Annex 1 to  Schedule 2 to the
Lease Agreement.

      "SB" shall mean any  optional,  recommended,  mandatory  or alert  service
bulletin or service  letter as, where not expressly  specified  herein or in any
other Operative Document,  issued by Airframe Manufacturer,  Engine Manufacturer
or the manufacturer of any Part.

      Section 3. General Definitions

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

     "Absolute  Transfer"  has the  meaning  set forth in Section  14.1.3 of the
Lease Agreement.

           "Acceptance Certificate" shall mean the Acceptance Certificate, dated
the Delivery  Date,  signed by Lessee and  confirmed  by Lessor,  in the form of
Exhibit A.

           "Affiliate"  shall mean in  relation  to a Person,  any other  Person
directly or indirectly  controlling,  controlled by or under common control with
that  Person.  For  purposes  of this  definition,  "control"  means the  power,
directly or  indirectly,  to direct or cause the direction of the management and
policies of such person,  whether through the ownership of voting  securities or
by contract or otherwise and  "controlling,"  "controlled  by" and "under common
control with" have correlative meanings.

           "Aircraft"  shall mean,  collectively,  the  Airframe and the Engines
and, unless the context does not permit, the Aircraft Documentation.

           "Authorizations"   shall  mean  each  and  every  approval,   waiver,
authorization,  consent, license, certificate or order of, or registration with,
or requirement for the giving of prior notice to, or the taking of any action in
respect  of,  the  Aviation  Authority,  any  Government  Entity  in the  Lessee
Jurisdiction or any other Government Entity having jurisdiction over Lessee, the
operation of the Aircraft or any action or transaction contemplated hereby or by
any Operative Document.

                                       9
<PAGE>

           "Basic Lease Term" shall mean the period  described in Section 3.1 of
the Lease Agreement.

           "Basic  Rent"  shall  mean the rent  payable  in respect of the Basic
Lease Term with  respect to the  Aircraft  pursuant  to Section 3.3 of the Lease
Agreement.

           "Basic Rent Payment  Date" shall mean (i) the date this  Agreement is
signed by Lessor and Lessee and (ii) the date, in each calendar month during the
Basic Lease Term after the month in which the Delivery Date occurs,  numerically
corresponding to the Delivery Date (or, if no  corresponding  date exists in any
such calendar month, the last day of such month).

           "Basis Point" shall mean 1/100th of 1%.

           "Contractual Currency" shall have the meaning set forth in Section
 9.4 of the Lease Agreement.

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

           "Default"   shall  mean  any  Event  of  Default  or  any  condition,
circumstance,  act or event which, upon the giving of notice,  the lapse of time
and/or the fulfillment of any other  condition would  constitute or give rise to
an Event of Default.

           "Delivery  Date"  shall  mean the date,  local  time at the  Delivery
Location,  on which the  Aircraft is  delivered by Lessor and accepted by Lessee
pursuant  to this Lease  Agreement  as such date is set forth in the  Acceptance
Certificate.

           "Dollars" and "US$"  mean the lawful currency of the United States of
America.

           "Event of Default" has the meaning set forth in Section 12 of the
Lease Agreement.

           "Event  of Loss"  shall  mean,  with  respect  to the  Aircraft,  the
Airframe or any Engine, any of the following events, conditions or circumstances
with respect to such property:

           (1)  Retention of  possession of the Aircraft by Lessee for more than
60 days  beyond  the last day of the Lease  Term  without  the  express  written
consent or instructions of Lessor.

                                       10
<PAGE>

           (2) The  destruction  of or damage of such property which renders (a)
repair of such property  uneconomical or (b) such property permanently unfit for
normal use by Lessee or Lessor.

           (3) Any loss of or damage to such property or other  occurrence which
the insurers determine or agree to be a total loss.

           (4) The confiscation,  condemnation, seizure, forfeiture, requisition
or similar  taking of the title to such property (for any reason  whatsoever and
whether de jure or de facto).

           (5) The disappearance,  hijacking or theft (including a confiscation,
condemnation, seizure, forfeiture, requisition or similar taking of title or use
not otherwise  included in this  definition)  of such property  which shall have
resulted  in the loss of  possession  or use of such  property  by Lessee  for a
period  that  continues  until  the  earliest  of (a) the  date  that is 60 days
following the  commencement  of such loss of possession or use (or, if less, the
remaining  Lease  Term) and (b) the date upon which the  Aircraft is modified in
such a manner as would  render  conversion  of such  property  for use in normal
commercial passenger service impractical or uneconomical.

           (6) The confiscation,  condemnation,  seizure, requisition or similar
taking by any  Government  Entity or purported  Government  Entity (other than a
requisition for use or hire by a Government  Entity of the State of Registration
or any  political  subdivision  thereof) of use or hire of such  property  which
shall have  resulted in the loss of possession or use of such property by Lessee
for a period that  continues  until the earliest of (a) the date that is 90 days
following the commencement of such loss of property or use (or, if earlier,  the
last day of the Lease Term) and (b) the date upon which the Aircraft is modified
in such a manner as would render  conversion  of such property for use in normal
commercial passenger service impractical or uneconomical.

           (7) The  requisition  for use or hire by a  Government  Entity of the
State of Registration which shall have resulted in the loss of possession or use
of such property by Lessee for a period that continues until the earliest of (a)
the last day of the Lease  Term and (b) the date  upon  which  the  Aircraft  is
modified in such a manner as would render conversion of such property for use in
normal commercial passenger service impractical or uneconomical.
           (8) As a result of any Law,  the use of such  property  in the normal
course of the business of air  transportation of persons and/or cargo shall have
been  prohibited for a continuous  period in excess of 180 days (or if less, the
remaining  Lease Term),  unless Lessee,  prior to the expiration of such period,
shall have undertaken and shall be diligently  carrying  forward all steps which
are  necessary or desirable to permit such use of such property by Lessee and so


                                       11
<PAGE>

long as such use shall  not have  been  prohibited  for a  continuous  period in
excess of 270 days (or if less,  the  remaining  Lease Term),  provided  that at
Lessor's  option  (to be  exercised  prior to the last day of the  Lease  Term),
Lessor  may waive  such  incipient  event of loss and  Lessee  shall  return the
Aircraft in accordance  with the terms and  conditions of this Agreement and the
other Operative Documents.

           (9) Any divestiture or impairment of any right,  title or interest of
Lessor in or to an Engine as a result of the  installation of such Engine on any
other airframe in violation of Section 8.

           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 one or more Engines  without loss of the Airframe shall not
be deemed an Event of Loss with respect to the Aircraft.

           "Expense" shall mean any liabilities,  obligations,  losses,  damages
(including  damages  for  loss of life,  injury  to  persons  or  damage  to any
property), penalties, fines, sanctions, claims (whether fraudulent,  groundless,
false or not), actions,  suits,  judgments,  legal proceedings (whether civil or
criminal),  investigations,  Taxes, costs, disbursements and expenses (including
reasonable legal fees and expenses, costs of investigation and related expenses)
of every kind and nature  whatsoever  (including  any  liability,  obligation or
claim for loss of use and any liability, obligation or claim arising in contract
or tort, whether or not arising from the negligence, actual, implied or imputed,
active or passive,  or absolute or strict  liability of an Indemnified  Party or
any other Person or under any other theory).

           "Financing  Party"  shall mean (1) each  Person,  if any,  providing,
directly or indirectly,  debt or equity financing or refinancing  related to the
purchase  price of the  Aircraft  and holding a direct or  indirect  security or
equity  interest in the  Aircraft,  as such parties are  identified by Lessor to
Lessee from time to time, and (2) the Security Agent, if any.

           "Financing  Security  Documents"  shall mean all  documents  related,
directly or  indirectly,  to the debt or equity  financing or refinancing of the
purchase  price of the Aircraft and providing for a security,  mortgage or other
interest in the Aircraft,  this lease Agreement or any other Operative Document,
as such documents are identified by Lessor to Lessee from time to time.

           "Force  Majeure"  shall mean acts of God or public enemy,  civil war,
insurrection or riot, fire, flood, explosion,  earthquake,  accident,  epidemic,
quarantine   restriction,   any  act  of  government,   governmental   priority,
allocation, regulation or order affecting, directly or indirectly, the Aircraft,


                                       12
<PAGE>

Lessor,  Airframe  Manufacturer  or  Engine  Manufacturer  or any  materials  or
facilities,  strike or labor dispute causing cessation, slowdown or interruption
of work, inability after due and timely diligence to procure equipment,  data or
materials  from  suppliers in a timely manner,  any other  "Excusable  Delay" as
defined in the Airframe  Manufacturer  Purchase  Agreement or any other cause to
the  extent  that such  cause is beyond  the  control  of Lessor  whether  above
mentioned or not and whether or not similar to the foregoing.

           "GAAP" shall mean generally accepted accounting  principles in Lessee
Jurisdiction,  as such principles may at any time or from time to time be varied
by any applicable  financial  accounting  rules and, with respect to any Person,
shall mean such principles applied on a basis consistent with prior periods.

           "Government  Entity"  shall  mean  (1) any  national,  state or local
government  of any country or any  international  authority  (including  in each
case,  any central bank or fiscal,  tax or monetary  authority),  (2) any board,
commission,  department,  division,  instrumentality,  court, agency, territory,
possession or political subdivision of any entity described in clause (1) above,
however constituted,  (3) any association,  organization or institution of which
any  entity  described  in  clause  (1) or (2)  above  is a  member  or to whose
jurisdiction  any  thereof is subject or in whose  activities  any  thereof is a
participant and (4) any taxing  authority of any entity described in clause (1),
(2) or (3) above.

           "Indebtedness"  shall mean all  obligations of Lessee that would,  in
accordance with GAAP, be shown as a liability on Lessee's  balance sheet, and in
any footnotes or notations thereto,  including (1) obligations for the repayment
of  monies   borrowed  or  raised,   (2)   obligations   under  finance  leases,
hire-purchase  arrangements,  conditional sale agreements and other  obligations
for the deferred purchase price of property, (3) guarantees, direct or indirect,
of the obligations of any other Person,  including any such obligations  secured
by  a  Lien  on  any  property  of  Lessee,   (4)  indemnity  and  reimbursement
obligations, including any such obligations arising to any issuer of a letter of
credit or similar  instrument,  and (5)  obligations  to purchase  or  otherwise
acquire any  indebtedness  of, or to advance  monies to or on behalf of, or make
any investment in any other Person.

           "Indemnified  Party" shall mean Lessor and its  Affiliates,  Airframe
Manufacturer  (to the extent  required  by Part E to  Exhibit C to the  Airframe
Manufacturer  Purchase  Agreement),  each Financing Party and the successors and
permitted  assigns  of  each  of the  foregoing  and  the  directors,  officers,
corporate stockholders,  partners, employees, servants and agents of each of the
foregoing.

                                       13
<PAGE>

           "Insured Party" shall mean each Indemnified Party.

           "Law"   shall  (1)  include  any   statute,   decree,   constitution,
regulation,  decision,  finding,  order,  rule,  judgment  or  directive  of any
Government Entity,  (2) include any treaty,  pact, compact or other agreement to
which any Government Entity is a signatory or party having the force of law, (3)
include any judicial or  administrative  interpretation  or application  thereof
having the force of law, (4) includes any guideline, directive,  interpretation,
rule or regulation  of any Person,  whether or not having the force of law, but,
if not having the force of law,  with respect to which  compliance  is customary
and (5) is a reference to any of the foregoing as amended, substituted, reissued
or reenacted.

           "Lease Term" shall mean the Basic Lease Term and, if any, the Renewal
 Lease Term.

           "Lessee  Lien"  shall  mean  any  Lien  over  all or any  part of the
Aircraft arising as a result of any act or omission by Lessee.

           "Lessor  Lien"  shall  mean  any  Lien  over  all or any  part of the
Aircraft  arising as a result of any act or  omission by Lessor,  including  any
Lien over all or any part of the  Aircraft  arising  as a result  of (a)  claims
against Lessor not related to the transactions contemplated or permitted by this
Agreement or the other Operative Documents,  (b) claims against Lessor for Taxes
not  indemnified  against  by Lessee  hereunder  or under  any  other  Operative
Document or (c) claims against  Lessor arising out of the voluntary  transfer by
Lessor of all or any part of its interest in the Aircraft.

           "Letter of Credit"  has the  meaning  set forth in Section 4.4 of the
 Lease Agreement.

           "Lien" shall mean any mortgage,  pledge,  lien, charge,  encumbrance,
hypothecation,  lease, sublease, seizure, exercise of rights, security interest,
judgment,  writ,  order or other  claim  or right of  possession  of any kind or
nature  whatsoever,  however and wherever  created or arising and whether or not
consensual  (including any agreement or arrangement to give or effect any of the
foregoing and any conditional sale or other title retention agreement).

           "Material  Adverse  Effect" shall mean (1) as of any date, a material
adverse change  between the date hereof and such date, in the business,  assets,
financial  condition or prospects of Lessee,  or (2) the occurrence of any event
or the existence of any  circumstances  that has or could reasonably be expected
to have a material  adverse  effect on (1) the ability of Lessee to carry on its
business or to perform its obligations under any Operative  Document to which it


                                       14
<PAGE>

is or will be a party or (2) the rights or interests of Lessor or any  Financing
Party under any Operative Document to which it is or will be a party.

           "Operative  Documents" shall mean the Lease  Agreement,  the Novation
Documents (as defined in the Novation  Agreement),  the Acceptance  Certificate,
each other document  delivered by Lessee to Lessor  pursuant to Schedule 6, each
other  document  delivered by Lessee to Lessor after the date hereof under or in
connection  with any of the  foregoing and any other  document  which Lessor and
Lessee agree is an "Operative Document".

           "Other Lease" shall mean any other aircraft lease  agreement  between
from time to time (1)  Lessor or any  Affiliate  of Lessor and (2) Lessee or any
Affiliate of Lessee.

           "Novation  Agreement" shall mean that certain Novation Agreement (MSN
28869),  dated  as of  the  date  hereof,  among  Lessor,  Lessee  and  Airframe
Manufacturer.

           "Past Due Rate"  shall  mean a rate equal to a  fluctuating  rate per
annum equal to 300 basis  points above the Dollar prime rate in effect from time
to time at the main office of Seattle First National Bank,  but, in any case, at
least 9%,  provided that such rate as determined  from time to time shall not in
any event be higher than the highest rate per annum  permitted from time to time
under any applicable Law.

           "Payment/Bankruptcy  Default"  shall mean any Event of Default or any
condition,  circumstance,  act or event described in Section 12.1, 12.2, 12.8 or
12.9, which, upon the giving of notice, the lapse of time and/or the fulfillment
of any other condition would constitute or give rise to an Event of Default.

           "Permitted  Lien"  shall  mean  any  Lien  referred  to  in  Sections
6.2.3.1.1 through 6.2.3.1.5 of the Lease Agreement.

           "Person" shall mean any individual,  corporation, trust, partnership,
unincorporated  association,  joint venture,  association,  joint-stock company,
government or Government Entity.

           "Rent" shall mean, collectively,  Basic Rent, Renewal Rent and
 Supplemental Rent.

           "Renewal Lease Term" shall mean the period described in Section 3.2.

           "Renewal  Rent" shall mean the rent payable  during the Renewal Lease
Term with respect to the Aircraft pursuant to Section 3.3.

           "Renewal  Rent  Determination  Date" shall mean the date seven months
prior to the then scheduled expiration of the Lease Term.

                                       15
<PAGE>

           "Renewal  Rent  Determination  Request"  has the meaning set forth in
Section 3.2 of the Lease Agreement.

           "Renewal  Rent  Payment  Date"  shall  mean (1) the  first day of the
Renewal  Lease Term and (2) the date in each  calendar  month during the Renewal
Lease Term after the first day of the Renewal  Lease Term  corresponding  to the
first day of the Renewal Lease Term (or, if no corresponding  date exists in any
such calendar month, the last day of such month).

           "Rent  Payment  Date" shall mean a Basic Rent  Payment  Date and/or a
Renewal Rent Payment Date, as the context may require.

           "Rome Convention" means the Convention for the Unification of Certain
Rules Relating to the Precautionary Arrest of Aircraft (Rome, 1933).

           "Secured Obligations" has the meaning set forth in Section 4.2 of the
Lease Agreement.

           "Security Agent" shall mean the designated representative,  howsoever
denominated,  of  one or  more  of the  Financing  Parties,  as  such  agent  is
identified by Lessor to Lessee from time to time.

           "Security  Deposit"  has the  meaning set forth in Section 4.1 of the
Lease Agreement.

           "Security  Transaction"  has the meaning set forth in Section 14.1.4
of the Lease Agreement.

           "Successor"  has the  meaning set forth in Section  6.2.1.3.1  of the
Lease Agreement.

           "Supplemental   Rent"  shall  mean  all  amounts,   liabilities   and
obligations  (other than Basic Rent and  Renewal  Rent)  which  Lessee  assumes,
agrees or otherwise  becomes  liable to pay to Lessor or any  Indemnified  Party
hereunder or under any of the other Operative  Documents,  including payments of
or in  respect  of  the  Security  Deposit,  Reserves,  Stipulated  Loss  Value,
Expenses,  Taxes,  interest  accrued  pursuant to Section  3.5 or other  amounts
payable under any indemnities.

           "Tangible  Net Worth" shall mean,  for any Person,  the excess of the
total assets  (excluding  goodwill,  intangible  assets and revaluation of fixed
assets) over total  liabilities  of such Person,  each  determined in accordance
with generally accepted accounting principles consistently applied.

