Document:

LEASE AGREEMENT N___AT

                          dated as of __________, 200_

                                     between

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
               NOT IN ITS INDIVIDUAL CAPACITY, EXCEPT AS EXPRESSLY
                  PROVIDED HEREIN, BUT SOLELY AS OWNER TRUSTEE,

                                     Lessor

                                       and

                            AMERICAN TRANS AIR, INC.,

                                     Lessee

     One Boeing model 737-800  aircraft  bearing United States  registration no.
N___AT and  manufacturer's  serial no. _____,  including  two CFM  International
model  CFM56-7  engines  bearing  manufacturer's  serial  nos.  _____  and _____
-------------------------------------------------------------

     THIS LEASE HAS BEEN EXECUTED IN COUNTERPARTS;  SEE SS. 18.5 FOR INFORMATION
CONCERNING THE RIGHTS OF HOLDERS OF THE VARIOUS COUNTERPARTS.

<PAGE>

                                    CONTENTS

1. DEFINITIONS AND CONSTRUCTION................................................1

2. DELIVERY AND ACCEPTANCE.....................................................1

  2.1 Delivery and Lease of Aircraft...........................................1
  2.2 Acceptance by Lessee.....................................................1

3. TERM AND RENT...............................................................1

  3.1 Term   1
  3.2 Rent   1
  3.3 Payments.................................................................4

4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS..............4

  4.1 Disclaimer of Warranties.................................................4
  4.2 Certain Agreements of Lessor.............................................5
  4.3 Quiet Enjoyment..........................................................5
  4.4 Investment of Funds Held as Security.....................................5
  4.5 Title Transfers by Lessor................................................6
  4.6 Lessor's Interest in Certain Engines.....................................7
  4.7 Lease For U.S. Federal Income Tax Law Purposes; Section 1110
  of Bankruptcy Code...........................................................7

5. RETURN OF AIRCRAFT..........................................................7

  5.1 Compliance with Annex B..................................................7
  5.2 Parking and Related Matters..............................................7
  5.3 Return of Other Engines..................................................8
  5.4 Fuel   8

6. LIENS     8

7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING..........................9

  7.1 Registration and Operation...............................................9
  7.2 Possession..............................................................11
  7.3 Certain Limitations on Subleasing or Other Relinquishment of Possession.15

8. MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS,
   MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS.................. ....16

  8.1 Maintenance; Replacement and Pooling of Parts; Alterations,
  Modifications, and Additions................................................16
  8.2 Information, Certificates, Notices, and Reports.........................16

9. VOLUNTARY TERMINATION UPON OBSOLESCENCE....................................18

  9.1 Right of Termination....................................................18
  9.2 Election by Lessor to Sell..............................................19
  9.3 Retention of Aircraft by Lessor.........................................21

10. LOSS, DESTRUCTION, REQUISITION, ETC.......................................22

  10.1 Event of Loss to the Aircraft..........................................22
  10.2 Event of Loss to an Engine; Engine Exchanges...........................25
  10.3 Conditions to any Replacement..........................................26
  10.4 Conveyance to Lessee...................................................28
  10.5 Application of Payments................................................28
  10.6 Requisition of Aircraft for Use........................................29
  10.7 Requisition of an Engine for Use.......................................29
  10.8 Application of Payments................................................30
  10.9 Application of Payments During Default.................................30

11. INSURANCE.................................................................30

  11.1 Lessee's Obligation to Insure..........................................30
  11.2 Insurance for Own Account..............................................30
  11.3 Indemnification by Government in Lieu of Insurance.....................31
  11.4 Application of Insurance Proceeds......................................31
  11.5 Application of Payments During Default.................................31

12. INSPECTION................................................................32

13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE...............................33

  13.1 In General.............................................................33
  13.2 Merger of Lessee.......................................................33
  13.3 Assignment as Security for Lessor's Obligations........................34
  13.4 Successor Owner Trustee................................................34

14. LEASE EVENTS OF DEFAULT...................................................34

  14.1 Payments...............................................................35
  14.2 Insurance..............................................................35
  14.3 Other Covenants........................................................35
  14.4 Representations and Warranties.........................................35
  14.5 Bankruptcy and Insolvency..............................................36
  14.6 Repudiation or Invalidity of Guarantee.................................36

15. REMEDIES AND WAIVERS......................................................37

  15.1 Remedies...............................................................37
  15.2 Limitations Under CRAF.................................................40
  15.3 Right to Perform for Lessee............................................40
  15.4 Determination of Fair Market Rental Value and Fair Market Sales Value..41
  15.5 Remedies Cumulative....................................................41

16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC........................41

17. RENEWAL AND PURCHASE OPTIONS..............................................42

  17.1 Notices Generally......................................................42
  17.2 Renewal Options........................................................42
  17.3 Purchase Options.......................................................44
  17.4 Appraisals.............................................................46

18. MISCELLANEOUS.............................................................47

  18.1 Amendments.............................................................47
  18.2 Severability...........................................................48
  18.3 Third-Party Beneficiary................................................48
  18.4 Reproduction of Documents..............................................48
  18.5 Counterparts...........................................................48
  18.6 Notices................................................................49
  18.7 Governing Law..........................................................49
  18.8 No Waiver..............................................................49
  18.9 Entire Agreement.......................................................49

ANNEXES, EXHIBITS, AND SCHEDULES

ANNEX A             Definitions
ANNEX B             Return Conditions
ANNEX C             Maintenance
ANNEX D             Insurance

EXHIBIT A           Aircraft Description
EXHIBIT B           Form of Return Acceptance Supplement

SCHEDULE 1          Certain Terms
SCHEDULE 2          Basic Rent Payments
SCHEDULE 2A         Basic Rent Allocations
SCHEDULE 3          Stipulated Loss Value Schedule
SCHEDULE 4          Termination Value Schedule
SCHEDULE 5          EBO Price Schedule
SCHEDULE 6          Permitted Countries
SCHEDULE 7          Placards

<PAGE>

                             LEASE AGREEMENT N___AT

         This Lease  Agreement  N___AT (this  "LEASE")  dated as of  __________,
200_, between (1) First Security Bank, National Association,  a national banking
association,  not in its  individual  capacity  (except  as  expressly  provided
herein) but solely as Owner Trustee ("LESSOR"), and (2) American Trans Air, Inc.
("LESSEE"), an Indiana corporation.

         Lessor and Lessee agree as follows:

                         1. DEFINITIONS AND CONSTRUCTION

         The terms defined in Annex A, when  capitalized as in Annex A, have the
same meanings when used in this Lease. Annex A also contains rules of usage that
control construction in this Lease.

                           2. DELIVERY AND ACCEPTANCE

         2.1               DELIVERY AND LEASE OF AIRCRAFT

         Lessor  hereby  leases the Aircraft to Lessee for the Term,  and Lessee
hereby leases the Aircraft from Lessor for the Term.

         2.2               ACCEPTANCE BY LESSEE

         Lessee hereby  confirms to Lessor that Lessee has duly and  irrevocably
accepted delivery of the Aircraft for all purposes of this Lease.

                                3. TERM AND RENT

         3.1               TERM

         The Aircraft shall be leased hereunder for the Term,  unless this Lease
or the leasing of the  Aircraft is earlier  terminated  in  accordance  with any
provision of this Lease.

         3.2               RENT

     3.2.1 BASIC RENT; ADJUSTMENTS TO BASIC RENT AND CERTAIN OTHER AMOUNTS

         (a)......During  the Base Term,  Lessee  shall pay to  Lessor,  on each
Payment Date,  Basic Rent in the amount equal to the percentage of Lessor's Cost
specified  in  Schedule 2 for such  Payment  Date.  The  amounts  and periods of
Lessee's  liability  for Basic Rent shall be as  allocated  in  accordance  with
Schedule  2A. Such Basic Rent  payments and such  allocations  shall be adjusted
pursuant to ss. 3.2.1(b).  During any Renewal Term,  Lessee shall pay to Lessor,
on each  Payment  Date,  Basic Rent equal to the Renewal  Rent for that  Renewal
Term, determined pursuant to ss. 17.2.2.

         (b)......Basic  Rent, Basic Rent  allocations,  Stipulated Loss Values,
Termination Values, and EBO Price shall be subject to adjustment as follows:

                  (1) If Transaction Expenses paid by Lessor pursuant to ss. 9.2
         of the Participation  Agreement are determined to be other than 2.0% of
         Lessor's Cost, then the Basic Rent percentages in Schedule 2, the Basic
         Rent allocations in Schedule 2A, the Stipulated Loss Value  percentages
         in Schedule 3, the Termination Value percentages in Schedule 4, and the
         EBO  Price  shall  be  recalculated  (upwards  or  downwards)  by Owner
         Participant,  on or before the 120th day after the Delivery  Date using
         the same methods and assumptions used to calculate original Basic Rent,
         EBO Price, Stipulated Loss Value, and Termination Value percentages, in
         order (aa) to maintain Owner  Participant's  Net Economic  Return,  and
         (bb) to the extent  possible  consistent  with  clause (aa) of this ss.
         3.2.1(b)(1), to minimize the Net Present Value of Rents to Lessee.

                  (2)  Notwithstanding  the  foregoing,  in no event  shall  any
         adjustment  to the EBO  Price be made  such  that the EBO Price is less
         than the greatest of (aa) the adjusted  Stipulated Loss Value as of the
         EBO Date,  (bb) the estimated  fair market value of the Aircraft on the
         EBO Date as set forth in the Appraisal  referred to in ss.  5.1.2(m) of
         the Participation  Agreement, and (cc) the sum of the present values of
         (i) Basic Rent payable, as adjusted, during the Base Term after the EBO
         Date,  and (ii) the appraised  fair market value of the Aircraft at the
         end of the Base Term as estimated in the  Appraisal  referred to in ss.
         5.1.2(m) of the  Participation  Agreement,  each discounted back to the
         EBO Date (using a discount rate of 16.5 %).

         (c) All adjustments  pursuant to ss. 3.2.1(b) shall be made as promptly
as  practicable  after  either Owner  Participant  or Lessee gives notice to the
other that an event has occurred that requires an adjustment.  Owner Participant
and  Lessee  shall give  prompt  notice to the other of any event  requiring  an
adjustment.  Any recalculation of the percentages of Basic Rent payments,  Basic
Rent allocations,  Stipulated Loss Value, Termination Value, and EBO Price shall
be  prepared by Owner  Participant,  subject to  verification  at the request of
Lessee  in  accordance  with  this  ss.  3.2.1(c),  on the  basis  of  the  same
methodology  and  assumptions  used by  Owner  Participant  in  determining  the
percentages of Basic Rent,  Stipulated Loss Value,  Termination  Value,  and EBO
Price as of the Delivery Date,  except as such assumptions have been modified to
reflect the events giving rise to adjustments  hereunder and taking into account
the law applicable at the time of such adjustment.  Promptly after an adjustment
is made hereunder,  Owner  Participant  shall deliver to Lessee a description of
such adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments (1) shall be made so as to avoid  characterization of the Lease as a
"disqualified  leaseback or long-term  agreement" within the meaning of Code ss.
467 and Treasury Regulations thereunder, and (2) shall be in compliance with the
requirements  of ss.  4(1) and ss.  4(6) of Revenue  Procedure  75-21 and ss.ss.
4.02(5),  4.07(l),  and 4.07(2) of Revenue Procedure 75-28, except to the extent
that on the Delivery  Date the Lease  constituted a  "disqualified  leaseback or
long-term  agreement"  or was  not in  compliance  with  the  Revenue  Procedure
sections  referred to in clause (2). In connection with any such  adjustments to
payments and allocations of Basic Rent,  appropriate  corresponding  adjustments
shall be made to the  percentages  set forth on Schedules 3 and 4 in the columns
headed "Deferred Basic Rent Amount" and "Prepaid Basic Rent Amount".  All of the
foregoing adjustments shall be set forth in an amendment to this Lease.

         (d) If  Lessee  believes  that any  calculations  by Owner  Participant
pursuant to ss. 3.2.1(c) are in error,  and if, after  consultation,  Lessee and
Owner  Participant do not agree on an adjustment,  then a  nationally-recognized
firm of  accountants  selected by Lessee and  reasonably  satisfactory  to Owner
Participant  shall  verify  such  calculations.   Owner  Participant  will  make
available to such firm (but not to Lessee or any  representative  of Lessee) the
methodology  and assumptions  referred to in ss. 3.2.1(c) and any  modifications
thereto made to reflect the events giving rise to adjustments hereunder (subject
to the  execution  by  such  firm  of a  confidentiality  agreement,  reasonably
acceptable to Owner Participant,  prohibiting disclosure of such methodology and
assumptions to any third party).  The  determination by such firm of accountants
shall be  final.  Lessee  will pay the  reasonable  costs and  expenses  of such
verification by such accountants, except that if it results in (1) a decrease in
Basic Rent which  decreases  the  remaining Net Present Value of Rents by ten or
more basis points from the remaining Net Present Value of Rents as  recalculated
by Owner  Participant,  or (2) a material  reduction in Stipulated  Loss Values,
Termination Values, or the EBO Price, then Owner Participant will pay such costs
and expenses.

                           3.2.2            SUPPLEMENTAL RENT

         Lessee  shall pay to Lessor,  or to whomever is entitled to it, any and
all Supplemental Rent when and as it becomes due and owing. Lessee will also pay
to Lessor, or to whomever is entitled to it, as Supplemental Rent, to the extent
permitted by  applicable  Law,  interest at the Past-Due Rate on any part of any
amount of Rent  (including  Supplemental  Rent) not paid by 11:00 a.m., New York
time, on the date when due (so long as, in the case of any Person not a party to
the Participation Agreement, Lessee had received timely notice of the account to
which such payment was required to be made),  for the period from and  including
the date on which the same was due to (but  excluding)  the date of  payment  in
full.

         3.3               PAYMENTS

         (a)  Payments  of Rent by  Lessee  shall  be paid by wire  transfer  of
immediately available Dollars, not later than 11:00 a.m., New York City time, on
the date when due,  to the  account  of Lessor  specified  in  Schedule 1 to the
Participation Agreement (or to such other account in the United States as Lessor
specifies to Lessee in writing at least 10 Business  Days before such payment of
Rent is due),  or, in the case of any  payment of  Supplemental  Rent  expressly
payable to a Person  other than  Lessor,  to the Person  that shall be  entitled
thereto, to such account in the United States as such Person specifies from time
to time to Lessee at least 10 Business Days before such payment of Rent is due.

         (b) Except as otherwise expressly provided herein, whenever any payment
of Rent shall be due on a day that is not a Business  Day, such payment shall be
made on the next day that is a Business  Day,  and,  if such  payment is made on
such next Business  Day, no interest  shall accrue on the amount of such payment
during such extension.

         (c) All  computations of interest under this Lease shall be made on the
basis of a year of 360 days composed of twelve 30-day months.

     4. DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS

         4.1               DISCLAIMER OF WARRANTIES

     LESSOR  LEASES AND LESSEE  TAKES THE  AIRCRAFT  "AS-IS,  WHERE-IS."  LESSEE
ACKNOWLEDGES   AND  AGREES  THAT,  AS  BETWEEN   LESSEE  AND  LESSOR  AND  OWNER
PARTICIPANT,  (A) LESSEE HAS SELECTED THE AIRCRAFT AND MANUFACTURER THEREOF, AND
(B) NEITHER LESSOR NOR OWNER PARTICIPANT  MAKES, HAS MADE, OR SHALL BE DEEMED TO
HAVE  MADE,  AND  EACH  WILL  BE  DEEMED  TO  HAVE  EXPRESSLY  DISCLAIMED,   ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:

     (1)   THE   AIRWORTHINESS,    VALUE,    CONDITION,    DESIGN,    OPERATION,
MERCHANTABILITY,  OR  FITNESS  FOR  USE OR FOR  ANY  PARTICULAR  PURPOSE  OF THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;

     (2)  THE  QUALITY  OF THE  MATERIAL  OR  WORKMANSHIP  WITH  RESPECT  TO THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF;

     (3) THE ABSENCE OF LATENT OR ANY OTHER DEFECT IN THE AIRFRAME,  ANY ENGINE,
OR ANY PART THEREOF, WHETHER OR NOT DISCOVERABLE;

     (4) THE ABSENCE OF ANY INFRINGEMENT OF ANY PATENT, TRADEMARK, OR COPYRIGHT,
OR THE LIKE; OR

     (5) THE ABSENCE OF  OBLIGATIONS  BASED ON STRICT  LIABILITY IN TORT, OR ANY
OTHER  IMPLIED  REPRESENTATION  OR  WARRANTY  WHATSOEVER  WITH  RESPECT  TO  THE
AIRFRAME, ANY ENGINE, OR ANY PART THEREOF.

         4.2               CERTAIN AGREEMENTS OF LESSOR

         Unless an Event of Default  exists,  Lessor agrees to make available to
Lessee such  rights as Lessor may have under any  warranty  with  respect to the
Aircraft  made,  or  made   available,   by  Airframe   Manufacturer  or  Engine
Manufacturer,  or any of their  subcontractors or suppliers,  pursuant to and in
accordance with the terms of the Purchase Agreement Assignment.

     4.3 QUIET ENJOYMENT

         So long as no Event of Default exists,  Lessor shall not interfere with
Lessee's rights  hereunder to continued  possession,  use, and operation of, and
quiet enjoyment of, the Aircraft during the Term.

     4.4 INVESTMENT OF FUNDS HELD AS SECURITY

     4.4.1 INVESTMENT

         Any money required to be paid to or retained by Lessor that is required
to be paid to Lessee or applied as provided  herein shall,  until paid to Lessee
as  provided  herein or applied as provided  herein,  be invested by Lessor from
time to time as directed in writing by Lessee (or, if Lessee does not so direct,
by or as directed  by Lessor in its sole  discretion)  and at Lessee's  risk and
expense in Cash Equivalents so long as such Cash Equivalents specified by Lessee
or Lessor (as  applicable)  can be acquired by Lessor using its reasonable  best
efforts.

     4.4.2 PAYMENT OF GAIN OR LOSS

         Any net gain (including  interest  received)  realized as the result of
investments  pursuant  to ss.  4.4.1  (net of any fees,  commissions,  and other
reasonable  expenses  incurred in connection with such investment) shall be held
and applied in the same manner as the principal amount is to be held and applied
hereunder. Lessee will promptly pay to Lessor, on demand, the amount of any loss
realized  as  the  result  of any  such  investment  (together  with  any  fees,
commissions,  and other  reasonable  expenses  incurred in connection  with such
investment),  such  amount  so  paid  to  be  held  and  applied  by  Lessor  as
contemplated in ss. 4.4.1.

     4.4.3 LIMITATION OF LIABILITY

         All  investments  under  this ss.  4.4  shall be at  Lessee's  risk and
expense,  and  Lessor  shall  not be  liable  for any  loss  resulting  from any
investment  made  under  this  ss.  4.4  other  than by  reason  of its  willful
misconduct or gross negligence.  Any such investment may be sold (without regard
to its maturity) by Lessor without instructions  whenever such sale is necessary
to make a distribution required by this Lease.

     4.5 TITLE TRANSFERS BY LESSOR

         If Lessor  shall be  required to transfer  title to the  Aircraft,  the
Airframe,  or any Engine to Lessee or any other  Person  pursuant to this Lease,
then  (a)  Lessor  shall  (1)  transfer  to  Lessee  or such  other  Person  (as
applicable)  all of Lessor's  right,  title and interest in and to the Aircraft,
the Airframe, or such Engine (as applicable), free and clear of all Lessor Liens
attributable to Lessor, FSB, or Owner Participant,  (2) assign to Lessee or such
other Person (as applicable),  if and to the extent permitted under the Purchase
Agreement,  all warranties of Airframe Manufacturer and Engine Manufacturer with
respect to the Aircraft,  the Airframe, or such Engine, and (3) assign to Lessee
or such  other  Person (as  applicable),  if and to the  extent  permitted,  all
claims,  if any, for damage to the Aircraft,  the Airframe,  or such Engine,  in
each  case  free  of  Lessor  Liens  attributable  to  Lessor,   FSB,  or  Owner
Participant,  and without recourse or warranty of any kind whatsoever (except as
to the  transfer  described  in clause  (1) above and as to the  absence of such
Lessor  Liens),  and (b) Lessor shall  promptly  deliver to Lessee or such other
Person (as applicable), a bill of sale and agreements of assignment,  evidencing
such transfer and  assignment,  and such other  instruments of transfer,  all in
form and substance  reasonably  satisfactory to Lessee (or such other Person, as
applicable),  as Lessee (or such other Person,  as  applicable)  may  reasonably
request and furnish to Lessor.

     4.6 LESSOR'S INTEREST IN CERTAIN ENGINES

         Lessor  hereby  agrees  for the  benefit  of each  lessor,  conditional
seller, or secured party of any engine (other than an Engine) leased, purchased,
or owned by Lessee or any Permitted  Sublessee  subject to a lease,  conditional
sale,  or other  security  agreement  that Lessor will not acquire or claim,  as
against such lessor,  conditional seller, or secured party, any right, title, or
interest in such engine as the result of the  installation of such engine on the
Airframe  at any time while such  engine is subject to such  lease,  conditional
sale, or other security agreement and owned by such lessor or conditional seller
or subject to a security interest in favor of such secured party.

     4.7  LEASE  FOR U.S.  FEDERAL  INCOME  TAX LAW  PURPOSES;  SECTION  1110 OF
BANKRUPTCY CODE

     (a) Lessee and Lessor  agree that this Lease is, and shall be treated as, a
lease for U.S. federal income tax purposes of the Aircraft,  Airframe,  Engines,
and Parts.

     (b) Lessee and Lessor  intend that Lessor shall be entitled to the benefits
of Section 1110 with respect to the right to take  possession  of the  Aircraft,
Airframe, Engines, and Parts as provided in this Lease.

     5. RETURN OF AIRCRAFT

     5.1 COMPLIANCE WITH ANNEX B

         Lessee  shall  comply  with each of the  provisions  of Annex B,  which
provisions  are hereby  incorporated  by this  reference as if set forth in full
herein.

     5.2 PARKING AND RELATED MATTERS

         If Lessor  gives  written  notice to Lessee,  not less than 10 days nor
more  than  120 days  before  the end of the  Term,  requesting  parking  of the
Aircraft upon its return  hereunder,  Lessee will assist Lessor in procuring (or
cause Lessor to be provided  with) outdoor  parking  facilities for the Aircraft
for a storage  period up to 30 days,  starting on the date of such  return,  and
upon  Lessor's  request to Lessee  made at least 10 days  before the end of such
initial  30-day  period,   for  an  additional  90-day  period  commencing  upon
expiration of such initial period, at such storage facility in the 48 contiguous
states of the United States as Lessee selects. Such storage shall be at Lessor's
risk, and Lessor shall pay all applicable storage fees, except that Lessee shall
pay the parking fees for the initial 30-day  storage  period;  PROVIDED  FURTHER
that  Lessee's  obligation  to provide  parking  shall be  subject  to  Lessor's
entering into an agreement with the storage facility,  before the storage period
begins, providing that Lessor shall bear all maintenance charges and other costs
incurred, and that Lessee's obligations hereunder will be solely for the payment
of parking fees for the initial 30-day period  pursuant to the terms of this ss.
5.2. Unless Lessor and Lessee otherwise agree, the location of such parking will
also constitute the return location for the Aircraft.

     5.3 RETURN OF OTHER ENGINES

         If any Engine  owned by Lessor is not  installed on the Airframe at the
time of return  hereunder,  Lessee shall return the  Airframe  hereunder  with a
Replacement  Engine meeting the  requirements of, and in accordance with, ss. 10
and Annex B. Thereupon,  Lessor will transfer to Lessee the Engine  constituting
part of such  Aircraft  but not  installed  on such  Airframe at the time of the
return of the Airframe.

     5.4 FUEL

         Upon the return of the  Airframe  upon any  termination  of this Lease,
Lessor shall pay Lessee,  as  compensation  for any fuel or oil contained in the
fuel or oil tanks of such  Airframe,  the value of such fuel or oil at the price
paid by Lessee for such fuel or oil. However,  if the Aircraft is being returned
in  connection  with the exercise of remedies  pursuant to ss. 15,  Lessor shall
have no  obligation  to make such payment to Lessee until Lessor shall have been
paid all amounts due to it pursuant to ss. 15.

     6. LIENS

         Lessee shall not,  directly or indirectly,  create,  incur,  assume, or
suffer to exist any Lien on or with respect to the Aircraft,  the Airframe,  any
Engine, or any Part, title to any of the foregoing,  or any interest therein, or
Lessee's rights in and to this Lease or any Permitted  Sublease,  except (a) the
rights of Lessor, Owner Participant,  and Lessee under the Operative Agreements,
and of any Permitted Sublessee under any Permitted  Sublease;  (b) Lessor Liens;
(c) the  rights  of  others  under  agreements  or  arrangements  to the  extent
permitted  by ss. 7.2,  ss. 7.3, or Annex C; (d) Liens for Taxes  either not yet
due or being  contested in good faith by  appropriate  proceedings if such Liens
and such  proceedings  do not involve  more than a DE MINIMIS  risk of the sale,
forfeiture,  or loss of the Aircraft,  the Airframe, any Engine, or the interest
of  Owner  Participant   therein;  (e)  materialmen's,   mechanics',   workers',
repairers',  employees',  or other like Liens arising in the ordinary  course of
business for amounts the payment of which either is not yet  delinquent for more
than 60 days or is being contested in good faith by appropriate proceedings,  if
such Liens and such  proceedings  do not involve any more than a DE MINIMIS risk
of the sale,  forfeiture,  or loss of the Aircraft, the Airframe, any Engine, or
the interest of Owner Participant therein; (f) Liens arising out of any judgment
or award  against  Lessee,  if,  within 60 days  after the entry  thereof,  that
judgment or award is discharged or vacated,  or has its execution stayed pending
appeal,  or is  discharged,  vacated,  or  reversed  within  60 days  after  the
expiration  of such stay,  and if during any such 60-day period there is not, or
any such judgment or award does not involve,  more than a DE MINIMIS risk of the
sale,  forfeiture,  or loss of the Aircraft,  the Airframe,  any Engine,  or the
interest of Owner  Participant  therein;  and (g) any other Lien with respect to
which Lessee or any Permitted  Sublessee  provides a bond, cash  collateral,  or
other  security  adequate  in the  reasonable  opinion of Lessor.  Lessee  shall
promptly  take or cause to be taken  such  action  as may be  necessary  duly to
discharge (by bonding or otherwise)  any Lien not excepted  above that arises in
respect of the Aircraft, the Airframe, any Engine, or any Part during the Term.

     7. REGISTRATION; OPERATION; POSSESSION AND SUBLEASING

     7.1 REGISTRATION AND OPERATION

     7.1.1 REGISTRATION AND RECORDATION

         Subject  to  Lessor's  and Owner  Participant's  compliance  with their
obligations under ss. 13 of the Participation Agreement,  Lessee shall cause the
Aircraft to be, and at all times during the Term to remain, duly registered with
the FAA under the Transportation  Code or with such other country of registry as
shall be permitted  under ss. 7.1.2  hereof,  in the name of Lessor as owner and
lessor  (except to the extent that such  registration  under the  Transportation
Code is prevented or lost because of Lessor's or Owner Participant's  failure to
comply with the citizenship  requirements for registration of the Aircraft under
the Transportation Code). Lessor shall execute and deliver all such documents as
Lessee  or any  Permitted  Sublessee  reasonably  requests  for the  purpose  of
effecting  and  continuing  such  registration.  Each of the  registrations  and
recordations  referenced in this ss. 7.1.1 will be at Lessee's cost and expense,
except as otherwise provided in this Lease.

     7.1.2 REREGISTRATION

         After the Tax Attribute  Period (or before such date,  provided  Lessee
pre-pays on a lump-sum basis any liability due under the Tax Indemnity Agreement
as a result of such registration on the assumption that such registration  would
continue for the  remainder of the term of the Permitted  Sublease  described in
ss. 7.6.11(a)(3) of the Participation  Agreement, if no Special Default or Event
of Default exists,  Lessee may, by written notice to Lessor (with a copy of such
notice to Owner  Participant),  request to change the country of registration of
the  Aircraft.  Any  such  change  in  registration  shall be  effected  only in
compliance  with,  and subject to all of the conditions set forth in, ss. 7.6.11
of the Participation Agreement.

     7.1.3 MARKINGS

         If permitted by  applicable  Law, on or reasonably  promptly  after the
Delivery  Date,  Lessee  will cause to be affixed  to,  and  maintained  in, the
cockpit of the Airframe and on each  Engine,  in each case in a clearly  visible
location,  a placard of a reasonable size and shape bearing the legend set forth
in Schedule 6. Such placards may be removed  temporarily,  if necessary,  in the
course of maintenance of the Airframe or Engines. If any such placard is damaged
or becomes illegible,  Lessee shall promptly replace it with a placard complying
with the requirements of this ss. 7.1.3.

