TRANSFER AGREEMENT AND DEED IN LIEU OF FORECLOSURE

TRANSFER AGREEMENT AND DEED IN LIEU OF FORECLOSURE dated as of May __, 2004
among (i) JETFLEET III, a California corporation ("Assignor"), (ii) WELLS FARGO
BANK NORTHWEST, NATIONAL ASSOCIATION (f/k/a First Security Bank, National
Association), as indenture trustee ("Indenture Trustee") under an Amended and
Restated Indenture of Trust dated as of September 22, 1995 (as heretofore
amended, supplemented or modified, the "Indenture"), between Indenture Trustee
and Assignor and (iii) WELLS FARGO BANK, NATIONAL ASSOCIATION, as owner trustee
(in such capacity, ("Assignee") under a Trust Agreement dated of even date
herewith between the Owner Trustee and the Indenture Trustee (the "Trust
Agreement").

                                    RECITALS

A.       Assignor and Indenture Trustee are party to the Indenture which sets
         forth, inter alia, terms and conditions relating to the issuance of
         JetFleet III Series A Secured Bonds (the "Bonds") by Assignor, and the
         creation and granting of a security interest for the benefit of
         Indenture Trustee in (among other items of property) the items of
         equipment identified on Exhibit A hereto (together with the engines,
         all parts, avionics, accessories, instruments, modules, appurtenances,
         furnishings, logs, manuals, books, film and records related thereto,
         the "Equipment") and the Relevant Agreements (as defined below);

B.       Assignor (or its affiliate) has previously entered into certain
         agreements identified on Exhibit B hereto covering the Equipment
         (together with all amendments and supplements thereto, and all related
         documents, certificates and instruments to the date hereof, the
         "Relevant Agreements");

C.       Assignor has defaulted on its obligations to the holders of the Bonds
         to make payments of principal and interest on the Bonds, which default
         constitutes an "Event of Default" under Sections 5.01(a) and 5.01(b) of
         the Indenture, and as a result of such default Indenture Trustee
         desires to exercise the remedy available to it pursuant to Section
         5.04(d) of the Indenture for the benefit of the holders of Bonds;

D.       The parties hereto anticipate that the proceeds from the sale of the
         assets subject to the lien of the Indenture will be less than amount
         outstanding under the Bonds and in order to reduce the costs involved
         in realizing the value of the Trust Estate (as defined in the
         Indenture), Assignor has agreed to transfer title to the Equipment to
         the Indenture Trustee or its nominee in partial satisfaction of its
         obligations under the Indenture in accordance with Section 9-620 and
         ff. of the California Uniform Commercial Code and the Letter Agreement
         between the Indenture Trustee and the Assignor dated April 8, 2004; and

E.       Indenture Trustee desires to cause legal title to the Equipment to be
         transferred to Assignee for the benefit of the Indenture Trustee and
         the ultimate benefit of the holders of Bonds, and therefore directs,
         pursuant to the terms and conditions set forth below, Assignor to sell,
         transfer and assign to Assignee all of its right, title and interest
         in, to and under, the Equipment and the Relevant Agreements
         (collectively, the "Assigned Property") in lieu of foreclosure.

                                    AGREEMENT

NOW THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, Assignor, Indenture Trustee and Assignee agree as follows:

1. Assignment; Transfer in Lieu of Foreclosure. Assignor hereby sells, assigns,
transfers and sets over unto Assignee, at the direction of Indenture Trustee, in
lieu of foreclosure and in partial satisfaction of Assignor's obligations under
the Indenture as set forth in the recitals to this Agreement, all of Assignor's
right, title and interest in and to the Assigned Property, including without
limitation all of its right, title and interest in and to the Equipment and all
payments and other amounts due and to become due under the Relevant Agreements,
in each case, from and after the date hereof.

2. Acceptance and Assumption; Partial Satisfaction of Bond Obligations. The
Assignee hereby accepts (subject to the terms of the Trust Agreement) the
assignment of all of Assignor's right, title and interest in and to the Assigned
Property pursuant to the terms of this Agreement. The Indenture Trustee hereby
accepts the foregoing assignment to the Assignee in partial satisfaction of the
obligations of Assignor under the Indenture and agrees to apply the proceeds
from disposition of the Assigned Property against such obligations of Assignor
as are outstanding under the Indenture.