           "Taxes"  shall  mean any and all  present or future  fees  (including
license,  documentation and registration  fees), taxes (including income,  gross
receipts,  sales,  rental,  use,  turnover,  value-added,  property (tangible or
intangible),  excise,  franchise,  capital,  user, transfer,  doing business and
stamp taxes or duties),  licenses, levies, imposts, duties, recording charges or
fees, or other charges,  assessments,  deductions or  withholdings of any nature


                                       16
<PAGE>

whatsoever,  together with any  assessments,  penalties,  late payment  charges,
notary  charges,  fines,  additions  to tax or other  similar  liabilities  with
respect to any of the foregoing and interest on any of the foregoing.

           "Tax  Indemnitee"  shall  mean  Lessor  and its  Affiliates  and each
Financing  Party and any  successor  or assign of any of the  foregoing  and any
Person that is a member of a group that files a  consolidated  or  combined  tax
return that includes Lessor or any of its Affiliates or any Financing Party.

           "Transaction Documents" has the meaning set forth in Section 4.2 of
the Lease Agreement.

           "U.S. Air Carrier" shall mean a commercial  United States air carrier
as to which there is in force an operating  certificate  issued by the Secretary
of  Transportation  pursuant to chapter 447 of U.S.  Aviation  Laws for aircraft
capable of carrying 10 or more  individuals or 6,000 pounds or more of cargo and
an  operating  certificate  issued  pursuant  to Part 121 of the  U.S.  Aviation
Regulations,  or  which  may  operate  as an air  carrier  by  certification  or
otherwise under any successor or substitute provisions therefor.

           "U.S.  Aviation Laws" shall mean the provisions of Subtitle VII of
Title 49 of the U.S.Code, as amended from time to time, or any similar
legislation of the United States enacted in  substitution, replacement or
supplement of all or any part of such subtitle, together with the U.S. Aviation
Regulations.


                                       17
<PAGE>

                
                             
                             
                                 
                                 
                                   SCHEDULE 2
                               OPERATIONAL MATTERS
                                   (MSN 28869)


Capitalized  terms used but not defined  herein (or in any annex  hereto)  shall
have the  respective  meanings,  and shall be  interpreted  and construed in the
manner, set forth in the Lease Agreement (MSN 28869),  dated as of June 27, 1997
(the "Lease Agreement"), between Boullioun Portfolio Finance I, Inc. and Western
Pacific Airlines, Inc., to which this document is a schedule.

      Section 1.  Maintenance; Operation; Etc.

              1.1 General Maintenance

           Lessee, at its own expense, shall, at all times during the Lease Term
and until the  Aircraft is returned  pursuant to the  requirements  of the Lease
Agreement in the condition and manner  required by this Schedule 2 and the Lease
Agreement maintain, service, repair, test, inspect and overhaul the Aircraft, or
cause  the  Aircraft  (subject  to  Section  8 of  the  Lease  Agreement)  to be
maintained, serviced, repaired, tested, inspected and overhauled:

              1.1.1  In accordance with:

     1.1.1.1 The Approved Maintenance Program (which shall not be amended in any
way  adverse  to  Lessor's  interests  or its rights  under the Lease  Agreement
without Lessor's prior written  consent,  except as may be required by Law or by
the applicable rules and regulations of the Aviation Authority).

     1.1.1.2 The Airframe,  Engine and Parts manufacturers'  maintenance (to the
extent not inconsistent  with the Approved  Maintenance  Program),  overhaul and
repair  manuals and  documents,  including  Airframe  Manufacturer's  Structural
Repair Manual.

     1.1.1.3 The rules and regulations of the Aviation Authority,  including the
rules and  regulations  with which Lessee must comply in order to enable a legal
and valid  Airworthiness  Certificate for the Aircraft,  and the registration of
the Aircraft,  to be  maintained in good standing at all times under  applicable
Law.

                                       1
<PAGE>

     1.1.1.4  To the  extent  not  inconsistent  with the  Approved  Maintenance
Program, U.S. domestic passenger airline standards.

                1.1.2  So  as  to  keep  the  Aircraft  in  the  same  condition
(operating and otherwise) as when delivered on the Delivery Date,  ordinary wear
excepted,  with  all  systems  fully  functional,  in a  condition  so that  the
airworthiness certificate can be maintained and operating in accordance with the
Airframe, Engine and Parts manufacturers' specifications.

                1.1.3 So as to ensure that the  Aircraft  at all times  receives
the same level of attention to  maintenance,  inspections  and  improvements  as
Lessee affords the balance of its fleet, including the method of compliance with
ADs,  the  rules  and  regulations  issued  by the  Aviation  Authority  and the
incorporation status and method of compliance with SBs.

           1.2  Modifications and Other Maintenance

     Without limiting Lessee's obligations under Section 1.1 of this Schedule 2,
Lessee shall, at its own expense:

                1.2.1  Required Modifications

                Procure that the Aircraft  shall comply on a  terminating  basis
with (1) all applicable  ADs issued by the Aviation  Authority and all alert and
mandatory  SBs  issued by  Airframe  Manufacturer,  Engine  Manufacturer  or the
manufacturer of any Part and (2) and all  Modifications  required to comply with
the  rules and  regulations  of the  Aviation  Authority  (clauses  (1) and (2),
collectively,  "Required  Modifications"),  (y) in the  case  of ADs  and  other
Aviation  Authority-required  Modifications,  the mandatory  compliance date for
which  action on such basis  falls  during the Lease Term and (z) in the case of
alert and  mandatory  SBs, the issuance  date thereof is prior to the  scheduled
expiration of the Lease Term,  provided that Lessee may, in good faith,  contest
the validity or application of any such Required  Modification  during the Lease
Term in any manner which does not involve any danger of the sale,  forfeiture or
loss of the  Aircraft  or,  in the  reasonable  judgment  of  Lessor,  otherwise
materially adversely affect Lessor.

                1.2.2  Corrosion Prevention and Control

                Procure that the Aircraft shall be maintained in accordance with
an  effective  corrosion  prevention  and  control  program  based  on  Airframe
Manufacturer's Maintenance Planning Document, CPCP and additional manufacturers'
recommendations,  including  the  recommendations  set  forth  in  SBs.  Without
limiting the generality of the foregoing,  (1) the Approved  Maintenance Program
shall  include  a  corrosion  prevention  and  control  program,   including  an
anti-fungus/biological growth and contamination prevention, testing, control and
treatment  program of all fuel tanks,  (2) periodic  inspections of all areas of
the  Aircraft  shall be  routinely  performed  and an  application  of corrosion
inhibiting  compound  shall be applied to the exposed areas of the Landing Gear,
wheel wells,  critical  surface areas and  principal  structural  elements,  (3)
periodic inspections, cleanup and resealing shall be performed under all galleys
and  lavatories,  (4) all galley and  lavatory  floor cover  material  and floor


                                       2
<PAGE>

panels shall be free of damage and tears,  secure and properly sealed to prevent
moisture ingress and (5) any corrosion found during these  inspections  shall be
promptly  repaired in  accordance  with the Airframe  Manufacturer's  structural
repair  manual and a map of all areas with  corrosion and a record of the actual
percentage  of material  loss after  blend-out  of each  corroded  area shall be
prepared.

                1.2.3  Repairs

                1.2.3.1  Procure that all repairs to the  Aircraft  shall be (1)
made  by  an  Approved  Maintenance  Performer  by  Aviation  Authority-licensed
mechanics,  (2)  classified as major or minor in accordance  with the applicable
manufacturer's  instructions,  (3) permanent repairs (or if temporary,  shall be
made  permanent not later than the next Major Check  performed on the Aircraft),
(4) accomplished in accordance with  FAA-approved  data,  including  engineering
change orders,  (5)  accomplished  in accordance  with, as applicable,  Airframe
Manufacturer's  Structural  Repair Manual,  Engine  Manufacturer's  Maintenance,
Overhaul and Repair Manual, any Parts manufacturer's  Maintenance,  Overhaul and
Repair  Manual,   or  equivalent   manuals,   documents,   instructions   and/or
recommendations  issued by the  applicable  manufacturer  of the repaired  item,
including  engineering  change orders,  (6)  accomplished in accordance with the
rules and  regulations  of the  Aviation  Authority  and (7) with respect to all
structural repairs, mapped.

                1.2.3.2  Procure that the following  information  (to the extent
applicable)  shall be provided  by Lessee with  respect to each repair for which
the cost of repair  exceeds the Damage  Notification  Threshold:  (1) a complete
description  of the damage and the repair,  including the specific  location and
cause of the damage, (2) detailed damage  assessment,  including (if applicable)
identification of the damaged fuselage skin or stringer  material  specification
and identification of the thickness and dimensions of cracks, dents or gouges as
compared to manufacturer's  allowable limitations,  (3) all original engineering
orders, work cards,  non-routine job cards,  manufacturer's written instructions
and/or  recommendations  utilized during accomplishment of the damage assessment
and/or repair,  (4) all data utilized in connection  with the damage  assessment
and/or repair,  including drawings,  if applicable,  calculations and stress and
load  analyses,  (5) a list of all parts and materials  used to accomplish  such
repair and (6) the  original  FAA Form 337 and FAA Form  8110-3  (or  equivalent
forms) for such repair.

                                       3
<PAGE>

                1.2.4  Communications

                Make  available  for  review  by Lessor  copies  of any  written
communications  with  the  Aviation  Authority,  Airframe  Manufacturer,  Engine
Manufacturer or other vendors with respect to damage, defects or malfunctions of
the Aircraft.

                1.2.5  Correction of Discrepancies

                Diligently   correct   any  and  all   discrepancies   from  the
requirements of the Lease Agreement identified by Lessor.

                1.2.6  Approved Maintenance Performer

                Ensure that only an  Approved  Maintenance  Performer  services,
maintains,  overhauls,  repairs  or  performs  any  Modifications  on or to  the
Aircraft or any installed engine or part.

                1.2.7  Aviation Authority Approved Parts

                Ensure    that    only    Aviation     Authority-approved    and
manufacturer-approved parts and materials are installed or used on the Aircraft.

                1.2.8  Maintenance of Non-"Engine"

                Notwithstanding  anything  to  the  contrary  contained  herein,
maintain  any  engine  which is not an  Engine  but  which is  installed  on the
Airframe as if it were an Engine.

                1.2.9  Certificate of Release

                Have a certificate of release to service issued by appropriately
authorized certifying staff after completion of any maintenance or repair of the
Aircraft and/or Parts by an Approved Maintenance Performer,  which release shall
be  issued  in  accordance  with  the  procedures  specified  in  such  Approved
Maintenance Performer's approved operations specifications.

           1.3  Replacement of Parts

                1.3.1  Replacement of Parts Required

                Except as otherwise  provided in Section 1.4 of this  Schedule 2
with  respect to  Modification  Parts  which may be removed  pursuant to Section
1.4.6 of this Schedule 2 and Obsolete  Parts,  Lessee shall replace,  at its own
expense, all Parts which may from time to time become worn out, obsolete,  lost,
stolen,  destroyed,  seized,  confiscated,  damaged beyond repair or permanently
rendered unfit for use for any reason  whatsoever with replacement  parts as set


                                       4
<PAGE>

forth in this Section 1.3. Each such replacement part  incorporated or installed
in or attached or added to the Airframe or any Engine shall:

                     1.3.1.1  Free of Liens

                     Be free and clear of all Liens(except for Permitted Liens).

                     1.3.1.2  Good Operating Condition, Etc.

     (1) Be in as good  operating  condition as such replaced  Part, (2) have no
more hours, cycles or calendar time than, be no more than six months older than,
have the same  interchangeable  modification  status  as,  and have a value  and
utility at least equal to, the Part replaced, assuming such replaced Part was in
the condition and repair required to be maintained by the terms hereof,  and (3)
with respect to avionics,  navigation and  communications  equipment,  be of the
same make and the same or more advanced model.

                      1.3.1.3  Aviation Authority Tag

     Have a current, legal and valid release certificate/airworthiness  approval
tag  identified  as a  FAA  Form  8130-3,  which  constitutes  evidence  of  the
airworthiness  and  eligibility  of a Part  issued  by the  manufacturer  or the
Approved Maintenance  Performer providing such Part and which shall identify the
manufacturer,  vendor,  manufacturer's part number,  serial number, make, model,
date and/or  total hours and cycles  since new or since the last  overhaul  and,
where applicable, indicate that such Part is new, serviceable or overhauled.

Lessee may use a replacement  part that does not comply with the requirements of
this Section  1.3.1 if a complying  part cannot be procured or installed  within
the available  ground time of the  Aircraft,  provided that the original Part is
reinstalled  or the  noncomplying  part is removed  and  replaced by a complying
part, in each case as promptly as  practicable  (and in any event within 60 days
of removal or, if earlier, on or before the last day of the Lease Term).

                1.3.2  Ownership of Parts

                Immediately  upon  any  part's  (including  Modification  Parts)
becoming  incorporated  in,  installed  on or  attached  to the  Airframe or any
Engine,  without  further  act (1) title to such part  shall  thereupon  vest in
Lessor,  free and clear of all Liens (other than Permitted Liens), (2) such part
shall  become  subject  to the  Lease  Agreement  and be deemed a "Part" of such
Airframe or such Engine for all  purposes  hereof and (3) title to any  replaced


                                       5
<PAGE>

Part shall thereupon vest in Lessee,  free and clear of all rights of Lessor and
all Lessor  Liens and shall no longer be deemed a Part  hereunder,  except  that
with respect to  non-complying  parts  described in the last sentence of Section
1.3.1 of this Schedule 2 where such non-compliance is due to the failure to meet
the  requirements of Section 1.3.1.1 or 1.3.1.2 of this Schedule 2 and the parts
described in Section  1.4.6 of this  Schedule 2, title thereto shall not vest in
Lessor.  Lessee will at its own  expense  take all such steps and  execute,  and
procure the execution of, all such instruments as Lessor may reasonably  require
and which are  necessary  to ensure that title so passes to Lessor  according to
all applicable  laws. At any time when requested by Lessor,  Lessee will provide
evidence  to Lessor's  reasonable  satisfaction  (including  the  provision,  if
required,  to Lessor of a legal opinion) that title has so passed to Lessor. All
Parts (other than  Modification  Parts) at any time removed from the Airframe or
any Engine shall remain the property of Lessor,  no matter where located,  until
such time as such Parts shall be replaced by Parts which have been  incorporated
or  installed  in or attached  to the  Airframe or any Engine and which meet the
requirements  set forth in Section 1.3.1 of this Schedule 2. Upon any removal of
Modification  Parts pursuant hereto,  title thereto shall,  without further act,
vest in Lessee free and clear of all rights of Lessor and all Lessor Liens,  and
such Modification Part shall no longer be deemed a Part hereunder.

                1.3.3  Removed Parts

                The   asset   value,   performance   standards,   manufacturer's
specifications,  modification  status,  interchangeability  status and SB and AD
incorporation  status  of all  removed  Parts  shall be  maintained  during  the
accomplishment  of all  maintenance,  modifications,  inspections,  repairs  and
overhauls.

           1.4  Modifications

                1.4.1  Ability to Modify

                Lessee,  at its own  expense,  may from time to time add further
parts or accessories and make such  Modifications  to the Airframe or any Engine
as Lessee may deem  desirable in the proper  conduct of its business (so long as
title to any Obsolete Parts shall remain in Lessor), provided that:

                      1.4.1.1  No Major Modifications

     Lessee shall not, without  Lessor's prior written  consent,  make any Major
Modifications  to the Aircraft,  and in connection  with  obtaining such consent
Lessee  shall (1) provide  Lessor with  advance  copies of all  designs,  plans,
diagrams,  drawings  and data to be used by Lessee in  accomplishing  such Major
Modifications  and (2)  obtain  the prior  approval  of the  Aviation  Authority
evidenced  by the  issuance by the Aviation  Authority  of a  supplemental  type
certificate or similar certificate.

                                       6
<PAGE>

                      1.4.1.2  May Not Diminish Value, Etc.

     No such Modification shall diminish the value or utility of the Airframe or
such Engine, or impair the condition or airworthiness  thereof, below the value,
utility,   condition  or  airworthiness   thereof   immediately  prior  to  such
Modification,  assuming  the  Airframe or such Engine were then of the value and
utility and in the condition  and repair  required to be maintained by the terms
of the Lease Agreement and each other Operative Document.

                1.4.2  No Obligation of Lessor to Pay

                Except as  required  under  Section  1.2.1 of this  Schedule  2,
Lessor  shall  not be  required  under  any  circumstances  to pay  directly  or
indirectly for any Modifications.

                1.4.3  Removal of Modification Part

                Notwithstanding  the  foregoing,  Lessee may, at any time during
the Lease Term, so long as no Payment/Bankruptcy Default shall have occurred and
be  continuing,  remove or  suffer to be  removed  any such  Modification  Part,
provided  that  such  Modification  Part  (1)  is in  addition  to,  and  not in
replacement  of  or  substitution  for,  any  Part  originally  incorporated  or
installed  in or attached to the  Airframe or any Engine at the time of delivery
thereof or any Part in replacement of or substitution  for any such Part, (2) is
not  required to be  incorporated  or  installed  in or attached or added to the
Airframe or any Engine  pursuant to the terms hereof and (3) can be removed from
the Airframe or such Engine without damaging the Airframe or such Engine (unless
such  damage is  repaired  by Lessee) or  diminishing  or  impairing  the value,
utility, condition or airworthiness which the Airframe or such Engine would have
had at such time had such  Modification not been made,  assuming the Airframe or
such Engine was then of the value and utility  and in the  condition  and repair
required  to be  maintained  by the terms of the Lease  Agreement  and the other
Operative Documents.