     7.1.4 COMPLIANCE WITH LAWS

         Lessee  shall not,  and shall not allow any other  Person to,  operate,
use, maintain, service, repair, overhaul, improve, or modify the Aircraft (a) in
violation of any Law binding on or applicable to the Aircraft,  the Airframe, or
any Engine, or (b) in violation of any airworthiness  certificate,  license,  or
registration of any Government Entity relating to the Aircraft, the Airframe, or
any Engine,  except (1) immaterial or  non-recurring  violations with respect to
which corrective  measures are taken promptly by Lessee or a Permitted Sublessee
(as  applicable)  upon  discovery  thereof,  and (2) to the extent Lessee or any
Permitted Sublessee is contesting the validity or application of any such Law or
requirement  relating to any such certificate,  license, or registration in good
faith in any  reasonable  manner  which does not involve  more than a DE MINIMIS
risk of the sale, forfeiture,  or loss of the Aircraft, the Airframe, any Engine
or the interest of Owner Participant  therein, any risk of criminal liability or
of material civil penalty against Lessor or Owner Participant.

     7.1.5 OPERATION

         Lessee  agrees  not to  operate,  use,  or  locate  the  Aircraft,  the
Airframe,  or any Engine, or allow the Aircraft,  the Airframe, or any Engine to
be operated,  used,  or located,  (a) in any area  excluded from coverage by any
insurance  required by the terms of ss. 11,  except in the case of a requisition
by the U.S.  Government where the U.S.  Government provides an indemnity in lieu
of such insurance, or insurance from the U.S. Government, covering such area, in
accordance  with ss. 11.3, or (b) in any recognized  area of hostilities  unless
fully  covered in accordance  with Annex D by war-risk  insurance as required by
the terms of ss. 11 (including ss. 11.3), unless in any case referred to in this
ss. 7.1.5 the Aircraft is only  temporarily  operated,  used, or located in such
area as a result of an emergency,  equipment  malfunction,  navigational  error,
hijacking, weather condition, or other similar unforeseen circumstances, so long
as Lessee diligently and in good faith proceeds to remove the Aircraft from such
area.

     7.2 POSSESSION

         Lessee will not,  without the prior written consent of Lessor and Owner
Participant,   sublease  or  otherwise  in  any  manner  deliver,  transfer,  or
relinquish  possession of the Aircraft,  the Airframe, or any Engine, or install
any Engine, or permit any Engine to be installed, on any airframe other than the
Airframe;  PROVIDED,  that,  subject to the  provisions of ss. 7.3,  Lessee may,
without such prior written consent:

     7.2.1 INTERCHANGE AND POOLING

         Subject or permit any  Permitted  Sublessee to subject (a) the Airframe
         to  normal   interchange   agreements   (provided  that  (1)  any  such
         interchange  agreement does not contemplate that Lessee (or a Permitted
         Sublessee) will be out of possession of the Airframe for more than five
         consecutive  days at a time  (absent  weather,  maintenance,  or  other
         exigencies),  and (2) the  party  to such  interchange  agreement  is a
         Permitted  Air Carrier,  not in  bankruptcy,  organized  and having its
         principal  place of business in a country with which the United  States
         then maintains  normal  diplomatic  relations and which  recognizes and
         gives  effect to the  rights,  title,  and  interests  of Lessor in the
         Airframe), or (b) any Engine (but only if such Engine is then installed
         upon  an  aircraft)  to  normal   interchange   agreements  or  pooling
         agreements or  arrangements,  in each case  customary in the commercial
         airline industry and entered into by Lessee or such Permitted Sublessee
         in the  ordinary  course  of  business;  PROVIDED,  that  (1)  no  such
         agreement or  arrangement  shall require any transfer of Lessor's title
         to the Airframe or such Engine,  and (2) if Lessor's  title to any such
         Engine  is   nevertheless   divested   under  any  such   agreement  or
         arrangement, then such Engine shall be deemed to have suffered an Event
         of  Loss as of the  date  of such  divestiture,  and  Lessee  shall  be
         required to replace such Engine with a Replacement  Engine  meeting the
         requirements of, and in accordance with, ss. 10.

     7.2.2 TESTING AND SERVICE

         Deliver or permit any Permitted  Sublessee to deliver possession of the
         Aircraft, the Airframe, any Engine, or any Part (a) to the manufacturer
         thereof  or to  any  third-party  maintenance  provider,  for  testing,
         service,  repair,  maintenance,  or  overhaul  work  on  the  Aircraft,
         Airframe,  any  Engine,  or any Part,  or, to the  extent  required  or
         permitted by the terms of Annex C, for alterations or  modifications in
         or additions to the Aircraft,  the Airframe,  or any Engine,  or (b) to
         any Person for the purpose of transport to a Person  referred to in the
         preceding clause (a).

     7.2.3 TRANSFER TO U.S. GOVERNMENT

         Transfer or permit any  Permitted  Sublessee to transfer  possession of
         the  Aircraft,  the  Airframe,  or any  Engine  to the U.S.  Government
         pursuant to CRAF or  otherwise,  in which event Lessee  shall  promptly
         notify Lessor in writing of any such  transfer of  possession  (and, in
         the case of any transfer pursuant to CRAF, in such  notification  shall
         identify by name, address, and telephone numbers the Contracting Office
         Representative(s) for the Military Airlift Command of the United States
         Air Force to whom notices must be given and to whom  requests or claims
         must be made to the extent applicable under CRAF).

     7.2.4 INSTALLATION OF ENGINES ON OWNED AIRCRAFT

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe owned by Lessee or such Permitted  Sublessee free and clear of
         all Liens except (a)  Permitted  Liens,  (b) Liens that do not apply to
         the  Engines,  and  (c)  the  rights  of  third  parties  under  normal
         interchange  or  pooling   agreements  and  arrangements  of  the  type
         permitted under ss. 7.2.1.

     7.2.5 INSTALLATION OF ENGINES ON OTHER AIRFRAMES

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe leased to Lessee or such Permitted Sublessee,  or purchased or
         owned by Lessee  or such  Permitted  Sublessee  subject  to a  security
         agreement,  conditional sale, or other secured  financing  arrangement,
         but only if (a) such airframe is free and clear of all Liens except (1)
         the  rights  of  the  parties  to  such  lease  or  secured   financing
         arrangement,  covering  such  airframe,  and  (2)  Liens  of  the  type
         permitted by clauses (a) and (b) of ss.  7.2.4,  and (b) Lessee or such
         Permitted  Sublessee has received from the lessor,  secured  party,  or
         conditional  seller,  in respect of such airframe,  a written agreement
         (which may be a copy of the lease, security agreement, conditional sale
         agreement,  or other agreement  covering such  airframe),  whereby such
         Person  agrees that it will not acquire or claim any right,  title,  or
         interest in, or Lien on, such Engine by reason of the  installation  of
         such  Engine on such  airframe at any time while such Engine is subject
         to this Lease or is owned by Lessor.

     7.2.6 INSTALLATIONS OF ENGINES ON FINANCED AIRCRAFT

         Install or permit any  Permitted  Sublessee  to install an Engine on an
         airframe owned by Lessee or such Permitted Sublessee,  leased to Lessee
         or such  Permitted  Sublessee,  or purchased or owned by Lessee or such
         Permitted  Sublessee  subject to a conditional  sale or other  security
         agreement  under  circumstances  where  neither ss. 7.2.4 nor ss. 7.2.5
         applies;  PROVIDED, that any such installation shall be deemed an Event
         of Loss with respect to such  Engine,  and Lessee shall comply with ss.
         10.2 in respect  thereof.  Until ss. 10.2 has been fully complied with,
         Lessor's  interest  in such  Engine  shall  continue  in full force and
         effect.

                           7.2.7            SUBLEASING

     With respect to the Aircraft,  the Airframe,  or any Engine,  if no Special
Default or Event of Default exists, enter into a sublease with any Permitted Air
Carrier, but only if:

     (a)  Lessee  provides  written  notice  to  Lessor  (with a copy  to  Owner
Participant) (such notice in the event of a sublease to a U.S. Air Carrier to be
given  promptly  after  entering into any such  sublease,  and, in the case of a
sublease to any other  Permitted  Air  Carrier,  10 Business  Days in advance of
entering into such sublease);

     (b) at the time that Lessee enters into such  sublease,  such Permitted Air
Carrier  shall  not be  subject  to  any  bankruptcy,  insolvency,  liquidation,
reorganization,   dissolution,   or  similar  proceeding,  and  shall  not  have
substantially all of its property in the possession of any liquidator,  trustee,
receiver, or similar Person;

     (c) any such  sublease (1) shall not extend  beyond the  expiration  of the
Base Term or any  Renewal  Term then in effect or  irrevocably  committed  to by
Lessee,  or contain a purchase  option,  unless  expressly  subject to  Lessee's
exercise of its renewal or purchase  options in accordance with the terms of ss.
17,  and in any event  subject  to the  requirements  of clause  (4) of this ss.
7.2.7(c),  (2) shall not  contain  any  purchase  option  exercisable  at a date
earlier than such date permitted  under ss. 17.3, (3) shall  explicitly  require
that  sublessee or sublessor  (or both with  specified  allocations)  will fully
comply with the Lease's  maintenance,  operation,  possession,  inspection,  and
insurance  requirements,  and (4) shall be expressly  subject and subordinate to
all the  terms of this  Lease  and to  Lessor's  rights,  powers,  and  remedies
hereunder,  including Lessor's rights under ss. 15 to repossess the Aircraft and
to terminate such sublease if an Event of Default exists;

     (d) in connection with a sublease to a Permitted  Foreign Air Carrier,  (1)
the United States maintains diplomatic relations with the country of domicile of
such Permitted Foreign Air Carrier, and (2) Lessee furnishes to Lessor and Owner
Participant a favorable  opinion of counsel,  reasonably  satisfactory to Lessor
and Owner  Participant,  located in the country of  domicile  of such  Permitted
Foreign Air Carrier,  that (aa) the terms of such sublease are legal, valid, and
binding  obligations of the parties thereto,  enforceable under the laws of such
jurisdiction,  (bb) it is not  necessary  for  Owner  Participant  or  Lessor to
register  or qualify to do  business  in such  jurisdiction,  if not  already so
registered or  qualified,  as a result of the proposed  sublease,  (cc) Lessor's
title to,  the  Aircraft,  Airframe,  and  Engines  will be  recognized  in such
jurisdiction,  (dd) the  Laws of such  jurisdiction  of  domicile  require  fair
compensation  by the  government  of such  jurisdiction,  payable  in a currency
freely  convertible  into  Dollars,  for the  loss  of  title  to the  Aircraft,
Airframe,  or Engines in the event of the requisition by such government of such
title (unless Lessee provides  insurance in the amounts required with respect to
hull insurance  under ss. 11 covering the  requisition of title to the Aircraft,
Airframe,  or  Engines by the  government  of such  jurisdiction  so long as the
Aircraft,  Airframe,  or  Engines  are  subject  to such  sublease),  (ee)  such
Permitted Air Carrier's agreement that its rights under the sublease are subject
and  subordinate  to all the terms of this  Lease is  enforceable  against  such
Permitted Air Carrier under  applicable Law, and (ff) such sublease will subject
Lessor and Owner  Participant  to no greater tort  liability  than in the United
States of America, OR, if such sublease will subject Lessor or Owner Participant
to greater  tort  liability  than in the United  States of  America,  Lessee (or
Permitted  Sublessee) has provided  insurance to insure against such  additional
liability;

     (e) Lessee furnishes to Lessor and Owner  Participant  evidence  reasonably
satisfactory to Lessor that the insurance required byss. 11 remains in effect;

     (f) all necessary documents are duly filed, registered, or recorded in such
public  offices as are required  fully to preserve  the title of Lessor,  in the
Aircraft, Airframe, and Engines;

     (g) Lessee shall  reimburse  Lessor and Owner  Participant for all of their
reasonable  out-of-pocket  fees  and  expenses  (including  reasonable  fees and
disbursements of counsel) incurred in connection with any such sublease;

     (h) no such sublease  shall be made to a "tax exempt  entity" as defined in
ss. 168(h)(2) of the Code, including a Permitted Foreign Air Carrier, before the
end of the Tax Attribute  Period unless Lessee  prepays on a lump-sum  basis any
liability  due under the Tax  Indemnity  Agreement as a result of such  sublease
based upon the assumption  that such sublease were to continue for the remainder
of the term of such sublease;

     (i) no such  sublease  will  adversely  affect  Lessor's  protection  under
Section 1110;

     (j) no such  sublease  shall permit the Permitted  Sublessee  thereunder to
sub-sublease  or transfer the Airframe or any Engine,  except for transfers by a
Permitted sublessee  permitted by the foregoing  provisions of this ss. 7.2, and
except that a Permitted  Sublessee who is a manufacturer may sub-sublease to any
Person to whom a sublease  would be permitted  under this ss.  7.2.7;  PROVIDED,
that (1) such  sub-sublease  shall  not  permit  any  sub-sub-subleasing  of the
Aircraft,  the Airframe,  or any Engine, and (2) such sub-sublease must meet the
requirement of a Permitted Sublease;

     (k) if the term of such  Sublease  is greater  than one year,  Lessee  will
assign such Sublease to Lessor as security for Lessee's obligations hereunder.

     7.3 CERTAIN LIMITATIONS ON SUBLEASING OR OTHER RELINQUISHMENT OF POSSESSION

         Notwithstanding anything to the contrary in ss. 7.2:

         (a) The rights of any Person who receives possession of the Aircraft in
accordance  with ss. 7.2 shall be subject  and  subordinate  to all the terms of
this Lease, and to Lessor's rights,  powers, and remedies  hereunder,  including
(1) Lessor's  right to repossess  the Aircraft  pursuant to ss. 15, (2) Lessor's
right  to  terminate   and  avoid  such   sublease,   delivery,   transfer,   or
relinquishment of possession if an Event of Default exists, and (3) the right to
require such Person to deliver the Aircraft,  Airframe, and Engines forthwith if
an Event of Default exists.

         (b) Lessee shall remain  primarily liable hereunder for the performance
of all the terms of this Lease to the same  extent as if such  transfer  had not
occurred,  and no transfer of  possession of the  Aircraft,  the  Airframe,  any
Engine,  or any Part shall in any way  discharge  or  diminish  any of  Lessee's
obligations to Lessor hereunder or under any other Operative Agreement.

         (c) Lessee  shall  ensure  that no  sublease,  delivery,  transfer,  or
relinquishment   permitted   under  ss.  7.2  shall  affect  the  United  States
registration of the Aircraft, unless also made in accordance with the provisions
of ss. 7.1.2.

         (d) Any event  that  constitutes  or would,  with the  passage of time,
constitute an Event of Loss under clause (3),  (4), or (5) of the  definition of
such  term  (as set  forth  in  Annex A) shall  not be  deemed  to  violate  the
provisions of ss. 7.2.

         (e)  No  Wet  Lease  shall   constitute   a  delivery,   transfer,   or
relinquishment of possession for purposes of ss. 7.2, nor shall it be prohibited
by the terms hereof.

     8.   MAINTENANCE;   REPLACEMENT   AND   POOLING   OF  PARTS;   ALTERATIONS,
MODIFICATIONS, AND ADDITIONS; OTHER LESSEE COVENANTS

     8.1   MAINTENANCE;   REPLACEMENT   AND   POOLING  OF  PARTS;   ALTERATIONS,
MODIFICATIONS, AND ADDITIONS

         At all times during the Term,  Lessee shall comply with (or cause to be
complied  with) each of the  provisions of Annex C, which  provisions are hereby
incorporated by this reference as if set forth in full herein.

         8.2               INFORMATION, CERTIFICATES, NOTICES, AND REPORTS

                           8.2.1            FINANCIAL INFORMATION

         Lessee will furnish to Lessor and Owner Participant:

                  (a)  within 90 days  after the end of each of the first  three
         fiscal quarters in each fiscal year of Lessee,  a consolidated  balance
         sheet  of  Lessee  and  Guarantor  as of the end of such  quarter,  and
         related  statements of income and cash flows for the period  commencing
         at the end of the previous  fiscal year and ending with the end of such
         quarter,   setting  forth  in  each  case  in   comparative   form  the
         corresponding  figures for the  corresponding  period in the  preceding
         fiscal year,  prepared in accordance  with GAAP;  PROVIDED,  that while
         Lessee or Guarantor  is subject to the  reporting  requirements  of the
         Securities  Exchange  Act of 1934,  a copy of Lessee's  or  Guarantor's
         report on Form 10-Q for such fiscal quarter  (excluding  exhibits) will
         satisfy this clause (a).

                  (b)  within  120 days  after  the end of each  fiscal  year of
         Lessee, a consolidated  balance sheet of Lessee and Guarantor as of the
         end of such fiscal year and related statements of income and cash flows
         of Lessee and Guarantor for such fiscal year, in comparative  form with
         the preceding fiscal year,  prepared in accordance with GAAP,  together
         with a report of Lessee's and Guarantor's  independent certified public
         accountants  with respect to their audit of such financial  statements;
         PROVIDED,  that while Lessee or  Guarantor is subject to the  reporting
         requirements of the Securities Exchange Act of 1934, a copy of Lessee's
         or  Guarantor's  report on Form 10-K for such  fiscal  year  (excluding
         exhibits) will satisfy this clause (b).

                           8.2.2            ANNUAL CERTIFICATE

         Within 120 days after the close of each fiscal  year of Lessee,  Lessee
shall deliver to Lessor and Owner Participant an Officer's Certificate of Lessee
to the effect that such officer is familiar with or has reviewed or caused to be
reviewed  the  relevant  terms of this  Lease  and the  other  Lessee  Operative
Agreements, and that such officer does not have knowledge of the existence as at
the date of such  certificate  of any  Event of  Default  (or,  if any  Event of
Default  exists,  specifying the nature and period of existence  thereof and the
action Lessee has taken or is taking or proposes to take with respect thereto).

                           8.2.3            INFORMATION FOR FILINGS

         Lessee  shall  promptly  furnish to Owner  Participant  or Lessor  such
information (other than with respect to the citizenship of Owner Participant and
Lessor) within Lessee's or any Permitted Sublessee's  possession,  or reasonably
available to or  obtainable  by Lessee or such  Permitted  Sublessee,  as may be
required to enable Lessor to file in a timely manner any reports  required to be
filed by it as lessor under the Lease or to enable Owner  Participant to file in
a timely manner any reports required to be filed by it as the beneficiary of the
Trust  Estate,  in either case,  with any  Government  Entity  because of, or in
connection  with,  the interest of Owner  Participant or Lessor in the Aircraft,
this Lease, or any other part of the Trust Estate;  PROVIDED, that, with respect
to any such information which Lessee reasonably deems commercially  sensitive or
confidential,  Owner Participant or Lessor (as applicable) shall afford Lessee a
reasonable  opportunity (to the extent  reasonably  obtainable) to seek from any
such Government Entity a waiver of the obligation of Owner Participant or Lessor
to file any such information, or shall consent to the filing of such information
directly by Lessee in lieu of filing by Owner Participant or Lessor,  and if any
such waiver or consent is  evidenced  to the  reasonable  satisfaction  of Owner
Participant  or Lessor (as  applicable),  then  Lessee  shall not be required to
furnish such information to Owner Participant or Lessor.

                           8.2.4            OTHER INFORMATION

         Lessee shall provide to Owner  Participant from time to time such other
information  or data as Owner  Participant  reasonably  requests  concerning the
Aircraft,   Lessee's   financial   condition,   or  otherwise  relating  to  the
transactions or matters contemplated in the Operative  Agreements,  in each case
to the extent  within  Lessee's  or any  Permitted  Sublessee's  possession,  or
reasonably available to or obtainable by Lessee or such Permitted Sublessee.

                   9. VOLUNTARY TERMINATION UPON OBSOLESCENCE

         9.1               RIGHT OF TERMINATION

         (a)  Provided  there is then no Special  Default  or Event of  Default,
Lessee  shall have the right at its option to  terminate  this Lease  during the
Base  Term,  effective  only on a  Termination  Date  occurring  on or after the
seventh anniversary of the Delivery Date, if:

                  (1) Lessee makes a good faith  determination that the Aircraft
         either  has become  economically  obsolete  or is  surplus to  Lessee's
         requirements,  and  Lessee's  Chief  Financial  Officer or Treasurer so
         certifies in writing to Lessor; and

                  (2) Lessee provides Lessor (with a copy to Owner  Participant)
         with written notice of Lessee's exercise of such termination option not
         less than 180 days and not more than 360 days  before  the  Termination
         Date specified in such notice.

         (b) Lessor shall notify Lessee of Lessor's  intention to sell or retain
the  Aircraft,  as  provided  in this ss. 9, not less than 120 days  before  the
Termination Date specified in the written notice pursuant to ss. 9.1(a)(2).  Any
failure by Lessor to give such notice of its  election  shall be deemed to be an
election to sell the Aircraft, as provided in this ss. 9.

         (c) In the event of any  termination  pursuant  to this ss.  9,  Lessee
shall not acquire  additional  737-800  aircraft during the 24 months  following
such  termination,  except to  replace  any lost or  damaged  aircraft  or under
short-term  operating leases, and Lessee shall notify Lessor in the event Lessee
plans to enter into such an operating lease to discuss the possible  re-lease of
the Aircraft from Lessor to Lessee under such short-term operating lease.

         9.2               ELECTION BY LESSOR TO SELL

                           9.2.1            BIDS; CLOSING OF SALE

         Unless  Lessor has notified  Lessee of Lessor's  election to retain the
Aircraft,  Lessee, as agent for Lessor,  shall, until the date ten Business Days
before the Termination Date, use commercially  reasonable efforts to obtain bids
for a cash  purchase  of the  Aircraft,  and Lessor may, if it desires to do so,
also  seek to obtain  such  bids.  If  Lessee  receives  any bid,  Lessee  shall
promptly,  and in any event at least ten  Business  Days before the  Termination
Date,  certify  to Lessor in writing  the amount and terms of such bid,  and the
name and  address of the Person  (who  shall not be Lessee or any  Affiliate  of
Lessee or any Person with whom Lessee or any such  Affiliate has an  arrangement
for the future use of the Aircraft by Lessee or any such  Affiliate)  submitting
such bid. If Lessor  receives  any bid on or before the date ten  Business  Days
before the Termination Date, Lessor shall, at least ten Business Days before the
Termination Date, certify to Lessee in writing the amount and terms of such bid,
and the name and address of the Person submitting such bid.

                           9.2.2            CLOSING OF SALE

         (a) On the  Termination  Date (1) Lessee shall deliver the Airframe and
Engines or engines  constituting part of the Aircraft to the bidder (if any) who
shall have  submitted  the highest  cash bid on or before the date ten  Business
Days before such  Termination  Date, in the same manner as if delivery were made
to Lessor  pursuant to ss. 5 and Annex B and in full  compliance  with the terms
thereof,  and shall duly  transfer to Lessor title to any such engines not owned
by Lessor, all in accordance with the terms of ss. 5 and Annex B, and (2) Lessor
shall  simultaneously  therewith transfer the Airframe and Engines or engines to
such bidder,  in the manner described in ss. 4.5, against cash paid to Lessor in
the  amount  of such  highest  bid and in the  manner  and in  funds of the type
specified in ss. 3.3.

         (b) All proceeds of any sale described in ss. 9.2.2(a) shall be paid to
and  retained  by Lessor  and,  on such  Termination  Date,  and as a  condition
precedent  to such sale and the  delivery of the Aircraft and Engines or engines
to such bidder,  Lessee  shall pay to Lessor,  in the manner and in funds of the
type specified in ss. 3.3:

     (1) all unpaid  Basic Rent due at any time  before such  Termination  Date;
plus

     (2) the excess (if any) of the Termination Value for the Aircraft, computed
as of such Termination Date, over the proceeds of such sale; plus

     (3) as provided in ss.  3.2.2,  interest  on the amounts  specified  in the
foregoing  clause (1) at the Past-Due  Rate from and including the date on which
any such amount was due to the date of payment of such amount in full.

         As a further  condition  precedent  to such sale and  delivery,  Lessee
shall pay all Supplemental  Rent due by Lessee to Lessor,  or Owner  Participant
under this Lease  (including (aa) all interest charges provided for hereunder or
under any other Lessee  Operative  Agreement with respect to the late payment of
any   amounts  so  payable,   (bb)  all   reasonable   and   previously-invoiced
out-of-pocket  fees and  expenses  (including  reasonable  fees and  expenses of
counsel, but excluding brokerage  commissions payable to any Person not retained
by Lessee) incurred by Lessor and Owner Participant in connection with such sale
and  the  related  termination  of this  Lease),  (cc)  all  previously-invoiced
commissions  payable to any Person  retained by Lessee in  connection  with such
sale,  and (dd) all sales,  transfer,  or similar Taxes then due with respect to
such sale).  To the extent not invoiced or due on the Termination  Date,  Lessee
shall pay in due course the obligations described in the foregoing clauses (cc),
(dd), and (ee).

         (c) Upon and  subject  to any such  sale and  receipt  of  proceeds  by
Lessor, and full and final payment of all amounts described in ss. 9.2.2(b), and
compliance by Lessee with all the other provisions of this ss. 9.2,

                  (1) Lessor will  transfer to Lessee,  in  accordance  with ss.
         4.5, any Engines  constituting  part of the Aircraft but which were not
         then installed on the Airframe and sold therewith; and

                  (2) the  obligation  of Lessee to pay Basic Rent,  on or after
         the Payment Date with reference to which Termination Value is computed,
         shall  cease,  and the Term shall end  effective as of the date of such
         sale.

         (d) A sale of the Aircraft  pursuant to this ss. 9.2.2 shall take place
only on a Termination  Date.  Subject to ss. 9.3, if no sale shall have occurred
on or as of the proposed  Termination  Date,  this Lease shall  continue in full
force and effect, and all of Lessee's obligations shall continue,  including its
obligation  to pay Rent,  in each case, as if the notice under ss. 9.1 shall not
have been given and,  subject to ss.  9.2.3(a),  Lessee may give another  notice
pursuant to ss. 9.1.

         (e) Lessor shall be under no duty to solicit  bids, to inquire into the
efforts of Lessee to obtain bids,  or otherwise to take any action in connection
with any such sale other than to transfer to the purchaser  named in the highest
bid  referred  to  above  (or to such  purchaser  and,  in the  case of  Engines
described  in ss.  9.2.2(c),  to Lessee)  the  Airframe  and  Engines or engines
against receipt of the payments described in ss. 9.2.2(b)

                           9.2.3            WITHDRAWAL OF NOTICE OF TERMINATION

         (a) So long as Lessor has not elected to retain the  Aircraft  pursuant
to ss. 9.1, Lessee may withdraw any notice given pursuant to ss. 9.1 at any time
on or before the date five Business Days before the proposed  Termination  Date,
whereupon this Lease shall continue in full force and effect and all of Lessee's
obligations  shall continue,  including its obligation to pay Rent, in each case
as if the  notice  under ss. 9.1 were not  given,  and  Lessee may give  another
notice pursuant to ss. 9.1; PROVIDED,  that Lessee shall not be entitled to give
more than three termination notices pursuant to ss. 9.1 during the Term.

         (b)  Lessee  shall  pay,  on  an  after-tax   basis,   all   reasonable
out-of-pocket  fees  and  expenses  of  Lessor  (including  reasonable  fees and
expenses of counsel)  and Owner  Participant  in  connection  with any notice of
termination  withdrawn by Lessee or in connection with any notice of termination
pursuant to which a sale of the Aircraft fails to occur.

         9.3               RETENTION OF AIRCRAFT BY LESSOR

     (a) If Lessor elects to retain the Aircraft in accordance  withss.  9.1, on
the Termination Date:

     (1) Lessee shall  deliver the Airframe and Engines or engines  constituting
part  of the  Aircraft  to  Lessor  pursuant  to ss.  5 and  Annex B and in full
compliance  with the terms  thereof,  and shall duly transfer to Lessor title to
any such engines not owned by Lessor,  all in accordance with the terms of ss. 5
and Annex B;

     (2)  Lessee  shall pay to  Lessor,  in the  manner and in funds of the type
specified inss. 3.3:

     (aa) all unpaid  Basic Rent due at any time before such  Termination  Date;
plus

     (bb) as provided in ss.  3.2.2,  interest on the amounts  specified  in the
foregoing  clause (aa) at the Past-Due Rate from and including the date on which
any such amount was due to the date of payment of such amount in full; and

                  (4)  Lessee  shall  also  pay all  Supplemental  Rent  due and
         payable  by Lessee to Lessor or Owner  Participant  under  this  Lease,
         including  all interest  charges  provided  for  hereunder or under any
         other Lessee  Operative  Agreement  with respect to the late payment of
         any  amounts so  payable,  and the  reasonable  out-of-pocket  fees and
         expenses  incurred by Lessor and Owner  Participant in connection  with
         such  termination  and  delivery of the  Airframe and Engine or engines
         (excluding  brokerage  commissions and similar  expenses payable to any
         Person(s) not retained by Lessee).