3. Assignor Representations and Acknowledgement.

3.1      Assignor represents and warrants to the Assignee that at the time of
the execution of this Agreement:

(a) Organization, Standing and Power. Assignor is a corporation duly organized
and validly existing in good standing under the laws of the State of California
and has all requisite power and authority to execute, deliver and perform its
obligations under this Agreement.

(b) Title. Except for the lien of the Indenture, Assignor has legal title to the
Assigned Property, free and clear of all liens, encumbrances, equities, security
interests, restrictions on transfer, and of any other claims whatsoever arising
by or through Assignor.

(c) No Conflicts. The execution, delivery and performance by Assignor of this
Agreement and a FAA bill of sale (or such other similar document as shall be
required to record the transfer with the applicable governmental authority) (A)
do not require the approval or consent of, the giving of notice to, the
registration with, or the taking of any other action in respect of, any
governmental authority, court, trustee or holder of any indebtedness or
obligation on the part of Assignor other than those that have been obtained,
made, done or taken, (B) do not and will not contravene any law, rule,
regulation, order, writ, injunction or decree applicable to Assignor or
Assignor's Articles of Incorporation or By-Laws, and (C) do not and will not
result in any breach of or conflict with the terms and provisions of any
agreement or instrument to which Assignor is a party or by which Assignor or its
properties or assets may be bound or affected.

(d) Litigation. There is no action, suit, claim, proceeding or investigation
pending or, to the knowledge of Assignor, threatened against Assignor before or
by any court, administrative agency or other governmental authority which, if
adversely determined, would impair the validity of, or the execution and
delivery by Assignor of, this Agreement or any Operative Document or the
performance by Assignor of its obligations hereunder or thereunder.

(e) Relevant Agreements. Exhibit B sets forth an exhaustive list of all
documents and agreements entered into by Assignee with respect to the Equipment
(other than the Indenture). Except for the Relevant Agreements and the
Indenture, there are no documents that affect in any material respect the
rights, interests, duties, obligations or liabilities of the Assignor in respect
of the Assigned Property. Assignor has provided Assignee with true and correct
copies of all amendments, supplements, and modifications to each Relevant
Agreement and the Indenture.

(f) No Amounts Due. There are no amounts owed by Assignor to any party under the
Relevant Agreements and no such amount shall be owed by Assignee to any lessee
or sublessee as a result of the consummation of the transactions contemplated
hereby.

3.2 ASSIGNOR SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY,
EXPRESS OR IMPLIED, AS TO THE AIRWORTHINESS, CONDITION, VALUE, DESIGN,
OPERATION, MERCHANTABILITY OR FITNESS FOR USE OF THE EQUIPMENT, AS TO THE
ABSENCE OF LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, AS TO THE
ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK OR COPYRIGHT, AS TO THE
ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN TORT, OR AS TO THE QUALITY
OF THE MATERIAL OR WORKMANSHIP OF THE EQUIPMENT, OR ANY OTHER REPRESENTATION OR
WARRANTY WHATSOEVER (EXCEPT FOR SUCH TITLE REPRESENTATION SET FORTH IN SECTION
3.1(b)), EXPRESS OR IMPLIED, WITH RESPECT TO THE EQUIPMENT.

3.3 Assignor acknowledges that the "Event of Default" under Section 5.01(a) and
5.01(b) of the Indenture has occurred and is continuing, as referred to in
Section C of the Recitals hereto.

4. Bill of Sale; Relevant Agreements; Account Information. Assignor shall
promptly deliver to Assignee upon the execution of this Agreement (i) executed
originals of such registration or recordation documents as shall have reasonably
been requested by Assignee to register or record the transactions contemplated
herein with any applicable governmental authorities (including, but not limited
to a FAA bill of sale), (ii) executed originals of each of the Relevant
Agreements (iii) all other documents, instruments or agreements which relate in
any material respect to the Relevant Agreements and (iv) copies of the files
(including without limitation correspondence with lessees and files pertaining
to maintenance) of Assignee that relate to the Equipment.