                1.4.4  Reversal of Modification

                Except  as  otherwise  agreed by  Lessor  in  writing,  upon the
written  request of Lessor,  to be given at least 30 Business  Days prior to the
scheduled  expiration of the Lease Term, Lessee shall, on or before the last day
of the Lease Term and at its own expense,  reverse any  Modification and restore
the Aircraft to its  required  condition  as if such  Modification  had not been
made.

                1.4.5  Title to Removed Modification Part

                Upon the removal by Lessee of any Modification  Part as provided
in Sections  1.4.3 and 1.4.4 of this  Schedule 2, title thereto  shall,  without


                                       7
<PAGE>

further act, vest in Lessee free and clear of Lessor and all Lessor  Liens,  and
such  Modification  Part  shall no longer be  deemed a Part of the  Airframe  or
Engine from which it was removed. Any Modification Part not removed by Lessee as
above provided prior to the return of the Airframe or Engine to Lessor hereunder
shall remain the property of Lessor.

                1.4.6  Passenger Communication Equipment

                Notwithstanding  Sections  1.3.1.1 and 1.3.2 of this Schedule 2,
Lessee may from time to time install on the Aircraft equipment that is leased or
conditionally sold to Lessee (and title to such equipment shall remain vested in
the lessor or  conditional  vendor  thereof) if (1) such  equipment is passenger
communications  and  entertainment  equipment and (2) it can be removed  without
causing  material  damage to the Aircraft and any damage  caused by such removal
is, prior to Return, repaired so that the Aircraft is restored to a condition at
least as good as prior to such installation (ordinary wear and tear excepted).

                1.4.7  Service Bulletin Kits

                During the Lease Term, Lessee shall from  time-to-time  request,
and shall install or retain, all SB kits relating to the Aircraft, any Engine or
any Part  which are  available  to Lessee at no cost  other  than  shipping  and
handling  costs.  If any "no cost" period lapses without  Lessee  acquiring such
kit,  Lessee shall be obligated to acquire such kit at the  manufacturer's  then
cost for such kit.

           1.5  Documentation

                1.5.1 During the Lease Term, Lessee shall maintain:

                      1.5.1.1  The Delivery Documentation and all other 
documentation delivered to Lessee with respect to the Aircraft, either Engine
 or any Part.

                      1.5.1.2 All other logbooks,  records  (including,  without
limitation, records relating to the
operation, service, inspection, maintenance, modification, testing, overhaul and
repair of the Aircraft  and all Parts  installed  therein or  thereon),  manuals
(including,  without limitation,  operations,  maintenance,  repair, overhaul or
parts  manuals),  data,  drawings or other documents (1) that are required to be
maintained  during the Lease Term under the terms of the Lease  Agreement or any
other Operative Document,  by the Aviation Authority,  the Approved  Maintenance
Program,  Airframe Manufacturer,  Engine Manufacturer or the manufacturer of any
Part and those that are  provided to Lessee or otherwise  maintained  during the
Lease Term with  respect to the Aircraft  (including,  without  limitation,  the
Airframe, any Engine, the APU and Parts) and (2) in a manner necessary to ensure


                                       8
<PAGE>

that the Aircraft is at all times in FAA  Condition.  Any such  documents  which
Lessee is no longer required to retain under the provisions of Lessee's approved
maintenance  policies and the  requirements  of the Aviation  Authority shall be
returned to Lessor at or before the Return.

     1.5.1.3  Updates  or  additions  to  any  of the  foregoing  and  renewals,
revisions and  replacements to any of the foregoing from time to time created or
obtained in accordance with the Lease Agreement or any other Operative Document,
applicable Law or otherwise.

                           1.5.1.3.1  In the English language.

     1.5.1.3.2  Current  and  up-to-date   (through   subscription  to  Airframe
Manufacturer and Engine  Manufacturer update services and with all documents and
records unique to the Aircraft to be maintained unique to the Aircraft).

     1.5.1.3.3 In conformity  with the rules of the Aviation  Authority and with
normal  practices  of  Lessee,  and in a manner  necessary  to  ensure  that the
Aircraft is at all times in FAA Condition.

                           1.5.1.3.4  So that such documentation:

     1.5.1.3.4.1  Accurately  discloses the location of each Engine and Part not
installed on the Airframe.

     1.5.1.3.4.2  Accurately  records  the  amount of time  consumed  and/or the
cycles  of use (as  appropriate)  of the  Airframe,  each  Engine  and all Parts
(including the APU) and all work performed thereon.

     1.5.1.3.4.3   Contains   accurate   back-to-birth   records   of  (1)  each
life-limited  Part first  installed on the Aircraft on the Delivery  Date to the
extent  back-to-birth  records therefor were delivered to Lessee on the Delivery
Date and (2) all  life-limited/Part  first  installed  on the Aircraft by Lessee
during the Lease Term.

                1.5.2 Any Aircraft  Documentation  not already  owned by Lessor,
when and as created or obtained by Lessee,  shall thereupon  become the property
of Lessor.

           1.6  Operation

                1.6.1  Lessee  shall not  operate  the  Aircraft  (or permit the
operation of the  Aircraft) in  violation  of any Law of any  Government  Entity
having  jurisdiction,  in  violation of the Approved  Maintenance  Program,  any
manufacturer's operating manuals,  recommendations or instructions, in violation
of any  airworthiness  certificate,  license  or  registration  relating  to the


                                       9
<PAGE>

Aircraft issued by any such Government Entity or in any manner inconsistent with
the practices of U.S. domestic aircraft carriers.

                1.6.2  Lessee shall not operate or locate the Aircraft or permit
the   Aircraft  to  be  operated  or  located  (1)  outside  of  the   Permitted
Jurisdictions,  (2) on routes other than those approved by the government of the
State  of  Registration  (if the  government  of the  State of  Registration  is
approving  routes)  between  destinations  in the Permitted  Jurisdictions,  (3)
except as permitted pursuant to Section 8.5 of the Lease Agreement,  in any area
excluded  from  coverage by any  insurance in effect or required by the terms of
the Lease  Agreement or in any war zone or in any recognized or threatened  area
of  hostilities  (without  Lessor's  consent)  and unless  fully  covered to the
satisfaction of Lessor by war-risk and allied perils insurance.

                1.6.3 Lessee  shall not use,  suffer or cause the Aircraft to be
used for the  carriage  of (1) whole  animals  living or dead (other than living
humans) except in the cargo compartments  according to I.A.T.A.  regulations and
except domestic pet animals carried in suitable containers to prevent the escape
of any liquid and as to ensure the welfare of the animal, (2) explosives, acids,
toxic chemicals or other corrosive materials,  unless the same are appropriately
packaged and labeled in  compliance  with  applicable  Law, (3) nuclear fuels or
wastes,  (4) illegal drugs,  controlled  substances or the like or (5) any other
goods,  materials or items of cargo which are  prohibited  by Law or which could
reasonably  be expected  or  anticipated  to cause  damage to or  forfeiture  or
seizure of the Aircraft.

                1.6.4  Lessee  shall not use, or permit the use of, the Aircraft
for testing or for  training,  qualifying or  reconfirming  the status of flight
crew members  other than  employees  of Lessee,  and then only if the use of the
Aircraft for such purpose is not disproportionate to the use for such purpose of
other Airframe Manufacturer Model 737-300 aircraft owned or operated by Lessee.

                1.6.5  Notwithstanding  anything herein to the contrary,  Lessee
shall not install,  and shall not permit the  installation of, any Engine on any
airframe that is not an Airframe Manufacturer Model 737-300 or -500 airframe.

           1.7  Identification Plates, Etc.

           Lessee  shall  affix  and at all times  maintain  in  respect  of the
Airframe  and each  Engine and the APU a fireproof  and  legible  identification
plate of a reasonable size, in the location  specified below,  that contains the
following  legends or any other legend  requested from time to time by Lessor in
writing:

                                       10
<PAGE>

     1.7.1 In the  case of the  Airframe,  in the  upper  sill of the  left-hand
forward entry door, adjacent to Airframe Manufacturer's plate, "THIS AIRCRAFT IS
OWNED BY BOULLIOUN  PORTFOLIO FINANCE I, INC. AND IS HELD UNDER LEASE BY WESTERN
PACIFIC AIRLINES, INC."

     1.7.2 In the  case of each  Engine,  in a  clearly  visible  place in close
proximity  to the  manufacturer's  plate,  "THIS  ENGINE  IS OWNED BY  BOULLIOUN
PORTFOLIO  FINANCE I, INC. AND IS HELD UNDER LEASE BY WESTERN PACIFIC  AIRLINES,
INC."

     1.7.3 In the case of the APU, in a clearly visible place in close proximity
to the manufacturer's  plate, "THIS APU IS OWNED BY BOULLIOUN  PORTFOLIO FINANCE
I, INC. AND IS HELD UNDER LEASE BY WESTERN PACIFIC AIRLINES, INC."

           If any  such  identification  plate  is lost or  damaged  or  becomes
illegible,  Lessee  shall  promptly  replace  it  with  a  identification  plate
complying  with  the  requirements  of this  Section  1.7.  If  Lessor  sells or
transfers its interest in the Aircraft in accordance with the Lease Agreement or
if  Lessor  notifies  Lessee  that  any  Security  Agent is a  mortgagee  of the
Aircraft,  then Lessee will promptly replace all identification  plates with new
identification  plates  which  specify the new owner and lessor of the  Aircraft
and/or  which note the  interests  of such  Security  Agent,  in any case in the
manner  specified  by  Lessor.  Lessee  shall not alter or remove or permit  the
alteration or removal of the  registration  certificate or the  nationality  and
registration marks required to be maintained on the Aircraft.
           1.8  Costs of Maintenance, Operation, Etc.

                1.8.1  In General

                Except as expressly  provided herein,  Lessee shall pay or cause
to be paid all costs  incurred in the  operation  of the  Aircraft for profit or
otherwise  during the Lease  Term,  including  the costs and  expenses of flight
crews, cabin personnel, fuel, oil, lubricants,  maintenance,  insurance, landing
fees, navigation fees, airport charges,  passenger service and any and all other
expenses  or claims of any kind or nature,  directly or  indirectly  incurred or
imposed in connection with or related to the acceptance,  delivery, nondelivery,
lease,   sublease,   charter,   subcharter,   deregistration,    reregistration,
possession,   use,   presence,   existence,   operation,   condition,   storage,
preparation,   installation,   testing,   manufacture,   design,   modification,
alteration,   maintenance,   repair,  re-lease,  sale,  return,  transportation,
transfer,  exportation,  importation,  abandonment  or other  disposition of the
Aircraft,  the  Airframe,  any  Engine  or  engine  or Part or any  other  thing
delivered under the Lease Agreement during the Lease Term.

                                       11
<PAGE>

                1.8.2  Payment of Flight Charges

                Without  limiting  the  effect  of  Section  6.2.3 of the  Lease
Agreement,  Lessee shall pay promptly upon the same becoming due and payable all
Flight  Charges  incurred  by Lessee  whether in respect of the  Aircraft or any
other aircraft of Lessee,  except to the extent being contested in good faith by
appropriate  proceedings  (and for the payment of which  adequate  reserves have
been  provided) so long as such contest does not involve any material  danger of
the sale,  forfeiture  or loss of the  Airframe,  any  Engine or any Part or any
interest therein or any adverse effect on Lessor. Upon Lessor's written request,
Lessee shall  provide to Lessor a list of the airports to which Lessee  operates
the Aircraft and, if also reasonably so requested by Lessor,  any other aircraft
operated by Lessee. Upon Lessor's written request, Lessee shall authorize Lessor
(or its designee) to confirm the status of Lessee's payment of Flight Charges at
such airports or with any other Government Entity specified by Lessor.

           1.9  Inspection

                1.9.1  Maintenance Schedule

                During  the  Lease  Term,   Lessee  shall  furnish  Lessor  such
information concerning the location,  condition,  maintenance, use and operation
of the Aircraft as Lessor may  reasonably  request.  Lessee shall provide Lessor
with  maintenance  schedules  relating to the Aircraft from time to time as such
schedules  are adjusted or updated.  Lessee shall give Lessor  reasonable  prior
notice of the date of, and any change in the date of,  any Major  Checks  and/or
planned  visit to a  maintenance  facility,  in order to enable  Lessor,  or its
agents,  representatives  or designees,  to inspect the Aircraft  (including the
Aircraft  Documentation)  at Lessee's  maintenance  facility and at the time and
place any such Major Checks or visits occur.

                1.9.2  Reasonable Inspections

                      1.9.2.1  Lessor's Inspections

     At all reasonable times (including during Major Checks), Lessor's personnel
and/or its authorized representatives (including the personnel and/or authorized
representatives of a potential  Follow-On Operator) may (at Lessor's expense, or
if such  inspection is made in connection  with or following an Event of Default
which is then continuing,  at Lessee's expense) inspect the Airframe and Engines
and inspect  and make copies of the books and records of Lessee  relating to the
Airframe and Engines and the maintenance of the Airframe and Engines  (including
any  Aircraft   Documentation,   the  Approved  Maintenance  Program,  and  also
including,  for the avoidance of doubt, any airworthiness  directive and service
bulletin compliance records, component life status reports, and the then-current
aircraft  configuration),  and if such  inspection  is  made at the  time of any


                                       12
<PAGE>

maintenance operation, such Persons may inspect behind any panels, bays or other
apertures  that  have  already  been  opened in the  course of such  maintenance
operation, provided that, so long as no Event of Default shall have occurred and
be continuing, no exercise of such inspection right shall unreasonably interfere
with the normal  operation or maintenance of the Aircraft by Lessee and provided
that if Lessor  detects or observes any corrosion or other  condition  requiring
repair  under the  Approved  Maintenance  Program,  and such  corrosion or other
condition is not limited to the then-open  panels,  bays or other  components of
the  Aircraft,  Airframe  or Engine,  then  Lessor  shall be entitled to require
Lessee  to  open,  or cause  to be  opened,  such  additional  panels  as may be
necessary to identify,  correct,  repair or defer such corrosion or condition in
accordance  with the Approved  Maintenance  Program,  the Airframe  Manufacturer
Structural  Repair  Manual and the  Corrosion  Prevention  Manual.  Except  with
respect  to   inspections   occurring   after  the  occurrence  and  during  the
continuation  of an Event of Default and except during the last 12 months of the
scheduled Lease Term, in both cases, in connection with the potential transition
of the Aircraft  from Lessee,  Lessor shall not  designate  any personnel of any
competitor of Lessee as Lessor's  authorized  representative  under this Section
1.9.2.1.

                      1.9.2.2  Purchase and/or Follow-On Lease

     Without  limiting any other  provision of the Lease  Agreement or any other
Operative  Document,  upon  request  by Lessor,  Lessee  shall from time to time
during the Lease Term make the Aircraft,  including the Aircraft  Documentation,
available for inspection and/or  photocopying to designated  representatives  or
technical teams evaluating the Aircraft for purchase and/or use after the end of
the Lease Term.  Lessor agrees to give Lessee  reasonable  advance notice of any
such  inspection  and,  so  long as no  Payment/Bankruptcy  Default  shall  have
occurred and be continuing, to coordinate such inspections with Lessee so as not
to  unreasonably  interfere  with Lessee's  operation or maintenance or with its
personnel.  All such inspections and  photocopying  shall be at the sole cost of
Lessor (or if such  inspection is made in connection  with or following an Event
of Default which is then continuing, at Lessee's expense). Lessee will cooperate
with Lessor, or any prospective  purchaser or Follow-On Operator,  in permitting
and facilitating the review of the Approved Maintenance Program,  including work
cards, for the purpose of transitioning the Aircraft to a different  maintenance
program.

                1.9.3  No Duty to Inspect

                Lessor  shall  not have a duty to make any such  inspection  nor
shall it incur any  liability or obligation to Lessee by reason of making or not
making any such inspection.

                                       13
<PAGE>

      Section 2.  Maintenance Reserve Payments

           2.1  Maintenance Reserve Amounts

                2.1.1  Maintenance Reserve Amounts

                Lessee shall pay to Lessor with respect to the Lease Term on the
fifteenth  day of each  calendar  month,  commencing on the fifteenth day of the
calendar  month  following the Delivery Date, and ending on the fifteenth day of
the calendar  month  following  the last day of the Lease Term,  the amounts set
forth below:

                      2.1.1.1  Airframe Reserve Amount

     In respect of the Airframe,  the Airframe  Reserve Amount for each Airframe
Flight Hour that the Airframe is operated during the preceding calendar month.

                      2.1.1.2  Engine Overhaul Reserve Amount

     In respect of each  Engine,  the Engine  Overhaul  Reserve  Amount for each
Engine Flight Hour that each Engine is operated  during the  preceding  calendar
month.

                      2.1.1.3  Engine Life-Limited Parts Reserve Amount

     In respect of life-limited  Parts installed in each Engine, the Engine Life
Limited  Part  Reserve  Amount for each Engine  Cycle  completed  by such Engine
during the preceding calendar month.

                      2.1.1.4  Landing Gear Reserve Amount

     In respect of the Landing  Gear,  the Landing Gear Reserve  Amount for each
Airframe Flight Hour that the Airframe is operated during the preceding calendar
month.

                      2.1.1.5  APU Reserve Amount

     In respect of the APU, the APU Reserve Amount for each Airframe Flight Hour
that the Airframe is operated during the preceding calendar month.

                2.1.2  Assumed Hour-to-Cycle Ratio Amount

                The Dollar  amounts  referred  to in this  Section  2.1  (except
Section  2.1.1.3) are based upon the Assumed  Hour-to-Cycle  Ratio.  On or about
each anniversary of the Delivery Date, Lessor and Lessee shall determine whether
during the  preceding  12 months the actual  ratio fell below or rose above this
assumed level by more than 0.1, and if so the relevant  Dollar  amounts shall be


                                       14
<PAGE>

adjusted  upwards or downwards to reflect such actual ratio,  the amount of such
adjustment  to be  determined  by mutual  agreement  of Lessor and Lessee  after
prompt, good faith negotiation.

                2.1.3  Reserve Inflation Rate

                Each of the Dollar amounts set forth in this Section 2.1 (as may
have been  previously  adjusted  pursuant to the  preceding  paragraph),  and as
adjusted  pursuant to this paragraph shall be adjusted on the anniversary of the
Delivery  Date each year  during the Lease Term by  multiplying  (1) such Dollar
amount by (2) the Reserve Inflation Rate.

           2.2  Reimbursement

                2.2.1  Airframe Reimbursement

                Lessor  shall,  subject to Section 2.4 of this Schedule 2 and if
no Default  has  occurred  and is then  continuing,  reimburse  Lessee  from the
Airframe account for the actual costs incurred by Lessee in respect of labor and
materials  consumed during the Airframe 7C/SI Check (or  equivalent)  (excluding
APU and Landing Gear) including the cost of defect  rectification (but excluding
components  (unless they are  scheduled to be overhauled at that check and their
lives are fully  restored) and any  maintenance  resulting from design faults or
damage  covered by warranty or caused by  accidental  damage,  foreign  objects,
faulty maintenance or operational mishandling).

                2.2.2  Engine Reimbursement

                Lessor  shall,  subject to Section 2.4 of this Schedule 2 and if
no Default has occurred and is then continuing, reimburse Lessee for the cost of
a scheduled Basic Shop Visit pursuant to the Approved Maintenance Program,  from
the  appropriate  Engine  sub-account  and for such  amounts as are equal to the
costs  incurred by Lessee for such Basic Shop Visit,  including  replacement  of
life-limited parts and components that are scheduled for overhaul or replacement
at that Basic  Shop Visit and for the  portion  of  unscheduled  overhauls  that
replace  work  which  would  have been  carried  out at the time of a  scheduled
removal or overhaul (but excluding any maintenance  resulting from design faults
or damage covered by warranty or caused by accidental  damage,  foreign objects,
faulty maintenance or operational mishandling).

                2.2.3  APU Reimbursement

                Lessor  shall,  subject to Section 2.4 of this Schedule 2 and if
no Default has occurred and is then  continuing,  reimburse  Lessee from the APU
account the actual  costs  incurred by Lessee in respect of labor and  materials
consumed during a scheduled Basic Shop Visit for the APU,  including the cost of


                                       15
<PAGE>

defect rectification (but excluding any maintenance resulting from design faults
or damage covered by warranty or caused by accidental  damage,  foreign objects,
faulty maintenance or operational mishandling).

                2.2.4  Landing Gear Reimbursement

                Lessor  shall,  subject to Section 3.4 of this Schedule 2 and if
no Default  has  occurred  and is then  continuing,  reimburse  Lessee  from the
Landing Gear account the actual costs incurred by Lessee in respect of labor and
materials  consumed  during any scheduled  Landing Gear Overhaul,  including the
cost of defect  rectification  (but  excluding any  maintenance  resulting  from
design  faults or damage  covered by  warranty or caused by  accidental  damage,
foreign objects, faulty maintenance or operational mishandling).

           2.3  Account Balances

           Lessor  shall  keep a  notional  running  account  in  respect of the
Airframe,  each Engine (with overhaul and life limited parts sub-accounts),  the
APU and the  Landing  Gear to which  shall be  credited  all  amounts in respect
thereof  received  under Section 2.1 hereof and debited all sums paid in respect
thereof by Lessor to, or on behalf of, Lessee under Section 2.2.

           2.4  No Negative Balances

           Lessor shall not be obliged to pay any sum under Sections 2.2 of this
Schedule 2 to the extent the amount requested would exceed the lesser of (1) the
balance in the  relevant  notional  account  at and as of the time the  relevant
check,  Basic Shop Visit or Landing  Gear  Overhaul  was  completed  and (2) the
balance of such notional account at the time Lessor is required pursuant to this
Section 2 to make a payment to Lessee in respect of such request. In any case in
which the amount paid to Lessee is not sufficient to pay the cost of such check,
Basic  Shop Visit or Landing  Gear  Overhaul,  to such  extent  Lessee  shall be
obligated to meet such costs from its own resources. No shortfall may be carried
forward or made the subject of any further claim for reimbursement.

           2.5  Rights in Reserves

           For the  avoidance of doubt,  it is agreed and  acknowledged  that as
between Lessor and Lessee the amounts in the accounts referred to in Section 2.3
of this  Schedule  2 are the sole and  exclusive  property  of Lessor and Lessor
shall be  entitled  to retain  absolutely  any  credit  balance,  including  any
interest thereon,  on the accounts referred to in Section 2.3 of this Schedule 2
remaining  after any expiration or termination of the Lease Term,  except as set
forth in Section 10.2 of the Lease Agreement.

                                       16
<PAGE>

           2.6  Payments

           Lessee shall submit to Lessor  detailed and  substantiated  labor and
material  invoices for all maintenance for which  reimbursement  is sought under
this Section 2 (using best  efforts so that Lessor  receives  such  invoices not
later than the 30th day  following  receipt by Lessee of such  invoices from the
Approved Maintenance  Performer (or, if such maintenance is performed by Lessee,
not later than the 30th day following  completion of such maintenance)).  Lessor
shall pay to Lessee all amounts reimbursable hereunder promptly upon its receipt
of such invoices.  In the event that any payment  otherwise due to Lessee is not
paid to Lessee as the result of any Default  then  continuing,  Lessor shall pay
such amount to Lessee promptly upon Lessee's having cured such Default, but only
if no other Default shall be then continuing.

      Section 3.  Return of the Aircraft

           3.1  Date and Location of Return

           Not later  than the end of the Lease  Term,  subject  only to Section
10.2 of the Lease Agreement,  Lessee,  at its own risk, cost and expense,  shall
return the Aircraft,  including the Airframe, the Engines, all Parts thereof and
the Aircraft  Documentation  to Lessor at the Return Location in accordance with
the provisions of the Lease Agreement,  including this Schedule 2, and the other
Operative Documents.

           3.2  Condition of Aircraft

           At Return, Lessee shall, at its sole risk, cost and expense,  procure
that the Aircraft is free and clear of all Liens  (other than Lessor  Liens) and
that the Aircraft  complies in all respects with the conditions and requirements
set forth in the Lease Agreement,  including Annex 1 to this Schedule 2, and the
other Operative Documents.

           3.3  Final Inspection

                3.3.1 No less than 120 days prior to commencement of the Return,
Lessee shall provide Lessor with written notice of the date of, and a reasonably
complete  plan for the  content of, the Final  Maintenance  and, no less than 30
days in advance of the commencement of the Final Maintenance,  shall give Lessor
further  written  notice of the date of, and any  changes  to the plan for,  the
Final Maintenance.  During such Final Maintenance,  the Aircraft,  including the
Aircraft  Documentation,  shall be made  available  to  Lessor  and/or  Lessor's
agents,  representatives  and designees (each, an "Inspecting Party") for ground
inspection  by the  Inspecting  Parties  at  Lessee's  facilities  or such other
location  as may be agreed by Lessor and  Lessee.  No less than 60 days prior to


                                       17
<PAGE>

the end of the Lease Term, Lessee shall make available to the Inspecting Parties
such  documentation  regarding the condition,  use,  maintenance,  operation and
history of the Aircraft during the Lease Term as Lessor may reasonably  request.
The Final  Inspection  shall include the procedures set forth in Annex 1 to this
Schedule 2. During the Final Inspection, Lessor's personnel shall have the right
to have the right to reasonably  request additional panels or areas be opened in
order to allow further  inspection by any Inspecting Party.  Lessee shall remove
the  Aircraft  from  scheduled  service  and open the areas of the  Aircraft  as
required to perform the Final  Maintenance and the other  inspections and checks
as  contemplated  in this Section 3 and Annex 1 to this Schedule 2 and otherwise
permit  Lessor  to  determine   that  the   Aircraft,   including  the  Aircraft
Documentation, is in the condition required under the Operative Documents.

                3.3.2  Promptly  after  such  inspections,  except as  otherwise
agreed in writing by Lessor and  Lessee,  any  discrepancies  from the  Aircraft
return condition requirements set forth in this Section 3, and any discrepancies
that must be corrected in order to comply with the Approved Maintenance Program,
which  shall  include  clearing  of all  deferred  maintenance  items,  shall be
corrected by Lessee at its cost prior to the operational  ground check described
in Section 3.4 of this Schedule 2.

           3.4  Operational Ground Check

                3.4.1  Promptly  after  the  correction  of  any   discrepancies
pursuant to Section 3.3 of this Schedule 2, Lessee shall conduct an  operational
ground check of the Aircraft in accordance  with the procedures set forth in the
Approved  Maintenance  Program and Airframe  Manufacturer's  maintenance  manual
criteria for the purpose of  demonstrating  to the  reasonable  satisfaction  of
Lessor the  operation  of the  systems,  including,  if required and at Lessee's
cost, a full fuel tank leak check, audible ignition check (both systems),  pitot
and static systems check and hydraulic system internal leak check.

                 3.4.2 Promptly after the  operational  ground check,  except as
otherwise  agreed in writing by Lessor and Lessee,  any  discrepancies  from the
Aircraft  return  condition  requirements  set forth in this  Section 3, and any
discrepancies  that  must be  corrected  in order to  comply  with the  Approved
Maintenance  Program and Airframe  Manufacturer's  maintenance  manual criteria,
shall be  corrected  by Lessee  at its cost  prior to the  demonstration  flight
described in Section 3.5 of this Schedule 2.

                                       18
<PAGE>






           3.5  Demonstration Flight

                3.5.1  Immediately   following  the  operational   ground  check
pursuant  to Section 3.4 of this  Schedule  2, but prior to  Lessor's  technical
acceptance of the Aircraft,  Lessee shall,  using its own pilots,  carry out for
the Inspecting Parties a demonstration flight in the Aircraft in accordance with
such procedures as may be mutually agreed between Lessor and Lessee, which shall
be no  less  stringent  than  the  procedures  used in  Airframe  Manufacturer's
predelivery  flight test, to demonstrate the proper  functioning of the Aircraft
systems and  components  within  limits  and/or  guidelines  established  by the
relevant  manufacturers and the Aviation  Authority.  Such flight shall continue
for the duration  necessary to perform such check flight  procedures,  but for a
period not exceeding 2 hours of flying time.

                3.5.2  Except as  otherwise  agreed in  writing by the Lessor or
Lessee,  promptly following such demonstration flight, any deficiencies from the
Aircraft  return  condition  requirements  set forth in this  Section 3, and any
discrepancies  that  must be  corrected  in order to  comply  with the  Approved
Maintenance  Program  and  Airframe  Manufacturer's  maintenance  manual  and to
achieve the proper functioning of the Aircraft systems and components,  shall be
corrected by Lessee at its cost prior to Return.

           3.6  Technical Acceptance

           Upon completion of the Final  Inspection and, unless otherwise agreed
in writing by Lessor and Lessee, correction of any discrepancies or deficiencies
required to be  corrected by Lessee  prior to Return,  Lessor shall  execute and
deliver to Lessee,  a Technical  Acceptance  Certificate  which  shall,  for all
purposes  hereof,  constitute  complete,  irrevocable  and absolute  evidence of
Lessor's technical acceptance of the Aircraft,  except as noted in the Technical
Acceptance Certificate.

           3.7  Indemnity

           Lessor hereby  assumes  liability  for and shall fully  indemnify and
hold harmless  Lessee and its Affiliates on demand and shall keep Lessee and its
Affiliates  fully  indemnified  at all times and on an after-tax  basis from and
against all  Expenses  arising  directly or  indirectly  from any injuries to or
deaths of Lessor's representatives or loss of or damage to property of Lessor or
its   representatives   or  the  Inspecting  Parties  or  designees  during  the
inspections described in this Section 3.

           3.8  Failure to Return Aircraft

           If Lessee  shall,  for any  reason  whatsoever,  fail to  return  the
Aircraft  at the time or in the  condition  specified  herein  or  return of the
Aircraft is not accepted by Lessor (in its sole discretion)  because of Lessee's


                                       19
<PAGE>

failure to meet the  requirements  of this Section 3, the  obligations of Lessee
provided  in the Lease  Agreement  and each other  Operative  Document  to which
Lessee is a party  (including  the  obligation  to pay Rent)  shall  continue in
effect with respect to the Aircraft,  and the Lease Term shall,  unless  earlier
terminated  in  accordance  with the Lease  Agreement,  be deemed to be extended
until Return of the Aircraft to Lessor, provided that this Section 3.8 shall not
be construed as permitting or authorizing  Lessee to fail to meet, or consenting
to or waiving any failure by Lessee to perform,  Lessee's  obligation  to return
the Aircraft in accordance with the requirements of the Lease Agreement.

           3.9  Transition

           Lessor intends to lease or sell the Aircraft to another Person at the
end of the  Lease  Term  and in order to  facilitate  such  lease or sale of the
Aircraft,  Lessee agrees to reasonably cooperate with Lessor at Lessor's expense
(except to the extent that Lessee is otherwise  so obligated  hereunder or under
any other Operative  Document) and to otherwise  assist Lessor by, upon Lessor's
request:

                3.9.1  Allowing  inspections  of the  Aircraft by the  Follow-On
Operator  (without  interrupting any scheduled flight or the Final  Maintenance)
and, specifically, inspections necessary to determine compliance with the return
requirements set forth in this Section 3.

                3.9.2  Scheduling  the  Return  of the  Aircraft  and the  Final
Inspection  in a manner  that will  allow  for a  simultaneous  delivery  of the
Aircraft to the Follow-On Operator.

                3.9.3  Providing   Aircraft   Documentation   and  the  Aircraft
Maintenance  Program  (including work cards) so that the Follow-On  Operator can
effect the transition of the Aircraft from the Approved  Maintenance  Program to
the maintenance program of the Follow-On Operator.

                3.9.4 Performing maintenance or modifications to the Aircraft in
addition  to those  required  upon  Return  as  reasonably  requested  by Lessor
(subject  to  agreeing  compensation  and  scheduling  with  Lessee for any such
additional maintenance or modifications).

           3.9.5  Assisting  Lessor in obtaining a certificate of  airworthiness
for the Aircraft,  including,  if desired by Lessor, an FAA Standard Certificate
of Airworthiness  for Transport  Category  Aircraft for operation by a U.S. Part
121 operator.

                                       20
<PAGE>

           3.10  [Intentionally Left Blank]

           3.11  Deferred Discrepancy Correction

           Lessor may, at its sole option,  accept  delivery of the Aircraft and
any discrepancies  found during the ground inspection,  operational ground check
and operational  test flight set forth in this Section 3 that were not corrected
by Lessee  prior to return of the  Aircraft to Lessor may be corrected by Lessor
or its designee  after  return of the  Aircraft,  at Lessee's  cost and expense,
provided  that  this  Section  3.11  shall not be  construed  as  permitting  or
authorizing  Lessee to fail to meet,  or consenting to or waiving any failure by
Lessee to perform, Lessee's obligation to return the Aircraft in accordance with
the requirements of the Lease Agreement. Lessee shall reimburse Lessor on demand
for  the  expenses   incurred  by  Lessor  in  accomplishing   such  discrepancy
corrections.




                                       21
<PAGE>


                                      

                                                                      Annex 1 to
                                                                   Schedule 2 to
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                   ANNEX 1 TO
                                   SCHEDULE 2
                                RETURN CONDITIONS


Capitalized  terms used but not  defined  herein (or in any  attachment  hereto)
shall have the respective  meanings,  and shall be interpreted  and construed in
the manner,  set forth in the Lease Agreement (MSN 28869),  dated as of June 27,
1997 (the "Lease  Agreement"),  between Boullioun  Portfolio Finance I, Inc. and
Western  Pacific  Airlines,  Inc.,  to  which  this  document  is an  annex to a
schedule.

      Section 1.  Condition of Airframe and Engines

      On the last day of the Lease Term, the Aircraft (1) shall be in compliance
with  Boeing  Detail  Specification  D6-38604-28  Revision A dated June 9, 1997,
except as changed in a manner either required or permitted pursuant to the Lease
Agreement or any other Operative Document and (2) shall:

           1.1  General Requirements

           Have been operated,  maintained  and repaired in accordance  with the
Lease  Agreement,  have all the same  capabilities as on the Delivery Date, have
all of its  components  and systems  functioning  in  accordance  with  relevant
manufacturer's specifications and within applicable limits and comply materially
with the requirements of Attachment 1 to this Annex 1.

           1.2  Condition Permitting Commercial Operation

           Be  in  FAA  Condition  and  in  a  condition   permitting  immediate
commercial  passenger and cargo revenue  service by Lessee under the  applicable
operating regulations of the Aviation Authority.  Lessee shall have reversed any
Modification as required by Section 1.4.4 of Schedule 2 to the Lease Agreement.

           1.3  Deregistration and Export Matters

           Have,  and be in  compliance  with, at Lessor's  option,  (1) a valid
export  certificate  of  airworthiness  (or  its  equivalent)  or  (2)  a  valid
certificate of airworthiness (or its equivalent),  in either case, issued by the
Aviation Authority.

                                       1
<PAGE>

           1.4  Final Airframe Check

                1.4.1  Required Check

                With  respect to the  Airframe,  have  accomplished  immediately
after  removal  from  service  and  immediately  prior to delivery to Lessor the
completion of the next due "C" check in accordance with Airframe  Manufacturer's
Maintenance  Planning  Document in respect of the  Aircraft  under the  Approved
Maintenance  Program (which checks shall  incorporate  all  lower-level  checks,
structural  inspections  and any  special  repair  items or special  inspections
(including CPCP items) as well as inspections  that have a frequency less than a
"C"  check)  (with the  effect  that no Major  Check for the  Airframe  shall be
required  under the  Approved  Maintenance  Program  for 3,000  Airframe  Flight
Hours).

                If during  the Lease Term the  Aircraft  is  maintained  under a
phased maintenance program (as opposed to a block maintenance  program),  Lessee
shall,  at  Lessee's  cost  and  expense,   perform  all  checks,   inspections,
maintenance,  etc.,  necessary  to return the  Aircraft  to a block  maintenance
program  based upon the  Boeing  Maintenance  Planning  Document  and  otherwise
acceptable to Lessor.

                1.4.2  Related Work

                Have,   as  a  part  of  the  final  "C"  Check,   completed   a
refurbishment  of the flight  deck and Cabin and all  interior  and flight  deck
equipment,  which shall include  replacement of damaged,  discolored or severely
worn seat suits and  cushions  and other  work to insure  that such seats are in
good operating condition. The Aircraft carpeting shall be replaced.

           1.5  ADs, SBs, Etc.

           (1)  Be in  compliance  on a  terminating  basis  with  all  Required
Modifications where (a) in the case of ADs and other Aviation Authority-required
Modifications,  the  mandatory  compliance  date for which  action on such basis
falls  during the Lease Term or 12 months  (or the  equivalent  hours and cycles
based on Lessee's then current usage of 737-300  aircraft)  after the Return and
(b) in the case of alert and mandatory  SBs, the issuance date thereof is during
the Lease Term and the  recommended  incorporation  date falls  during the Lease
Term or 12 months  after (or the  equivalent  hours and cycles based on Lessee's
then current  usage of 737-300  aircraft),  and (2) have no required  inspection
under any outstanding  Aviation  Authority AD or under any alert or mandatory SB
or instruction due within either (a) as applicable, 12 months (or the equivalent
hours and cycles based on Lessee's  then current  usage of 737-300  aircraft) or
(b) a full inspection  period  whichever is less,  provided that, in the case of


                                       2
<PAGE>

both  clauses  (1) and (2),  in the event that  Lessee has  obtained a waiver or
deviation from the Aviation  Authority,  Airframe  Manufacturer or from any such
manufacturer  from  having  to comply  with any such  Required  Modification  or
inspection,  Lessee shall, irrespective of such waiver or deviation, comply with
all such Required Modifications and inspections prior to the Return. In the case
of each such Required  Modification,  Lessor shall reimburse Lessee for the cost
of such modification  pursuant to Section 2 of Schedule 3 to the Lease Agreement
as if such modification fell within the scope of such section,  provided further
that if Lessor shall be so required to reimburse Lessee,  Lessee shall, prior to
performing  such  modification,  provide  Lessor with at least 10 Business  Days
written notice of Lessee's intent to perform such  modification  together with a
detailed  cost  estimate,  and Lessor may,  within such 10 Business  Day period,
elect to have Lessee not perform such modification.

           1.6  Engine Condition

           Have neither Engine on watch for any reason whatsoever,  and (1) each
of the Engines  shall have an EGT margin of not less than  22(degree)C,  (2) the
trend  monitoring  data for each Engine  shall not exhibit any  abnormal  trends
during the six month period prior to Return,  and (3) the Engine operational and
performance  parameters shall be sufficiently  within limits specified by Engine
Manufacturer  and the condition of the Engine shall  otherwise be such to permit
full take-off power to  manufacturer's  specification.  If Lessor and Lessee are
unable to agree  whether such  criteria  have been met,  Lessor and Lessee shall
consult a qualified  Engine  Manufacturer  engineer and agree to be bound by the
determination  of such engineer (the cost of such engineer to be shared  equally
by Lessor and Lessee). Any deficiencies shall be corrected by Lessee.

                1.6.1  Engine Borescope

                With  respect to each Engine,  have had a complete  (100% of all
stages) video borescope  inspection performed by Lessee during Final Inspection,
and in the presence of the Inspecting Parties,  and satisfactory  evidence shall
be  provided to Lessor  reflecting  the  correction  of any  discrepancies  from
manufacturer or regulatory  limitations,  specifications and/or tolerances found
during such inspection.

                1.6.2  Full-Rated Performance

                Be  capable  of  certificated,  full-rated  performance  without
limitations  throughout the operating envelope as defined in the airplane flight
manual;  performance  compliance  will  be  demonstrated  by  one  or two of the
following,  at Lessor's option:  (1) at the time of the acceptance  flight test,
(2) by on-wing static  inspection  and testing of the  powerplants in accordance
with the  engine  maintenance  manual,  (3) by  review of trend  monitoring  and


                                       3
<PAGE>

EGT/test cell data (in the event an Engine is just out of test cell) or (4) by a
power assurance check in accordance  with the Approved  Maintenance  Program and
Engine Manufacturer's recommendations.

           1.7  APU Condition

           With respect to the APU, have no more than 3,000 APU hours since last
removal  and the  most  recent  Basic  Shop  Visit  and  capable  of  full-rated
performance,  and the APU shall have had a video borescope  inspection performed
by  Lessee  during  Final  Inspection,  and in the  presence  of the  Inspecting
Parties,  and satisfactory  evidence shall be provided to Lessor  reflecting the
correction of any  discrepancies  from  manufacturer or regulatory  limitations,
specifications and/or tolerances found during such inspection.

           1.8  Landing Gear Condition

           With  respect to each  Landing  Gear,  have at least  5,000  Airframe
Flight  Hours and  3,000  Airframe  Cycles  remaining  until its next  scheduled
Landing Gear Overhaul.

           1.9  Life Limited Parts

           1.9.1 With  respect to each  Airframe  life and  calendar  controlled
component,  have a minimum of 12 months,  and 3,200  Airframe  Flight  Hours and
1,500 Airframe Cycles  remaining to next scheduled  test,  inspection or removal
(in accordance with the Approved  Maintenance  Program),  but (1) if a component
has a life,  overhaul or check interval limit that is less than the above-stated
hours,  cycles or calendar time  requirement  (in  accordance  with the Approved
Maintenance  Program),  then such  component  shall have a full  check  interval
remaining and (2) "on-condition" and  "condition-monitored"  components shall be
fully  functioning in accordance with  manufacturer's  specifications  and shall
have been  operationally  checked and tested  during the Final  Maintenance  and
shall have no  indication  of incipient  faults.  All Airframe life and calendar
controlled  components  shall on average be no older in hours or cycles than the
Aircraft  and in no case  shall any  single  such Part be more than six  month's
older in hours or cycles than the Aircraft,  provided that, without limiting the
foregoing, each component shall have the same or more recent part or dash number
as the component installed on the Aircraft on the Delivery Date.

           1.9.2 No Engine  life-limited Parts shall have less than 3,000 Engine
Cycles remaining until the next scheduled removal or replacement.




                                       4
<PAGE>

           1.10  Tires and Brakes

           Have at least 50% treads on each of the tires (with not more than two
re-caps) and have remaining not less than 50% percent  service wear life on each
brake.  Lessee shall  compensate  Lessor (at Lessee's then current cost) for the
difference  in the  condition  and  value of the tires and  brakes  between  the
Delivery Date and the Return.

           1.11  Paint

           Be  properly  stripped  and painted in a livery to be  designated  by
Lessor  provided  that Lessor  provides  Lessee  with  necessary  templates  and
drawings at least 15 days prior to the Return,  and after such  painting  Lessee
shall balance the rudder in accordance with Airframe Manufacturer procedures.

           1.12  Service Bulletin Kits

           Have all  service  bulletins  for which  kits have been  received  or
manufactured  by Lessee for the Aircraft,  as of the  commencement  of the Final
Inspection, installed thereon prior to Return (with all other such kits received
by Lessee  after  such time to be shipped  by  commercial  carrier to a location
specified by Lessor).

           1.13  Fuel and Oil

           With each fuel tank and oil tank containing the same quantity of fuel
or oil as was  contained  in such  fuel  and oil  tanks  when the  Airframe  was
delivered to Lessee or, in the case of  differences in any such  quantities,  an
appropriate  adjustment  will  be  made by  payment  to  Lessor  or  Lessee,  as
appropriate,  at the then-current market price at the Return Location of fuel or
oil, as the case may be.

           1.14  Lessee Certificate

           Be accompanied by a certificate  from a senior  technical  officer of
Lessee stating and certifying that:

                1.14.1  The  Aircraft  has not been  involved  in any  accidents
(other than those  disclosed on an annex to such  certificate)  during the Lease
Term.

                1.14.2 All  Aircraft  Documentation  for the  Aircraft  has been
delivered with the Aircraft.

                1.14.3 The Aircraft is free of corrosion to the extent  required
by the Approved Maintenance Program.




                                       5
<PAGE>



                1.14.4 The Engines and APU have been  completely  borescoped and
that either no defects  exceeding the relevant  manufacturer's  tolerances  were
found or such defects have been repaired.

                1.14.5 All  Required  Modifications  which are  required  by the
Lease  Agreement  or any other  Operative  Document  to be  incorporated  in the
Aircraft  prior to the last day of the Lease Term have been so  incorporated  on
the date and in the manner of described in such certificate.

                1.14.6 The  completeness and accuracy of the list of engineering
orders attached to such certificate reflecting any Modification to the Aircraft.

                1.14.7 The  completeness and accuracy of the record of status of
life-limited  Parts in each Engine and, if any such Part is a replacement  for a
previous  Part and is not a new Part,  the full  back-to-birth  history  of such
replacement Part (to the extent required by the Lease Agreement).

      Section 2.  Aircraft Documentation

      At Return,  Lessee  shall  deliver to Lessor at the  Return  Location  the
Aircraft Documentation. All Aircraft Documentation provided to Lessor at time of
Return shall be listed and included as an attachment to the Technical Acceptance
Certificate.  Lessee shall ensure that all  Aircraft  Documentation  provided to
Lessor  shall be in good  condition,  readable  and capable of being  reproduced
using standard  reproduction  processes and otherwise shall have been maintained
in accordance with the Lease Agreement and the other  Operative  Documents.  All
Aircraft  Documentation  shall be in printed form  (except only those  documents
which   Lessee  has  received  or   maintained   only  in   non-printed   form).
Notwithstanding the above, the flight manual shall be revised, if necessary,  to
delete master change 7200MP3286 ("Thrust Enhancement").




                                       6
<PAGE>



                                                                 Attachment 1 to
                                                                      Annex 1 to
                                                                   Schedule 2 to
                                                                 Lease Agreement
                                                                     (MSN 28869)


                      GENERAL CONDITION RETURN REQUIREMENTS

General

1.  The  Aircraft  shall  (a) be  clean  and in good  operational  and  physical
condition by U.S.  domestic airline  standards for commercial  passenger service
commensurate  with a deep  cleaning of the  Aircraft,  (b) be free of  temporary
repairs, (c) have no excessive,  multiple or overlaid External Repairs, (d) have
no repairs not in accordance with Airframe Manufacturer structural repair manual
or approved by Airframe  Manufacturer,  (e) be free of damage and loose, missing
or pulled  fasteners,  (f) be free of  scratches,  buckles and damage  exceeding
manufacturer tolerances and (g) have no deferred or hold over maintenance.

2. The Aircraft  shall be free of fuel leaks,  and the fuel,  hydraulic  and oil
systems of the Aircraft,  including the Engines, shall have been tested and free
of any contaminants and Lessee shall provide to Lessor the results of laboratory
tests of all such systems.

Fuselage, Windows and Doors

3.  Windows  shall be free of  delamination,  blemishes,  crazing,  and shall be
properly sealed and free of any air leaks.

4. Doors shall be free moving,  correctly  rigged and be fitted with serviceable
seals, and free of any air noise or leaks.

Wings and Empennage

5. All leading edges shall be free from significant damage.

6. All control surfaces shall be waxed and polished.

7. All unpainted cowlings and fairings shall be polished.

8. Wings shall be free of fuel leaks.

9. With respect to the wings and horizontal stabilizer and all control surfaces,
be  clean,  in good  condition,  free of  dents,  cracks,  abrasions,  stain and
discoloration outside of manufacturer tolerances.

                                       7
<PAGE>


Interior

10.  Ceilings,  sidewalls and bulkhead  panels shall be clean and free of cracks
and stains.

11. All carpets and seat covers shall be in good condition, clean and stain free
and meet  applicable  fire  resistance  regulations  as required  for  continued
commercial operation by Lessee.

12.  All  seats  shall  be  serviceable,  in good  condition  and  repainted  as
necessary.

13. All signs and decals shall be clean and legible.

14.  All  emergency  equipment  having a  calendar  life  shall  have a  minimum
remaining  life of one year or one hundred  percent (100%) of its total approved
life, whichever is less.

15. All  passenger  communication  systems and  entertainment  systems  shall be
functional and in good condition.

Galleys and Galley Equipment

16. All galley areas shall be clean,  free from food  contamination  and free of
cracks and corrosion, and meet safety and health standards.

17. All galley areas and equipment  shall be in good condition,  clean,  sealed,
stain free and meet safety and health standards.

18. All galley  structure,  galley inserts and galley carts shall be clean, free
of defects and serviceable.

Flight Deck

19.  Flight  deck shall be clean,  free of stains and cracks,  and all  features
shall be functional.

20. All decals shall be clean, secure and legible.

21.  All  fairing  panels  shall be free of stains and  cracks,  shall be clean,
secure and repainted, as necessary.

22. Floor coverings shall be clean and effectively sealed.

23.  Seat  covers  shall  be in good  condition,  clean  and  shall  conform  to
applicable fire resistance regulations.

24. Seats shall be fully serviceable and shall be repainted, as necessary.



                                       8
<PAGE>


Cargo Compartments

25. All panels shall be in good condition,  properly  installed,  free of cracks
and stains and properly sealed.

26. All nets shall be in good condition.

27. All decals and required notices shall be installed.

28. All doors shall be in good repair, properly functional,  sealed and properly
rigged.

Landing Gear and Wheel Wells

29.  Landing gear and doors shall be clean,  free of leaks and damage,  properly
rigged and repaired, as necessary.

30. Wheel wells should be clean, free of leaks and damage,  and properly treated
for corrosion prevention.

31. All decals shall be clean, secure and legible.

32. Wheels shall be clean and free of corrosion.

Corrosion

33. The entire fuselage shall be substantially  free from corrosion and shall be
adequately  treated and an approved  corrosion  prevention  program  shall be in
operation.

34. After  stripping  and prior to painting as required in Annex 1 to Schedule 2
to the Lease Agreement,  the exterior of the Aircraft shall be inspected and any
corrosion,  structure  damage, or other defects shall be corrected in accordance
with the  corrosion  treatment and  correction  criteria set forth in the Boeing
Structural Repair Manual and the Corrosion  Prevention Manual and as recommended
by Airframe Manufacturer.

35.  Fuel  tanks  shall be free  from  contamination  and  corrosion  and a tank
treatment program shall be in operation.




                                       9
<PAGE>



                                                                 Attachment 2 to
                                                                      Annex 1 to
                                                                   Schedule 2 to
                                                                 Lease Agreement
                                                                     (MSN 28869)


                       AIRCRAFT AND AIRCRAFT DOCUMENTATION
                        TECHNICAL ACCEPTANCE CERTIFICATE


     Boullioun   Portfolio  Finance  I,  Inc.   ("Lessor")  hereby  accepts  and
acknowledges   receipt  from  Western  Pacific  Airlines,   Inc.  ("Lessee")  in
accordance  with the terms and  conditions of the Lease  Agreement  (MSN 28869),
dated as of June 27, 1997 (the "Lease  Agreement"),  between  Lessor and Lessee,
of:

Aircraft: 737-33R

Airframe Manufacturer's Serial Number:  28869

APU Serial Number:  [______]

Landing Gear Serial Numbers:

Right [______]

Left [______]

Nose [________]

with two installed CFM56-3C-1 engines with Engine Manufacturer's Serial Numbers:

Position (1)  [_________]

Position (2)  [_________]

together  with the aircraft  documentation  described in Supplement 1 hereto and
with the  operating  times and cycles as  accumulated  on the Aircraft up to the
time of redelivery as described in Supplement 2 hereto,  and the loose equipment
described  in  Supplement  3  hereto,   in  [return   location]  on  [date],  at
/a.m.//p.m./




                                       10
<PAGE>



Lessor and Lessee have each caused this receipt to be duly executed on the above
date.

BOULLIOUN PORTFOLIO FINANCE I, INC.


By:
    Title:


WESTERN PACIFIC AIRLINES, INC.


By:
    Title:





                                       11
<PAGE>



                                                                 Supplement 1 to
                                                                 Attachment 2 to
                                                                      Annex 1 to
                                                                   Schedule 2 to
                                                                 Lease Agreement
                                                                     (MSN 28869)


                             AIRCRAFT DOCUMENTATION

                                            Identification

Title/Description              Number                         Quantity






                                       12
<PAGE>



                                                                 Supplement 2 to
                                                                 Attachment 2 to
                                                                      Annex 1 to
                                                                   Schedule 2 to
                                                                 Lease Agreement
                                                                     (MSN 28869)


                       AIRCRAFT STATUS ON ________, 19____

Airframe          __________

   Serial Number:                                        _____________________
   Registration Number:                                  _____________________
   Airframe Flight Hours Since New:                      _____________________
   Airframe Cycles Since New:                            _____________________
   Last C-Check Performed:                               _____________________
   Flight Hours at Last C-Check:                         _____________________
   Cycles at Last C-Check:                               _____________________
   Last Airframe 7C/SI-Check Performed:                  _____________________
   Flight Hours at Last Airframe 7C/SI-Check:            _____________________
   Cycles at Last Airframe 7C/SI-Check:                  _____________________
   Fuel Aboard:                                          _____________________
   Oil Aboard:

Engines                                        Position 1      Position 2     
   Serial Number of Original Engine*:       _______________  _________________
   Flight Hours Since New:                  _______________  _________________
   Cycles Since New:                        _______________  _________________
   Last Basic Shop Visit Performed (type):  _______________  _________________
   Flight Hours at Last Basic Shop Visit:   _______________  _________________
   Cycles at Last Basic Shop Visit:         _______________  _________________

*or Replacement Engine, if applicable


Auxiliary Power Unit

   Serial Number                                              _____________
   APU Hours Since New:                                       _____________
   APU Cycles Since New:                                      _____________
   Last Maintenance Visit (type):                             _____________
   APU Hours at Last Basic Shop Visit:                        _____________
   APU Cycles at Last Basic Shop Visit:                       _____________



                                       13
<PAGE>



Landing Gear      Nose                      LMG                   RMG
   Serial Number:                        _____________       _____________
   Flight Hours Since New:               _____________       _____________
   Cycles Since New:                     _____________       _____________
   Flight Hours Since OH:                _____________       _____________
   Cycles Since OH:                      _____________       _____________
   Cycles Last Shop Visit:               _____________       _____________

Tires and Brakes

                           % Wear Life Remaining

     Nose                    Tires                 Brakes

       Left
       Right

     RH Main:
       Left
       Right

     LH Main:
       Left
       Right





                                       14
<PAGE>



                                                                 Supplement 3 to
                                                                 Attachment 2 to
                                                                      Annex 1 to
                                                                   Schedule 2 to
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                 LOOSE EQUIPMENT




                                       15
<PAGE>


                                         

                                   Schedule 3
                                  Confidential
                                   Information
                                 Lease Agreement
                                   (MSN 28869)


                                   SCHEDULE 3
                            CONFIDENTIAL INFORMATION

This Schedule is a schedule to the Lease Agreement (MSN 28869), dated as of 
June 27,1997(the "Lease Agreement"), between Boullioun Portfolio Finance I Inc.
 and Western Pacific Airlines, Inc.

      Section 1.  Definitions

      "Airframe Reserve Amount" shall mean US$[    ]*.

      "APU Reserve Amount" shall mean US$[   ]*.

      "Basic Rent Amount" shall mean US$[     ]*.

      "Damage Notice Threshold" shall mean US$[      ]*.

      "Documentation Security Deposit Installment" shall mean US[     ]*.

      "Engine Life Limited Part  Reserve  Amount"  shall mean US$[ ]*,  provided
that if Lessee uses enhanced thrust  capabilities  of either Engine,  and Lessor
reasonably  determines that such use significantly  increases the cost per cycle
of Engine  Life  Limited  Parts,  Lessor and  Lessee  shall  agree a  reasonable
adjustment to such Dollar amount.  Lessee shall  promptly  provide to Lessor any
reports provided by Lessee to the Engine Manufacturer  relating to or evidencing
the use of enhanced thrust capabilities.

      "Engine  Overhaul  Reserve  Amount"  shall mean US$[ ]*,  provided that if
Lessee uses enhanced thrust capabilities of either Engine, and Lessor reasonably
determines that such use  significantly  increases the cost of Basic Shop Visits
or shortens the time between Basic Shop Visits,  Lessor and Lessee shall agree a
reasonable  adjustment to such Dollar amount.  Lessee shall promptly  provide to
Lessor any reports provided by Lessee to the Engine Manufacturer  relating to or
evidencing the use of enhanced thrust capabilities.

      "Initial  Security  Deposit  Installment"  shall mean the US$[ ]* received
from Lessee in accordance  with that certain  letter  agreement,  dated June 13,
1997, between Boullioun Aviation Services, Inc. and Lessee.

                                       1
<PAGE>

      "Landing Gear Reserve Amount" shall mean US$[   ]*.

      "Reserve Inflation Rate" shall mean [    ]*.

      "Stipulated Loss Value" shall mean, for each of the following periods, the
amount set forth opposite such period:

                                Year        _________         Amount

                                   1                          [    ]*
                                   2                          [    ]*
                                   3                          [    ]*
                                   4                          [    ]*
                                   5                          [    ]*
                                   6                          [    ]*
                                   7                          [    ]*
                                   8                          [    ]*
                                   9                          [    ]*
                                   10                         [    ]*
                                   11                         [    ]*
                                   12                         [    ]*

      "Stipulated Deductible Amount" shall mean US$[     ]*.

      "Stipulated Liability Coverage" shall mean US$[    ]*.

      Section 2. Required Modifications

With respect to each Required  Modification (within the meaning of Section 1.2.1
of Schedule 2) with a mandatory  compliance  date during the Lease Term (without
giving effect to any  exceptions or extensions  sought by or granted to Lessee),
complied with during the Lease Term and with a cost of compliance (determined as
provided  below) in excess  of US$[ ]*,  Lessor  shall  reimburse  Lessee  for a
portion of the cost of compliance with such modification as follows:

                  R    = 120 - M x (C-US$[ ]*) 120

where

"R" means the portion of the cost of  compliance  with such  modification  to be
reimbursed to Lessee.

"M" means the number of calendar months  (including  parts thereof)  between (1)
the earlier of (a) the date of actual  compliance with such modification and (b)
the  originally  required  date of mandatory  compliance  and (2) the end of the
scheduled Lease Term.

                                       2
<PAGE>

"C" means the cost of  compliance  with such  modification  at the normal  labor
rates (less profit if Lessee  performs  the work and no change kits  supplied by
the  Manufacturer)  of the Approved  Maintenance  Performer(s)  performing  such
modification,  plus reasonable cost of direct  materials  incorporated  (but not
including  loss or  expenses  incurred  because  of  inability  to  operate  the
Aircraft).

Lessee shall  submit to Lessor  detailed  and  substantiated  labor and material
invoices for all such costs for which reimbursement is sought under this Section
1.2.1 and in any event (using best efforts so that Lessor receives such invoices
not later than the 30th day  following  receipt by Lessee of such  invoices from
the Approved  Maintenance  Performer  (or, if such  maintenance  is performed by
Lessee, not later than the 30th day following  completion of such maintenance)).
Lessor shall pay to Lessee all amounts then reimbursable  hereunder on the fifth
anniversary  of the Delivery Date and on the last day of the Lease Term provided
no Default has  occurred and is then  continuing.  In the event that any payment
otherwise  due to Lessee is not paid to Lessee as the result of any Default then
continuing, Lessor shall pay such amount to Lessee promptly upon Lessee's having
cured such Default, but only if no other Default shall be then continuing. [Note
to reader:  Also read Section 1.5 of Annex 1 to Schedule 2,  including  the last
sentence thereof.





                                       3
<PAGE>


                                          

                                                                      Schedule 4
                                                              Notice and Account
                                                                     Information
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                   SCHEDULE 4
                         NOTICE AND ACCOUNT INFORMATION
                                   (MSN 28869)


LESSOR ADDRESS:

Boullioun Portfolio Finance I, Inc.
c/o Boullioun Aircraft Holding Company, Inc.
500 - 108th Avenue N.E., 25th Floor
Bellevue, Washington  98004
Attention:  Secretary
Facsimile:  425-450-1581
Telephone:  425-454-3106

LESSOR ACCOUNT:

Bank:                                       Seafirst Bank
                                            Seattle, Washington
ABA Number:                                 125000024
Account Number:                             To be advised
Contact:                                    Kathy Tran
Facsimile:                                  206-358-8051
Telephone:                                  206-358-2914
Reference:                                  WPA 28869

LESSEE ADDRESS:

Western Pacific Airlines, Inc.
2864 South Circle Drive, Suite 1100
Colorado Springs, Colorado  80906
Attention:                                  President
Facsimile:                                  719-527-7480
Telephone:                                  719-527-7200

LESSEE ACCOUNT:

Bank:                                       Colorado National Bank
                           Colorado Springs, Colorado
ABA Number:                                 102000021
Beneficiary:                                Western Pacific Airlines, Inc.
Account Name:                               Western Pacific Airlines, Inc.
                                            Operating Account
Account Number:                             194312007769



                                       1
<PAGE>





WestPac Lease Agreement (MSN 28869)
Schedule 5
Execution Copy                                  
                                      

                                                                      Schedule 5
                                                                     Tax Matters
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                   SCHEDULE 5
                                   TAX MATTERS


Capitalized  terms used but not defined  herein (or in any annex  hereto)  shall
have the  respective  meanings,  and shall be  interpreted  and construed in the
manner, set forth in the Lease Agreement (MSN 28869),  dated as of June 27, 1997
(the "Lease Agreement"), between Boullioun Portfolio Finance I, Inc. and Western
Pacific Airlines, Inc., to which this document is a schedule.

      Section 1.  Lessee Liability

      Except as provided in Section 2, Lessee shall pay or cause to be paid, and
on written demand shall indemnify and hold harmless each Tax Indemnitee from and
against,  any and all Taxes howsoever  imposed or levied on or asserted against,
from time to time, any Tax  Indemnitee,  Lessee,  the Aircraft,  Airframe or any
Engine or any Parts thereof or any interest therein by any Government Entity on,
with respect to, based on or measured by:

      (A)  the  acceptance,   rejection,  delivery,   redelivery,   nondelivery,
transport, ownership, registration, deregistration,  reregistration, possession,
repossession,  operation, location, use, condition,  maintenance,  repair, sale,
return,  import,  export,  repossession,   abandonment,  installation,  storage,
manufacture,   charter,   leasing,   subleasing,    modification,    rebuilding,
improvement, importation, exportation or other disposition of, or the imposition
of any Lien on, the  Aircraft,  Airframe  or any Engine or any Part or  interest
therein (or the  incurrence of any liability to refund or pay over any amount as
the result of any such Lien);

      (B) the rentals,  receipts or earnings from the Aircraft,  Airframe or any
Engine or Parts thereof or interest therein;

      (C) the Aircraft,  Airframe or any Engine or any Parts thereof or interest
therein (including, without limitation, title or a security interest therein) or
any data or any other thing  delivered  or to be delivered  under the  Operative
Documents; or

      (D)  otherwise  with  respect  to or in  connection  with  the  execution,
delivery, enforcement, amendment or supplement to the Operative Documents or the
transactions contemplated by the Operative Documents.

                                       1
<PAGE>

      Section 2.  Exclusions From Lessee's Liability

      The provisions of Section 1 shall not apply to:

      (A) Taxes that are imposed on a Tax  Indemnitee by any  Government  Entity
and that are based on, or measured by, gross or net income or gross or net worth
or capital of any Tax Indemnitee (notwithstanding the foregoing, Section 1 shall
apply to, and the Tax Indemnitees shall be indemnified  against,  any such Taxes
(1) which are in the nature of sales, use, rental, ad valorem, license, property
or value-added Taxes or (2) to the extent such Taxes would not have been imposed
by such Government Entity (other than the U.S. Federal government) upon such Tax
Indemnitee  but for (x) a relation or asserted  relation of any such  Government
Entity  to  the  Aircraft  or the  transactions  contemplated  by the  Operative
Documents,  (y) the  registration  or change in  registration  or the  actual or
deemed use, operation or location by or for any Lessee Person of the Aircraft or
(z) the activities of any Lessee Person,  including  activities  both related to
the Aircraft,  including,  without limitation,  Modifications,  replacements and
substitutions, and unrelated to the Aircraft);

      (B) Sales,  use or similar transfer Taxes imposed on a Tax Indemnitee upon
any voluntary or involuntary  transfer or  disposition  (other than any transfer
pursuant to any  exercise of  remedies in  connection  with an Event of Default,
pooling  arrangement,  Event of Loss or any deemed transfer caused by any Lessee
Person)  by such  Tax  Indemnitee  of any  equitable  or legal  interest  in the
Aircraft,  Airframe,  any Engine or any Part to any Person  other than Lessee or
any Affiliate of Lessee ("Lessor Transfer"); or

      (C) Taxes to the extent  incurred  with  respect  to any period  after the
later of (1)  expiration  or earlier  termination  of this Lease and (2) the (y)
return of possession of the Aircraft in accordance  with the terms of this Lease
or (z) sale or other transfer of the Aircraft hereof  following an Event of Loss
with  respect  to the  Aircraft  in  accordance  with the  terms of this  Lease;
provided,  however,  that the  exclusion  set forth in this clause (C) shall not
apply to the extent such Taxes relate to periods  prior to, or events  occurring
or matters arising prior to or in connection with, such expiration,  termination
or sale.

      (D) Taxes  imposed  solely as a result of (I) the  willful  misconduct  or
gross  negligence of a Tax Indemnitee,  (II) the breach by any Tax Indemnitee of
any of its representations,  warranties or covenants contained in this Agreement
(unless caused by any Lessee Person) or (III) Lessor Liens;

      (E) Taxes  either not yet due or being  contested in  accordance  with the
provisions of Section 6;

                                       2
<PAGE>

      (F) Taxes due solely to any failure of a Tax Indemnitee to (x) file proper
and timely  reports or returns or to pay any Taxes when due,  or (y) comply with
any  certification,  information,  documentation,  reporting  or  other  similar
requirements concerning the nationality,  residence, identity or connection with
the  jurisdiction  imposing such Taxes, if such compliance is required to obtain
or establish  relief or exemption from or reduction in such Taxes and Lessor was
eligible to comply with such requirement;

      (G) Taxes imposed under Section 887 of the Code; or

      (H) Taxes to the  extent  they  exceed the amount of Taxes that would have
been  imposed if there had not been a transfer of the  Aircraft to a Person that
is not a U.S. person.

      Section 3.  No Reduction for Withholding, Etc.

      All  payments  by Lessee  under  this  Agreement  or any  other  Operative
Document, whether in respect of Rent, interest, fees or any other item, shall be
made in full without any deduction or withholding (whether in respect of setoff,
counterclaim,  duties,  Taxes,  monetary  transfer and other  charges,  wages or
otherwise  whatsoever),  unless the withholding or deduction is required by Law,
in which event Lessee shall:

      (A) forthwith pay to Lessor such additional  amount so that the net amount
received by Lessor after the deduction or withholding will equal the full amount
which would have been received by it had no such deduction or  withholding  been
made;

      (B) pay to the relevant  Government  Entity  within the period for payment
permitted by  applicable  Law the full amount of the  deduction  or  withholding
(including,  but without prejudice to the generality of the foregoing,  the full
amount of any deduction or withholding from any additional  amount paid pursuant
to this Section 3); and

      (C)  promptly  furnish  to  Lessor an  official  receipt  of the  relevant
taxation or other  authorities  involved for all amounts deducted or withheld as
aforesaid  or, if no such  receipt is issued,  a  certificate  of  deduction  or
equivalent evidence thereof.

      Section 4.  Reports

      Lessee will  provide  promptly  upon request  such  information  as may be
reasonably  requested by a Tax Indemnitee or required to enable a Tax Indemnitee
to timely and properly fulfill its tax filing  requirements  with respect to the
transactions  contemplated  by  the  Operative  Documents,   including,  without
limitation,  those requirements that relate to Taxes based on or measured by the
total time the Aircraft is located in a particular place irrespective of whether


                                       3
<PAGE>

the  Aircraft is there for  revenue,  maintenance  or storage  purposes.  If any
report,  return or  statement  is required  to be filed with  respect to any Tax
which is subject to  indemnification  under  Section 1, Lessee shall timely file
the same  (except  for any such  report,  return  or  statement  which  such Tax
Indemnitee intends to file or for income tax returns or any other return, report
or  statement  which the Tax  Indemnitee  is  required by Law to file in its own
name). Lessee shall either file such report, return or statement and send a copy
of such report,  return or statement to the Tax  Indemnitee  or, where Lessee is
not permitted to file such report, return or statement, it shall notify such Tax
Indemnitee of such  requirement  and prepare and deliver such report,  return or
statement to such Tax Indemnitee in a manner satisfactory to such Tax Indemnitee
no later than 30 days prior to the time such  report,  return or statement is to
be filed.  Lessee shall hold each Tax  Indemnitee  harmless from and against any
liabilities,  including,  without limitation,  penalties,  late payment charges,
notary charges,  additions to tax, fines and interest arising out of any failure
to  timely  file  or  inaccuracy  in  any  such  return,  statement,  report  or
information  if such failure to timely file or  inaccuracy  is  attributable  to
Lessee's failure to fulfill its obligations hereunder. Lessee shall not have any
right to examine the income tax returns of any Tax Indemnitee.  Lessee agrees to
use commercially  reasonable efforts to obtain official receipts  indicating the
payment by it of all foreign  income and  withholding  Taxes that are subject to
indemnification  under Section 1 and shall promptly  deliver to the relevant Tax
Indemnitee each such receipt obtained by Lessee.

      Section 5.  Payment

      Upon written  demand of the Tax  Indemnitee,  Lessee shall pay any Tax for
which it is liable pursuant to Section 1 in immediately available funds directly
to the appropriate Government Entity or to such Tax Indemnitee,  but in no event
shall such payment be required more than five days prior to the date such Tax is
due.  Any such  demand for  payment  from a Tax  Indemnitee  shall  specify,  in
reasonable  detail,  the  calculation of the amount of the payment and the facts
upon which the right to payment is based and shall be verified  upon the request
and at the expense of Lessee by the independent accountants for Lessor. Each Tax
Indemnitee  shall promptly  forward to Lessee any notice,  bill or advice in the
nature  of a notice  or bill  received  by it  concerning  any  Tax.  As soon as
practical  after each  payment of any Tax by Lessee  directly to any  Government
Entity, Lessee shall furnish the appropriate Tax Indemnitee with the original or
a  certified  copy of a receipt for  Lessee's  payment of such Tax or such other
evidence  of  payment  of such  Tax as is  reasonably  acceptable  to  such  Tax
Indemnitee. Lessee shall also furnish promptly upon request such data as any Tax
Indemnitee  may  require  to  enable  such Tax  Indemnitee  to  comply  with the
requirements of any taxing jurisdiction.

                                       4
<PAGE>

      Section 6.  Contest

      If a claim is made in writing  against a Tax Indemnitee  (whether on audit
or otherwise) for any Taxes that Lessee is required to pay or indemnify  against
pursuant to Section 1, such Tax Indemnitee shall notify Lessee in writing within
30 Business  Days of the receipt of such  claim,  provided  that a failure to so
notify will not diminish or relieve Lessee of any  obligations  under Section 1,
unless such failure is willful and the failure precludes a contest. If requested
by Lessee in  accordance  with  Section 1 and in  writing  within 30 days  after
receipt by Lessee of the notice  described in the preceding  sentence,  such Tax
Indemnitee  shall  in good  faith  and  with due  diligence  contact  (including
pursuing all  administrative and judicial appeals) in the name of Tax Indemnitee
or, if permitted by law and  requested by Lessee and  reasonably  acceptable  to
such Tax Indemnitee in the name of Lessee, the validity, applicability or amount
of such Taxes in appropriate  administrative or judicial  proceedings,  provided
that (1) prior to taking  such  action  Lessee  shall have  agreed to pay to Tax
Indemnitee  promptly after written demand all  out-of-pocket  costs and expenses
that Tax  Indemnitee  may  incur  in  connection  with  contesting  such  claim,
including,  without  limitation,  all reasonable legal and accountant's fees and
disbursements  and costs of  administrative  and judicial  proceedings,  and the
amount of any interest or penalties that may be attributable to and payable as a
result of contesting such claim,  and such Tax Indemnitee  shall not be required
to continue  any contest or waive any  indemnity  claims if Lessee does not make
such payments  promptly after  receiving  notice of the amounts due, (2) if such
contest is to be  initiated  by the payment of, and the claiming of a refund for
such Taxes,  Lessee shall have advanced Tax Indemnitee  sufficient  funds (on an
interest-free  basis) to make such payment, (3) no Event of Default has occurred
and is continuing, (4) the action to be taken will not result in a material risk
of sale,  forfeiture or loss of Lessor's  title to the Aircraft  (unless  Lessee
provides  a bond or  other  security  satisfactory  to  Lessor),  (5)  prior  to
commencing any action, Lessee acknowledges its liability hereunder for the Taxes
being contested and (6) at Tax Indemnitee's request, Lessee shall provide to Tax
Indemnitee a written  opinion of  independent  tax counsel  selected by such Tax
Indemnitee  that there is a reasonable  basis for such contest.  Notwithstanding
that the  conditions  set forth in clauses (1), (2), (3), (4), (5) and (6) above
may have been  satisfied,  Tax Indemnitee,  after  consulting in good faith with
Lessee,  may elect not to pursue  any  contest  or  proceeding  pursuant  to the
preceding sentence or elect to discontinue (by settlement or otherwise) any such
contest or proceeding  commenced  pursuant to the preceding  sentence,  but such
election shall  constitute a waiver by Tax Indemnitee of any right to payment or
indemnification  pursuant to Section 1 with respect to the  adjustment  that was
the subject of such proposed contest or proceeding (and any other adjustment the


                                       5
<PAGE>

contest of which is  precluded  by such  failure to contest)  and, if Lessee has
theretofore  paid or provided Tax  Indemnitee  with funds to pay any amount with
respect to such adjustments,  Tax Indemnitee shall promptly repay such amount to
Lessee.  If Tax Indemnitee  shall obtain a refund in whatever form of all or any
part of any Taxes that Lessee shall have paid or  reimbursed  to Tax  Indemnitee
hereunder,  Tax Indemnitee  shall,  provided that no Event of Default shall have
occurred and be continuing,  pay to Lessee an amount that is equal to the sum of
the amount of such refund or credit,  plus any interest  received on such refund
attributable  to any Taxes paid by, or with funds  provided by,  Lessee prior to
receipt of such refund, reduced by any Taxes incurred by Lessor by reason of the
receipt or accrual of such refund and interest and net of any expenses described
in clause (1) of the second  sentence of Section 1 that have not been previously
reimbursed,  and  increased by any Tax benefit  realized by Tax  Indemnitee as a
result or any payment by Tax Indemnitee made pursuant to this sentence, provided
further  that,  if, at the time of such  payment an Event of Default  shall have
occurred and be continuing, Tax Indemnitee shall hold the amount of such payment
as security for the obligations of Lessee to Tax Indemnitee under the Lease, and
at such time as there shall not be continuing  any such Event of Default,  shall
pay such amount to the Lessee.  Tax Indemnitee hereby agrees that it will inform
Lessee of the time and place of, and Tax Indemnitee  will not object to Lessee's
presence at, any proceeding  conducted pursuant to this Section 6 if in its good
faith discretion it determines that such proceeding will not involve any matters
unrelated  to  Taxes  that are the  subject  of  Section  1 and that it will not
otherwise  adversely affect the Tax Indemnitee,  provided that Lessee's presence
also must be allowed by applicable law and provided  further that the conditions
set forth in clauses (1), (2), (3), (4), (5) and (6) above shall have been,  and
shall continue to be satisfied.

      Section 7.  Tax Savings
      If an  Indemnified  Party or Tax  Indemnitee  determines in its good faith
that it has actually  recognized a Tax benefit (other than a foreign tax credit)
as a result of or with  respect  to any Taxes  paid or  indemnified  against  by
Lessee under Section 1 (whether by way of deduction,  credit or otherwise), such
Indemnified  Party  or Tax  Indemnitee  shall  pay  to  Lessee,  promptly  after
recognition  of such Tax  benefit,  an amount  that,  after  subtraction  of any
further Tax savings that such Indemnified Party or Tax Indemnitee  recognizes as
a result of the  payment  thereof,  is equal to the amount of such Tax  benefit,
provided  that if any such  Tax  benefit  is  subsequently  disallowed,  lost or
reduced,  Lessee shall,  upon written notice from such Indemnified  Party or Tax
Indemnitee,  promptly  repay the amounts paid to the Lessee with respect to such
Tax benefit, provided further that the amount payable under this Section 7 to an
Indemnified  Party or Tax  Indemnitee,  as the case may be, shall not exceed the


                                       6
<PAGE>

amount of all prior  payments by Lessee to such Tax  Indemnitee  or  Indemnified
Party, as the case may be, under Section 1 hereof, or Section 9 of the Lease, as
the case may be, and any excess shall be carried forward to reduce pro tanto any
future  obligations of Lessee to such Tax Indemnitee or Indemnified  Party under
Section  1  hereof,  or  Section 9 of the  Lease,  as the case may be,  provided
further that such  Indemnified  Party or Tax  Indemnitee  shall not be obligated
under this  Section 7 to pay Lessee any  amounts  with  respect to Tax  benefits
realized  as a result of any Taxes not paid or  indemnified  against  by Lessee.
Notwithstanding  anything  to the  contrary  in  Section  1, if at the  time any
payments would  otherwise be due to Lessee  pursuant to this Section 7, an Event
of Default shall have occurred and be continuing,  such Indemnified Party or Tax
Indemnitee shall hold the amount of such payment as security for the obligations
of the Lessee to Lessor  under the Lease and at such time as there  shall not be
continuing  any  such  Event  of  Default,  shall  pay such  amount  to  Lessee.
Indemnified  Parties and Tax  Indemnitees  shall use reasonable  efforts in good
faith in filing their Tax returns and in dealing with taxing authorities to seek
and to promptly  claim any such Tax benefit or savings and to minimize the Taxes
payable or indemnifiable by Lessee hereunder.




                                       7
<PAGE>


                                          
                                     

                                                                      Schedule 6
                                                            Conditions Precedent
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                   SCHEDULE 6
                              CONDITIONS PRECEDENT

Capitalized  terms used but not defined  herein (or in any annex  hereto)  shall
have the  respective  meanings,  and shall be  interpreted  and construed in the
manner, set forth in the Lease Agreement (MSN 28869),  dated as of June 27, 1997
(the "Lease Agreement"), between Boullioun Portfolio Finance I, Inc. and Western
Pacific Airlines, Inc., to which this document is a schedule.

The  obligation  of Lessor to lease the  Aircraft  to Lessee  under  this  Lease
Agreement  is subject to the  fulfillment  to the  satisfaction  of Lessor,  and
Lessee shall procure such  fulfillment,  to the  satisfaction of Lessor,  on the
Delivery Date (or, if another date is specified below, on or prior to such date)
of the following conditions precedent:

      Section 1.  Agreements and Documents

           The following  documents,  agreements,  instruments  or  certificates
shall have been duly authorized,  executed and delivered by the respective party
or parties  thereto (other than Lessor),  shall each be satisfactory in form and
substance  to Lessor  and shall be in full force and  effect  (unless  expressly
provided otherwise) and in the English language, and executed counterparts shall
have been delivered to Lessor:

           1.1  Lease Agreement

           This Lease Agreement.

           1.2  Acceptance Certificate

           The Acceptance  Certificate evidencing the delivery and acceptance of
the Aircraft, duly and properly completed and dated the Delivery Date.

           1.3  Insurance Documents

           (1) A certificate  of insurance in the form of Exhibit B to the Lease
Agreement and which  otherwise  complies with the  requirements of Section 11 of
the Lease Agreement, (2) a broker's letter in the form of Exhibit C to the Lease
Agreement  from the  Insurance  Broker  and which  otherwise  complies  with the


                                       1
<PAGE>

requirements  of  Section 11 of the Lease  Agreement  and (3) a  certificate  of
insurance evidencing compliance with Section 11.12 of the Lease Agreement.

           1.4  [Intentionally Left Blank]

           1.5  Legal Opinion

           An opinion  of each of (1)  Lessee's  counsel  in form and  substance
satisfactory  to  Lessor  and  dated  the  Delivery  Date,  such  counsel  to be
reasonably  acceptable  to Lessor,  (2) Lessor's  counsel in form and  substance
satisfactory   to  Lessor  and  (3)  Crowe  &  Dunlevy  in  form  and  substance
satisfactory to Lessor.

           1.6  Process Agent Letter

           A letter  from the  process  agent  appointed  by Lessee  pursuant to
Section 18.5 of the Lease Agreement accepting such appointment.

           1.7  Officer Certificate

           A certificate in the form of Exhibit H.

           1.8  Financial Information

           Copies of audited  consolidated  financial  statements  (including  a
balance  sheet,  statement  of cash  flows and a profit and loss  statement)  of
Lessee,  prepared in Dollars in accordance  with GAAP, in reasonable  detail and
setting forth in comparative  form the  respective  figures as of the end of and
for the  preceding  fiscal  year as  certified  by Lessee's  independent  public
accountants, including their certificate and accompanying comments.

           1.9  [Intentionally Left Blank]

           1.10  Lessee's Maintenance Program

           Prior  to  the  Scheduled   Delivery  Date,  the  Lessee's   proposed
maintenance program for the Aircraft and such information  reasonably  requested
by Lessor regarding the proposed  maintenance  program (including all work cards
associated with maintenance  checks and evidence that the Aviation Authority has
approved  the  proposed  maintenance  program),  such program to comply with the
definition of "Approved  Maintenance  Program" in Section 2 of Schedule 1 to the
Lease  Agreement and otherwise be  satisfactory in form and substance to Lessor;
upon acceptance of the proposed  maintenance program by Lessor, such maintenance
program  shall become the  "Approved  Maintenance  Program" for purposes of this
Lease Agreement and all other Operative Documents.

                                       2
<PAGE>

           1.11  [Intentionally Left Blank]

           1.12  Novation Agreement

           The Novation Agreement.

      Section 2.  First Rent Payment Made

           Lessee shall have paid the first  installment  of Basic Rent when due
pursuant to Section 3.3 of the Lease Agreement.

      Section 3.  Security Deposit Paid or Letter of Credit Delivered

           Lessee shall have (1) paid all  installments of the Security  Deposit
due on or  before  the  Delivery  Date  pursuant  to  Section  4.1 of the  Lease
Agreement or (2) delivered to Lessor a Letter of Credit,  which Letter of Credit
complies with the requirements of Section 4.4 of the Lease Agreement.

      Section 4.  Registration of Aircraft

           The  Aircraft  shall  have been  duly  registered  with the  Aviation
Authority  and a  certificate  of  airworthiness  shall have been  issued by the
Aviation  Authority and Lessor shall have received evidence of such registration
and issuance.

      Section 5.  Filings, Etc.

      Lessor shall have received evidence that on the Delivery Date all filings,
registrations, recordings and other actions have been or will be taken which are
necessary or advisable to ensure the validity,  effectiveness and enforceability
of the Lease  Agreement  and the other  Operative  Documents  and to protect and
perfect  the rights and  interest  of Lessor  and the  Financing  Parties in the
Aircraft and the Operative Documents.

      Section 6.  Authorizations

      Evidence of the  issuance of each  Authorization  which may be required in
relation to, or in  connection  with,  (1) Lessee  engaging in air transport and
carrying on  scheduled  passenger  and cargo  service in each case as  presently
conducted,  (2) the operation of the Aircraft in compliance with applicable Law,
(3) permitting the execution and delivery by Lessee of the Lease Agreement,  the
Acceptance  Certificate and each other Operative Document and the performance by
Lessee of its obligations hereunder and thereunder.

                                       3
<PAGE>

      Section 7.  No Default

      No Default,  Event of Loss, or event, condition or circumstance that would
with the giving of notice or passage of time  become or give rise to an Event of
Loss, shall have occurred.

      Section 8.  Section 1110

      Lessor  shall  have  received  evidence  that  Lessor is  entitled  to the
protection  of Section 1110 of the United States  Bankruptcy  Code in connection
with its right to take  possession  of the Aircraft in the event of a case under
Chapter 11 of the United States Bankruptcy Code in which Lessee is a debtor.

      Section 9.  Matters Related to the Novation Agreement

      All conditions  precedent to Lessor's  obligation to purchase the Aircraft
under the Novation  Agreement shall have been met to the  satisfaction of Lessor
and the Aircraft shall have been delivered to and accepted by Lessor pursuant to
the Airframe Manufacturer Purchase Agreement.

      Section 10.  Other Matters

      All other matters  incident to the Lease Agreement and the other Operative
Documents  and the lease of the Aircraft  shall be  reasonably  satisfactory  to
Lessor.

The conditions  precedent  specified in this Schedule 6 are for the sole benefit
of Lessor and may be waived or  deferred in whole or in part and with or without
condition by Lessor.  If any of such  conditions  is not  satisfied or waived in
writing  by  Lessor  on and as of the  Delivery  Date  and  Lessor,  in its sole
discretion,  nonetheless  proceeds  with the  delivery of the Aircraft to Lessee
hereunder,  Lessee  hereby  covenants  and  agrees  to  satisfy,  or  cause  the
satisfaction of, such outstanding  conditions  within 15 days after the Delivery
Date.





                                       4
<PAGE>




                                                                       Exhibit A
                                                                Lease Supplement
                                                                 Lease Agreement
                                                                     (MSN 28869)

                                    EXHIBIT A
                             ACCEPTANCE CERTIFICATE
                                   (MSN 28869)

     ACCEPTANCE   CERTIFICATE  (MSN  28869),  dated  [_______],   199[__]  (this
"Acceptance Certificate"), by Western Pacific Airlines, Inc. ("Lessee").

Reference is made to Lease Agreement (MSN 28869), dated as of June 27, 1997 (the
"Lease  Agreement"),  between  Lessee and  Boullioun  Portfolio  Finance I, Inc.
("Lessor").  Capitalized  terms  used  but not  defined  herein  shall  have the
respective meanings ascribed thereto in the Lease Agreement.

1. Lessee hereby irrevocably and unconditionally accepts and leases from Lessor,
under and for all  purposes  of the  Lease  Agreement  and the  other  Operative
Documents,  the Aircraft,  as more particularly  defined in the Lease Agreement,
but including the following:

         One Boeing Model 737-33R airframe bearing  manufacturer's serial number
         28869  and  FAA  Registration  Number  N964WP,  together  with  (a) two
         CFM56-3C-1  engines  bearing  manufacturer's  serial numbers 858550 and
         858552,  respectively,  (b) APU bearing  manufacturer's  serial  number
         P-100814 and (c) three landing gear assemblies  bearing  manufacturer's
         serial numbers MC05771P2887 (LM), MC05772P2887 (RM) and T5598P2887 (N).

2.  Lessee  confirms  that the  "Delivery  Date" for all  purposes  of the Lease
Agreement  is the date set forth in the  opening  paragraph  of this  Acceptance
Certificate  and  confirms  that the Lease Term shall  commence on the  Delivery
Date.

3. Lessee hereby confirms its agreement to pay Rent throughout the Lease Term in
the amounts,  to the Persons and otherwise in accordance  with the provisions of
Section 3 of the Lease Agreement and in accordance with the other  provisions of
the Lease Agreement and the other Operative Documents.

4. THIS ACCEPTANCE  CERTIFICATE SHALL IN ALL RESPECTS,  INCLUDING ALL MATTERS OF
CONSTRUCTION,  VALIDITY  AND  PERFORMANCE,  BE  GOVERNED  BY AND  CONSTRUED  AND
ENFORCED  IN  ACCORDANCE  WITH  THE  INTERNAL  LAWS  OF THE  STATE  OF NEW  YORK
APPLICABLE  TO  CONTRACTS  ENTERED INTO IN THAT STATE  BETWEEN  CITIZENS OF THAT
STATE AND TO BE  PERFORMED  WHOLLY  WITHIN THAT STATE  WITHOUT  REFERENCE TO ANY
RULES GOVERNING CONFLICTS OF LAWS.




                                       1
<PAGE>



Lessee  has  caused  this  Acceptance  Certificate  to be  executed  by its duly
authorized officer as of the day and year first above written.


WESTERN PACIFIC AIRLINES, INC.


By:
    Title:


Confirmed:

BOULLIOUN PORTFOLIO FINANCE I, INC.


By:
    Title:



                                       2
<PAGE>


                      

                                                                    Exhibit B to
                                                                  Certificate of
                                                                       Insurance
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                    EXHIBIT B
                        FORM OF CERTIFICATE OF INSURANCE


ISSUED TO:                                NAMED INSURED:
BOULLIOUN PORTFOLIO                       WESTERN PACIFIC AIRLINES, INC.
   FINANCE I, INC.                        (Lessee)
(Lessor)                                  2864 South Circle Drive,
500-108th Avenue N.E.                     Suite 1100
25th Floor                                Colorado Springs, CO  80906
Bellevue, WA  98004

[Security Agent]



     COVERAGE: The Insurers acknowledge advice of a certain Lease Agreement (MSN
28869) dated as of June 27, 1997 by and between  Boullioun  Portfolio Finance I,
Inc.  ("Lessor") and Western Pacific Airlines,  Inc.  ("Lessee") with respect to
one (1) Boeing 373-33R Aircraft,  U.S.  Registration No. N964WP,  Manufacturer's
Serial No. 28869 and two (2) CFM-56C-1 engines, serial nos. 858550 and 858552.

     [Reference  loan  documents  and define  agent and  lenders  as  "Financing
Parties" and agent as "Agent"]









This  Certificate  of Insurance is issued subject to the terms and conditions of
the referenced policies.  This Certificate neither  affirmatively nor negatively
amends, alters or extends the coverage afforded by any policy described herein.




                                       1
<PAGE>



         INSURERS                                    HULL/SPARES/LIABILITY

                                   [DESCRIBE]

                         BRIEF DESCRIPTION OF INSURANCE

A.       WORLDWIDE COMPREHENSIVE LIABILITY COVERAGE

         Combined Single Limit of Liability each occurrence and annual aggregate
         (where  applicable) for Bodily Injury and/or Property Damage Liability,
         including War liability,  Aircraft Passenger Liability, Aircraft Public
         Liability,,  Aircraft  Property  Damage  Liability,  Passenger  Baggage
         Liability,  Airport  Liability,   Hangarkeepers,   Premises,  Products,
         Contractual, Cargo and Mail Liability.

B.       WORLDWIDE HULL/SPARES - "ALL RISK"

         Physical  Loss  or  Damage,   subject  to  policy  terms,   conditions,
         limitations,  exclusions, and deductibles,  for aircraft or spare parts
         owned by or leased under written contract to Western Pacific  Airlines,
         Inc.

C.       HULL - "WAR RISK"

         Physical Loss or Damage arising from risks of War and Allied Perils (as
         per form RJM Airline 1A 11/94 (LSW 555B) wording plus AVN.65 clause) as
         more fully described in the policy language. The available limit may be
         affected by the annual aggregate limit of [$[ ]*] for all aircraft.  In
         no event will more than seven days notice of  cancellation  be afforded
         with  respect to this  coverage.  Coverage  is  provided on a Worldwide
         basis.

                               SPECIAL PROVISIONS


A.       GENERAL PROVISIONS

1.       Coverage is of the type usually carried by corporations  engaged in the
         same or a similar business,  similarly  situated with Lessee and owning
         and operating  similar aircraft and engines,  and covering risks of the
         kind customarily insured against by such corporations.

2.       The  insurance  shall not be  invalidated  by any action or inaction by
         Lessee and  insure the  interest  of Lessor  and each  Financing  Party
         regardless  of any  breach or  violation  by Lessee or any other  named
         insured or additional insured of any warranty, declaration or condition
         contained in such policies.

                                       2
<PAGE>

3.       Neither  Lessor nor any  Financing  Party shall have any  liability for
         premiums,  commissions,  calls  or  assessments  with  respect  to such
         policies.

4.       Insurers  hereon waive any right to any set-off or  counterclaim or any
         other deduction,  whether by attachment or otherwise, in respect of any
         liability  of  Lessor,  any  Financing  Party or any  other  Additional
         Insureds.

5.       The Lessor and Security Agent will be provided  thirty (30) days notice
         of any  cancellation  or material  change in policy terms or conditions
         except  with  respect  to "war risk"  coverage  for which the notice of
         cancellation  period shall be seven (7) days or whatever shorter period
         may be customarily obtainable.

6.       The  insurers  waive their rights of  subrogation  with respect to this
         lease against Lessor,  each Financing  Party and each other  additional
         insured.

7. All sums expressed herein are in U.S. dollars.

B.       HULL COVERAGE - "ALL RISK" AND "WAR RISK"

1.       Agreed Value:  $[_____]* each aircraft

2.       Spares:  $[   ]* any one location/$[   ]* any one transit

3.       The War  Risk  Underwriters  and the All Risk  Underwriters  agree to a
         50/50 claim  funding  agreement in the event of any dispute as to which
         insurance is applicable.

4.       The hull deductible  applicable to the aircraft is the current standard
         market deductible of $[ ]*.

5.       The Lessor and each Financing Party and their respective successors and
         assigns are named as Additional Insureds.

6.       A loss will be settled  jointly  with  Lessor and  Lessee,  and will be
         payable in Dollars to  [Lessor/Security  Agent], as sole loss payee, to
         the extent of the Agreed Value, for the account of all interests.

C.       LIABILITY INSURANCE

     1. Limit:  Not less than $[ ]* per occurrence  except Personal Injury which
        has a $[ ]* Limit.




                                       3
<PAGE>



2.       Lessor and each  Financing  Party and their  respective  affiliates and
         their  respective  shareholders,   subsidiaries,   agents,   employees,
         officers,  directors,  successors and assigns to which this certificate
         pertains are  Additional  Insureds as their  respective  interests  may
         appear.

3.       The insurance  evidenced hereon is primary to and not contributory with
         any separate insurance maintained by Lessor or any Financing Party.

4.       All the provisions of this coverage,  except with respect to the limits
         of  liability,  shall  operate  in the same  manner as if there  were a
         separate policy covering each such insured.




                                       4
<PAGE>

                                      

                                                                    Exhibit C to
                                                                 Broker's Letter
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                    EXHIBIT C
                        FORM OF INSURANCE BROKER'S LETTER


[_____], 1997


Boullioun Portfolio Finance I, Inc.
c/o Boullioun Aircraft Holding Company, Inc.
500 - 108th Avenue N.E., 25th Floor
Bellevue, Washington  98004

[Security Agent]

Re:      Western Pacific Airlines Lease Agreement (MSN 28869)
         dated as of June 27, 1997 For One B737-33R Aircraft U.S.Registration
         No. N964WP Manufacturer's Serial No. 28869


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

In connection with this letter,  we have read Section 11 and Exhibits B and C of
the agreement (and the related  definitions) between the Client and you dated as
of June 27, 1997 ("Agreement"),  dealing with insurance requirements,  a copy of
which is attached (the "Insurance  Covenant").  We have not read or reviewed the
balance of the Agreement,  including  without  limitation any provision  thereof
which might relate to or influence  the meaning of the language in the Insurance
Covenant.

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

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

                                       1
<PAGE>

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

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

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

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

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

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

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

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

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

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

Very truly yours,




                                       2
<PAGE>

                     

                                                                    Exhibit D to
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                    EXHIBIT D
                           [Intentionally Left Blank]



<PAGE>



                      

                                                                       Exhibit E
                                                                 Lease Agreement
                                                                     (MSN 28869)

                                    EXHIBIT E
                           [Intentionally Left Blank]


<PAGE>




                       

                                                                       Exhibit F
                                                                 Aircraft Status
                                                                          Report
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                    EXHIBIT F
                             AIRCRAFT STATUS REPORT
                                  (MSN 28869)


MONTH ENDING:_________________
             

AIRFRAME
                                                  
AIRCRAFT S/N  __________          TYPE  ___________       REG.____________
                                                  

                                                                      
TOTAL FLIGHT HOURS __________             TOTAL CYCLES ____________
                                                                       
FLT. HOURS FOR MONTH ____________         CYCLES FOR MONTH ___________
                                                                  

                                                                         
DATE AND TIME                             APPROX. DATE AND
LAST "C" CHECK _____________              TIME NEXT "C" CHECK ____________
                                                                     

ENGINES                            ENGINE 1                  ENGINE 2
---------------------------------------------------------------------
                        
S/N                         
                       
                       
TOTAL FLIGHT HRS
                        
                       
TOTAL CYCLES
                       
                       
FLIGHT HRS FOR MONTH
                       
                       
CYCLES FOR MONTH
                       
                       
TIME/CYCLES SLSV
                       
                       
CURRENT LOCATION
                       

Technical Activity during relevant period

1. Major Maintenance  (including  C-Check or Structural check) 2. Engine, APU or
Landing Gear Maintenance - indicate cause 3. ADs complied with
4. Other  significant  Damages,  Repairs or  Modifications  - indicate cause and
attach  any  copies of repair or  Modification  drawings  or data in  respect of
unique or nonstandard repair of Modification to the Aircraft or any Part.















<PAGE>

                     

                                                                       Exhibit G
                                                                Letter of Credit
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                    EXHIBIT G
                                LETTER OF CREDIT
                                   (MSN 28869)
______________, 199[__]


Letter of Credit No. _______


Boullioun Portfolio Finance I, Inc.
c/o Boullioun Aircraft Holding Company, Inc.
500-108th Avenue N.E.,
Twenty-Fifth Floor
Bellevue, Washington  98004

Attention:  [______]


Dear Sir or Madam:

We hereby  establish  in your  favor,  at the  request  and for the  account  of
[_________] (the "Company"),  our irrevocable  letter of credit in the amount of
US$[________]  (the "Stated  Amount")  available  against  presentation of (a) a
sight draft drawn on us dated on or before the date of such  presentation and in
the form of the  Exhibit A hereto and (b) a  certificate  dated the date of such
draft in the form of  Exhibit B hereto,  in each case,  signed by an  individual
being or purporting to be your authorized representative.

Such  presentation  must be made  on a  Business  Day to our  Letter  of  Credit
Department in [New York] at [Bank's address]  (Facsimile  Number:  [__________];
Confirmation  Number:  [______________]))  on or before [___________] or if such
date is not a  Business  Day,  then on or before  the  following  Business  Day.
"Business  Day"  means a day other than a  Saturday,  a Sunday or a day on which
banks are required or  authorized to be closed in New York,  New York.  Any such
presentation may be made by means of  telefacsimile  and we shall be entitled to
rely thereon as if such draft and certificate were presented in person, provided
such draft and certificate are in conformity with the  requirements for the same
as set forth  herein,  but for the  requirement  of an  original  signature.  In
addition,  any draft and certificate hereunder may be presented by mail, express
courier (e.g., DHL) or in person.

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<PAGE>

A draft presented hereunder may be in an amount of up to the Stated Amount. More
than one draft may be presented  hereunder,  subject to the aggregate  amount of
such drafts not exceeding the Stated Amount.

We hereby agree with you that each draft presented  hereunder in compliance with
the terms  hereof will be duly  honored by our payment to you (or in  accordance
with your  instruction)  of the  amount of such draft in  immediately  available
funds:

(a) not  later  than  3:00  p.m.,  [New  York]  time,  on the day such  draft is
presented to us as aforesaid,  if such  presentation  is made to us at or before
12:00 noon, [New York] time, or

(b) not later than 3:00 p.m., [New York] time, on the Business Day following the
day such draft is presented to us as aforesaid,  if such presentation is made to
us after 12:00 noon, [New York] time.

Upon the earlier of (a) [__________],  and (b) irrevocable  payment by us of the
entire  Stated  Amount (in one or more  drawings),  this Letter of Credit  shall
automatically terminate.

Except as otherwise provided herein,  this Letter of Credit shall be governed by
and  construed  in  accordance   with  the  Uniform  Customs  and  Practice  for
Documentary  Credits  (1993  Revision),  ICC  Publication  No. 500 (the  "UCP").
Notwithstanding  Article 17 of the UCP, if this Letter of Credit  expires during
an  interruption of business as described in said Article 17, we agree to effect
payment if a drawing is made  against this Letter of Credit  within  thirty (30)
days after the resumption of business.

Notwithstanding  Article 48 of the UCP, this Letter of Credit may be transferred
and assigned in its entirety more than once.

Upon request, but no more than once in any thirty day period, we will confirm to
you in  writing  that this  Letter of Credit is in full  force and effect and is
enforceable against us in accordance with its terms.




                                       2
<PAGE>



This Letter of Credit sets forth in full the terms of our  undertaking and shall
not in any way be modified,  amended or amplified by reference to any  documents
instruments or agreements  referred to herein, or in which this Letter of Credit
is referred to or to which this Letter of Credit  relates and any such reference
shall not be deemed to  incorporate  herein  by  reference  any such  documents,
instruments and agreements.

Very truly yours,

[BANK]


By
   Name:
   Title:



                                       3
<PAGE>



                                                                    Exhibit A to
                                                                Letter of Credit
                                                             No. _______________


                                   SIGHT DRAFT



Irrevocable Letter of Credit No:  ____      Date of Draft: _______, 19__


To the Order of BOULLIOUN PORTFOLIO FINANCE I, INC.

Pay                                                      [_____________] DOLLARS

     At SIGHT by wire transfer of such amount to the account of  [_________]  at
[Bank, Address] (ABA number: [___________]; account number: [__________])

DRAWN UNDER [ISSUING BANK] LETTER OF CREDIT NO. __________

TO:      [ISSUING BANK]
         [Presentment Address]


BOULLIOUN PORTFOLIO FINANCE I, INC.


By:
   Name:
   Title:


[Endorse on back]



                                       4
<PAGE>



                                                                    Exhibit B to
                                                                Letter of Credit
                                                             No. _______________


                               DRAWING CERTIFICATE

Irrevocable Letter of Credit No.

         The  undersigned,   a  duly  authorized   representative  of  Boullioun
Portfolio  Finance I, Inc.  ("Beneficiary"),  hereby certifies to [ISSUING BANK]
(the "Bank") with  reference to  Irrevocable  Letter of Credit No.  [__________]
(the  "Letter  of  Credit"),  issued  by the Bank in favor  of  Beneficiary,  as
follows:

         1. Beneficiary is presenting a sight draft herewith to draw funds under
the Letter of Credit in the amount of US$[__________].

         2. Demand for payment under the Letter of Credit is being made prior to
the expiration thereof.

         3. An Event of  Default  has  occurred  and is  continuing  under  that
certain  Lease  Agreement  (MSN  28869),  dated as of June [__],  1997,  between
Boullioun Portfolio Finance I, Inc. and Western Pacific Airlines, Inc.

         IN WITNESS  WHEREOF,  Beneficiary  has caused this  certificate and the
accompanying  draft to be executed as of the  [__________]  day of [__________],
199__.


BOULLIOUN PORTFOLIO FINANCE I, INC.


By:
   Name:
   Title:



                                       5
<PAGE>




                                                                       Exhibit H
                                                           Officer's Certificate
                                                                 Lease Agreement
                                                                     (MSN 28869)


                                    EXHIBIT H
                              OFFICER'S CERTIFICATE
                                   (MSN 28869)


I,  __________________________,  the  [__________________]  of  WESTERN  PACIFIC
AIRLINES,  INC. (the "Company"),  a corporation duly organized under the laws of
the State of Delaware,  in  connection  with that certain Lease  Agreement  (MSN
28869),  dated as of June [__], 1997,  between  Boullioun  Portfolio  Finance I,
Inc.("Lessor")  and the Company  (the "Lease  Agreement")  hereby  certify  that
attached hereto is a true and correct copy of the following documents;  each has
not been amended since the date  specified  therein and remain in full force and
effect as of the date of this Certificate:

1. The  [Articles  of  Association,  By-Laws]  and any other  organizational  or
charter documents of the Company.

2.       Resolutions of the Company approving the terms of, and the transactions
         contemplated by, the Lease Agreement and the other Operative  Documents
         (as  defined  in  the  Lease  Agreement),  authorizing  the  execution,
         delivery and  performance by the Company of the Lease Agreement and the
         other Operative Documents.

I further  certify that  following are the names of, the positions  held by, and
the specimen  signatures of, the Officers of the Company duly  authorized by the
Company to execute and deliver the Lease  Agreement and all other  documents and
instruments in connection therewith:

Name                         Position                     Specimen Signature












<PAGE>


IN WITNESS WHEREOF,  this Certificate is issued as of this _____ day of [_____],
199__.

                                                  WESTERN PACIFIC AIRLINES, INC.


                                       By:
                                     Title:

<PAGE>