         (b) Upon full and final payment to Lessor and Owner  Participant of the
amounts  described in ss.  9.3(a)(1),  and (3) and (4), and compliance by Lessee
with all the applicable provisions of ss. 9.3(a)(2),

                  (1) Lessor will  transfer to Lessee,  in  accordance  with ss.
         4.5, any Engines  constituting  part of the Aircraft but which were not
         then installed on the Airframe and sold therewith; and

                  (2) Lessee's  obligation to pay Basic Rent otherwise due on or
         after the Termination  Date shall cease,  and the Term for the Aircraft
         shall end effective as of such Termination Date.

                    10. LOSS, DESTRUCTION, REQUISITION, ETC.

         10.1              EVENT OF LOSS TO THE AIRCRAFT

                           10.1.1           NOTICE AND ELECTION

         (a) If an Event of Loss to the Airframe  (and any  Engine(s)  installed
thereon)  occurs,  Lessee shall  promptly (and in any event within 15 days after
such  occurrence)  notify  Lessor and Owner  Participant  of such Event of Loss.
Within 60 days after such  occurrence,  Lessee shall give to Lessor (with a copy
to Owner  Participant)  written  notice of Lessee's  election to make payment in
respect of such Event of Loss,  as  provided  in ss.  10.1.2,  or to replace the
Airframe and any such Engine(s) as provided in ss. 10.1.3.

         (b)  Lessee's  failure to give the notice of election  described in ss.
10.1.1(a)  shall be  deemed to be an  election  of the  option  set forth in ss.
10.1.2. In addition,  Lessee shall not be entitled to elect the option set forth
in ss. 10.1.3 if, at the time Lessor  receives such notice from Lessee or on the
replacement date, a Special Default or an Event of Default exists.

         (c) For purposes of ss. 10.1.2,  an Event of Loss to the Airframe shall
be deemed to constitute  an Event of Loss to the  Aircraft.  For purposes of ss.
10.1.3, any Engine not actually suffering an Event of Loss shall not be required
to be replaced.

     10.1.2 PAYMENT OF LOSS AND TERMINATION OF LEASE

         (a) If Lessee elects, in accordance with ss. 10.1.1, to make payment in
respect of any such Event of Loss,  then Lessee  shall pay, in the manner and in
funds of the type specified in ss. 3.3, the following amounts:

                  (1) on the date (the "LOSS PAYMENT  DATE") that is the earlier
         of (x) the  Stipulated  Loss Value Date  first  following  the 75th day
         following the date of the occurrence of such Event of Loss, and (y) the
         Stipulated  Loss Value Date first  following  the fourth  Business  Day
         following  the receipt of the  insurance  proceeds with respect to such
         occurrence  (but in any event  not  earlier  than the date of  Lessee's
         election  under ss.  10.1.1 to make  payment  under  this ss.  10.1.2),
         Lessee shall pay to Lessor:

     (aa) all unpaid  Basic Rent due at any time before the Loss  Payment  Date;
plus

     [(bb) all Basic Rent due on the Loss Payment Date; plus]

     (cc) the Stipulated  Loss Value  computed as of the  Stipulated  Loss Value
Date  immediately  preceding the Loss Payment Date (or, if the Loss Payment Date
is a Stipulated Loss Value Date, the Loss Payment Date), plus

     (dd) if the Loss  Payment  Date is not a  Stipulated  Loss Value  Date,  an
additional  amount  equal to  interest,  at the rate per annum  equal to the SLV
Rate, on the amount of the excess  referred to in clause (cc) above for each day
from and including the  Stipulated  Loss Value Date referred to in clause [(cc)]
to but excluding the Loss Payment Date; plus

     (ee) as provided in ss.  3.2.2,  interest  on the amount  specified  in the
foregoing  clause (aa) at the Past-Due Rate from and including the date on which
any such amount was due to the date of payment of such amount in full; and

                  (2) on or before the date  required for payment of the amounts
         specified in clause  10.1.2(a)(1),  Lessee shall also pay to Lessor and
         Owner Participant all other amounts due and payable by Lessee to Lessor
         and Owner Participant under this Lease, the Participation Agreement, or
         any other Lessee  Operative  Agreement and, on an after-tax  basis, all
         out-of-pocket fees and expenses (including reasonable fees and expenses
         of counsel) incurred by Lessor and each Owner Participant in connection
         with such Event of Loss.

         (b) Upon payment in full of all amounts  described in the foregoing ss.
10.1.2(a)(1),  (1) Lessee's  liability for use of the Aircraft and obligation to
pay Basic Rent hereunder with respect to the Aircraft shall  terminate,  (2) the
Term for the Aircraft  shall end,  and (3) Lessor will  transfer the Aircraft to
Lessee,  as-is and where-is,  and subject to any insurer's  salvage rights,  but
otherwise in the manner described in ss. 4.5.

                           10.1.3           REPLACEMENT OF AIRFRAME AND ENGINES

         (a) If Lessee elects,  in accordance  with ss.  10.1.1,  to replace the
Airframe and any Engine(s)  suffering the Event of Loss,  then Lessee shall,  as
promptly as possible  and in any event within 120 days after the  occurrence  of
such Event of Loss, convey or cause to be conveyed to Lessor, in compliance with
ss. 10.3 and as replacement for the Airframe and any such Engine(s),  title to a
Replacement Airframe (which shall comply with ss. 10.1.3(b)),  and for each such
Engine a Replacement Engine, in each case free and clear of all Liens other than
Permitted Liens (PROVIDED,  that if such conveyance  occurs after the end of the
Term,  Lessee  shall pay rent for the  Aircraft  from the end of the Term  until
return  thereof  pursuant  to ss. 5 at a daily rate equal to the  average  daily
Basic Rent or Renewal Rent, as applicable,  over the Base Term or  then-expiring
Renewal Term, as applicable).  If Lessee makes such election, but for any reason
does not effect such replacement  within such time period and in compliance with
the  requirements  set forth in ss.  10.3,  then Lessee  shall be deemed to have
initially  made the election set forth in ss. 10.1.2 with the effect that Lessee
shall pay,  in the manner and in funds of the type  specified  in ss.  3.3,  the
amounts required under, and in accordance with, ss. 10.1.2 (except that the time
period for payment  referenced in ss.  10.1.2(a)(1)  shall,  for the purposes of
this ss.  10.1.3(a),  in all cases be on the  Stipulated  Loss  Value Date first
following the 120th day  following  the date of the  occurrence of such Event of
Loss).

         (b) Any such Replacement Airframe shall be an airframe  manufactured by
the Airframe  Manufacturer that is the same model as the Airframe to be replaced
thereby, or an improved model, and that has a current value,  estimated residual
value,  utility,  and remaining economic useful life (without regard to hours or
cycles remaining until the next regular  maintenance check,  provided no Special
Default or Event of Default  then  exists) at least equal to the  Airframe to be
replaced thereby  (assuming that such Airframe had been maintained in accordance
with this Lease), immediately prior to such Event of Loss and that has a year of
manufacture  no  earlier  than that of the  Airframe  to be  replaced.  Any such
Replacement  Engine shall meet the requirements of, and be conveyed by Lessee to
Lessor in accordance with, ss. 10.2 (other than the notice requirement set forth
in ss. 10.2.1).

         10.2              EVENT OF LOSS TO AN ENGINE; ENGINE EXCHANGES

                           10.2.1           NOTICE

         If an Event of Loss to an Engine occurs under circumstances in which no
Event of Loss to the Airframe  occurs,  Lessee shall  promptly (and in any event
within 15 days after such occurrence) notify Lessor of such Event of Loss.

                           10.2.2           REPLACEMENT OF ENGINE

         Lessee  shall,  promptly  and in any  event  within  60 days  after the
occurrence of such Event of Loss,  convey or cause to be conveyed to Lessor,  in
compliance with ss. 10.3 and as replacement for the Engine with respect to which
any Event of Loss occurred, title to a Replacement Engine, free and clear of all
Liens other than Permitted  Liens.  Such  Replacement  Engine shall be an engine
manufactured by Engine  Manufacturer  that is the same model as the Engine to be
replaced  thereby,  or an improved model,  and that is suitable for installation
and use on the Airframe, and that has a current value, estimated residual value,
utility,  and remaining economic useful life (without regard to hours and cycles
remaining until  overhaul,  provided no Special Default or Event of Default then
exists) at least equal to the Engine to be replaced thereby  (assuming that such
Engine had been  maintained in accordance with the Lease)  immediately  prior to
such Event of Loss.

                           10.2.3           ENGINE EXCHANGE

         Upon not less than five Business  Days' prior written  notice to Lessor
(with a copy to  Owner  Participant),  Lessee  may  replace  any  Engine  leased
hereunder with another engine (the "EXCHANGED  Engine") meeting the requirements
of ss.  10.2.2.  Such  Exchanged  Engine  shall be deemed  to be a  "Replacement
Engine", and Lessor and Lessee shall comply with the provisions of ss. 10.3 with
regard to the Exchanged Engine and the Engine so replaced.

         10.3              CONDITIONS TO ANY REPLACEMENT

                           10.3.1           DOCUMENTS

         Before  or at the  time  of  conveyance  of  title  to any  Replacement
Airframe  or  Replacement  Engine  to  Lessor,  Lessee  shall  take  each of the
following actions:

         (a) furnish Lessor with a full warranty (as to title) bill of sale duly
conveying to Lessor such Replacement Airframe or Replacement Engine, in form and
substance  reasonably  satisfactory to Lessor and Owner  Participant,  and cause
such  Replacement  Airframe to be duly registered in the name of Lessor pursuant
to the Transportation Code (or such other applicable Law of a jurisdiction other
than the United States where the Aircraft is  registered in accordance  with ss.
7.1.2);

         (b) cause (1) a supplement to this Lease,  subjecting such  Replacement
Airframe or  Replacement  Engine to this Lease,  duly executed by Lessee,  to be
delivered to Lessor for  execution,  and, upon such  execution,  to be filed for
recordation  with the FAA  pursuant  to the  Transportation  Code (or such other
applicable Law of a jurisdiction other than the United States where the Aircraft
is registered in accordance with ss. 7.1.2),  and (2) such Financing  Statements
and other filings,  as Owner Participant  reasonably  request,  duly executed by
Lessee and (to the extent  applicable)  Lessor  (and  Lessor  shall  execute and
deliver the same),  to be filed in such  locations as any such party  reasonably
requests;

         (c) furnish such evidence of compliance  with the insurance  provisions
of ss. 11 with respect to such  Replacement  Airframe or  Replacement  Engine as
Owner Participant reasonably requests;

         (d) furnish an opinion or opinions  of Lessee's  counsel  (which may be
Lessee's legal  department)  reasonably  satisfactory  to Owner  Participant and
addressed  to Lessor  and Owner  Participant  to the  effect  that (1) such full
warranty  bill of sale  referred to in ss.  10.3.1(a)  constitutes  an effective
instrument  for  the  conveyance  of  title  to  the  Replacement   Airframe  or
Replacement  Engine,  and (2) in the  case  of a  Replacement  Airframe  or of a
Replacement  Engine  substituted  under ss. 10.2.3 in the absence of an Event of
Loss,  (aa) Lessor will be entitled to the benefits of Section 1110 with respect
to the  Replacement  Airframe,  and  (bb)  as to the  U.S.  federal  income  tax
consequences to Owner Participant of the replacement;

         (e) furnish an opinion of  Lessee's  aviation  law  counsel  reasonably
satisfactory to Owner  Participant and addressed to Lessor and Owner Participant
as to the due registration of any such  Replacement  Airframe and the due filing
for  recordation  of  each  supplement  to  this  Lease  with  respect  to  such
Replacement  Airframe or Replacement  Engine under the  Transportation  Code (or
such other  applicable Law of a jurisdiction  other than the United States where
the Aircraft is registered in accordance with ss. 7.1.2);

         (f) with respect to the  replacement  of the Airframe and any Engine(s)
installed  thereon  at the  time of the  Event of Loss,  if  requested  by Owner
Participant and at Lessee's  expense,  furnish a certified report of a qualified
independent aircraft appraiser,  such report and such appraiser to be reasonably
satisfactory to Owner Participant, certifying that such Replacement Airframe and
any such Replacement Engine complies with the current value,  estimated residual
value, utility, and remaining economic useful life requirements set forth in ss.
10.1.3(b); and

         (g) take such other  actions and furnish  such other  certificates  and
documents as Lessor or Owner  Participant  may reasonably  request in order that
such Replacement  Airframe or Replacement  Engine be duly and properly titled in
Lessor, leased hereunder and subjected to the Lien of the Trust Indenture to the
same extent as initially required under the Operative Agreements with respect to
the Airframe or Engine so replaced.

         Lessor  and  Lessee  understand  and agree  that if, at the time of any
replacement of the Airframe or any Engine(s) as contemplated in this ss. 10, the
Airframe was registered in a jurisdiction other than the United States, then the
requirements  set forth above in this ss. 10.3.1 relating to compliance with the
requirements of the  Transportation  Code or the FAA shall be deemed to refer to
the  comparable  applicable  Law of, and the Aviation  Authority  of, such other
jurisdiction.

                           10.3.2           OTHER OBLIGATIONS

         (a)  Lessor  and  Lessee  agree  that,  when and after any  Replacement
Airframe  becomes the  Airframe  hereunder,  and when and after any  Replacement
Engine becomes an Engine  hereunder,  this Lease shall continue to be, and shall
be treated as, a lease for U.S.  federal income tax purposes of such Replacement
Airframe and such Replacement Engine. Without limiting the foregoing, Lessee and
Lessor intend that Lessor shall,  in all events,  be entitled to the benefits of
Section 1110 with respect to any Replacement Airframe or Replacement Engine, and
Lessee  and  Lessor  shall  cooperate  and take  such  action  as the  other may
reasonably  request  so as to  ensure  that  Lessor  shall be  entitled  to such
benefits.

         (b) No Event of Loss to an Engine, or to an Airframe,  shall result in,
or  otherwise  allow or permit  (other than as provided in ss.  10.1.2(b)),  any
reduction,  deferral,  discharge, or other change in the timing or amount of any
Rent payable by Lessee  hereunder,  and (subject to such ss.  10.1.2(b))  Lessee
shall pay all such Rent and other  amounts as though  such Event of Loss had not
occurred.

         10.4              CONVEYANCE TO LESSEE

         Upon compliance by Lessee with the applicable  terms of ss.ss.  10.1.3,
10.2, and 10.3.1,  Lessor will transfer to Lessee the Airframe or Engine(s),  as
applicable,  with respect to which such Event of Loss  occurred,  in  accordance
with ss. 4.5.

         10.5              APPLICATION OF PAYMENTS

         Any amounts, other than insurance proceeds in respect of damage or loss
not  constituting an Event of Loss (the  application of which is provided for in
ss. 11), received at any time by Lessor, Lessee, or any Permitted Sublessee from
any  Government  Entity or any other Person in respect of any Event of Loss will
be paid over to Lessor to be held in  accordance  with ss.  4.5 and  applied  as
follows:

                           10.5.1           REPLACEMENT OF AIRFRAME AND ENGINES

         If such  amounts  are  received  with  respect to the  Airframe  or any
Engine(s)  installed  thereon at the time of such Event of Loss,  upon  Lessee's
compliance with the applicable  terms of ss. 10.1.3 with respect to the Event of
Loss for which such amounts are  received,  such amounts  shall  (subject to ss.
10.9) be paid over to, or retained by, Lessee.

                           10.5.2           LOSS OF ENGINE

         If such amounts are received  with respect to an Engine  (other than an
Engine  installed on the Airframe  when the Airframe  suffers an Event of Loss),
upon Lessee's compliance with the applicable terms of ss. 10.2.2 with respect to
the Event of Loss for which  such  amounts  are  received,  such  amounts  shall
(subject to ss. 10.9) be paid over to, or retained by, Lessee.

                           10.5.3           PAYMENT OF LOSS

         If such amounts are received,  in whole or in part, with respect to the
Airframe,  and Lessee makes, has made or is deemed to have made the election set
forth in ss. 10.1.2, such amounts shall be applied as follows:

     (a) FIRST,  if the sum  described  in ss.  10.1.2 has not then been paid in
full by Lessee,  such amounts shall be paid to Lessor to the extent necessary to
pay in full such sum; and

     (b) SECOND,  the remainder,  if any, shall (subject toss.  10.9) be paid to
Lessee.

         10.6              REQUISITION OF AIRCRAFT FOR USE

         If any Government  Entity  requisitions the use of the Airframe and the
Engines or engines installed thereon, and if the requisition does not constitute
an Event of Loss, Lessee shall promptly notify Lessor of such  requisition,  and
all of Lessee's  obligations  under this Lease shall continue to the same extent
as if such  requisition  had not occurred;  PROVIDED,  that, if the Airframe and
Engines or engines installed thereon are not returned to Lessor by Lessee at the
end of the Term or within 30 days  thereafter,  then  Lessee  shall be deemed to
have made the election set forth in ss. 10.1.2 with the effect that Lessee shall
be  obligated to pay the  Stipulated  Loss Value and all other  amounts  payable
pursuant to ss.  10.1.2 with  respect to the Aircraft as if an Event of Loss had
occurred as of the end of the Term. If such  requisition  does not constitute an
Event of Loss, Lessee shall be obligated to return the Airframe and Engine(s) or
engine(s) to Lessor  pursuant  to, and in all other  respects to comply with the
provisions of, ss. 5 promptly upon their return by such Government  Entity,  and
Lessee  shall  pay (or cause to be paid) to  Lessor  upon such  return an amount
equal to the average daily Basic Rent payable by Lessee during the Term for each
day after the end of the Term to but excluding  the day of such return,  up to a
maximum of 30 days,  which  payment  may be made from any  payments  received by
Lessor  or  Lessee  from  any  Government  Entity  for the  use of the  Aircraft
(notwithstanding any language to the contrary contained in ss. 10.8).

         10.7              REQUISITION OF AN ENGINE FOR USE

         If any Government  Entity  requisitions  for use any Engine but not the
Airframe,  Lessee will replace  such Engine by  complying  with ss. 10.2 and ss.
10.3 to the same  extent as if an Event of Loss with  respect to that Engine had
occurred,  and any  payments  received by Lessor or Lessee from such  Government
Entity with respect to such requisition  shall be paid or retained in accordance
with ss. 10.5.2.

         10.8              APPLICATION OF PAYMENTS

         All payments received by Lessor or Lessee, or any Permitted  Sublessee,
from  any  Government  Entity  for  the use of the  Airframe  and  Engine(s)  or
engine(s)  installed  thereon during the Term shall be paid over to, or retained
by,  Lessee,  and all payments  received by Lessor or Lessee from any Government
Entity for the use of the Airframe and Engine(s) or engine(s)  installed thereon
after the Term shall be paid over to, or retained by, Lessor; PROVIDED, that, if
such  requisition  constitutes an Event of Loss, then all such payments shall be
paid over to Lessor and held as provided in ss. 10.5.

         10.9              APPLICATION OF PAYMENTS DURING DEFAULT

         Any amount  described in this ss. 10 that is payable or creditable  to,
or  retainable  by,  Lessee  shall not be paid or credited  to, or retained  by,
Lessee  if a Special  Default  or Event of  Default  exists  when such  payment,
credit, or retention would otherwise occur, but shall instead be held by or paid
over to Lessor as security  for  Lessee's  obligations  under this Lease and the
other Lessee  Operative  Agreements,  and shall be invested  pursuant to ss. 4.4
hereof,  unless and until such  amount is applied,  at the option of Lessor,  or
upon Lessee's written request to Lessor,  from time to time during the existence
of an Event of Default, to Lessee's obligations under this Lease as and when due
(any  such  application  shall  be made to such  Lessee  obligations  as  Lessor
determines in its sole discretion).  If and when no Special Default and no Event
of  Default  exists,  such  amount  shall be paid to  Lessee to the  extent  not
previously applied in accordance with this ss. 10.9.

                                  11. INSURANCE

         11.1              LESSEE'S OBLIGATION TO INSURE

         Lessee  shall comply with,  or cause to be complied  with,  each of the
provisions  of  Annex  D,  which  provisions  are  hereby  incorporated  by this
reference as if set forth in full herein.

         11.2              INSURANCE FOR OWN ACCOUNT

         Nothing in ss. 11 shall limit or prohibit  (a) Lessee from  maintaining
the policies of insurance  required  under Annex D with higher limits than those
specified  in  Annex  D, or (b)  Lessor  or  Owner  Participant  from  obtaining
insurance  for its own account (and any  proceeds  payable  under such  separate
insurance  shall  be  payable  as  provided  in the  policy  relating  thereto);
PROVIDED,  that no insurance may be obtained or  maintained  that would limit or
otherwise adversely affect the coverage of or increase the cost of any insurance
required  to be  obtained or  maintained  by Lessee  pursuant to this ss. 11 and
Annex D.

         11.3              INDEMNIFICATION BY GOVERNMENT IN LIEU OF INSURANCE

         During the period of any Government Entity's requisition for use of the
Aircraft or any Engine,  Lessor,  and Owner Participant shall accept, in lieu of
insurance  against any risk with respect to the  Aircraft  described in Annex D,
indemnification  from, or insurance  provided by, the U.S.  Government,  or upon
Owner Participant's written consent,  other Government Entity, against such risk
in an amount that,  when added to the amount of insurance  (including  permitted
self-insurance),  if any,  against  such  risk  that  Lessee  (or any  Permitted
Sublessee) may continue to maintain,  in accordance with this ss. 11, during the
period of such  requisition,  shall be at least equal to the amount of insurance
against such risk otherwise required by this ss. 11.

         11.4              APPLICATION OF INSURANCE PROCEEDS

         As between  Lessor and Lessee,  all  insurance  proceeds  received as a
result of the occurrence of an Event of Loss to the Aircraft or any Engine under
policies  required to be  maintained  by Lessee  pursuant to this ss. 11 will be
applied in accordance  with ss. 10.5.  All proceeds of insurance  required to be
maintained by Lessee, in accordance with ss. 11 and ss. B of Annex D, in respect
of any  property  damage  or  loss  not  constituting  an  Event  of Loss to the
Aircraft,  the  Airframe,  or any Engine will be applied to pay (or to reimburse
Lessee) for repairs or for replacement property  incorporated in accordance with
ss. 8.1,  and any  balance  remaining  after such  repairs or  replacement  with
respect to such damage or loss shall be paid over to, or retained by, Lessee.

         11.5              APPLICATION OF PAYMENTS DURING DEFAULT

         Any amount  described in this ss. 11 that is payable or creditable  to,
or  retainable  by,  Lessee  shall not be paid or credited  to, or retained  by,
Lessee  if a Special  Default  or Event of  Default  exists  when such  payment,
credit, or retention would otherwise occur, but shall instead be held by or paid
over to Lessor as security for Lessee's  obligations under this Lease, and shall
be invested  pursuant  to ss. 4.4 unless and until such  amount is  applied,  at
Lessor's option,  or upon Lessee's written request to Lessor,  from time to time
during the existence of an Event of Default, to Lessee's  obligations under this
Lease  and the  other  Lessee  Operative  Agreements  as and when due (any  such
application to be made to such obligations of Lessee as Lessor determines in its
sole  discretion).  If and when no Special  Default and Event of Default exists,
such  amount  shall be paid to Lessee to the  extent not  previously  applied in
accordance with this ss. 11.5.

                                 12. INSPECTION

         (a) At  all  reasonable  times  Lessor,  Owner  Participant,  or  their
authorized  representatives  (the "INSPECTING  PARTIES") may (not more than once
every 12 months by each such Person, unless an Event of Default exists or during
the last 12 months of the Base Term and any Renewal Term,  then such  inspection
right shall not be so limited) inspect the Aircraft and the Aircraft  Documents,
and any such  Inspecting  Party may make copies of the  Aircraft  Documents  not
reasonably deemed confidential by Lessee or a Permitted Sublessee.

         (b) Any  inspection  of the  Aircraft  hereunder  shall be limited to a
visual,  walk-around inspection that may include going on board the Aircraft and
visually examining the contents of any open panels, bays, or other components of
the  Airframe  or Engines,  but shall not  include  the opening of any  unopened
panels, bays, or other components of the Aircraft,  and no such inspection shall
interfere with Lessee's or any Permitted Sublessee's maintenance or operation of
the Aircraft, the Airframe, or any Engine.

         (c) Lessor and Owner  Participant  shall not have any duty or liability
to make,  or any duty or  liability  by reason of not  making,  any such  visit,
inspection or survey.

         (d) Each  Inspecting  Party shall bear its own  expenses in  connection
with any such  inspection  (including  the cost of any copies made in accordance
with ss. 12(a)), except following an Event of Default, in which case Lessee will
bear the costs of inspection and pay the same on demand.

         (e) Upon Lessor's  request,  during the last 12 months of the Base Term
and any Renewal Term, Lessee will give 10 Business Days' prior written notice to
Lessor and Owner Participant of any scheduled  maintenance checks,  inspections,
surveys,  or  repair  visits.  During  such  period,  Owner  Participant  or its
representative  may attend  any and all such  maintenance  checks,  inspections,
surveys, or repair visits.

                 13. ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE

         13.1              IN GENERAL

         This Lease and the other  Lessee  Operative  Agreements  shall bind and
benefit Lessor and Lessee and their successors and permitted assigns.  Except as
otherwise  expressly  permitted  by the terms of the  Lease or any other  Lessee
Operative Agreement, Lessee will not, without the prior written consent of Owner
Participant, assign any of its rights under this Lease.

         13.2              MERGER OF LESSEE

                           13.2.1           IN GENERAL

     Lessee  shall not  consolidate  with or merge into any other  Person  under
circumstances  in which  Lessee is not the  surviving  corporation,  or  convey,
transfer,  or lease in one or more  transactions all or substantially all of its
assets to any other Person, unless:

     (a) such Person is organized, existing, and in good standing under the Laws
of the United States,  any state of the United States, or the District Columbia,
and,  upon  consummation  of such  transaction,  such Person will be a U.S.  Air
Carrier;

     (b) such Person  executes  and delivers to Lessor and Owner  Participant  a
duly authorized,  legal, valid, binding, and enforceable  agreement,  reasonably
satisfactory in form and substance to Owner Participant, containing an effective
assumption by such Person of the due and punctual  performance and observance of
each covenant, agreement, and condition in the Lessee Operative Agreements to be
performed or observed by Lessee;

     (c) such Person makes such filings and recordings  with the FAA pursuant to
the Transportation  Code as shall be necessary to evidence such consolidation or
merger;

     (d) Lessee  furnishes  Lessor and Owner  Participant  an opinion of counsel
reasonably   satisfactory   to  Owner   Participant  to  the  effect  that  such
consolidation  or merger has satisfied at the closing of such  consolidation  or
merger items (a), (b) and (c) above;

     (e) immediately  after giving effect to such  consolidation  or merger,  no
Special Default or Event of Default exists;

         (f) unless Owner  Participant  otherwise  consents,  immediately  after
giving effect to such consolidation or merger,  such Person will have a tangible
net worth of at least  the  lesser of (i) 100% of  Lessee's  tangible  net worth
immediately prior to such  consolidation or merger, and (ii) the greater of (aa)
the tangible net worth of Lessee as of March 31, 2000,  and (bb) 65% of Lessee's
tangible net worth immediately prior to such consolidation or merger; and

         (g) upon such consolidation or merger becoming  effective,  Lessor will
enjoy the same  degree of  protection  under  Section  1110 with  respect to the
Aircraft as Lessor enjoyed prior to such merger.

                           13.2.2           EFFECT OF MERGER

         Upon any such  consolidation  or merger of Lessee with or into,  or the
conveyance,  transfer,  or lease by  Lessee of all or  substantially  all of its
assets to, any Person in accordance with this ss. 13.2, such Person will succeed
to, and be  substituted  for, and may exercise  every right and power of, Lessee
under the Lessee Operative Agreements with the same effect as if such Person had
been named as  "Lessee"  therein.  No such  consolidation,  merger,  conveyance,
transfer, or lease shall have the effect of releasing Lessee or such Person from
any of Lessee's obligations,  liabilities,  covenants, or undertakings under the
Lessee Operative Agreements.

         13.3              SUCCESSOR OWNER TRUSTEE

         If any successor is appointed to serve as Owner Trustee pursuant to the
terms of the  Participation  Agreement and the Trust  Agreement,  such successor
shall,  upon  written  notice by such  successor  to Lessee,  succeed to all the
rights,  powers,  and  title of  Lessor  hereunder,  and  shall be  deemed to be
"Lessor"  and the owner of the Aircraft and the other assets of the Trust Estate
for all purposes hereof,  without the need for any consent or approval by Lessee
and without in any way altering the terms of this Lease or Lessee's  obligations
hereunder.  An appointment and designation of a successor as Owner Trustee shall
not exhaust the right to appoint and designate further  successors or additional
trustees as Owner Trustees pursuant to the Participation Agreement and the Trust
Agreement,  and such  right may be  exercised  repeatedly  as long as this Lease
shall be in effect.

                              14. EVENTS OF DEFAULT

         The  existence  of any  one or  more  of the  following  circumstances,
conditions,  acts,  or events,  for any reason  whatsoever  and whether any such
circumstance,  condition,  act, or event is  voluntary or  involuntary  or comes
about or is effected by  operation of Law or pursuant to or in  compliance  with
any judgment, decree, order, rule, or regulation of any Government Entity, shall
constitute an Event of Default so long as it shall not have been remedied:

         14.1              PAYMENTS

         Lessee fails to pay any amount of Basic Rent, Stipulated Loss Value, or
Termination  Value  within five  Business  Days after it becomes  due; or Lessee
fails  to pay any  Supplemental  Rent  (other  than  Stipulated  Loss  Value  or
Termination Value) when due and such failure continues for a period in excess of
ten Business  Days from and after the date of any written  notice to Lessee from
Lessor of the failure to make such payment when due.

         14.2              INSURANCE

         Lessee  fails to  carry  and  maintain,  or  cause  to be  carried  and
maintained,  insurance on and in respect of the Aircraft in accordance  with the
provisions of ss. 11.

         14.3              OTHER COVENANTS

         Lessee  fails to  observe  or  perform  (or  cause to be  observed  and
performed) in any material respect any other covenant,  agreement, or obligation
of  Lessee  in any  Lessee  Operative  Agreement,  and  such  failure  continues
unremedied  for a period of 30 days from and  after the date of  written  notice
thereof to Lessee (or the  Guarantor,  as the case may be) from  Lessor or Owner
Participant,  unless such  failure is capable of being  corrected  and Lessee is
diligently  proceeding  to  correct  such  failure,  and such  failure  poses no
imminent  and  material  risk  of  Lessor  or  Owner  Participant  losing  their
respective  interests in the Aircraft,  in which case there shall be no Event of
Default unless and until such failure  continues  unremedied for a period of 270
days after  receipt of such  notice;  PROVIDED,  that in all events  Lessee must
remedy  such  failures  within  90  days of  Lessee's  obtaining  access  to the
Aircraft.

         14.4              REPRESENTATIONS AND WARRANTIES

         Any  representation  or warranty made by Lessee in any Lessee Operative
Agreement  (other  than  Lessee's  representations  and  warranties  in the  Tax
Indemnity  Agreement)  (a)  proves to have  been  untrue  or  inaccurate  in any
material  respect as of the date made,  (b) is material at the time in question,
and  (c)  remains  uncured  (to  the  extent  of  the  adverse  impact  of  such
incorrectness  on the interest of Owner  Participant  or Lessor) for a period in
excess of 30 days from and after the date of written  notice thereof from Lessor
or Owner Participant to Lessee (or Guarantor, as the case may be); provided that
clause (c) above will not apply to Lessee's  representations as to the financial
condition of Lessee.

         14.5              BANKRUPTCY AND INSOLVENCY

         (a) Lessee or Guarantor consents to the appointment of or the taking of
possession by a receiver,  trustee,  or liquidator of itself or of substantially
all of its property,  or Lessee or Guarantor  admits in writing its inability to
pay its debts generally as they come due, or does not pay its debts generally as
they become due or makes a general  assignment for the benefit of creditors,  or
Lessee or  Guarantor  files a voluntary  petition in  bankruptcy  or a voluntary
petition or an answer seeking  reorganization,  liquidation or other relief in a
case under any bankruptcy  Laws or other  insolvency  Laws (as in effect at such
time), or Lessee or Guarantor  seeks relief by voluntary  petition,  answer,  or
consent  under the  provisions  of any other  bankruptcy  or other  similar  Law
providing for the  reorganization or winding-up of corporations (as in effect at
such time); or

         (b) an order,  judgment, or decree is entered by any court of competent
jurisdiction  appointing,  without Lessee's or Guarantor's  consent, a receiver,
trustee,  or  liquidator of Lessee or Guarantor or of  substantially  all of the
property of Lessee or Guarantor, or substantially all of Lessee's or Guarantor's
property is sequestered,  and any such order, judgment, or decree of appointment
or sequestration  remains in force  undismissed,  unstayed,  and unvacated for a
period of 90 days after the date of entry thereof; or

         (c) a  petition  against  Lessee  or  Guarantor  in a  case  under  any
bankruptcy  Laws or other  insolvency  Laws (as in effect at such time) is filed
and not  withdrawn  or  dismissed  within 90 days  thereafter,  or if, under the
provisions of any Law providing for reorganization or winding-up of corporations
that applies to Lessee or Guarantor, any court of competent jurisdiction assumes
jurisdiction, custody, or control of Lessee or Guarantor or of substantially all
of its  property,  and such  jurisdiction,  custody or control  remains in force
unrelinquished, unstayed, and unterminated for a period of 90 days.

         14.6     REPUDIATION OR INVALIDITY OF GUARANTEE

         Either (a) Guarantor  repudiates its obligations,  in whole or in part,
under  the  Guarantee;  or (b) the  Guarantee  ceases to be in full  effect,  is
determined to be invalid, or becomes unenforceable for any reason.

                            15. REMEDIES AND WAIVERS

         15.1              REMEDIES

         If any Event of Default  exists,  Lessor  may, at its option and at any
time and from time to time,  exercise any one or more of the following  remedies
as Lessor in its sole discretion shall elect:

                           15.1.1           RETURN AND REPOSSESSION

         Lessor may cause  Lessee,  upon  giving  written  notice to Lessee,  to
return promptly,  and Lessee shall return promptly,  the Airframe and Engines as
Lessor  shall so  demand,  to Lessor or its order in the  manner  and  condition
required by, and otherwise in accordance  with,  all the provisions of ss. 5, as
if the Airframe or Engine were being  returned at the end of the Term or Lessor,
at its option,  may enter upon the premises where the Airframe or any Engine, or
any Part  thereof,  is located and take  immediate  possession of and remove the
same by summary  proceedings  or otherwise,  all without  liability  accruing to
Lessor for or by reason of such entry or taking of  possession,  whether for the
restoration of damage to property caused by such taking or otherwise.

                           15.1.2           SALE AND USE

         Lessor may sell the  Airframe or any Engine at public or private  sale,
at  such  time(s)  and  place(s),   and  to  such  Person(s)   (including  Owner
Participant),  as Lessor  determines;  or Lessor may otherwise dispose of, hold,
use,  operate,  lease to others,  or keep idle the  Airframe or any  Engine,  as
Lessor,  in its sole  discretion,  shall  determine,  all free and  clear of any
rights of Lessee and without any duty to account to Lessee with  respect to such
action  or  inaction  or for  any  proceeds  with  respect  thereto,  except  as
hereinafter  set  forth in this ss.  15,  and  except  to the  extent  that such
proceeds  would  constitute,  under  applicable  Law, a  mitigation  of Lessor's
damages suffered or incurred as a result of the subject Event of Default. Lessor
shall give to Lessee at least 15 days'  prior  written  notice of the date fixed
for any  public  sale of the  Airframe  or any Engine or of the date on or after
which will occur the execution of any contract providing for any private sale.

                           15.1.3           CERTAIN LIQUIDATED DAMAGES

         Whether or not Lessor shall have exercised,  or shall thereafter at any
time exercise,  any of its rights under ss. 15.1.1 or ss. 15.1.2 with respect to
the Airframe or any Engine,  or any Part thereof,  Lessor,  by written notice to
Lessee specifying a payment date (which shall be the first Stipulated Loss Value
Date occurring not less than 10 days after the date of such notice),  may demand
that  Lessee to pay to Lessor,  and Lessee  shall pay to Lessor,  on the payment
date so  specified  and in the manner and in funds of the type  specified in ss.
3.3, as  liquidated  damages for loss of a bargain and not as a penalty (in lieu
of the Basic Rent (as  applicable)  for the  Aircraft  in respect of all periods
commencing  on or after the date  specified  for  payment in such  notice),  the
following amounts:

     (a) all unpaid Basic Rent due at any time before the Stipulated  Loss Value
Date specified in such notice; plus

     (b)  whichever of the  following  amounts  Lessor,  in its sole  discretion
specifies in such notice:

                  (1) an  amount  equal to the  excess  (if any) of the  present
         value,  computed as of the Stipulated Loss Value Date specified in such
         notice,  discounted  to such  date  at a rate  equal  to the  SLV  Rate
         compounded   quarterly,   of  all   unpaid   Basic   Rent   during  the
         then-remaining  portion  of the Base  Term (or,  if a Renewal  Term has
         commenced,  of all unpaid  Basic Rent during the  remaining  portion of
         such  Renewal  Term) over the Fair Market  Rental Value of the Aircraft
         for the  remainder  of the Term,  after  discounting  such Fair  Market
         Rental  Value to  present  value (at a rate per annum  equal to the SLV
         Rate,  compounded  quarterly)  as of the  Stipulated  Loss  Value  Date
         specified in such notice, or

                  (2) an amount  equal to the excess (if any) of the  Stipulated
         Loss Value for the Aircraft,  computed as of the Stipulated  Loss Value
         Date specified in such notice,  over the Fair Market Sales Value of the
         Aircraft,  as of the  Stipulated  Loss  Value  Date  specified  in such
         notice; plus

         (c) interest on the amounts  specified in the  foregoing  clause (a) at
the Past-Due  Rate from and  including the date on which any such amount was due
to the date of payment of such amount; plus

         (d) interest on the amount  specified in the foregoing clause (b)(1) or
(b)(2),  according to Lessor's election, at the Past-Due Rate from and including
the  Stipulated  Loss Value Date specified in such notice to the date of payment
of such amount.

                           15.1.4           LIQUIDATED DAMAGES UPON SALE

         If,  pursuant  to ss.  15.1.2 or  applicable  Law,  Lessor has sold the
Airframe or any Engine,  then, in lieu of exercising its rights under ss. 15.1.3
with  respect to the  Aircraft,  the  Airframe,  or any Engine (as  applicable),
Lessor may, if Lessor so elects,  upon giving written  notice to Lessee,  demand
that  Lessee to pay to Lessor,  and Lessee  shall pay to Lessor,  on the date of
such sale and in the manner and in funds of the type  specified  in ss.  3.3, as
liquidated  damages  for loss of a bargain  and not as a penalty (in lieu of the
Basic Rent for the Aircraft in respect of all periods commencing on or after the
date of such sale), the following amounts:

     (a) all unpaid Basic Rent due at any time before the Stipulated  Loss Value
Date on or immediately preceding the date of such sale; plus

     (b) an amount equal to the excess, if any, of (1) the Stipulated Loss Value
of the Aircraft,  computed as of the  Stipulated  Loss Value Date referred to in
the foregoing clause (a), over (2) the proceeds of such sale; plus

     (c) if the date of such sale is not a Stipulated Loss Value Date, an amount
equal to interest, at the rate per annum equal to the SLV Rate, on the amount of
Stipulated Loss Value referred to in clause (b)(1) above, from and including the
Stipulated  Loss Value Date referred to in the foregoing  clause (a) to the date
of such sale; plus

     (d) all brokerage  and other  out-of-pocket  fees and expenses  incurred by
Lessor and Owner Participant in connection with such sale; plus

     (e) interest on the amounts  specified in the  foregoing  clause (a) at the
Past-Due  Rate from and  including  the date on which any such amount was due to
the date of payment of such amount; plus

     (f) interest on the sum of the amounts  specified in the foregoing  clauses
(b), (d) and (e) at the Past-Due  Rate from and  including the date of such sale
to the date of payment of such amounts.

                           15.1.5           RESCISSION

         Lessor may (a) at its option, rescind or terminate this Lease as to the
Aircraft,  the Airframe, or any Engine, or any Part thereof, or (b) exercise any
other  right or  remedy  that may be  available  to it under  applicable  Law or
proceed by  appropriate  court  action to enforce the terms hereof or to recover
damages for the breach hereof.

                           15.1.6           OTHER REMEDIES

         In addition to the  foregoing  remedies  (but  without  duplication  of
amounts  otherwise  paid under this ss. 15),  Lessee shall be liable for any and
all unpaid Rent due  hereunder  before,  during,  or after  (except as otherwise
provided  herein) the  exercise  of any of the  foregoing  remedies  and for all
reasonable  attorneys'  fees and other  costs and  expenses  of Lessor and Owner
Participant,  including interest on overdue Rent at the rate as herein provided,
incurred by reason of the  existence  of any Event of Default or the exercise of
Lessor's  remedies  with respect  thereto,  including all  reasonable  costs and
expenses incurred in connection with the return of the Airframe or any Engine in
accordance  with the terms of ss. 5, or in placing the Airframe or any Engine in
the condition and airworthiness required by ss. 5.

         15.2              LIMITATIONS UNDER CRAF

         Notwithstanding  the provisions of ss. 15.1, during any period that the
Aircraft,  the Airframe, or any Engine is subject to CRAF in accordance with the
provisions  of ss. 7.2.3 and in the  possession of the U.S.  Government,  Lessor
shall not, as a result of any Event of Default,  exercise its remedies hereunder
in such manner as to limit  Lessee's  control under this Lease (or any Permitted
Sublessee's control under any Permitted Sublease) of the Aircraft, the Airframe,
or such Engine,  unless  Lessor gives at least 30 days' (or such other period as
may then apply under CRAF) written notice of default  hereunder by registered or
certified  mail to  Lessee  (and  any  Permitted  Sublessee)  with a copy to the
Contracting  Officer  Representative or Representatives for the Military Airlift
Command of the United  States Air Force to whom  notices must be given under the
contract governing Lessee's (or any Permitted Sublessee's) participation in CRAF
with respect to the Aircraft, the Airframe, or any Engine.

         15.3              RIGHT TO PERFORM FOR LESSEE

         If Lessee (a) fails to make any payment of Rent  required to be made by
it  hereunder  or (b)  fails to  perform  or comply  with any of its  agreements
contained  herein and such failure  under this clause (b) continues for a period
of 30 days after the  earlier  of Lessor or Owner  Participant,  giving  written
notice  thereof to  Lessee,  or (c) fails to  maintain  the  insurance  required
hereunder  and such failure  under this clause (c)  continues  for 10 days after
such notice,  then Lessor or Owner  Participant  may (but shall not be obligated
to) make such payment or perform or comply with such  agreement,  and the amount
of such  payment and the amount of the  expenses of Lessor or Owner  Participant
incurred in  connection  with such payment or the  performance  of or compliance
with such  agreement (as  applicable),  together  with  interest  thereon at the
Past-Due Rate, shall be deemed  Supplemental Rent, payable by Lessee upon demand
by Lessor or Owner Participant,  whichever is entitled thereto. No such payment,
performance,  or  compliance  shall be deemed to waive any Default or  otherwise
relieve Lessee of its obligations with respect thereto.

     15.4 DETERMINATION OF FAIR MARKET RENTAL VALUE AND FAIR MARKET SALES VALUE

         For the  purpose of this ss. 15, the Fair  Market  Rental  Value or the
Fair Market Sales Value of the Aircraft,  the  Airframe,  or any Engine shall be
determined  on an "as is, where is" basis and shall take into account  customary
brokerage and other  out-of-pocket  fees and expenses which  typically  would be
incurred in connection with a re-lease or sale of such an aircraft, airframe, or
engine. Any such determination shall be made by an Appraiser selected by Lessor,
and the  costs  and  expenses  associated  therewith  shall be borne by  Lessee;
PROVIDED, that, if Lessor does not obtain possession of the Aircraft pursuant to
this ss. 15, an Appraiser  shall not be appointed,  and Fair Market Rental Value
and Fair Market Sales Value for purposes of this ss. 15 shall be zero.

         15.5              REMEDIES CUMULATIVE

         Nothing  contained in this Lease shall be construed to limit in any way
any right,  power,  remedy,  or privilege of Lessor hereunder or under any other
Operative  Agreement or now or hereafter existing at law or in equity.  Each and
every  right,  power,  remedy,  and  privilege  hereby given to, or retained by,
Lessor in this Lease  shall be in  addition  to and not in  limitation  of every
other right, power,  remedy, and privilege given under the Operative  Agreements
or now or hereafter existing at law or in equity.  Each and every right,  power,
remedy,  and  privilege  of Lessor  under  this  Lease  and any other  Operative
Agreement may be exercised from time to time or simultaneously  and as often and
in such order as may be deemed  expedient by Lessor.  All such  rights,  powers,
remedies, and privileges 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.
Lessee hereby waives to the extent  permitted by applicable  Law any right which
it may have to require Lessor to choose or elect remedies.

                         16. LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC.

         (a)  Lessee's  obligation  to pay all Rent payable  hereunder  shall be
absolute  and  unconditional,  and  shall  not  be  affected  by  any  event  or
circumstance,  including: (1) any setoff, counterclaim,  recoupment, defense, or
other right that Lessee may have against Lessor, Owner Participant, or any other
Person for any reason  whatsoever;  (2) any defect in the title,  airworthiness,
condition, design, operation, or fitness for use of, or any damage to or loss or
destruction of, the Aircraft,  the Airframe,  or any Engine, or any interruption
or  cessation  in the  use or  possession  thereof  by  Lessee  for  any  reason
whatsoever;  (3)  any  insolvency,   bankruptcy,   reorganization,   or  similar
proceedings  by or  against  Lessee  or  any  other  Person;  or (4)  any  other
circumstance,  happening, or event whatsoever,  whether or not similar to any of
the foregoing.

         (b) If for any reason  whatsoever  this Lease  shall be  terminated  in
whole  or in  part by  operation  of law or  otherwise  except  as  specifically
provided herein,  Lessee  nonetheless agrees to pay an amount equal to each Rent
payment at the time such payment would have become due and payable in accordance
with the terms  hereof had this Lease not been  terminated  in whole or in part.
Lessee hereby  waives,  to the extent  permitted by applicable  Law, any and all
rights that it may now have or that at any time  hereafter may be conferred upon
it, by statute or otherwise,  to  terminate,  cancel,  quit,  or surrender  this
Lease, except in accordance with the express terms hereof.

         (c)  Nothing  set forth in this ss. 16 shall be  construed  to prohibit
Lessee  from  separately  pursuing  any claim that it may have from time to time
against  Lessor or any other Person with  respect to any matter  (other than the
absolute and unconditional nature of Lessee's obligations hereunder to pay Rent,
and other than the matters specified in paragraphs (a) and (b) above).

                        17. RENEWAL AND PURCHASE OPTIONS

         17.1              NOTICES GENERALLY

         (a) Unless otherwise  provided by this ss. 17, at least 270 days and no
more than 365 days  before the  Scheduled  Expiration  Date for the Base Term or
then-current  Renewal Term,  Lessee may provide  irrevocable  written  notice to
Lessor  (a  "PRELIMINARY  NOTICE"),   with  a  copy  of  such  notice  to  Owner
Participant,  that Lessee  intends to exercise  the option  either to extend the
leasing of the Aircraft  for a Renewal Term  pursuant to ss. 17.2 or to purchase
the Aircraft on the Scheduled Expiration Date pursuant to ss. 17.3.

         (b) If Lessee gives a Preliminary  Notice,  then Lessee shall provide a
further notice, at least 30 days before the following Scheduled Expiration Date,
specifying  which  option it intends  to elect,  pursuant  to ss.  17.2.1 or ss.
17.3.1 (as applicable).  If Lessee fails to give such further notice at least 30
days before  such  Scheduled  Expiration  Date,  Lessee  shall be deemed to have
elected its option to purchase the Aircraft pursuant to ss. 17.3.1.

         17.2              RENEWAL OPTIONS

                           17.2.1           RENEWAL NOTICE

         (a) If Lessee has given a Preliminary Notice, as specified in ss. 17.1,
and subject to the terms and  conditions  of this ss. 17.2,  Lessee may exercise
its option to extend the leasing of the Aircraft  hereunder  until the following
Scheduled Expiration Date, on the same terms (except as contemplated by this ss.
17) as in the Lessee  Operative  Agreements  with  respect to the Base Term,  by
delivering a notice (a "RENEWAL  NOTICE") to Lessor not less than 30 days before
the Scheduled Expiration Date.

     (b) Notwithstanding anything to the contrary in any Operative Agreement:

                  (1) No  Preliminary  Notice or Renewal Notice shall be binding
         on Lessor  or oblige  Lessor to  extend  the  leasing  of the  Aircraft
         hereunder for a Renewal Term if any Special Default or Event of Default
         exists on and as of the date that such  Renewal  Term  would  otherwise
         commence.

                  (2) A Renewal  Notice  shall be  revocable  by Lessee until 10
         Business Days after the Renewal Rent is  determined in accordance  with
         ss.  17.2.2,  and unless  revoked by written notice by Lessee to Lessor
         shall   thereafter   become   irrevocable   and  shall   constitute  an
         unconditional  obligation  of  Lessee  to  extend  the  leasing  of the
         Aircraft  hereunder  for the Renewal Term to which such Renewal  Notice
         relates.  If Lessee revokes a Renewal Notice as indicated above, Lessee
         will be deemed to have  irrevocably  elected its option to purchase the
         Aircraft pursuant to ss. 17.3.1.

                  (3) Lessee shall not be entitled to give any Renewal Notice if
         it (aa) has not  delivered  a  Preliminary  Notice to Lessor,  (bb) has
         delivered a Purchase Notice to Lessor, or (cc) has previously delivered
         four Renewal Notices to Lessor.

                           17.2.2           RENEWAL RENT

         (a)  During  each  Renewal  Term,  Lessee  shall  pay to Lessor on each
Payment Date,  in the manner and in the funds of the type  specified in ss. 3.3,
Renewal Rent in arrears.

         (b) The Renewal Rent payable by Lessee on each Payment Date during each
Renewal Term shall be the Fixed Rate (or, if less, the Applicable  Percentage of
the Fair  Market  Rental  Value).  Any such Fair  Market  Rental  Value shall be
determined  not more than 120 days and not less than 100 days  before  the first
day of such Renewal Term by mutual agreement of Lessor and Lessee or, if they do
not agree, by an appraisal in accordance with ss. 17.4.

     17.2.3 STIPULATED LOSS AND TERMINATION VALUES

         (a) For any Renewal Term,  Stipulated  Loss Value Dates and Termination
Value Dates shall be extended  throughout such Renewal Term on the same days and
for the same months as during the Base Term.

         (b)  Stipulated  Loss  Value and  Termination  Value  amounts  that are
payable  during any such Renewal Term shall be  determined at the same time that
the  Renewal  Rent  for  such  Renewal  Term is  determined  under  ss.  17.2.2.
Stipulated Loss Values and  Termination  Values for any such Renewal Term shall,
commencing  on the first day of such Renewal  Term,  be equal to the Fair Market
Sales Value of the Aircraft on such day, and shall decline  ratably on a monthly
basis to the salvage  value of the Aircraft as of the last day of its  remaining
useful life.

         (c) For purposes of calculating  Stipulated  Loss Value and Termination
Value  amounts  applicable  during any Renewal  Term,  the  "salvage  value" and
"useful life" shall be determined by mutual agreement of Lessor and Lessee,  or,
if they do not agree, by an appraisal in accordance with ss. 17.4.

         17.3              PURCHASE OPTIONS

                           17.3.1           PURCHASE NOTICE

     (a) Provided that at the time of such election no Special  Default or Event
of Default exists,  Lessee may,  subject to ss. 17.1 and this ss. 17.3, elect to
purchase the  Aircraft:  (1) on the EBO Date as shown on Schedule 5 at the price
indicated  thereon;  (2) on any Purchase  Date, at a purchase price equal to the
Fair Market Sales Value of the Aircraft computed as of the Purchase Date; or (3)
(aa) on any  Payment  Date  occurring  after  the  Tax  Attribute  Period,  if a
Burdensome  Indemnity  Payment not waived by Owner  Participant shall become due
and owing,  if Lessee did not cause such indemnity with the intent of permitting
such purchase and if such purchase  would  eliminate  such indemnity on a future
basis,  or (bb) on any Payment Date after the EBO Date,  if Lessee has committed
to (but not  commenced) a  Significant  Expenditure,  then (whether as to clause
(aa) or (bb)) at a purchase  price  equal to the  greater of (x) the Fair Market
Sales Value of the Aircraft  computed as of such Payment Date (not including any
portion of the Fair  Market  Sales  Value of the  Aircraft  attributable  to any
Significant Expenditure) and (y) the Termination Value for the Aircraft computed
as of such Payment Date.

     (b) Lessee may exercise such option to purchase the  Aircraft,  by delivery
of a  written  notice  (a  "PURCHASE  NOTICE")  to  Lessor  (with a copy of such
Purchase Notice to Owner Participant) not less than 60 days and no more than 365
days before the EBO Date (for a purchase under ss. 17.3.1(a)(1)),  not less than
30 days and no more than 365 days before the Purchase Date (for a purchase under
ss.  17.3.1(a)(2)),  and not less than 120 days and no more than 365 days before
the Payment Date specified in such Purchase Notice (for a voluntary  termination
purchase under ss. 17.3.1(a)(3)).

     (c) Notwithstanding anything to the contrary in any Operative Agreement:

                  (1) Any  Purchase  Notice  delivered  or  deemed  to have been
         delivered pursuant to ss.  17.3.1(a)(1) or (2) shall be irrevocable and
         shall constitute an unconditional  obligation of Lessee to purchase the
         Aircraft  under  this  ss.  17.3;  and any  Purchase  Notice  delivered
         pursuant to ss. 17.3.1(a)(3), shall be revocable until 10 Business Days
         after the  determination  of the Fair Market Sales Value in  accordance
         with ss.  17.3.2,  and unless so revoked by written notice by Lessee to
         Lessor  (with a copy to  Owner  Participant)  shall  thereafter  become
         irrevocable and shall constitute an unconditional  obligation of Lessee
         to purchase the Aircraft under this ss. 17.3.

     (2) Lessee  shall not be entitled to give any Purchase  Notice  pursuant to
ss. 17.3.1(a)(2) if it has not delivered a Preliminary Notice.

     17.3.2 DETERMINATION OF FAIR MARKET SALES VALUE

         The Fair Market Sales Value of the  Aircraft  shall be  determined  not
more than 120 days and not less than 100 days  before  the  applicable  Purchase
Date or Payment Date by mutual agreement of Lessor and Lessee, or, if they shall
be unable to agree, by an appraisal in accordance with ss. 17.4.

                           17.3.3   PAYMENTS BY LESSEE

     (a) If Lessee elects to purchase the Aircraft pursuant to clause (1) of ss.
17.3.1(a),  then on the EBO Date  Lessee  shall  pay to  Lessor  in  immediately
available funds:

     (1) all unpaid Basic Rent due before the EBO Date; plus

     (2) the EBO Price; plus

     (3) all Supplemental  Rent then due, and any sales or transfer tax then due
in connection with such purchase.

     (b) If Lessee elects to purchase the Aircraft pursuant to clause (2) of ss.
17.3.1(a),  then on the  applicable  Purchase Date Lessee shall pay to Lessor in
immediately available funds:

     (1) all unpaid Basic Rent due on or before such Purchase Date; plus

     (2) the applicable purchase price for the Aircraft; plus

     (3) all Supplemental  Rent then due, and any sales or transfer tax then due
in connection with such purchase.

     (c) If Lessee elects to purchase the Aircraft pursuant to clause (3) of ss.
17.3.1(a),  then on the Payment  Date on which  Lessee  elects to  purchase  the
Aircraft, Lessee shall pay to Lessor in immediately available funds:

     (1) all unpaid Basic Rent due on or before such Payment Date; plus

     (2) the purchase price of the Aircraft pursuant to such clause (3); plus

     (3) all Supplemental  Rent then due, and any sales or transfer tax then due
in connection with such purchase.

                           17.3.4           TITLE

         Upon full and final  payment  by  Lessee of (a) the  applicable  amount
payable under ss. 17.3.3,  (b) on an after-tax basis, all out-of-pocket fees and
expenses (including  reasonable fees and expenses of counsel) incurred by Lessor
and Owner  Participant  in connection  with such purchase and invoiced to Lessee
prior  thereto,  and (c) all other  amounts then due and payable by Lessee under
the Operative  Agreements,  Lessor will transfer to Lessee title to the Aircraft
in accordance with ss. 4.5.

                           17.3.5           INSTALLMENT EBO PURCHASE

         Lessee and Lessor  acknowledge that at Lessee's  election the EBO Price
may be payable in  installments  as  provided  in  Schedule 5. Lessor and Lessee
agree  that  if  Lessee  elects  to  purchase  the  Aircraft   pursuant  to  ss.
17.3.1(a)(1) and elects to pay the EBO Price in  installments,  Lessee agrees to
provide security to Lessor to secure the unpaid balance of the EBO Price,  which
security  shall  be  required  to be in an  amount  and  otherwise  in form  and
substance  reasonably  satisfactory to Lessor and Owner Participant.  Subject to
the foregoing,  upon payment of the initial  installment of the EBO Price as set
forth in Schedule 5 together with all amounts  otherwise payable pursuant to ss.
17.3.3(a)  and ss.  17.3.4,  Lessor  will  transfer  title  to the  Aircraft  in
accordance with ss. 4.5.

         17.4              APPRAISALS

         Whenever  Fair Market  Rental  Value or Fair Market  Sales Value of the
Aircraft is required to be determined by an appraisal  under this ss. 17, Lessee
and Lessor  shall  appoint a  mutually-satisfactory  Appraiser  to conduct  such
appraisal.  If Lessee and Lessor  fail to agree upon a  satisfactory  Appraiser,
then each shall promptly appoint a separate Appraiser, and such Appraisers shall
jointly determine such amount. If either Lessee or Lessor does not so appoint an
Appraiser,  the determination of the single Appraiser  appointed shall be final.
If two Appraisers  are appointed and within seven days after the  appointment of
the latter of such two Appraisers,  they do not agree upon such amount, such two
Appraisers  shall,  within eight days after such latter  appointment,  appoint a
third Appraiser,  and such amount shall be determined by such three  Appraisers,
who shall  make their  separate  appraisals  within  seven  days  following  the
appointment  of the third  Appraiser,  and any  determination  so made  shall be
conclusive  and binding  upon Lessor and Lessee.  If no such third  Appraiser is
appointed within such eight-day period, either Lessor or Lessee may apply to the
American  Arbitration  Association  to make such  appointment,  and both parties
shall be bound by such appointment.  The foregoing  appraisal procedure shall in
any event be  completed no less than 125 days before the end of the Base Term or
any Renewal Term (unless such procedure is undertaken in connection  with ss. 15
or ss.  17.3.1(a),  in  which  case it shall be  completed  promptly).  If three
Appraisers are appointed and the difference  between the determination  which is
further from the middle  determination and the middle determination is more than
125%  of  the  difference  between  the  middle   determination  and  the  third
determination,  then such further determination shall be excluded, the remaining
two  determinations  shall be  averaged,  and such  average  shall be final  and
binding   upon  Lessor  and  Lessee.   Otherwise,   the  average  of  all  three
determinations  shall be final and binding upon Lessor and Lessee.  The fees and
expenses of all such  Appraisers  and such  appraisal  procedure  shall be borne
equally by Lessee and Lessor.

                                18. MISCELLANEOUS

         18.1              AMENDMENTS

         No  provision  of this  Lease  may be  amended,  supplemented,  waived,
modified,  discharged,  terminated,  or otherwise varied orally,  but only by an
instrument in writing that  specifically  identifies the provision of this Lease
that it purports to amend, supplement,  waive, modify, discharge,  terminate, or
otherwise  vary and is  signed  by  Lessor  and  Lessee.  Each  such  amendment,
supplement, waiver, modification,  discharge,  termination, or variance shall be
effective only in the specific  instance and for the specific  purpose for which
it is given.  No provision of this Lease shall be varied or contradicted by oral
communication,  course of dealing or performance,  or other manner not set forth
in an  agreement,  document,  or  instrument in writing and signed by Lessor and
Lessee.

         18.2              SEVERABILITY

         If  any   provision   hereof  shall  be  held  invalid,   illegal,   or
unenforceable in any respect in any jurisdiction,  then, to the extent permitted
by Law, (a) all other provisions hereof shall remain in full force and effect in
such  jurisdiction,  and (b) such invalidity,  illegality,  or  unenforceability
shall not affect the validity,  legality, or enforceability of such provision in
any other jurisdiction.  If, however,  any Law pursuant to which such provisions
are held invalid,  illegal,  or unenforceable  may be waived,  Lessor and Lessee
hereby waive such Law to the full extent  permitted,  to the end that this Lease
shall be deemed to be a valid and binding agreement in all respects, enforceable
in accordance with its terms.

         18.3              THIRD-PARTY BENEFICIARY

         This Lease is not  intended  to  provide,  and shall not  provide,  any
Person not a party hereto (other than Owner Participant and the Persons referred
to in ss. 4.6) with any rights of any nature  whatsoever  against  either of the
parties hereto,  and no Person not a party hereto (other than Owner  Participant
and the  Persons  referred  to in ss.  4.6)  shall  have any  right,  power,  or
privilege in respect of this Lease, or have any benefit or interest  arising out
of this Lease.

         18.4              REPRODUCTION OF DOCUMENTS

         This Lease (including all annexes,  schedules, and exhibits hereto) and
all  agreements,  instruments,  and  documents  relating  hereto,  including (a)
consents,  waivers,  and modifications  that may hereafter be executed,  and (b)
financial  statements,   certificates,   and  other  information  previously  or
hereafter  furnished to any party hereto, may be reproduced by such party by any
photographic,  photostatic,  microfilm,  micro-card,  miniature photographic, or
other  similar  process,  and such party may destroy any  original  documents so
reproduced.  Any  such  reproduction  shall be  admissible  in  evidence  as the
original itself in any judicial or administrative proceeding (whether or not the
original is in existence and whether or not such  reproduction  was made by such
party in the regular course of business),  and any  enlargement,  facsimile,  or
further reproduction of such reproduction likewise is admissible in evidence.

         18.5              COUNTERPARTS

         This Lease and any amendments, waivers, consents, or supplements hereto
may be executed in any number of counterparts (or upon separate  signature pages
bound together into one or more counterparts),  each fully-executed set 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. The
single fully-executed  original of this Lease marked "Original" on the signature
page  hereof  is  the  original  for  chattel  paper  purposes,  and  all  other
counterparts   are   duplicates  for  chattel  paper  purposes  and  are  marked
"duplicate" on the signature page hereof. No security interest in this Lease may
be perfected by the possession of any counterpart other than the "Original".

         18.6              NOTICES

         Unless otherwise  expressly permitted by the terms hereof, all notices,
requests,  demands,  authorizations,  directions,  consents,  waivers, and other
communications  required or permitted  to be made,  given,  furnished,  or filed
hereunder shall be made, given, furnished, or filed, and shall become effective,
in the manner prescribed in ss. 15.7 of the Participation Agreement.

         18.7              GOVERNING LAW

         THIS LEASE  SHALL IN ALL  RESPECTS  BE GOVERNED  BY, AND  CONSTRUED  IN
ACCORDANCE  WITH,  THE LAWS OF THE STATE OF NEW YORK,  INCLUDING  ALL MATTERS OF
CONSTRUCTION,  VALIDITY,  AND PERFORMANCE.  THIS LEASE IS BEING DELIVERED IN THE
STATE OF NEW YORK.

         18.8              NO WAIVER

         No failure on the part of Lessor to exercise, and no delay by Lessor in
exercising,  any of its rights, powers, remedies, or privileges under this Lease
or  provided  at Law,  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  breach  hereof  or  default  hereunder  or as an
acquiescence  therein,  nor shall any  single or  partial  exercise  of any such
right,  power,  remedy,  or  privilege  preclude  any other or further  exercise
thereof  by Lessor  or the  exercise  of any  other  right,  power,  remedy,  or
privilege by Lessor. No notice to or demand on Lessee in any case shall,  unless
otherwise  required  under this  Lease,  entitle  Lessee to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of Lessor to any other or  further  action in any  circumstances  without
notice or demand.

         18.9              ENTIRE AGREEMENT

         This Lease, together with the other Operative Agreements,  on and as of
the date hereof  constitute  the entire  agreement  of the  parties  hereto with
respect to the subject matter hereof and thereof,  and all prior  understandings
or agreements,  whether written or oral, between the parties hereto with respect
to such subject matter are hereby superseded in their entirety.

                           [THE REST OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

<PAGE>

         IN  WITNESS  WHEREOF,  Lessor  and  Lessee  have  executed  this  Lease
Agreement N___AT.

                                    FIRST SECURITY BANK, NATIONAL
                                    ASSOCIATION,   NOT  IN  ITS
                                    INDIVIDUAL CAPACITY, EXCEPT
                                    AS    EXPRESSLY    PROVIDED
                                    HEREIN,   BUT   SOLELY   AS
                                    TRUSTEE   UNDER  THE  TRUST
                                    AGREEMENT, as Lessor

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

                                    AMERICAN TRANS AIR, INC., as Lessee

                                       By:

                                                           Name:
                                                           Title:

   [This is the ORIGINAL counterpart of the Lease for chattel paper purposes]

                                                       [or]

            [This                is a DUPLICATE executed counterpart, and is NOT
                                 the  original  counterpart,  of the Lease,  for
                                 chattel paper purposes.]

<PAGE>

                              AIRCRAFT DESCRIPTION

The Aircraft is a Boeing model 737-800  aircraft,  consisting of (1) an airframe
bearing FAA registration no. N___AT and  manufacturer's  serial no.  __________,
(2) two CFM  International  model CFM56-7 engines (each of which has 750 or more
rated takeoff horsepower or its equivalent),  bearing manufacturer's serial nos.
__________  and  __________,   and  (3)  all  appliances,   parts,  instruments,
appurtenances,   accessories,  furnishings,  and  other  equipment  or  property
incorporated in such airframe and engines.

<PAGE>

                       RETURN ACCEPTANCE SUPPLEMENT N___AT

         This Supplement,  dated __________, ____, is entered into between First
Security Bank, National Association, a national banking association,  not in its
individual  capacity but solely as Owner Trustee under Trust  Agreement  N___AT,
dated as of  __________________,  ____, with the Owner Participant named therein
(such Owner Trustee, in its capacity as trustee, being referred to as "LESSOR"),
and American Trans Air, Inc. ("LESSEE"), an Indiana corporation.

         Lessor  and  Lessee  have  entered  into Lease  Agreement  N___AT  (the
"LEASE"),  dated as of  [_____________,  ____],  relating  to the  Boeing  model
737-800  aircraft  described  below.  Terms  defined  in the Lease have the same
meanings when used in this Supplement.

         Lessor and Lessee hereby agree as follows:

         1. Lessor and Lessee are executing this Return Acceptance Supplement to
confirm that,  on the date hereof,  Lessee  returned the following  Airframe and
Engines to Lessor:

     Airframe:   U.S.   registration  no.  N___AT;   manufacturer's  serial  no.
__________; and

     Engines: two CFM International engines,  bearing manufacturer's serial nos.
__________  and  __________.  2.  This  Return  Acceptance  Supplement  is being
delivered in _____________________.

     3.  Lessor and Lessee  agree that the Lease is  terminated,  except for the
provisions thereof that expressly survive termination.

<PAGE>

         IN WITNESS  WHEREOF,  Lessor  and  Lessee  have  executed  this  Return
Acceptance Supplement N___AT.

                   FIRST SECURITY BANK, NATIONAL
                   ASSOCIATION,   NOT  IN  ITS
                   INDIVIDUAL CAPACITY, EXCEPT
                   AS    EXPRESSLY    PROVIDED
                   HEREIN,   BUT   SOLELY   AS
                   TRUSTEE   UNDER  THE  TRUST
                   AGREEMENT, as Lessor

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

                   AMERICAN TRANS AIR, INC., as Lessee

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

<PAGE>

                                  CERTAIN TERMS

      DEFINED TERM                                            DEFINITION

Commencement Date                        __________, 200_

Fixed Rate                               $__________ per quarterly Payment Date
                                         [60% OF AVERAGE BASIC RENT DURING THE
                                         BASE TERM]

Minimum Liability Insurance Amount       (CONFIDENTIAL MATERIAL OMITTED)

Past-Due Rate                            (CONFIDENTIAL MATERIAL OMITTED)

Scheduled Expiration Date
                                         (a)   for   the
                                         Base Term,  the
                                         20th
                                         anniversary  of
                                         the    Delivery
                                         Date,  and  (b)
                                         for  a  Renewal
                                         Term,  the  day
                                         before      the
                                         first
                                         anniversary  of
                                         the  first  day
                                         of that Renewal
                                         Term

Similar Aircraft                         Boeing model 737-800 aircraft
                                         (other than the Aircraft)

SLV Rate                                 ___________% per annum

Threshold Amount                         (CONFIDENTIAL MATERIAL OMITTED)

<PAGE>

                               BASIC RENT PAYMENTS

                                                 PERCENTAGE OF
                PAYMENT DATE                     LESSOR'S COST

<PAGE>

                             BASIC RENT ALLOCATIONS

         FROM (BUT                                              ALLOCATION OF
      NOT INCLUDING)             THROUGH                          BASIC RENT

-----------------------------------------------------------------------

<PAGE>

                              STIPULATED LOSS VALUE

     STIPULATED       STIPULATED       PREPAID BASIC            DEFERRED BASIC
   LOSS VALUE DATE    LOSS VALUE        RENT AMOUNT              RENT AMOUNT

<PAGE>

                                TERMINATION VALUE

   TERMINATION      TERMINATION VALUE        PREPAID BASIC        DEFERRED BASIC
   VALUE DATE                                 RENT AMOUNT           RENT AMOUNT

<PAGE>

------------------------------------------------------------------------------

                               EBO PRICE SCHEDULE

                           Unadjusted                              Adjusted EBO
                            EBO Price       Rent Adjustment            Amount
                         (Percentage of    (Percentage of         (Percentage of
           EBO Date      Lessor's Cost)    Lessor's Cost)         Lessor's Cost)

<PAGE>

                               PERMITTED COUNTRIES

<PAGE>

Argentina*

Australia

Austria

Bahamas

Belgium

Bermuda

Brazil*

Canada

Chile*

Denmark

Ecuador*

Egypt*

Finland

France

Germany

Greece*

Hungary*

Iceland

India*

Indonesia*

Ireland

Italy**

Jamaica*

Japan

Liechtenstein*

Luxembourg

Malaysia*

Malta*

Mexico**

Monaco

Morocco*

Netherlands

New Zealand

Norway

Paraguay*

Peoples Republic of China*

Philippines*

Portugal

Republic of China (Taiwan)*

Singapore*

South Africa*

South Korea*

Spain

Sweden

Switzerland

Thailand*

United Kingdom

Uruguay*

Venezuela*

United States of America

*SUBLEASING AND  RE-REGISTRATION  PERMITTED ONLY WITH OWNER  PARTICIPANT'S PRIOR
  WRITTEN CONSENT,  WHICH CONSENT OWNER PARTICIPANT MAY WITHHOLD IN ITS SOLE AND
  ABSOLUTE DISCRETION.

**APPROVED FOR SUBLEASING BUT LESSEE MAY NOT RE-REGISTER IN SUCH COUNTRY WITHOUT
  OWNER PARTICIPANT'S PRIOR WRITTEN CONSENT, WHICH CONSENT OWNER PARTICIPANT MAY
  WITHHOLD IN ITS SOLE AND ABSOLUTE DISCRETION..

<PAGE>

                                    PLACARDS

                                   Leased from
                   First Security Bank, National Association,
                                as owner trustee

<PAGE>

                                     ANNEX B

                                RETURN CONDITIONS

         This Annex B shall apply to the return of the  Aircraft by or on behalf
of Lessee  under the Lease,  whether at a Scheduled  Expiration  Date,  upon the
exercise  of  Lessee's  rights  under ss. 9 of the Lease,  upon the  exercise of
Lessor's remedies following the occurrence of an Event of Default, or otherwise.
However,  this  Annex B shall not apply (1) if an Event of Loss to the  Aircraft
occurs (unless the Aircraft is replaced  under ss. 10.1.3 of the Lease),  or (2)
if Lessee buys the Aircraft in accordance with ss. 17 of the Lease.

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized  as in Annex A, have the same  meanings  when  used in this  "Return
Conditions"   Annex.   Annex  A  also  contains  rules  of  usage  that  control
construction in this "Return Conditions" Annex.

(CONFIDENTIAL MATERIAL OMITTED)

<PAGE>

                                     ANNEX C

                                   MAINTENANCE

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized   as  in  Annex  A,  have  the  same  meanings  when  used  in  this
"Maintenance"  Annex.  Annex  A  also  contains  rules  of  usage  that  control
construction in this "Maintenance" Annex.

         A.       MAINTENANCE.
                  -----------

         Lessee shall maintain,  service,  repair, and overhaul the Aircraft (or
cause the Aircraft to be  maintained,  serviced,  repaired,  and  overhauled) in
accordance  with  (1)  maintenance   standards  required  by,  or  substantially
equivalent to those required by, the FAA or the central civil aviation authority
of Canada, Japan, and the JAA for the Aircraft (the "MAINTENANCE  PROGRAM"),  so
as (aa) to keep  the  Aircraft  in as good  operating  condition  as  originally
delivered  hereunder,  ordinary  wear  and tear  excepted,  and (bb) to keep the
Aircraft  in  such  operating  condition  as  may be  necessary  to  enable  the
applicable airworthiness certificate for the Aircraft to be maintained under the
regulations of the FAA or other Aviation Authority then having jurisdiction over
the  operation  of the  Aircraft,  other than  during (x)  temporary  periods of
storage  in  accordance  with  applicable   regulations,   (y)  maintenance  and
modification  permitted  hereunder,  and (z) periods  when the FAA or such other
Aviation  Authority has revoked or suspended the airworthiness  certificates for
Similar Aircraft;  and (2) except during periods when a Permitted Sublease is in
effect,  the same  standards as Lessee uses with respect to similar  aircraft of
similar  size in its fleet  operated  by Lessee in  similar  circumstances  and,
during any period in which a Permitted Sublease is in effect, the same standards
used by the Permitted Sublessee with respect to similar aircraft of similar size
in its fleet and operated by the Permitted  Sublessee in similar  circumstances.
Lessee  further  agrees that the Aircraft will be  maintained,  used,  serviced,
repaired,  overhauled,  or inspected in  compliance  with  applicable  Laws with
respect  to  the  maintenance  of  the  Aircraft  and in  compliance  with  each
applicable airworthiness certificate,  license, and registration relating to the
Aircraft  issued by the  Aviation  Authority,  other than minor or  nonrecurring
violations  with respect to which  corrective  measures are taken upon discovery
thereof and except to the extent Lessee or Permitted  Sublessee is contesting in
good faith the validity or application  of any such Law or requirement  relating
to any such certificate, license, or registration in any reasonable manner which
does not create a material  risk of sale,  loss,  or forfeiture of the Aircraft,
the Airframe,  or any Engine or the interest of Owner  Participant  therein or a
material risk of criminal  liability or material civil penalty against Lessor or
Owner Participant. Lessee shall cause the Aircraft Documents to be maintained in
English and  promptly  furnish  Lessor and Owner  Participant  with  information
necessary for filing with applicable governmental aviation authorities.

         B.       REPLACEMENT OF PARTS.
                  --------------------

         Except as otherwise  provided herein,  Lessee will promptly replace (or
cause to be  replaced)  all  Parts  that are from time to time  incorporated  or
installed  in or attached  to the  Aircraft,  and that  become  worn out,  lost,
stolen, destroyed,  seized,  confiscated,  damaged beyond repair, or permanently
rendered unfit for use for any reason whatsoever. In addition, Lessee may remove
(or  permit to be  removed)  any Parts in the  ordinary  course of  maintenance,
service,  repair,  overhaul, or testing, whether or not such Parts are worn out,
lost,  stolen,  destroyed,  seized,  confiscated,   damaged  beyond  repair,  or
permanently rendered unfit for use; PROVIDED, that, except as otherwise provided
herein,  Lessee will replace or cause the  replacement of such Parts as promptly
as  practicable.  All  replacement  Parts  shall be free and clear of all Liens,
except for Permitted Liens and pooling  arrangements to the extent  permitted by
ss. C below and shall be in good operating  condition and (except in the case of
replacement  property  installed on the basis of operational  exigencies) have a
value and  utility  not less than the value and  utility  of the Parts  replaced
(assuming such replaced Parts were in the condition  required under this Lease).
Except as  otherwise  provided  herein,  all Parts at any time  removed from the
Aircraft  shall remain the property of Lessor,  no matter where  located,  until
they are  replaced  by Parts  that have been  incorporated  or  installed  in or
attached to the Aircraft and that meet the  requirements  for replacement  Parts
specified  above. As soon as a replacement  Part is incorporated or installed in
or attached to the Aircraft as above provided, without further act, (1) title to
the  replaced  Part shall vest in Lessee (or if a Permitted  Sublease is then in
effect,  in the Permitted  Sublessee) free and clear of all Lessor Liens and all
rights  of  Lessor,  and the  replaced  Part  shall no  longer  be deemed a Part
hereunder, (2) title to such replacement Part shall vest in Lessor, subject only
to Permitted  Liens and pooling  arrangements  to the extent  permitted by ss. C
below and except in the case of replacement property temporarily installed on an
emergency  basis,  and (3) such  replacement  Part shall become  subject to this
Lease and be deemed part of the Aircraft for all purposes  hereof and thereof to
the same extent as the Parts originally incorporated or installed in or attached
to such Aircraft.

         C.       POOLING OF PARTS.
                  ----------------

         Any Part  removed  from the  Aircraft  may be  subjected by Lessee or a
Permitted  Sublessee to a normal  pooling  arrangement  customary in the airline
industry and entered  into in the ordinary  course of business of Lessee or such
Permitted  Sublessee,  so long as a Part  replacing  such  removed Part shall be
incorporated  or installed in or attached to the Aircraft in accordance with ss.
B of this Annex C as promptly as  practicable  after the removal of such removed
Part. In addition,  any  replacement  Part when  incorporated or installed in or
attached  to the  Aircraft  may be owned by any third  party  subject  to such a
normal  pooling  arrangement,  so long as  Lessee  or  Permitted  Sublessee,  as
promptly  thereafter  as  reasonably  possible,  either (1) causes title to such
replacement  Part to vest in Lessor in  accordance  with ss. B of this  Annex C,
free and clear of all Liens (except Permitted Liens), or (2) replaces (or causes
to be replaced)  such  replacement  Part by  incorporating  or  installing in or
attaching  to the  Aircraft  a  further  replacement  Part  owned by Lessee or a
Permitted  Sublessee free and clear of all Liens (except Permitted Liens) and by
causing title to such further  replacement  Part to vest in Lessor in accordance
with ss. B of this Annex C.

         D.       ALTERATIONS, MODIFICATIONS, AND ADDITIONS.
                  -----------------------------------------

         Lessee  shall  make  (or  cause  to  be  made)  such   alterations  and
modifications  in and  additions to the Aircraft as may be required from time to
time to meet the  applicable  standards of the FAA or other  Aviation  Authority
having  jurisdiction  over the  operation  of the  Aircraft,  to the extent made
mandatory in respect of the  Aircraft (a  "MANDATORY  MODIFICATION");  PROVIDED,
that Lessee or any  Permitted  Sublessee  may, in good faith and by  appropriate
procedure,  contest the validity or application of any law, rule, regulation, or
order in any  reasonable  manner which does not have more than a DE MINIMIS risk
of adversely  affecting  Lessor's  interest in the Aircraft and does not involve
more than a DE MINIMIS risk of sale, forfeiture,  or loss of the Aircraft or the
interest of Owner Participant  therein,  more than a DE MINIMIS risk of material
civil  penalty,  or any risk of criminal  liability  being  imposed on Lessor or
Owner  Participant.  In  addition,  Lessee  may make or  permit  to be made such
alterations  and  modifications  in and  additions  to  the  Aircraft  (each  an
"OPTIONAL MODIFICATION") as Lessee or any Permitted Sublessee deems desirable in
the proper  conduct of its  business,  including  removal of Parts which  Lessee
deems are obsolete or no longer  suitable or appropriate for use in the Aircraft
(PROVIDED, that Lessee's right to remove obsolete Parts will be limited to Parts
having an  aggregate  original  cost not  exceeding  1% of Lessor's  Cost of the
Aircraft  with Lessor having the right to request such parts be shipped to Owner
Participant upon removal at Lessee's  expense;  PROVIDED,  that no such Optional
Modification shall (1) diminish the fair market value, estimated residual value,
utility,  or economic  useful life of the  Aircraft or any Engine below its fair
market  value,  estimated  residual  value,  utility,  or  economic  useful life
immediately  before such  Optional  Modification  (assuming the Aircraft or such
Engine  was in the  condition  required  by the Lease  immediately  before  such
Optional  Modification),  (2) cause the Aircraft to cease to have the applicable
standard airworthiness certificate, or (3) cause the Aircraft to become "limited
use  property"  within the  meaning of Rev.  Proc.  79-48.  Except as  otherwise
provided  herein,  title to all Parts  (other than  Removable  Parts (as defined
below))  incorporated  or installed in or attached to the Aircraft as the result
of such Optional  Modification  shall,  without  further act, vest in Lessor and
become subject to this Lease.  Notwithstanding  anything to the contrary in this
ss. D, Lessee or a Permitted  Sublessee may, at any time during the Term, remove
any Part (such Part being referred to herein as a "REMOVABLE PART") if (aa) such
Part is in addition to, and not in replacement of or substitution  for, any Part
originally  incorporated or installed in or attached to the Aircraft at the time
of delivery  thereof to Lessee or any Part in  replacement  of, or  substitution
for,  any such  Part,  (bb)  such Part is not  required  to be  incorporated  or
installed in or attached to the Aircraft  pursuant to the terms of ss. A of this
Annex C or the  first  sentence  of this ss. D or  pursuant  to the terms of any
insurance  policies  required to be carried hereunder or any applicable law, and
(cc)  such Part can be  removed  from the  Airframe  or  Engine  without  in any
material respect  diminishing the fair market value,  estimated  residual value,
utility,  or  remaining  economic  useful life that the Airframe or Engine would
have had at the time of removal had such  removal not  occurred,  assuming  that
such  Airframe  or  Engine  was in  the  condition  and  repair  required  to be
maintained by the terms hereof and such Removable Part had not been incorporated
or installed in or attached to the Aircraft.  Removable Parts may be leased from
or financed by third  parties  other than Lessor.  Title to any  Removable  Part
shall not vest in Lessor;  except that any Part not removed before the return to
Lessor  hereunder  of the  Airframe  or  Engine  on  which  it is  incorporated,
installed, or attached shall become the property of Lessor.

         E.       RECORDS.
                  -------

         Lessee  shall  maintain  (or  cause  to  be  maintained)  all  Aircraft
Documents. All Aircraft Documents that are specific to the Aircraft shall be the
property  of Lessor,  but shall  become the  property  of Lessee  upon  Lessee's
purchase  of the  Aircraft  pursuant  to the  terms  of this  Lease  or upon the
occurrence of an Event of Loss and Lessee's compliance with ss. 10.

<PAGE>

                                     ANNEX D

                                    INSURANCE

         The  terms  defined  in  Annex  A  to  Lease  Agreement  N___AT,   when
capitalized as in Annex A, have the same meanings when used in this  "Insurance"
Annex.  Annex A also contains rules of usage that control  construction  in this
"Insurance" Annex.

A.       LIABILITY INSURANCE

         1. Except as provided in ss. A2 below, Lessee will carry or cause to be
carried  at  all  times,   at  no  expense  to  Lessor  or  Owner   Participant,
comprehensive  airline legal liability (including passenger liability,  property
damage, and contractual  liability insurance) with respect to the Aircraft which
is (a) in an amount not less than the greater of (x) the amount of comprehensive
airline legal liability insurance from time to time applicable to aircraft owned
or leased  and  operated  by Lessee of the same type and  operating  on  similar
routes as the  Aircraft,  and (y) the  Minimum  Liability  Insurance  Amount per
occurrence;  (b) of the type and  covering  the same  risks as from time to time
applicable to aircraft,  operated by Lessee and similarly-situated  carriers, of
the same type as the  Aircraft;  and (c)  maintained  in effect with insurers of
internationally recognized responsibility in the international aviation industry
(such insurers being referred to herein as "APPROVED INSURERS").

         2.  During any  period  that the  Aircraft  is on the ground and not in
operation,  Lessee may carry or cause to be  carried,  in lieu of the  insurance
required by ss. A1 above,  insurance otherwise conforming with the provisions of
ss. A1 except that (a) the  amounts of coverage  shall not be required to exceed
the amounts of public  liability and property damage insurance from time to time
applicable  to  aircraft  owned or  operated  by  Lessee of the same type as the
Aircraft which are on the ground and not in operation,  and (b) the scope of the
risks  covered and the type of insurance  shall be the same as from time to time
shall be  applicable  to  aircraft  owned or operated by Lessee of the same type
which are on the ground and not in operation.

B.       HULL INSURANCE

         1. Except as provided in ss. B2 below, Lessee will carry or cause to be
carried  at all  times,  at no  expense  to  Lessor or Owner  Participant,  with
Approved Insurers  "all-risk" ground and flight aircraft hull insurance covering
the Aircraft  (including  the Engines when they are installed on the Airframe or
any  other  airframe)  which is of the type as from time to time  applicable  to
aircraft  operated  by  Lessee of the same  type as the  Aircraft  for an amount
denominated in United States Dollars not less than the Stipulated  Loss Value of
the Aircraft

         Any  policies  of  insurance  carried  in  accordance  with this ss. B1
covering the Aircraft and any policies taken out in  substitution or replacement
for any such policies  shall  provide that (a) in the event of a loss  involving
proceeds in excess of the Threshold Amount, the proceeds in respect of such loss
up to an amount equal to the  Stipulated  Loss Value for the  Aircraft  shall be
payable  to  Lessor,  except  in the case of a loss  with  respect  to an Engine
installed on an airframe  other than the Airframe,  in which case Lessee (or any
Permitted  Sublessee)  shall  endeavor to arrange  for any payment of  insurance
proceeds in respect of such loss to be held for the  account of Lessor,  whether
such payment is made to Lessee (or any  Permitted  Sublessee) or any third party
[and, if or Lessor receives such a payment otherwise than in respect of an Event
of Loss, then, upon receipt of evidence  reasonably  satisfactory to Lessor that
the damage giving rise to such payment has been repaired or that such payment is
then required to pay for repairs then being made, Lessor shall pay the amount of
such  payment to Lessee or its  order],  and (b) the  entire  amount of any loss
involving proceeds of the Threshold Amount or less or the amount of any proceeds
of any loss in excess of the  Stipulated  Loss Value for the  Aircraft  shall be
paid to Lessee or its order  unless an Event of Default  exists and the insurers
have been notified  thereof by Lessor.  In the case of a loss with respect to an
engine (other than an Engine)  installed on the Airframe,  Lessor shall hold any
payment to it of any insurance  proceeds for that loss for the account of Lessee
or any other third party who is entitled to receive such proceeds.

         2.  During any  period  that the  Aircraft  is on the ground and not in
operation,  Lessee may carry or cause to be  carried,  in lieu of the  insurance
required by ss. B1 above,  insurance otherwise conforming with the provisions of
ss. B1,  except that the scope of the risks and the type of  insurance  shall be
the same as from time to time applicable to aircraft owned by Lessee of the same
type similarly on the ground and not in operation,  PROVIDED,  that Lessee shall
maintain  insurance  against risk of loss or damage to the Aircraft in an amount
equal to the Stipulated  Loss Value of the Aircraft  during such period that the
Aircraft is on the ground and not in operation.

C.       WAR-RISK, HIJACKING, AND ALLIED PERILS INSURANCE

         If Lessee (or any Permitted  Sublessee) operates or proposes to operate
the  Aircraft,  the  Airframe,  or any  Engine  (1) in any  area  of  recognized
hostilities,  or (2) on  international  routes  and  Lessee  (or such  Permitted
Sublessee) maintains war-risk,  hijacking,  or allied perils insurance for other
aircraft that it operates on such routes or in such areas, Lessee shall maintain
or cause to be maintained  war-risk,  hijacking,  and allied perils insurance of
substantially  the same type carried by similar  United  States  commercial  air
carriers  operating the same or comparable  models of aircraft on similar routes
or in such  areas,  and in no event in an amount less than the  Stipulated  Loss
Value.

D.       GENERAL PROVISIONS

         Any policies of insurance  carried in accordance  with ss.ss. A, B, and
C, including any policies  taken out in  substitution  or  replacement  for such
policies:

     (1) shall name Lessor and Owner  Participant  (and in respect of  liability
insurances,  to the extent they are available  without  unreimbursed  additional
cost to Lessee, each of their respective successors, assigns, directors, agents,
officers, and employees) as additional insureds (the "ADDITIONAL INSUREDS"),  as
their interests may appear;

     (2)  shall  apply  worldwide  and  have  no  territorial   restrictions  or
limitations  (except  only in the  case of war,  hijacking,  and  allied  perils
insurance  required  under  ss.  C,  which  shall  apply to the  fullest  extent
available in the international insurance market);

     (3) shall  provide  that,  in respect of the  interests  of the  Additional
Insureds in such policies, the insurance shall not be invalidated or impaired by
any act or omission  (including  misrepresentation  and nondisclosure) by Lessee
(or any  Permitted  Sublessee)  or any other Person  (including  use for illegal
purposes  of the  Aircraft  or any  Engine),  and shall  insure  the  Additional
Insureds regardless of any breach or violation of any representation,  warranty,
declaration,  term,  or condition  contained in such  policies by Lessee (or any
Permitted Sublessee);

     (4) shall  provide  that,  if the insurers  cancel such  insurance  for any
reason whatsoever, or if it is allowed to lapse for nonpayment of premium, or if
any  material  change  is made in the  insurance  which  adversely  affects  the
interest of any of the Additional Insureds, such cancellation,  lapse, or change
shall not be effective as to the Additional  Insureds for 30 days (seven days in
the case of war risk,  hijacking,  and allied perils insurance) after receipt by
the Additional Insureds of written notice by such insurers of such cancellation,
lapse or change,  PROVIDED,  that if any notice  period  specified  above is not
reasonably obtainable, such policies shall provide for as long a period of prior
notice as shall then be reasonably obtainable;

     (5) shall waive any rights of recourse,  subrogation, setoff (including for
unpaid  premiums),  recoupment,  counterclaim,  or other  deduction,  whether by
attachment or otherwise, against each Additional Insured;

     (6) shall be primary without right of contribution from any other insurance
that may be available to any Additional Insured;

     (7) shall provide that all of the liability  insurance  provisions thereof,
except the limits of  liability,  shall operate in all respects as if a separate
policy had been issued covering each party insured thereunder;

     (8) shall provide that none of the Additional  Insureds shall be liable for
any insurance premium; and

     (9)  shall  contain  a 50/50  Clause  per  Lloyd's  Aviation  Underwriters'
Association Standard Policy Form AVS 103;

     PROVIDED,  that any such  endorsements may be subject to any limitations on
endorsements  generally  prevailing in the airline insurance  marketplace at the
time (E.G., AVN67B).

E.       REPORTS AND CERTIFICATES; OTHER INFORMATION

         On or before the  Delivery  Date and on or before each  renewal date of
the insurance  policies required  hereunder (and no less often than on an annual
basis),  Lessee  will  furnish  or cause to be  furnished  to  Lessor  and Owner
Participant insurance certificates describing in reasonable detail the insurance
maintained hereunder and a report, signed by Lessee's or a Permitted Sublessee's
regular  independent  insurance  broker (the  "INSURANCE  BROKER"),  stating the
opinion of such  Insurance  Broker that (1) all premiums for the insurance  then
due have been paid, and (2) such insurance complies with the terms of this Annex
D. To the extent that such agreement is reasonably obtainable,  Lessee will also
cause the Insurance  Broker to agree to notify Lessor and Owner  Participant  in
writing of any  default in the  payment of any  premium  and of any other act or
omission on the part of Lessee of which the  Insurance  Broker has knowledge and
which  might  invalidate  or  render  unenforceable,  in whole  or in part,  any
insurance on the Aircraft or Engines or cause the cancellation or termination of
such insurance,  and to notify Lessor and Owner  Participant in writing at least
30 days (seven days for war-risk  and allied  perils  coverage,  or such shorter
period therefor as may be available in the  international  insurance  market, as
applicable) before the cancellation,  lapse, or materially adverse change of any
insurance maintained pursuant to this Annex D.

F.       RIGHT TO PAY PREMIUMS

         Each  Additional  Insured shall have the rights but not the obligations
of an additional named insured.  No Additional Insured shall have any obligation
to pay any premium,  commission,  assessment,  or call due on any such insurance
(including  reinsurance).   Notwithstanding  the  foregoing,  in  the  event  of
cancellation of any required insurance due to the nonpayment of premium, each of
Lessor and Owner Participant  shall have the option, in its sole discretion,  to
pay any  such  premium  and to  maintain  such  coverage,  as  Lessor  or  Owner
Participant may require,  until the scheduled expiry date of such insurance and,
in such event, Lessee shall, upon demand,  reimburse Lessor or Owner Participant
for amounts that they so pay.

G.       DEDUCTIBLES; SELF-INSURANCE

         Lessee  may  self-insure  by way  of  deductible,  premium  adjustment,
franchise  provisions,  or  otherwise  (including,  with  respect  to  insurance
maintained  pursuant to ss. B, insuring for a maximum  amount which is less than
the  Stipulated  Loss Value of the Aircraft)  the  insurance  covering the risks
required  to be  insured  against  pursuant  to ss. 11 and this  Annex D under a
program  applicable to all aircraft in Lessee's fleet,  but in no case shall the
aggregate  amount of  self-insurance  (including any  applicable  deductible) in
regard to ss. 11 and this Annex D during any policy  year,  with  respect to the
Aircraft,  exceed (CONFIDENTIAL MATERIAL OMITTED). In addition,  Lessee (and any
Permitted   Sublessee)  may  self-insure  to  the  extent  that  any  applicable
deductible per aircraft that does not exceed  industry  standards for major U.S.
airlines.ANNEX A

                                   DEFINITIONS

                               GENERAL PROVISIONS

     (a) In each Operative  Agreement,  unless otherwise expressly  provided,  a
reference to:

     (1) each of "Lessee", "Lessor", "Loan Participant", "Owner Trustee", "Owner
Participant",  "Mortgagee",  "Note  Holder",  and any other Person  includes any
successor in interest to it and any permitted  transferee,  permitted purchaser,
or permitted assignee of it;

     (2) any agreement or other  document  (including  any annex,  schedule,  or
exhibit  thereto,  or any other part thereof)  includes that  agreement or other
document as amended,  supplemented,  or otherwise  modified and any agreement or
other document entered into in substitution or replacement therefor from time to
time, and in each case in accordance  with its terms and in accordance  with the
Operative Agreements;

     (3) any  provision  of any Law  includes  any such  provision  as  amended,
modified, supplemented,  substituted, reissued, or reenacted before the Delivery
Date, and thereafter from time to time;

     (4) "Agreement", "this Agreement",  "hereby", "herein", "hereto", "hereof",
"hereunder",  and words of similar import, when used in any Operative Agreement,
refer to such Operative Agreement as a whole and not to any particular provision
of such Operative Agreement;

     (5)  "including",  "include",  and terms or phrases of similar import means
"including [etc.], without limitation";

     (6) "or" is conjunctive and not disjunctive; and

     (7) a reference to a "section" or "ss.",  an  "Exhibit",  an "Annex",  or a
"Schedule" in any Operative  Agreement,  or in any annex thereto, is a reference
to a section  of, or an exhibit,  an annex,  or a schedule  to,  such  Operative
Agreement or such annex, respectively.

     (b) Each  exhibit,  annex,  and  schedule to each  Operative  Agreement  is
incorporated in, and is a part of, such Operative Agreement.

     (c) Unless otherwise defined or specified in any Operative  Agreement,  all
accounting  terms therein shall be construed and all  accounting  determinations
thereunder shall be made in accordance with GAAP.

     (d) Headings used in any Operative  Agreement are for convenience only, and
shall not in any way affect the construction of, or be taken into  consideration
in interpreting, such Operative Agreement.

     (e) For  purposes of each  Operative  Agreement,  the  existence of a Lease
Event of Default,  Lease Default,  or Special Default referred to in ss. 14.5 of
the Lease shall not  prohibit  Lessee from taking any action or  exercising  any
right that is  conditioned on the  non-existence  of any Lease Event of Default,
Lease Default, or Special Default if such Lease Event of Default, Lease Default,
or Special  Default  consists of the institution of  reorganization  proceedings
with respect to Lessee under Chapter 11 of the Bankruptcy  Code, and the trustee
or  debtor-in-possession  in such  proceedings  (1) has  agreed to  perform  its
obligations  under the  Lease  with the  approval  of the  applicable  court and
thereafter  continues to perform such  obligations  in  accordance  with Section
1110,  or (2) has assumed the Lease with the approval of the relevant  court and
thereafter continues to perform its obligations under the Lease.

DEFINED TERMS

            ACTUAL  KNOWLEDGE:  (a) as it applies to Owner Trustee or Mortgagee,
actual  knowledge of a responsible  officer in the Corporate Trust Department or
the  Corporate  Trust  Office,  respectively,  and (b) as it  applies  to  Owner
Participant  or Lessee,  actual  knowledge  of a Vice  President  or more senior
officer of Owner Participant or Lessee  (respectively),  or any other officer of
Owner  Participant  or  Lessee  (respectively)  having  responsibility  for  the
Transactions;  PROVIDED, that each of Lessee, Owner Participant,  Owner Trustee,
and  Mortgagee  shall be deemed to have "Actual  Knowledge"  of any matter as to
which it has received notice from Lessee,  Owner  Participant,  any Note Holder,
Owner Trustee,  or Mortgagee,  given  pursuant to ss. 15.7 of the  Participation
Agreement.

            ADDITIONAL INSURED: defined inss. D of Annex D to the Lease.

            AFFILIATE  of any Person:  any other Person  directly or  indirectly
controlling,  controlled  by, or under  common  control  with such  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,  by contract,  or otherwise,
and  "controlling",  "controlled  by",  and  "under  common  control  with" have
correlative meanings, PROVIDED, that neither Owner Participant nor the Mortgagee
will be deemed to be an "Affiliate" of Lessor or Owner Trustee (and vice versa),
and  none  of  Owner  Trustee  or  Owner  Participant  will be  deemed  to be an
"Affiliate" of the Mortgagee (and vice versa).

     AIRCRAFT: the Airframe and Engines.

     AIRCRAFT  BILL OF  SALE:  a  warranty  bill of sale  granting  title to the
Aircraft,  which  bill of sale  Seller is to  deliver  to Owner  Trustee  on the
Delivery Date.

     AIRCRAFT  DESCRIPTION  EXHIBIT:  Exhibit A to the Lease or Exhibit A to the
Mortgage.

     AIRCRAFT  DOCUMENTS:  all technical data,  manuals,  and log books, and all
inspection,  modification,  and  overhaul  records  and other  service,  repair,
maintenance,  and technical  records that the relevant Aviation  Authority,  the
Lease,  or the  Maintenance  Program  requires be maintained with respect to the
Aircraft,   including  all  required   additions,   renewals,   revisions,   and
replacements  of any  such  materials,  in each  case in  whatever  form  and by
whatever means or medium (including  microfiche,  microfilm,  paper, or computer
disk)  such  materials  are  maintained  or  retained  by or on behalf of Lessee
(PROVIDED, that all such materials shall be maintained in the English language).

     AIRFRAME:  (1) the aircraft (excluding Engines or engines from time to time
installed  thereon)  manufactured  by Airframe  Manufacturer  and  identified by
Airframe  Manufacturer's  model number,  United States registration  number, and
Airframe  Manufacturer's  serial  number set forth in the  Aircraft  Description
Exhibit, or (2) any Replacement  Airframe,  including in either case any and all
Parts  incorporated or installed in or attached or appurtenant to such airframe,
and any and all Parts  removed  from such  airframe,  unless title to such Parts
does not vest in Lessor in  accordance  with ss.  8.1 and Annex C of the  Lease.
Upon  substitution  of a Replacement  Airframe under and in accordance  with the
Lease, such Replacement  Airframe shall become subject to the Lease and shall be
the  "Airframe" for all purposes of the Operative  Agreements,  and the replaced
Airframe  shall  cease to be  subject  to the Lease  and  shall  cease to be the
"Airframe".

     AIRFRAME MANUFACTURER: The Boeing Company, a Delaware corporation.

     ALLOCATED  EETC EXPENSES  means the Pro Rata Portion of the specified  fees
and expenses of each of the following  incurred in connection  with the issuance
of the Pass-Through Certificates on the Issuance Date: (i) the placement fee and
reimbursed expenses of ____________________ and the other institutions,  if any,
acting as initial purchasers of the Pass-Through Certificates,  (ii) the upfront
fee and reimbursed  expenses of Wilmington Trust Company,  as the  Subordination
Agent, the Pass-Through  Trustees,  and the Paying Agents, (iii) the upfront fee
and reimbursed expenses of First Security Bank, National Association,  as Escrow
Agent, (iv) the upfront fee of ____________________,  as the Depository, (v) the
upfront fee of  ____________________,  as the Liquidity Provider,  (vi) the fees
and expenses of ____________________,  special counsel to the initial purchasers
and the  Liquidity  Provider,  (vii) the fees and  expenses of  Richards  Layton
Finger,  special  counsel  to the  Pass-Through  Trustees,  Paying  Agents,  and
Subordination Agent, [and the fees and expenses of ____________________, special
counsel to Policy Provider,] (ix) the fees and expenses of Troutman Sanders LLP,
special counsel to Lessee, (x) the fees and expenses of Cravath, Swaine & Moore,
securities counsel to Lessee,  (xi) the fees of the appraisers  utilized for the
Offering  Memorandum,  (xiii)  the fees of the  appraisers  utilized  by  Policy
Provider,  (xiv) the fees and expenses of Moody's  Investors  Service,  Inc. and
Standard & Poor's Rating  Services,  (xv) the fees and expenses of Ernst & Young
LLP, and (xvi) the initial  quarterly  premium due to Policy  Provider under the
Policy Provider Agreement. As used in this definition,  "Pro Rata Portion" means
one-[tenth].

     AMORTIZATION  AMOUNT for any Equipment  Note,  as of any Payment Date:  the
amount  determined by multiplying the percentage set forth opposite such Payment
Date on the Amortization Schedule by the Original Amount of such Equipment Note.

     AMORTIZATION  SCHEDULE for an Equipment Note: the amortization schedule for
that Equipment Note delivered pursuant toss. 2.02 of the Mortgage.

     APPLICABLE   PERCENTAGE:   means  (A)  for  the  [first  one-year   Renewal
Term][first two one-year Renewal Terms], (1) 100% if, at the time that the first
Renewal  Term  begins,  Lessee  provides  Owner  Participant  with an opinion of
counsel reasonably  satisfactory to Owner Participant to the effect that, due to
a Change in Tax Law or  clarification  of law, if the Applicable  Percentage had
been 100% on the Closing  Date no Renewal  Term would have been  included in the
Lease Term under Code ss. 467 and the Treasury  Regulations  thereunder  and (2)
otherwise, 105%; and (B) for any subsequent Renewal Term, 100%.

     APPRAISER:  a  firm  of  internationally-recognized,  independent  aircraft
appraisers.

     AVERAGE LIFE DATE for any Equipment  Note:  the date which follows the time
of  determination  by a period equal to the Remaining  Weighted  Average Life of
such Equipment Note. The "REMAINING  WEIGHTED AVERAGE LIFE" (calculated in days)
for any Equipment Note on a given date is (1) the sum of (a) each then-remaining
scheduled  payment of principal of such Equipment Note,  TIMES (b) the number of
days from and  including  such  determination  date to but excluding the date on
which such payment of  principal  is  scheduled  to be made,  DIVIDED BY (2) the
then-outstanding principal amount of such Equipment Note.

     AVIATION  AUTHORITY:  the FAA or, if the  Aircraft is  registered  with any
other Government Entity under and in accordance withss. 7.1.2 of the Lease, such
other Government Entity.

     BANKRUPTCY  CODE: the United States  Bankruptcy  Code, 11 U.S.C.ss.  101 ET
SEQ.

     BASE TERM: the period beginning on and including the Commencement  Date and
ending on the Scheduled Expiration Date therefor,  or such earlier date on which
the Term terminates in accordance with the provisions of the Lease.

     BASIC RENT: the rent (including,  to the extent  applicable,  Renewal Rent)
payable or allocable,  as applicable,  for the Aircraft pursuant to ss. 3.2.1(a)
of the Lease.

     BENEFICIAL  OWNER of an  Equipment  Note: a Person who, by reason of direct
ownership,  contract, share ownership, or otherwise, has the right to receive or
participate  in  receiving,  directly  or  indirectly,  payments  of  principal,
interest, or Make-Whole Amount for that Equipment Note; PROVIDED,  that a Person
shall not be a Beneficial  Owner of an  Equipment  Note solely  because  another
Person in whom such a Person owns common stock or other equity  securities  is a
registered  holder or Beneficial Owner of such Equipment Note unless such Person
is an Affiliate of such other Person.

     BILLS OF SALE: the FAA Bill of Sale and the Aircraft Bill of Sale.

     BURDENSOME  INDEMNITY  PAYMENT:  an indemnity  payment  pursuant to the Tax
Indemnity  Agreement or ss. 9 of the  Participation  Agreement which would cause
the  aggregate  net present  value of all losses paid or payable by Lessee as of
the  determination  date,   discounted  quarterly  at  the  Debt  Rate,  to  the
determination date, to exceed 2.5% of Lessor's Cost.

     BUSINESS DAY: any day other than a Saturday,  Sunday, or other day on which
commercial  banks are  authorized  or required by law to close in New York,  NY,
Indianapolis,  IN,  Wilmington,  DE, or Salt Lake  City,  UT, or, so long as any
Equipment  Note remains  outstanding,  the city and state in which the Mortgagee
maintains its Corporate Trust Office or receives and disburses funds.

     CASH  EQUIVALENTS:  the following  securities (which shall mature within 90
days of the  date of  purchase  thereof):  (1)  direct  obligations  of the U.S.
Government;  (2)  obligations  fully  guaranteed  by the  U.S.  Government;  (3)
certificates of deposit issued by, or bankers'  acceptances of, or time deposits
or a deposit account with, Owner Trustee, Mortgagee, or any bank, trust company,
or national banking association incorporated or doing business under the laws of
the United States or any state thereof having a combined capital and surplus and
retained  earnings of at least  $500,000,000  and having a rate of "C" or better
from the Thomson BankWatch Service;  or (4) commercial paper of any issuer doing
business under the laws of the United States or one of the states thereof and in
each case having a rating assigned to such commercial paper by Standard & Poor's
or Moody's at least equal to A1 or P1, respectively.

     CITIZEN  OF  THE  UNITED  STATES:   defined  inss.   40102(a)(15)   of  the
Transportation Code and in the FARs.

     CLOSING: the closing of the transactions  contemplated by the Participation
Agreement on the Delivery Date.

     CODE:  the  Internal  Revenue  Code of 1986;  PROVIDED,  that  when used in
relation  to a  Plan,  "Code"  shall  be  interpreted  in  accordance  with  the
regulations and rulings issued thereunder.

     COLLATERAL:  the property in which a security  interest is created in favor
of the Loan Trustee under the "Granting Clause" of the Mortgage.

     COMMENCEMENT DATE: defined in Schedule 1 to the Lease.

     COMMITMENT  for  any   Participant:   that   Participant's   commitment  to
participate  in the payment of Lessor's  Cost, as reflected in Schedule 2 of the
Participation Agreement.

     COMMITMENT  TERMINATION  DATE:  defined in Schedule 3 to the  Participation
Agreement.

     CONSENT AND AGREEMENT: Manufacturer Consent and Agreement N___AT, dated the
Delivery Date, of Airframe Manufacturer.

     CONTINUOUS STAY PERIOD: defined inss. 4.04(a) of the Mortgage.

     CORPORATE  TRUST  DEPARTMENT or TRUST  OFFICE:  Owner  Trustee's  principal
corporate trust office, located from time to time at Owner Trustee's address for
notices under the Participation  Agreement,  or such other office at which Owner
Trustee's corporate trust business shall be administered and which Owner Trustee
specifies by notice in writing to Lessee, Mortgagee, and each Note Holder.

     CORPORATE  TRUST  OFFICE:   Mortgagee's   principal   office,   located  at
Mortgagee's address for notices under the Participation Agreement, or such other
office at which  Mortgagee's  corporate trust business shall be administered and
which  Mortgagee  specifies by notice in writing to Lessee,  Owner Trustee,  and
each Note Holder.

     CRAF:  the Civil  Reserve  Air Fleet  Program  established  pursuant  to 10
U.S.C.ss. 9511 - 13, or any similar substitute program.

     DEBT: any liability for borrowed money, or any liability for the payment of
money  in  connection  with any  letter  of  credit  transaction,  or any  other
liabilities evidenced or to be evidenced by bonds,  debentures,  notes, or other
similar instruments.

     DEBT RATE: (1) for any Series, the rate as defined in the Mortgage, and (2)
for any other purpose, with respect to any period, the weighted average interest
rate per annum  during such period  borne by the  outstanding  Equipment  Notes,
excluding any interest  payable at the Past-Due Rate (or, if no Equipment  Notes
are outstanding, such weighted average interest rate on the Delivery Date).

     DELAYED   DELIVERY   DATE:  a  delayed   Delivery  Date  notified  to  each
Participant,  Owner Trustee and  Mortgagee by Lessee  pursuant to ss. 4.3 of the
Participation Agreement, which delayed Delivery Date shall be a Business Day not
later than the Commitment Termination Date.

     DELIVERY  DATE:  __________,  200_ (which is the date when the  Aircraft is
delivered  to and  accepted  by Lessee  under  the  Lease  and when the  Closing
occurs).

     DOLLARS,  UNITED STATES  DOLLARS,  or $: the lawful  currency of the United
States.

     DOT:  the  Department  of  Transportation  of  the  United  States,  or any
Government   Entity   succeeding  to  the   functions  of  such   Department  of
Transportation.

     EBO DATE: as specified in Schedule 5 to the Lease.

     EBO PRICE:  as specified in Schedule 5 to the Lease,  as adjusted  pursuant
toss. 3.2.1 of the Lease.

     ELIGIBLE  ACCOUNT:   an  account   established  by  and  with  an  Eligible
Institution at Mortgagee's  request,  which institution agrees, for all purposes
of the UCC  (including  UCC  Article  8),  that  (1)  such  account  shall  be a
"securities account" (as defined in UCC ss. 8-501), (2) all property (other than
cash)  credited  to such  account  shall be treated as a  "financial  asset" (as
defined in UCC ss.  8-102(9)),  (3) Mortgagee shall be the "entitlement  holder"
(as defined in UCC ss.  8-102(7)) of such  account,  (4) it will comply with all
entitlement  orders  issued by  Mortgagee  to the  exclusion of Lessee and Owner
Trustee,  and (5) the  "securities  intermediary  jurisdiction"  (under  UCC ss.
8-110(e)) shall be the state of New York.

     ELIGIBLE  INSTITUTION:  the corporate  trust  department of (1)  Wilmington
Trust Company, acting solely in its capacity as a "securities  intermediary" (as
defined in UCC ss. 8-102(14)),  or (2) a depository  institution organized under
the laws of the United States of America or any one of the states thereof or the
District  of  Columbia  (or any U.S.  branch  of a  foreign  bank),  which has a
long-term  unsecured  debt rating from Moody's and Standard & Poor's of at least
A-3 or its equivalent.

     ENFORCEMENT DATE: defined inss. 4.03 of the Mortgage.

     ENGINE:  (1) each of the engines  manufactured by Engine  Manufacturer  and
identified  by Engine  Manufacturer's  model  number and  Engine  Manufacturer's
serial number in the Aircraft  Description  Exhibit and originally  installed on
the Airframe on delivery  thereof  pursuant to the Lease, or (2) any Replacement
Engine,  in any case whether or not from time to time  installed on the Airframe
or installed on any other airframe or aircraft,  including (for both clauses (1)
and  (2))  any and  all  Parts  incorporated  or  installed  in or  attached  or
appurtenant  to such  engine,  and any and all Parts  removed  from such engine,
unless  title to such Parts does not vest in Lessor in  accordance  with ss. 8.1
and Annex C of the Lease. Upon substitution of a Replacement Engine under and in
accordance with the Lease,  such Replacement  Engine shall become subject to the
Lease and shall be an "Engine" for all purposes of the Operative Agreements, and
the replaced Engine shall cease to be subject to the Lease and shall cease to be
an "Engine".

     ENGINE MANUFACTURER: CFM International.

     [ENGINE  MANUFACTURER  WARRANTY  AGREEMENT:  Engine  Manufacturer  Warranty
Agreement  N___AT,  dated the Delivery Date,  among Engine  Manufacturer,  Owner
Trustee and Lessee.]

     EQUIPMENT  NOTE:  any equipment  note issued under the Mortgage in the form
specified in ss. 2.01 and Exhibit B thereof (as such form may be varied pursuant
to the terms of the  Mortgage),  or any Equipment Note issued under the Mortgage
in exchange for or replacement of any Equipment Note.

     EQUIPMENT NOTE REGISTER: defined inss. 2.08 of the Mortgage.

     ERISA: the Employee Retirement Income Security Act of 1974.

     ESCROW AGENT: ________________________________________.

     ESCROW AGREEMENT: each of the two Escrow and Paying Agent Agreements, among
Escrow  Agent,  Paying Agent,  certain  initial  purchasers of the  Pass-Through
Certificates named therein,  and one of the Pass-Through  Trustees,  dated as of
the Issuance  Date,  each of which  relates to one of the  Pass-Through  Trusts,
PROVIDED,  that,  for  purposes  of any  obligation  of  Lessee,  no  amendment,
modification,  or supplement to, or  substitution  or  replacement  of, any such
Escrow Agreement shall be effective unless Lessee consents to it.

     EVENT OF LOSS with respect to the Aircraft,  the  Airframe,  or any Engine:
any of the following circumstances,  conditions,  or events with respect to such
property, which shall have occurred for any reason whatsoever:

     (1) the  destruction  of such  property,  damage  to such  property  beyond
economic repair, or rendition of such property  permanently unfit for normal use
by Lessee;

     (2) the actual or constructive  total loss of such property,  or any damage
to such property, or requisition of title or use of such property, which results
in an insurance settlement with respect to such property on the basis of a total
loss or constructive or compromised total loss;

     (3)  any  theft,  hijacking,  or  disappearance  of  such  property  for 90
consecutive days or more or, if earlier,  the fifth day following the end of the
Term;

     (4)  any  seizure,  condemnation,   confiscation,  taking,  or  requisition
(including loss of title) of such property by any Government Entity or purported
Government  Entity (other than a requisition of use by the U.S.  Government) for
180 consecutive days or, if earlier, at the end of the Term;

     (5) any seizure, condemnation,  confiscation, taking, or requisition of use
of such property by the U.S.  Government that continues until the 30th day after
the last day of the  Term;  and (6) as a result  of any law,  rule,  regulation,
order, or other action by the Aviation  Authority or by any Government Entity of
the government of registry of the Aircraft or by any Government Entity otherwise
having  jurisdiction  over the operation or use of the Aircraft,  the use of the
Aircraft,  the Airframe, or any Engine in the normal course of Lessee's business
of passenger air  transportation is prohibited for 180 consecutive days, unless,
before  the  expiration  of  such  180-day  period,  Lessee  undertakes  and  is
diligently  carrying  forward such steps as are necessary or desirable to permit
the  normal  use of such  property  by  Lessee,  but in any event if such use is
prohibited for a continuous period of 360 days, PROVIDED,  that such prohibition
shall not create an Event of Loss if such prohibition  applies to other B737-800
aircraft  (or CFM 56-7  engines)  in Lessee's  fleet and also  applies to Boeing
737-800  aircraft  (or CFM 56-7  engines)  not owned or  operated by Lessee and,
before the expiration of such 360-day period,  Lessee conforms at least one unit
of such  property  in its  fleet  to the  requirements  of any such  law,  rule,
regulation, order, or other action, begins regular commercial use of the same in
such jurisdiction,  and is diligently  carrying forward,  in a manner which does
not  discriminate  against such property in so conforming  such property,  steps
which are  necessary  or  desirable  to permit the normal use of the Aircraft by
Lessee,  but in any event if such use is prohibited  for a continuous  period of
540 days or such use is prohibited at the expiration of the Term.

     EXCESS AMOUNT: defined inss. 2.03(b) of the Mortgage.

     EXCLUDED  PAYMENTS:  (1) indemnity payments paid or payable by Lessee to or
in  respect of Owner  Participant  or FSB,  their  Affiliates,  successors,  and
permitted assigns, and their directors, officers, employees, and agents pursuant
to ss. 9 of the Participation  Agreement,  or any corresponding payments payable
as Supplemental Rent under the Lease, (2) proceeds of public liability insurance
paid or payable as a result of insurance  claims made,  or losses  suffered,  by
Owner  Participant or FSB (or the other Persons  specified in clause (1)),  that
are payable directly to Owner  Participant or FSB (or any such other Person) for
its own  account,  (3)  proceeds of  insurance  maintained  with  respect to the
Aircraft by Owner  Participant  or any Affiliate  thereof for its own account or
benefit (whether directly or through Owner Trustee) and permitted under ss. 11.2
of the Lease,  (4) all  payments  required  to be made  under the Tax  Indemnity
Agreement by Lessee,  (5) any Transaction  Expenses paid or payable by Lessee to
Owner Trustee (to the extent for its sole benefit) or Owner Participant pursuant
to the Lease or the  Participation  Agreement,  (6) any amount  payable to Owner
Participant  by any  transferee  as the  purchase  price of Owner  Participant's
interest in the Trust  Estate,  (7) any interest  that pursuant to the Operative
Agreements  may  from  time to time  accrue  in  respect  of any of the  amounts
described in clauses (1) through (6) above,  (8) all payments  made by Guarantor
in respect of any of the foregoing,  (9) any right to enforce the payment of any
amount  described  in clauses (1) through (8) above  (PROVIDED,  that the rights
referred to in this clause (9) shall not  include the  exercise of any  remedies
provided for in the Lease, other than the right to sue for specific  performance
of any covenant to make such payment or to sue for damages for the breach of any
such  covenant),  and (10) any right to exercise  any election or option or make
any  decision  or  determination,  or to give or receive  any  notice,  consent,
waiver, or approval, or to take any other action in respect of, but in each case
only to the extent relating to, any Excluded Payments.

     EXPENSES:   any  and  all  liabilities,   obligations,   losses,   damages,
settlements,  penalties,  claims,  actions,  suits, costs,  demands,  judgments,
expenses,  and  disbursements  (including  reasonable fees,  disbursements,  and
reasonable  out of pocket  costs and  expenses  of legal  counsel,  accountants,
appraisers, inspectors, or other professionals, and costs of investigation).

     FAA:  the Federal  Aviation  Administration  of the United  States,  or any
Government   Entity  succeeding  to  the  functions  of  such  Federal  Aviation
Administration.

     FAA BILL OF SALE: a bill of sale for the Aircraft on AC Form 8050-2 (or any
other  FAA-approved  form),  delivered to Owner  Trustee on the Delivery Date by
Seller.

     FAA COUNSEL: Crowe & Dunlevy.

     FAA-FILED DOCUMENTS:  the Lease, the Mortgage, the Trust Agreement, the FAA
Bill of Sale, and an application  for  registration of the Aircraft with the FAA
in Owner Trustee's name.

     FARS: the Federal Aviation  Regulations  issued or promulgated  pursuant to
the Transportation Code from time to time.

     FAIR MARKET RENTAL  VALUE:  the fair market rental value in Dollars for the
Aircraft that would apply in an arm's-length transaction between an informed and
willing lessee under no compulsion to lease,  and an informed and willing lessor
under no  compulsion  to lease,  for the  applicable  period,  assuming that (1)
except as provided in ss. 15.4 of the Lease, the Aircraft has been maintained in
accordance with, and is in the condition  required by, the Lease, (2) rent would
be paid  quarterly,  and (3) except as provided  in ss.  15.4 of the Lease,  the
Aircraft would be leased during any such period on the same terms and conditions
(except for Basic Rent amount) as during the Base Term.

     FAIR MARKET  SALES  VALUE:  the fair market  sales value in Dollars for the
Aircraft that would apply in an arm's-length transaction between an informed and
willing  buyer under no  compulsion  to buy, and an informed and willing  seller
under no compulsion  to sell, in a transaction  that would close on or about the
relevant time of determination, assuming that (1) except as provided in ss. 15.4
of the Lease, the Aircraft has been maintained in accordance with the Lease, and
is in the  condition  required  by the  Lease,  and  (2)  the  Aircraft  will be
delivered to such informed and willing buyer in the return condition required by
the Lease.

     FINANCING  STATEMENTS:  UCC-1 (and,  where  appropriate,  UCC-3)  financing
statements (1) covering the  Collateral,  by Owner Trustee,  as debtor,  showing
Mortgagee as secured party, for filing in Utah and each other jurisdiction where
(in  Mortgagee's  opinion)  filing  is  necessary  to  perfect  its  Lien on the
Collateral, and (2) covering the Aircraft, as a precautionary matter, by Lessee,
as lessee,  showing  Owner  Trustee as lessor and Mortgagee as assignee of Owner
Trustee,  for filing in  Indiana  and each  other  jurisdiction  where (in Owner
Trustee's or Mortgagee's opinion) filing is reasonably desirable.

     FIXED RATE: defined in Schedule 1 to the Lease.

     FSB:  First  Security  Bank,  National  Association,   a  national  banking
association,  not in its capacity as trustee under the Trust  Agreement,  but in
its individual capacity.

     GAAP:  generally  accepted  accounting  principles  as  set  forth  in  the
statements of financial  accounting standards issued by the Financial Accounting
Standards Board of the American  Institute of Certified Public  Accountants,  as
varied by any applicable financial accounting rules or regulations issued by the
SEC, and applied on a basis consistent with prior periods except as disclosed in
the pertinent Person's financial statements.

     GOVERNMENT  ENTITY:  (1)  any  federal,  state,   provincial,   or  similar
government,  and any  body,  board,  department,  commission,  court,  tribunal,
authority,  agency, or other instrumentality of any such government or otherwise
exercising any executive, legislative,  judicial,  administrative, or regulatory
functions  of  such  government,  or (2)  any  other  government  entity  having
jurisdiction  over  any  matter  contemplated  by the  Operative  Agreements  or
relating to the  observance  or  performance  of the  obligations  of any of the
parties to the Operative Agreements.

     GTA: the General  Terms  Agreement,  as defined in the  Purchase  Agreement
Assignment.

     GUARANTEE:  Guarantee N___AT,  dated the Delivery Date, issued by Guarantor
in favor of Owner Trustee, FSB, Mortgagee, WTC, and each Participant.

     GUARANTOR: AmTran, Inc., an Indiana corporation.

     INDEMNITEE:  (1) FSB and Owner  Trustee,  (2) WTC and  Mortgagee,  (3) each
separate or additional  trustee appointed pursuant to the Trust Agreement or the
Mortgage,  (4) each  Participant,  (5) the Trust Estate and the Collateral,  (6)
each  Affiliate  of the Persons  described  in clauses (1) through  (4), (7) the
directors,  officers,  employees, and agents of each of the Persons described in
clauses  (1) through (4) and in clause (6),  (8) the  successors  and  permitted
assigns of the Persons  described in clauses (1) through (4), and in clauses (6)
and (7), and (9) the Pass-Through  Indemnitees;  provided, that the Pass-Through
Indemnitees  are Indemnitees  only for purposes of ss. 9.1 of the  Participation
Agreement.  If any Indemnitee is Airframe Manufacturer or Engine Manufacturer or
any  subcontractor  or  supplier  of either  thereof,  such  Person  shall be an
Indemnitee only in its capacity as Owner Participant,  Loan Participant, or Note
Holder.

     INTERCREDITOR AGREEMENT: the Intercreditor Agreement among the Pass-Through
Trustees,  each Liquidity Provider,  Policy Provider,  and Subordination  Agent,
dated as of the Issuance Date, PROVIDED, that, for purposes of any obligation of
Lessee,  no  amendment,  modification,  or  supplement  to, or  substitution  or
replacement of, such  Intercreditor  Agreement shall be effective  unless Lessee
consents to it.

     IRS: the Internal  Revenue Service of the United States,  or any Government
Entity succeeding to the functions of such Internal Revenue Service.

     ISSUANCE DATE: __________, 200_.

     JAA: the Joint Aviation Authority of the European Union.

     LAW: (1) any constitution, treaty, statute, law, decree, regulation, order,
rule,  or  directive  of  any  Government   Entity,  and  (2)  any  judicial  or
administrative  interpretation  or application of, or decision under, any of the
foregoing.

     LEASE or LEASE AGREEMENT:  Lease Agreement N___AT, dated the Delivery Date,
between Owner Trustee and Lessee.

     LEASE DEFAULT:  (1) any condition,  circumstance,  act, or event that, with
the giving of notice or the lapse of time,  would  constitute  a Lease  Event of
Default, or (2) any Lease Event of Default.

     LEASE EVENT OF DEFAULT:  any one or more of the conditions,  circumstances,
acts, or events set forth inss. 14 of the Lease.

     LESSEE: American Trans Air, Inc., an Indiana corporation.

     LESSEE ADVISOR:  Capstar Partners,  LLC, in its capacity as special advisor
to Lessee.

     LESSEE OPERATIVE AGREEMENTS:  the Participation  Agreement,  the Lease, the
Tax  Indemnity  Agreement,  the  Purchase  Agreement  Assignment  [, the  Engine
Manufacturer  Warranty  Agreement,] and each other agreement  between Lessee and
any other party to the  Participation  Agreement,  relating to the Transactions,
delivered on the Delivery Date.

     LESSEE PERSON: Lessee, any sublessee, assignee, successor, or other user or
Person in possession of the Aircraft, the Airframe, or an Engine with or without
color of right,  or any  Affiliate of any of the  foregoing  (excluding  any Tax
Indemnitee or any related Tax  Indemnitee  with respect  thereto,  or any Person
using or claiming any rights with respect to the Aircraft,  the Airframe,  or an
Engine directly by or through any of the Persons in this  parenthetical  phrase,
but not excluding any Person  claiming  directly or indirectly  through or under
the Lease).

     LESSEE'S ADVISOR(S): defined in Schedule 3 to the Participation Agreement.

     LESSOR: Owner Trustee in its capacity as lessor under the Lease.

     LESSOR LIEN,  with respect to any Person,  on any property  (including  the
Trust  Estate,  the  Collateral,  the Aircraft,  Airframe,  Engines,  Parts,  or
Aircraft Documents) or any payments:  any Lien on such property or payments that
results  from (1)  claims  against  such  Person  (if such  Person is a trustee,
whether in its individual  capacity or in its capacity as a trustee) not related
to any of the Transactions, (2) acts or omissions of such Person (if such Person
is a  trustee,  whether  in its  individual  capacity  or in its  capacity  as a
trustee) in violation of its obligations under any of the terms of the Operative
Agreements,  or not related to the  Transactions,  (3) Taxes against such Person
(if such  Person is a trustee,  whether  in its  individual  capacity  or in its
capacity as a trustee) or any of its  Affiliates  that Lessee is not required to
indemnify under the Participation  Agreement,  or (4) claims against such Person
arising out of its transfer of all or part of its interest in the Aircraft,  the
Trust Estate, or the Operative Agreements, other than a Transfer required by the
terms of the Operative  Agreements or  attributable  to the existence of a Lease
Event of Default.

     LESSOR'S  COST:  the amount paid by Owner Trustee to Seller to purchase the
Aircraft  pursuant to the Purchase  Agreement  Assignment and the  Participation
Agreement,  as designated  by Dollar  amount in Schedule 3 to the  Participation
Agreement.

     LIEN: any mortgage,  pledge, lien, charge,  claim,  encumbrance,  lease, or
security interest affecting the title to or any interest in property.

     LIQUIDITY FACILITIES:  the two Revolving Credit Agreements (consisting of a
separate Revolving Credit Agreement with Liquidity Provider with respect to each
Pass-Through  Trust) between  Subordination  Agent,  as borrower,  and Liquidity
Provider,  each dated as of the Issuance Date,  PROVIDED,  that, for purposes of
any  obligation of Lessee,  no  amendment,  modification,  or supplement  to, or
substitution or replacement  of, any such Liquidity  Facility shall be effective
unless Lessee consents to it.

     LIQUIDITY  PROVIDER:  ______________,  as "Class G Liquidity  Provider" and
"Class C Liquidity  Provider"  (as such terms are  defined in the  Intercreditor
Agreement), or any Replacement Liquidity Provider.

     LOAN TRUSTEE: Wilmington Trust Company, a Delaware banking corporation, not
in its individual capacity but solely as loan trustee under the Mortgage.

     LOAN PARTICIPANT: a Note Holder.

     LOSS PAYMENT DATE: defined inss. 10.1.2(a)(1) of the Lease.

     MAINTENANCE PROGRAM: defined in Annex C to the Lease.

     MAJORITY  IN  INTEREST  OF  NOTE  HOLDERS  as  of  a  particular   date  of
determination:  the  holders  of a  majority  in unpaid  Original  Amount of all
Equipment Notes  outstanding as of such date (excluding any Equipment Notes held
by Owner  Trustee,  Lessee,  or Owner  Participant  or any Affiliate of any such
party or any interests of Owner Trustee or Owner  Participant  therein by reason
of subrogation  pursuant to ss. 4.03 of the Mortgage (unless all Equipment Notes
then outstanding are held by Owner Trustee,  Lessee,  Owner Participant,  or any
Affiliate of any  thereof));  PROVIDED,  that for the purposes of directing  any
action,  casting  any vote,  or  giving  any  consent,  waiver,  or  instruction
hereunder,  any Note Holder may (in its sole discretion) allocate any fractional
portion  of the  principal  amount of its  Equipment  Note(s)  in favor of or in
opposition to any such action, vote, consent, waiver, or instruction.

     MAKE-WHOLE  AMOUNT  with  respect  to any  Equipment  Note:  an amount  (as
determined by an independent  investment bank of national standing) equal to the
excess, if any, of (a) the present value of the remaining  scheduled payments of
principal  and  interest  to  maturity  of  such  Equipment  Note,  computed  by
discounting  such payments on a quarterly basis on each Payment Date (assuming a
360-day  year of twelve  30-day  months),  using a  discount  rate  equal to the
Treasury Yield, over (b) the outstanding principal amount of such Equipment Note
plus  accrued  interest  to  the  determination   date.  For  purposes  of  this
definition,  "TREASURY YIELD" means, at the determination date for any Equipment
Note,  the  interest  rate  (expressed  as a decimal  and, in the case of United
States Treasury bills,  converted to a bond equivalent  yield)  determined to be
the per annum rate equal to the  quarterly  yield to maturity for United  States
Treasury securities maturing on the Average Life Date of such Equipment Note and
trading  in  the  public   securities   markets  either  (1)  as  determined  by
interpolation  between the most-recent  weekly average yield to maturity for two
series of United States Treasury  securities,  trading in the public  securities
markets,  (aa) one  maturing as close as  possible  to, but  earlier  than,  the
Average Life Date of such  Equipment  Note, and (bb) the other maturing as close
as possible to, but later than, the Average Life Date of such Equipment Note, in
each case as published in the most-recent H.15(519),  or (2) if a weekly average
yield to maturity for United States Treasury  securities maturing on the Average
Life Date of such Equipment Note is reported on the most-recent H.15(519),  such
weekly  average  yield to maturity as  published in such  H.15(519)  "H.15(519)"
means the  weekly  statistical  release  designated  as such,  or any  successor
publication,  published by the Board of Governors of the Federal Reserve System.
The  determination  date for a Make-Whole Amount shall be the third Business Day
before  the  applicable   payment  or  redemption  date,  and  the  "MOST-RECENT
H.15(519)"  means the  H.15(519)  published  before the close of business on the
third Business Day before the applicable payment or redemption date.

     MATERIALLY ADVERSE CHANGE with respect to any Person: any event, condition,
or  circumstance  that  materially  adversely  affects such  Person's  business,
prospects,  or consolidated  financial  condition,  or its ability to observe or
perform  its  obligations,  liabilities,  and  agreements  under  the  Operative
Agreements.

     MINIMUM LIABILITY INSURANCE AMOUNT: defined in Schedule 1 to the Lease.

     MOODY'S: Moody's Investors Service, Inc.

     MORTGAGE:  Trust  Indenture and Mortgage  N___AT,  dated the Delivery Date,
between Owner Trustee and Mortgagee.

     MORTGAGE AGREEMENTS:  the Participation  Agreement, the Lease, the Purchase
Agreement,  the Purchase Agreement  Assignment,  the Consent and Agreement,  the
Engine  Manufacturer  Warranty  Agreement,  the  Bills  of Sale,  and any  other
contract,  agreement,  or instrument from time to time assigned or pledged under
the Mortgage.

     MORTGAGE DEFAULT: (1) any condition, circumstance, act, or event that, with
the giving of notice or the lapse of time,  would constitute a Mortgage Event of
Default, or (2) any Mortgage Event of Default.

     MORTGAGE   EVENT  OF   DEFAULT:   any  one  or  more  of  the   conditions,
circumstances, acts, or events set forth inss. 4.02 of the Mortgage.

     MORTGAGE INDEMNITEE: (1) WTC and Mortgagee, (2) each separate or additional
trustee appointed  pursuant to the Mortgage,  (3) Subordination  Agent, (4) each
Liquidity  Provider,  (5) Policy Provider,  (6) each Pass-Through  Trustee,  (7)
Paying Agent,  (8) Escrow Agent, (9) each Loan  Participant,  (10) each of their
respective  successors and assigns,  and (11) each of the  directors,  officers,
employees, and agents of such Persons .

     MORTGAGED PROPERTY: defined inss. 3.03 of the Mortgage.

     MORTGAGEE: Wilmington Trust Company, a Delaware banking corporation, not in
its individual capacity but solely as loan trustee under the Mortgage.

     MORTGAGEE AGREEMENTS:  the Participation  Agreement, the Mortgage, and each
other  agreement  between  Mortgagee  and any other  party to the  Participation
Agreement, relating to the Transactions, delivered on the Delivery Date.

     MORTGAGEE EVENT: (1) in the event of a reorganization  proceeding involving
Lessee  under  Chapter  11 of the  Bankruptcy  Code,  (a)  the  trustee  in such
proceeding or Lessee does not assume or agree to perform its  obligations  under
the Lease,  as contemplated  under Section 1110,  during the 60-day period under
ss.  1110(a)(1)(A)  of the  Bankruptcy  Code (or such longer period as may apply
under ss. 1110(b) of the Bankruptcy  Code), or (b) at any time after agreeing to
perform or assuming such  obligations,  such trustee or Lessee ceases to perform
such  obligations  with the result that the  Continuous  Stay Period comes to an
end, or (2) either the  Equipment  Notes become due and payable  pursuant to ss.
4.04(b) of the  Mortgage,  or Mortgagee  takes action or notifies  Owner Trustee
that it  intends  to take  action  to  foreclose  the  Lien of the  Mortgage  or
otherwise commence the exercise of any significant remedy in accordance with ss.
4.04(a) of the Mortgage.

     NET ECONOMIC RETURN:  Owner  Participant's net after-tax book yield,  using
the "multiple  investment  sinking  fund" method of analysis,  and aggregate and
present  value  (discounted  at 6% per  annum) of the net  after-tax  cash flow,
computed  both  through the EBO Date  (assuming  Lessee's  exercise of the early
buy-out option in ss. 17.3.1(a)(1) of the Lease) and through the end of the Base
Term, and computed on the basis of the same  methodology  and assumptions as the
initial  Owner   Participant  used  in  determining   Basic  Rent  payments  and
allocations,   Stipulated  Loss  Value   percentages,   and  Termination   Value
percentages,  as of the  Delivery  Date,  as such  assumptions  are adjusted for
events that have been the basis for  adjustments  to Basic Rent  pursuant to ss.
3.2.1(b) of the Lease or events  giving rise to indemnity  payments  pursuant to
ss. 5 of the Tax Indemnity Agreement;  PROVIDED, that, even if the initial Owner
Participant  transfers its interest,  Net Economic Return shall be calculated as
if the initial Owner  Participant had retained its interest;  PROVIDED  FURTHER,
that,  notwithstanding  the preceding proviso,  solely for purposes of ss. 11 of
the  Participation  Agreement  and  calculating  any  adjustments  to Basic Rent
payments and  allocations,  Stipulated Loss Values,  EBO Price,  and Termination
Values in  connection  with a  refunding  pursuant to such ss. 11 at a time when
Owner  Participant is a transferee (other than an Affiliate of the initial Owner
Participant), the after-tax yield (but not the after-tax cash flow) component of
Net Economic  Return shall be  calculated  on the basis of the  methodology  and
assumptions  used by the  transferee  Owner  Participant  as of the date when it
acquires its interest.

     NET  PRESENT  VALUE  OF  RENTS:  the  present  value,  as of  the  date  of
determination,  discounted at 10% per annum, compounded quarterly to the date of
determination,  of all unpaid  Basic  Rent  payments  during the  then-remaining
portion of the Base Term, expressed as a percentage of Lessor's Cost.

     NET WORTH for any  Person:  the excess of its total  assets  over its total
liabilities.

     NEW DEBT: debt securities in an aggregate principal amount specified in the
Re-Funding   Information,   with  such  principal   amount  not  to  exceed  the
then-outstanding  principal balance due under the then-existing  Equipment Notes
being re-funded.

     NON-U.S.  PERSON: any Person,  other than a United States person as defined
in Codess. 7701(a)(30).

     NOTE HOLDER: a registered holder of one or more Equipment Notes.

     NOTE  PURCHASE  AGREEMENT:  the Note  Purchase  Agreement,  dated as of the
Issuance  Date,  among American Trans Air,  Inc.,  Subordination  Agent,  Escrow
Agent,  Paying Agent, and  Pass-Through  Trustee under each  Pass-Through  Trust
Agreement, providing for the issuance and sale of Equipment Notes.

     OFFICER'S  CERTIFICATE  of any  party  to the  Participation  Agreement:  a
certificate signed by the Chairman, the President, any Vice President (including
those with varying ranks such as  Executive,  Senior,  Assistant,  or Staff Vice
President), the Treasurer, or the Secretary of such party.

     OPERATIVE AGREEMENTS: the Participation Agreement, the Trust Agreement, the
Purchase Agreement  Assignment,  the Guarantee,  the Consent and Agreement,  the
Engine Manufacturer  Warranty Agreement,  the Lease, the Mortgage,  the Bills of
Sale, the Tax Indemnity Agreement, and the Equipment Notes.

     OPERATIVE  INDENTURE:  an indenture  under which notes have been issued and
purchased by the Pass-Through Trustees pursuant to the Note Purchase Agreement.

     OP JURISDICTION: defined in Schedule 3 to the Participation Agreement.

     ORIGINAL AMOUNT of an Equipment Note: the stated original  principal amount
of such Equipment Note and, with respect to all Equipment  Notes,  the aggregate
stated original principal amounts of all such equipment notes.

     OWNER  PARTICIPANT:  the Person  executing the  Participation  Agreement as
"Owner  Participant";  except that,  after an Owner  Participant  Transfers  its
interest to a  successor  Owner  Participant,  such  transferor  shall not be an
"Owner  Participant"  (except  as  provided  in ss.  10.2  of the  Participation
Agreement) and the successor Owner Participant shall be the "Owner Participant".

     OWNER  PARTICIPANT  AGREEMENTS:   the  Participation   Agreement,  the  Tax
Indemnity Agreement,  the Trust Agreement and each other agreement between Owner
Participant and any other party to the Participation  Agreement  relating to the
Transactions, delivered on the Delivery Date.

     OWNER PARTICIPANT'S  PERCENTAGE:  the percentage of Lessor's Cost allocated
to Owner Participant in Schedule 2 to the Participation Agreement.

     OWNER  TRUSTEE:  First  Security  Bank,  National  Association,  a national
banking  association,  not in  its  individual  capacity,  except  as  expressly
provided in any Operative Agreement, but solely as Owner Trustee under the Trust
Agreement.

     OWNER TRUSTEE AGREEMENTS: the Participation Agreement, the Lease, the Trust
Agreement, the Mortgage, the Equipment Notes, the Purchase Agreement Assignment,
[the Engine Manufacturer  Warranty  Agreement,] and each other agreement between
Owner Trustee and any other party to the  Participation  Agreement,  relating to
the Transactions, delivered on the Delivery Date.

     PARTICIPANT: Owner Participant or a Loan Participant.

     PARTICIPATION AGREEMENT: Participation Agreement N___AT, dated the Delivery
Date, among Lessee,  Owner Participant,  Owner Trustee,  Pass-Through  Trustees,
Subordination Agent, and Mortgagee.

     PARTS:  all  appliances,  parts,  components,  instruments,  appurtenances,
accessories,  furnishings,  seats, and other equipment of whatever nature (other
than (1)  Engines or  engines,  and (2) any items  leased by Lessee from a third
party other than  Lessor)  from time to time  installed  or  incorporated  in or
attached or appurtenant to the Airframe or any Engine.

     PASS-THROUGH  AGREEMENTS:  the  Pass-Through  Trust  Agreements,  the  Note
Purchase  Agreement,  the  Deposit  Agreements,   the  Escrow  Agreements,   the
Intercreditor  Agreement,  the Policy and the Policy  Provider  Agreements,  the
Liquidity Facilities,  and the Fee Letters referred to in ss. 2.3 of each of the
Liquidity Facilities,  PROVIDED, that no amendment,  modification, or supplement
to, or  substitution  or replacement  of, any such Fee Letter shall be effective
for purposes of any obligation of Lessee, unless Lessee consents to it.

     PASS-THROUGH  CERTIFICATES:  the  pass-through  certificates  issued by the
Pass-Through  Trusts  (including any  pass-through  certificates  for which such
pass-through certificates may be exchanged).

     PASS-THROUGH  INDEMNITEES:  (1) Subordination  Agent,  Paying Agent, Escrow
Agent, Liquidity Provider,  Policy Provider, and Pass-Through Trustees, (2) each
Affiliate of a Person  described in the preceding clause (1), (3) the directors,
officers, employees, and agents of the Persons described in clauses (1) and (2),
and (4) the successors and permitted assigns of the Persons described in clauses
(1), (2), and (3).

     PASS-THROUGH  TRUST: each of the two separate  pass-through  trusts created
under the Pass-Through Trust Agreements.

     PASS-THROUGH TRUST AGREEMENT:  each of the two separate  pass-through trust
agreements,  dated  as of  the  Issuance  Date,  by  and  between  Lessee  and a
Pass-Through Trustee.

     PASS-THROUGH   TRUSTEE:   Wilmington  Trust  Company,  a  Delaware  banking
corporation,  not in its  individual  capacity  but  solely in its  capacity  as
trustee under each Pass-Through Trust Agreement.

     PASS-THROUGH   TRUSTEE  AGREEMENTS:   the  Participation   Agreement,   the
Pass-Through  Trust  Agreements,   the  Note  Purchase  Agreement,  the  Deposit
Agreements, the Escrow Agreements, and the Intercreditor Agreement.

     PAST-DUE RATE: defined in Schedule 1 to the Lease.

     PAYING AGENT:  Wilmington Trust Company,  as Paying Agent under each of the
Escrow Agreements.

     PAYMENT DATE:  each  __________,  __________,  __________,  and  __________
during  the  Term,  commencing  with the  first  such  date to occur  after  the
Commencement Date.

     PAYMENT  PERIOD:  each  of  the  consecutive  quarterly  periods  (or  such
applicable  shorter period  beginning on the Delivery Date or the first day of a
Renewal  Term)  during  the Term and  ending on a Payment  Date,  the first such
period commencing on and including the Delivery Date.

     PERMITTED AIR CARRIER:  (1) any  manufacturer  of  commercial  airframes or
commercial aircraft engines, or any Affiliate thereof, (2) any Permitted Foreign
Air Carrier, (3) any Person approved in writing by Owner Participant, or (4) any
U.S. Air Carrier.

     PERMITTED COUNTRY:  any country listed on Schedule 5 to the Lease,  subject
to the notes set forth on such Schedule.

     PERMITTED  FOREIGN AIR CARRIER:  any air carrier that (1) has its principal
executive  offices in a  Permitted  Country,  and (2) is  authorized  to conduct
commercial  airline  operations  and to  operate  jet  aircraft  similar  to the
Aircraft under the applicable Laws of such Permitted Country.

     PERMITTED  INSTITUTION:   any  bank,  trust  company,   insurance  company,
financial institution,  or corporation or limited liability company (other than,
without  Lessee's  consent,  a  commercial  air carrier,  a commercial  aircraft
operator,  a freight forwarder,  an airframe  manufacturer  (other than Airframe
Manufacturer) or aircraft engine manufacturer (other than Engine  Manufacturer),
or an Affiliate of any of the foregoing),  in each case with a combined  capital
and surplus or net worth of at least $50,000,000.

     PERMITTED  LIEN:  any Lien  described in clauses (a) through (g) ofss. 6 of
the Lease.

     PERMITTED SUBLEASE: a sublease permitted underss. 7.2.7 of the Lease.

     PERMITTED SUBLESSEE: the sublessee under a Permitted Sublease.

     PERSON  or  PERSON:  an  individual,  firm,  business,  partnership,  joint
venture,   trust,  trustee,   Government  Entity,   organization,   association,
corporation,   limited  liability  company,   government  agency,   governmental
committee,  governmental  department,  governmental authority, and other body or
organization,  corporate or incorporate, whether having distinct legal status or
not, or any member of any of the same.

     PLAN: any employee benefit plan within the meaning of ERISAss. 3(3), or any
plan within the meaning of Codess. 4975(e)(1).

     POLICY: defined inss. 1.1 of the Intercreditor Agreement.

     POLICY PROVIDER: [AIG].

     POLICY  PROVIDER   AGREEMENT:   defined  inss.  1.1  of  the  Intercreditor
Agreement.

     PRELIMINARY NOTICE: defined inss. 17.1 of the Lease.

     PTT PERCENTAGE with respect to each Pass-Through Trustee: the percentage of
Lessor's  Cost  allocated  to such  Pass-Through  Trustee  in  Schedule 2 to the
Participation Agreement.

     PURCHASE AGREEMENT:  shall mean Purchase Agreement No. _____ by and between
Lessee and the Airframe  Manufacturer,  dated as of __________,  2000, including
the exhibits and letter  agreements  appended thereto and  incorporated  therein
(except Letter Agreement Nos. __________, __________, and ----------).

     PURCHASE  AGREEMENT  ASSIGNMENT:  Purchase  Agreement and Engine Warranties
Assignment N___AT, dated the Delivery Date, between Lessee and Owner Trustee.

     PURCHASE DATE: the last Business Day of the Base Term or a Renewal Term, as
specified in any Purchase Notice.

     PURCHASE NOTICE: defined inss. 17.3.1 of the Lease.

     QIB: defined inss. 2.08 of the Mortgage.

     RE-FUNDING  CERTIFICATE:  a certificate of an authorized  representative of
Owner  Participant  delivered  pursuant  to  ss.  11.1.1  of  the  Participation
Agreement,  setting  forth  (1)  the  Re-Funding  Date  and  (2)  the  following
information,  subject  to  the  limitations  in  ss.  11  of  the  Participation
Agreement: (a) the principal amount of debt to be issued by Owner Trustee on the
Re-Funding  Date  which  amount  cannot  exceed the  outstanding  balance of the
existing Debt and (b) the proposed revised  schedules of Basic Rent payments and
allocations,  Stipulated Loss Value percentages,  Termination Value percentages,
the EBO Price, and the proposed Amortization Schedules, calculated in accordance
with ss. 3.2.1 of the Lease.

     RE-FUNDING DATE: the proposed date on which the outstanding Equipment Notes
will  be  redeemed  and  refinanced  pursuant  to ss.  11 of  the  Participation
Agreement.

     RE-FUNDING  INFORMATION:  the  information  set  forth  in  the  Re-Funding
Certificate  (other than the Re-Funding  Date),  as revised by any  verification
procedures demanded by Lessee pursuant to ss. 3.2.1(d) of the Lease.

     REGISTRATION  RIGHTS  AGREEMENT:   the  Exchange  and  Registration  Rights
Agreement dated the Issuance Date by and among  Guarantor,  Lessee,  and certain
initial  purchasers of the Pass-Through  Certificates  named therein,  providing
for, among other things,  the exchange  offer with respect to such  Pass-Through
Certificates to be registered under the Securities Act or the shelf registration
of such Pass-Through Certificates for a period specified therein.

     REMOVABLE PARTS: defined inss. D of Annex C to the Lease.

     RENEWAL NOTICE: defined inss. 17.2.1 of the Lease.

     RENEWAL  RENT:  the  basic  rent  payable  for a Renewal  Term,  determined
pursuant toss. 17.2.2 of the Lease.

     RENEWAL TERM: a one-year term for which the Lease is extended by Lessee (if
applicable) pursuant toss. 17 of the Lease.

     RENT: Basic Rent and Supplemental Rent.

     REPLACEMENT  AIRFRAME:  an airframe  substituted for the Airframe  pursuant
toss. 10 of the Lease.

     REPLACEMENT  ENGINE:  an engine  substituted  for an Engine pursuant to the
Lease.

     REPLACEMENT LIQUIDITY PROVIDER: defined in the Intercreditor Agreement.

     RETURN ACCEPTANCE SUPPLEMENT:  a Return Acceptance Supplement,  dated as of
the date the  Aircraft  is  returned to Lessor  pursuant  toss.  5 of the Lease,
entered into by Lessor and Lessee, substantially in the form of Exhibit B to the
Lease.

     SCHEDULED DELIVERY DATE: the expected Delivery Date that Lessee
notifies to each Participant,  Owner Trustee,  and Mortgagee pursuant to ss. 4.1
of the Participation Agreement,  which must be a Business Day not later than the
Commitment Termination Date.

     SCHEDULED EXPIRATION DATE: defined in Schedule 1 to the Lease.

     SEC: the  Securities and Exchange  Commission of the United States,  or any
Government  Entity  succeeding to the functions of the  Securities  and Exchange
Commission.

     SECTION 1110: Bankruptcy Codess. 1110.

     SECTION 1110 PERIOD: defined inss. 4.04(a) of the Mortgage.

     SECURED OBLIGATIONS: defined inss. 2.06 of the Mortgage.

     SECURITIES ACT: the Securities Act of 1933.

     SECURITY: a "security" as defined inss. 2(1) of the Securities Act.

     SELLER: _______________ [Lessee] [Airframe Manufacturer] [other].

     SENIOR HOLDER: defined inss. 2.16(c) of the Mortgage.

     SERIES: Series G or Series C.

     SERIES C or SERIES C EQUIPMENT  NOTES:  Equipment  Notes  issued  under the
Mortgage and  designated as "Series C"  thereunder,  in the Original  Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series C".

     SERIES G or SERIES G EQUIPMENT  NOTES:  Equipment  Notes  issued  under the
Mortgage and  designated as "Series G"  thereunder,  in the Original  Amount and
maturities and bearing interest as specified in Schedule I to the Mortgage under
the heading "Series G".

     SIGNIFICANT   EXPENDITURE:   expenditures   in  excess  of  $5,000,000  for
non-severable   improvements  to  the  Aircraft  which   constitute   "Mandatory
Modifications" as defined inss. D of Annex C to the Lease.

     SIMILAR AIRCRAFT: defined in Schedule 1 to the Lease.

     SLV RATE: defined in Schedule 1 to the Lease.

     SPECIAL  DEFAULT:  (1)  Lessee's  failure to pay any amount of Basic  Rent,
Stipulated Loss Value,  or Termination  Value when due, or (2) any Lease Default
referred to inss. 14.5 of the Lease.

     STANDARD & POOR'S: Standard & Poor's Ratings Services.

     STIPULATED LOSS VALUE for the Aircraft:  (1) during the Base Term, Lessor's
Cost  multiplied by the  percentage in Schedule 3 to the Lease (as adjusted from
time to time in  accordance  with ss.  3.2.1  of the  Lease)  for the  pertinent
Stipulated  Loss  Value  Date,  and (2)  during  any  Renewal  Term,  the amount
determined pursuant to ss. 17.2.3 of the Lease.  Notwithstanding anything to the
contrary in any  Operative  Agreement,  Stipulated  Loss Value  shall  always be
sufficient to pay in full, as of the date of payment  thereof  (assuming  timely
payment of the Equipment Notes before such date), the unpaid principal amount of
all  Equipment  Notes  outstanding  as of such date,  together  with accrued and
unpaid  interest on all Equipment  Notes as of such date (without  regard to any
interest  accrued on the Equipment  Notes at a rate exceeding the Debt Rate). If
the event giving rise to an obligation to pay any  Stipulated  Loss Value occurs
and the  actual  date that the loss of tax  benefits  resulting  from such event
shall be earlier  or later than the date  assumed  in  calculating  the  federal
income tax consequences  reflected in the applicable Stipulated Loss Value, such
Stipulated Loss Value shall be  appropriately  adjusted  upwards or downwards to
reflect the actual date of such loss.

     STIPULATED  LOSS VALUE DATE for any month:  the day in that month specified
in Schedule 3 to the Lease or, if that day is not a Business  Day, the following
Business Day.

     SUBORDINATION AGENT: Wilmington Trust Company, as subordination agent under
the Intercreditor Agreement.

     SUBORDINATION AGENT AGREEMENTS:  the Participation Agreement, the Liquidity
Facilities, and the Intercreditor Agreement.

     SUPPLEMENTAL  RENT:  without  duplication,  (1) all  Expenses,  Transaction
Expenses,  and all other  amounts,  liabilities,  indemnities,  and  obligations
(other than Basic Rent, but including any Make-Whole Amount) that Lessee assumes
or  becomes  obligated  to pay or  agrees  to pay  under  any  Lessee  Operative
Agreement to or on behalf of Lessor or any other  Person,  including  Stipulated
Loss  Value,  Termination  Value,  and  indemnity  payments  under  ss. 9 of the
Participation  Agreement,  but  excluding  any  amount  as to  which  Lessee  is
obligated to pay a pro rata share pursuant to clause (5) of this definition, (2)
(a) to the extent not  payable  (whether  or not in fact paid) under ss. 6(a) or
ss. 6(b), as applicable, of the Note Purchase Agreement (as originally in effect
or amended with Owner Participant's  consent), the fees payable to (x) Liquidity
Provider under ss. 2.3 of each Liquidity Facility,  multiplied by a fraction the
numerator of which is the then-outstanding aggregate principal amount of all the
series of Equipment Notes, and the denominator of which is the  then-outstanding
aggregate  principal  amount of all  "Series G  Equipment  Notes" and  "Series C
Equipment Notes" (each as defined in the Note Purchase Agreement) and (y) Policy
Provider under ss.  3.02(d)(i) of the Policy Provider  Agreement and the related
Policy Fee Letter (as defined in the Policy Provider Agreement)  multiplied by a
fraction  the  numerator  of  which  shall  be  the  then-outstanding  aggregate
principal  amount of the Series G Equipment  Notes and the  denominator of which
shall be the then  outstanding  aggregate  principal  amount  of all  "Series  G
Equipment Notes" (as defined in the Note Purchase Agreement); (b) (x) the amount
equal to interest on any  Downgrade  Advance  (other than any Applied  Downgrade
Advance)  payable  under ss. 3.7 of each  Liquidity  Facility  minus  Investment
Earnings from such Downgrade  Advance,  multiplied by (y) the fraction specified
in the  foregoing  clause  (a)(x);  (c) (x) the amount  equal to interest on any
Non-Extension  Advance (other than any Applied  Non-Extension  Advance)  payable
under ss. 3.7 of each  Liquidity  Facility  minus  Investment  Earnings  on such
Non-Extension  Advance  multiplied by (y) the fraction specified in the forgoing
clause (a)(x); (d) if any payment default exists with respect to interest on any
series  of  Equipment  Notes,  (x) an amount  equal to  interest  on any  Unpaid
Advance,  Applied Downgrade Advance,  or Applied  Non-Extension  Advance payable
under ss.  3.7 of each  Liquidity  Facility  (or if Policy  Provider  has made a
payment in respect of such Advance to the Liquidity  Provider or, in the case of
the Series G Equipment  Notes, if Policy Provider has made a payment  equivalent
to such an Advance,  as would have been payable  under ss. 3.7 of the  Liquidity
Facility in respect of the Class G Certificates had such Advance been made) plus
any interest at the Past-Due Rate actually payable (whether or not in fact paid)
in respect of the overdue  scheduled  interest on the Equipment Notes in respect
of  which  such  Unpaid  Advance,   Applied   Downgrade   Advance,   or  Applied
Non-Extension  Advance was made by the applicable Liquidity Provider (or, in the
case of the Series G Equipment  Notes, an equivalent  payment was made by Policy
Provider)  multiplied by (y) a fraction the numerator of which is the sum of all
then-overdue  interest on the Equipment Notes (other than interest  becoming due
and payable solely as a result of acceleration of any Equipment Notes),  and the
denominator  of  which  shall  be the sum of all  then-overdue  interest  on all
"Series G Equipment  Notes" and "Series C Equipment  Notes"  (each as defined in
the Note  Purchase  Agreement)  (other than  interest  becoming  due and payable
solely as a result  of  acceleration  of any such  "Equipment  Notes");  and (e)
Lessor's  pro rata share of any other  amounts  owed to  Liquidity  Provider  by
Subordination  Agent as  borrower  under each  Liquidity  Facility  (other  than
amounts  due  as  repayment  of  advances  thereunder  or as  interest  on  such
advances), except to the extent payable pursuant to clause (a), (b), (c), or (d)
above,  (3) Lessor's pro rata share of all  compensation  and  reimbursement  of
expenses,  disbursements,  and advances  payable  under the  Pass-Through  Trust
Agreements, (4) Lessor's pro rata share of all compensation and reimbursement of
expenses and disbursements  (including  payments of indemnities)  payable either
(a) to  Subordination  Agent  under the  Intercreditor  Agreement,  except  with
respect to any income or  franchise  taxes  incurred by  Subordination  Agent in
connection with the transactions contemplated by the Intercreditor Agreement, or
(b) by Lessee to  Policy  Provider  under the  Policy  Provider  Agreement,  (5)
Lessor's  pro  rata  share  of  any  amount  payable  under  ss.  9.1  (and,  if
attributable   thereto,   ss.  9.5)  of  the  Participation   Agreement  to  any
Pass-Through  Indemnitee to the extent such amount  relates to, results from, or
arises  out of or in  connection  with (a) the  Pass-Through  Agreements  or the
enforcement of any of the terms of any of the Pass-Through  Agreements,  (b) the
offer,  sale,  or  delivery of the  Pass-Through  Certificates  or any  interest
therein or  represented  thereby,  or (c) any breach of or failure to perform or
observe,  or any other  noncompliance  with,  any covenant or agreement or other
obligation to be performed by Lessee under any  Pass-Through  Agreement,  or the
falsity  of any  representation  or  warranty  of  Lessee  in  any  Pass-Through
Agreement,  and (6) if Lessee requests any amendment to any Operative  Agreement
or  Pass-Through  Agreement,  Lessor's pro rata share of all reasonable fees and
expenses  (including  fees and  disbursements  of counsel) of Escrow  Agents and
Paying Agents in connection therewith payable by Pass-Through Trustees under the
Escrow Agreements. As used herein, (1) "LESSOR'S PRO RATA SHARE" means as of any
time a  fraction,  the  numerator  of  which is the  then-outstanding  principal
balance  of  Equipment  Notes,  and the  denominator  of which is the  aggregate
then-outstanding  principal  balance of all "Equipment Notes" (as each such term
is  defined  in each of the  Operative  Indentures),  "(2)  "Policy"  means  the
Certificate  Guaranty  Insurance  Policy  (including  the  endorsement  attached
thereto and  constituting a part thereof) issued by Policy Provider  pursuant to
the Policy Provider  Agreement,  and (3) "Policy  Provider  Agreement" means the
Insurance and  Indemnity  Agreement  dated as of the Policy  issuance date among
Lessee,   Subordination  Agent,  and  Policy  Provider.  For  purposes  of  this
definition,  "Applied Downgrade Advance", "Applied Non-Extension Advance", "Cash
Collateral   Account",   "Downgrade  Advance",   "Final  Advance",   "Investment
Earnings",  "Non-Extension Advance", and "Unpaid Advance" have the same meanings
as in each Liquidity Facility.

     TAX ATTRIBUTE  PERIOD:  the period from the Delivery Date through  December
31, 20__ [DELIVERY  DATE YEAR PLUS SEVEN] or such longer period of  depreciation
as may be allowable by reason of an indemnifiable  event under the Tax Indemnity
Agreement;

     TAX INDEMNITEE:  (1) FSB and Owner Trustee, (2) WTC and Mortgagee, (3) each
separate or additional  trustee appointed pursuant to the Trust Agreement or the
Mortgage,  (4) each  Participant,  (5) the Trust Estate and the Collateral,  (6)
Policy Provider,  and (7) the successors,  assigns, and agents of the foregoing.
For purposes of this definition,  the term "Owner Participant" shall include any
member of an  affiliated  group  (within the meaning of Code ss.  1504) of which
Owner Participant is a member at the pertinent time, if consolidated,  joint, or
combined  returns are filed for such  affiliated  group for federal,  state,  or
local income tax purposes.

     TAX INDEMNITY AGREEMENT: Tax Indemnity Agreement N___AT, dated the Delivery
Date, between Lessee and Owner Participant.

     TAXES:  all  fees  (including  license,   recording,   documentation,   and
registration fees), taxes, including income, gross receipt franchise sales, use,
rental, turnover,  business,  occupational,  excise,  value-added,  tangible and
intangible  property  and  stamp  taxes,  levies,   imposts,   duties,  charges,
assessments,  or  withholdings  of any nature  whatsoever  imposed by any Taxing
Authority,  and any penalties,  additions to tax, fines, or interest  thereon or
additions thereto.

     TAXING AUTHORITY:  any federal,  state, or local government or other taxing
authority in the United  States or its  possessions,  any foreign  government or
political  subdivision or taxing authority  thereof,  any  international  taxing
authority,  or any  territory  or  possession  of the  United  States  or taxing
authority thereof.

     TERM: the term,  commencing on the Delivery Date, for which the Aircraft is
leased  pursuant  to ss. 3 of the  Lease,  consisting  of the Base  Term and any
Renewal  Term(s);  PROVIDED,  that,  if at the  scheduled  end of the  Term  the
Aircraft or Airframe is being used,  or was within the previous six months being
used, by the U.S. Government pursuant to CRAF, the Term shall be deemed extended
for the period  necessary  to  accommodate  usage of the  Aircraft  or  Airframe
pursuant to CRAF plus six months  thereafter,  and Lessee  shall be obligated to
pay Basic Rent for any such  extension  period at a quarterly  rate equal to the
average of the Basic Rent paid  during the Base Term or the  applicable  Renewal
Term (whichever ended immediately before such extension).

     TERMINATION DATE: any Payment Date occurring after the seventh  anniversary
of the Delivery Date on which the Lease  terminates in accordance  withss.  9 of
the Lease.

     TERMINATION  VALUE  for  the  Aircraft:  Lessor's  Cost  multiplied  by the
percentage  in  Schedule  4 to the  Lease  (as  adjusted  from  time  to time in
accordance  with ss.  3.2.1 of the Lease) for the  pertinent  Termination  Value
Date.  Notwithstanding  anything  to the  contrary in any  Operative  Agreement,
Termination  Value shall always be  sufficient to pay in full, as of the date of
payment  thereof  (assuming  timely  payment of the Equipment  Notes before such
date), the unpaid principal amount of all Equipment Notes outstanding as of such
date,  together with accrued and unpaid  interest on all such Equipment Notes as
of such date (without regard to any interest accrued on the Equipment Notes at a
rate exceeding the Debt Rate).  If the event giving rise to an obligation to pay
any  Termination  Value occurs and the actual date that the loss of tax benefits
resulting  from such event  shall be  earlier or later than the date  assumed in
calculating  the federal  income tax  consequences  reflected in the  applicable
Termination  Value,  such  Termination  Value  shall be  appropriately  adjusted
upwards or downwards to reflect the actual date of such loss.

     TERMINATION  VALUE DATE for any month:  the day in such month  specified in
Schedule 4 to the Lease or, if such day is not a  Business  Day,  the  following
Business Day.

     THRESHOLD AMOUNT: defined in Schedule 1 to the Lease.

     TRANSACTION EXPENSES:  (1) the reasonable and actual fees and disbursements
incurred in  connection  with the  negotiation,  execution,  and delivery of the
Operative  Agreements  of (a)  Richards,  Layton & Finger,  special  counsel for
Mortgagee,  such  information to be furnished by Mortgagee,  (b) Ray,  Quinney &
Nebeker,  special  counsel for Owner  Trustee  under the Trust  Agreement,  such
information to be furnished by Owner Trustee, (c) FAA Counsel,  such information
to be furnished by Lessee,  (d) Dewey  Ballantine LLP,  special counsel to Owner
Participant  (as defined in  Schedule 3 to the  Participation  Agreement),  such
information  to be furnished  by Owner  Participant,  (e)  ____________________,
special counsel to the Loan  Participants,  such  information to be furnished by
Lessee, (f) Troutman Sanders LLP, special counsel to Lessee, such information to
be furnished by Lessee, and (g) Lessee Advisor, such information to be furnished
by Lessee, (2) all fees, taxes, and other charges payable in connection with the
recording or filing of instruments and financing statements, such information to
be  furnished  by  Lessee,  (3)  the  initial  fee  and  reasonable  and  actual
disbursements of Owner Trustee under the Trust Agreement, such information to be
furnished  by Owner  Trustee,  (4) the  initial  fee and  reasonable  and actual
disbursements of Mortgagee under the Mortgage,  such information to be furnished
by Mortgagee,  (5) the fee of the Appraiser with respect to the appraisal of the
Aircraft  referred  to in ss.  5.1.2(l)  of the  Participation  Agreement,  such
information to be furnished by Owner  Participant,  and (6) the equity placement
fee and reasonable disbursements of Lessee's Advisor(s),  such information to be
furnished by Lessee, and the Allocated EETC Expenses.

     TRANSACTIONS: the transactions contemplated by the Operative Agreements.

     TRANSFER: the transfer, sale, assignment, or other conveyance of all or any
interest in any property, right, or interest.

     TRANSFEREE:  a  Person  to whom  Owner  Participant,  Owner  Trustee,  Loan
Participant,  or Note Holder  purports or intends to Transfer  any or all of its
right,  title,  or interest in the Trust Estate or in its Equipment Note and the
Collateral,  as described  in ss.  10.1.1(a),  ss.  10.1.2,  or ss.  10.1.3 (but
excluding  participants in any  participation  referred to in ss. 10.1.3) of the
Participation Agreement.

     TRANSPORTATION CODE: subtitle VII of title 49, United States Code.

     TRUST: the trust created by the Trust Agreement.

     TRUST AGREEMENT:  Trust Agreement  N___AT,  dated as of __________ 1, 200_,
between Owner Participant and FSB.

     TRUST ESTATE: all Owner Trustee's estate, right, title, and interest in and
to the Aircraft, the Lease, the Purchase Agreement, [and the Engine Manufacturer
Warranty  Agreement,]  including all Basic Rent and Supplemental Rent (including
insurance proceeds and requisition, indemnity, or other payments of any kind for
of with respect to the Aircraft), but excluding any Excluded Payment.

     UCC:  the  Uniform   Commercial   Code  as  in  effect  in  any  applicable
jurisdiction.

     UNITED  STATES or U.S.:  the United States of America;  PROVIDED,  that for
geographic  purposes,  "United  States"  means the 50 states and the District of
Columbia of the United States of America.

     U.S.  AIR  CARRIER:  any United  States air carrier who is a Citizen of the
United  States  holding  an air  carrier  operating  certificate  issued  by the
Secretary of Transportation  pursuant to chapter 447 of the Transportation  Code
for aircraft  capable of carrying 10 or more  individuals or 6000 pounds or more
of cargo, and as to whom there is in force an air carrier operating  certificate
issued  pursuant  to FAR Part  121,  or who may  operate  as an air  carrier  by
certification or otherwise under any successor or substitute provisions therefor
or in the absence thereof.

     U.S.  GOVERNMENT:  the  federal  government  of the United  States,  or any
instrumentality or agency thereof the obligations of which are guaranteed by the
full faith and credit of the federal government of the United States.

     U.S. PERSON: any Person described in Codess. 7701(a)(30).

     WEIGHTED  AVERAGE LIFE TO MATURITY with respect to any  specified  Debt, at
the time of the determination  thereof: the number of years obtained by dividing
the Remaining Dollar Years of such Debt by the then-outstanding principal amount
of such  Debt.  "REMAINING  DOLLAR  YEARS"  means  the  amount  obtained  by (1)
multiplying the amount of each then-remaining  principal payment on such Debt by
the number of years  (calculated  at the nearest  one-twelfth)  that will elapse
between the date of  determination  of the Weighted  Average Life to Maturity of
such Debt and the date of that required  payment,  and (2) totaling the products
obtained in clause (1).

     WET LEASE: any arrangement  whereby Lessee or a Permitted  Sublessee agrees
to furnish the Aircraft,  the Airframe,  or any Engine to a third party pursuant
to which the Aircraft,  Airframe,  or Engine is at all times in the  operational
control of Lessee or a Permitted Sublessee,  PROVIDED, that Lessee's obligations
under the Lease shall continue in full force and effect notwithstanding any such
arrangement.

     WTC:  Wilmington Trust Company,  Delaware banking  corporation,  not in its
capacity as Mortgagee under the Mortgage, but in its individual capacity.

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