5. Indemnification. Assignor shall indemnify and hold harmless Assignee and its
successors and assigns from and against any and all claims, including, but not
limited to reasonable attorneys fees and costs with respect to such claims,
resulting from any misrepresentation, breach of warranty or non-fulfillment of
any covenant on the part of Assignor under this Agreement or Assignor's failure
to perform any of its obligations under the Indenture or the Relevant Agreements
prior to the date hereof. This indemnification shall survive the consummation of
the transactions contemplated by this Agreement and its termination.

6. Further Assurances; Notices; Payments.

                  6.1 Assignor will promptly and duly execute and deliver such
further documents, deeds, bills of sale, and assurances and take such further
action as may from time to time be necessary to carry out the intent and purpose
of this Agreement, including, without limitation, if requested by Assignee,
documents necessary for the deregistration and/or reregistration of the
Equipment and/or filing of assignments of the Relevant Agreements with the
appropriate governmental authorities. If requested by Assignee, Assignor shall
use its reasonable best efforts to cause a lessee under a Relevant Agreement to
amend and reissue in the name of the Assignee any documentation originally
issued in the name of Assignor under the terms of such Relevant Agreement, and
Assignor shall use its reasonable best efforts to cause all payments of amounts
due under a Relevant Agreement (from a lessee or sublessee thereunder) to be
made to Assignee directly.

                  6.2 Assignor shall cause its affiliate, AeroCentury Corp., and
by executing an acknowledgement to this Agreement AeroCentury Corp. hereby
agrees (i) to the assignment to Assignee of all of its right, title and interest
in the Storage Agreement between AeroCentury Corp. and Embraer Aircraft
Maintenance Services, Inc. dated February 11, 2004 and (ii) to obtain from
Embraer Aircraft Maintenance Services, Inc, a written acknowledgement in the
form of Annex I hereto.

                  6.3 Assignor shall notify Assignee of, and shall hold in trust
for the benefit of Assignee, any payments received by Assignor in respect of the
Relevant Agreements. Upon receipt, and without request or demand therefor, any
such payment shall be promptly remitted by Assignor to the account of Assignee
specified in Section 4 hereof.

                  6.4 All notices required to be given to Assignor in its
capacity as "Lessor" under and as defined in any of the Relevant Agreements or
hereunder shall be promptly transmitted by Assignor from and after the date
hereof to Wells Fargo Bank, National Association, Sixth and Marquette, MAC
N9303-120, Minneapolis, MN, 55479, Fax: (612) 667-7337 Attention: Virginia A.
Housum.

7. Reservation of Rights. Indenture Trustee does not waive, and hereby expressly
reserves, all rights and remedies available to it pursuant to the Indenture and
under any applicable law. The transfer in lieu of foreclosure effected hereby
shall be without prejudice to any such right or remedy so provided, which rights
and remedies may be exercised at any time hereafter in Indenture Trustee's sole
discretion.

8. Counterparts. This Agreement may be executed by the parties hereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.

9. Entire Agreement. This Agreement supersedes all previous arrangements and
agreements, whether written or oral, and comprises the entire agreement between
the parties hereto, in respect of the subject matter hereof.

10. Severability. If any provision hereof shall be held invalid or unenforceable
by any court or as a result of future administrative or legislative action, such
holding or action shall be strictly construed and shall not affect the validity
or effect of any other provision hereof.

11. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of New York.







                            [Signature Page Follows]


<PAGE>



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

  JETFLEET III, a California corporation


  By:________________________
  Name:
  Its:

  WELLS FARGO BANK NORTHWEST, NATIONAL ASSOCIATION, as Indenture
  Trustee


  By:________________________
  Name:
  Its:

  WELLS FARGO BANK, NATIONAL ASSOCIATION, as Owner Trustee


  By:________________________
  Name:
  Its:

AGREED AND ACKNOWLEDGED for purposes of Section 6.2 hereof:

AEROCENTURY CORP.


By:________________________
Name:
Its:




<PAGE>





300126946v3
                                    EXHIBIT A

                              EQUIPMENT INFORMATION



One (1) Saab 340A aircraft, together with two General Electric GE CT7-5A2
engines, two Dowty Rotol R320/4-123-F/1 propellers, all bearing the following
marks:
<table>

                      <c>               <c>                        <c>
------------------------------------------ -------------------------- -------------------------
                Aircraft                    Engines (Manufacturer's          Propellers
                                                  Serial No.)          (Manufacturer's Serial
                                                                                No.)
------------------------------------------ -------------------------- -------------------------
------------------------ ----------------- -------------------------- -------------------------
 Manufacturer's Serial   Registration No.
          No.
------------------------ ----------------- -------------------------- -------------------------
------------------------ ----------------- -------------------------- -------------------------
          024                 N111PX           GE-E367206DKU and         DRG2770/84 and DRG
                                                  GE-E367170                  1729/84
------------------------ ----------------- -------------------------- -------------------------
</table>

<PAGE>



                                    EXHIBIT B

                       DESCRIPTIONS OF RELEVANT AGREEMENTS

1.            Aircraft Sale and Purchase Agreement between AeroCentury Corp. and
              TA Air V Corp. dated August 12, 1999.

2.            FAA Aircraft Bill of Sale between JetFleet III and State Street
              Bank and Trust Company dated August 13, 1999.

3.            Long Form Warranty Bill of Sale dated August 13, 1999.

4.            Aircraft Lease Agreement between Fleet National Bank and Express
              Airlines I, Inc. dated June 1, 1996.

5.            Certificate of Name Change Amendment changing "Express Airlines I,
              Inc." to Pinnacle Airlines, Inc.

6.            Storage and Maintenance Letter Agreement between JetFleet
              Management Corp. and Worldwide Aircraft Services, Inc. dated
              January 3, 2003.

7.            Storage Agreement between AeroCentury Corp. and Embraer Aircraft
              Maintenance Services, Inc. dated February 11, 2004.

8.            Certificate  of  Insurance  issued by Frank  Crystal & Co.,  Inc.
              dated May 18, 2004 and  relating to the Equipment.


9.            Any other agreement, supplement, guaranty, instrument,
              certificate, or other document entered into in connection with
              items 1 through 8 above, or otherwise relating to the Equipment.

<PAGE>



                                     ANNEX 1

                       [FORM OF LETTER TO STORAGE COMPANY]


EAMS-Embraer Aircraft Maintenance Services, Inc.
10 Airways Blvd
Nashville, TN  37217 USA
TEL (615) 367-2100
FAX (615) 367-4327
Attn:    Scott Hall



[Date]

          Re: Storage Agreement between  AeroCentury Corp.  ("AeroCentury")  and
          Embraer  Aircraft  Maintenance  Services,  Inc.  ("EAMS")  dated as of
          February 11, 2004 (the "Storage Agreement") covering one (1) Saab 340A
          Aircraft, bearing registration number N111PX and manufacturer's serial
          number  024,  together  with two General  Electric GE CT7-5A2  engines
          bearing  manufacturer's  serial number  GE-E367206DKU  and GE-E367170,
          respectively,  and two Dowty Rotol  R320/4-123-F/1  propellers bearing
          manufacturer's   serial  number   DRG2770/84   and   DRG1729/84   (the
          "Aircraft").


To Whom It May Concern:

Reference is made to (i) the Storage Agreement, (ii) the Amended and Restated
Indenture of Trust dated as of September 22, 1995 (the "Indenture") between
Wells Fargo Bank Northwest, National Association (f/k/a First Security Bank,
National Association), as indenture trustee thereunder ("Indenture Trustee"),
and Lessor, and (iii) the Transfer Agreement and Deed in Lieu of Foreclosure
dated as of May __, 2004 (the "Transfer Agreement"), a copy of which is attached
hereto.

EAMS acknowledges the notice and instructions herein contained as adequate
notice of the transactions contemplated by the Transfer Agreement. Pursuant to
the Transfer Agreement, AeroCentury has transferred all of its right, title and
interest in and to, inter alia, the Storage Agreement and the Aircraft to Wells
Fargo Bank, National Association, as owner trustee ("Owner Trustee").

EAMS acknowledges and agrees that AeroCentury is not in default of any of its
obligations under the Storage Documents and all payment obligations owed by the
AeroCentury to EAMS under the Storage Documents have been satisfied as of the
date hereof.

Please indicate your acceptance of the above by signing below.

Very truly yours,



AeroCentury Corp., a Delaware corporation

By:_____________________
Name:
Title:

Acknowledged and Agreed:


EMBRAER AIRCRAFT MAINTENANCE SERVICES

By:____________________
Name:
Title: