Document:

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                                                                   Exhibit 10.75

                                                               EXECUTION VERSION

TO THE EXTENT THAT THIS AIRCRAFT LEASE AGREEMENT CONSTITUTES CHATTEL PAPER
(AS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE
JURISDICTION), NO SECURITY U14TEREST IN THIS AIRCRAFT LEASE AGREEMENT MAY BE
CREATED THROUGH TRANSFER OR POSSESSION OF ANY COUNTERPART OTHER THAN THE
ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART
DESIGNATED AS THE ORIGINAL ON THE SIGNATURE PAGE OF THIS AGREEMENT BY GE
CAPITAL AVIATION SERVICES, INC.

                            AIRCRAFT LEASE AGREEMENT

                          DATED AS OF DECEMBER 14, 2001
                                     BETWEEN

                               AIRCRAFT 32582 LLC

                                    AS LESSOR

                                       AND

                              ALOHA AIRLINES, INC.

                                    AS LESSEE

                  IN RESPECT OF AIRCRAFT: BOEING MODEL 737-700
                                SERIAL NO: 32582
                          U.S. REGISTRATION NO.: N744AL

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

                        INCORPORATING THE PROVISIONS OF A

                             COMMON TERMS AGREEMENT

                             DATED AS OF MAY 12, 2000

<PAGE>

                            AIRCRAFT LEASE AGREEMENT

     THIS AIRCRAFT LEASE AGREEMENT is made as of December 14, 2001 and is
     BETWEEN:

     (1)  AIRCRAFT 32582 LLC, a limited liability company organized under the
          Laws of the State of Delaware having its principal place of business
          and chief executive office at 201 High Ridge Road, Stamford,
          Connecticut 06927 "(LESSOR"); and

     (2)  ALOHA AIRLINES, INC., a corporation incorporated under the Laws of
          the State of Delaware with its principal place of business at 371
          Aokea Street, Honolulu, Hawaii 96819 and its chief executive office at
          500 Ala Moana Blvd., Two Waterfront Tower, Suite 500, Honolulu, Hawaii
          96813 ("LESSEE").

     WHEREAS:

     (A)  Lessee wishes to lease the Aircraft (as defined below) from Lessor,
          and Lessor wishes to lease the Aircraft to Lessee, on the terms and
          subject to the conditions provided herein;

     (B)  General Electric Capital Corporation ("GECC"), an Affiliate of Lessor,
          and Lessee have entered into the Common Terms Agreement (as defined
          below) in respect of aircraft that may be leased from time to time by
          Lessee or one of its Affiliates from GECC or one of its Affiliates;
          and

     (C)  Lessor and Lessee wish to incorporate by reference such Common Terms
          Agreement, as well as Schedules A and B attached hereto, into this
          Aircraft Lease Agreement for the Aircraft and a true and complete copy
          of such Common Terms Agreement is attached hereto as Schedule C;

     NOW, THEREFORE, for good and valuable consideration, the receipt and
     sufficiency of which are hereby acknowledged, the parties hereto hereby
     agree as follows:

     1.   INTERPRETATION

     1.1  DEFINITIONS: In this Aircraft Lease Agreement, the following
          capitalized Words and expressions have the respective meanings set
          forth below:

          AIRCRAFT means the Airframe and Engines described on Schedule A
          hereto.

          AIRFRAME STRUCTURAL CHECK, AIRFRAME SUPPLEMENTAL RENT, ANNUAL
          SUPPLEMENTAL RENT ADJUSTMENT, AND APU SUPPLEMENTAL RENT have the
          meaning specified in Schedule B.

          ASSUMED RATIO has the meaning specified in Schedule B.

                                      -1-

<PAGE>

             COMMON TERMS AGREEMENT means the "Aircraft Lease Common Terms
             Agreement" dated as of May 12, 2000 executed by GECC and Lessee (as
             in effect on the date hereof without, unless Lessor and Lessee
             otherwise expressly agree, giving any effect to any subsequent
             amendment, supplement, waiver or other modification thereto), and
             which forms part of this Aircraft Lease Agreement.

             DELIVERY CONDITION REQUIREMENTS means the requirements specified in
             Part II of Schedule A.

             DELIVERY LOCATION means Abbotsford, British Columbia, Canada or
             such other location as Lessor and Lessee mutually agree in order to
             minimize any Taxes that may be applicable to the Delivery.

             DEPOSIT means all amounts payable pursuant to Section 3.1 hereof.

             ENGINE SUPPLEMENTAL RENT AND ENGINE LLP SUPPLEMENTAL RENT have
             the meanings specified in Schedule B.

             FINAL DELIVERY DATE means the date that is 90 days after the last
             day of the Scheduled Delivery Month.

             FINANCING DOCUMENTS means the documents, if any, relating to any
             indebtedness of Lessor secured, in whole or in part, by Lessor's
             interest in the Aircraft and this Aircraft Lease Agreement.

             FINANCING DOCUMENTS CONTEST RIGHTS, FINANCING DOCUMENTS INDEMNITY
             AMOUNTS AND FINANCING DOCUMENTS TAX AMOUNTS are all inapplicable.

             FINANCING PARTIES means the Persons, if any, that hold the
             indebtedness of Lessor evidenced by the financing Documents, and
             shall include the Financing Parties Representative.

             FINANCING PARTIES' REPRESENTATIVE the Person, if any, identified by
             Lessor to Lessee in writing as the representative of the Financing
             Parties and the beneficiary of the Security Interest in the
             Aircraft and this Aircraft Lease Agreement created by the Financing
             Documents, and its successors and assigns.

             GUARANTOR is inapplicable.

             INDEMNITEE means each of Lessor, Owner, GECC, GECAS, the Financing
             Parties and their respective successors and permitted assigns, and
             each of their respective shareholders,

                                      -2-

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             subsidiaries, affiliates, partners, contractors, directors,
             officers, representatives, agents and employees.

             LANDING GEAR SUPPLEMENTAL RENT has the meaning specified in
             Schedule B.

             MANUFACTURER means the manufacturer of the Airframe or an Engine,
             as the case may be, as set forth on Schedule A hereto.

             OWNER means Lessor.

             PBH PERIOD has the meaning specified in Schedule B.

             PBH Rate has the meaning specified in Schedule B.

             PRE-APPROVED BANK means (i) First Hawaiian Bank for so long as its
             long-term unsecured Dollar denominated debt carries a rating from
             S&P of A- or better, and (ii) any bank organized under the laws of
             the United States or any State thereof, or the New York branch of a
             major international bank for only so long as its long-term Dollar
             denominated unsecured debt (or if it does not have long-term
             unsecured Dollar denominated debt its parent corporation's
             long-term unsecured Dollar denominated debt) carries a rating from
             S&P of A or better.

             REDELIVERY LOCATION means any location in the State of Washington,
             Oregon or California as Lessor may designate to Lessee or such
             other location as may be agreed in writing by Lessor and Lessee.

             RENT COMMENCEMENT DATE means the date on which Lessor tenders the
             Aircraft aft under Clause 4.3.(a) of the Common Terms Agreement and
             the Lessee Conditions Precedent are met or could reasonably be
             expected to be met if the Delivery of the Aircraft had occurred.

             SCHEDULED DELIVERY DATE means the date that Aircraft is scheduled
             to be delivered by Lessor to Lessee under the Lease, as notified by
             Lessor to Lessee pursuant to Section 4.1 of the Common Terms
             Agreement, and, notwithstanding any subsequent delays in delivery,
             the "Scheduled Delivery Date" shall remain the first such date
             notified by Lessor to Lessee pursuant to Section 4.1 of the Common
             Terms Agreement.

             SCHEDULED DELIVERY MONTH means February, 2002.

             SCHEDULED DELIVERY WEEK means the week during which the Scheduled
             Deli very Date occurs.

             SCHEDULED EXPIRY DATE means the day immediately preceding the
             fifteenth (15th) anniversary of the Rent Commencement Date (or in
             the event that such date is a day that is

                                      -3-

<PAGE>

             not a Business Day, the immediately preceding Business Day), which
             date shall be specifically set forth in Lease Supplement No. 1;
             provided, however, that Lessee shall receive a credit for Rent
             actually paid by Lessee to Lessor, on a per them basis, against
             other obligations owed by Lessee to Lessor at the Return Occasion
             in respect of any nonBusiness Days which are truncated from the
             Tenn based on this provision.

             STATE OF DESIGN means the United States.

             TAX INDEMNITEE means each of Owner, Lessor, and each member of the
             consolidated group of which Lessor or Owner is a member for United
             States Federal Income Tax purposes, and their successors and
             permitted assigns.

    1.2      INTERPRETATION: Unless otherwise defined herein, words and
             expressions defined in the Common Terms Agreement have the same
             respective meanings for the purposes of this Aircraft Lease
             Agreement. The construction provisions of Section 1.2 of the Common
             Terms Agreement shall apply to this Aircraft Lease Agreement.

    2.       LEASING

    2.1      AGREEMENT TO LEASE: Subject to the terms and conditions of the
             Lease, Lessor will lease the Aircraft to Lessee and Lessee will
             take delivery of and lease the Aircraft from Lessor in accordance
             with the Lease for the duration of the Term.

    2.2      TERM: Subject to Sections 4.1 through 4.4 of the Common Terms
             Agreement, Delivery of the Aircraft will occur at the Delivery
             Location, whereupon Lessee shall accept the Aircraft hereunder and
             evidence such Delivery and acceptance by executing and delivering
             Lease Supplement No. 1 as provided in Section 4.3 of the Common
             Terms Agreement. The Term will commence on the Delivery Date, which
             Delivery Date is scheduled to occur in the Scheduled Delivery
             Month, and will expire on the Scheduled Expiry Date, subject to the
             following:

             2.2.1  LESSEE'S EARLY TERMINATION OPTION: Lessee may at its sole
                    option terminate the Lease at the first yearly anniversary
                    of the Delivery Date by providing written notice of its
                    election to terminate under this Section 2.2.1 to Lessor not
                    less than 180 days prior to the first yearly anniversary of
                    the Delivery Date. Upon such termination, Lessee shall
                    return the Aircraft to Lessor at the first yearly
                    anniversary of the Delivery Date in accordance with all of
                    the requirements of the Lease, including without limitation
                    those set forth in Part III of Schedule A hereto.

             2.2.2  LESSOR'S EARLY TERMINATION OPTION: Lessor may terminate the
                    Lease at any time at or prior to the first yearly
                    anniversary of the Delivery Date by providing written

                                      -4-

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                    notice ("LESSOR'S NOTICE") of its election to terminate
                    under this Section 2.2.2 to Lessee not less than 60 days
                    prior to the termination date specified in such notice;
                    provided, however, Lessee may elect to nullify the early
                    termination of the Lease by Lessor under this Section 2.2.2
                    if, within fifteen (15) days following Lessee's receipt of
                    Lessor's Notice, Lessee delivers to Lessor a written
                    instrument in form and substance satisfactory to Lessor
                    ("LESSEE'S COMMITMENT AND WAIVER") by which Lessee confirms
                    its commitment to keep the Aircraft for the full Term and
                    waives forever Lessee's right to terminate the Lease at the
                    first yearly anniversary of the Delivery Date under Section
                    2.2.1 above. Upon receipt of Lessee's Commitment and
                    Waiver, Lessor's election to terminate the Lease under
                    this Section 2.2.2 shall be deemed null and void and the
                    Lease shall continue in full force and effect (subject,
                    however, to Lessee's waiver of its rights pursuant to
                    Lessee's Commitment and Waiver) as though Lessor's Notice
                    had never been delivered. If Lessor delivers a Lessor's
                    Notice and Lessee does not deliver Lessee's Commitment
                    and Waiver within fifteen (15) days following Lessee's
                    receipt of Lessor's Notice, then Lessee shall return the
                    Aircraft to Lessor at the termination date specified in
                    Lessor's Notice in accordance with all of the
                    requirements of the Lease, including without limitation
                    those set forth in Part III of Schedule A hereto.

     3.      PAYMENTS

     3.1     DEPOSIT AND LETTER OF CREDIT: Lessee shall pay to Lessor the
             Deposit in cash (to which Deposit Section 5.13 of the Common Terms
             Agreement shall apply) in the amount and at the times provided in
             Schedule B hereto. Lessee shall be permitted to deliver to Lessor
             an irrevocable Letter of Credit in lieu of a portion of the Deposit
             in an amount up to the amount provided in Schedule B as the LC
             Amount, which Letter of Credit shall comply with the provisions of
             Section 5.14 of the Common Terms Agreement

     3.2     RENT: Lessee shall pay Rent to Lessor on each Rent Date during the
             Tenn in the amount provided in Schedule B hereto and as provided in
             Sections 5.2 and 5.3 of the Common Terms Agreement. The first
             installment of Rent shall be due and payable on the Rent
             Commencement Date as defined herein.

     3.3     SUPPLEMENTAL RENT: Lessee shall pay Supplemental Rent to Lessor on
             each applicable date during the Term in the amounts provided in
             Schedule B hereto and as provided in Section 5.4 of the Common
             Terms Agreement.

                                       -5-

<PAGE>

    3.4      LESSOR'S MAINTENANCE CONTRIBUTION:

             3.4.1    Provided that no Default has occurred and is continuing,
                      Lessor will pay (as a separate and independent obligation
                      and not as a return of Supplemental Rent) the following
                      amounts to Lessee by way of contribution to the cost of
                      maintenance of the Aircraft, UPON RECEIPT BY LESSOR,
                      WITHIN SIX MONTHS AFTER COMMENCEMENT OF SUCH MAINTENANCE
                      AND BEFORE THE EXPIRY DATE, of an invoice and supporting
                      documentation reasonably satisfactory to Lessor
                      evidencing performance of the following work by the,
                      Maintenance Performer:

                     (a) AIRFRAME: With respect to the Airframe, the completion,
                         in accordance with the Lease, of the Airframe
                         Structural Check, the lesser of (aa) the amount of that
                         invoice and (bb) an amount equal to the aggregate
                         amount of the Airframe Supplemental Rent paid under the
                         Lease at the date such work starts less the aggregate
                         amount previously paid by Lessor under this sub-clause;

                    (b)  ENGINE LIFE-LIMITED PARTS: With respect to life-limited
                         Parts within any Engine, the performance, in accordance
                         with the Lease, of any replacement or repair of those
                         Parts ("Engine LLP Replacement"), the lesser of (x) the
                         amount of that invoice and (y) an amount equal to the
                         aggregate amount of the Engine LLP Supplemental Rent
                         paid in respect of that Engine under the Lease at the
                         date such work starts less the aggregate amount
                         previously paid in respect of that Engine by Lessor
                         under this sub-clause;

                    (c)  ENGINE REFURBISHMENT: With respect to any Engine, the
                         performance, in accordance with the Lease, of Engine
                         Refurbishment in respect of that Engine the lesser of
                         (x) the amount of that invoice and (y) an amount equal
                         to the aggregate amount of the Engine Supplemental Rent
                         paid under the Lease in respect of that Engine at the
                         date such work starts less the aggregate amount
                         previously paid in respect of that Engine by Lessor
                         under this sub-clause;

                    (d)  APU: With respect to the APU, the performance, in
                         accordance with the Lease, of all shop visits requiring
                         APU removal and disassembly, the lesser of (x) the
                         amount of that invoice and (y) an amount equal to the
                         aggregate amount of the APU Supplemental Rent paid
                         under the Lease at the date such work starts less the
                         aggregate amount previously paid by Lessor under this
                         sub-clause; and

                                       -6-

<PAGE>

                    (e)  LANDING GEAR: With respect to the Landing Gear, the
                         performance in accordance with the Lease, of all work
                         on the landing gear in the nature of overhaul and
                         requiring removal and disassembly, the lesser of (x)
                         the amount of that invoice and (y) an amount equal to
                         the aggregate amount of the Landing Gear Supplemental
                         Rent paid under the Lease at the date such work starts
                         less the aggregate amount previously paid by Lessor
                         under this sub-clause.

             PROVIDED THAT Lessor will not pay any such contribution:

              3.4.2   in respect of paragraphs (a)-(e) above, for repairs
                      arising as a result of accidents or incidents (whether or
                      not eligible for recovery under Lessee's insurance),
                      operational or maintenance mishandling or airworthiness
                      directive work; nor

              3.4.3   in respect of paragraphs (b) and (c) above, for repairs
                      arising as a result of foreign object damage, the removal,
                      installation, maintenance and repair of QEC (Quick Engine
                      Change Kits) and/or any replacement of parts not required
                      under the Lessee's Maintenance Program to be replaced as
                      part of the maintenance described in clause (a) through
                      (e) above, as the case may be.

     3.5     LESSOR'S BANK ACCOUNT: For the purposes of Section 5.5 of the
             Common Terms Agreement, Lessor's bank account and wire transfer
             particulars, to which all payments to Lessor shall be made, are at
             the date hereof Bankers Trust Company, New York, ABA 021 001 033,
             For the account of Aircraft 32582 LLC., Account Number:
             50-259-862.

     3.6     MACRS: Lessor has assumed that MACRS Deductions shall be available
             in respect of the leasing of the Aircraft and accordingly the
             provisions of Section 5.7(d) of the Common Terms Agreement and the
             related provisions of Schedule B shall apply under this Agreement.

     4.       CONDITION OF THE AIRCRAFT AT DELIVERY

     4.1      On the Delivery Date, as a condition to Lessee's obligation to
              accept delivery thereof, the Aircraft shall be in the condition
              provided in Part II of Schedule A hereto.

     5.       CONDITION OF THE AIRCRAFT AT REDELIVERY

     5.1      On the Return Occasion, Lessee shall redeliver the Aircraft to
              Lessor at the Redelivery Location and at such redelivery the
              Aircraft shall be in the condition provided in Part III of
              Schedule A hereto and in the Common Terms Agreement, including
              Schedule 6 of the Common Terms Agreement.

                                      -7-

<PAGE>

    6.      ADDRESSES FOR NOTICES

            The addresses and facsimile and telephone numbers of Lessor and
            Lessee are as follows:

            Lessor:         Aircraft 32582 LLC
            Address:        c/o GE Capital Aviation Services
                            201 High Ridge Road
                            Stamford, CT 06927
            Attention:      Contracts Leader
            Facsimile:      (203) 357-3201
            Telephone:      (203) 357-4482

            Lessee:         Aloha Airlines, Inc.
            Address:        371 Aokea Street
                            Honolulu, Hawaii 96819
            Attention:      Executive Vice President and Chief Financial Officer
            Facsimile:      (808) 833-3100
            Telephone:      (808) 836-4245

    7.      THE SCHEDULES AND COMMON TERMS AGREEMENT

            ALL THE PROVISIONS OF SCHEDULE A HERETO, SCHEDULE B HERETO, AND THE
            COMMON TERMS AGREEMENT, ARE INCORPORATED By REFERENCE HEREIN AND ARE
            PART OF THIS AIRCRAFT LEASE AGREEMENT AS IF THEY WERE SET OUT IN
            FULL HEREIN. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, BY
            ITS SIGNATURE BELOW, THE LESSEE ACKNOWLEDGES AND AGREES THAT THE
            LEASE OF THE AIRCRAFT HEREUNDER IS ON AN "AS IS, WHERE IS" BASIS AND
            THAT THE DISCLAIMERS, EXCULPATIONS AND LIMITATIONS OF LIABILITY,
            INDEMNITIES, THE CHOICE OF NEW YORK LAW AS THE GOVERNING LAW, THE
            LESSEE'S SUBMISSION TO PERSONAL JURISDICTION IN NEW YORK, AND THE
            WAIVER OF ANY RIGHT TO A TRIAL BY JURY PROVIDED FOR IN THE COMMON
            TERMS AGREEMENT ARE INCORPORATED HEREIN BY SUCH REFERENCE AND ARE
            PART OF TIES AIRCRAFT LEASE AGREEMENT AS IF THE SAME WERE SET OUT IN
            FULL HEREIN.

    8.      NO AMENDMENT EXCEPT IN WRITING

            No provision of this Lease, including any provision of Schedule A,
            Schedule B or the Common Terms Agreement, may be amended, rescinded,
            changed, waived, discharged, terminated or otherwise modified in any
            way whatsoever, except by a writing signed by the party to be
            charged. Lessor and Lessee acknowledge their agreement to the
            provisions of this Section 8 by their signatures below.

                                       -8-

<PAGE>

            IN WITNESS WHEREOF, the parties hereto have executed this
            Aircraft Lease Agreement, each by their duly authorized
            representative(s), as of the date shown at the beginning of
            this Aircraft Lease Agreement.

            LESSOR:                              LESSEE:

            AIRCRAFT 32582 LLC                   ALOHA AIRLINES, INC.

            By:  AFS INVESTMENTS I, Inc.
                 Its Member

            By: /s/ Charles H. Meyer              By: ________________________
                -------------------------
            Name:   Charles H. Meyer              Name: ______________________

            Title:    Vice President              Title: _____________________

                                                   By: _______________________

                                                  Name: ______________________

                                                  Title: _____________________

<PAGE>

     IN WITNESS WHEREOF, the parties- hereto have executed this Aircraft Lease
     Agreement, each by their duly authorized representative(s), as of the date
     shown at the beginning of this Aircraft Lease Agreement.

      LESSOR:                               LESSEE:

      AIRCRAFT 32582 LLC                    ALOHA AIRLINES, INC.

      By: __________________________        By: /s/ Brenda F. Cutwright
      Name: ________________________           --------------------------------
      Title: _______________________        Name:     Brenda F. Cutwright
                                            Title:    Exec. Vice President & CFO

                                            By: /s/ James M. King
                                               --------------------------------
                                            Name:    James M. King
                                                     Senior Vice President
                                       Title:   Planning & Business Development

<PAGE>

                                   SCHEDULE A

                     PART I-AIRFRAME AND ENGINES DESCRIPTION

    AIRCRAFT

           Manufacturer:              Boeing

           Model:                     737-700 ETOPS

           Serial Number:             32582

           U.S. Registration No.      N744AL

    ENGINES (each of which has 750 or more rated takeoff horsepower or the
    equivalent of such horsepower)

           Engine Type:               CFM56-7B26

           Serial Nos:                888699 and 888702

                                      A-1

<PAGE>

                                   SCHEDULE A

                     PART II-DELIVERY CONDITION REQUIREMENTS

     Set forth below is a description of the condition in which the Aircraft
     must be in order for Lessee to be obligated to accept the Aircraft under
     the Lease. It is solely a description of such condition precedent and shall
     not be construed as a representation, warranty or agreement of any kind
     whatsoever, express or implied, by Lessor with respect to the Aircraft or
     its condition, all of which have been disclaimed by Lessor and waived by
     Lessee as set forth in the Lease, including in the Common Terms Agreement.

     DELIVERY CONDITION REQUIREMENTS:

     This "DELIVERY CONDITION REQUIREMENTS" are as follows:

               Airframe,                Configured in accordance with GECAS
               Engines,                 Detail Specification D6-38808-34
               Components:              (Revision D) as modified for the Boeing
                                        737-700 aircraft bearing
                                        manufacturer's serial number 30830
                                        ("Aircraft 30830") pursuant to that
                                        certain Aircraft Lease Agreement
                                        dated as of May 12, 2000 between
                                        Lessee and an affiliate of Lessor,
                                        with the following differences from
                                        the configuration of 30830: (i)
                                        SATCOM partial provisions are not
                                        installed; (ii) location of cockpit
                                        printer in sidewall; (iii) hand rails
                                        to overhead bin doors are not
                                        installed; (iv) installation of six
                                        (rather than five) attendants seats;
                                        (v) dual aspirated TAT probes not
                                        installed; (vi) airstairs not
                                        installed but Lessor will provide
                                        airstairs and data kit free of charge
                                        after Delivery.

                                        For the avoidance of doubt, Lessor
                                        and Lessee acknowledge and agree
                                        that, although the Aircraft 30830 was
                                        new from the Manufacturer at the time
                                        of delivery to Lessee, the Aircraft
                                        will undergo certain modification
                                        work, both at the Manufacturer and at
                                        a third party maintenance facility,
                                        in order to bring it into the
                                        configuration specified above, prior
                                        to Delivery to Lessee.

                                       A-2

<PAGE>

               Livery Painting:         Lessee's current livery as in effect on
                                        the date of this Aircraft Lease
                                        Agreement, or such other livery as
                                        Lessee may specify in writing to Lessor
                                        so long as Lessee provides to Lessor,
                                        reasonably in advance of the Scheduled
                                        Delivery Month so as to permit Lessor to
                                        make all necessary arrangements for such
                                        painting, all technical specifications
                                        necessary in order to complete the
                                        painting of the Aircraft in such livery

                                       A-3

<PAGE>

                                   SCHEDULE A

           PART III- PROCEDURES AND OPERATING CONDITION AT REDELIVERY

          On the Return Occasion the Aircraft, subject to ordinary wear and tear
          of a kind and to an extent consistent with similar aircraft engaged in
          commercial airline operations, will be redelivered to Lessor by Lessee
          in accordance with the procedures and in any event in the condition
          set out below. For the avoidance of doubt any damage assessment and/or
          rectification criteria used in assessing the redelivery condition
          shall be as prescribed in the Manufacturer's structural repair manual
          ("SRM") and/or the Manufacturer's Maintenance Planning Document, as
          appropriate. Any damage outside the scope of the SRM shall require FAA
          8110-3 certification.

1.1       FINAL INSPECTION

          Immediately prior to the Return Occasion, Lessee will make the
          Aircraft available to Lessor and Owner for inspection ("FINAL
          INSPECTION") in order to verify that the condition of the Aircraft
          complies with the Lease. The Final Inspection will include, and be
          long enough to permit Lessor to:

          (a)  inspect the Aircraft Documents and Records;

          (b)  inspect the Aircraft (with Lessee to open or remove panels as
               reasonably requested by Lessor or Owner based on Lessor's or
               Owner's visual observation of the Aircraft and/or their
               respective review of the Aircraft Documents and Records),
               uninstalled Parts and the APU (including a complete video
               borescope inspection of the APU);

          (c)  inspect the Engines, including (i) a complete video borescope
               inspection of (A) the low pressure and high pressure compressors
               and (B) turbine area and (ii) power assurance runs (including
               full take-off power engine run-up performed in accordance with
               the performance test in the Engine Manufacturer's test
               specifications, and the Engines shall not exceed corrected limits
               for all parameters using temperature corrected charts); and

          (d)  observe a two hour demonstration flight at Lessee's cost (with up
               to three (to the extent permitted by FARS) of Lessor's and
               Owner's representatives as on-board observers).

          Furthermore, Lessee acknowledges that a purchaser or the next
          operator of the Aircraft may need to inspect the Aircraft, the Engines
          and the Aircraft Documents and Records prior to redelivery and Lessee
          hereby agrees to cooperate reasonably at all times during the Term

                                       A-4

<PAGE>

          with Lessor, Owner and/or such purchaser or such next operator in
          order to coordinate, assist and grant access for the above inspections
          and/or sale or subsequent lease as applicable.

          Lessor or Owner, as the case may be, is responsible for and will
          indemnify Lessee against all Losses arising from the death or injury
          to any observer or any employee of Lessor or Owner, as the case may
          be, in connection with the inspection of the Aircraft under this
          Section 1.1.

1.2       GENERAL CONDITION

          The Aircraft will:

          (a)  be in the same configuration as at Delivery after giving effect
               to any post-Delivery modifications to the Aircraft paid for or
               otherwise provided by or on behalf of Lessor (or as permitted by
               the Lease or as otherwise mutually agreed), be in as good
               operating condition and appearance as when delivered to Lessee
               (after giving effect to any such post-Delivery modifications),
               except for ordinary wear and tear and alterations and
               modifications authorized or required under the Lease and paid for
               by Lessee or a Sub-Lessee, and be clean by major passenger
               airline standards;

          (b)  have installed the full complement of equipment, parts,
               accessories, furnishings and loose equipment as when originally
               delivered to Lessee (subject to Lessee's rights under Section
               8.12 to reverse certain Equipment Changes, after giving effect to
               all modifications, repairs or maintenance performed during the
               Term, regardless of whether paid for by Lessee or Lessor) and the
               Aircraft (including the Aircraft Documents and Records) shall be
               in a condition suitable for immediate registration with the FAA
               (assuming that the Owner qualifies for such registration) and
               immediate operations under FAR Part 121 with a new operator,
               without waiver, unless the benefit of such waiver is applicable
               to the next operator of the Aircraft; and if any of the engines
               or parts tendered for redelivery with the Aircraft is not one of
               the Engines or Parts referred to in the Certificate of Technical
               Acceptance or a Replacement Engine installed pursuant to Section
               8.11(b) following an Engine Event of Loss, Lessor shall have no
               obligation to accept such engine or part unless Lessee furnishes
               to Lessor all the documents and evidence in respect of such
               engine or part in accordance with Section 8.11(b), as if such
               engine were a Replacement Engine or replacement Part, and
               otherwise complies with such Section 8.11(b) with respect
               thereto;

          (c)  have in existence a valid and effective certificate of
               airworthiness (and if required by Lessor, a valid and effective
               export certificate of airworthiness) with respect to

                                       A-5

<PAGE>

               the Aircraft issued by the Air Authority (in the case of an
               export certificate of airworthiness no earlier than 30 days prior
               to the redelivery);

          (d)  comply with the Manufacturer's original specifications as at the
               Delivery, except as modified during the Term in accordance with
               the Manufacturer's service bulletins or letters, Airworthiness
               Directives, Air Authority approved data or otherwise as permitted
               by the Lease;

          (e)  be fresh out of a "C" Check (or higher check if applicable) in
               block format (which shall be the next sequential "C" Check under
               Lessee's Maintenance Program following the last regularly
               scheduled "C" Check performed by Lessee prior to the Return
               Occasion if Lessee's Maintenance Program is based on the then
               current Manufacturer's Maintenance Planning Document in block
               format. If Lessee's Maintenance Program is not based on the
               Manufacturer's Maintenance Planning Document in block format,
               then Lessee shall integrate the Aircraft Maintenance Program onto
               the then current Manufacturer's Maintenance Planning Document
               Block Maintenance Program such that all airframe inspections
               falling due within the "C" check interval (which shall not be
               less than 4,000 Flight Hours) as defined in and in accordance
               with the Manufacturer's Maintenance Planning Document have been
               accomplished;

          (f)  have had accomplished all outstanding Airworthiness Directives
               affecting that model of Aircraft issued by the FAA requiring
               action during the Term or within 180 days after the Return
               Occasion or the Scheduled Expiry Date, whichever is later; for
               this purpose, compliance shall be by terminating action if:

               (i)  Lessee has complied by terminating action for sixty-five
                    percent (65%) of the aircraft of the same model and series
                    then operated by Lessee; or

               (ii) the latest date permitted by such Airworthiness Directive
                    for required compliance by terminating action falls within
                    180 days after the Return Occasion or the Scheduled Expiry
                    Date, whichever is later.

               (iii) In no event shall there be any non-transferable time
                    extensions, waivers, deviations or alternative means of
                    compliance with any Airworthiness Directions or other
                    Regulations.

          (g)  have installed all applicable vendor's and Manufacturer's service
               bulletin kits received free of charge by Lessee during the Term
               that are appropriate for the Aircraft and to the extent not
               installed, those kits will be furnished free of charge to Lessor;

                                       A-6

<PAGE>

          (h)  have the fuselage, empennage, wings painted in Lessee's livery;

          (i)  have all signs and decals clean, secure and legible;

          (j)  [NOT APPLICABLE];

          (k)  have no open, deferred, continued, carry over or placarded
               maintenance items or watch items or placarded log book items, and
               all other log book discrepancies shall be cleared;

          (l)  all discrepancies discovered during the inspections described
               above which exceed the Manufacturer's maintenance manual
               allowable limits for in-service aircraft shall have been repaired
               in accordance with FAA-approved procedures;

          (m)  all repairs of a temporary or interim nature, requiring
               repetitive inspections or future upgrading, including external
               doublers with blind fasteners, shall be upgraded to permanent
               repair in accordance with the Manufacturer's Maintenance Planning
               Document or structural repair manual; and

          (n)  all systems shall be fully operational for their intended
               functions in accordance with the Manufacturer's Maintenance
               Planning Document specifications.

1.3       COMPONENTS

          (a)  If the Aircraft Lease Agreement specifies Minimum Component
               Flight Hours and/or Minimum Component Cycles, each Airframe
               Flight Hour and Cycle controlled Hard Time Component (other than
               the APU) shall have not less than the Minimum Component Flight
               Hours and the Minimum Component Cycles of life remaining to the
               next scheduled removal, in accordance with the Lessee's
               Maintenance Program and shall be supported by appropriate
               certification documentation indicating TSN, CSN, TSO and CSO such
               as FAA form 8130-1; for this purpose "Hard Time Component" means
               any component which has a limited on-wing life in accordance with
               the Manufacturer's Maintenance Planning Document and which can
               have life fully restored through appropriate maintenance;

          (b)  If the Aircraft Lease Agreement specifies a Minimum Component
               Calendar Life, each calendar-limited component including safety
               equipment will have not less than its Minimum Component Calendar
               Life remaining to the next scheduled removal in accordance with
               the Lessee's Maintenance Program;

          (c)  Each "on-condition" and "condition-monitored" component will be
               serviceable;

                                       A-7

<PAGE>

          (d)  The installed components as a group will have an average of total
               flight time since new of not more than that of the Airframe;

          (e)  If the Aircraft Lease Agreement specifies Minimum Component
               Flight Hours and/or Minimum Component Cycles, each Airframe
               Life-Limited Component will have not less than the Minimum
               Component Flight Hours and the Minimum Component Cycles remaining
               to next scheduled removal and will be supported by certification
               documentation necessary to demonstrate back-to-birth
               traceability; for this purpose "Airframe Life-Limited Component"
               means a component with an ultimate life which cannot be restored
               through appropriate maintenance.

1.4       ENGINES

          Each Engine (or a Replacement Engine as and to the extent
          permitted by Section 1.2(b)) will be installed on the Aircraft and
          comply with the following:

          (a)  If the Aircraft Lease Agreement specifies a Minimum Engine Flight
               Hours and/or Minimum Engine Cycles, each Engine will have not
               less than the Minimum Engine Flight Hours and Minimum Engine
               Cycles expected life remaining to the next expected removal. The
               expected life remaining will be determined by third party
               mutually acceptable to both Lessor and Lessee (at Lessor's cost)
               or by the Engine Manufacturer, in each case based on the
               inspection and checks to be performed at the Return Occasion in
               accordance with the Lease;

          (b)  Each Engine shall have just completed at the location for
               Lessor's acceptance on the Return Occasion a hot (including
               combustion chamber) and cold section video borescope inspection,
               which inspection shall be performed at Lessor's expense, and a
               power assurance run performed at Lessee's expense in accordance
               with the Lessee's Maintenance Program or Manufacturer's
               Maintenance Planning Document and any defects discovered in such
               inspections which exceed the Engine manufacturer's in-service
               limits shall be corrected at Lessee's expense. Lessee shall cause
               such borescope inspections to be performed and to be recorded on
               videotape by an agency selected by Lessor and shall provide
               Lessor with a copy of such videotape on the Return Occasion. No
               Engine shall be on "watch" for any reason requiring any special
               or out of sequence inspection. Each Engine shall comply with the
               operations specification of Lessee without waiver or exceptions.
               All items beyond the Engine manufacturer's in-service limits
               shall be repaired;

          (c)  If the Aircraft Lease Agreement specifies Minimum Component
               Cycles, each Engine Life-Limited Component will have not less
               than the Minimum Component Cycles remaining per the
               manufacturer's then current limitations for the part

                                       A-8

<PAGE>

               number in question, and will be supported by certification
               documentation necessary to demonstrate back-to-birth
               traceability; for this purpose "Engine Life-Limited Component"
               means a component with an ultimate life which cannot be restored
               through appropriate maintenance; and

1.5       FUSELAGE, WINDOWS AND DOORS

          (a)  The fuselage will be free of major dents and abrasions in excess
               of the limits specified in Manufacturer's Maintenance Planning
               Document or structural repair manual; loose or pulled or missing
               rivets shall be replaced;

          (b)  Windows will be free of delamination, blemishes and crazing, in
               excess of the limits specified in the Manufacturer's Maintenance
               Planning Document or structural repair manual and will be
               properly sealed; and

          (c)  Doors will be free moving, correctly rigged and be fitted with
               serviceable seals.

1.6       WINGS AND EMPENNAGE

          (a)  Leading edges will be free from damage in excess of the limits
               specified in the Manufacturer's Maintenance Planning Document or
               structural repair manual; and

          (b)  Unpainted surfaces of the wings and empennage will be polished.

1.7       INTERIOR AND COCKPIT

          All soft furnishings, including but not limited to carpets, seat
          covers and curtains, will be in good condition, clean and free of
          stains and meet FAR fire resistance regulations.

1.8       LANDING GEAR; WHEELS AND BRAKES

          (a)  The Landing Gear and wheel wells will be clean, free of leaks and
               repaired as necessary;

          (b)  Each installed Landing Gear shall have no more Cycles accumulated
               than the Airframe and, if the Aircraft Lease Agreement specifies
               Minimum Landing Gear Flight Hours and/or Minimum Landing Gear
               Cycles and Minimum Landing Gear Calendar Time, not less than the
               Minimum Landing Gear Flight Hours and the Minimum Landing Gear
               Cycles and the Minimum Landing Gear Calendar Time shall be
               remaining to the next scheduled overhaul or removal, as the case
               may be, of each installed Landing Gear in accordance with the
               then current Manufacturer's Maintenance Planning Document and
               Lessee's Maintenance Program; and

          (c)  The wheels and brakes will have not less than half of their
               useful life remaining.

                                       A-9

<PAGE>

1.9       RETURN OF AUXILIARY POWER UNIT (APU)

          The APU shall have just completed a borescope inspection and
          shall meet all air outputs and temperature limitations under load in
          accordance with the Lessee's Maintenance Program and the APU
          manufacturer's maintenance manual, and any defects discovered in such
          inspection, which exceed the APU manufacturer's in-service limits,
          shall be corrected at Lessee's expense. If the Aircraft Lease
          Agreement specifies a Minimum APU Limit, the APU shall have not more
          than the Minimum APU Limit since the last gas path refurbishment. If
          the Aircraft Lease Agreement specifies a Minimum APU LLP Limit, APU
          Life Limited Parts shall have not less than the Minimum APU LLP Limit
          of useful life remaining on average.

1.10      CORROSION

          (a)  The Aircraft shall be in compliance with the Manufacturer's
               corrosion prevention and control program (CPCP) requirements. All
               CPCP inspections which would normally be accomplished while
               access is provided during structural inspection in accordance
               with the Lessee's Maintenance Program during the Term shall have
               been accomplished;

          (b)  The entire fuselage will be substantially free from corrosion and
               will be adequately treated in accordance with Lessee's corrosion
               prevention program and the Manufacturer's Maintenance Planning
               Document; and

          (c)  Fuel tanks will be free from contamination and corrosion and a
               tank treatment program will be in operation.

1.11      FUEL

          If the Aircraft Lease Agreement specifies a Minimum Measurable
          Fuel Requirement, at redelivery, the Aircraft fuel tanks shall contain
          at least enough fuel to meet the Minimum Measurable Fuel Requirement.

1.12      MAINTENANCE PROGRAM

          (a)  Prior to the Return Occasion and upon Lessor's or Owner's
               request, Lessee will provide Lessor or Owner or its agent
               reasonable access to the Lessee's Maintenance Program and the
               Aircraft Documents and Records in order to facilitate the
               Aircraft's integration into any subsequent operator's fleet; and

          (b)  Lessee will, if requested by Lessor or Owner to do so, provide
               sufficient access to Lessee's Maintenance Program in order to
               integrate the Aircraft to the next operator's maintenance
               program. Lessor and any Person to whom Lessor grants

                                      A-10

<PAGE>

                      access to Lessee's Maintenance Program shall agree that it
                      will not disclose the contents of the Lessee's Maintenance
                      Program to any Person except to the extent necessary to
                      monitor Lessee's compliance with the Lease and/or to
                      bridge the maintenance program for the Aircraft from the
                      Lessee's Maintenance Program to another program after the
                      Return Occasion.

1.13      AIRCRAFT DOCUMENTS

          At redelivery Lessee will deliver to Lessor and Owner all current
          and complete historical records required to be maintained relevant to
          the Aircraft, including documents, manuals, data, overhaul records,
          life limited part traceability to "zero time since new", log books,
          original delivery documents serviceable parts tags, FAA forms,
          modification records and inspection records, and including each of the
          Aircraft Documents and Records.

1.13.     ETOPS:

          The Aircraft shall be certified by the FAA for 180 minutes ETOPS
          operation or shall be in such condition as to be eligible for
          certification by the FAA for 180 minutes ETOPS operation.

                                   SCHEDULE B

                                COMMERCIAL TERMS

     Lessor and Lessee hereby agree that the definitions and other commercial
and financial terms set forth in this Schedule B shall apply to the leasing of
the Aircraft under the Lease.

     In addition, Lessor and Lessee understand and agree that the commercial and
financial information contained in this Schedule B are considered by Lessor and
Lessee as proprietary and confidential. Lessor and Lessee each hereby agree, and
any of their assignees, upon becoming such shall agree that it will treat this
Schedule B as proprietary and confidential and will not, without the prior
written consent of the other, disclose or cause to be disclosed, the terms
hereof or thereof to any Person, except to its agents, representatives,
advisors, employees, counsel, underwriters, auditors, investors, financing
parties, head lessors and sub-lessees as necessary or appropriate for the
leasing transaction which is the subject hereof, or except (a) as may be
required by applicable Law or pursuant to an order, or a valid and binding
request, issued by any court or other Government Entity having jurisdiction over
Lessor, Lessee or the assignee of either of them, as the case may be, or (b) as
necessary to enable Lessor or its assignee to make transfers, assignments or
other dispositions to potential transferees, assignees or participants of its
interest in and to the Lease.

     In connection with any such disclosure or any filing of the information
contained herein or therein pursuant to any such applicable Law, Lessor, Lessee
or the assignee of either of them, as the case may be, shall request and use its
best reasonable efforts to obtain confidential

                                     A-11

<PAGE>

treatment of this Schedule B and the other party will cooperate in making and
supporting any such request for confidential treatment.

      PART I        CASUALTY OCCURRENCE DEFINITIONS

      [This provision has been omitted as confidential information, and
      is separately filed with the Commission.]

      PART II       DEPOSIT; DISCOUNT RATE; LC AMOUNT; INTEREST RATE

      [This provision has been omitted as confidential information, and
      is separately filed with the Commission.]

      PART III      RENT

      [This provision has been omitted as confidential information, and
      is separately filed with the Commission.]

                                       A-12

<PAGE>

      PART IV       TAX DEFINITIONS; SPECIAL TAX INDEMNITY

      [This provision has been omitted as confidential information, and
      is separately filed with the Commission.]

                                       A-14

<PAGE>

      PART V        SUPPLEMENTAL RENT

      [This provision has been omitted as confidential information, and
      is separately filed with the Commission.]

                                       A-15

<PAGE>

    PART VI         MAINTENANCE AND RETURN CONDITION DEFINITIONS;
                    AIRWORTHINESS DIRECTIVE SHARING PAYMENTS

    [This provision has been omitted as confidential information, and
    is separately filed with the Commission.]

                                       A-16

<PAGE>

       PART VII     SUBLEASE FEE

       [This provision has been omitted as confidential information, and
       is separately filed with the Commission.]

       PART VIII    UTILIZATION RATIO

       [This provision has been omitted as confidential information, and
       is separately filed with the Commission.]

                                       A-18

<PAGE>

                                   SCHEDULE C

                      AIRCRAFT LEASE COMMON TERMS AGREEMENT
                                       AND
               AMENDMENT TO AIRCRAFT LEASE COMMON TERMS AGREEMENT

<PAGE>

                                                               EXECUTION VERSION

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

                                 AIRCRAFT LEASE
                             COMMON TERMS AGREEMENT

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

                             DATED AS OF MAY 12, 2000

                                     BETWEEN

                      GENERAL ELECTRIC CAPITAL CORPORATION

                                       And

                              ALOHA AIRLINES, INC.

<PAGE>

                                    CONTENTS

<TABLE>
<CAPTION>
    SECTION                                                                PAGE

    <S>     <C>                                                             <C>

     1.     INTERPRETATION ...................................................1
     2.     REPRESENTATIONS AND WARRANTIES ...................................2
     3.     CONDITIONS PRECEDENT .............................................2
     4.     COMMENCEMENT .....................................................3
     5.     PAYMENTS .........................................................5
     6.     MANUFACTURER'S WARRANTIES ........................................19
     7.     LESSOR'S COVENANTS ...............................................20
     8.     LESSEE'S COVENANTS ...............................................20
     9.     INSURANCE ........................................................38
     10.    INDEMNITY ........................................................39
     11.    EVENTS OF LOSS ...................................................41
     12.    RETURN OF AIRCRAFT ...............................................42
     13.    DEFAULT ..........................................................45
     14.    TRANSFER .........................................................52
     15.    MISCELLANEOUS ....................................................54
     16.    DISCLAIMERS AND WAIVERS ..........................................58
     17.    BROKERS AND OTHER THIRD PARTIES ..................................61
</TABLE>

<PAGE>

   Schedule 1        Definitions
   Schedule 2        Representations and Warranties
   Schedule 3        Conditions Precedent
   Schedule 4        Pre-Delivery Procedures and Delivery Condition
   Schedule 5        Certificate of Technical Acceptance
   Schedule 6        [NOT APPLICABLE]
   Schedule 7        Insurance Requirements
   Schedule 8        Form of Lessee's Legal Opinion
   Schedule 9        Events of Default
   Schedule 10       [NOT APPLICABLE]
   Schedule 11       Form of Lease Termination Certificate
   Schedule 12       Form of Lease Supplement No. 1
   Schedule 13       Form of Letter of Credit
   Schedule 14       Maintenance Performers
   Schedule 15       Technical Report

<PAGE>

                             COMMON TERMS AGREEMENT

  THIS COMMON TERMS AGREEMENT (THIS "CTA") is made as of May 12, 2000 BETWEEN:

  (1)      GENERAL ELECTRIC CAPITAL CORPORATION ("GE CAPITAL") and

  (2)      ALOHA AIRLINES, INC. ("ALOHA")

  WHEREAS:

          (A)  From time to time, Aloha or one of its Affiliates may wish to
               lease commercial aircraft from GE Capital or one of its
               Affiliates, and GE Capital or one of its Affiliates may wish to
               lease commercial aircraft to Aloha or one of its Affiliates;

          (B)  Each party hereto wishes to provide in one document for certain
               common terms and conditions, as hereinafter provided in this CTA,
               that will be applicable, unless otherwise stated, to each such
               lease referred to in Recital (A); and

          (C)  Each such lease transaction will be concluded only on the terms
               of an agreement entitled "Aircraft Lease Agreement," which
               together with this CTA (which will be incorporated into and
               become part of such Aircraft Lease Agreement), will constitute
               the lease for the applicable aircraft as identified therein;

   NOW, THEREFORE, for good and valuable consideration the receipt and
   sufficiency of which are hereby acknowledged, the parties hereto hereby agree
   as follows:

   1.      INTERPRETATION

   1.1     Definitions

           All references herein to "Lease" mean the integrated agreement
           consisting of the various documents comprising the Lease as defined
           in Schedule 1. In the Lease, capitalized words and expressions have
           the meanings set out for them in Schedule 1 and in the Aircraft Lease
           Agreement.

   1.2     Construction

           (a)      In the Lease, unless otherwise stated, a reference to:

                    (i)  "Lessor," "Lessee," "GECAS," "Owner" or any other
                         Person includes any of their successors and assignees;

                    (ii) plural concepts shall include the singular and vice
                         versa;

<PAGE>

                    (iii) any document (except this CTA unless Lessor and Lessee
                         otherwise expressly agree) shall include any changes to
                         that document and any replacement for it;

                    (iv) a Section or a Schedule is a reference to a clause of
                         or a schedule to this CTA;

                    (v)  any Regulation shall include any changes to that
                         Regulation and any replacement for it;

                    (vi) an obligation of a Person refers to any obligation that
                         Person has under or in relation to the Lease; and

                    (vii) "includes," "including", "include" or similar terms
                         shall not be construed as limiting and shall mean
                         "including, without limitation."

          (b)  Headings to Sections and Schedules in the Lease are not intended
               to affect their meaning.

  2.      REPRESENTATIONS AND WARRANTIES

  2.1     Lessee's Representations and Warranties

          Lessee hereby makes the representations and warranties set out in
          Section 1.1 of Schedule 2 as of the date of execution of the Aircraft
          Lease Agreement and as of the Delivery Date, and Lessee understands
          that these statements must be true, both when the Aircraft Lease
          Agreement is executed and on the Delivery Date.

  2.2     Lessor's Representations and Warranties

          Lessor hereby makes the representations and warranties set out in
          Section 1.2 of Schedule 2 as of the date of execution of the Aircraft
          Lease Agreement and as of the Delivery Date, and Lessor understands
          that these statements must be true, both when the Aircraft Lease
          Agreement is executed and on the Delivery Date.

  3.      CONDITIONS PRECEDENT

  3.1     Conditions Precedent

          Lessor need not deliver and start the leasing of the Aircraft under
          the Lease unless each of the Lessor Conditions Precedent is satisfied
          or waived in writing by Lessor. Lessee need not accept and start the
          leasing of the Aircraft under the Lease unless each of the Lessee
          Conditions Precedent is satisfied or waived in writing by Lessee;
          provided, however, in the event that Lessee fails to accept and start
          the leasing of the Aircraft under the Lease, any Lessee Condition
          Precedent which reasonably could be expected to be met if the Delivery
          of the Aircraft had

                                      -2-

<PAGE>

            occurred shall be deemed to have been satisfied or waived for
            purposes of determining Lessee's liability for Rent in respect of
            the Aircraft in accordance with Section 4.1(b) below.

    3.2     Waiver

            If any Lessor Condition Precedent is not satisfied, or waived in
            writing by Lessor, on or before the Delivery Date, and Lessor (in
            its absolute discretion) nonetheless agrees to deliver the Aircraft
            to Lessee and to start the leasing of the Aircraft, Lessee will
            ensure that such Lessor Condition Precedent is fulfilled within 15
            days after the Delivery Date, and Lessor may treat as an Event of
            Default the failure of Lessee to do so.

    4.    COMMENCEMENT

          Leasing

          (a)  Lessor shall notify Lessee of the Scheduled Delivery Week as soon
               as possible, but no later than at least thirty (30) days prior to
               the Scheduled Delivery Month, and Lessor shall notify Lessee of
               the Scheduled Delivery Date as soon as possible, but no later
               than at least one (1) week prior to the Scheduled Delivery Week.
               Subject to Sections 3.1 and 4.4, Lessor will lease the Aircraft
               to Lessee and Lessee will take the Aircraft on lease for the
               Term, which shall commence on the Delivery Date, and which shall
               be evidenced by Lessee's execution of Lease Supplement No. 1.

          (b)  If (i) Lessee is unwilling or unable to accept delivery of the
               Aircraft on the date on which Lessor tenders the Aircraft for
               Delivery to Lessee under and in accordance with Section 4.3(a),
               or Lessee fails to fulfil any Lessor Condition Precedent on or
               before such date, and (ii) the Lessee Conditions Precedent are
               met (or could reasonably be expected to be met if Delivery had
               occurred), then the Rent Commencement Date for the Aircraft shall
               be deemed to have occurred on the date on which it is tendered by
               Lessor for Delivery in accordance with subclause (ii) of this
               Section 4.1(b), and Lessee shall be obligated to pay Rent for
               the Aircraft on and from such date regardless of whether the
               Delivery Date occurs or whether Lessee executes Lease Supplement
               No. 1, but Lessor shall have no obligation to deliver, and Lessee
               shall have no lease interest in the Aircraft or other right to
               possession of the Aircraft, unless and until Lessee fulfils all
               Lessor Conditions Precedent as and when provided in the Lease and
               Lessee accepts delivery of the Aircraft as evidenced by its
               execution of Lease Supplement No. 1, and so long as no Default
               has occurred and is continuing.

          (c)  Lessee will be responsible for all risks associated with any loss
               of or damage to the Aircraft from the Rent Commencement Date
               until possession of the Aircraft is returned

                                      -3-

<PAGE>

               to Lessor on the Return Occasion and Lessor executes and delivers
               to Lessee the acknowledgement contemplated by Section 12.4.

  4.2      Procedure Before Delivery

           Lessor and Lessee will follow the Pre-Delivery Procedure.

  4.3      Delivery and Acceptance

           (a)      After the Pre-Delivery Procedure has been carried out:

                    (i)  Subject to Section 3.1, Lessor will tender delivery of
                         the Aircraft to Lessee at the Delivery Location.

                    (ii) Subject to Section 3.1, Lessee will accept the
                         Aircraft. Upon such acceptance, Lessee must also
                         provide evidence of its acceptance by signing Lease
                         Supplement No. 1 and delivering it to Lessor.

          (b)  Lessee's acceptance of the Aircraft shall be regarded as
               absolute, unconditional and irrevocable.

  4.4     Delayed Delivery

          If Delivery takes place after the Scheduled Delivery Date or does not
          happen due to an Unforeseen Event or for any other reason (other than
          Lessor's willful misconduct in the performance of its obligation to
          deliver the Aircraft under and subject to the conditions in the
          Lease):

          (a)  Lessor will not be responsible for any Losses that Lessee suffers
               resulting from the delay or from the non-delivery of the
               Aircraft;

          (b)  Lessee will not, except in the circumstances described in Section
               4.4(c), be entitled to terminate the Lease or to reject the
               Aircraft when it is offered for Delivery because of the delay.

          (c)  If the Aircraft has not been tendered for Delivery, in accordance
               with Section 4.3, by the Final Delivery Date, either party may
               terminate the Lease by delivering notice to the other party
               within 10 days of such Final Delivery Date (and if such notice is
               not delivered within such 10-day period the Final Delivery Date
               will be deemed extended for one additional period of 90 days).
               Upon the delivery of any such notice or automatically on the
               expiration of such 90-day period if no such notice has been
               delivered, all obligations of each party under the Lease will end
               on the date of such notice or the date of the

                                      -4-

<PAGE>

               expiration of such period, as the case may be, except that
               Lessor will repay to Lessee the Deposit (if any) or return to
               Lessee or cancel any Letter of Credit and Lessee will remain
               obligated under its indemnity set forth in Section 3 of Schedule
               4.

          (d)  Lessee hereby agrees that its only right or remedy for a delay in
               or failure of delivery of the Aircraft due to an Unforeseen Event
               or for any other reason (other than Lessor's willful misconduct
               in the performance of its obligation to deliver the Aircraft
               under and subject to the conditions in the Lease) is the remedy
               set forth in Section 4.4(c) above and Lessee hereby waives any
               rights it may have under Section 2A-406 of the UCC or otherwise
               for any delay in or failure of delivery.

  5.      PAYMENTS

  5.1     Deposit

          Lessee shall pay Lessor any Deposit that is specified in Section 3 of
          the Aircraft Lease Agreement.

  5.2     Rental Periods

          The first Rental Period will start on the Rent Commencement Date
          and each subsequent Rental Period will start on the date immediately
          following the last day of the previous Rental Period. Each Rental
          Period will end on the date immediately before the numerically
          corresponding day in the next month, except that:

          (a)  if there is no numerically corresponding day in that month, it
               will end on the last day of that month; and

          (b)  if a Rental Period would otherwise overrun the Expiry Date, it
               will end on the Expiry Date.

  5.3     Rent

          (a)  TIME OF PAYMENT: Lessee will pay to Lessor or its order Rent in
               advance on each Rent Date. Lessor must receive value for the
               payment on each Rent Date. If a Rental Period begins on a day
               which is not a Business Day, the Rent payable in respect of that
               Rental Period shall be paid on the Business Day immediately
               following that day.

          (b)  AMOUNT: The Rent payable during the Term shall be calculated in
               accordance with Schedule B of the Aircraft Lease Agreement.

                                       -5-

<PAGE>

  5.4     Supplemental Rent

          (a)  AMOUNT: If, under the Aircraft Lease Agreement, Lessee is
               required to pay Supplemental Rent, Lessee will pay that
               Supplemental Rent, at the rates referred to in Section 3 of the
               Aircraft Lease Agreement, to Lessor in relation to each calendar
               month (or part of a month) of the Term, on the fifteenth day
               following the end of that calendar month (except that the last
               payment of Supplemental Rent during the Term shall be paid on the
               Expiry Date).

          (b)  ADJUSTMENT: If, under the Aircraft Lease Agreement, Lessee is
               required to pay Supplemental Rent, the Supplemental Rent rates
               shall be adjusted after the Delivery Date in the manner provided
               in the Aircraft Lease Agreement.

          (c)  LESSOR'S PROPERTY: Lessee acknowledges and agrees that
               Supplemental Rent is additional rent for the leasing of the
               Aircraft and not cash collateral or other collateral security for
               Lessee's maintenance obligations under the Lease. Once paid all
               Supplemental Rent is the property of Lessor, it is not refundable
               to Lessee under any circumstances whatsoever and Lessee has no
               interest therein whatsoever.

  5.5      Payments

           All payments by Lessee to Lessor under the Lease will be made for
           value on the due date in Dollars and in immediately available funds
           by wire transfer to the Lessor's Account as specified in the Aircraft
           Lease Agreement.

  5.6      Withholding and Tax Credit

           (a) WITHHOLDING: Lessee must not deduct any amount from any of its
               payments under the Lease, for or on account of any Taxes, unless
               it is required by law to do so, in which case Lessee must:

               (i)  deduct the minimum amount necessary to comply with the Law;

               (ii) pay Lessor an extra amount so that Lessor receives a net
                    amount on the relevant payment date, that is equal to the
                    amount that it would have received if the reduction had not
                    been made (provided that Lessee shall have no obligation to
                    pay Lessor an extra amount on account of withholding in
                    relation to any Taxes with respect to which Lessee is not
                    required to indemnify Lessor under Section 5.7). The amount
                    of any such payment to Lessor must take into account the tax
                    treatment of that payment to Lessor applying the principles
                    of Section 5.10 such that Lessor shall be in no worse
                    position than it would have been if the deduction had not
                    applied in the first place;

                                      -6-

<PAGE>

               (iii) pay the Tax to the relevant taxing authority according
                     to the relevant Law; and

               (iv)  obtain a receipt (if one is available) from the relevant
                     taxing authority and give it to Lessor.

          (b)  TAX CREDIT: If Lessor, in good faith, determines that it has
               realized a tax benefit (by way of deduction, credit or otherwise)
               as a result of any payment for which Lessee is liable under
               Section 5.6(a), Section 5.7, Section 5.10, Section 5.21 or
               Section 10, Lessor shall pay to Lessee as soon as practicable
               after the tax benefit has been realized (but not before Lessee
               has made all payments and indemnities to Lessor required under
               this Section or Section 5.7), an amount which will ensure that
               (after taking account of the payment itself) Lessor is in no
               better and no worse position than it would have been if the Tax
               giving rise to the payment hereunder had not been incurred.

               Nothing in this Section 5.6(b) shall:

               (i)  interfere with the right of Lessor to arrange its tax
                    affairs in whatever manner it thinks fit; or

               (ii) oblige Lessor to disclose any information relating to its
                    Tax affairs or any Tax computations (other than information
                    reasonably necessary for Lessee to verify Lessor's
                    determination, which information may be supplied on a
                    confidential basis to an independent third party reasonably
                    acceptable to Lessor and Lessee).

  5.7     Tax Indemnity

          (a)  General:

               (i)  Except as provided in Section 5.7(c), Lessee will on demand
                    pay and indemnify each Tax Indemnitee against any and all
                    Taxes levied or imposed against or upon or payable by such
                    Tax Indemnitee or Lessee and arising from, with respect to
                    or in connection with the transactions pursuant to the
                    Lease, including all Taxes relating or attributable to
                    Lessee, the Lease or the Aircraft, directly or indirectly,
                    in connection with the importation, exportation,
                    registration, ownership (but only to the extent relating to
                    or attributable to or arising as a result of the possession,
                    operation, use or maintenance of the Aircraft by Lessee),
                    leasing, sub-leasing, purchase, delivery, possession, use,
                    operation, repair, maintenance, overhaul, transportation,
                    landing, storage, presence or redelivery of the Aircraft or
                    any part thereof or any rent, receipts, insurance proceeds,
                    income, indemnification payment or other amounts arising
                    therefrom, or the making of any Equipment Change or the
                    permanent replacement of any Engine.

                                      -7-

<PAGE>

               (ii) All Taxes indemnified pursuant to this Section 5.7(a) shall
                    be paid by Lessee directly to the appropriate taxing
                    authority (to the extent permitted by applicable Law) at or
                    before the time prescribed by applicable Law. After any
                    payment by Lessee of any Tax directly to a taxing authority,
                    Lessee shall furnish to Lessor, on request, a certified copy
                    of a receipt for Lessee's payment of such Tax or such other
                    evidence of payment of such Tax as is reasonably obtainable
                    by Lessee and reasonably acceptable to Lessor.

               (iii) Any amount payable by Lessee to a Tax Indemnitee pursuant
                    to Section 5.7(a) shall be paid within ten days after
                    receipt of a written demand therefor from the relevant Tax
                    Indemnitee accompanied by a written statement describing in
                    reasonable detail the basis for such indemnity and the
                    computation of the amount so payable, provided that if an
                    amount of any indemnified Tax is being contested in
                    accordance with Section 5.9 and Lessee shall have duly
                    performed (and shall continue to perform) all its
                    obligations under Section 5.9 with respect to such contest,
                    then payment of the indemnity with respect to such Tax under
                    Section 5.7(a) shall, at Lessee's election, be deferred
                    until the date the contest has been completed.

          (b)  Sales and Use Taxes:

               (i)  Without limiting Section 5.7(a) above, Lessee shall pay to
                    Lessor (or, if permitted by applicable Law and if requested
                    by Lessor, Lessee shall pay to the relevant tax authority
                    for the account of Lessor):

                    (y)  all sales, use, excise, rental, value added, goods and
                         services and similar taxes ("SALES TAXES") required to
                         be paid to the tax authority of the jurisdiction in
                         which the Delivery Location is situated or to the
                         jurisdiction of the Habitual Base or the State of
                         Incorporation with respect to the lease of the Aircraft
                         to Lessee pursuant to the Lease unless Lessee delivers
                         to Lessor on or prior to the Delivery Date such
                         exemption certificate or other document as may be
                         required by applicable law to evidence Lessor's
                         entitlement to exemption from all Sales Taxes imposed
                         by each such jurisdiction with respect to the. lease of
                         the Aircraft pursuant to the Lease; and

                    (z)  all Sales Taxes required to be paid to the tax
                         authority of any jurisdiction in which the Aircraft may
                         be used, operated or otherwise located from time to
                         time unless Lessee deliver to Lessor such exemption
                         certificates or other documents as may be required by
                         applicable law to evidence Lessee's entitlement to
                         exemption from all Sales Taxes imposed by each

                                      -8-

<PAGE>

                         such jurisdiction with respect to the lease of the
                         Aircraft pursuant to the Lease.

               (ii) Lessee and Lessor will cooperate with each other in
                    connection with the preparation and filing of any exemption
                    application or similar document that is reasonably necessary
                    or desirable under applicable Law to avoid the imposition of
                    any Sales Taxes with respect to the transactions
                    contemplated by the Lease.

               (iii) The specific obligations with respect to sales and use
                    taxes set forth in this Section 5.7(b) are in addition to,
                    and are not in substitution for, Lessee's obligation to
                    indemnify for sales and use taxes pursuant to Section
                    5.7(a).

          (c)  Lessee is not required to indemnify a Tax Indemnitee under
               Section 5.7(a) or Section 5.7(b) to the extent that the Tax
               arises because of:

               (i)  the willful misconduct or gross negligence of the Tax
                    Indemnitee seeking indemnity under Section 5.7;

               (ii) a Tax liability a Tax Indemnitee has which would have arisen
                    even if the Lease had not been entered into;

               (iii) a Tax liability charged on or measured by a Tax
                    Indemnitee's net income, profits or gains by any Government
                    Entity in the United States; but excluding any Tax (A) that
                    is a Sales Tax (other than a Sales Tax that is enacted by a
                    Government Entity as a substitute for or replacement of a
                    Tax charged on or measured by net income, profits, or gains
                    as a revenue source for that Government Entity (a
                    "Replacement Sales Tax")) or (B) that is imposed by any
                    government or taxing authority of any jurisdiction (other
                    than the United States federal government) if and to the
                    extent that such Tax (including a Replacement Sales Tax)
                    results from (x) the use, operation, presence, registration
                    or location of the Aircraft, the Airframe, any Engine or any
                    Part in the jurisdiction imposing the Tax, or (y) the situs
                    of organization, any place of business or any activity of
                    Lessee or any other Person having use, possession or custody
                    of the Aircraft, the Airframe, any Engine or any Part in the
                    jurisdiction imposing the Tax;

               (iv) a Tax liability charged with respect to the period, or an
                    event occurring, (x) prior to the Delivery Date or (y)
                    after the Expiry Date and, in either case, unrelated to
                    Lessor's dealings with Lessee or to the transactions
                    contemplated by the Lease;

               (v)  a Tax liability arising out of any voluntary transfer or
                    disposition by a Tax Indemnitee of any equitable or legal
                    interest in the Aircraft or any part thereof or

                                      -9-
<PAGE>

                    this Agreement to any Person (including a transfer or
                    disposition by way of security but excluding a transfer or
                    disposition pursuant to the exercise of remedies in
                    connection with an Event Default), provided, however, that
                    Lessor shall in connection with an Event of Default comply
                    with any request as Lessee shall make concerning the
                    appropriate jurisdiction in which such disposition shall be
                    made unless Lessor reasonably determines (and advises
                    Lessee) that compliance with such request by Lessee would
                    generate an adverse consequence or prejudice Lessor; or

               (vi) a Tax liability with respect to a Tax based on or measured
                    by the value or principal amount of any loan or promissory
                    note (or security therefor) entered into by a Tax Indemnitee
                    or anyone claiming an interest in the Aircraft or any
                    portion thereof through a Tax Indemnitee; or

               (vii) a Tax liability arising out of a Replacement Sales Tax as
                    described in Section 5.7(c)(iii), but excluding a
                    Replacement Sales Tax described in Section 5.7(c)(iii)(B).

          (d)  Lessee will also indemnify each Tax Indemnitee, on an After-Tax
               Basis, as set forth in the Section entitled "Special Tax
               Indemnity" in Schedule B of the Aircraft Lease Agreement, and the
               provisions of Section 5.9 (TAX CONTEST AND INFORMATION) shall
               apply thereto.

  5.8     [NOT APPLICABLE]

  5.9     Tax Contest and Information

          (a)  If a Tax Indemnitee receives a notice of an audit or a written
               claim for any Tax for which Lessee would be required to pay an
               indemnity pursuant to Section 5.6 or Section 5.7, Lessor or such
               Tax Indemnitee shall notify Lessee promptly of such audit or
               claim, provided that any failure to provide such notice will not
               relieve Lessee of any indemnification obligation pursuant to
               Section 5.6 or 5.7 except to the extent that such failure
               precludes the right to contest such Taxes. If requested by Lessee
               in writing promptly after receipt of notice hereunder, Lessor
               shall or Lessor shall cause, to the extent that it has the
               ability to do so through relationship or contractual privity,
               such Tax Indemnitee to, upon receipt of indemnity satisfactory to
               it and at the expense of Lessee (including all costs, expenses,
               legal and accountants' fees and disbursements, and penalties,
               interest and additions to tax incurred in contesting such claim)
               permit Lessee to contest such audit or claim, or, if such contest
               (w) relates to an income tax, (x) involves Taxes in addition to
               those for which Lessee is responsible hereunder, (y) may not,
               under applicable law be conducted by Lessee, or (z) is one for
               which Lessee requests in writing

                                      -10-

<PAGE>

               that Lessor or the Tax Indemnitee conduct such contest,
               Lessor shall, or Lessor shall cause, to the extent that it has
               the ability to do so through relationship or contractual privity,
               the appropriate Tax Indemnitee to in good faith contest such
               audit or claim, by (i) resisting payment thereof if practicable
               and appropriate, (ii) not paying the same except under protest if
               protest is necessary and proper, or (iii) if payment is made,
               using reasonable efforts to obtain a refund of such Taxes in
               appropriate administrative and judicial proceedings. Lessor or
               the Tax Indemnitee shall determine the method of any contest
               conducted by Lessor or the Tax Indemnitee and (in good faith
               consultation with Lessee) control the conduct thereof, except
               that with respect to matters described in clause (y) or in clause
               (z) above which are not also described in clause (w) or clause
               (x) above Lessor shall and Lessor shall cause, to the extent that
               it has the ability to do so through relationship or contractual
               privity, the Tax Indemnitee to comply with the reasonable
               instructions of Lessee regarding the method of any contest
               conducted by Lessor or the Tax Indemnitee and Lessee shall (in
               good faith consultation with Lessor) control the conduct thereof.
               Lessee shall determine the method of any contest conducted by
               Lessee and (in good faith consultation with Lessor or the Tax
               Indemnitee) control the conduct thereof. Lessee shall pay in full
               all payments of Rent and other amounts payable pursuant to the
               Lease, without reduction for or on account of any Tax (except as
               provided in Section 5.6), while such contest is continuing.
               Lessor shall not be required to contest, or to continue to
               contest, a claim for Taxes under this Section 5.9 if (x) such
               contest would result in a risk of criminal penalties or risk of a
               sale, forfeiture or loss of, or the imposition of a Security
               Interest (other than a Permitted Lien) on, the Aircraft, or (y)
               Lessee shall not have furnished, at Lessee's expense, an opinion
               of independent tax counsel selected by Lessor and reasonably
               satisfactory to Lessee, that a reasonable basis exists for such
               contest, or (z) a Default shall be continuing (unless Lessee
               shall have provided security reasonably satisfactory to Lessor
               securing Lessee's performance of its obligations under this
               Section 5.9). If Lessor or any Tax Indemnitee contests any claim
               for Taxes by making a payment and seeking a refund thereof, then
               Lessee shall advance to Lessor or such Tax Indemnitee, on an
               interest-free basis, an amount equal to the Taxes to be paid by
               Lessor or such Tax Indemnitee in connection with the contest and
               shall indemnify Lessor or such Tax Indemnitee on an After-Tax
               Basis for any adverse tax consequences to Lessor or such Tax
               Indemnitee of such interest-free advance. Upon the final
               determination of any contest pursuant to this Section 5.9 in
               respect of any Taxes for which Lessee shall have made an advance
               to Lessor or a Tax Indemnitee in accordance with the immediately
               preceding sentence, the amount of Lessee's obligation shall be
               determined as if such advance had not been made; any indemnity
               obligation of Lessee to Lessor or a Tax Indemnitee under this
               Section 5.9 and Lessor's or such Tax Indemnitee's obligation to
               repay the advance will be satisfied first by setoff against each
               other, and any difference owing by either party shall be paid
               within ten days after such final determination.

                                       -11-

<PAGE>

          (b)  If Lessor or any Tax Indemnitee obtains a refund or reimbursement
               of all or any part of any Taxes for which a full indemnity was
               paid by Lessee, Lessor shall and Lessor shall cause such Tax
               Indemnitee to pay Lessee the amount of such refund or
               reimbursement, reduced by any Taxes imposed on Lessor or such Tax
               Indemnitee on receipt or accrual of such refund or reimbursement
               and increased by any Taxes saved by Lessor or such Tax Indemnitee
               by reason of the deductibility of such payment by Lessor or such
               Tax Indemnitee. If, in addition to such refund or reimbursement,
               Lessor or such Tax Indemnitee receives an amount of interest on
               such refund or reimbursement or a recovery of costs or attorney's
               fees with respect thereto that were paid by Lessee, Lessor or
               such Tax Indemnitee shall pay to Lessee the portion of such
               interest or recovered costs or attorneys fees which is fairly
               attributable to such refund, reduced by any Taxes imposed by
               Lessor or such Tax Indemnitee on receipt or accrual of such
               interest and increased by any Taxes saved by reason of the
               deductibility of such payment by Lessor or such Tax Indemnitee.
               Neither Lessor nor the Tax Indemnitee shall be required to make
               any payment to Lessee pursuant to this Section 5.9 if, and for so
               long as, a Defaulft shall have occurred and be continuing.

          (c)  Lessor or a Tax Indemnitee in its sole discretion (by written
               notice to Lessee) may waive its rights to indemnification
               pursuant to Section 5.7 with respect to any claim for any Tax and
               may refrain from contesting or continuing the contest of such
               claim, in which event Lessee shall have no obligation to
               indemnify Lessor for the Taxes that are the subject of such
               claim. If Lessor agrees to a settlement of any contest conducted
               pursuant to this Section 5.9 without the prior written consent of
               Lessee, which consent shall not be unreasonably withheld, then
               Lessor shall be deemed to have waived its rights to the
               indemnification provided for in Section 5.7 with respect to the
               Tax liability accepted in such settlement or with respect to
               which Lessee's ability to avoid or minimize, directly or by
               instruction to the Lessor or such Tax Indemnitee regarding how to
               avoid or minimize, Taxes has been materially impaired as a result
               of failure of the Lessor or such Tax Indemnitee to so contest or
               continue to contest.

          (d)  Information:

               (i)  If Lessee is required by any applicable Law, or by any third
                    party, to deliver any report or return in connection with
                    any Taxes for which Lessee would be obligated to indemnify
                    Lessor or any other Tax Indemnitee under the. Lease, Lessee
                    will complete the same and, on request, supply a copy of the
                    report or return to Lessor.

               (ii) If any report, return or statement is required to be made by
                    Lessor or any other Tax Indemnitee with respect to any Tax
                    for which there is an indemnity obligation of Lessee under
                    the Lease, and Lessee knows of, or reasonably should

                                       -12-

<PAGE>

                    have known of, such return, report or statement, Lessee will
                    promptly notify Lessor of the requirement and:

                    (y)  if permitted by applicable Law, make and timely file
                         such report, return or statement (except for any
                         report, return or statement that Lessor has notified
                         Lessee that Lessor or any other Tax Indemnitee intends
                         to prepare. and file), prepare such return in such
                         manner as will show Lessor as lessor of the Aircraft
                         and the ownership -of the Aircraft in Lessor if
                         required or appropriate, and provide Lessor upon
                         request a copy of each such report, return or statement
                         filed by Lessee, or.

                    (z)  if Lessee is not permitted by applicable Law to file
                         any such report return or statement, Lessee will
                         prepare and deliver to Lessor a proposed form of such
                         report, return or statement within a reasonable time
                         prior to the time such report, return or statement is
                         to be filed.

               (iii) Lessee will provide such information and documents as
                    Lessor may reasonably request to enable Lessor or any other
                    Tax Indemnitee to comply with its tax filing, audit and
                    litigation obligations. Lessor or any other Tax Indemnitee
                    will provide such information or documents, at Lessee's
                    expense, that Lessee does not otherwise have as Lessee may
                    reasonably request and which are necessary to enable Lessee
                    to comply with its obligations under the Lease (including
                    Sections 5.6 and 5.7 of the CTA and Schedule B of the
                    Aircraft Lease Agreement) or to minimize Taxes that are the
                    subject of any filing, audit, or contest under this Section
                    5.9.

  5.10     Indemnity Payments - After-Tax Basis

           The amount of any payment made under Section 5.7 (TAX INDEMNITY)
           (including Section 5.7(d)), Section 5.21 (EXPENSES) or Section 10
           (INDEMNITY) to or for the benefit of any Indemnitee, shall include
           such amount as may be necessary to hold such Indemnitee harmless on
           an After-Tax Basis from all Taxes required to be paid by such
           Indemnitee with respect to such payment or indemnity (including any
           payments pursuant to this Section 5.10.

  5.11    Lessor Obligations Following Expiry Date

           Within 91 days (or such shorter period after the Expiry Date to which
           Lessor may agree after Lessee demonstrates to Lessor's reasonable
           satisfaction that Lessee has a net worth, determined in accordance
           with GAAP, of not less than Five Million Dollars ($5,000,000.00) as
           of the Expiry Date) after:

                                      -13-

<PAGE>

          (a)  redelivery of the Aircraft to Lessor in accordance with and in
               the condition required by the Lease; or

          (b)  payment to Lessor of the Agreed Value following an Event of Loss
               after the Delivery Date;

          and in each case so long as all amounts which may then be due
          and payable under the Lease and the Other Agreements shall
          have been paid in full and (no other Default has occurred and
          is continuing:

               (i)  Lessor will pay to Lessee the balance of the Deposit (if
                    any);

               (ii) Lessor will pay to Lessee the amount of any Rent received in
                    respect of any period falling after the date of redelivery
                    of the Aircraft or payment of the Agreed Value, as the case
                    may be; and

               (iii) Lessor will return to Lessee or cancel any Letter of
                    Credit.

  5.12    Net Lease

          The Lease is a net lease. The Lessee's obligation to pay Rent and to
          perform all of its other obligations under the Lease is absolute and
          unconditional no matter what happens and no matter how fundamental or
          unforeseen the event, including any of the following: (a) any right of
          set-off, counterclaim, recoupment, defense or other right which either
          party to the Lease may have against the other (including any right of
          reimbursement) or which Lessee may have against the Manufacturer, any
          manufacturer or seller of or any Person providing services with
          respect to the Aircraft, any Engine or any Part or any other Person,
          for any reason whatsoever; (b) any unavailability of the Aircraft for
          any reason, including a requisition of the Aircraft or any prohibition
          or interruption of or interference with or other restriction against
          Lessee's use, operation or possession of the Aircraft (whether or not
          the same would, but for this provision, result in the termination of
          the Lease by operation of law); (c) any lack or invalidity of title or
          any other defect in title, airworthiness, merchantability, fitness for
          any purpose, condition, design, or operation of any kind or nature of
          the Aircraft for any particular use or trade, or for registration or
          documentation under the Laws of any relevant jurisdiction, or any
          Event of Loss in respect of or any damage to the Aircraft; (d) any
          insolvency, bankruptcy, reorganization, arrangement, readjustment of
          debt, dissolution, liquidation or similar proceedings by or against
          Lessor, Lessee or any other Person; (e) any invalidity or
          unenforceability or lack of due authorization of, or other defect in,
          the Lease; (f) any Security Interests or Taxes; and/or (g) any other
          cause or circumstance which but for this provision would or might
          otherwise have the effect of terminating or in any way affecting any
          obligation of Lessee under the Lease. Lessee acknowledges and agrees
          that it has used its own judgement in selecting the Aircraft, and has
          not relied on Lessor or

                                      -14-

<PAGE>

           on any information supplied by Lessor, that Lessor is not a
           manufacturer of or dealer in aircraft and that Lessor has all of
           the rights and benefits of a lessor under a lease to which
           Section 2A-407 of the UCC applies as provided in such Section
           2A-407.

           Except as expressly set forth elsewhere in the Lease, Lessee hereby
           waives, to the extent permitted by applicable Law, any and all
           right which it may now have or which at any time hereafter may be
           conferred upon it, by statute or otherwise, to terminate, abate,
           cancel, quit, reduce, defer, suspend or surrender the Lease or the
           Aircraft or any obligation imposed upon Lessee under the Lease
           (including payment of Rent or Supplemental Rent).

           Each payment of Rent or Supplemental Rent made by Lessee shall be
           final. Lessee will not seek to recover all or any part of any
           payment of Rent or Supplemental Rent for any reason whatsoever
           except manifest error.

           If for any reason whatsoever the Lease shall be terminated in whole
           or in part by operation of Law, except as specifically provided in
           the Lease, Lessee waives all rights (if any) to any termination or
           diminution in its Rent or Supplemental Rent obligations hereunder
           and nonetheless agrees to pay to Lessor, an amount equal to each
           Rent and Supplemental Rent payment at the time such payments would
           have become due and payable in accordance with the terms thereof
           had the Lease not been terminated in whole or in part and so long
           as such payments are made and all other terms and conditions hereof
           are complied with by Lessee, Lessor and Lessee will deem the Lease
           to remain in full force and effect and Lessee shall continue in
           possession of the Aircraft under the terms and conditions of the
           Lease.

           Nothing in this Section 5.12 will be construed to limit Lessee's
           right to institute separate legal proceedings against Lessor in the
           event of Lessor's breach of the Lease as and to the extent
           permitted by Sections 7.1 and 16.3 of this CTA, or to limit
           Lessee's rights and remedies against any other Person.

  5.13     Further Provisions Regarding Deposit

          (a)  If, under the Lease, Lessee is required to pay a Deposit, Lessee
               hereby grants a security interest in the Deposit to Lessor and
               the remaining provisions of this Section shall apply. Lessee
               agrees that Lessor shall be entitled to commingle the Deposit
               with Lessor's general or other funds, Lessor will have no
               obligation to pay any interest thereon and Lessor will not hold
               any such funds as agent or in trust for Lessee or in any similar
               fiduciary capacity. In this regard, Lessee acknowledges and
               agrees that it is not located in the State of New York within the
               meaning of Section 7-101 1-c. (b) of the New York General
               Obligations Law and, therefore, the requirements of Section 7-101
               of the New York General Obligations Law to the effect that Lessor
               hold the Deposit in a separate, interest bearing account do not
               apply.

                                       -15-

<PAGE>

          (b)  if any Event of Default or any Default under clause (g) of
               Schedule 9 shall have occurred and be continuing, in addition to
               all rights and remedies accorded to Lessor elsewhere in the Lease
               or under Law in respect of the Deposit, Lessor may immediately or
               at any time thereafter, without prior notice to Lessee, apply all
               or part of the Deposit in or towards the payment or discharge of
               any matured obligation owed by Lessee or any affiliate or
               associate of Lessee under the Lease or the Other Agreements, in
               such order as Lessor sees fit, and/or exercise any of the rights
               of set-off described in Section 5.20 against all or part of the
               Deposit.

          (c)  If Lessor exercises the rights described in Section 5.13(b)
               above, Lessee shall, following a demand in writing from Lessor,
               immediately restore the Deposit to the level at which it stood
               immediately prior to such exercise.

  5.14    Letter of Credit

          (a)  If, under the Lease, Lessee is required or elects to provide
               Lessor with a Letter of Credit, the provisions of this Section
               shall apply. Any Letter of Credit provided by Lessee to Lessor
               will be issued and payable by a Pre-Approved Bank or another bank
               acceptable to Lessor in its sole and absolute discretion and in
               substantially the form of Schedule 13, or in another form and
               substance acceptable to Lessor in its sole and absolute
               discretion, and, if not issued by a Pre-Approved Bank or by the
               New York branch of a major international bank acceptable to
               Lessor in its sole and absolute discretion from time to time,
               will be confirmed by and payable at the New York branch of a
               major international bank acceptable to Lessor in its sole and
               absolute discretion from time to time, and will be issued as
               security for all payment obligations of Lessee or any its
               Affiliates under the Lease and each Other Agreement (including
               any and all Losses suffered or incurred by Lessor or any of its
               Affiliates in respect of which Lessee or any if its Affiliates is
               obligated under the Lease or each Other Agreement), which shall
               remain in full force and effect until the Required LC Expiry Date
               and may be drawn down by Lessor upon demand at any time or times
               prior to the Required LC Expiry Date following (i) the occurrence
               of an Event of Default or a Default under clause (g) of Schedule
               9, or (ii) the receipt by Lessor of notice of non-renewal of the
               Letter of Credit under Section 5.14(b) below.

          (b)  The Letter of Credit may have a validity period or periods ending
               prior to the Required LC Expiry Date, provided that (i) the
               Letter of Credit shall be renewed automatically, without further
               act or deed by any party, until such time as Lessor receives
               notice of non-renewal of the Letter Credit, (ii) notice of
               non-renewal of the Letter of Credit shall be provided to Lessor
               no less than 30 Business Days prior to its then scheduled expiry
               date, (iii) Lessor shall be entitled to draw the full amount of
               the Letter of Credit immediately in

                                      -16-

<PAGE>

               the event that Lessor receives any notice of non-renewal of
               the Letter of Credit; and (iv) a Letter of Credit shall remain in
               force at all times up to the Required LC Expiry Date.

          (c)  If at any time during the Term, the current issuing or confirming
               bank for the Letter of Credit ceases to meet the requirements set
               forth in the definition of Pre-Approved Bank, Lessee shall within
               five (5) Business Days after the date of notice from Lessor of
               such decrease in credit rating, cause the Letter of Credit to be
               replaced by a Letter of Credit issued by another bank that meets
               the definition of a Pre-Approved Bank and (if requested by Lessor
               in its sole and absolute discretion) that such replacement Letter
               of Credit is confirmed by another bank that meets the requirement
               of a Pre-Approved Bank.

          (d)  If Lessor makes a drawing under the Letter of Credit, Lessee
               shall, following a demand in writing by Lessor, immediately cause
               the maximum amount available for drawing under the Letter of
               Credit to be restored to the level at which it stood immediately
               prior to such drawing.

  5.15      Guarantee

            If, under the Aircraft Lease Agreement, Lessee is required to
            provide Lessor with a Guarantee, Lessee will on or prior to the
            Delivery Date provide Lessor with the Guarantee.

            If Lessee fails to pay any amount payable under the Lease on the due
            date, Lessee will pay on demand from time to time to Lessor interest
            (both before and after judgement) on that amount, from the due date
            to the date of payment in full by Lessee to Lessor, at the Interest
            Rate. All such interest will be compounded monthly and calculated on
            the basis of the actual number of days elapsed in the month,
            assuming a 30 day month and a 360 day year.

  5.17      Currency

           (a) Except for Losses and expenses suffered or incurred by Lessor,
               which shall be payable by Lessee to Lessor in the currency and in
               the amount in which such Loss is suffered or incurred, all
               amounts payable to Lessor under the Lease shall be payable in
               Dollars in New York and payment in Dollars in New York is of the
               essence. Lessee must indemnify Lessor against any Loss Lessor
               suffers if.

               (i)  Lessor receives an amount relating to Lessee's obligations
                    in a different currency from that in which payments should
                    be made under the Lease; or

               (ii) Lessee pays a judgement or claim in a different currency
                    from that in which payments should be made under the Lease.

                                      -17-

<PAGE>

          (b)  Lessee relinquishes any right to pay any amount under the Lease
               in a currency which is different from the currency provided in
               the Lease. Notwithstanding any such receipt, judgement or claim
               described in Section 5.17(a), Lessee shall have a separate
               obligation to pay, and Lessor shall have a separate claim against
               Lessee for, amounts to be indemnified by Lessee under this
               Section 5.17.

  5.18     Certificates

           Except where expressly provided in the Lease, any certificate or
           determination by Lessor as to any rate of interest or as to any other
           amount payable under the Lease will, in the absence of manifest
           error, be presumed to be correct.

  5.19     Appropriation

           If any sum paid or recovered by Lessor in respect of the liabilities
           of Lessee under the Lease is less than the amount then due, Lessor
           may apply that sum to amounts due under the Lease in such proportions
           and order and generally in such manner as Lessor may determine in its
           sole discretion.

  5.20     Set-off

           (a)  In this sub-clause, references to Lessee will also include
                Lessee Affiliates.

          (b)  Lessor may, without notice, set-off any obligations owed by
               Lessee under the Lease or under the Other Agreements against any
               obligation Lessor or any of its Affiliates owes Lessee under the
               Lease or under the Other Agreements, regardless of the place of
               payment or currency. Promptly after making any such set-off,
               Lessor shall notify Lessee thereof, including in such notice such
               information about the set-off as may be reasonably required to
               enable a reasonable person to identify the claims so set off and
               to verify the calculation of the set-off, but neither failure to
               give such notice nor any alleged defect in such notice shall
               affect the effectiveness of any such set-off.

           If the obligations are in different currencies, Lessor may convert
           either obligation at the martket rate of exchange available in New
           York. If the amount of an obligation is unknown, lessor may estimate
           the amount. Any difference between the estimated obligation and the
           actual obligation will be paid by either Lessor or Lessee, as
           appropriate, when the amount becomes known.

  5.21     Expenses

           Lessee will pay to Lessor on demand all reasonable expenses
           (including all legal fees and expenses and the fees and expenses of
           other professional advisers) that the Lessor suffers or incurs:

                                      -18-

<PAGE>

          (a)  to deal with any amendments, extensions, consents or waivers that
               are required in connection with the Lease (but excluding any
               expenses incurred by Lessor or Owner in connection with any
               change in the ownership or financing of the Aircraft or a change
               in the Lease that is otherwise requested by Lessor or Owner, and
               in each case unrelated to any consent, waiver or amendment
               requested by Lessee or any other act or omission of Lessee) or to
               deal with any replacement of any Engine or Part (except for the
               replacement of an Engine by or at the request of Lessor prior to
               the Delivery Date);

          (b)  for FAA counsel and otherwise to act upon any advice and obtain
               assistance to perfect the Lease in the State of Registry and the
               State of Incorporation (and any other appropriate place); and

          (c)  in contemplation of, or otherwise in connection with, the
               enforcement or preservation of any of Lessor's rights under the
               Lease (including under Section 10) or in respect of the
               repossession of any Aircraft.

          All amounts payable pursuant to this Section 5.21 will be paid in the
          currency in which they are incurred by Lessor.

  6.      MANUFACTURER'S WARRANTIES

          (a)  So long as no Default has occurred which is continuing, Lessor
               shall make available to Lessee during the Term the benefit of all
               manufacturer's warranties in relation to the repair or remedy of
               any defect in the Aircraft (including compensation for loss of
               use of the Aircraft) to the extent that it is permitted to do so.
               In furtherance of the foregoing, Lessor shall take such actions,
               at Lessee's cost and expense, as Lessee may reasonably request
               to make such warranties available to Lessee.

          (b)  If a Default has occurred and is continuing Lessor may
               immediately recover from Lessee the proceeds of any warranty
               claims previously paid to Lessee to the extent that such claims
               relate to any defect in the Aircraft not fully and completely
               rectified by Lessee before such Default and Lessor may:

               (i)  retain for its own account any such proceeds previously paid
                    to Lessor which would have been remitted to Lessee under
                    this Section 6 in the absence of such Default; and

               (ii) cause any proceeds of any pending claims to be paid to
                    Lessor, rather than Lessee.

                                      -19-

<PAGE>

          (c)  Lessee will take all steps at the end of the Tenn as may be
               reasonably required to ensure that the benefit of any warranties
               relating to the Aircraft which have not expired is vested in
               Lessor.

  7.       LESSOR'S COVENANTS

  7.1      QUIET ENJOYMENT

           So long as no Default has occurred and is continuing, Lessor will not
           interfere with Lessee's right to quiet use and possession of the
           Aircraft during the Term. Exercise by Lessor of its rights of
           inspection or other rights provided to it under the Lease in the
           absence of a Default shall not be considered to be a breach of the
           foregoing covenant. Lessee agrees that its only right with respect to
           a default by Lessor under the Lease is to make a claim against Lessor
           for actual damages resulting directly therefrom and in any event
           subject to Section 16.3 hereof, and Lessee hereby waives any and all
           other rights or remedies it may have under Section 2A-211 of the UCC
           or Sections 2A-508 through 2A-522 of the UCC or otherwise.

  7.2      MAINTENANCE CONTRIBUTIONS

           If, under the Aircraft Lease Agreement for -the Aircraft, Lessee is
           required to pay Supplemental Rent, then provided no Default has
           occurred and is continuing, Lessor will pay such amounts, if any, as
           may be specified in the Aircraft Lease Agreement to Lessee by way of
           contribution to the cost of maintenance of the Aircraft, which
           payments, if any, shall be made in the amounts and in the manner
           specified in the Aircraft Lease Agreement.

  8.       LESSEE'S COVENANTS

  8.1      Duration: Lessee shall perform and comply, or cause its Permitted
           Sub-Lessee or maintenance contractor to perform and comply, with its
           undertakings and covenants in the Lease at all times during the Term.
           All such undertakings and covenants shall, except where expressly
           otherwise stated, be performed at the expense of Lessee.

  8.2      Information

           Lessee will:

           (a)  provide Lessor with a Technical Report for the Aircraft within
                15 days after the end of each calendar month throughout the
                Term and otherwise provide Lessor with a Technical Report for
                the Aircraft within thirty (30) days after Lessor's request
                therefor;

           (b)  provide Lessor with the Financial Information;

                                       -20-

<PAGE>

          (c)  (i) notify Lessor of any Event of Loss and of any event which is
               likely to result in an insurance claim in excess of the Damage
               Notification Threshold promptly after the occurrence of any such
               event, (ii) consult with Lessor in the course of, and keep Lessor
               fully apprised as to the details of, any negotiations with its
               insurers or insurance brokers (and, in the case of repairable
               damage, with any applicable repair facility) with respect to any
               insurance claim arising out of such event, and (iii) obtain
               Lessor's prior approval before agreeing to any disposition of any
               insurance claim in excess of the Damage Notification Threshold;

          (d)  upon the occurrence of any event which is likely to give rise to
               an insurance claim under any of the Insurances relating to the
               Aircraft, Lessee shall promptly execute and deliver all documents
               and instruments and take all such other action as may reasonably
               be required to initiate and process any such claim under the
               applicable insurance, and in any event, Lessee shall initiate
               such claim, execute such documents or instruments and take such
               other action promptly following a written request by Lessor that
               Lessee initiate such claim, execute such document or instrument
               or take such other action;

          (e)  provide Lessor, upon request, with evidence that all Taxes and
               charges that are due and payable and were incurred by Lessee in
               connection with the Aircraft, its location and its operations,
               including those invoiced by airports and air traffic control
               authorities have been paid in full (or are being contested in
               good faith by appropriate proceedings in respect of which
               adequate reserves have been provided by Lessee and non-payment of
               which does not give rise to any risk of the Aircraft or any
               interest therein being sold, forfeited or otherwise lost or of
               criminal liability on the part of Lessor or Owner);

          (f)  provide Lessor with such other information concerning the
               location, condition, use and operation of the Aircraft or
               concerning the business or financial affairs of Lessee, as Lessor
               may from time to time reasonably request;

          (g)  [NOT APPLICABLE];

          (h)  [NOT APPLICABLE];

          (i)  notify Lessor promptly as to any material modification to
               Lessee's Maintenance Program (including, without limitation, any
               change from maintenance on a block format to maintenance on a
               phase-basis); provided, however, that Lessee shall not make any
               modifications to Lessee's Maintenance Program which may adversely
               affect the return conditions specified in Part III of Schedule A
               to the Aircraft Lease Agreement without prior consultation with
               Lessor. For the avoidance of doubt, changes to Lessee's
               Maintenance Program extending or shortening times between
               scheduled overhaul of Parts

                                       -21-

<PAGE>

               shall not be deemed to be material modification or to
               adversely affect the return conditions;

  8.3      Lawful and Safe Operation

           Lessee will operate the Aircraft for commercial purposes from the
           Delivery Date until the Return Occasion from a base within the State
           of Registry or from such other base outside the State of Registry
           pursuant to a sub-lease or a wet-lease complying with Section 8.4(a),
           provided, always that Lessee must not use or operate the Aircraft or
           suffer or permit the Aircraft to be used or operated:

          (a)  in violation of any applicable Regulations or in a manner causing
               Lessor, Owner, any Financing Party or GECAS to be in violation of
               (i) any applicable Regulations of the United States, (ii) any
               applicable Regulations of any jurisdiction of which Lessee is
               notified in writing by Lessor as a jurisdiction applicable to
               Lessor, Owner, GECAS or any Financing Party, or (iii) any
               applicable Regulations of any other jurisdiction into which or
               over which the Aircraft is operated; provided, however, that
               nothing in Section 8.3(a)(ii) shall be deemed to require Lessee
               to comply with any Regulations of any jurisdiction other than the
               United States which pertain to the maintenance or modification of
               aircraft.

          (b)  for any purpose for which the Aircraft was not designed or which
               is illegal;

          (c)  to carry cargo which could reasonably be expected to damage the
               Aircraft;

          (d)  in any circumstances or place where the Aircraft is not covered
               by the Insurances; or

          (e)  for purposes of training, qualifying or re-confirming the status
               of cockpit personnel except for the benefit of Lessee's or a
               Permitted Sub-Lessee's cockpit personnel, and then only if the
               use of the Aircraft for such purpose is not disproportionate to
               the use for such purpose of other aircraft of the same type
               operated by Lessee or such Permitted Sub-Lessee, as the case may
               be.

  8.4      Subleasing

          (a)  AT NO TIME PRIOR TO THE RETURN OCCASION WILL LESSEE SUB-LEASE,
               WET-LEASE OR OTHERWISE GIVE POSSESSION OR CONTROL OF THE AIRCRAFT
               OR ANY ENGINE TO, OR OTHERWISE PERMIT THE AIRCRAFT OR ANY ENGINE
               TO BE IN THE POSSESSION OR CONTROL OF, ANY PERSON EXCEPT:

                                       -22-

<PAGE>

               (i)  when the prior written consent of Lessor has been obtained,
                    which consent shall not be unreasonably withheld (it being
                    expressly acknowledged by Lessor and Lessee that the
                    withholding of Lessor's consent in respect of any sub-lease
                    or wet lease shall not be deemed to be unreasonable if the
                    terms of such sub-lease do not comply with the conditions
                    set out in Section 8.4(b) or the terms of such wet lease do
                    not comply with Section 8.4(c), as the case may be); or

               (ii) where the Aircraft or Engine is delivered to a manufacturer
                    or maintenance facility for work to be done on it as
                    required or permitted under the Lease; or

               (iii) to a sub-lessee of the Aircraft to which Lessor consents in
                    writing (a "PERMITTED SUB-LESSEE"), pursuant to a sub-lease
                    to which Lessor consents in (a "PERMITTED SUB-LEASE"), which
                    complies with the conditions set out in Section 8.4(b), and
                    provided that no Default shall have occurred and be
                    continuing at the commencement of such sub-lease;

               (iv) on a wet-lease which complies with Section 8.4(c); or

               (v)  with respect to an Engine, as permitted under Section
                    8.11.

          (b)  If Lessor grants its consent to a proposed sub-lessee and a
               proposed sub-lease, in addition to any conditions required by
               Lessor as part of any such consent of Lessor, each of the
               following conditions shall be required to be satisfied in
               relation to any Permitted Sub Lease prior to any sub-leasing
               pursuant to this Section:

               (i)  NOTIFICATION: at least 30 days prior to entering into any
                    Permitted Sub-Lease, Lessee shall give Lessor written
                    notice, specifying the identity of the Permitted Sub-Lessee,
                    the term of the Permitted Sub-Lease, the delivery date under
                    the Permitted Sub-Lease and the habitual base of the
                    Permitted Sub-Lessee;

               (ii) Term: the term of the Permitted Sub-Lease shall not be
                    capable of extending beyond one month (or such shorter
                    period as Lessor may agree (which agreement shall not be
                    unreasonably withheld) in giving its consent to such
                    Permitted Sub Lease) before the Scheduled Expiry Date;

               (iii) FORM: a Permitted Sub-Lease shall:

                    (aa) not contain provisions inconsistent with the provisions
                         of the Lease (but may impose additional or more
                         stringent obligations on any Permitted Sub-Lessee than
                         are imposed on Lessee under the Lease);

                                       -23-

<PAGE>

                    (bb) provide that no further subleases of the Aircraft by
                         such Permitted Sub-Lessee are permitted; and

                    (cc) include provisions or having substantially the
                         substantially identical to same effect as Sections 2.1,
                         5.6, 5.7, 5.10, 5.12, 5.16, 5.17, 5.21, 8, 9, 10, 11,
                         13, 15.1, 15.8 and 16 and Schedules 2 (Section 1.1), 7
                         and 9 of the Lease (but the Permitted Sub-Lease may
                         impose additional or more stringent obligations on any
                         Permitted Sub-Lessee than are imposed on Lessee under
                         the Lease);

               (iv) Subordination and Assignment: the Permitted Sub-Lease shall
                    provide that (aa) the Permitted Sub-Lease is subject and
                    subordinate to the Lease in all respects and the rights of
                    the Permitted Sub-Lessee under the Permitted Sub-Lease are
                    subject and subordinate in all respects to the rights of
                    Lessor under the Lease; and (bb) prior to delivery of the
                    Aircraft to the Permitted Sub-Lessee (as a condition
                    precedent thereof), the Permitted Sub-Lessee shall provide
                    an acknowledgement to Lessor and Owner in a form reasonably
                    satisfactory to Lessor, confirming its agreement to this
                    provision and confirming that, except to the extent, if any,
                    that it receives a quiet enjoyment letter from Lessor
                    pursuant to Section 8.4(b)(v) below, its rights to
                    possession of the Aircraft under the Permitted Sub-Lease
                    will terminate immediately upon the termination of the
                    Lease, and that it will redeliver the Aircraft to Lessor,
                    upon notification from Lessor that an Event of Default has
                    occurred and that it has, as a result thereof, terminated
                    Lessee's right to possession of the Aircraft under the Lease
                    (the "SUBORDINATION ACKNOWLEDGEMENT"). The Permitted
                    Sub-Lease shall be assigned, as security, to Lessor for
                    Lessee's obligations under the Lease, pursuant to an
                    agreement reasonably acceptable to Lessor (the "SUB-LEASE
                    ASSIGNMENT") (and, if applicable, Lessor's interest in such
                    Sub-Lease Assignment may be reassigned, as security, to
                    Owner and/or the Financing Parties' Representative);

               (v)  QUIET ENJOYMENT: the Permitted Sub-Lease shall provide that
                    the Permitted Sub-Lessee shall have the right to quiet
                    enjoyment of the Aircraft for so long as no Event of Default
                    has occurred under the Lease; provided, however, that, upon
                    request by a Permitted Sub-Lessee, Lessor shall, and shall
                    cause the Financing Parties Representative (if applicable)
                    to, execute and deliver to the Permitted Sub-Lessee a letter
                    of quiet enjoyment in respect of the Permitted Sub-Lessee's
                    use and possession of the Aircraft for so long as no event
                    of default occurs under the Permitted Sub-Lease,
                    notwithstanding the occurrence of an Event of Default under
                    the Lease, in a form substantially similar to Section 7.1
                    hereof if Lessor is satisfied in its sole discretion as to
                    (i) the creditworthiness of the Proposed Sub-

                                      -24-

<PAGE>

                    Lessee at the time of such request, (ii) the sufficiency of
                    the rentals and other payment obligations, including
                    indemnities under the Permitted Sub-Lease to discharge in
                    full the Rent and the indemnity obligations of Lessee under
                    the Lease, (iii) the installment frequency of the rent
                    payable under the Permitted Sub-Lease, (iv) the
                    acknowledgment of and agreement by the Permitted Sub-Lessee
                    to be bound by the provisions of Section 16 hereof, (v) the
                    acknowledgment by each of the Permitted Sub-Lessee and the
                    Lessee that Lessor shall have no greater liability to either
                    Permitted Sub-Lessee or the Lessee in respect of Lessor's
                    obligations under Section 7.1 hereof or under such letter
                    than Lessor would have had under Section 7.1 in the absence
                    of the Permitted Sub-Lease, (vi) the form and substance of
                    the Subordination Acknowledgment, and (vii) the terms of the
                    Permitted Sub-Lease in respect of the matters contemplated
                    by this Section 8.4(b);

               (vi) OBLIGATIONS OF LESSEE: Lessee shall remain primarily liable
                    under the Lease for the performance and observance of all
                    its obligations to the same extent as if no Permitted
                    Sub-Lease had been entered into. To the extent that the
                    Permitted Sub-Lessee properly performs an obligation under
                    the Permitted Sub-Lease, Lessor agrees that such performance
                    shall also be regarded as discharging (to such extent)
                    Lessee's corresponding obligation;

               (vii)INSURANCES: all insurance requirements herein shall be
                    complied with either by Lessee or by the Permitted
                    Sub-Lessee as if references in the insurance provisions
                    of the Lease to "Lessee" were references to "the
                    Permitted Sub-Lessee", and Lessee shall provide or cause
                    the Permitted Sub-Lessee to provide the insurance
                    certificate and brokers' letter of undertaking referred
                    to in Section 9.3(c)(ii) at least five (5) Business Days
                    prior to the commencement of the Permitted Sub-Lease;

               (viii) REGISTRATION: there shall be no change in the registration
                    of the Aircraft from its State of Registry;

               (ix) REPOSSESSION OR POLITICAL RISK INSURANCE: if reasonably
                    required by Lessor or if required of Lessor by Owner or the
                    Financing Parties' Representative, repossession or political
                    risk insurance, as the case may be, shall be obtained by
                    Lessor at Lessee's cost, provided that repossession or
                    political risk insurance , as the case may be, will not be
                    required if the Permitted Sub-Lessee meets the requirements
                    of Sections 8.7(iv) and (v). If repossession or political
                    risk insurance is required, the Permitted Sub-Lease must
                    provide that, if any such repossession or political risk, as
                    the case may be, insurance cannot be obtained or renewed, a
                    termination event will occur upon notice by Lessor to Lessee
                    or the

                                       -25-

<PAGE>

                    Permitted Sub-Lessee of an inability to procure
                    repossession or political risk, as the case may be,
                    insurance;

               (x)  LEGAL OPINIONS: as a condition precedent to the
                    effectiveness of the Permitted Sub-Lease, Lessee shall
                    provide to Lessor the following legal opinions (at Lessee's
                    or Permitted Sub-Lessee's expense) addressed to Lessor,
                    Owner and the Financing Parties' Representative from counsel
                    reasonably acceptable to Lessor;

                    (aa) a legal opinion in relation to the Permitted Sub-Lease
                         in form and substance reasonably satisfactory to, and
                         containing such other matters set out in Schedule 8
                         requested by, Lessor and confirming further that each
                         of the Subordination Acknowledgement, the Permitted
                         Sub-Lease and the Sub-Lease Assignment is valid,
                         binding and (except as limited by any equitable
                         principles and applicable bankruptcy, insolvency,
                         reorganization, moratorium or similar laws affecting
                         creditors' or lessors' rights generally) enforceable
                         against Permitted Sub-Lessee and, in the case of the
                         Sub-Lease Assignment, properly perfected as against
                         Lessee;

                    (bb) if the Habitual Base is not in the United States, one
                         or more legal opinions in form and from counsel
                         reasonably acceptable to Lessor to the effect, inter
                         alia, that Lessor's, Owner's and Financing Parties'
                         Representative's interests in the Aircraft will be
                         recognized under the laws of such country or countries
                         (it being expressly understood that there shall be no
                         requirement that any single legal point or issue be
                         covered in opinions from more than one counsel except
                         to the extent, if any, that the laws of more than one
                         jurisdiction may be at issue); and

                    (cc) such opinions as may be required under the Financing
                         Documents.

                         Final forms of the foregoing opinion or opinions (x)
                         shall be forwarded promptly to Lessor at least five
                         Business Days prior to the effective date of the
                         Permitted Sub-Lease, and (y) may, if different
                         opinions are required hereunder, be made by a single
                         counsel qualified to render opinions in each such
                         country;

               (xi) FILINGS: Lessee shall co-operate with Lessor (at no cost to
                    Lessor) in connection with the execution and filing of any
                    documents reasonably required by Lessor to be executed and
                    filed from time to time with any registry or authority in
                    the Habitual Base, the State of Registration and State of
                    Incorporation (of each of Lessee and the Permitted
                    Sub-Lessee) in order to protect the interests of Lessor,
                    Owner and Financing Parties' Representative in and to the
                    Aircraft, the Lease or

                                       -26-

<PAGE>

                    the Permitted Sub-Lease and/or to ensure the validity,
                    enforcement or priority thereof;

               (xii) EXPENSES: Lessee will pay to Lessor on demand all
                    reasonable out of pocket expenses (including legal, survey
                    and other costs) and Taxes payable or incurred by Lessor,
                    Owner or Financing Parties' Representative in connection
                    with the review and approval of the documentation required
                    pursuant to this Section or otherwise incurred in connection
                    with any requested sub-lease or the sub-leasing of the
                    Aircraft thereunder, and will pay any Sublease Fee specified
                    in the Aircraft Lease Agreement for such Aircraft;

               (xiii) PERMITTED SUB-LEASE: Promptly after its execution, Lessee
                    shall provide Lessor with a copy of the signed Permitted
                    Sub-Lease;

               (xiv) ACKNOWLEDGEMENT BY GUARANTOR: If a Guarantee is required
                    under the Aircraft Lease Agreement, Lessee shall provide to
                    Lessor at least five Business Days prior to the effective
                    date of the Permitted Sub-Lease an acknowledgement by
                    Guarantor of the Permitted Sub-Lease and confirmation that
                    the Guarantee will remain in full force and effect during
                    the term of such Permitted Sub-Lease;

               (xv) FINANCING RESTRICTIONS AND REQUIREMENTS: If Lessee requests
                    Lessor's consent to a sub-lease, it will not be unreasonable
                    for Lessor to decline its consent to such sub-lease, if such
                    sub-lease would result in a breach by Lessor of the
                    restrictions contained in or give rise to any liability or
                    adversely affect Lessor's rights or obligations or otherwise
                    result in a detriment under any of the Financing Documents;
                    and

               (xvi) MAINTENANCE PROGRAM: Lessee shall, or shall cause the
                    Permitted Sub-Lessee to, provide Lessor with such
                    information as Lessor may reasonably request with respect to
                    the Maintenance Program of the Permitted Sub-Lessee, and
                    Lessor shall be reasonably satisfied with the Maintenance
                    Program of the Permitted SubLessee.

          (c)  Notwithstanding Section 8.4 (a), Lessee shall be permitted to wet
               lease the Aircraft provided such wet lease constitutes an
               arrangement whereby Lessee agrees to furnish the Aircraft to a
               third party pursuant to which the Aircraft (i) shall be operated
               solely by regular employees of Lessee possessing all current
               certificates and licenses that are required by applicable
               Regulations, including by the State of Registry, and shall remain
               in the operational control and possession of Lessee, (ii) shall
               be subject to insurance coverage as provided for in the Lease,
               (iii) shall be used and operated in accordance with the Lease and
               shall be maintained or caused to be maintained by Lessee in
               accordance

                                       -27-

<PAGE>

               with Lessee's Maintenance Program and Lessee's normal
               maintenance practices, (iv) shall not be subject to any change in
               its State of Registry, and (v) shall not be operated out of a
               Habitual Base located outside the United States; and provided
               always that, such arrangement is expressly subordinated to the
               Lease and the rights of Lessor and Owner thereunder and to the
               Aircraft, and Lessee provides Lessor with all opinions,
               certificates and other documents requested by Lessor which are
               required to be provided, and takes all other action requested by
               Lessor which is required of Lessee or Lessor under any Financing
               Document in connection with such a wet lease.

  8.5     INSPECTION

          (a)  Lessee will permit Lessor's, Owner's and the Financing Parties'
               Representative representatives to inspect the Aircraft at any
               time. Unless a Default has occurred and is continuing, any such
               Person will give Lessee reasonable notice of inspection and will
               ensure that it does not result in a disruption to the scheduled
               operation or maintenance of the Aircraft. Lessee shall comply
               with the reasonable requests of Lessor's, Owner's and the
               Financing Parties' Representative representatives during the
               course of an inspection, including any request to travel on the
               flight deck of the Aircraft as an observer, subject, to any
               applicable Regulations and insurance requirements.

          (b)  The cost of conducting an inspection shall be borne by Lessor,
               Owner or the Financing Parties, as the case may be, unless, as a
               result of that inspection, Lessee is found to be in material
               default of its obligations under the Lease in which case the cost
               shall be borne by Lessee.

          (c)  No liability or obligation will be incurred by Lessor, Owner,
               Financing Parties' Representative or the Financing Parties, as
               the case may be, by reason of non-exercise by any of them of the
               inspection rights referred to in this Section.

  8.6     OWNERSHIP; PROPERTY INTERESTS; RELATED MATTERS

          (a)  Lessee will:

               (i)  fix and maintain Nameplates containing the Nameplate
                    Inscription in a prominent position in the cockpit or cabin
                    of the Aircraft and on each Engine;

               (ii) in any circumstance where such interests are relevant, take
                    all reasonable steps to make sure that all relevant Persons
                    know about the interests of Owner, Lessor and Financing
                    Parties Representative in the Aircraft; and

               (iii) pay all navigation charges, air traffic control charges,
                    landing charges or other amounts of any nature imposed by
                    any Government Entity with respect to

                                       -28-

<PAGE>

                    Lessee, the Aircraft and/or the Lease except to the
                    extent that, in the reasonable opinion of Lessor, such
                    payment is being contested in good faith by appropriate
                    proceedings in respect of which adequate reserves have been
                    provided by Lessee and non-payment of which does not give
                    rise to any material likelihood of the Aircraft or any
                    interest therein being sold, forfeited or otherwise lost or
                    of criminal liability on the part of Lessor or Owner.

          (b)  Lessee will not:

               (i)  represent that it is the owner of the Aircraft or that it
                    has an economic interest (equivalent to ownership) in the
                    Aircraft for Tax treatment or other purposes;

               (ii) take any action or fail to take any action, other than
                    action required under the Lease (including under Section
                    7.1) to be taken by Lessor, Affiliates of Lessor, Owner or a
                    Financing Party, if such action or omission could result in
                    a forfeiture or seizure of the Aircraft or otherwise
                    similarly put Owner's and/or Lessor's and/or Financing
                    Parties' Representative's rights or interests at risk,

               (iii) represent to others that Owner, Lessor or Financing
                    Parties' Representative is associated with or responsible
                    for the business activities and/or flight operations of
                    Lessee;

               (iv) allow the Aircraft or Owner's, Lessor's or Financing
                    Parties' Representative's interest in it or the Lease to
                    become or remain subject to any Security Interest (other
                    than a Permitted Lien); or

               (v)  allow the name of any Person to be placed on the Aircraft or
                    any Engine as a designation that could reasonably be
                    interpreted as a claim of ownership or as a Security
                    Interest; provided, that Lessee may place thereon, or allow
                    a Permitted Sub-Lessee to place thereon, its customary
                    livery, insignia and colors.

  8.7      GENERAL

          (a)  Lessee will:

               (i)  maintain its business as a commercial scheduled airline,
                    will preserve its corporate existence (other than as
                    permitted in Section 8.7 (vii) below) and will maintain all
                    rights, privileges, licenses and franchises material thereto
                    or material to performing its obligations under the Lease;

               (ii) not operate, maintain, insure or deal with, or keep records
                    with respect to, the Aircraft in a manner which
                    discriminates against the Aircraft adversely insofar as

                                       -29-

<PAGE>

                    Lessor's, Owner's or Financing Parties' interests are
                    concerned, when compared with the manner in which Lessee
                    operates, maintains, insures or deals with, or keep records
                    with respect. to, similar aircraft, engines or parts in
                    Lessee's fleet; provided, however, in the -event that Lessee
                    determines that any particular expenditure or modification
                    may not be prudent during the last nine months prior to the
                    Scheduled Expiry Date, then Lessor and Lessee shall discuss
                    the issue and negotiate in good faith to agree on a mutually
                    acceptable solution.

               (iii) not change the location of its chief executive office from
                    that described in the heading of the Aircraft Lease
                    Agreement or otherwise be located (as defined in Section
                    9-103(3)(d) of the UCC) at any place in the United States
                    other than the location described the heading of the
                    Aircraft Lease Agreement, except upon 30 days prior written
                    notice thereof to Lessor;

               (iv) remain a Certificated Air Carrier and maintain its status so
                    as to fall within the purview of Section 1110 of Title 11
                    of the U.S.C. or any analogous statute;

               (v)  remain a "citizen of the United States" as defined in
                    Section 40102(a)(15)(c) of Title 49 of the U.S.C.;

               (vi) not liquidate or dissolve; and

               (vii) not consolidate with or merge into or with any other
                    corporation or other Person, and not convey, transfer, lease
                    or otherwise dispose of all or substantially all of its
                    property and other assets to, or acquire all or any
                    substantial part of the property or other assets or capital
                    stock of (if such acquisition is analogous in either purpose
                    or effect to a consolidation or merger), any corporation or
                    other Person, unless Lessee provides Lessor with written
                    notice of such transaction promptly following Lessee's
                    execution of a binding agreement or commitment to enter into
                    any such transaction, which notice shall in any event be
                    provided no later than 30 days prior to the effectiveness or
                    consummation of any such transaction and which notice shall
                    describe such transaction in reasonable detail and contain
                    or be accompanied by evidence reasonably satisfactory to
                    Lessor demonstrating that such transaction will comply with
                    the following requirements of this Section and unless:

                    (x)  such transaction shall not have any material adverse
                         effect on the rights of Lessor, Owner or the Financing
                         Parties' Representative under or in respect of the
                         Lease or the Aircraft; and all applicable requirements
                         of the Financing Documents shall have been complied
                         with in connection therewith;

                                       -30-

<PAGE>

                    (y)  the Person formed by or surviving such consolidation or
                         merger or the Person which acquires by conveyance,
                         transfer, lease or other disposition all or
                         substantially all of such property and other assets or
                         stock (the "SUCCESSOR ENTITY"): (A) shall be a
                         corporation organized and existing under the laws of
                         the United States or any State thereof or the District
                         of Columbia; (B) immediately after giving effect to
                         such transaction, shall be Lessee or shall have
                         acquired or succeeded to all or substantially all of
                         the property and other assets of Lessee (if such assets
                         are being transferred) as an entirety, and shall have a
                         tangible net worth (determined in accordance with GAAP)
                         of not less than Lessee's tangible net worth
                         (determined in accordance with GAAP) immediately prior
                         to such transaction; (C) shall be a "citizen of the
                         United States" of America as defined in Section
                         40102(a)(15)(c) of Title 49 of the U.S.C. and a
                         Certificated Air Carrier; and (D) shall execute and
                         deliver to Lessor such recordations and filings with
                         any Governmental Entity and such other documents as
                         Lessor determines shall be reasonably necessary or
                         advisable to evidence, or in connection with, such
                         consolidation, merger, sale, lease, transfer or other
                         disposition and an agreement, in form and substance
                         reasonably satisfactory to Lessor which is a legal,
                         valid, binding and enforceable assumption by such
                         Successor Entity of the due and punctual performance
                         and observance of each covenant and condition of the
                         Lease and the other related documents to which Lessee
                         is a party, and an officer's certificate to such effect
                         and to the effect that the other requirements of this
                         Section have been satisfied, and a legal opinion from
                         counsel to such effect and otherwise in such form and
                         substance reasonably satisfactory to Lessor; and

                    (z)  no Default shall have occurred and be continuing or
                         shall occur as a result thereof.

  8.8      RECORDS

           Lessee will keep all Aircraft Documents and Records:

          (a)  in English;

          (b)  according to good United States airline practice; and

          (c)  so they meet the requirements of applicable Regulations
               (including FAR 91.417) and Lessee's Maintenance Program.

                                      -31-

<PAGE>

  8.9      PROTECTION

           Lessee will:

          (a)  take all actions requested by Lessor that are within Lessee's
               control to keep the Aircraft registered with the Air Authority in
               the name of Owner and, if applicable, subject to the
               first-priority Security Interest in favor of Financing Parties'
               Representative; and

          (b)  make any and all filings required to be made with the Air
               Authority registry that are within its control and take all other
               actions within its' control that are necessary or advisable to
               reflect on the Air Authority registry any change in the ownership
               of the Aircraft, or in the interests of Lessor, Owner or the
               Financing Parties' Representative in the Lease or the Aircraft,
               any modification to the Aircraft (such as the permanent
               replacement of any Engine or Part in accordance with the Lease)
               or as a result of any change in applicable Regulation. Lessor
               will bear any costs incurred as a consequence of a transfer by
               Lessor, Owner or the Financing Parties' Representative of the
               interests of Lessor, Owner or the Financing Parties'
               Representative in the Lease or the Aircraft or a change in the
               identity of Lessor, Owner or the Financing Parties'
               Representative (in each case, unrelated to the replacement of any
               Engine or Part or a Default), and Lessee will bear any other
               costs incurred in complying with this Section, including in
               connection with the replacement of any Engine or Part.

  8.10     MAINTENANCE AND REPAIR

           Lessee will maintain, overhaul and repair the Aircraft (or arrange
           for the Aircraft to be maintained, overhauled and repaired, through
           the Maintenance Performer), so that:

          (a)  the Aircraft is kept in as good operating condition and repair as
               the condition of the Aircraft as at Delivery and after giving
               effect to any post-Delivery modifications, repairs or maintenance
               paid for or otherwise provided by or on behalf of Lessor, except
               for ordinary wear and tear;

          (b)  the Lessee has a current certificate of airworthiness (issued by
               the Air Authority in the appropriate public transport category)
               for the Aircraft;

          (c)  the Aircraft complies with (i) all applicable Regulations
               including the standard stipulated by FAR Part 121 Subpart L and
               any other rules and regulations of the FAA and, subject to the
               provisions of ss. 8.10(d), in at least the same manner and with
               at least the same care, including record keeping, maintenance
               scheduling, modification status and technical condition, as is
               the case with respect to similar aircraft owned or otherwise
               operated by Lessee and as if Lessee were to retain and continue
               operating the Aircraft in its fleet after

                                       -32-

<PAGE>

               the Expiry Date, including ill maintenance to the Airframe,
               any Engine or any Part required to maintain all warranties,
               performance guaranties or service life policies that are assigned
               by Lessor to Lessee in Full force and effect; and (ii) the
               requirements of all Airworthiness Directives and all service
               bulletins designated by the State of Design or State of Registry
               as "mandatory," and to be carried out before the Return Occasion
               or the Scheduled Expiry Date, whichever is later, or within a
               period of 180 days after the Return Occasion or the Scheduled
               Expiry Date, whichever is later; and

          (d)  all maintenance is carried out according to Lessee's Maintenance
               Program in at least the same manner and with at least the same
               care, including maintenance scheduling, modification status and
               technical condition, as is the case with respect to similar
               aircraft owned or otherwise operated by Lessee; provided,
               however, in the event that Lessee determines that any particular
               expenditure or modification may not be prudent during the last
               nine months prior to the Scheduled Expiry Date, then Lessor and
               Lessee shall discuss the issue and negotiate in good faith to
               agree on a mutually acceptable solution.

  8.11    REMOVAL OF ENGINES AND PARTS

          (a)  GENERAL: Lessee must replace, within one hundred and five (105)
               days thereof, any Engine that has suffered an Engine Event of
               Loss in accordance with Section 8.11 (b), and any Part which is
               permanently removed from the Aircraft must be replaced in
               accordance with Section 8.11 (b). Any Part which otherwise is
               lost, stolen, destroyed, seized, obsolete, confiscated, damaged
               beyond repair or permanently rendered unfit for any reason, must
               be replaced in accordance with Section 8.11(b). Any Engine or
               Part may be installed on another aircraft Lessee owns or leases
               in accordance with Section 8.11 (c). Lessee may temporarily
               install an engine or part in accordance with Section 8.11(d).
               Lessee shall obtain from any Person to whom possession of an
               Engine is given (other than (i) any Maintenance Performer to whom
               an Engine is delivered for maintenance, repair or overhaul, (ii)
               the Engine Manufacturer, or (iii) any other Person to whom an
               Engine is given solely for purpose of transporting the Engine),
               and from the lessor of any airframe on which an Engine is
               installed and from any holder of a Security Interest in any
               airframe on which an Engine is installed, an agreement in writing
               (which agreement, in the case of a lease or Security Interest,
               may be contained in the applicable lease or Security Interest
               agreement covering such airframe) that such Person will not
               acquire or claim any rights, title or interest in such Engine as
               a result of such Engine being installed on such other airframe at
               any time while such Engine is subject to the Lease. In the event
               Lessee shall have received from a lessor of or secured party
               holding a Security Interest in any airframe leased to Lessee or
               owned by Lessee a written agreement pursuant to the foregoing
               sentence and the lease or Security Interest covering such
               airframe also covers an engine or engines owned by the lessor
               under such lease or subject to such Security

                                       -33-

<PAGE>

               Interest in favor of the secured party under such Security
               Interest, Lessor hereby agrees for the benefit of such lessor or
               secured party that Lessor will not acquire or claim as against
               such lessor or secured party, any rights, title or interest in
               any such engine as a result of such engine being installed on the
               Airframe at any time while such engine is owned by such lessor
               and subject to such lease or such Security Interest in favor of
               such secured party.

          (b)  PERMANENT REPLACEMENT: If Lessee permanently replaces an Engine
               or Part:

               (i)  in the case of an Engine, the replacement engine must be of
                    the same manufacturer and model, or at Lessee's option an
                    engine of an improved model, and have equivalent or better
                    remaining useful life and modification status as the Engine
                    it replaces, and is otherwise of an equivalent or better
                    value and utility and suitable for installation and use on
                    the Airframe without impairing the value or utility of the
                    Airframe and compatible with the remaining installed
                    Engine(s);

               (ii) in the case of a Part, the replacement part must be in good
                    operating condition, have a value and utility the same or
                    better than the Part it is replacing, be of the same or a
                    more advanced make and model and be of the same
                    interchangeable modification status as the Part it is
                    replacing;

               (iii) the replacement engine or part must have become and remain,
                    until replaced in accordance with this Section, the property
                    of Owner free from Security Interests (other than Permitted
                    Liens), and subject to the applicable Financing Documents;

               (iv) Lessee must have full details of the source and
                    maintenance records of the replacement engine or part and
                    in the case of serialized rotable parts, also have a
                    complete service history; and

               (v)  Lessee must comply with the requirements of the Financing
                    Documents in connection with any such replacement including
                    to provide such legal opinions and other documents as may be
                    required under the Financing Documents.

          (c)  OTHER AIRCRAFT: An Engine or Part may be installed on an aircraft
               which Lessee owns or leases if:

               (i)  no Event of Default has occurred and is continuing;

               (ii) Lessee or a Permitted Sub-Lessee has operational control
                    over the aircraft;

               (iii)Owner keeps the ownership of the Engine or Part concerned
                    until replaced in accordance with Section 8.11(b);

                                       -34-

<PAGE>

               (iv) the Engine or Part does not become subject to a Security
                    Interest and the applicable airframe is not subject to any
                    Security Interest except a Permitted Lien or a lease or
                    Security Interest described in Section 8.11 (a) above; and

               (v)  the Engine or Part is replaced in accordance with
                    Section 8.11(b) or is removed from the aircraft as soon
                    as practicable under Lessee's engine rotation program
                    but not later than the Expiry Date.

          (d)  TEMPORARY REPLACEMENT: Lessee may install any engine or part on
               the Aircraft as a temporary replacement if.

               (i)  no Event of Default has occurred and is continuing;

               (ii) there is not available an engine or part complying with the
                    requirements of the Lease for a replacement Engine or Part;

               (iii) it would result in an unreasonable disruption of the
                    operation of the Aircraft or the business of Lessee to have
                    the Aircraft grounded until such time as an engine or part
                    complying with the requirements of the Lease for a
                    replacement Engine or Part becomes available for
                    installation;

               (iv) as soon as practicable (under Lessee's engine rotation
                    program in the case of an engine) after an engine or part is
                    installed on the Aircraft, but before the earlier of sixty
                    (60) days after such temporary replacement or the Expiry
                    Date, Lessee removes that engine or part and replaces it
                    with the original Engine or Part (or by an engine or part
                    which is allowed by Section 8.11 (b)); and

               (v) the Insurances for the Aircraft are not adversely affected.

          (e)  POOLING/INTERCHANGE: Lessee shall not subject any Engine or Part
               to any pooling, interchange, lease or similar arrangement unless
               Lessee obtains Lessor's prior written consent thereto, which
               consent shall not be unreasonably withheld.

          (f)  Engines: Notwithstanding anything to the contrary set forth in
               Sections 8.11 (c) and (d) above, so long as no Default shall have
               occurred and be continuing, any Engine may remain installed on an
               aircraft other than the Aircraft, and any auxiliary power unit
               may remain installed on the Aircraft indefinitely during the
               Term; provided, however, (i) upon the occurrence of any Default,
               Lessee shall promptly, and in any case within sixty (60) days
               following the occurrence of such Default, cause each Engine to be
               re-installed on the Aircraft, or, at Lessee's election, cause any
               of the Engines to be replaced by a replacement Engine meeting the
               requirements of, and in accordance with, Section 8.11 (b), and
               (ii) in any event Lessee shall cause such Engine to be either
               re-installed on the Aircraft or

                                       -35-

<PAGE>

               replaced by a replacement Engine meeting the requirements of, and
               in accordance with, Section 8.11 (b) on or before the Expiry
               Date.

          (g)  APU: Notwithstanding anything to the contrary set forth in
               Sections 8.11(c) and (d) above, so long as no Default shall have
               occurred and be continuing, the APU may remain installed on an
               aircraft other than the Aircraft, and any auxiliary power unit
               may remain installed on the Aircraft indefinitely during the
               Term; provided, however, (i) upon the occurrence of any Default,
               Lessee shall promptly, and in any case within sixty (60) days
               following the occurrence of such Default, cause the APU to be
               re-installed on the Aircraft, or, at Lessee's election, cause the
               APU to be replaced by a replacement auxiliary power unit meeting
               the requirements of, and in accordance with, Section 8.11 (b),
               and (ii) in any event Lessee shall cause the APU to be either
               re-installed on the Aircraft or replaced by a Replacement APU
               meeting the requirements of, and in accordance with, Section 8.11
               (b) on or before the Expiry Date.

  8.12      EQUIPMENT CHANGES

            Lessee will not make any modification or addition to the Aircraft
            (each an "EQUIPMENT CHANGE"), except for an Equipment Change which:

               (i)  is expressly permitted or required by the Lease; or

               (ii) has (x) a cost (including labor) of less than the
                    Modification Approval Amount or (y) the prior written
                    approval of Lessor, and (z) in either case, does not
                    diminish the condition, utility, airworthiness or value of
                    the Aircraft.

           So long as no Default has occurred and is continuing, Lessee may
           remove or reverse any Equipment Change provided that the Equipment
           Change is not required pursuant to the terms of the Lease or to
           maintain the Insurances and removal or reversal does not diminish the
           value, utility, airworthiness or condition of the Aircraft assuming
           that such Equipment Change was not made and that Aircraft is
           maintained in accordance with the Lease. Furthermore, Lessor may
           require Lessee to remove or reverse any Equipment Change on the
           Expiry Date and to restore the Aircraft to its condition prior to
           that Equipment Change. Any Equipment Change not so removed or
           reversed becomes the property of Lessor or Owner, as the case may be,
           at the Expiry Date.

  8.13     TITLE ON AN EQUIPMENT CHANGE

           Title to any equipment that is installed on the Airframe shall,
           except in the case of an engine or an auxiliary power unit or a
           temporary replacement of a Part or any In-Flight Equipment, vest in
           Owner solely by virtue of its attachment to the Airframe or an
           Engine and it shall then be subject

                                       -36-

<PAGE>

          to the Lease and, if applicable, the Financing Documents, as if
          it were attached to the Aircraft at Delivery. In the case of any
          replacement of an Engine or the APU pursuant to Section 8.11 (b), and
          otherwise if so requested by Lessor, Lessee will provide a properly
          executed bill of sale or similar instrument to evidence the vesting of
          good and marketable title, free and clear of Security Interest (except
          Lessor Liens), to any such Replacement Engine, Replacement APU or
          other equipment in Owner and all documents required under the
          Financing Documents. After Lessor has determined that Lessee has
          permanently replaced an Engine or the APU in accordance with Section
          8.11 (b) and this Section 8.13, Lessor will, or will procure that
          Owner will, without recourse or warranty (except as to the absence of
          Lessor's Liens), transfer to Lessee or will procure that Owner will
          transfer to Lessee all of Lessor's or Owner's, as the case may be,
          rights to the engine or the auxiliary power unit that has been
          replaced, on an AS IS, WHERE IS basis, and will at Lessee's expense
          provide or will procure that Owner provides a bill of sale or similar
          instrument as Lessee may reasonably request to evidence such transfer.
          Lessee shall indemnify, on an After-Tax Basis, Lessor, Owner and each
          other Tax Indemnitee for all fees, expenses and Taxes incurred by
          Lessor, Owner or any other Tax Indemnitee in connection with any such
          transfer.

  8.14    INFLIGHT EQUIPMENT

          (a)  Notwithstanding any other provision of this Agreement, Lessor
               acknowledges that Lessee may at any time during the Term install
               a telephone system and/or an inflight entertainment system for
               passenger use (collectively, the Inflight Equipment) on the
               Aircraft notwithstanding that the Inflight Equipment may not be
               owned by Lessee provided that:

               (i)  Lessee shall give Lessor notice of the installation of any
                    Inflight Equipment on the Aircraft and the name and address
                    of the owner of such Inflight Equipment;

               (ii) the documents pursuant to which the owner of the Might
                    Equipment installs same on the Aircraft shall provide that
                    such owner shall not have any lien, security interest,
                    claim or other encumbrance on or against the Aircraft, and
                    such owners only right with respect to the Aircraft shall be
                    to remove the Inflight Equipment from the Aircraft and, such
                    documents shall also provide that such owner shall remove
                    the Inflight Equipment from the Aircraft not later than the
                    earlier of (A) thirty (30) days after notice from Lessor of
                    the occurrence of an Event of Default, and (B) the Expiry
                    Date;

               (iii)such right of removal is subject to and conditioned upon
                    such owner restoring, or causing Lessee to restore, all
                    alterations made to the Aircraft in connection with the
                    installation of the Inflight Equipment to the condition
                    prior to the installation thereof (ordinary wear and tear
                    excepted).

          (b)  Lessor acknowledges that at all times:

               (i)  the owner of the Inflight Equipment has and will retain sole
                    and exclusive right and title to and in the Inflight
                    Equipment;

               (ii) the Inflight Equipment shall not constitute a Part or a part
                    of the Aircraft;

                                       -37-

<PAGE>

               (iii)title to the Inflight Equipment shall not transfer to or
                    from Lessor pursuant to Clauses 8.12 and 8.13; and

               (iv) the Inflight Equipment shall not become subject to the
                    Security Interest of any Person to whom Lessor grants a
                    Security Interest in the Aircraft pursuant to Clause 14.1.

  9.      INSURANCE

  9.1     INSURANCE

          Lessee will maintain the Insurance in full force during the Term, and
          thereafter as expressly required in the Lease, which Insurance shall
          be of the type usual and customary in the industry for comparable
          operators operating similar equipment in similar circumstances, and
          shall be through reputable brokers and insurers of recognized
          standing in the commercial aviation insurance industry. The Insurance
          shall in any event meet the requirements set forth in Schedule 7.

  9.2     [NOT APPLICABLE]

  9.3     Insurance Undertakings and Information: Lessee will:

          (a)  comply with the terms and conditions of each policy of any
               Insurance and not do, consent or agree to any act or omission
               which:

               (i)  invalidates or may invalidate any Insurance; or

               (ii) renders or may render void or voidable the whole or any part
                    of any Insurance; or

               (iii)brings any particular liability within the scope of an
                    exclusion or exception to any Insurance;

          (b)  not take out any insurance or reinsurance in respect of the
               Aircraft other than that which is required under the Lease which
               adversely affects the Insurance required to be maintained
               hereunder; provided, however, Lessee may purchase a separate
               "hull total loss" policy with respect to the Aircraft in such
               amount as Lessee may desire;

          (c)  commence renewal procedures at least 30 days prior to expiry of
               any of the Insurance and provide to Lessor:

               (i)  if requested by Lessor in writing, a written status report
                    of renewal negotiation as of the time of the request;

               (ii) [NOT APPLICABLE);

                                       -38-

<PAGE>

               (iii)receipt of certificates of insurance (and where appropriate
                    certificates of reinsurance), and broker's (and any
                    reinsurance broker's) letter of undertaking in a form
                    acceptable to Lessor, detailing the coverage and confirming
                    compliance with the specified insurance requirements of the
                    Lease and, in the case of the broker's letter of
                    undertaking, opining that the Insurance complies with the
                    requirements of the Lease on or before each renewal date;

     (d)  on reasonable request, provide to Lessor copies of documents or other
          information evidencing the Insurances; and

     (e)  provide any other insurance and reinsurance related information, or
          assistance, in respect of the Insurance as Lessor may reasonably
          require.

  9.4     FAILURE TO INSURE

          If Lessee fails to maintain any of the Insurance in compliance with
          the Lease:

          (a)  each of the Indemnitees will be entitled but not bound (without
               prejudice to any other rights of Lessor under the Lease) to pay
               the premiums due or to effect and maintain insurance satisfactory
               to such Indemnitee or otherwise remedy Lessee's failure in such
               manner (including, without limitation to effect and maintain an
               "owner's interest" policy) as such Indemnitee considers
               appropriate. Any sums so expended by any such Indemnitee will
               become immediately due and payable by Lessee on demand by Lessor
               together with interest thereon at the Interest Rate, from the
               date of expenditure by such Indemnitee up to the date of
               reimbursement by Lessee; and

          (b)  Lessor at any time while such failure is continuing may require
               the Aircraft to remain at any airport or to proceed to and remain
               at any airport designated by Lessor until the failure is remedied
               to Lessor's reasonable satisfaction;

  9.5     CONTINUING INDEMNITY

          Lessee shall effect and maintain product legal liability
          insurance after the Expiry Date with respect to its liability under
          Section 10 (INDEMNITY) for two years, and such insurance shall name
          each Indemnitee as an additional insured.

  10.     INDEMNITY

          (a)  Except as provided in Section 10(b) below, Lessee agrees to
               assume liability for and to indemnify each of the Indemnitees
               against and agrees to pay on demand any and all Losses which an
               Indemnitee may at any time suffer or incur at any time, whether
               directly or indirectly, arising out of, related to or in any way
               connected with:

                                       -39-

<PAGE>

               (i)  the ownership, maintenance, overhaul, service, repair,
                    delivery, possession, transfer of ownership or possession,
                    import, export, registration, control, storage,
                    modification, leasing, insurance, inspection, testing,
                    design, date processing, sub-leasing, use, condition,
                    redelivery or other matters relating to the Aircraft, any
                    Engine or any Part (regardless of whether in the air or on
                    the ground, and regardless of whether such Losses are based
                    on strict liability in tort, any act or omission, including
                    the negligence, of any Indemnitee, or otherwise); or

               (ii) any breach by the Lessee of any of its obligations under the
                    Lease; or

               (iii)the design, testing or use of or any article or material
                    in, the Aircraft, any Engine or any Part or its use or
                    operation, including any defect in design and regardless of
                    whether it is discoverable, and any infringement of patent,
                    copyright, trademark, design or other proprietary right
                    claimed by any Person or a breach of any obligation of
                    confidentiality claimed to be owed to any Person.

                    For the avoidance of doubt, the reference to "ownership" in
                    clause (i) shall not require Lessee to indemnify Lessor
                    in respect of (y) any defect in Lessor's or Owner's title to
                    the Aircraft or (z) any decline in residual value of the
                    Aircraft if Lessee shall have fully complied with its
                    obligations under the Lease.

          (b)  Lessee is not required to indemnify any particular Indemnitee
               (provided that (i) Lessor and its Subsidiaries and Affiliates and
               its and their officers, directors, representatives, agents,
               partners, contractors and employees shall be treated as a single
               Indemnitee, and (ii) each Financing Party and its shareholders,
               subsidiaries, affiliates, partners, contractors, directors,
               officers, representatives, agents and employees shall be treated
               as a single Indemnitee) under this Section, to the extent a
               particular Loss is:

               (i)  caused solely by the willful misconduct of that Indemnitee
                    or gross negligence of that Indemnitee, other than gross
                    negligence imputed to that Indemnitee by reason of its
                    interest in the Aircraft or the Lease;

               (ii) caused solely by Lessor's breach of the Lease which does not
                    result from a Default;

               (iii) related to any Taxes (but without prejudice to any
                    Indemnitee's rights under any other provision of this Lease
                    relating to Taxes);

               (iv) caused solely by an event which occurs before the
                    commencement of the Term (except where the Loss is suffered
                    during the Tenn as a result of a pre-Delivery defect in or
                    such Loss otherwise arises out of or relates to or is any
                    way

                                       -40-

<PAGE>

                    connected with the manufacture, design, maintenance, repair,
                    rebuilding, overhaul or modification of the Aircraft);

               (v)  caused solely by an event which occurs after the redelivery
                    of the Aircraft to Lessor in compliance with the Lease and
                    is not attributable to any act, omission, event or
                    circumstance occurring prior to such redelivery;

               (vi) caused solely as a result of any sale, assignment, transfer
                    or other disposition (whether voluntary or involuntary) by
                    such Indemnitee of the Aircraft or Engine or any interest
                    therein that is not a replacement thereof under the Lease or
                    is otherwise not contemplated under the Lease, and unless
                    such sale, transfer or other disposition has resulted from
                    or occurred following a Default; or

               (vii)consists of normal administrative costs and expenses of
                    such Indemnitee (but excluding any such costs or expenses
                    resulting from the occurrence of any Default); or

              (viii)consists of costs or expenses for which Lessor has
                    expressly agreed to be responsible under any other provision
                    of the Lease.

  11.     EVENTS OF LOSS

  11.1    EVENTS OF LOSS

          (a)  If an Event of Loss occurs prior to Delivery of the Aircraft, the
               Lease will immediately terminate and except as expressly stated
               in the Lease neither party will have any further obligation other
               than pursuant to Section 5.21 and Section 3 of Schedule 4, except
               that Lessor will return the Deposit (if any) to Lessee and return
               to Lessee or cancel any Letter of Credit.

          (b)  If an Event of Loss occurs after Delivery, Lessee will pay the
               Agreed Value to Lessor on or prior to the earlier of (i) sixty
               (60) days after the Event of Loss and (ii) the date of receipt of
               insurance proceeds in respect of that Event of Loss.

          (c)  Subject to the rights of any insurers and reinsurers or other
               third party, upon irrevocable payment in full to Lessor of the
               Agreed Value and all other amounts which may be or become payable
               to Lessor under the Lease, and if Lessee requests such transfer,
               Lessor will, or will procure that Owner will, without recourse or
               warranty (except as to the absence of Lessor's Liens) transfer to
               Lessee or will procure that Owner transfers to Lessee or to
               Lessee's designee legal and beneficial title, subject to no Less
               or's Liens (but otherwise without warranty), to the Aircraft, on
               an AS IS, WHERE IS basis, and will at Lessee's expense, execute
               and deliver or will procure that Owner executes and delivers

                                       -41-

<PAGE>

                    such bills of sale and other documents and instruments as
                    Lessee may reasonably request to evidence (on the public
                    record or otherwise) such transfer, free and clear of all
                    rights of Lessor and Owner and Lessor Liens. Lessee shall
                    indemnify, on an After-Tax Basis, Lessor, Owner and each
                    other Tax Indemnitee for all fees, expenses and Taxes
                    incurred by Lessor, Owner or any other Tax Indemnitee in
                    connection with any such transfer.

  11.2    REQUISITION

          During any requisition for use or hire of the Aircraft, any Engine or
          Part which does not constitute an Event of Loss

          (a)  the Rent and other charges payable under the Lease will not be
               suspended or abated either in whole or in part, and Lessee will
               not be released from any of its other obligations (other than
               operational obligations with which Lessee is unable to comply
               solely by virtue of the requisition); and

          (b)  so long as no Default has occurred and is continuing, Lessee will
               be entitled to any compensation paid by the requisitioning
               authority in respect of such authority's use of the Aircraft,
               such Engine or such Part during the Term. Lessee will, as soon as
               practicable after the end of any such requisition, cause the
               Aircraft to be put into the condition required by the Lease.
               Lessor will be entitled to all compensation payable by the
               requisitioning authority in respect of any change in the
               structure, state or condition of the Aircraft arising during the
               period of requisition, and Lessor will apply such compensation in
               reimbursing Lessee for the cost of complying with its obligations
               under the Lease in respect of any such change, but, if any
               Default has occurred and is continuing, Lessor may apply the
               compensation in or towards settlement of any amounts owing by
               Lessee under the Lease and/or under any Other Agreement.

  12.      RETURN OF AIRCRAFT

  12.1     RETURN

           On the Expiry Date or redelivery of the Aircraft pursuant to Section
           13.2 or termination of the leasing of the Aircraft under the Lease,
           Lessee will, unless an Event of Loss has occurred, redeliver the
           Aircraft and the Aircraft Documents and Records at Lessee's expense
           to Lessor at the Redelivery Location, in accordance with the
           procedures and in compliance with the conditions set forth in the
           Aircraft Lease Agreement, free and clear of till Security Interests
           (other than Lessor Liens) and in a condition qualifying for and
           having a valid and fully effective certification of airworthiness
           under FAR Part 12 1. Lessor shall commence the Final Inspection in
           accordance with the Aircraft Lease Agreement promptly upon Lessee
           making the Aircraft and the Aircraft Documents and Records available
           for the Final Inspection provided that Lessee gives

                                       -42-

<PAGE>

            Lessor no less than thirty (30) days prior written notice of the
            availability of the Aircraft and the Aircraft Documents and Records
            for such inspection.

  12.2      NON-COMPLIANCE

            If at the time of Final Inspection Lessee has not fully complied
            with any of its obligations under the Lease (including, without
            limitation, Part III of Schedule A to the Aircraft Lease Agreement),
            or Lessee fails to make the Aircraft available to Lessor on a timely
            basis for inspection and redelivery pursuant to Section 12.1 and
            Part III of Schedule A to the Aircraft Lease Agreement (whether such
            failure is due to any act or omission of Lessee or any other
            circumstance whatsoever), the Term shall be extended until the time
            when the Aircraft has been redelivered to Lessor in full compliance
            with the Lease, for the sole purpose of enabling such non-compliance
            or failure to be promptly rectified, and during such extension
            period:

           (a)  Lessee shall not use the Aircraft in flight operations except
                those related directly to the redelivery of the Aircraft to
                Lessor;

           (b)  all Lessee's obligations and covenants under the Lease will
                remain in full force until Lessee so redelivers the Aircraft;
                and

           (c) Lessee shall pay Rent to Lessor at a rate per month equal to the
               amount of Rent payable in respect of the last scheduled Rental
               Period plus 50 per cent thereof, calculated on a per diem basis;
               provided, however, with respect to the portion of such extension,
               if any, attributable solely to a good faith dispute between
               Lessor and Lessee as to the meaning of some particular language
               in the Lease applicable to the return of the Aircraft, whether
               set forth in Part III of Schedule A to the Aircraft Lease
               Agreement or elsewhere (but not, for the avoidance of doubt, in
               respect of any dispute as to the result or outcome of any
               inspection or check required in connection with the Final
               Inspection under the Lease), Lessee shall pay to Lessor Rent,
               calculated on a per diem basis, at 50% of the rate otherwise
               applicable, which rate shall be equal to (i) 50% of the rate
               applicable to the last scheduled Rental Period, without giving
               effect to the 50% premium required in the introductory clause of
               this paragraph (c), if as of the Scheduled Expiry Date the
               Aircraft is in full compliance with the requirements of the Lease
               for return to Lessor (other than the item in dispute), and (ii)
               50% of the rate specified in the introductory clause of this
               paragraph (c), or 75% of the rate applicable to the last
               scheduled Rental Period, if the rate specified in the
               introductory clause of this paragraph (c) becomes applicable as
               of the Scheduled Expiry Date due to Lessee's failure to comply
               with its obligations in respect of the Final Inspection in a
               timely manner or the Aircraft otherwise fails to comply as of the
               Scheduled Delivery Date with the requirements of the Lease for
               return to Lessor in any respect other than in reference to the
               disputed language. For so long as the Aircraft remains
               non-compliant with any requirements of the Lease other than those
               that are the

                                      -43-

<PAGE>

               subject of the disputed language, Lessee shall pay to Lessor
               Rent in the amount specified in the introductory clause of this
               paragraph (c), and the Rent rate specified in this clause (ii)
               shall become applicable, if at all, only from and after such time
               as the Aircraft is brought into compliance with all requirements
               of the Lease for return to Lessor (including, but not limited to,
               Part III of Schedule A to the Aircraft Lease Agreement) other
               than the with respect to the items that are the subject of the
               disputed language, such that the disputed language remains as the
               sole cause in the delay in the return of the Aircraft to Lessor.

           Any such extension shall not prejudice Lessor's right to treat such
           non-compliance or failure as an Event of Default at any time and to
           enforce such rights and remedies as may be available to Lessor in
           respect thereof under the terms of the Lease or applicable Law.
           Without limiting the generality of the foregoing, Lessee's Rent
           obligation under paragraph (c) above shall be without prejudice to
           Lessor's rights to terminate the letting of the Aircraft and to
           indemnification pursuant to Section 13.3.

           Lessor may elect (either on first tender of the Aircraft by Lessee or
           at any time during the said extension period) to accept redelivery of
           the Aircraft notwithstanding non-compliance with Section 12.1 or Part
           III of Schedule A to the Aircraft lease Agreement, in which case
           Lessee will indemnify Lessor on an After-Tax Basis, and provide cash
           to Lessor (in an amount satisfactory to Lessor) as security for that
           indemnity, in respect of the cost to Lessor of putting the Aircraft
           into the condition required by the Lease.

  12.3     REDELIVERY

           Upon redelivery Lessee will provide to Lessor, upon Lessor's request,
           all documents necessary to export the Aircraft from the United States
           (including a valid and subsisting export certificate of airworthiness
           for the Aircraft) or required in relation to the deregistration of
           the Aircraft with the Air Authority.

  12.4     ACKNOWLEDGEMENT

           Provided Lessee has complied with its obligations under Section 12
           Hereof and Part III of Schedule A to the Aircraft Lease Agreement,
           following redelivery of the Aircraft by Lessee to Lessor at the
           Redelivery Location, Lessor will deliver to Lessee an acknowledgement
           confirming that Lessee has redelivered the Aircraft to Lessor in
           accordance with the Lease which acknowledgement shall be without
           prejudice to Lessor's accrued and continuing rights under the Lease
           or any Other Agreement.

                                       -44-

<PAGE>

  13.       DEFAULT

  13.1      EVENTS

            The occurrence of any of the Events of Default will constitute a
            repudiation (but not a termination) of the Lease by Lessee (whether
            the occurrence of any such Event of Default is voluntary or
            involuntary or occurs by operation of Law or pursuant to or in
            compliance with any judgement, decree or order of any court or any
            order, rule or regulation of any Government Entity).

  13.2      RIGHTS AND REMEDIES

            If an Event of Default occurs, Lessor may at its option (and without
            prejudice to any of its other rights under the Lease), at any time
            thereafter (without notice to Lessee except as required under
            applicable Law):

            (a) accept such repudiation and by notice to Lessee and with
                immediate effect cancel the leasing of the Aircraft (but
                without prejudice to the continuing obligations of Lessee under
                the Lease), whereupon all rights of Lessee under the Lease
                shall cease; and/or

            (b) proceed by appropriate court action or actions to enforce
                performance of the Lease including the payment of all Rent and
                all other amounts payable to Lessor or any Indemnitee pursuant
                to the terms of the Lease; and/or

           (c)  proceed by appropriate court action or actions to recover
                damages for the breach of the Lease which shall include:

               (i)  all Rent and other amounts which are or become due and
                    payable hereunder prior to the earlier to occur of the date
                    Lessor sells or releases the Aircraft or receives payment of
                    the amount calculated pursuant to clause (ii) below;

               (ii) an amount equal to the aggregate Rent for the remainder of
                    the Term (determined without reference to any right of
                    Lessor to cancel the leasing of the Aircraft, whether or not
                    such right is exercised), discounted periodically (equal to
                    installment frequency) to present worth at the Discount Rate
                    to the date of payment by Lessee to Lessor, less the
                    applicable amount set forth below:

                    A.   in the event that Lessor has re-let the Aircraft on
                         terms (other than rental payment terms) which, taken as
                         a whole, Lessor reasonably regards as being
                         substantially similar to the material economic terms of
                         the Lease (taking into account factors affecting the
                         degree of risk associated with such release and/or the
                         residual value of the Aircraft thereunder, but

                                       -45-

<PAGE>

                         excluding the rental payment terms), an amount equal to
                         the aggregate basic rental payments to become due under
                         such re-lease for the period coinciding with the
                         remainder of the Term (determined without reference to
                         any right of Lessor to cancel the leasing of the
                         Aircraft, whether or not such right is exercised),
                         discounted periodically (equal to installment
                         frequency) to present worth at the Discount Rate
                         to the date of payment by Lessee; or

                    B.   in the event that Lessor has not re-let the Aircraft or
                         has sold the Aircraft or has re-let the Aircraft on
                         terms which, taken as a whole, Lessor does not
                         reasonably regard as being substantially similar to the
                         material economic terms of the Lease (taking into
                         account factors affecting the degree of risk associated
                         with such re-lease and/or the residual value of the
                         Aircraft thereunder, but excluding the rental payment
                         terms), an amount equal to the fair market rental value
                         (determined pursuant to the Appraisal Procedure) of the
                         Aircraft for the period commencing with the date that
                         Lessor reasonably anticipates that the Aircraft could
                         be re-let at such rental rate and ending with the date
                         that the Term was scheduled to expire (determined
                         without reference to any right of Lessor to cancel the
                         leasing of the Aircraft, whether or not such right is
                         exercised), discounted periodically (equal to
                         installment frequency) to present worth at the Discount
                         Rate to the date of payment by Lessee.

              (iii) all costs and other incidental damages associated with
                    Lessor's exercise of its remedies hereunder or otherwise
                    incurred by Lessor as a result of an Event of Default,
                    including repossession costs, legal fees, Aircraft
                    storage, maintenance and insurance costs, Aircraft
                    re-lease or sale costs (including, in the case of a
                    release, any costs incurred to transition the Aircraft to
                    the next operator's maintenance program) and Lessor's
                    internal costs and expenses (including the cost of
                    personnel time calculated based upon the compensation
                    paid to the individuals involved on an annual basis and a
                    general Lessor overhead allocation), all such costs and
                    incidental damages being referred to herein collectively
                    as "Enforcement and Remarketing Costs";

               (iv) any loss, premium, penalty or expense which may be incurred
                    in repaying funds raised to finance the Aircraft or in
                    unwinding any financial instrument relating in whole or in
                    part to Lessor's financing of the Aircraft, all such amounts
                    being referred to herein collectively as "Unwind Expenses";

               (v)  any loss, cost, expense or liability, or damage to Lessor's
                    residual interest in the Aircraft, sustained by Lessor due
                    to Lessee's failure to maintain the Aircraft in

                                       -46-

<PAGE>

                    accordance with the terms of this Agreement or Lessee's
                    failure to redeliver the Aircraft in the condition required
                    by this Agreement, including any consequential loss of
                    revenues or profits, all such amounts being referred to
                    herein collectively as "Aircraft Condition Damages"; and

               (vi) such additional amount, if any, as may be necessary to place
                    Lessor in the same economic position, on an After-Tax Basis,
                    as Lessor would have been in if Lessee had timely performed
                    each of its obligations under this Agreement; and/or

          (d)  either:

               (i)  enter upon the premises where all or any part of the
                    Aircraft is located and take immediate possession of and, at
                    Lessor's sole option, remove the same (and/or any engine
                    which is not an Engine but which is installed on the
                    Airframe, subject to the rights of the lessor or secured
                    party thereof), 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, conversion or
                    otherwise, caused by such entry or taking, except damages
                    caused by gross negligence or willful misconduct; or (ii) by
                    delivering notice to Lessee, require Lessee to redeliver the
                    Aircraft to Lessor at Phoenix Sky Harbor International
                    Airport in Phoenix, Arizona (or such other location as
                    Lessor may require) on the date specified in such notice and
                    in all respects in the condition required by the Lease upon
                    the Return Occasion (it being understood that Lessee shall
                    not delay any such return for the purpose of placing the
                    Aircraft in such condition, but shall nevertheless be liable
                    to Lessor for the failure of the Aircraft to be in such
                    condition); and/or

          (e)  sell at private or public sale, as Lessor may determine, or hold,
               use, operate or lease to others the Aircraft as Lessor in its
               sole discretion may determine, all free and clear of any rights
               of Lessee; and/or

          (f)  by written notice to Lessee specifying a payment date (which
               shall be a date not earlier than five (5) Business Days following
               the date of such notice), Lessor may demand that Lessee pay to
               Lessor, and Lessee shall pay to Lessor on the payment date
               specified in such notice (in lieu of the Rent due for the period
               commencing after the date specified for payment in such notice)
               the sum of the following amounts:

               (i)  all Rent and other amounts which are or are expected to
                    become due and payable hereunder prior to the payment date
                    specified by Lessor;

                                       -47-

<PAGE>

                    an amount equaling the aggregate Rent for the remainder
                    of the Term (determined without reference to any right of
                    Lessor to cancel the leasing of the Aircraft, whether or not
                    such right is exercised), discounted periodically (equal to
                    installment frequency) to present worth at the Discount Rate
                    to the payment date specified by Lessee to Lessor, less the
                    applicable amount set forth below:

                    A.   in the event that Lessor has re-let the Aircraft on
                         terms (other than rental payment terms) which, taken as
                         a whole, Lessor reasonably regards as being
                         substantially similar to the material economic terms of
                         the Lease (taking into account factors affecting the
                         degree of risk associated with such re-lease and/or the
                         residual value of the Aircraft thereunder, but
                         excluding the rental payment terms), an amount equal to
                         the aggregate basic rental payments to become due under
                         such re-lease for the period coinciding with the
                         remainder of the Term (determined without reference to
                         any right of Lessor to cancel the leasing of the
                         Aircraft, whether or not such right is exercised),
                         discounted periodically (equal to installment
                         frequency) to present worth at the Discount Rate to the
                         date of payment by Lessee; or

                    B.   in the event that Lessor has not re-let the Aircraft or
                         has sold the Aircraft or has re-let the Aircraft on
                         terms which, taken as a whole, Lessor does not
                         reasonably regard as being substantially similar to the
                         material economic terms of the Lease (taking into
                         account factors affecting the degree of risk associated
                         with such release and/or the residual value of the
                         Aircraft thereunder, but excluding the rental payment
                         terms), an amount equal to the fair market rental value
                         (determined pursuant to the Appraisal Procedure) of the
                         Aircraft for the period commencing with the date that
                         Lessor reasonably anticipates that the Aircraft could
                         be re-let at such rental rate and ending with the date
                         that the Term was scheduled to expire (determined
                         without reference to any right of Lessor to cancel the
                         leasing of the Aircraft, whether or not such right is
                         exercised), discounted periodically (equal to
                         installment frequency) to present worth at the Discount
                         Rate to the date of payment by Lessee;

               (iii) an amount equal to Lessor's reasonably anticipated
                    Enforcement and Remarketing Costs, Unwind Expenses and
                    Aircraft Condition Damages; and

               (iv) such additional amount, if any, as may be necessary to place
                    Lessor in the same economic position, on an After-Tax Basis,
                    as Lessor would have been in if Lessee had timely performed
                    each of its obligations under this Agreement;.

                                       -48-

<PAGE>

               (v)  it being understood that, to the extent that any of the
                    foregoing amounts represents an estimate by Lessor of
                    losses, damages, costs or expenses which Lessor expects to
                    incur, (y) Lessor shall adjust the amount thereof as needed
                    to reflect the actual amount of such losses, damages, costs
                    or expenses incurred by Lessor when substantially all of
                    such amounts become known to Lessor, but Lessee shall
                    nevertheless be obligated to pay the amount demanded by
                    Lessor (subject to such subsequent adjustment in which (i)
                    amounts, if any, actually paid by Lessee to Lessor upon such
                    demand as may exceed the actual amount of losses, damages,
                    costs or expenses incurred by Lessor as finally determined
                    by Lessor are refunded to Lessee or otherwise credited to
                    the account of Lessee and (ii) additional amounts, if any,
                    as may be required to cure any shortfall between the
                    estimated amounts paid by Lessee and the actual amount of
                    losses, damages, costs or expenses incurred by Lessor as
                    finally determined by Lessor are paid by Lessee to Lessor),
                    and (z) notwithstanding the amount specified in such demand,
                    Lessor shall be entitled to claim such other (and greater)
                    amount in any action against Lessee hereunder; and/or

          (g)  draw upon the Deposit or the Letter of Credit and apply such
               amounts to any amounts owing to Lessor hereunder and/or make
               demand against any Guarantor for any or all of the foregoing.

          In addition to the foregoing, Lessor shall be entitled to
          exercise such other rights and remedies as may be available under
          applicable Law and Lessee shall be liable on an After-Tax Basis for,
          and shall pay Lessor on demand: (i) interest on all unpaid amounts at
          the Interest Rate, from the due date until the date of payment in
          full; (ii) all reasonable legal fees and other reasonable costs and
          expenses incurred by Lessor by reason of the occurrence of any Event
          of Default or the exercise of Lessor's remedies with respect thereto;
          and (iii) all reasonable expenses, disbursements, costs and fees
          incurred in (A) repossessing, storing, preserving, shipping,
          maintaining, repairing and refurbishing the Aircraft, the Airframe,
          any Engine or Part to the condition required by Section 12 hereof and
          (B) preparing the Aircraft, the Airframe, an Engine or Part for sale
          or lease, advertising the sale or lease of the Aircraft, the Airframe,
          an Engine or Part and selling or releasing the Aircraft, the Airframe,
          an Engine or Part.

          Lessor is hereby authorized and instructed, but shall have no
          obligation, to make any expenditures which Lessor, in its sole
          discretion, considers advisable to repair and restore the Aircraft,
          the Airframe, an Engine or Part to the condition required by Section
          12 hereof (it being understood that Lessee shall be liable for all
          such expenditures).

          Lessee hereby agrees that, in the event of the return to or
          repossession by Lessor of the Aircraft, the Airframe, an Engine or
          Part, any rights in any warranty (express or implied) previously

                                       -49-

<PAGE>

          assigned to Lessee or otherwise held by Lessee shall without further
          act, notice or writing be assigned or reassigned to Lessor, if
          assignable.

          No remedy referred to in this Section 13 is intended to be exclusive,
          but, to the extent permissible under the Lease or under applicable
          Law, each shall be cumulative and in addition to any other remedy
          referred to above or otherwise available to Lessor at Law or in
          equity; and the exercise or beginning of exercise by Lessor of any one
          or more of such remedies shall not preclude the simultaneous or later
          exercise by Lessor of any or all of such other remedies; provided,
          however, that nothing in this Section 13 shall be construed to permit
          Lessor to obtain a duplicate recovery of any element of damages to
          which Lessor is entitled. No express or implied waiver by Lessor of
          any Default or Event of Default shall in any way be, or be construed
          to be, a waiver of any future or subsequent Default or Event of
          Default.

                                      -50-

<PAGE>

   13.3    Power of Attorney: Lessee hereby appoints Lessor as the
           attorney-in-fact of Lessee, with full authority in the place and
           stead of Lessee and in the name of Lessee or otherwise, for the
           purpose of carrying out the provisions of the Lease and taking any
           action and executing any instrument that Lessor may deem necessary or
           advisable to accomplish the purposes hereof, provided, however, that
           Lessor may only take action or execute instruments under this Section
           13 after an Event of Default has occurred and is continuing. Lessee
           hereby declares that the foregoing powers are granted for valuable
           consideration, constitute powers granted as security for the
           performance of the obligations of Lessee hereunder and are coupled
           with an interest and shall be irrevocable. Without limiting the
           generality of the foregoing or any other rights of Lessor under the
           Lease, upon the occurrence and during the continuation of an Event of
           Default, Lessor shall have the sole and exclusive right and power to
           (i) settle, compromise, adjust or defend any actions, suits or
           proceedings relating to or pertaining to the Aircraft, Airframe or
           any Engine, or the Lease and (ii) make proof of loss, appear in and
           prosecute any action arising from any policy or policies of insurance
           maintained pursuant to the Lease, and settle, adjust or compromise
           any claims for loss, damage or destruction under, or take any other
           action in respect of, any such policy or policies.

   13.4    Sale or Re-Lease

           If an Event of Default occurs, Lessor may sell or re-lease or
           otherwise deal with the Aircraft at such time and in such manner and
           on such terms as Lessor considers appropriate in its absolute
           discretion, free and clear of any interest of Lessee, as if the Lease
           had never been entered into. Lessor shall have no duty or obligation
           to sell the Aircraft, and Lessor shall be obligated to attempt to
           re-lease the Aircraft only to the extent, if any, that it is required
           to do so under Article 2A of the UCC, and Lessee hereby disclaims any
           right to compel Lessor to sell or otherwise release the Aircraft.

   13.5    Removal of Lease from FAA Registry

           If an Event of Default occurs, Lessee will at the request of Lessor,
           immediately take all steps necessary to enable the Aircraft to be
           redelivered to Lessor in accordance with and free and clear of the
           Lease and Lessee hereby irrevocably and by way of security for its
           obligations under the Lease appoints (which appointment is coupled
           with an interest) Lessor as its attorney-in-fact to execute and
           deliver any documentation and to do any act or thing not prohibited
           by Law required in connection with the foregoing during the
           continuance of an Event of Default. Without limiting the foregoing,
           Lessor may file with the FAA the Lease Termination Certificate
           provided to Lessor under the Lease.

                                       -51-

<PAGE>

  14.     TRANSFER

  14.1    Lessee

          LESSEE WILL NOT ASSIGN, DELEGATE OR OTHERWISE TRANSFER (VOLUNTARILY,
          INVOLUNTARILY, BY OPERATION OF LAW OR OTHERWISE) ANY OF ITS RIGHTS OR
          OBLIGATIONS UNDER THE LEASE (INCLUDING THE AIRCRAFT LEASE AGREEMENT OR
          THIS CTA), OR CREATE OR PERMIT TO EXIST ANY SECURITY INTEREST OVER ANY
          OF ITS RIGHTS UNDER THE LEASE (INCLUDING THE AIRCRAFT LEASE AGREEMENT
          OR THIS CTA), AND ANY ATTEMPT TO DO SO SHALL BE NULL AND VOID. The
          foregoing shall not be construed to prohibit a Permitted Sub-Lease.

   14.2   Lessor

          Lessee acknowledges and agrees that Lessor will, if applicable under
          the Financing Documents, assign as security Lessor's interest in the
          Lease as described in the Acknowledgement and Agreement referred to in
          Schedule 3.

          In addition insofar as Lessee is concerned, Lessor may, without the
          consent of Lessee, further transfer all or any of its rights or
          obligations under the Lease or all or any of its right, title or
          interest in and to the Aircraft, including pursuant to:

          (a)  a sale and leaseback; or

          (b)  a novation or assignment of the Lease and/or a sale of the
               Aircraft (including to a special purpose or securitization or
               monetization trust, fund, limited liability company, corporation,
               partnership or other vehicle or in connection with any other
               direct or indirect raising of capital); or

          (c)  a secured loan financing.

          Lessor will promptly notify Lessee of any transfer and Lessee agrees
          promptly to execute and deliver in connection with any transfer such
          documents and assurances (including an acknowledgement of the transfer
          and a certificate as to the absence of any Default under the Lease)
          and to take such further action as Lessor may reasonably request to
          establish or protect the rights and remedies created or intended to be
          created in favor of the transferee in connection with any transfer.
          After any transfer, the transferee shall be entitled to be an
          Indemnitee and to such other rights under the Lease as Lessor shall
          specify. Upon an assignment or novation described in clause (b),
          Lessor shall be released from all obligations and liabilities under
          the Lease to the extent such obligations and liabilities are assumed
          by such transferee, and the Lease, including this CTA as in effect at
          that time and as incorporated in the Aircraft Lease Agreement, shall
          be

                                       -52-

<PAGE>

           deemed applicable as between Lessee and the transferee of the Lease
           and may be amended, supplemented or otherwise modified without the
           consent of the transferor (if this CTA is applicable to the Other
           Agreements not so transferred, it shall remain in full force and
           effect and may be amended, supplemented or otherwise modified without
           the consent of the transferee). Notwithstanding any such assignment
           or novation, Lessor, Owner, Financing Parties' Representative and
           each other Indemnitee shall continue to be entitled to
           indemnification under Section 10, and shall continue to be named as
           an additional insured. under all Insurances referred to in Section 9
           for a period of not less than two years after such transfer. The
           agreements, covenants, obligations and liabilities contained in the
           Lease, including all obligations to pay Rent and indemnify each
           Indemnitee, are made for the benefit of Lessor (and, in the case of
           Section 10, each other Indemnitee) and its or their respective
           successors and assigns, notwithstanding the possibility that any such
           Person was not originally a party to the Lease or may, at the time
           such enforcement is sought, not be a party to the Lease.

  14.3     Conditions

           In connection with any such transfer by Lessor:

          (a)  QUIET ENJOYMENT: as a condition precedent to such transfer
               becoming effective, Lessor will procure that the transferee or
               any new owner of the Aircraft or any new holder of a Security
               Interest in the Aircraft or any holder of an interest in the
               Aircraft or the Lease (by way of security or otherwise), as the
               case may be, shall in the case of a transferee that is the
               "Lessor" acknowledge Lessor's obligation under Section 7.1 or, if
               not the Lessor, execute and deliver to Lessee a letter of quiet
               enjoyment in respect of Lessee's use and possession of the
               Aircraft in a form substantially similar to Section 7.1 hereof;

          (b)  COSTS: Lessor shall reimburse to Lessee its reasonable
               out-of-pocket expenses (including reasonable legal fees and
               expenses) actually incurred in connection with co-operating with
               Lessor in relation to any such transfer referred to in this
               Section 14, provided that such expenses are substantiated to
               Lessor's reasonable satisfaction

          (c)  RIGHTS OF LESSEE: as a condition precedent to any transfer
               becoming effective, such transfer shall not, at the time of the
               transfer, materially expand Lessee's obligations under the Lease
               or materially reduce Lessee's rights under the Lease, in each
               case as compared to what such obligations and rights would have
               been in the absence of such transfer; provided, however, that no
               transfer to any Person that meets the requirements of a "citizen
               of the United States" under 49 U.S.C. Section 40102(a)(15) shall
               be deemed to materially expand Lessee's obligations or materially
               restrict Lessee's rights under the Lease.

                                       -53-

<PAGE>

  15.     MISCELLANEOUS

  15.1    Survival

          Lessee's obligations under Section 3 of Schedule 4, under Sections
          5.6, 5.7, 5.10, 5.21, 9.5, 10, 12, and 13.2 and under any other
          provision of the Lease providing for an obligation on the part of the
          Lessee to indemnify Lessor or any other Indemnitee shall survive the
          expiration or any termination of the Lease and continue in full force
          and effect.

  15.2    Waivers, Remedies Cumulative

          The rights of Lessor under the Lease may be exercised as often as
          necessary, are cumulative and not exclusive of its rights under any
          Law; and may be waived only in writing and specifically. Delay by
          Lessor in exercising, or non-exercise of, any such right will not
          constitute a waiver of that right.

  15.3    Delegation

          Lessor may delegate to any Person all or any of the rights, powers or
          discretion vested in it by the Lease, and any such delegation may be
          made upon such terms and conditions and subject to such regulations
          (including power to sub-delegate) as Lessor in its absolute discretion
          thinks fit.

  15.4    Severability

          If a provision of the Lease is or becomes illegal, invalid or
          unenforceable in any jurisdiction, that will not affect:

          (a)  the legality, validity or enforceability in that jurisdiction of
               any other provision of the Lease; or

          (b)  the legality, validity or enforceability in any other
               jurisdiction of that or any other provision of the Lease.

  15.5    Remedy

          If Lessee fails to comply with any provision of the Lease, Lessor may,
          without being in any way obliged to do so or responsible for so doing
          and without prejudice to the ability of Lessor to treat such
          non-compliance as a Default, effect compliance on behalf of Lessee,
          whereupon Lessee shall become liable to pay immediately any sums
          expended by Lessor together with all costs and expenses (including
          legal fees and expenses) in connection with the non-compliance.

                                       -54-

<PAGE>

15.6       Time of Essence

           The time stipulated in the Lease for all payments payable by Lessee
           and the prompt, punctual performance of Lessee's other obligations
           under the Lease are of the essence of the Lease.

15.7       Notices

           All notices under, or in connection with, the Lease will, unless
           otherwise stated, be given in writing by means of a overnight courier
           service or facsimile. Any such notice is deemed effectively to be
           given when received by the recipient (or if receipt is refused by the
           intended recipient, when so refused).

           The addresses and facsimile and telephone numbers of Lessee and
           Lessor are as set forth in the Aircraft Lease Agreement.

15.8       Governing Law; Jurisdiction; WAIVER OF JURY TRIAL

          (a)  PURSUANT TO AND IN ACCORDANCE WITH SECTION 5-1401 OF THE NEW
               YORK GENERAL OBLIGATIONS LAW, THE PARTIES HERETO AGREE THAT THE
               LEASE IN ALL RESPECTS SHALL BE GOVERNED BY, AND CONSTRUED IN
               ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, UNITED
               STATES, AS APPLIED TO CONTRACTS TO BE PERFORMED WHOLLY WITHIN THE
               STATE OF NEW YORK (EXCLUSIVE OF SECTION 7-101 OF THE NEW YORK
               GENERAL OBLIGATIONS LAW WHICH IS INAPPLICABLE TO THE LEASE). THE
               PARTIES AGREE THAT THE LEASE WAS EXECUTED AND DELIVERED IN THE
               STATE OF NEW YORK.

          (b)  Pursuant to and in accordance with Section 5-1402 of the New York
               General Obligations Law, Lessee and Lessor each agree that the
               United States District Court for the Southern District of New
               York and any New York state court sitting in the County of New
               York, New York, and all related appellate courts, are to have
               non-exclusive jurisdiction to settle any disputes arising out of
               or relating to the Lease and submits itself and its property to
               the non-exclusive jurisdiction of the foregoing courts with
               respect to such disputes.

          (c)  Without prejudice to any other mode of service, Lessee:

               (i)  appoints CT Corporation System, 1633 Broadway, New York, New
                    York 10019, as its agent for service of process relating to
                    any proceedings before the New York courts in connection
                    with the Lease and agrees to maintain the process agent in
                    New York notified to Lessor;

                                      -55-

<PAGE>

               (ii) agrees that failure by a process agent to notify Lessee of
                    the process shall not invalidate the proceedings concerned;

               (iii) consents to the service of process relating to any such
                    proceedings by prepaid mailing of a copy of the process to
                    Lessee's agent at the address identified in paragraph (i) or
                    by prepaid mailing by air mail, certified or registered mail
                    of a copy of the process to Lessee at the address set forth
                    in Section 15.7.

          (d)  [NOT APPLICABLE.]

          (e)  Each of Lessor and Lessee:

               (i)  waives to the fullest extent permitted by Law any objection
                    which it may now or hereafter have to the courts referred to
                    in Section 15.8(b) above on grounds of inconvenient forum or
                    otherwise as regards proceedings in connection with the
                    Lease;

               (ii) waives to the fullest extent permitted by Law any objection
                    which it may now or hereafter have to the laying of venue of
                    any suit, action or proceeding arising out of or relating to
                    the Lease brought in the courts referred to in Section
                    15.8(b); and

              (iii) agrees that a judgement or order of any court referred to
                    in Section 15.8(b) in connection with the Lease is
                    conclusive and binding on it and may be enforced against
                    it in the courts of any other jurisdiction.

          (f)  Nothing in this Section 15.8 limits the right of either party to
               bring proceedings against the other in connection with the Lease:

               (i)  in any other court of competent jurisdiction; or

               (ii) concurrently in more than one jurisdiction.

          (g)  Each of Lessee and Lessor irrevocably and unconditionally:

               (i)  agrees that if the other brings legal proceedings against it
                    or its assets in relation to the Lease no sovereign or other
                    immunity from such legal proceedings (which will be deemed
                    to include suit, court jurisdiction, attachment prior to
                    judgement, attachment in aid of execution of a judgement,
                    other attachment, the obtaining of judgement, execution of a
                    judgement or other enforcement or legal process or remedy)
                    will be claimed by or on behalf of itself or with respect to
                    its assets; and

                                       -56-

<PAGE>

               (ii) waives any such right of immunity which it or its assets now
                    has or may in the future acquire and agrees that the
                    foregoing waiver shall have the fullest extent permitted
                    under the Foreign Sovereign Immunities Act of 1976 of the
                    United States and is intended to be irrevocable for the
                    purposes of such Act.

          (h)  EACH OF LESSEE AND LESSOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
               WAIVES ANY AND ALL RIGHTS TO A JURY TRIAL IN RESPECT OF ANY CLAIM
               OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THE LEASE OR ANY
               DEALINGS BETWEEN THEM RELATING TO THE SUBJECT MATTER OF THE
               TRANSACTIONS CONTEMPLATED THEREBY OR THE LESSOR/LESSEE
               RELATIONSHIP BEING ESTABLISHED, including, without limitation,
               contract claims, tort claims, breach of duty claims and other
               common law and statutory claims. Each of Lessor and Lessee
               represents and warrants that each has reviewed and voluntarily
               waives its jury trial rights following consultation with its
               legal counsel. THIS WAIVER IS IRREVOCABLE, AND THIS WAIVER SHALL
               APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR
               MODIFICATIONS TO THE LEASE. In the event of litigation, this
               Section may be filed as a written consent to a trial by the
               court.

15.9      Sole and Entire Agreement; True Lease; Section 1110

          (a)  ENTIRE AGREEMENT: The Lease is the sole and entire agreement
               between Lessor and Lessee in relation to the leasing of the
               Aircraft, and supersedes all previous agreements in relation to
               that leasing. Any amendments to the Lease must be made in writing
               and signed on behalf of Lessor and Lessee.

          (b)  TRUE LEASE: The parties intend and agree that the Lease:

               (i)  constitutes a "true lease", and not a "security interest" as
                    defined in Section 1-201(37) of the UCC;

               (ii) constitutes a "true lease" for United States Federal income
                    tax purposes; and

              (iii) confers only a leasehold interest on Lessee in and to the
                    Aircraft on and subject to the terms of the Lease, and no
                    ownership or other interest with respect to the Aircraft
                    is provided to Lessee under the Lease.

               Lessee shall not file a tax return that is inconsistent with
               the provisions of this Section 15.9(b).

          (c)  SECTION 1110: Lessee acknowledges that Lessor would not have
               entered into the Lease unless it had available to it the benefits
               of a lessor under Section 1110 of Title 11 of the

                                       -57-

<PAGE>

               U.S.C. Lessee covenants and agrees with Lessor that to better
               ensure the availability of such benefits, Lessee shall not
               oppose any motion, petition or application filed by Lessor with
               any bankruptcy court having jurisdiction over Lessee whereby
               Lessor seeks recovery of possession of the Aircraft under said
               Section 1110, except in a situation in which Lessee shall have
               complied with the requirements of said Section 1110 to be
               fulfilled in order to entitle Lessee to continued use and
               possession of the Aircraft hereunder. In the event said Section
               1110 is amended, or if it is repealed and another statute is
               enacted in lieu thereof, Lessor and Lessee agree to amend the
               Lease and take such other action not inconsistent with the Lease
               as Lessor reasonably requests so as to afford to Lessor the
               rights and benefits as such amended or substituted statute
               confers upon owners and lessors of aircraft similarly situated to
               Lessor.

15.10      Indemnitees

           All rights expressed to be granted to each Indemnitee (other than
           Lessor) under the Lease are given to Lessor on behalf of that
           Indemnitee, and each Indemnitee is an express third party beneficiary
           thereof.

15.11      Counterparts

           The Lease (including the Aircraft Lease Agreement and this CTA) may
           be executed in two or more counterparts, each of which shall be
           deemed an original, but all of which together shall constitute one
           and the same instrument. To the extent, if any, that the Lease
           constitutes chattel paper (as such term is defined in the Uniform
           Commercial Code as in effect in any applicable jurisdiction), no
           security interest in the Lease may be created through the transfer or
           possession of any counterpart other than the original counterpart,
           which shall be identified as the counterpart designated as the
           "original" on the signature page of the Aircraft Lease Agreement by
           Financing Parties' Representative, Owner or Lessor, as the case may
           be.

15.12      Language

           All notices to be given under the Lease will be in English. All
           documents delivered to Lessor pursuant to the Lease (including any
           documents to be delivered pursuant to the Conditions Precedent) will
           be in English.

16.        DISCLAIMERS AND WAIVERS

           LESSOR AND LESSEE AGREE THAT THE DISCLAIMERS, WAIVERS AND
           CONFIRMATIONS SET FORTH IN CLAUSES 16.1 TO 16.4 BELOW SHALL APPLY AT
           ALL TIMES DURING THE TERM. LESSEE'S ACCEPTANCE OF THE AIRCRAFT IN
           ACCORDANCE WITH SECTION 4.3 SHALL BE CONCLUSIVE EVIDENCE THAT

                                      -58-

<PAGE>

           LESSEE HAS FULLY INSPECTED THE AIRCRAFT AND EVERY PART THEREOF AND
           THAT THE AIRCRAFT, THE ENGINES, THE PARTS AND THE AIRCRAFT DOCUMENTS
           AND RECORDS ARE TECHNICALLY ACCEPTABLE TO LESSEE AND SATISFY THE
           DELIVERY CONDITION REQUIREMENTS AND ARE IN SUITABLE CONDITION FOR
           DELIVERY TO AND ACCEPTANCE BY LESSEE.

16.1       Exclusion

           THE AIRCRAFT IS LEASED AND DELIVERED UNDER THE LEASE "AS IS, WHERE
           IS," AND LESSEE AGREES AND ACKNOWLEDGES THAT:

          (a)  LESSOR WILL HAVE NO LIABILITY IN RELATION TO, AND LESSOR HAS NOT
               AND WILL NOT BE DEEMED TO HAVE ACCEPTED, MADE OR GIVEN (WHETHER
               BY VIRTUE OF HAVING DONE OR FAILED TO DO ANY ACT, OR HAVING
               ACQUIRED OR FAILED TO ACQUIRE ANY STATUS UNDER OR IN RELATION TO
               THE LEASE OR OTHERWISE), ANY GUARANTEES, COVENANTS, WARRANTIES OR
               REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO, THE
               AIRCRAFT OR ANY ENGINE OR PART OR ANY SERVICES PROVIDED BY LESSOR
               UNDER THE LEASE, INCLUDING (BUT NOT LIMITED TO) THE TITLE (EXCEPT
               AS AND TO THE EXTENT EXPRESSLY PROVIDED IN SECTION 7.1),
               DESCRIPTION, AIRWORTHINESS, COMPLIANCE WITH SPECIFICATIONS,
               OPERATION, MERCHANTABILITY, QUALITY, FREEDOM FROM INFRINGEMENT OF
               PATENT, COPYRIGHT, TRADEMARK OR OTHER PROPRIETARY RIGHTS, FITNESS
               FOR ANY PARTICULAR USE OR PURPOSE, VALUE, DURABILITY, DATE
               PROCESSING, CONDITION, OR DESIGN, OR AS TO THE QUALITY OF THE
               MATERIAL OR WORKMANSHIP, THE ABSENCE OF LATENT OR OTHER DEFECTS,
               WHETHER OR NOT DISCOVERABLE, OR AS TO ANY OTHER MATTER
               WHATSOEVER, EXPRESS OR IMPLIED (INCLUDING ANY IMPLIED WARRANTY
               ARISING FROM A COURSE OF PERFORMANCE OR DEALING OR USAGE OF
               TRADE) WITH RESPECT TO THE AIRCRAFT, ANY ENGINE OR ANY PART OR
               ANY SERVICES PROVIDED BY LESSOR UNDER THE LEASE; AND

          (b)  LESSOR SHALL NOT HAVE ANY OBLIGATION OR LIABILITY WHATSOEVER TO
               LESSEE (WHETHER ARISING IN CONTRACT OR IN TORT, AND WHETHER
               ARISING BY REFERENCE TO NEGLIGENCE, MISREPRESENTATION OR STRICT
               LIABILITY OF LESSOR OR OTHERWISE) FOR:

               (i)  ANY LIABILITY, LOSS OR DAMAGE CAUSED OR ALLEGED TO BE CAUSED
                    DIRECTLY OR INDIRECTLY BY THE AIRCRAFT OR ANY ENGINE OR BY
                    ANY INADEQUACY THEREOF OR DEFICIENCY OR

                                       -59-

<PAGE>

                    DEFECT THEREIN OR BY ANY OTHER CIRCUMSTANCE IN
                    CONNECTION THEREWITH (EXCEPT FOR DIRECT DAMAGES DUE TO
                    LESSOR'S BREACH AS AND TO THE EXTENT EXPRESSLY PROVIDED IN
                    SECTION 4.4 OR 7.1 HEREOF);

               (ii) THE USE, OPERATION OR PERFORMANCE OF THE AIRCRAFT OR ANY
                    RISKS RELATING THERETO;

               (iii) ANY INTERRUPTION OF SERVICE, LOSS OF BUSINESS OR
                    ANTICIPATED PROFITS OR ANY OTHER DIRECT (EXCEPT FOR DIRECT
                    DAMAGES DUE TO LESSOR'S BREACH AS PROVIDED IN SECTION 4.4 or
                    7.1), INDIRECT OR CONSEQUENTIAL LOSS OR DAMAGE; OR

               (iv) THE DELIVERY, OPERATION, SERVICING, MAINTENANCE, REPAIR,
                    IMPROVEMENT OR REPLACEMENT OF THE AIRCRAFT, ANY ENGINE OR
                    ANY PART.

16.2      Waiver

          LESSEE HEREBY WAIVES, AS BETWEEN ITSELF AND LESSOR, ALL ITS RIGHTS IN
          RESPECT OF ANY CONDITION, WARRANTY OR REPRESENTATION, EXPRESS OR
          IMPLIED, ON THE PART OF LESSOR AND ALL CLAIMS AGAINST LESSOR HOWSOEVER
          AND WHENEVER ARISING AT ANY TIME IN RESPECT OF OR OUT OF ANY OF THE
          MATTERS REFERRED TO IN SECTION 16.1.

16.3      Disclaimer of Consequential Damages

          LESSEE AGREES THAT IT SHALL NOT BE ENTITLED TO RECOVER, AND HEREBY
          DISCLAIMS AND WAIVES ANY RIGHT THAT IT MAY OTHERWISE HAVE TO RECOVER,
          FOR INTERRUPTION OF SERVICE, LOSS OF BUSINESS, LOST PROFITS OR
          REVENUES OR CONSEQUENTIAL DAMAGES (AS DEFINED IN SECTION 2A-520 OF THE
          UCC OR OTHERWISE) AS A RESULT OF ANY BREACH OR ALLEGED BREACH BY
          LESSOR OF ANY OF THE AGREEMENTS, REPRESENTATIONS OR WARRANTIES OF
          LESSOR CONTAINED IN THE LEASE (INCLUDING A BREACH BY LESSOR UNDER
          SECTION 4.4 OR 7.1).

16.4      Confirmation

          LESSEE CONFIRMS THAT IT IS FULLY AWARE OF THE PROVISIONS OF THIS
          SECTION 16 AND ACKNOWLEDGES THAT RENT AND OTHER AMOUNTS PAYABLE UNDER
          THE LEASE HAVE BEEN CALCULATED BASED ON ITS PROVISIONS.

                                       -60-

<PAGE>

16.5      Limitation

          LESSOR HEREBY EXPRESSLY AGREES AND ACKNOWLEDGES THAT NOTHING IN THIS
          SECTION 16 SHALL DEROGATE FROM LESSOR'S OBLIGATIONS UNDER, OR
          OTHERWISE LIMIT LESSOR'S LIABILITY IN RESPECT OF, SECTIONS 2.2,
          4.4(c), 7.1, 7.2, 14.2 or 14.3 HEREOF OR SECTION 2(c) OF SCHEDULE 4
          HERETO.

17.       BROKERS AND OTHER THIRD PARTIES

17.1      No Brokers

          Each of the parties hereby represents and warrants to the other that
          it has not paid, agreed to pay or caused to be paid directly or
          indirectly in any form, any commission, percentage, contingent fee,
          brokerage or other similar payments of any kind, in connection with
          the establishment or operation of the Lease, to any Person (other than
          fees payable to legal advisers or portfolio services).

17.2      Indemnity

          Each party agrees to indemnify and hold the other harmless from and
          against any and all claims, suits, damages, costs and expenses
          (including, reasonable legal fees and expenses) asserted by any agent,
          broker or other third party for any commission or compensation of any
          nature whatsoever based upon the Lease or the Aircraft, if such claim,
          suit, damage, cost or expense arises out of any breach by the
          indemnifying party, its employees or agents of Section 17.1.

                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
                           THE SIGNATURE PAGE FOLLOWS.

                                      -61-

<PAGE>

 IN WITNESS WHEREOF the parties hereto have executed the Common Terms Agreement
 on the date shown at the beginning of the document.

 GENERAL ELECTRIC CAPITAL CORPORATION

 By: /s/ Norm Liu
     -------------------
 Name:   Norm Liu
     -------------------
 Title:  Vice President
     -------------------

 ALOHA AIRLINES, INC.

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

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

<PAGE>

IN WITNESS WHEREOF the parties hereto have executed the Common Terms
Agreement on the date shown at the beginning of the document.

  GENERAL ELECTRIC CAPITAL CORPORATION

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

  ALOHA AIRLINES, INC.

 By: /s/ Brenda F. Cutwright
     -------------------------------
 Name:   Brenda F. Cutwright
     -------------------------------
 Title:  Exec. Vice President & CFO
     -------------------------------

  By: /s/ James M. King
     ------------------------------
  Name:   James M. King
     ------------------------------
  Title: VP Planning & Development

<PAGE>

                             SCHEDULE 1
                            DEFINITIONS

  The following words and expressions have the respective meanings set forth
  below:

  ACT means the Federal Aviation Act of 1958, as amended, and as recodified in
  Title 49 U.S.C. pursuant to Public Law 103-272, or any similar legislation of
  the United States enacted in substitution or replacement thereof.

  AFFILIATE means as to any Person, any other Person that, directly or
  indirectly, is in control of, is controlled by, or is under common control
  with, such Person. For purposes of this definition, "control" of a Person
  means the power, directly or indirectly, either to (a) vote 50% or more of the
  securities having ordinary voting power for the election of directors (or
  persons performing similar functions) of such Person or (b) direct or cause
  the direction of the management and policies of such Person, whether by
  contract or otherwise.

  AFTER-TAX BASIS means in the case of any amount payable on an "After-Tax
  Basis" to or for the benefit of any Person (including any amount payable
  pursuant to this definition) that the total amount paid shall be such that the
  Person actually realizes the amount payable, after deduction from the total
  amount paid of the net amount of all Taxes required to be paid by such Person
  with respect to the receipt or accrual by it of such amount.

  AGREED VALUE has the meaning given in the Aircraft Lease Agreement.

  Air Authority means the FAA.

  AIRCRAFT has the meaning given in the Aircraft Lease Agreement.

  AIRCRAFT DOCUMENTS AND RECORDS means the documents, data and records
  identified in the list attached to the Certificate of Technical Acceptance,
  and any other documents and records Lessee is required to maintain under
  Section 8.8, and all additions, renewals, revisions and replacements from time
  to time made to any of the foregoing in accordance with the Lease.

  AIRCRAFT LEASE AGREEMENT means the specific aircraft lease agreement for the
  Aircraft entered or to be entered into between the parties hereto or
  Affiliates thereof.

  AIRFRAME means the Aircraft, excluding the Engines and Aircraft Documents and
  Records.

  AIRFRAME STRUCTURAL CHECK has the meaning given in the Aircraft Lease
  Agreement.

  AIRFRAME SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
  Agreement.

                                      1-1

<PAGE>

  AIRWORTHINESS DIRECTIVE means an airworthiness directive issued by the State
  of Design or the State of Registry.

  ANNUAL SUPPLEMENTAL RENT ADJUSTMENT has the meaning given in the Aircraft
  Lease Agreement.

  APPRAISAL PROCEDURE means the following procedure for determining the "fair
  market rental value" of the Aircraft pursuant to Sections 13.2 and 13.4 of
  the CTA: (a) Lessor shall select an independent aircraft appraiser in its
  sole and absolute discretion who shall make a determination of "fair market
  rental value" of the Aircraft; and (b) the fees and expenses of the
  appraiser shall be paid by Lessee. "Fair market rental value" shall mean
  the value determined by an appraisal completed on an "as-is" and "where-is"
  basis.

  APU means the auxiliary power unit installed on the Aircraft on the Delivery
  Date and any replacement auxiliary power unit installed on the Aircraft and
  title to which is transferred to Owner in accordance with the Lease.

  APU SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease Agreement.

  ASSUMED UTILIZATION has the meaning given in the Aircraft Lease Agreement.

  ASSUMED RATIO has the meaning given in the Aircraft Lease Agreement.

  BUSINESS DAY means any day other than a Saturday, Sunday or other day on which
  banking institutions in New York, New York or Honolulu, Hawaii are authorized
  or required by Law to be closed.

  "C" CHECK means a block "C" check in accordance with Lessee's Maintenance
  Program or, if the Lessee's Maintenance Program is not based on the
  Manufacturer's Maintenance Planning Document on a block basis, in accordance
  with the Manufacturer's Maintenance Planning Document.

  CERTIFICATE OF TECHNICAL ACCEPTANCE means a certificate of technical
  acceptance in the form of Part I or Part 2, as applicable, of Schedule 5.

  CERTIFICATED AIR CARRIER means any Person (except the United States
  Government) that is a "citizen of the United States of America" (as defined in
  Section 40102 of Title 49 of the U.S.C.) and holding a Certificate of Public
  Convenience and Necessity issued under Section 41102 of Title 49 of U.S.C. by
  the Department of Transportation or any predecessor or successor agency
  thereto, and an air carrier operating certificate issued pursuant to Chapter
  447 of Title 49 of U.S.C. or, in the event such certificates shall no longer
  be applicable, any Person (except the United States Government) that is a
  citizen of the United States (as defined in Section 40102 of Title 49 of the
  U.S.C.) and legally engaged in the business of transporting for hire
  passengers or cargo by air predominantly to, from or between points within the
  United States of America, and, in either event, operating commercial jet
  aircraft capable of carrying ten or more individuals or 6,000 pounds or more
  of cargo, which also is certificated so as to entitle Lessor, as a lessor, to
  the benefits of Section 1110 of Title 11 of U.S.C. with respect to the
  Aircraft.

                                       1-2

<PAGE>

  CONDITIONS PRECEDENT means Lessee Conditions Precedent and Lessor's Conditions
  Precedent, collectively, or any of them, as the context may require.

  CYCLE means one take-off and landing of the Aircraft.

  DAMAGE NOTIFICATION THRESHOLD has the meaning given in the Aircraft Lease
  Agreement.

  DEDUCTIBLE AMOUNT has the meaning given in the Aircraft Lease Agreement.

  DEFAULT means any Event of Default or any event or circumstance which, with
  the giving of notice and/or lapse of time and/or determination of materiality
  and/or fulfillment of any other condition, would constitute an Event of
  Default.

  DEFECT means any defect or non-conformity with the Delivery Condition
  Requirements notified by Lessee to Lessor during the Pre-Delivery Procedure.

  DELIVERY means delivery of the Aircraft by Lessor to Lessee under the Lease.

  DELIVERY CONDITION REQUIREMENTS has the meaning given in the Aircraft Lease
  Agreement.

  DELIVERY DATE means the date on which Delivery occurs.

  DELIVERY LOCATION has the meaning given in the Aircraft Lease Agreement.

  DEPOSIT has the meaning given in the Aircraft Lease Agreement.

  DISCOUNT RATE has the meaning given in the Aircraft Lease Agreement.

  DOLLARS AND $ means the lawful currency of the United States.

  ENGINE means, whether or not installed on the Aircraft:

     (a)  each engine of the manufacture and model specified in the Aircraft
          Lease Agreement for the Aircraft which Lessor offers to Lessee for
          delivery with the Airframe on the Delivery Date, such engines being
          described as to serial numbers on the Certificate of Technical
          Acceptance; and

     (b)  any Replacement Engine, with effect from the time when title thereto
          has passed to Owner in accordance with the Lease;

  and in each case includes all modules and Parts from time to time belonging to
  or installed in that engine but excludes any properly replaced engine title to
  which has passed to Lessee pursuant to the Lease.

  ENGINE CYCLE means operation of an engine on an aircraft from and including a
  take-off to and including the landing of that aircraft.

                                       1-3

<PAGE>

 ENGINE EVENT OF LOSS means the occurrence, with respect to the Engine only,
 whether or not installed on the Airframe, of any of those events described in
 the definition of Event of Loss.

 ENGINE FLIGHT HOUR means each hour or part thereof an Engine is operated,
 elapsing from the moment the wheels of an aircraft on which such Engine is
 installed leave the ground until the wheels of such aircraft next touch the
 ground.

 ENGINE LLP REPLACEMENT has the meaning given in Section 7.2(ii);

 ENGINE LLP SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
 Agreement.

 ENGINE REFURBISHMENT means all scheduled and unscheduled off the wing Engine
 maintenance and repair accomplished for each module in accordance with the
 performance restoration or full overhaul sections of the Manufacturer's
 workscope planning guide.

 ENGINE SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease Agreement.

 EQUIPMENT CHANGE has the meaning given in Section 8.12.

 ERISA means the Employee Retirement Income Security Act of 1974, as amended.

 EVENT OF DEFAULT means any event or condition specified in Schedule 9.

 EVENT OF LOSS means with respect to the Aircraft (including for the purposes of
 this definition the Airframe):

     (a)  the actual or constructive, compromised, arranged or agreed total loss
          of the Aircraft; or

     (b)  the Aircraft being destroyed, damaged beyond reasonable economic
          repair as determined by Lessor or permanently rendered unfit for
          normal use for any reason whatsoever; or

     (c)  the Aircraft being condemned, confiscated or requisitioned for title,
          or title to the Aircraft being otherwise compulsorily acquired by the
          government of the State of Registry or any other Government Entity; or

     (d)  the Aircraft being hijacked, stolen, confiscated, detained, seized,
          condemned or requisitioned for use or hire for the lesser of (i) a
          period of more than 30 days (or 60 days in the case of requisition for
          use or hire by the government of the State of Registry) or (ii) a
          period equal to or exceeding the remaining balance of the Term; or

     (e)  as a result of any rule, regulation, order or other action by the FAA
          the use of the Aircraft by Lessee or any Permitted Sub Lessee shall
          have been prohibited for a period of twelve (12) consecutive months.

                                       1-4

<PAGE>

  EXPIRY DATE means the Scheduled Expiry Date or, if earlier (i) the date when
  Lessor acting in accordance with the provisions of the Lease, terminates the
  leasing of the Aircraft to Lessee under the Lease, or (ii) subject to the
  provisions of Section 11.1 and 11.2, the date when Lessor receives the Agreed
  Value together with any other amounts then due and unpaid under the Lease and
  the Other Agreements following an Event of Loss; provided, that if the Term is
  extended pursuant to Section 12.2, the Expiry Date shall be extended to the
  date to which the Term is extended pursuant to Section 12.2.

  FAA means the Federal Aviation Administration of the United States and any
  successor thereof.

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

  FINAL DELIVERY DATE has the meaning given in the Aircraft Lease Agreement.

  FINAL INSPECTION has the meaning given in Section 1.1 of Part III of
  Schedule A to the Aircraft Lease Agreement.

  FINANCIAL INDEBTEDNESS means any indebtedness in respect of.

     (a)  moneys borrowed or raised;

     (b)  any liability under any debenture, bond, note, loan stock, acceptance,
          documentary credit or other security;

     (c)  the acquisition cost of any asset to the extent payable before or
          after the time of acquisition or possession (exclusive of trade
          payables); or

     (d)  any guarantee, indemnity or similar assurance against financial loss
          of any person in respect of the above.

  FINANCIAL INFORMATION means:

     (a)  as soon as available but not in any event later than 60 days after the
          last day of each fiscal quarter of Lessee, the consolidated financial
          statements of Aloha Airgroup, Inc. (consisting of a balance sheet and
          statements of operations and of retained earnings and cash flows)
          prepared for the most recent previous fiscal quarter certified by a
          qualified financial officer of Aloha Airgroup, Inc. as being true and
          correct and fairly presenting its financial condition and results of
          operation in accordance with GAAP (subject to year end adjustments);
          and

     (b)  as soon as available but not in any event later than 120 days after
          the last day of each fiscal year of Lessee, the audited combined
          financial statements of Aloha Airgroup, Inc. (consisting of a balance
          sheet and statements of operations and of retained earnings and cash
          flows), prepared for the fiscal year then most recently ended
          certified by the independent auditors of Aloha Airgroup, Inc. without
          qualification.

                                       1-5

<PAGE>

   FINANCING DOCUMENTS (if applicable) has the meaning given in the Aircraft
   Lease Agreement.

   FINANCING DOCUMENTS CONTEST RIGHTS (if applicable) has the meaning given in
   the Aircraft Lease Agreement.

   FINANCING DOCUMENTS INDEMNITY AMOUNTS (if applicable) has the meaning given
   in the Aircraft Lease Agreement.

   FINANCING DOCUMENTS TAX AMOUNTS (if applicable) has the meaning given in the
   Aircraft Lease Agreement.

   FINANCING PARTIES (if applicable) has the meaning given in the Aircraft Lease
   Agreement.

   FINANCING PARTIES' REPRESENTATIVE (if applicable) has the meaning given in
   the Aircraft Lease Agreement.

   FINANCING STATEMENTS means Uniform Commercial Code Financing Statements in
   respect of the Lease and the Aircraft and Engines leased thereunder prepared
   in a form acceptable for filing with the applicable Government Entities in
   the state in which Lessee's chief executive office is located (as the term
   "chief executive office" is defined in Article 9 of the Uniform Commercial
   Code as in effect in such state) and such other jurisdictions as Lessor shall
   reasonably require.

   FLIGHT HOUR means each hour or part thereof elapsing from the moment the
   wheels of the Aircraft leave the ground on take off until the wheels of the
   Aircraft next touch the ground.

   GAAP means generally accepted accounting principles in the United States.

   GE CAPITAL means General Electric Capital Corporation.

   GECAS means either or both of GE Capital Aviation Services, Limited and GE
   Capital Aviation Services, Inc.

   GOVERNMENT ENTITY means:

     (a)  national government, political subdivision thereof, or local
          jurisdiction therein;

     (b)  any instrumentality, board, commission, court, or agency of any of the
          above, however constituted; and

     (c)  any association, organization, or institution of which any of the
          above is a member or to whose jurisdiction any thereof is subject or
          in whose activities any of the above is a participant.

                                       1-6

<PAGE>

 GUARANTEE means, if applicable, a guarantee by the Guarantor in form and
 substance reasonably acceptable to Lessor and references to the Guarantee
 include reference to any replacement or re-issued guarantee.

 GUARANTOR (if applicable) has the meaning given in the Aircraft Lease
 Agreement.

 HABITUAL BASE means the jurisdiction in which the Aircraft's primary aircraft
 operations center is located.

 INDEMNITEE has the meaning given in the Aircraft Lease Agreement.

 INTEREST RATE has the meaning given in the Aircraft Lease Agreement.

 INSURANCE means the insurance in respect of the Aircraft in form and substance
 satisfactory to Lessor, and includes any insurance and reinsurance required by
 Section 9 and Schedule 7.

 LANDING GEAR means the landing gear assembly of the Aircraft excluding any
 rotable components.

 LANDING GEAR SUPPLEMENTAL RENT has the meaning given in the Aircraft Lease
 Agreement.

 LAW means and includes (a) any statute, decree, constitution, regulation,
 order, judgement or other directive of any Goverment Entity; (b) any treaty,
 pact, compact or other agreement to which any Government Entity is a signatory
 or party; (c) any judicial or administrative interpretation or application of
 any Law described in (a) or (b) above; and (d) any amendment or revision of any
 Law described in (a), (b) or (c) above.

 LC AMOUNT has the meaning given in the Aircraft Lease Agreement.

 LEASE means the Aircraft Lease Agreement for the Aircraft (of which this CTA
 forms a part), any schedules or documents executed pursuant to the Schedules
 hereto or pursuant to the Aircraft Lease Agreement, any Lease Supplement to the
 Lease (including Lease Supplement No. 1), and any side letters related to the
 Lease.

 LEASE SUPPLEMENT means any Lease Supplement executed and delivered with respect
 to the Lease.

 LEASE SUPPLEMENT NO. 1 means a Lease Supplement No. 1 substantially in the form
 of Schedule 12.

 LEASE TERMINATION CERTIFICATE means a Lease Termination Certificate
 substantially in the. form of Schedule 11 in respect of the Lease.

 LESSEE means the Person named as Lessee in the Aircraft Lease Agreement.

 LESSEE AFFILIATE means any Subsidiary or other Affiliate for the time being of
 Lessee.

 LESSEE CONDITIONS PRECEDENT means the conditions specified in Part B of
 Schedule 3.

                                       1-7

<PAGE>

 LESSEE'S MAINTENANCE PROGRAM means the Maintenance Program specifically
 approved by the Air Authority for maintenance of the Aircraft by Lessee, or at
 any time that a Permitted Sub-Lease approved by Lessor and meeting the
 requirements of Section 8.4(b) is in effect, by the Permitted Sub-Lessee under
 such Permitted Sub-Lease.

 LESSOR means the Person named as Lessor in the Aircraft Lease Agreement.

 LESSOR CONDITIONS PRECEDENT means the conditions specified in Part A of
 Schedule 3.

 LESSOR LIEN means (i) any Security Interest whatsoever from time to time
 created by Lessor or Owner in connection with the financing of the Aircraft,
 including the Financing Documents, and (ii) any other, Security Interest in the
 Aircraft which (a) results from acts of or claims against Lessor or Owner or
 any affiliate of Lessor or Owner that do not relate to the transactions
 contemplated by the Lease or by any other contract or agreement between Lessee
 or any affiliate of Lessee and Lessor or Owner or any affiliate of Lessor or
 Owner and (b) is not attributable to Lessee or Lessee's use or possession of
 the Aircraft.

 LESSOR/OWNER TAX JURISDICTION has the meaning given in the Aircraft Lease
 Agreement.

 LESSOR TAXES means Taxes for which Lessee is not obligated to indemnify Lessor
 and/or Owner and/or a Financing Party as provided in Section 5.7(c).

 LETTER OF CREDIT means any letter of credit issued in relation to the Lease
 pursuant to Section 5.14 and any replacement or renewal of that letter of
 credit.

 LOSSES means any and all cost, expense (including any and all reasonable legal
 fees and expenses and the fees and expenses of other professional advisers),
 claims, proceedings, losses, liabilities, obligations, damages (whether direct,
 indirect, special, incidental or consequential), suits, judgements, fees,
 penalties or fines (whether criminal or civil) of any kind or nature
 whatsoever, including any of the foregoing arising or imposed with or without
 any Indemnitee's fault or negligence, whether passive or active or under the
 doctrine of strict liability.

 MAINTENANCE CONTRIBUTIONS means, as and if applicable, all amounts payable by
 Lessor pursuant to Section 7.2.

 MAINTENANCE PERFORMER means (i) any of the Persons identified on Schedule 14
 hereto (until such time as Lessor delivers written notice to Lessee of the
 removal of any such Person from the list of Maintenance Performers), or (ii)
 such other mutually acceptable Persons as may be added to Schedule 14 hereto
 from time to time (Lessee shall advise Lessor in writing of any request to add
 a Person to Schedule 14 and Lessor shall respond in writing).

 MAINTENANCE PROGRAM means an Air Authority approved maintenance program for the
 Aircraft and encompassing scheduled maintenance, condition-monitored
 maintenance, and/or on-condition

                                       1-8

<PAGE>

  maintenance of Airframe, Engines and Parts, including servicing, testing,
  preventive maintenance, repairs, structural inspections, system checks,
  overhauls, approved modifications, engineering orders, airworthiness
  directives, corrosion control, inspections and treatments.

  MAJOR CHECKS means any C-check, multiple C-check or heavier check (including
  structural inspections and CPCP) suggested for commercial aircraft of the same
  model as the Aircraft by its manufacturer (however denominated) as set out in
  the Lessee's Maintenance Program.

  MANUFACTURER has the meaning given in the Aircraft Lease Agreement.

  MANUFACTURER'S MAINTENANCE PLANNING DOCUMENT means the recommended maintenance
  program for the Aircraft issued by the Manufacturer as in effect at the time
  of any applicable Determination.

  MINIMUM AIRFRAME LIFE LIMITED COMPONENT CYCLES has the meaning given in the
  Aircraft Lease Agreement.

  MINIMUM AIRFRAME LIFE LIMITED COMPONENT FLIGHT HOURS has the meaning given in
  the Aircraft Lease Agreement.

  MINIMUM APU LIMIT has the meaning given in the Aircraft Lease Agreement.

  MINIMUM APU LLP LIMIT has the meaning given in the Aircraft Lease Agreement.

  MINIMUM COMPONENT CALENDAR LIFE has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM COMPONENT CYCLES has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM COMPONENT FLIGHT HOURS has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM ENGINE CYCLES has the meaning given in the Aircraft Lease Agreement.

  MINIMUM ENGINE FLIGHT HOURS has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM LANDING GEAR CALENDAR TIME has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM LANDING GEAR CYCLES has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM LANDING GEAR FLIGHT HOURS has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM LIABILITY COVERAGE has the meaning given in the Aircraft Lease
  Agreement.

  MINIMUM MEASURABLE FUEL REQUIREMENT has the meaning given in the Aircraft
  Lease Agreement.

  NAMEPLATE INSCRIPTION means the inscription to be included on the Nameplates
  as reasonably requested by Lessor from time to time.

                                       1-9

<PAGE>

  NAMEPLATES means the fireproof plates to be installed on the Aircraft in
  accordance with Section 8.6(a).

  OTHER AGREEMENTS means any aircraft, engine or spare parts related lease or
  financing agreement (including an Aircraft, engine or spare parts related
  loan, hire purchase, conditional sale, credit sale or security agreement) from
  time to time entered into between Lessor (or any Subsidiary or Affiliate of
  Lessor), on the one hand, and Lessee (or any Subsidiary or Affiliate of
  Lessee), on the other hand.

  OWNER has the meaning given in the Aircraft Lease Agreement.

  PART means, whether or not installed on the Aircraft:

     (a)  any component, furnishing or equipment (other than a complete Engine
          or engine) incorporated or installed in or attached to or furnished
          with the Aircraft on the Delivery Date or thereafter if paid for or
          otherwise provided by or on behalf of Lessor; and

     (b)  any other component, furnishing or equipment (other than a complete
          Engine or engine), with effect from the time when title thereto has
          passed to Owner pursuant to the Lease;

     (c)  but excludes any such items title to which has passed to Lessee
          pursuant to the Lease.

  PART 36 OR FAR PART 36 means Part 36 of the FAR, as amended or modified from
  time to time.

  PART 121 OR FAR PART 121 means Part 121 of the FAR, as amended or modified
  from time to time.

  PERMITTED LIEN means:

     (a)  any lien for Taxes not assessed or, if assessed, not yet due and
          payable, or being diligently contested in good faith by appropriate
          proceedings;

     (b)  any lien of a repairer, mechanic, hangar-keeper or other similar lien
          arising in the ordinary course of business by operation of Law in
          respect of obligations which are not overdue or are being diligently
          contested in good faith by appropriate proceedings;

     (c)  any Lessor Lien; and

     (d)  rights of others under any sub-lease or other arrangements to the
          extent expressly permitted under Section 8.4;

  but only if (in the case of both (a) and (b)) (i) adequate reserves have been
  provided by Lessee for the payment of such Taxes or obligations; and (ii) such
  proceedings, or the continued existence of the lien, do not give rise to any
  risk of the sale, forfeiture or other loss of the Aircraft or any interest
  therein or of criminal liability on the part of Lessor or Owner.

                                      1-10

<PAGE>

  PERMITTED SUB-LEASE means any sub-lease of the Aircraft to a Permitted
  Sub-Lessee to which Lessor has consented as provided for in Section 8.4(a).

  PERMITTED SUB-LESSEE means any sub-lessee of the Aircraft to which Lessor has
  consented as provided in Section 8.4(a).

  PERSON means any individual person, any form of corporate or business
  association, trust, Government Entity, or organization or association of which
  any of the above is a member or a participant.

  PRE-APPROVED BANK has the meaning given in the Aircraft Lease Agreement.

  PRE-DELIVERY PROCEDURE means the procedure leading to Delivery as specified in
  Schedule 4.

  REDELIVERY LOCATION has the meaning given in the Aircraft Lease Agreement.

  REGULATIONS means any Law or regulation, official directive or recommendation,
  mandatory requirement, or contractual undertalking, or airworthiness
  requirements or limitations, which applies to Lessee or the Aircraft and any
  Law or regulation, official directive or recommendation or mandatory
  requirement which applies to Lessor, Owner, Financing Parties' Representative
  or GECAS.

  RENT means the basic monthly "Rent", as defined in Schedule B of the Aircraft
  Lease Agreement, and payable pursuant to Section 5.3.

  RENT COMMENCEMENT DATE has the meaning given in the Aircraft Lease Agreement.

  RENTAL PERIOD means each period ascertained in accordance with Section 5.2.

  RENT DATE means the first day of each Rental Period.

  REPLACEMENT APU means an "APU" that has duly replaced the APU in accordance
  with the requirements of Section 8.11(b).

  REPLACEMENT ENGINE means an "Engine" that has duly replaced an "Engine" in
  accordance with the requirements of Section 8.11(b).

  REQUIRED LC EXPIRY DATE means the date being 91 days after the Expiry Date.

  RETURN OCCASION means the date on which the Aircraft is redelivered to Lessor
  in accordance with Section 12.

  SCHEDULED DELIVERY DATE has the meaning given in the Aircraft Lease Agreement.

  SCHEDULED DELIVERY MONTH has the meaning given in the Aircraft Lease
  Agreement.

  SCHEDULED DELIVERY WEEK has the meaning given in the Aircraft Lease Agreement.

                                      1-11

<PAGE>

  SCHEDULED EXPIRY DATE has the meaning given in the Aircraft Lease Agreement.

  SECURITY INTEREST means any mortgage, chattel mortgage, security interest,
  charge, pledge, lien, conditional sale agreement, title retention agreement,
  equipment trust agreement, encumbrance, assignment, hypothecation, right of
  detention, right of set-off or any other agreement or arrangement having the
  effect of conferring security.

  STATE OF DESIGN has the meaning specified in the Aircraft Lease Agreement.

  STATE OF INCORPORATION means the United States and the state of organization
  of the applicable Person as identified in the heading of the Aircraft Lease
  Agreement.

  STATE OF REGISTRY means the United States.

  SUBSIDIARY means:

     (a)  in relation to any reference to financial statements, any Person whose
          financial statements are consolidated with the accounts of Lessee in
          accordance with GAAP; and

     (b)  for any other purpose, an entity from time to time of which another
          has direct or indirect control or owns directly or indirectly more
          than 50 percent of the voting share capital or similar equity
          interests.

  SUPPLEMENTAL RENT means, as and if applicable, all amounts payable under the
  Lease in respect of each of Airframe Supplemental Rent, Engine Supplemental
  Rent, Engine LLP Supplemental Rent, APU Supplemental Rent and Landing Gear
  Supplemental Rent.

  TAXES means any and all present and future taxes, duties, withholdings,
  levies, assessments, imposts, fees and other governmental charges of all kinds
  (including any value added or similar tax and any stamp, documentary, license,
  registration or similar fees or tax) imposed by a Government Entity, together
  with any penalties, fines, surcharges and interest thereon and any additions
  thereto.

  TAX INDEMNITEE has the meaning given in the Aircraft Lease Agreement.

  TECHNICAL REPORT means a monthly report of the Flight Hours, Cycles, Engine
  Flight Hours and Engine Cycles operated by the Airframe and Engines in respect
  of each calendar month substantially in the form attached as Schedule 15.

  TERM means the period commencing on the Delivery Date and ending on the Expiry
  Date.

  UCC means the Uniform Commercial Code as in effect in the State of New York.

  UNFORESEEN EVENT means:

                                      1-12

<PAGE>

     (a)  civil disturbance or act of any Government Entity;

     (b)  natural disaster or any other act of God;

     (c)  Law of, or any allocation or other action by, a Government Entity or
          any unexpected shortage of labor, materials or facilities affecting
          the Aircraft;

     (d)  any damage or Defect;

     (e)  labor disputes;

     (f)  breach of contract by any Person (other than Lessor), or other failure
          to deliver or redeliver the Aircraft by any Person (whether or not a
          breach) with possession or control of the Aircraft (other than by
          Lessor, if it has possession and control of the Aircraft), including
          any failure to deliver or delay in delivery by any prior lessee, any
          seller of the Aircraft or any Person performing modifications or
          maintenance to the Aircraft and any breach by any prior lessee, seller
          or modification or maintenance performer or failure to cooperate by
          any prior lessee, seller or modification or maintenance performer, or
          any "excusable" or "inexcusable" delay under any previous lease,
          purchase or modification or maintenance agreement for the Aircraft, or
          any purchase or modification or maintenance agreement for the Aircraft
          terminating prior to Delivery (including due to Lessor or an Affiliate
          of Lessor voluntarily terminating such agreement);

     (g)  delays in obtaining the Aircraft or any equipment or services for the
          Aircraft;

     (h)  any delay due to Air Authority certifications; or

     (i)  any other cause beyond the control of Lessor or not occasioned by
          Lessor's gross negligence or willful misconduct.

   UNITED STATES means the United States of America.

   U.S.C. means the United States Code.

                                      1-13

<PAGE>

                                   SCHEDULE 2
                         REPRESENTATIONS AND WARRANTIES

   1.1      LESSEE'S REPRESENTATIONS AND WARRANTIES

   Lessee's representations and warranties to Lessor as of the date of execution
   of the Lease and the Delivery Date are as follows:

          (a)  STATUS: It is duly organized, validly existing and in good
               standing in its State of Incorporation.

          (b)  NON-CONFLICT: Execution, delivery and performance of the Lease do
               not contravene or breach any Regulation applicable to Lessee.

          (c)  POWER AND AUTHORITY: It has all corporate and other power and
               authority to execute, deliver and perform the Lease, and the
               Lease has been duly authorized, executed and delivered by Lessee.

          (d)  LEGAL VALIDITY: The Lease is its legal, valid and binding
               obligation, enforceable against Lessee in accordance with its
               terms.

          (e)  NO EVENT OF DEFAULT: No Event of Default has occurred and is
               continuing or would occur because of Delivery.

          (f)  LITIGATION: It is not involved in any litigation or other dispute
               which could materially and adversely affect its financial
               condition or its ability to perform its obligations under the
               Lease.

          (g)  FINANCIAL INFORMATION: Its audited financial statements most
               recently delivered to Lessor:

               (i)  have been prepared in accordance with GAAP; and

               (ii) are true and correct and present fairly the financial
                    condition and results of operations of Lessee as at the date
                    thereof and for the period then ending.

          (h)  FULL DISCLOSURE: Neither the audited financial statements
               referred to in paragraph (g) nor any other financial, operational
               or credit related information provided to Lessor by Lessee for
               the purposes of the Lease contains as of the date thereof any
               untrue statement of a material fact or omits to state any
               material fact necessary in order to make the statements therein
               not misleading in the light of the circumstances under which they
               were made.

                                       2-1

<PAGE>

          (i)  LOCATION: Lessee's chief executive office (as that term is
               defined in Article 9 of the UCC) is located at the address set
               forth in the heading of the Aircraft Lease Agreement; and the
               records of the Lessee concerning the Aircraft are maintained at
               such chief executive office or at the Habitual Base of the
               Aircraft.

          (j)  CERTIFICATED AIR CARRIER: Lessee is a Certificated Air Carrier
               and Lessor, as lessor of the Aircraft to Lessee, is entitled to
               the benefits of Section 1110 of Title 11 of the U.S.C. with
               respect to the Aircraft.

          (k)  CITIZEN OF THE UNITED STATES: Lessee is a "citizen of the United
               States" as defined in Section 40102 of Title 49 of the U.S.C.

          (l)  ERISA: Lessee is not engaged in any transaction in connection
               with which it could be subjected to either a civil penalty
               assessed pursuant to Section 502 of ERISA or any tax imposed by
               Section 4975 of the Internal Revenue Code; no material liability
               to the Pension Benefit Guaranty Corporation has been or is
               expected by Lessee to be incurred with respect to any employee
               pension benefit plan (as defined in Section 3 of ERISA)
               maintained by Lessee or by any trade or business (whether or not
               incorporated) which together with Lessee would be treated as a
               single employer under Section 4001 of ERISA and Section 414 of
               the Internal Revenue Code; there has been no reportable event (as
               defined in Section 4043(b) of ERISA) with respect to any such
               employee pension benefit plan; no notice of intent to terminate
               any such employee pension benefit plan has been filed or is
               expected to be filed, nor has any such employee pension benefit
               been terminated; no circumstance exists or is anticipated that
               constitutes or would constitute grounds under Section 4042 of
               ERISA for the Pension Benefit Guaranty Corporation to institute
               proceedings to terminate, or to appoint a trustee to manage the
               administration of, such an employee pension benefit plan; and no
               accumulated funding deficiency (as defined in Section 302 of
               ERISA or Section 412 of the Internal Revenue Code), whether or
               not waived, exists with respect to any such employee pension
               benefit plan.

          (m)  MATERIAL ADVERSE CHANGE: there has been no material adverse
               change in the financial condition or operations of Lessee and
               Lessee Affiliates or in the ability of Lessee to comply with its
               obligations under the Lease since the date of the financial
               statements most recently provided to Lessor on or prior to the
               date of the Aircraft Lease Agreement.

   1.2     LESSOR'S REPRESENTATIONS AND WARRANTIES

  Lessor's representations and warranties to Lessee as of the date of execution
  of the Lease and the Delivery Date are as follows:

          (a)  STATUS: It is duly organized, validly existing and in good
               standing in its State of Incorporation.

                                       2-2

<PAGE>

          (b)  NON-CONFLICT: Execution, delivery and performance of the Lease do
               not contravene or breach any Regulation applicable to Lessor.

          (c)  POWER AND AUTHORITY: It has all corporate and other power and
               authority to execute, deliver and perform the Lease, and the
               Lease has been duly authorized, executed and delivered by Lessor.

          (d)  LEGAL VALIDITY: The Lease is its legal, valid and binding
               obligation, enforceable against Lessor in accordance with its
               terms.

          (e)  CITIZEN OF THE UNITED STATES: Lessor is a "citizen of the United
               States" as defined in Section 40102 of Title 49 of the U.S.C. and
               the FAR.

                                       2-3

<PAGE>

                                   SCHEDULE 3
                              CONDITIONS PRECEDENT

  PART A - LESSOR CONDITIONS PRECEDENT

  The conditions precedent to Lessor's obligation to deliver and to commence the
  leasing of the Aircraft are as follows. All documents delivered to Lessor
  pursuant to this Schedule 3 will be in English:

  1.1     PRELIMINARY CONDITIONS

  Lessor will receive from Lessee, not later than two Business Days prior to the
  Scheduled Delivery Date, each of the following, satisfactory in form and
  substance to Lessor:

          (a)  OPINION(S): forms of the opinion(s) substantially in the form of
               Schedule 8 that will be issued on the Delivery Date by legal
               counsel(s) reasonably acceptable to Lessor with respect to the
               laws of the State of New York, the state of the location of
               Lessee's chief executive offices and the general corporate laws
               of the State of Incorporation;

          (b)  APPROVALS: evidence of the issue of each approval, license and
               consent, if any, which is required in relation to, or in
               connection with the performance by Lessee of any of its
               obligations under the Lease;

          (c)  IMPORT: evidence that any required license, and all customs
               formalities, relating to the import of the Aircraft into the
               Habitual Base have been obtained or complied with, and that the
               import of the Aircraft into the Habitual Base is exempt from
               Taxes;

          (d)  PROCESS AGENT: a letter from the process agent appointed by
               Lessee in the Lease accepting that appointment;

          (e)  LICENSES: copies of Lessee's air transport license, air carrier
               operating certificate, air operator's certificates, including
               authority to operate the Aircraft under FAR Part 121, and a
               Certificate of Public Convenience and Necessity issued under
               Section 40102 of Title 49 of U.S.C.;

          (f)  UCC: Financing Statements with respect to the Lease and the
               Aircraft in a form reasonably acceptable to Lessor shall have
               been executed and delivered by Lessee to Lessor and duly filed.
               in each jurisdiction reasonably requested by Lessor;

          (g)  LETTER OF CREDIT (if applicable): the form of the Letter of
               Credit;

          (h)  GENERAL: such other documents as Lessor may reasonably request.

                                       3-1

<PAGE>

  1.2     FINAL CONDITIONS

          (a)  Final Documents: Lessor shall receive on or before the Delivery
               Date each of the following:

               (i)  CERTIFICATE OF TECHNICAL ACCEPTANCE AND LEASE SUPPLEMENT NO.
                    1: each of the Certificate of Technical Acceptance and Lease
                    Supplement No. 1, dated and fully completed, and executed by
                    Lessee, and, in the case of Lease Supplement No. 1, filed
                    for recording at the FAA (together with the CTA);

               (ii) OPINIONS: a signed original (or facsimile transmission
                    thereof) of each of the opinions referred to in
                    Section 1.1(a) of this Schedule, dated the Delivery Date;

               (iii)PAYMENTS: all sums due to Lessor under the Lease on or
                    before the Delivery Date, including the first payment of
                    Rent and, if applicable, the balance of the Deposit;

                (iv)INSURANCE: certificates of insurance, an opinion and
                    undertaking from Lessee's insurance broker and other
                    evidence reasonably satisfactory to Lessor that Lessee is
                    taking the required steps to ensure due compliance with the
                    provisions of the Agreement as to Insurance with effect on
                    and after the Delivery Date;

                 (v)FINANCIAL INFORMATION: the latest Financial Information of
                    Lessee requested by Lessor;

               (vi) LETTER OF CREDIT (if applicable): the Letter of Credit;

               (vii)GUARANTEE (if applicable): the Guarantee, duly executed and
                    delivered by the Guarantor, and an opinion of legal counsel
                    acceptable to Lessor in respect of the Guarantee in form and
                    substance acceptable to Lessor and its legal counsel;

              (viii)LESSEE'S MAINTENANCE PROGRAM: such information and
                    documents relating to the Lessee's Maintenance Program as
                    Lessor may reasonably require;

               (ix) FILINGS: evidence that on the Delivery Date all filings,
                    registrations, recordings and other actions have been or
                    will be taken WHICH are necessary or advisable to ensure the
                    validity, effectiveness and enforceability of the Lease and
                    to protect the interests of Owner and, if applicable, the
                    Financing Parties in the Aircraft, any Engine or any Part
                    and in the Lease;

               (x)  FAA OPINION: evidence that there will be issued an opinion
                    of __________ or other counsel reasonably acceptable to
                    Lessor WHO are recognized specialists with regard to FAA
                    registration matters in a form reasonably acceptable to
                    Lessor as

                                       3-2

<PAGE>

                    to the due filing for recordation of the Lease and, if
                    applicable, the Financing Documents, (the costs for which
                    shall be paid by Lessee);

               (xi) CERTIFICATE OF LEASE TERMINATION: a certificate of lease
                    termination executed by a duly authorized officer of Lessee
                    substantially in the form of Schedule 11 acknowledging that
                    the Lease is no longer in effect with respect to the
                    Aircraft and Engines, which certificate Lessor will hold in
                    escrow to be filed at the FAA upon the expiration or other
                    termination of the Lease;

               (xii) ACKNOWLEDGEMENT AND AGREEMENT RE ASSIGNMENT (if
                    applicable): an acknowledgement of and certain agreements
                    with respect to the assignment by Lessor of this Lease to
                    Owner and Financing Parties' Representative in the form
                    previously provided to Lessee or as Owner or Financing
                    Parties' Representative may otherwise reasonably request;
                    and

               (xiii) GENERAL: such other documents as Lessor may reasonably
                    request;

          (c)  REPRESENTATIONS/WARRANTIES: the representations and warranties of
               Lessee in Schedule 2 shall be true and correct in all material
               respects, and would be true and correct in all material respects
               if repeated on Delivery; and

          (d)  NO DEFAULT: no Default shall have occurred and be continuing on
               Delivery or could reasonably be expected to result from the
               leasing of the Aircraft to Lessee under the Lease.

   PART B - LESSEE CONDITIONS PRECEDENT

   The conditions precedent to Lessee's obligation to accept and to commence the
   leasing of the Aircraft are as follows. All documents delivered to Lessee
   pursuant to this Schedule 3 will be in English.

          (a)  FINAL DOCUMENTS: Lessee shall receive on or before the Delivery
               Date for the Aircraft each of the following:

               (i)  LEASE SUPPLEMENT NO. 1: Lease Supplement No. 1, dated and
                    executed by Lessor and filed for recording at the FAA
                    (together with the CTA); and

               (ii) ACKNOWLEDGEMENT RE QUIET ENJOYMENT: if Lessee is required to
                    deliver an acknowledgement of or agreement with respect to
                    the assignment by Lessor of the Lease to Owner or Financing
                    Parties' Representative, an agreement by each such Person
                    (Owner, Financing Parties' Representative or both, as the
                    case may be) as to itself to the effect set forth in Section
                    7.1;

                                       3-3

<PAGE>

               (iii)REPRESENTATIONS/WARRANTIES: the representations and
                    warranties of Lessor in Schedule 2 shall be true and correct
                    in all material respects, and would be true and correct in
                    all material respects if repeated on Delivery; and

               (iv) DELIVERY CONDITION REQUIREMENTS: tender by Lessor of
                    delivery of the Aircraft in compliance with the Delivery
                    Condition Requirements.

                                       3-4

<PAGE>

                                   SCHEDULE 4
                 PRE-DELIVERY PROCEDURES AND DELIVERY CONDITION

                      REQUIREMENTS - PART 1 (NEW AIRCRAFT)

   1.     LICENSES

          (a)  It is the responsibility of Lessee to obtain all licenses,
               permits or approvals necessary to export or transport the
               Aircraft from the Delivery Location.

          (b)  Lessor will provide Lessee with any required data and information
               for the purposes of obtaining any such licenses, permits or
               approvals.

   2.     INSPECTION

          Except as otherwise provided in the Aircraft Lease Agreement:

          (a)  Subject to any applicable purchase agreement, Lessee may inspect
               the Aircraft (including such rights as Lessor has to be present
               and inspect, on an ongoing basis, the manufacture of the Aircraft
               and including a demonstration flight at no expense to Lessee with
               up to two (2) representatives of Lessee on the Aircraft as
               observers) to ensure that the Aircraft fulfils the Delivery
               Condition Requirements.

          (b)  If Lessee's inspection of the Aircraft shows that the Aircraft
               does not fulfil the Delivery Condition Requirements, Lessor will
               correct any defects and make the Aircraft available for
               re-inspection by Lessee provided that, in Lessor's reasonable
               opinion, it is not impracticable or prohibitively expensive to
               correct the defect.

          (c)  If Lessor notifies Lessee that it does not intend to correct the
               defect, either party may terminate the Lease, and upon such
               termination neither party shall have any further liability to any
               party under this Lease, except that Lessor shall promptly return
               to Lessee the Deposit and/or the Letter of Credit, if any, to
               Lessor.

   3.      INDEMNITY

           Lessee is responsible for and will indemnify each Indemnitee against
           all Losses arising from death or injury to any observer or any
           employee of Lessee in connection with the inspection of the Aircraft.

                                       4-1

<PAGE>

                                   SCHEDULE 4
                 PRE-DELIVERY PROCEDURES AND DELIVERY CONDITION

                      REQUIREMENTS - PART 2 (USED AIRCRAFT)

   1.     LICENSES

          (a)  It is the responsibility of Lessee to obtain all licenses,
               permits or approvals necessary to export or transport the
               Aircraft from the Delivery Location.

          (b)  Lessor will provide Lessee with any required data and information
               for the purposes of obtaining any such licenses, permits or
               approvals.

  2.      INSPECTION

          Except as otherwise provided in the Aircraft Lease Agreement:

          (a)  Subject to any applicable purchase, agreement or prior lease,
               Lessee may inspect the Aircraft (including a demonstration flight
               at no expense to Lessee with up to two (2) representatives of
               Lessee on the Aircraft as observers) to ensure that the Aircraft
               fulfils the Delivery Condition Requirements.

          (b)  If Lessee's inspection of the Aircraft shows that the Aircraft
               does not fulfil the Delivery Condition Requirements, Lessor will
               correct any defects and make the Aircraft available for
               re-inspection by Lessee provided that, in Lessor's reasonable
               opinion, it is not impracticable or prohibitively expensive to
               correct the defect.

          (c)  If Lessor notifies Lessee that it does not intend to correct the
               defect, either party may terminate the Lease, and upon such
               termination neither party shall have any further liability to any
               party under this Lease, except that Lessor shall promptly return
               to Lessee the Deposit and/or the Letter of Credit, if any, to
               Lessor.

  3.      INDEMNITY

          Lessee is responsible for and will indemnify each Indemnitee against
          all Losses arising from death or injury to any observer or any
          employee of Lessee in connection with the inspection of the Aircraft.

                                      4-2

<PAGE>

                                   SCHEDULE 5

           CERTIFICATE OF TECHNICAL ACCEPTANCE - PART 1 (NEW AIRCRAFT)

  This Certificate of Technical Acceptance is delivered, on the date set out
  below by _______ ("Lessee") to _______ ("Lessor") pursuant to the Aircraft
  Lease Agreement dated _______ between Lessor and Lessee (the "Lease"). The
  capitalized terms used in this Certificate shall have the meaning given to
  such terns in the Lease.

  DETAILS OF ACCEPTANCE

  Lessee hereby confirms to Lessor that Lessee has at [     ] o'clock on this
  _______ day of _______, at _______, technically accepted the following, in
  accordance with the provisions of the Lease:

  _______ Aircraft, Manufacturer's Serial Number _______;

  _______ Engines:

   Engine Number      Manufacturer's Serial Number
   [To be completed at Delivery]

   (each of which has 750 or more rated take off horsepower or the equivalent
   of such horsepower)

   Fuel Status:     Kilos/lbs _______; and

   Loose Equipment Check List: in accordance with the list signed by Lessor and
   Lessee and attached hereto.

   Aircraft Documents and Records: in accordance with the list signed by Lessor
   and Lessee and attached hereto.

   LOPA drawing attached.

   HOURS AND CYCLES DATA (as of Delivery Date)

   Airframe:

  Time Since New: ------                      Cycles Since New: ---------

  Landing Gear (Main and Nose)

  Time Since New: [, Center]                  Cycles Since New: ---------

  Engines

  Position:                                   Time Since New: -----------

                                              Cycles Since New: ---------

  _______________________________________

  Auxiliary Power Unit:
  Number of Flight Hours/APU Hours
  (as applicable) since New: ------------

                                       5-1

<PAGE>

  ACCEPTANCE:

  Lessee hereby confirms that the Aircraft, Engines, Parts and Aircraft
  Documents and Records are technically acceptable to it, satisfy all of the
  Delivery Condition Requirements and are in the condition for delivery and
  acceptance as required under the Lease.

  IN WITNESS WHEREOF, Lessee and Lessor have, by their duly authorized
  representative, executed this Certificate of Technical Acceptance on the
  date in paragraph I above.

  LESSEE: __________________

  By: ______________________

  Title: ___________________

  LESSOR: __________________

  By: ______________________

  Title: ___________________

                                       5-2

<PAGE>

                                   SCHEDULE 5

          CERTIFICATE OF TECHNICAL ACCEPTANCE - PART 2 (USED AIRCRAFT)

    This Certificate of Technical Acceptance is delivered, on the date set
    out below by _____ ("Lessee") to _____ ("Lessor") pursuant to the
    Aircraft Lease Agreement dated _____ between Lessor and Lessee (the
    "Lease"). The capitalized terms used in this Certificate shall have the
    meaning given to such terms in the Lease.

   DETAILS OF ACCEPTANCE

   Lessee hereby confirms to Lessor that Lessee has [] at o'clock on this
    _____ day of  _____, at  _____, technically accepted the following, in
    accordance with the provisions of the Lease:

     _____ Aircraft, Manufacturer's Serial Number _____;

      _____ Engines:

   Engine Number     Manufacturer's Serial Number

   [to be completed at Delivery]

   (each of which has 750 or more rated take off horsepower or the equivalent of
   such horsepower)

   Fuel Status:      Kilos/lbs  _____; and

  Loose Equipment Check List: in accordance with the list signed by Lessor and
  Lessee and attached hereto.

  Aircraft Documents and Records: in accordance with the list signed by Lessor
  and Lessee and attached hereto.

   HOURS AND CYCLES DATA (as of Delivery Date)

   Airframe:

   Number of Hours since last Airframe Structural Check:  _____ hours

   "C" Check (or Equivalent)

   Interval: _________________

   Time Since: _______________

   Landing Gear Overhaul:

   Number of Cycles Since Last Overhaul:

                                       5-3

<PAGE>

   [_____] Gear __________________________ cycles

   Interval: __________________________

   Engines:

   Number of Hours Since Last Engine Refurbishment:

   S/N _________: _________ hours

   Hot Section Inspection:

   Interval: __________________________

   Time Since (S/N __________): __________

   Time Remaining to First Restriction:

   Engine S/N:

   Hours: ___________ Restriction: ___________

   Cycles: __________ Restriction: ___________

   Average Cycles in Life Limited Parts (see attached Schedule): _____________

   Auxiliary Power Unit:

   Number of APU Hours since Last Heavy Shop Visit:

   _______________ hours    Date accomplished _________________

   Hot Section Inspection:

   Interval: ____________________

   Time Since: __________________

   Interior Equipment:

   LOPA - attached ______________

   Emergency drawing - attached ____________________

   Galley Equipment ____________________

                                      5-4

<PAGE>

   ACCEPTANCE:

   Lessee hereby confirms that the Aircraft, Engines, Parts and Aircraft
   Documents and Records are technically acceptable to it, satisfy all of the
   Delivery Condition Requirements and are in the condition for delivery and
   acceptance as required under the Lease.

   IN WITNESS WHEREOF, Lessee and Lessor have, by their duly authorized
   representative, executed this Certificate of Technical Acceptance on the date
   in paragraph 1 above.

   LESSEE:

   By: _______________

   Title: ____________

   LESSOR:

   By: _______________

   Title: ____________

   By: _______________

   Title: ____________

                                       5-5

<PAGE>

                                   SCHEDULE 6
                                [NOT APPLICABLE]

                                       6-1

<PAGE>

                                   SCHEDULE 7

                             INSURANCE REQUIREMENTS

  1.1      TYPES OF INSURANCE

  The Insurances required to be maintained are as follows:

          (a)  HULL ALL RISKS of loss or damage while flying, taxiing and on the
               ground with respect to the Aircraft on an agreed value basis for
               not less than the Agreed Value and not more than 110% of the
               Agreed Value and with a deductible not exceeding the Deductible
               Amount;

          (b)  HULL WAR AND ALLIED PERILS, being such risks excluded from the
               Hull All Risks Policy, to the fullest extent available from the
               leading international insurance markets for the Agreed Value;
               provided that, when the Aircraft is being operated in or over the
               Untied States or Canada, coverage may be limited to such coverage
               as is usual and customary. for comparable airlines, operating
               similar equipment in similar circumstances, namely subject to the
               North American buy-back;

          (c)  ALL RISKS (including War and Allied Risk except when on the
               ground or in transit other than by air) property insurance on all
               Engines and Parts when not installed on the Aircraft for like
               kind and quality value and including engine test and running
               risks; and

          (d)  COMPREHENSIVE AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER,
               BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY
               (INCLUDING PRODUCTS) LEGAL LIABILITY for a combined single limit
               (bodily injury/property damage) of an amount not less than the
               Minimum Liability Coverage for the time being for any one
               occurrence (but in respect of products and personal injury
               liability, this limit may be an aggregate limit for any and all
               losses occurring during the currency of the policy). War and
               Allied Risks are also to be covered under the policy in line with
               prudent market practice for comparable airlines, operating
               similar equipment in similar circumstances.

  1.2      TERMS OF HULL AND SPARES INSURANCE

  All required hull and spares insurance, so far as it relates to the Aircraft,
  will:

          (a)  LOSS PAYEE: name Lessor, as loss payee (without imposing on
               Lessor any obligation imposed on the insured, including the
               liability to pay any calls, commissions or premiums);

          (b)  PAYMENT OF LOSSES: Losses will be payable in Dollars to Lessor
               for all amounts up to the Agreed Value and to Lessee for any
               excess above the Agreed Value (which excess shall not exceed 10%
               of the Agreed Value), except where the insurance payment does not

                                       7-1

<PAGE>

               exceed the Damage Notification Threshold, and no Default is
               in existence, in which case the loss will be settled with and
               paid to Lessee;

          (c)  50/50 PROVISION: if separate Hull "all risks" and "war risks"
               insurances are arranged, include a 50-150 provision in
               accordance with market practice (AVS. 103 is the current
               London market language); and

          (d)  NO OPTION TO REPLACE: confirm that the insurers are not entitled
               to replace the Aircraft in the event of an insured Event of Loss
               and are not entitled to replace any Engine in the event of an
               Engine Event of Loss with respect to such Engine.

    1.3     TERMS OF LIABILITY INSURANCE

    All required liability insurances will:

          (a)  ADDITIONAL INSUREDS: include each Indemnitee, as additional
               insureds for its respective rights and interests, warranted, each
               as to itself only, no operational interest (without imposing on
               any such Person any obligation imposed on the insured, including
               the liability to pay any calls, commissions or premiums);

          (b)  SEVERABILITY: include a severability of interests clause which
               provides that the insurance, except for the limit of liability,
               will operate to give each insured the same protection as if there
               were a separate policy issued to each insured; and

          (c)  PRIMARY POLICY: contain a provision confirming that the policy is
               primary without right of contribution and the liability of the
               insurers will not be affected by any other insurance of which
               Lessor, any Indemnitee or Lessee has the benefit so as to reduce
               the amount payable to the additional insureds under such
               policies.

    1.4     TERMS OF ALL INSURANCES

    All Insurances will:

          (a)  INDUSTRY PRACTICE: be in accordance with standard industry
               practice for airlines operating similar aircraft in similar
               circumstances;

          (b)  DOLLARS: provide cover denominated in Dollars;

          (c)  WORLDWIDE: operate on a worldwide basis subject to such
               limitations and exclusions as are in line with industry practice
               obtained by prudent United States-based international air
               carriers;

          (d)  BREACH OF WARRANTY: provide that, in relation to the interests of
               each of the additional assureds, the Insurances will not be
               invalidated by any act or omission by Lessee, or any other Person
               other than the respective additional assureds seeking protection
               and shall

                                      7-2

<PAGE>

               insure the interests of each of the additional assureds
               regardless of any breach or violation by Lessee, or any other
               Person other than the respective additional assured seeking
               protection of any warranty, declaration or condition, contained
               in such Insurances;

          (e)  SUBROGATION: provide that the insurers will hold harmless and
               waive any rights of recourse or subrogation against the
               additional insureds to the extent Lessee has waived its rights
               against the additional insureds in the Lease;

          (f)  PREMIUMS: provide that the additional insureds will have no
               obligation or responsibility for the payment of any premiums due
               (but reserve the right to pay the same should any of them elect
               so to do) and that the insurers will not exercise any right of
               set-off, counter claim or other deduction, by attachment or
               otherwise, in respect of any premium due against the respective
               interests of the additional insureds other than outstanding
               premiums relating to the Aircraft, any Engine or Part the subject
               of the relevant claim;

          (g)  CANCELLATION/CHANGE: provide that the Insurances will continue
               unaltered for the benefit of the additional insureds for at least
               30 days after written notice by registered mail or telex of any
               cancellation, change, event of non-payment of premium or
               installment thereof has been sent by insurer(s) to Lessor, or
               where an insurance broker is appointed to the insurance broker
               who shall promptly send on such notice to Lessor, except in the
               case of war risks for which 7 days (or such lesser period as is
               or may be customarily available in respect of war risks or allied
               perils) will be given, or in the case of war between the 5 great
               powers or nuclear peril for which termination is automatic; and

          (h)  [NOT APPLICABLE]

          (i)  [INTENTIONALLY OMITTED.]

          (j)  INDEMNITIES: accept and insure the indemnity provisions of the
               Lease to the extent of the risks covered by the policies.

   1.5    DEDUCTIBLES

   Lessee shall be responsible for any and all deductibles under the Insurances.

   1.6     APPLICATION OF INSURANCE PROCEEDS

   The Insurances will be endorsed to provide for payment of proceeds as
   follows:

          (a)  EVENT OF LOSS: all insurance payments up to the Agreed Value
               received as the result of an Event of Loss occurring during the
               Term will be paid to Lessor as loss payee and any amount in
               excess of the Agreed Value (which excess shall not exceed 10% of
               the Agreed Value) shall be paid to Lessee;

                                       7-3

<PAGE>

          (b)  EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance proceeds
               of any damage or loss to the Aircraft, any Engine or any Part
               occurring during the Term not constituting an Event of Loss and
               in excess of the Damage Notification Threshold will be paid to
               the appropriate repair facility, and applied in payment (or paid
               to Lessee and/or Lessor as reimbursement) for repairs or
               replacement property upon Lessor being satisfied that the repairs
               or replacement have been effected in accordance with the Lease.

          (c)  BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in
               amounts below the Damage Notification Threshold shall be paid by
               the insurer directly to Lessee;

          (d)  LIABILITY PROCEEDS: all insurance proceeds in respect of third
               party liability will be paid by the insurers to the relevant
               third party in satisfaction of the relevant liability or to
               Owner, Lessor, Financing Partners' Representative or Lessee, as
               the case may be, in reimbursement of any payment so made;

          (e)  DEFAULT: notwithstanding any of the foregoing paragraphs, if at
               the time of the payment of any such insurance proceeds a Default
               has occurred and is continuing, all such proceeds will be paid to
               Lessor, Owner or Financing Parties' Representative, as the case
               may be, or retained to be applied toward payment of any amounts
               which may be or become payable by Lessee in such order as Lessor
               or Owner, as the case may be, may elect until such time as no
               Default is continuing and then applied as described above; and to
               the extent that insurance proceeds are paid to Lessee, Lessee
               agrees to hold such proceeds in trust and comply with the
               foregoing provisions and apply or pay over such proceeds as so
               required.

  1.7    UNITED STATES GOVERNMENTAL INDEMNITY

  Notwithstanding any of the foregoing paragraphs, in the event of a Permitted
  Sub-Lease to, or a requisition of use by, the United States or any
  Governmental Entity whose obligations have the full faith and credit of the
  federal Government of the United States, Lessor agrees to accept in lieu of
  insurance required hereunder indemnification or insurance from the United
  States or such a Governmental Entity in a form reasonably acceptable to Lessor
  and Owner and against such risks and in such amounts and on such terms such
  that when added to the Insurance maintained by Lessee, Lessee is in full
  compliance with the requirements of Section 9 and this Schedule.

                                       7-4

<PAGE>

                                   SCHEDULE 8

                 FORM OF LESSEE'S AND GUARANTOR'S LEGAL OPINION

  [Lessor]

  [Owner]

  [Financing Parties' Representative]

  Ladies and Gentlemen:

  1.      You have asked us to render an opinion in connection with the
          transaction governed by or subject to, inter alia, the following
          documents.

          (a)  the Lease as defined below;

          (b)  the [Articles/Certificate of Incorporation and By-laws]* of
               Lessee; and

               [*Counsel should amend this reference as necessary to
               describe the actual constitutional documents of Lessee].

          (c)  all other documents, approvals and consents of whatever nature
               and wherever kept which it was, in our judgement and to our
               knowledge, necessary or appropriate to examine to enable us to
               give the opinion expressed below.

           Words and expressions used and not otherwise defined herein will bear
           the same meanings as defined in an Aircraft Lease Agreement dated
           _______________, _______ between _______________ ("Lessor") and
           _______________ ("Lessee") in respect of one _______________ aircraft
           with manufacturer's serial number _______________ together with the
           ________ installed ________ engines (the "AIRCRAFT"). As used herein
           the term "Lease" means and includes the Aircraft Lease Agreement
           which incorporates the Common Terms Agreement (as defined therein)
           and Lease Supplement No. ________. Also, for the purposes of this
           opinion, the term "Lease" includes the Acknowledgment and Agreement
           dated as of the date hereof executed by Lessee in favor of Owner and
           Financing Parties' Representative.

  2.       Having considered the documents listed in paragraph 1 above, and
           having regard to the relevant laws of ___________ we are pleased to
           advise that in our opinion:-

           (a)      Lessee is a company duly incorporated and in good standing
                    under the laws of ___________________, and is qualified to
                    do business as a foreign corporation in each jurisdiction
                    where failure to so qualify would have a materially
                    adverse effect on Lessee's business or its ability to
                    perform its obligations under the Lease;

           (b)      Lessee has the corporate power to enter into and perform,
                    and has taken all necessary corporate action to authorize
                    the entry into, and the execution, delivery and performance
                    by it of, the Lease and the transactions contemplated by the
                    Lease;

                                       8-1

<PAGE>

           (c)      the entry into and performance by Lessee of, and the
                    transactions contemplated by, the Lease do not and will not
                    (x) conflict with any laws binding on Lessee, (y) conflict
                    with the [Articles/Certificate of Incorporation or By-laws)
                    of Lessee; or (z) conflict with or result in default under
                    any agreement or instrument which is binding upon Lessee or'
                    any of its assets or result in the creation of any Security
                    Interest on any of its assets;

           (d)      no authorizations, consents, licenses, approvals and
                    registrations (other than those which have been obtained and
                    of which copies are attached hereto) are necessary or
                    desirable to be obtained from any governmental or other
                    regulatory authorities in the United States or any other
                    jurisdiction having jurisdiction over Lessee, its operations
                    or its properties to enable Lessee (x) to enter into and
                    perform the transactions contemplated by the Lease, (y) to
                    operate the Aircraft in the United States and on
                    international flights for the transport of fare-paying
                    passengers, or (z) to make the payments provided for in the
                    Lease;

           (e)      except for the filing and recordation of [a bill of sale in
                    favor of the Owner,] the Financing Documents and the Lease
                    with the FAA (which filing has been duly made on or before
                    this date) and the filing of Financing Statements in
                    _____________, it is not necessary or desirable, to ensure
                    the priority, validity and enforceability of all the
                    obligations of Lessee under the Lease, as against Lessee and
                    all third parties, or to perfect the interests of Lessor,
                    Owner or Financing Parties' Representative in and to, the
                    Aircraft or the Lease, that the Lease be filed, registered,
                    recorded or notarized in any public office or elsewhere or
                    that any other instrument be signed, delivered, filed,
                    registered or recorded, that any tax or duty be paid or that
                    any other action whatsoever be taken;

           (f)      the Lease has been duly executed and delivered on behalf of
                    Lessee and constitutes the legal, valid and binding
                    obligation of Lessee, enforceable against Lessee in
                    accordance with its terms;

           (g)      [NOT APPLICABLE];

           (h)      there is no applicable usury or interest limitation law in
                    _______________ applicable to payments in accordance with
                    the Lease;

           (i)      there are no registration, stamp or other taxes or duties of
                    any kind payable in _______________ in connection with the
                    execution, performance or enforcement by legal proceedings
                    of the Lease or the Guaranty;

           (j)      the choice of New York law to govern the Lease will be
                    upheld as a valid choice of law in any action in the courts
                    of ____________________;

           (k)      the consent to the jurisdiction by Lessee contained in the
                    Lease is valid and binding on Lessee;

                                       8-2

<PAGE>

            (l)      Lessee is a Certificated Air Carrier;

            (m)      Lessee is a "citizen of the United States" as defined in
                     49 U.S.C. Section 40102(a)(15);

            (n)      Lessee's "chief executive office" (as referenced in the
                     Uniform Commercial Code adopted in the State of
                     _________________) is _______________;

            (o)      Lessor will not violate any law or regulation of the States
                     of ______________ or New York or any federal laws or
                     regulations of the United States of America and Lessor will
                     not become liable to income tax in the State of
                     ________________ solely by reason of Lessor entering into
                     the Lease with Lessee or performing its obligations
                     thereunder or enforcement of its rights thereunder;

            (p)      It is not necessary for Lessor to establish a place of
                     business or be licensed or qualified to do business in the
                     State of __________________ or New York in order for Lessor
                     to enforce any provisions of the Lease; and

            (q)      Lessor is entitled to the benefits of Section 1110 of
                     Title 11 of the U.S.C. with respect to the Aircraft and
                     the Lease.

                                                Very truly yours,

   [If there is a Guarantor/Guarantee the opinion must also include paragraphs
   (a), (b), (c), (d), (e), (f), (g), (h), (i), (J), (k), (o) and (p) revised
   to be applicable to the Guarantor/Guarantee]

                                       8-3

<PAGE>

                                   SCHEDULE 9
                                EVENTS OF DEFAULT

   Each of the following events or conditions constitutes an Event of Default:

          (a)       NON-PAYMENT: Lessee fails to make any payment of Rent,
                    Supplemental Rent or any other amount payable under the
                    Lease on the due date and such failure continues for three
                    (3) Business Days or more; or

          (b)       INSURANCE: Lessee fails to comply with any provision of
                    Section 9 (other than the requirement to provide Lessor with
                    evidence of renewal of any policy on or before the renewal
                    date where the policy has actually been renewed on or prior
                    to such date) or Schedule 7, or any insurance required to be
                    maintained under the Lease is cancelled or terminated, or a
                    notice of cancellation is given in respect of any such
                    insurance; or

          (c)       BREACH: (i) Lessee fails to provide Lessor with evidence of
                    renewal of any insurance policy on or before the renewal
                    date for that policy where the policy has actually been
                    renewed on or prior to such date and such failure continues
                    for 24 hours after notice from Lessor to Lessee of such
                    failure to comply; or (ii) Lessee fails to comply with any
                    other provision of the Lease not referenced in this Schedule
                    9 and, if such failure is in the opinion of Lessor capable
                    of remedy, such failure continues for 30 days after notice
                    from Lessor to Lessee; or

          (d)       REPRESENTATION: any representation or warranty made (or
                    deemed to be repeated) by Lessee in or pursuant to the Lease
                    or in any document executed by Lessee in connection with or
                    pursuant to the Lease or in any document or in any
                    certificate is or proves to have been incorrect in any
                    material respect when made or deemed to be repeated; or

          (e)       CROSS-DEFAULT:

                    (i)      any amount in respect of Financial Indebtedness of
                             Lessee or any Lessee Affiliate having a principal
                             amount in excess of Five Hundred Thousand Dollars
                             ($500,000) is not paid when due;

                    (ii)     any such Financial Indebtedness becomes due or
                             capable of being declared due prior to the date
                             when it would otherwise have become due; or becomes
                             due as a result of an event of default or
                             termination event, howsoever described, on the part
                             of Lessee or any other Person prior to the date
                             when it would otherwise have become due; or

                    (iii)    the security for any such Financial Indebtedness
                             becomes enforceable; or

                                       9-1

<PAGE>

                    (iv)      any event of default or termination event,
                              howsoever described, occurs under any Other
                              Agreement, or any other lease, hire purchase,
                              conditional sale or credit sale agreement of
                              Lessee or any Lessee Affiliate; or

                    APPROVALS: any consent, authorization, license, certificate
                    or approval of or registration with or declaration to any
                    Government Entity required to be obtained or maintained by
                    Lessee in connection with the Lease and/or the operation of
                    the Aircraft (including any airline license or air transport
                    license including authority to operate the Aircraft under
                    Part 121 of the FARs, a Certificate of Convenience and
                    Necessity issued under the Act and any air carrier operating
                    certificate issued under the Act) is modified in a
                    materially prejudicial manner or is withheld, or is revoked,
                    suspended, cancelled, withdrawn, terminated or not renewed,
                    or otherwise ceases to be in full force; or

           (g)      BANKRUPTCY, ETC:

                    (i)       Lessee or any Lessee Affiliate consents to the
                              appointment of a custodian, receiver, trustee or
                              liquidator of itself or all or a material part of
                              its property or its consolidated property, or
                              Lessee or any Lessee Affiliate admits in writing
                              its inability to, or is unable to, or does not,
                              pay its debts generally as they come due, or makes
                              a general assignment for the benefit of creditors,
                              or Lessee or any Lessee Affiliate files a
                              voluntary petition in bankruptcy or voluntary
                              petition seeking reorganization in a proceeding
                              under any bankruptcy or insolvency laws (as now or
                              hereafter in effect), or an answer admitting the
                              material allegations of a petition filed against
                              Lessee in any such proceeding, or Lessee or any
                              Lessee Affiliate by voluntary petition, answer or
                              consent seeks relief under the provisions of any
                              other bankruptcy, insolvency or other similar law
                              providing for the reorganization or winding-up of
                              debtors, or provides for an agreement,
                              composition, extension or adjustment with its
                              creditors, or any board of directors or
                              shareholder action is taken by Lessee or any
                              Lessee Affiliate in furtherance of any of the
                              foregoing, whether or not the same is fully
                              effected or accomplished; or

                    (ii)      An order, judgement or decree is entered by any
                              court appointing, without the consent of Lessee or
                              any Lessee Affiliate, a custodian, receiver,
                              trustee or liquidator of or sequestering any of
                              Lessee's or any Lessee Affiliate's property, and
                              any such order, judgement or decree of appointment
                              or sequestration remains in effect, undismissed,
                              unstayed or unvacated for a period of 30 days
                              after the date of entry thereof or at any time an
                              order for relief is granted; or

                    (iii)     An involuntary petition against Lessee or any
                              Lessee Affiliate or other proceeding under the
                              United States Federal Bankruptcy laws or other
                              insolvency laws (as now or hereafter in effect) is
                              filed and is not withdrawn or dismissed

                                       9-2

<PAGE>

                              within 30 days thereafter or at any time an order
                              for relief is granted in such proceeding, or if,
                              under the provisions of any law providing for
                              reorganization or winding-up of debtors which may
                              apply to Lessee or any Lessee Affiliate, any court
                              of competent jurisdiction assumes jurisdiction
                              over, or custody or control of, Lessee or any
                              Lessee Affiliate or of all or any material part of
                              Lessee's or Lessee Affiliates' property, and such
                              jurisdiction, custody or control remains in
                              effect, unrelinquished, unstayed. or unterminated
                              for a period of 30 days or at any time an order
                              for relief is granted in such proceeding; or

          (h)       SUSPENSION OF BUSINESS: Lessee suspends or ceases or takes
                    substantive steps to suspend or cease to carry on all or a
                    material part of its business as a Certificated Air Carrier
                    (other than as a result of a labor dispute with Lessee's
                    employees); or

          (i)       RIGHTS AND REMEDIES: Lessee or any other Person claiming by
                    or through Lessee challenges the existence, validity,
                    enforceability or priority of the Lease or the rights of
                    Lessor as lessor or of Owner as owner in respect of the
                    Aircraft or Financing Parties' Representative as holder of a
                    first priority Security Interest in the Aircraft and the
                    Lease; or

          (j)       CHANGE OF CONTROL: any single person or group of persons
                    acquire control of Lessee or Guarantor without the previous
                    consent in writing of Lessor; or

          (k)       DELIVERY: Lessee fails to comply with its obligation under
                    Section 4 to accept delivery of the Aircraft or Lessee fails
                    to comply with its obligations under Section 2 of Part III
                    of Schedule A to the Aircraft Lease Agreement; or

          (l)       ADVERSE CHANGE: any event or series of events occurs which,
                    in the reasonable opinion of Lessor, could be expected to
                    have a material adverse effect on the financial condition or
                    operations of Lessee or Guarantor or on the ability of
                    Lessee to comply with its obligations under the Lease or on
                    the ability of Guarantor to comply with its obligations
                    under the Guarantee; or

          (m)       LETTER OF CREDIT:

                    (i)       the issuer of the Letter of Credit (if any) fails
                              to make any payment under that Letter of Credit
                              when due; or

                    (ii)      any such Letter of Credit is not in full force or,
                              for any reason ceases to constitute the legal,
                              valid and binding obligation of the issuer; or

                    (iii)     any of the events listed in paragraph (g) above
                              applies to such issuer (references in those
                              sub-paragraphs to Lessee being deemed to be to the
                              issuer); or

                                       9-3

<PAGE>

                    (iv)      where applicable, any Letter of Credit is not
                              renewed, extended or reissued within the time, or
                              replaced when, required by Section 5.14; or

                    (v)       any consent, authorization, license, certificate
                              or approval of or registration with or declaration
                              to any Governmental Entity required to be obtained
                              or maintained by the issuer of the Letter of
                              Credit in connection with the Letter of Credit is
                              modified in a materially prejudicial manner or is
                              withheld, revoked, suspended, cancelled,
                              withdrawn, terminated or not renewed, or otherwise
                              ceases to be in full force; or

                    (vi)      and each reference in this paragraph (in) to "the
                              issuer" shall include a reference to any
                              confirming bank for the Letter of Credit

          (n)       REDELIVERY: Lessee fails to return the Aircraft to Lessor on
                    the Expiry Date in accordance with Section 12; or

          (o)       LITIGATION: a judgement for the payment of money not covered
                    by insurance in excess of Six Hundred Fifty Thousand Dollars
                    ($650,000) (or the equivalent thereof in other currencies)
                    shall be rendered against Lessee or any Lessee Affiliate and
                    the same shall remain undischarged for a period of 30 days,
                    unless during such period, execution of such judgement shall
                    have been effectively stayed by agreement of the parties
                    involved or by court order or such judgement shall have been
                    adequately bonded; or

          (p)       GUARANTEE:

                    (i)       any representation or warranty made by Guarantor
                              is or proves to have been incorrect in any
                              material respect when made or deemed to be
                              repeated or Guarantor fails to make any payment or
                              comply with any other obligation under the
                              Guarantee when due; or

                    (ii)      the Guarantor repudiates, revokes or claims that
                              it has no further obligations under the Guarantee
                              or the Guarantee ceases to be in full force or,
                              for any reason, ceases to be the legal, valid and
                              binding obligation of Guarantor; or

                    (iii)     any of the events listed in paragraph (f)(i) or
                              (g) above occurs in respect of Guarantor (and for
                              purposes of this paragraph(s), references in those
                              paragraphs to Lessee shall be deemed to be
                              references to Guarantor); or

          (q)       UNLAWFUL: it becomes unlawful for Lessee to perform any of
                    its obligations under the Lease or the Lease becomes wholly
                    or partly invalid or unenforceable; or

          (r)       TRANSFER/LESSEE REQUIREMENTS: Lessee makes or permits any
                    assignment or transfer of the Lease, or any interest
                    herein, or of the right to possession of the Aircraft, the

                                       9-4

<PAGE>

                    Airframe, or any Engine, or any obligations under the Lease,
                    or Lessee subleases the Aircraft, in any case except as
                    expressly permitted in the Lease; or Lessee breaches any
                    provision of Section 8.7; or

          (s)       ENGINE LOSS: Lessee fails to timely comply with its
                    obligations under Sections 8.11(a) and 8.11(b) with
                    respect to an Engine Event of Loss.

          (t)       OTHER: Such other events, if any, as may be specified in the
                    Aircraft Lease Agreement.

                                       9-5

<PAGE>

                                   SCHEDULE 10

                                [NOT APPLICABLE]

                                      10-1

<PAGE>

                                   SCHEDULE 11

                      FORM OF LEASE TERMINATION CERTIFICATE

   The undersigned hereby certify that the Aircraft Lease Agreement dated as of
   ___________________, ________ between the undersigned Lessor and undersigned
   Lessee, and as further described in the Appendix attached hereto, has
   terminated (except as described in Section 15.1 of the Common Terms Agreement
   incorporated therein) and the aircraft and aircraft engines covered thereby
   are no longer subject to the terms thereof. This certificate may be executed
   in one or more counterparts each of which when taken together shall
   constitute one and the same instrument.

       DATED this __________________ day of ____________________, ________

   LESSOR                                    LESSEE

   [    INSERT LESSOR'S NAME    ]            [    INSERT LESSEE'S NAME     ]
   ______________________________            ______________________________
   By: __________________________            By: __________________________
   Title: _______________________            Title: _______________________

                                      11-1

<PAGE>

                                   SCHEDULE 12
                         FORM OF LEASE SUPPLEMENT NO. 1

                LEASE SUPPLEMENT NO. 1. dated ______________, _________, between
       __________________________________, [a corporation organized under the
       laws of _________________] [not in its individual capacity, but solely as
       owner trustee] ("Lessor"), and ____________________, a corporation
       organized under the laws of the ________________________ ("Lessee").

                Lessor and Lessee have previously entered into that certain
       Aircraft Lease Agreement dated as of ____________________, including the
       Common Terms Agreement as defined therein (collectively, herein referred
       to as the "Agreement" and the defined terms therein being hereinafter
       used with the same meaning). The Agreement provides for the execution and
       delivery from time to time of a Lease Supplement substantially in the
       form hereof for the purpose of leasing the aircraft described below under
       the Agreement as and when delivered by Lessor to Lessee in accordance
       with the terms thereof.

                The Agreement and this Lease Supplement relate to the Aircraft,
       Engines and Parts as more precisely described below and in the
       Certificate of Technical Acceptance. A counterpart of the Agreement is
       attached hereto and this Lease Supplement and the Agreement shall form
       one document.

                In consideration of the premises and other good and sufficient
       consideration, Lessor and Lessee hereby agree as follows:

                1. Lessor hereby delivers and leases to Lessee under and
       pursuant to the Agreement and Lessee hereby accepts, acknowledges receipt
       of possession and leases from Lessor under and pursuant to the Agreement,
       that certain __________________ aircraft, and the ___________________
       (______) _________________ Engines (each of which Engines has 750 or more
       rated takeoff horsepower or the equivalent of such horsepower) described
       in Schedule 1 hereto, together with the Aircraft Documents and Records
       described in the Agreement (the "Delivered Aircraft").

       2. The Delivery Date of the Delivered Aircraft is the date of this Lease
       Supplement set forth in the opening paragraph hereof.

       3. The Term for the Delivered Aircraft shall commence on the Delivery
       Date and shall end on the Expiry Date, with respect to which the
       Scheduled Expiry Date shall be [insert date].

       4. The amount of Rent for the Delivered Aircraft is set forth in Schedule
       B to the Agreement.

                                      12-1

<PAGE>

      5. Lessee hereby confirms to Lessor that (i) the Delivered Aircraft and
      each delivered Engine have been duly marked in accordance with the terms
      of Section 8.6(a) of the Agreement, (ii) the Aircraft is insured as
      required by the Agreement, (iii) the representations and warranties of
      Lessee referred to in Section 2.1 of the Agreement are hereby repeated
      with effect as of the date first above written, (iv) having inspected the
      Delivered Aircraft, Lessee acknowledges that the Delivered Aircraft
      satisfies all conditions required for Lessee's acceptance of delivery as
      set forth in the Agreement, and (v) the execution and delivery of this
      Lease Supplement signifies absolute and irrevocable acceptance by Lessee
      of the Delivered Aircraft for all purposes hereof and of the Agreement.

      6. All of the terms and provisions of the Agreement are hereby
      incorporated by reference in this Lease Supplement to the same extent as
      if fully set forth herein.

      7. This Lease Supplement may be executed in any number of counterparts;
      each of such counterparts, shall for all purposes be deemed to be an
      original; and all such counterparts shall together constitute but one and
      the same Lease Supplement.

              IN WITNESS WHEREOF, Lessor and Lessee have caused this Lease
      Supplement No. 1 to be duly executed as of the day and year first above
      written.

      LESSOR,                                LESSEE,

      [INSERT LESSOR'S NAME]                 [INSERT LESSEE'S NAME]

      By: ______________________             By: ______________________
      Name: ____________________             Name: ____________________
      Title: ___________________             Title: ___________________

                                      12-2

<PAGE>

                                   SCHEDULE 13

                            FORM OF LETTER OF CREDIT

                      IRREVOCABLE STANDBY LETTER OF CREDIT

      BENEFICIARY:
      Aviation Financial Services, Inc.
      Attention:______________________
      201 High Ridge Road
      Stamford, CT 06927

      Gentlemen:

               We hereby establish our irrevocable Standby Letter of Credit No.
      S/B _______________ dated February ____, 2000 (this "Letter of Credit") in
      your favor in connection with the leasing of one Boeing 737-700 aircraft
      by Aviation Financial Services Inc. ("Beneficiary") to Aloha Airlines,
      Inc. ("Customer"). All bank charges relating to this Letter of Credit are
      for the account of Customer.

               At the request of Customer for account of same, we hereby
      establish this Irrevocable Standby Letter of Credit No. S/B ___________
      (this "Letter of Credit") to authorise you to draw on First Hawaiian
      Bank, Honolulu, Hawaii an amount or amounts not exceeding in aggregate
      US$___________ (___________ United States Dollars) upon receipt by us
      of the following demand certificate from Beneficiary, accompanied by a
      copy of this Letter of Credit (which certificate and copy may be
      presented to us by telecopy at telecopy no.___________________):

               "The undersigned are two authorised signatories of Aviation
               Financial Services Inc ("Beneficiary"). Beneficiary hereby
               draws upon the Irrevocable Standby Letter of Credit No. S/B
               ___________ of first Hawaiian Bank, Honolulu, Hawaii dated"
               ___________. Beneficiary hereby instructs you to transfer
               US$___________ (______________ United States Dollars) to
               Bankers Trust Company, New York, ABA 021 001033, For the
               account of: Aviation Financial Services Inc., Account Number:
               50-259-862, immediately, with telex confirmation to us of such
               payment."

               We hereby agree with you that drawings drawn under and in
      compliance with the terms of this Letter of Credit received on or prior to
      the first anniversary of the date of this Letter of Credit (as the same
      may be extended pursuant to the terms hereof, the "Expiration Date") will
      be duly honoured upon receipt by us of such a demand certificate. Partial
      drawings are permitted. This Letter of Credit shall be automatically
      renewed for successive one year periods until at least ________________,
      unless at least thirty (30) business days prior to the then current
      Expiration Date, we notify you in writing by certified mail, return
      receipt requested, at the address set forth above or such other address as
      Beneficiary may have notified to us in writing, of our election not to
      renew this Letter of Credit beyond the then current Expiration Date. In
      the event of such non-

                                      13-1

<PAGE>

       renewal, the full amount of this Letter of Credit may be drawn down upon
       presentation of a demand certificate as provided above.

                If a drawing by you hereunder does not, in any instance, conform
       to the provisions of this Letter of Credit, we shall give you prompt
       notice that the purported drawing was not effected in accordance with
       such provisions, stating the reasons therefor, and that we are holding
       any documents presented in connection therewith at your disposal or are
       returning the same to you, as we may elect.

                This Letter of Credit is transferable and constitutes an
       obligation to make payment against documents. Except to the extent the
       express provisions hereof conflict, this Letter of Credit is issued
       subject to the Uniform Customs and Practice for Documentary Credits (1993
       Revision) International Chamber of Commerce Publication No. 500 ("Uniform
       Customs").

                                       Sincerely,

                                       FIRST HAWAIIAN BANK

       _________________________       _____________________________
       Authorised Signature            Authorised Signature

                                      13-2

<PAGE>

                                   SCHEDULE 14

                             MAINTENANCE PERFORMERS

       Air New Zealand Limited
       Repair Station #ANZZ188C
       Christchurch

       Aviation Management Systems
       Repair Station #ZM7R567Y
       Sky Harbor Int'l Airport

       Aviation Management Systems
       Repair Station #D8LR566Y
       Goodyear, AZ

       BFGoodrich Aerospace MR0
       Repair Station #HN6R593N
       Everett, WA

       Conair Aviation Ltd.
       Repair Station #AMO 10-75
       Abbotsford, B.C.

       Spar Aerospace Limited
       Repair Station #AMO 03-57
       Canada

                                      14-1

<PAGE>

                                   SCHEDULE 15

                            FORM OF TECHNICAL REPORT

                             AIRCRAFT SPECIFICATIONS
                                    WORKSHEET

<TABLE>
        <S>                    <C>                           <C>                     <C>
        GENERAL                                              WEIGHTS
                             __________________                                      __________________
        Registration:        __________________              Max. Taxi Weight:       __________________
        Manufacturer:        __________________              Max. Take Off Weight:   __________________
        Aircraft Type:       __________________              Max. Landing Weight:    __________________
        Serial Number:       __________________              Max. Zero Fuel Weight:  __________________
        Line Number:         __________________              Operating Empty Weight: __________________
        Date of Manufacture: __________________              Fuel Capacity:          __________________
        Aircraft TT:         __________________                                      __________________
        Aircraft TC:         __________________              UTILIZATION             __________________
        Data as of:          __________________              Hours:                  __________________
                                                             Cycles:                 __________________
</TABLE>

        INSPECTIONS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
        TYPE OF CHECK        LAST ACCOMPLISHED                                TIME
                          DATE     TIME      CYCLE         INTERVAL         REMAINING
-------------------------------------------------------------------------------------
<S>                       <C>      <C>       <C>           <C>              <C>
             C
-------------------------------------------------------------------------------------
</TABLE>

__________ Any major checks coming due in the next 3 months.

                                              ________________
        ENGINES                          MFG: ________________

                                              ________________
                                         TYPE:________________

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------
        POSITION          S/N      TT        TC            TSO              TCO
-------------------------------------------------------------------------------------
<S>                       <C>      <C>       <C>           <C>              <C>

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

-------------------------------------------------------------------------------------
</TABLE>

                                      15-1

<PAGE>

                             AIRCRAFT SPECIFICATIONS
                                    WORKSHEET

        REGISTRATION: ________________________

        AUXILIARY POWER UNIT
                                       ________________
                                  MFG: ________________

                                       ________________
                                  TYPE:________________

       S/N             TT                 TC             TSO
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

       LANDING GEAR

                 OVERHAUL INTERVAL
                                        ________________
                                  MAIN: ________________

                                        ________________
                                  NOSE: ________________

<TABLE>
<CAPTION>
         --------------------------------------------------------------------------------
             S/N     TT      TC      TSO       CSO         TIME            CYCLES
                                                         REMAINING        REMAINING
                                                          TO O/H           TO LIFE
         --------------------------------------------------------------------------------
<S>      <C>        <C>     <C>      <C>       <C>        <C>              <C>
  NLG
         --------------------------------------------------------------------------------
  LMG
         --------------------------------------------------------------------------------
  RMG
         --------------------------------------------------------------------------------
</TABLE>

        INTERIOR EQUIPMENT
<TABLE>
<CAPTION>
                                           QTY                       LOCATION & TYPE
        <S>                       <C>                               <C>
                         _________________________________________________________________
        GALLEYS:         _________________________________________________________________
        LAVATORIES:      _________________________________________________________________
        AIR STAIRS:      _________________________________________________________________
        PSGR. SEATS:     _________________________________________________________________
</TABLE>

                                      15-2

<PAGE>

                                                               EXECUTION VERSION

                                  AMENDMENT TO

                      AIRCRAFT LEASE COMMON TERMS AGREEMENT

                             DATED DECEMBER 14, 2001

                                     BETWEEN

                      GENERAL ELECTRIC CAPITAL CORPORATION
                                    AS LESSOR

                                       AND

                              ALOHA AIRLINES, INC.

                                    AS LESSEE

<PAGE>

 THIS AMENDMENT TO AIRCRAFT LEASE COMMON TERMS AGREEMENT is made on December 14,
 2001 (this "AGREEMENT")

 BETWEEN:

 GENERAL ELECTRIC CAPITAL CORPORATION, a company incorporated under the laws of
 Delaware whose principal office is at 201 Long Ridge Road, Stamford, CT 06927,
 U.S.A. ("GE CAPITAL"); and

 ALOHA AIRLINES, INC., a company incorporated under the laws of Delaware whose
 principal place of business is at 371 Aokea Street, Honolulu, HI 96819, U.S.A.
 and its chief executive office at 500 Ala Moana Blvd., Two Waterfront Tower,
 Suite 500, Honolulu, HI 96813, U.S.A. ("ALOHA").

 WHEREAS:

 (A)     GE Capital and Aloha have previously entered into that certain Aircraft
         Lease Common Terms Agreement dated as of May 12, 2000 (the "CTA");

 (B)     GE Capital and Aloha desire to amend the CTA on the terms set forth in
         this Agreement.

 IT IS AGREED as follows:

 1.      INTERPRETATION

 1.1     DEFINITIONS: From and after the effective date of this Agreement
         (as notified to Lessee pursuant to the Notice), all references herein
         to the "Lease" mean the integrated agreement consisting of the various
         documents comprising the Lease as defined in Schedule 1 to the CTA as
         the same is amended by this Agreement and all references in the Lease
         to "the Lease," the "Aircraft Lease Agreement," "hereunder" or the like
         shall mean the Lease as amended by this Agreement. Capitalized terms
         used herein but not defined shall have the respective meanings ascribed
         to such terms in the Lease.

 1.2     CONSTRUCTION: The provisions of Clause 1.2 (Construction) of the CTA
         shall apply to this Agreement as if the same were set out in full
         herein.

 2.      AMENDMENT TO CTA

 2.1     Schedule 7 to the CTA is hereby amended to read in its entirety as set
         forth on Schedule 7 attached to this Agreement.

 3.      MISCELLANEOUS

 3.1     FURTHER ASSURANCES: Aloha agrees from time to time to do and perform
         such other and further acts and execute and deliver any and all such
         other instruments as may be required by law or reasonably requested by
         GE Capital to establish, maintain and protect the rights and remedies
         of GE Capital and to carry out and effect the intent and purpose of
         this Agreement and of any Lease in which the CTA as amended by this
         Agreement may be incorporated.

                                        1

<PAGE>

     3.2     COUNTERPARTS: This Agreement may be executed in any number of
             separate counterparts, and each counterpart shall when executed and
             delivered be an original document, but all counterparts shall
             together constitute one and the same instrument.

     3.3     GOVERNING LAW: The provisions of Clause 15.8 (Governing Law;
             Jurisdiction; WAIVER OF JURY TRIAL) of the CTA shall apply to this
             Agreement as if the same were set out in full herein.

     3.4     VARIATION: The provisions of this Agreement shall not be varied
             otherwise than by an instrument in writing executed by or on behalf
             of GE Capital and Aloha.

     3.5     INVALIDITY OF ANY PROVISION: If any provision of this Agreement
             becomes invalid, illegal or unenforceable in any respect under any
             law, the validity, legality and enforceability of the remaining
             provisions shall not in any way be affected or impaired.

     3.6     COSTS AND EXPENSES: Aloha shall pay to GE Capital on demand all
             fees, costs and expenses incurred or payable by GE Capital in
             connection with the preparation, negotiation and completion of this
             Agreement and performance of the transactions contemplated hereby.

    4.       CONTINUATION OF COMMON TERMS AGREEMENT

             Save as expressly amended by this Agreement, the CTA shall
             continue in full and unvaried force and effect as the legal,
             valid and binding rights and obligations of each of GE Capital
             and Aloha enforceable in accordance with their respective terms.

                                        2

<PAGE>

                                   SCHEDULE 7
                             INSURANCE REQUIREMENTS

    1.1     TYPES OF INSURANCE

    The Insurances required to be maintained are as follows:

          (a)       HULL ALL RISKS of loss or damage while flying, taxiing and
                    on the ground with respect to the Aircraft on an agreed
                    value basis for not less than the Agreed Value and not more
                    than 110% of the Agreed Value and with a deductible not
                    exceeding the Deductible Amount;

          (b)       HULL WAR RISKS AND ALLIED PERILS in accordance with LSW555B
                    or its equivalent form reasonably acceptable to Lessor (or
                    an agreement of the United States Government to insure
                    against or indemnify for substantially the same risks) in an
                    amount not less than the Agreed Value;

          (c)       ALL RISKS (including War and Allied Risk except when on the
                    ground or in transit other than by air) property insurance
                    on all Engines and Parts when not installed on the Aircraft
                    for like kind and quality value and including engine test
                    and running risks; and

          (d)       COMPREHENSIVE AIRCRAFT THIRD PARTY, PROPERTY DAMAGE,
                    PASSENGER, BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD
                    PARTY (INCLUDING PRODUCTS) LEGAL LIABILITY for a combined
                    single limit (bodily injury/property damage) of an amount
                    not less than the Minimum Liability Coverage for the time
                    being for any one occurrence (but in respect of products and
                    personal injury liability, this limit may be an aggregate
                    limit for any and all losses occurring during the currency
                    of the policy). War and Allied Risks are also to be covered
                    under the policy in line with prudent market practice for
                    comparable airlines, operating similar equipment in similar
                    circumstances. In addition, without limitation of the
                    requirements of the preceding sentence (and notwithstanding
                    anything to the contrary contained in the preceding
                    sentence), the Lessee shall in all events maintain war risk
                    and allied perils liability insurance in accordance with
                    London form AVN52C (as in effect on September 1, 2001) or
                    its equivalent form reasonsably acceptable to Lessor (or an
                    agreement of the United States Government to insure against
                    or indemnify for substantially the same risks), from time to
                    time, with respect to the Aircraft in an amount not less
                    than the Minimum Liability Coverage.

    1.2     TERMS OF HULL AND SPARES INSURANCE

    All required hull and spares insurance, so far as it relates to the
    Aircraft, will:

          (a)       LOSS PAYEE: name Lessor, as loss payee (without imposing on
                    Lessor any obligation imposed on the insured, including the
                    liability to pay any calls, commissions or premiums);

          (b)       PAYMENT OF LOSSES: Losses will be payable in Dollars to
                    Lessor for all amounts up to the Agreed Value and to Lessee
                    for any excess above the Agreed Value

                                        4

<PAGE>

                    (which excess shall not exceed 10% of the Agreed Value),
                    except where the insurance payment does not exceed the
                    Damage Notification Threshold, and no Default is in
                    existence, in which case the loss will be settled with and
                    paid to Lessee;

          (c)       50/50 PROVISION: if separate Hull "all risks" and "war
                    risks" insurances are arranged, include a 50/50 provision
                    in accordance with market practice (AVS. 103 is the current
                    London market language); and

          (d)       NO OPTION TO REPLACE: confirm that the insurers are not
                    entitled to replace the Aircraft in the event of an insured
                    Event of Loss and are not entitled to replace any Engine in
                    the event of an Engine Event of Loss with respect to such
                    Engine.

     1.3     TERMS OF LIABILITY INSURANCE

     All required liability insurances will:

          (a)       ADDITIONAL INSUREDS: include each Indemnitee, as additional
                    insureds for its respective rights and interests, warranted,
                    each as to itself only, no operational interest (without
                    imposing on any such Person any obligation imposed on the
                    insured, including the liability to pay any calls,
                    commissions or premiums);

          (b)       SEVERABILITY: include a severability of interests clause
                    which provides that the insurance, except for the limit of
                    liability, will operate to give each insured the same
                    protection as if there were a separate policy issued to each
                    insured; and

          (c)       PRIMARY POLICY: contain a provision confirming that the
                    policy is primary without right of contribution and the
                    liability of the insurers will not be affected by any other
                    insurance of which Lessor, any Indemnitee or Lessee has the
                    benefit so as to reduce the amount payable to the additional
                    insureds under such policies.

     1.4     TERMS OF ALL INSURANCES

     All Insurances will:

          (a)       INDUSTRY PRACTICE: be in accordance with standard industry
                    practice for airlines operating similar aircraft in similar
                    circumstances;

          (b)       DOLLARS: provide cover denominated in Dollars;

          (c)       WORLDWIDE: operate on a worldwide basis subject to such
                    limitations and exclusions as are in line with industry
                    practice obtained by prudent United States based
                    international air carriers;

          (d)       BREACH OF WARRANTY: provide that, in relation to the
                    interests of each of the additional assureds, the Insurances
                    will not be invalidated by any act or omission by Lessee, or
                    any other Person other than the respective additional
                    assureds seeking protection and shall insure the interests
                    of each of the additional assureds regardless of any breach
                    or violation by Lessee, or any other Person other than the
                    respective additional assured seeking protection of any
                    warranty, declaration or condition, contained in such
                    Insurances;

                                        5

<PAGE>

          (e)       SUBROGATION: Provide that the insurers will hold harmless
                    and waive any rights of recourse or subrogation against the
                    additional insureds to the extent Lessee has waived its
                    rights against the additional insureds in the Lease;

          (f)       PREMIUMS: provide that the additional insureds will have no
                    obligation or responsibility for the payment of any premiums
                    due (but reserve the right to pay the same should any of
                    them elect so to do) and that the insurers will not exercise
                    any right of set-off, counter-claim or other deduction, by
                    attachment or otherwise, in respect of any premium due
                    against the respective interests of the additional insureds
                    other than outstanding, premiums relating to the Aircraft,
                    any Engine or Part the subject of the relevant claim;

          (g)       CANCELLATION/CHANGE: provide that the Insurances will
                    continue unaltered for the benefit of the additional
                    insureds for at least 30 days after written notice by
                    registered mail or telex of any cancellation, change, event
                    of non-payment of premium or installment thereof has been
                    sent by insurer(s) to Lessor, or where an insurance broker
                    is appointed to the insurance broker who shall promptly send
                    on such notice to Lessor, except in the case of war risks
                    for which 7 days (or such lesser period as is or may be
                    customarily available in respect of war risks or allied
                    perils) will be given, or in the case of war between the 5
                    great powers or nuclear peril for which termination is
                    automatic; and

          (h)       [NOT APPLICABLE]

          (I)       [INTENTIONALLY OMITTED.]

          (j)       INDEMNITIES: accept and insure the indemnity provisions of
                    the Lease to the extent of the risks covered by the
                    policies.

    1.5      DEDUCTIBLES

    Lessee shall be responsible for any and all deductibles under the
    Insurances.

    1.6      APPLICATION OF INSURANCE PROCEEDS

    The Insurances will be endorsed to provide for payment of proceeds as
    follows:

          (a)       EVENT OF LOSS: all insurance payments up to the Agreed Value
                    received as the result of an Event of Loss occurring during
                    the Term will be paid to Lessor as loss payee and any amount
                    in excess of the Agreed Value (which excess shall not exceed
                    10% of the Agreed Value) shall be paid to Lessee;

          (b)       EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance
                    proceeds of any damage or loss to the Aircraft, any Engine
                    or any Part occurring during the Term not constituting an
                    Event of Loss and in excess of the Damage Notification
                    Threshold will be paid to the appropriate repair facility,
                    and applied in payment (or paid to Lessee and/or Lessor as
                    reimbursement) for repairs or replacement property upon
                    Lessor being satisfied that the repairs or replacement have
                    been effected in accordance with the Lease.

          (c)       BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in
                    amounts below

                                        6

<PAGE>

                    the Damage Notification Threshold shall be paid by the
                    insurer directly to Lessee;

          (d)       LIABILITY PROCEEDS: all insurance proceeds in respect of
                    third party liability will be paid by the insurers to the
                    relevant third party in satisfaction of the relevant
                    liability or to Owner, Lessor, Financing Partners'
                    Representative or Lessee, as the case may be, in
                    reimbursement of any payment so made;

          (e)       DEFAULT: notwithstanding any of the foregoing paragraphs, if
                    at the time of the payment of any such insurance proceeds a
                    Default has occurred and is continuing, all such proceeds
                    will be paid to Lessor, Owner or Financing Parties,
                    Representative, as the case may be, or retained to be
                    applied toward payment of any amounts which may, be or
                    become payable by Lessee in such order as Lessor or Owner,
                    as the case may be, may elect until such time as no Default
                    is continuing and then applied as described above; and to
                    the extent that insurance proceeds are paid to Lessee,
                    Lessee agrees to hold such proceeds in trust and comply with
                    the foregoing provisions and apply or pay over such proceeds
                    as so required.

   1.7      UNITED STATES GOVERNMENTAL INDEMNITY

   Notwithstanding any of the foregoing paragraphs, in the event of a Permitted
   Sub-Lease to, or a requisition of use by, the United States or any
   Governmental Entity whose obligations have the full faith and credit of the
   federal Government of the United States, Lessor agrees to accept in lieu of
   insurance required hereunder indemnification or insurance from the United
   States or such a Governmental Entity in a form reasonably acceptable to
   Lessor and Owner and against such risks and in such amounts and on such terms
   such that when added to the Insurance maintained by Lessee, Lessee is in full
   compliance with the requirements of Section 9 and this Schedule.

                                        7

<PAGE>

          IN WITNESS WHEREOF the parties hereto have executed this Agreement the
          day and year first above written.

          Signed for and on behalf of
          GENERAL ELECTRIC CAPITAL CORPORATION

          By:     /s/ Norman Liu
                --------------------------------

          Name:   Norman Liu
                --------------------------------

          Title:  Vice President
                --------------------------------

          Signed for and on behalf of
          ALOHA AIRLINES, INC.

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

          Name:
                --------------------------------

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

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

          Name:
                --------------------------------

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

<PAGE>

          IN WITNESS WHEREOF the parties hereto have executed this Agreement the
          day and year first above written.

          Signed for and on behalf of
          GENERAL ELECTRIC CAPITAL CORPORATION

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

          Name:
                --------------------------------

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

          Signed for and on behalf of
          ALOHA AIRLINES, INC.

          By:     /s/ Brenda F. Cutwright
                --------------------------------

          Name:      Brenda F. Cutwright
                --------------------------------

          Title:      Exec. Vice President & CFO
                --------------------------------

          By:     /s/ James M. King
                --------------------------------

          Name:      JAMES M. KING
                --------------------------------
                     SENIOR VICE PRESIDENT
          Title: PLANNING & BUSINESS DEVELOPMENT
                --------------------------------

<PAGE>
                                                             EXECUTION VERSION

                                  AMENDMENT TO

                      AIRCRAFT LEASE COMMON TERMS AGREEMENT

                             DATED DECEMBER 14, 2001

                                     BETWEEN

                      GENERAL ELECTRIC CAPITAL CORPORATION

                                    AS LESSOR

                                       AND

                              ALOHA AIRLINES, INC.

                                    AS LESSEE

<PAGE>

THIS AMENDMENT TO AIRCRAFT LEASE COMMON TERMS AGREEMENT is made on December 14,
2001 (this "AGREEMENT")

BETWEEN:

GENERAL ELECTRIC CAPITAL CORPORATION, a company incorporated under the laws of
Delaware whose principal office is at 201 Long Ridge Road, Stamford, CT 06927,
U.S.A. ("GE CAPITAL"); and

ALOHA AIRLINES, INC., a company incorporated under the laws of Delaware whose
principal place of business is at 371 Aokea Street, Honolulu, HI 96819, U.S.A.
and its chief executive office at 500 Ala Moana Blvd., Two Waterfront Tower,
Suite 500, Honolulu, HI 96813, U.S.A. ("ALOHA").

WHEREAS:

(A)  GE Capital and Aloha have previously entered into that certain Aircraft
     Lease Common Terms Agreement dated as of May 12, 2000 (the "CTA");

(B)  GE Capital and Aloha desire to amend the CTA on the terms set forth in this
     Agreement.

IT IS AGREED as follows:

1.   INTERPRETATION

1.1  DEFINITIONS: From and after the effective date of this Agreement (as
     notified to Lessee pursuant to the Notice), all references herein to the
     "Lease" mean the integrated agreement consisting of the various documents
     comprising the Lease as defined in Schedule 1 to the CTA as the same is
     amended by this Agreement and all references in the Lease to "the Lease,"
     the "Aircraft Lease Agreement," "hereunder" or the like shall mean the
     Lease as amended by this Agreement. Capitalized terms used herein but not
     defined shall have the respective meanings ascribed to such terms in the
     Lease.

1.2  CONSTRUCTION: The provisions of Clause 1.2 (Construction) of the CTA shall
     apply to this Agreement as if the same were set out in full herein.

2.   AMENDMENT TO CTA

2.1  Schedule 7 to the CTA is hereby amended to read in its entirety as set
     forth on Schedule 7 attached to this Agreement.

3.   MISCELLANEOUS

3.1  FURTHER ASSURANCES: Aloha agrees from time to time to do and perform such
     other and further acts and execute and deliver any and all such other
     instruments as may be required by law or reasonably requested by GE Capital
     to establish, maintain and protect the rights and remedies of GE Capital
     and to carry out and effect the intent and purpose of this Agreement and of
     any Lease in which the CTA as amended by this Agreement may be
     incorporated.

                                        1

<PAGE>

3.2  COUNTERPARTS: This Agreement may be executed in any number of separate
     counterparts, and each counterpart shall when executed and delivered be an
     original document, but all counterparts shall together constitute one and
     the same instrument.

3.3  GOVERNING LAW: The provisions of Clause 15.8 (Governing Law; Jurisdiction;
     WAIVER OF JURY TRIAL) of the CTA shall apply to this Agreement as if the
     same were set out in full herein.

3.4  VARIATION: The provisions of this Agreement shall not be varied otherwise
     than by an instrument in writing executed by or on behalf of GE Capital and
     Aloha.

3.5  INVALIDITY OF ANY PROVISION: If any provision of this Agreement becomes
     invalid, illegal or unenforceable in any respect under any law, the
     validity, legality and enforceability of the remaining provisions shall not
     in any way be affected or impaired.

3.6  COSTS AND EXPENSES: Aloha shall pay to GE Capital on demand all fees, costs
     and expenses incurred or payable by GE Capital in connection with the
     preparation, negotiation and completion of this Agreement and performance
     of the transactions contemplated hereby.

4.   CONTINUATION OF COMMON TERMS AGREEMENT

     Save as expressly amended by this Agreement, the CTA shall continue in full
     and unvaried force and effect as the legal, valid and binding rights and
     obligations of each of GE Capital and Aloha enforceable in accordance with
     their respective terms.

                                        2

<PAGE>

                                   SCHEDULE 7
                             INSURANCE REQUIREMENTS

1.1  TYPES OF INSURANCE

The Insurances required to be maintained are as follows:

     (a)  HULL ALL RISKS of loss or damage while flying, taxiing and on the
          ground with respect to the Aircraft on an agreed value basis for not
          less than the Agreed Value and not more than 110% of the Agreed Value
          and with a deductible not exceeding the Deductible Amount;

     (b)  HULL WAR RISKS AND ALLIED PERILS in accordance with LSW555B or its
          equivalent form reasonably acceptable to Lessor (or an agreement of
          the United States Government to insure against or indemnify for
          substantially the same risks) in an amount not less than the Agreed
          Value;

     (c)  ALL RISKS (including War and Allied Risk except when on the ground or
          in transit other than by air) property insurance on all Engines and
          Parts when not installed on the Aircraft for like kind and quality
          value and including engine test and running risks; and

     (d)  COMPREHENSIVE AIRCRAFT THIRD PARTY, PROPERTY DAMAGE, PASSENGER,
          BAGGAGE, CARGO AND MAIL AND AIRLINE GENERAL THIRD PARTY (INCLUDING
          PRODUCTS) LEGAL LIABILITY for a combined single limit (bodily
          injury/property damage) of an amount not less than the Minimum
          Liability Coverage for the time being for any one occurrence (but in
          respect of products and personal injury liability, this limit may be
          an aggregate limit for any and all losses occurring during the
          currency of the policy). War and Allied Risks are also to be covered
          under the policy in line with prudent market practice for comparable
          airlines, operating similar equipment in similar circumstances. In
          addition, without limitation of the requirements of the preceding
          sentence (and notwithstanding anything to the contrary contained in
          the preceding sentence), the Lessee shall in all events maintain war
          risk and allied perils liability insurance in accordance with London
          form AVN52C (as in effect on September 1, 2001) or its equivalent form
          reasonsably acceptable to Lessor (or an agreement of the United States
          Government to insure against or indemnify for substantially the same
          risks), from time to time with respect to the Aircraft in an amount
          not less than the Minimum' Liability Coverage.

1.2  TERMS OF HULL AND SPARES INSURANCE

All required hull and spares insurance, so far as it relates to the Aircraft,
will:

     (a)  LOSS PAYEE: name Lessor, as loss payee (without imposing on Lessor any
          obligation imposed on the insured, including the liability to pay any
          calls, commissions or premiums);

     (b)  PAYMENT OF LOSSES: Losses will be payable in Dollars to Lessor for all
          amounts up to the Agreed Value and to Lessee for any excess above the
          Agreed Value

                                        4

<PAGE>

          (which excess shall not exceed 10% of the Agreed Value), except where
          the insurance payment does not exceed the Damage Notification
          Threshold, and no Default is in existence, in which case the loss will
          be settled with and paid to Lessee;

     (c)  50/50 PROVISION: if separate Hull "all risks" and "war risks"
          insurances are arranged, include a 50/50 provision in accordance with
          market practice (AVS. 103 is the current London market language); and

     (d)  NO OPTION TO REPLACE: confirm that the insurers are not entitled to
          replace the Aircraft in the event of an insured Event of Loss and are
          not entitled to replace any Engine in the event of an Engine Event of
          Loss with respect to such Engine.

1.3  TERMS OF LIABILITY INSURANCE

     All required liability insurances will:

     (a)  ADDITIONAL INSUREDS: include each Indemnitee, as additional insureds
          for its respective rights and interests, warranted, each as to itself
          only, no operational interest (without imposing on any such Person any
          obligation imposed on the insured, including the liability to pay any
          calls, commissions or premiums);

     (b)  SEVERABILITY: include a severability of interests clause which
          provides that the insurance, except for the limit of liability, will
          operate to give each insured the same protection as if there were a
          separate policy issued to each insured; and

     (c)  PRIMARY POLICY: contain a provision confirming that the policy is
          primary without right of contribution and the liability of the
          insurers will not be affected by any other insurance of which Lessor,
          any Indemnitee or Lessee has the benefit so as to reduce the amount
          payable to the additional insureds under such policies.

1.4  TERMS OF ALL INSURANCES

All Insurances will:

     (a)  INDUSTRY PRACTICE: be in accordance with standard industry practice
          for airlines operating similar aircraft in similar circumstances;

     (b)  DOLLARS: provide cover denominated in Dollars;

     (c)  WORLDWIDE: operate on a worldwide basis subject to such limitations
          and exclusions as are in line with industry practice obtained by
          prudent United States based international air carriers;

     (d)  BREACH OF WARRANTY: provide that, in relation to the interests of each
          of the additional assureds, the Insurances will not be invalidated by
          any act or omission by Lessee, or any other Person other than the
          respective additional assureds seeking protection and shall insure the
          interests of each of the additional assureds regardless of any breach
          or violation by Lessee, or any other Person other than the respective
          additional assured seeking protection of any warranty, declaration or
          condition, contained in such Insurances;

                                        5

<PAGE>

     (e)  SUBROGATION: Provide that the insurers will hold harmless and waive
          any rights of recourse or subrogation against the additional insureds
          to the extent Lessee has waived its rights against the additional
          insureds in the Lease;

     (f)  PREMIUMS: provide that the additional insureds will have no obligation
          or responsibility for the payment of any premiums due (but reserve the
          right to pay the same should any of them elect so to do) and that the
          insurers will not exercise any right of set-off, counter-claim or
          other deduction, by attachment or otherwise, in respect of any premium
          due against the respective interests of the additional insureds other
          than outstanding, premiums relating to the Aircraft, any Engine or
          Part the subject of the relevant claim;

     (g)  CANCELLATION/CHANGE: provide that the Insurances will continue
          unaltered for the benefit of the additional insureds for at least 30
          days after written notice by registered mail or telex of any
          cancellation, change, event of non-payment of premium or installment
          thereof has been sent by insurer(s) to Lessor, or where an insurance
          broker is appointed to the insurance broker who shall promptly send on
          such notice to Lessor, except in the case of war risks for which 7
          days (or such lesser period as is or may be customarily available in
          respect of war risks or allied perils) will be given, or in the case
          of war between the 5 great powers or nuclear peril for which
          termination is automatic; and

     (h)  [NOT APPLICABLE]

     (I)  [INTENTIONALLY OMITTED.]

     (j)  INDEMNITIES: accept and insure the indemnity provisions of the Lease
          to the extent of the risks covered by the policies.

1.5  DEDUCTIBLES

Lessee shall be responsible for any and all deductibles under the Insurances.

1.6  APPLICATION OF INSURANCE PROCEEDS

The Insurances will be endorsed to provide for payment of proceeds as follows:

     (a)  EVENT OF LOSS: all insurance payments up to the Agreed Value received
          as the result of an Event of Loss occurring during the Term will be
          paid to Lessor as loss payee and any amount in excess of the Agreed
          Value (which excess shall not exceed 10% of the Agreed Value) shall be
          paid to Lessee;

     (b)  EXCEEDING DAMAGE NOTIFICATION THRESHOLD: all insurance proceeds of any
          damage or loss to the Aircraft, any Engine or any Part occurring
          during the Term not constituting an Event of Loss and in excess of the
          Damage Notification Threshold will be paid to the appropriate repair
          facility, and applied in payment (or paid to Lessee and/or Lessor as
          reimbursement) for repairs or replacement property upon Lessor being
          satisfied that the repairs or replacement have been effected in
          accordance with the Lease.

     (c)  BELOW DAMAGE NOTIFICATION THRESHOLD: insurance proceeds in amounts
          below

                                       6

<PAGE>

          the Damage Notification Threshold shall be paid by the insurer
          directly to Lessee;

     (d)  LIABILITY PROCEEDS: all insurance proceeds in respect of third party
          liability will be paid by the insurers to the relevant third party in
          satisfaction of the relevant liability or to Owner, Lessor, Financing
          Partners' Representative or Lessee, as the case may be, in
          reimbursement of any payment so made;

     (e)  DEFAULT: notwithstanding any of the foregoing paragraphs, if at the
          time of the payment of any such insurance proceeds a Default has
          occurred and is continuing, all such proceeds will be paid to Lessor,
          Owner or Financing Parties, Representative, as the case may be, or
          retained to be applied toward payment of any amounts which may, be or
          become payable by Lessee in such order as Lessor or Owner, as the case
          may be, may elect until such time as no Default is continuing and then
          applied as described above; and to the extent that insurance proceeds
          are paid to Lessee, Lessee agrees to hold such proceeds in trust and
          comply with the foregoing provisions and apply or pay over such
          proceeds as so required.

1.7  UNITED STATES GOVERNMENTAL INDEMNITY

Notwithstanding any of the foregoing paragraphs, in the event of a Permitted
Sub-Lease to, or a requisition of use by, the United States or any Governmental
Entity whose obligations have the full faith and credit of the federal
Government of the United States, Lessor agrees to accept in lieu of insurance
required hereunder indemnification or insurance from the United States or such a
Governmental Entity in a form reasonably acceptable to Lessor and Owner and
against such risks and in such amounts and on such terms such that when added to
the Insurance maintained by Lessee, Lessee is in full compliance with the
requirements of Section 9 and this Schedule.

                                        7

<PAGE>

IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and
year first above written.

Signed for and on behalf of
GENERAL ELECTRIC CAPITAL CORPORATION

By:    /s/ Norman Liu
      ----------------------------

Name:    Norman Liu
      ----------------------------

Title:   Vice President
      ----------------------------

Signed for and on behalf of
ALOHA AIRLINES, INC.

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

Name:
      ----------------------------

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

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

Name:
      ----------------------------

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

<PAGE>

IN WITNESS WHEREOF the parties hereto have executed this Agreement the day and
year first above written.

Signed for and on behalf of
GENERAL ELECTRIC CAPITAL CORPORATION

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

Name:
      ----------------------------

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

Signed for and on behalf of
ALOHA AIRLINES, INC.

By:     /s/ Brenda F. Cutwright
      --------------------------------

Name:     Brenda F. Cutwright
      --------------------------------

Title: Exec. Vice President & CFO
      --------------------------------

By:     /s/ James M. King
      ---------------------------------

Name:     James M. King
      ---------------------------------
         SENIOR VICE PRESIDENT
Title: PLANNING & BUSINESS DEVELOPMENT
      ---------------------------------<Page>

                                                                    Exhibit 10.1

                               SEVERANCE AGREEMENT

                  THIS AGREEMENT is entered into as of the 1st day of September
2001 (the "Effective Date") by and between Avaya Inc., a Delaware corporation,
and Donald K. Peterson (the "Executive").

                               W I T N E S S E T H

                  WHEREAS, the Executive currently serves as a key employee of
the Company (as defined in Section 1) and the Executive's services and knowledge
are valuable to the Company in connection with the management of one or more of
the Company's principal operating facilities, divisions, departments or
subsidiaries; and

                  WHEREAS, the Board (as defined in Section 1) has determined
that it is in the best interests of the Company and its stockholders to secure
the Executive's continued services and to ensure the Executive's continued
dedication and objectivity in the event of any threat or occurrence of, or
negotiation or other action that could lead to, or create the possibility of, a
Change in Control (as defined in Section 1) of the Company, without concern as
to whether the Executive might be hindered or distracted by personal
uncertainties and risks created by any such possible Change in Control, and to
encourage the Executive's full attention and dedication to the Company, the
Board has authorized the Company to enter into this Agreement.

                  NOW, THEREFORE, for and in consideration of the premises and
the mutual covenants and agreements herein contained, the Company and the
Executive hereby agree as follows:

                  1. DEFINITIONS. As used in this Agreement, the following terms
shall have the respective meanings set forth below:

                  (a) "Board" means the Board of Directors of the Company.

                  (b) "Cause" means:

                           (1) a material breach by the Executive of those
                  duties and responsibilities of the Executive which do not
                  differ in any material respect from the duties and
                  responsibilities of the Executive during the 90-day period
                  immediately prior to a Change in Control (other than as a
                  result of incapacity due to physical or mental illness) which
                  is demonstrably willful and deliberate on the Executive's
                  part, which is committed in bad faith or without reasonable
                  belief that such breach is in the best interests of the
                  Company and which is not remedied in a reasonable period of
                  time after receipt of written notice from the Company
                  specifying such breach;

                           (2) the commission by the Executive of a felony
                  involving moral turpitude;

                                      -1-
<Page>

                           (3) the commission by the Executive of theft, fraud,
                  breach of trust or any act of dishonesty involving the Company
                  or its subsidiaries; or

                           (4) the significant violation by the Executive of the
                  Company's code of conduct or any statutory or common law duty
                  of loyalty to the Company or its subsidiaries.

                  (c) "Change in Control" means:

                           (1) an acquisition by any individual, entity or group
                  (within the meaning of Section 13 (d)(3) or 14 (d)(2) of the
                  Securities Exchange Act of 1934, as amended (the "Exchange
                  Act"), (an "Entity") of beneficial ownership (within the
                  meaning of Rule 13d-3 promulgated under the Exchange Act) of
                  20% or more of either (A) the then outstanding shares of
                  common stock of the Company (the "Outstanding Company Common
                  Stock") or (B) the combined voting power of the then
                  outstanding voting securities of the Company entitled to vote
                  generally in the election of directors (the "Outstanding
                  Company Voting Securities"); excluding, however, the
                  following: (1) any acquisition directly from the Company,
                  other than an acquisition by virtue of the exercise of a
                  conversion privilege unless the security so being converted
                  was itself acquired directly from the Company, (2) any
                  acquisition by the Company, (3) any acquisition by any
                  employee benefit plan (or related trust) sponsored or
                  maintained by the Company or any corporation controlled by the
                  Company, or (4) any acquisition by any corporation pursuant to
                  a transaction which complies with clauses (A), (B) and (C) of
                  subsection (3) of this Section 1(c); or

                           (2) a change in the composition of the Board such
                  that the individuals who, as of the Effective Date, constitute
                  the Board (such Board shall be hereinafter referred to as the
                  "Incumbent Board") cease for any reason to constitute at least
                  a majority of the Board; PROVIDED, HOWEVER, that for purposes
                  of this definition, that any individual who becomes a member
                  of the Board subsequent to the Effective Date, whose election,
                  or nomination for election by the Company's stockholders, was
                  approved by a vote of at least a majority of those individuals
                  who are members of the Board and who were also members of the
                  Incumbent Board (or deemed to be such pursuant to this
                  proviso) shall be considered as though such individual were a
                  member of the Incumbent Board; and PROVIDED, FURTHER HOWEVER,
                  that any such individual whose initial assumption of office
                  occurs as a result of or in connection with either an actual
                  or threatened solicitation by an Entity other than the Board
                  for the purpose of opposing a solicitation by any other Entity
                  with respect to the election or removal of directors or other
                  actual or threatened solicitation of proxies or consents by or
                  on behalf of an Entity other than the Board shall not be so
                  considered as a member of the Incumbent Board; or

                           (3) the approval by the stockholders of the Company
                  of a merger, reorganization or consolidation or sale or other
                  disposition of all or substantially all of the assets of the
                  Company (each, a "Corporate Transaction") or, if consummation
                  of such Corporate Transaction is subject, at the time of such
                  approval by stockholders, to the consent of any government or
                  governmental agency, the obtaining of such consent (either
                  explicitly or implicitly by consummation); excluding however,
                  such a Corporate

                                      -2-
<Page>

                  Transaction pursuant to which (A) all or substantially all of
                  the individuals and entities who are beneficial owners,
                  respectively, of the Outstanding Company Stock and Outstanding
                  Company Voting Securities immediately prior to such Corporate
                  Transaction will beneficially own, directly or indirectly,
                  more than 60% of, respectively, the outstanding shares of
                  common stock, and the combined voting power of the then
                  outstanding voting securities entitled to vote generally in
                  the election of directors, as the case may be, of the
                  corporation resulting from such Corporate Transaction
                  (including, without limitation, a corporation or other
                  individual, partnership, association, joint-stock company,
                  trust, unincorporated organization, limited liability company,
                  other entity or government or political subdivision which as a
                  result of such transaction owns the Company or all or
                  substantially all of the Company's assets either directly or
                  through one or more subsidiaries (a "Parent Company")) in
                  substantially the same proportions as their ownership,
                  immediately prior to such Corporate Transaction, of the
                  Outstanding Company Common Stock and Outstanding Company
                  Voting Securities, as the case may be, (B) no Entity (other
                  than the Company, any employee benefit plan (or related trust)
                  of the Company, such corporation resulting from such Corporate
                  Transaction or, if reference was made to equity ownership of
                  any Parent Company for purposes of determining whether clause
                  (A) above is satisfied in connection with the applicable
                  Corporate Transaction, such Parent Company) will beneficially
                  own, directly or indirectly, 20% or more of, respectively, the
                  outstanding shares of common stock of the corporation
                  resulting from such Corporate Transaction or the combined
                  voting power of the outstanding voting securities of such
                  corporation entitled to vote generally in the election of the
                  directors unless such ownership resulted solely from ownership
                  of securities of the Company prior to the Corporate
                  Transaction, and (C) individuals who were members of the
                  Incumbent Board will immediately after the consummation of the
                  Corporate Transaction constitute at least a majority of the
                  members of the board of directors of the corporation resulting
                  from such Corporate Transaction (or, if reference was made to
                  equity ownership of any Parent Company for purposes of
                  determining whether clause (A) above is satisfied in
                  connection with the applicable Corporate Transaction, of the
                  Parent Company); or

                           (4) the approval by the stockholders of the Company
                  of a complete liquidation or dissolution of the Company.

                  (d) "Company" means Avaya Inc., a Delaware corporation.

                  (e) "Date of Termination" means:

                           (1) the effective date on which the Executive's
                  employment by the Company terminates as specified in a prior
                  written notice by the Company or the Executive, as the case
                  may be, to the other, delivered pursuant to Section 11 or

                           (2) if the Executive's employment by the Company
                  terminates by reason of death, the date of death of the
                  Executive.

                  (f) "Entity" has the meaning set forth in Section 1(c)(1).

                                      -3-
<Page>

                  (g) "Good Reason" means, without the Executive's express
written consent, the occurrence of any of the following events after a Change in
Control:

                           (1) any of (i) the assignment to the Executive of any
                  duties inconsistent in any material respect with the
                  Executive's duties or responsibilities with the Company
                  immediately prior to such Change in Control, (ii) any material
                  reduction in the Executive's duties or responsibilities with
                  the Company immediately prior to such Change in Control; (iii)
                  a change in the Executive's titles or offices with the Company
                  as in effect immediately prior to such Change in Control which
                  is adverse to the Executive or (iv) any removal or involuntary
                  termination of the Executive from the Company otherwise than
                  as expressly permitted by this Agreement;

                           (2) a reduction by the Company in the Executive's
                  rate of annual base salary or Target Percentage as in effect
                  immediately prior to such Change in Control (or if a different
                  short-term incentive compensation opportunity is then in
                  effect, a reduction in the amount of such different short-term
                  incentive compensation opportunity below the short-term
                  incentive compensation opportunity which had been afforded by
                  the Target Percentage as in effect immediately prior to such
                  Change in Control) or as the same may be increased from time
                  to time thereafter;

                           (3) any requirement of the Company that the Executive
                  be based more than 30 miles from the facility where the
                  Executive is located at the time of the Change in Control;

                           (4) the failure of the Company to continue in effect
                  any incentive compensation plan or supplemental retirement
                  plan, including the Supplemental Pension Plan, in which the
                  Executive is participating immediately prior to such Change in
                  Control, unless the Executive is permitted to participate in
                  other plans providing the Executive with substantially
                  comparable compensation opportunity and benefits, or the
                  taking of any action by the Company which would adversely
                  affect the Executive's participation in or materially reduce
                  the Executive's compensation opportunity and benefits under
                  any such plan; or

                           (5) the failure of the Company to obtain the
                  assumption agreement from any successor as contemplated in
                  Section 10(b).

                  For purposes of this Agreement, any good faith determination
of Good Reason made by the Executive shall be conclusive; PROVIDED, HOWEVER,
that an isolated, insubstantial and inadvertent action taken in good faith and
which is remedied by the Company promptly after receipt of written notice
thereof given by the Executive shall not constitute Good Reason.

                  (h) "Nonqualifying Termination" means a termination of the
Executive's employment:

                           (1) by the Company for Cause,

                           (2) by the Executive for any reason other than Good
                  Reason,

                                      -4-
<Page>

                           (3) by the Executive for Good Reason more than six
                  (6) months after the event constituting Good Reason,

                           (4) as a result of the Executive's death or

                           (5) by the Company under circumstances where the
                  Executive qualifies for benefits under a long-term disability
                  pay plan.

                  (i) "Potential Change in Control," for purposes of this Plan,
shall mean the happening of any of the following events:

                           (1) the commencement of a tender or exchange offer by
                  any third person which, if consummated, would result in a
                  Change in Control;

                           (2) the execution of an agreement by the Company, the
                  consummation of which would result in the occurrence of a
                  Change in Control;

                           (3) the public announcement by any person (including
                  the Company) of an intention to take or to consider taking
                  actions which if consummated would constitute a Change in
                  Control other than through a contested election for directors
                  of the Company; or

                           (4) the adoption by the Board, as a result of other
                  circumstances, including, without limitation, circumstances
                  similar or related to the foregoing, of a resolution to the
                  effect that a Potential Change in Control has occurred.

A Potential Change in Control shall be deemed to be pending until the earliest
of (i) the first anniversary thereof, (ii) the occurrence of a Change in Control
and (iii) the occurrence of a subsequent Potential Change in Control.

                  (j) "Supplemental Pension Plan" means the Avaya Inc.
Supplemental Pension Plan or any successor plan.

                  (k) "Target Percentage" means the annualized percentage
applied to an Executive's annual base salary in order to calculate the target
award for such Executive under the Company's short-term incentive compensation
program, prior to the application of Company or individual performance factors.

                  (l) "Termination Period" means the period of time beginning
with a Change in Control and ending on the earlier to occur of:

                           (1) two years following such Change in Control and

                           (2) the Executive's death.

                  2. OBLIGATIONS OF THE EXECUTIVE. The Executive agrees that in
the event of a Potential Change in Control, he shall not voluntarily leave the
employ of the Company without Good Reason prior to the termination of such
Potential Change in Control as follows:

                                      -5-
<Page>

                  (a) if the Potential Change in Control terminates by reason
other than the occurrence of a Change in Control, until the earlier of (1) the
first anniversary of such Potential Change in Control and (2) the occurrence of
a subsequent Potential Change in Control; and

                  (b) if the Potential Change in Control terminates by reason of
the occurrence of a Change in Control, until 90 days following such Change in
Control.

                  For purposes of clause (a) of the preceding sentence, Good
Reason shall be determined as if a Change in Control had occurred when such
Potential Change in Control became known to the Board.

                  3. PAYMENTS UPON TERMINATION OF EMPLOYMENT.

                  (a) If during the Termination Period the employment of the
Executive shall terminate, other than by reason of a Nonqualifying Termination,
then the Company shall pay to the Executive, within 30 days following the Date
of Termination, as compensation for services rendered to the Company:

                           (1) a cash amount equal to the sum of (i) the
                  Executive's full annual base salary from the Company and its
                  affiliated companies through the Date of Termination and any
                  short-term incentive compensation earned by the Executive for
                  any performance period ending prior to the Date of
                  Termination, in each case to the extent not theretofore paid,
                  (ii) an amount equal to the Executive's annual base salary
                  multiplied by the Executive's Target Percentage applicable
                  immediately prior to the Date of Termination (or, if greater,
                  immediately prior to the Change in Control), multiplied by
                  50%, multiplied by a fraction, the numerator of which is the
                  number of days elapsed in the applicable six-month performance
                  period in which the Date of Termination occurs through the
                  Date of Termination and the denominator of which is 180 (or if
                  a different short-term incentive compensation opportunity is
                  then in effect, an amount equal to the target short-term
                  incentive compensation afforded by such different short-term
                  incentive compensation opportunity for the applicable
                  performance period in which the Date of Termination occurs
                  (but not less than the amount that would have been afforded by
                  the Target Percentage as in effect immediately prior to such
                  Change in Control), multiplied by a fraction, the numerator of
                  which is the number of days elapsed in the applicable
                  performance period in which the Date of Termination occurs
                  through the Date of Termination and the denominator of which
                  is the total number of days in such applicable performance
                  period) and (iii) any compensation previously deferred by the
                  Executive (together with any interest and earnings thereon)
                  and any accrued vacation pay, in each case to the extent not
                  theretofore paid; plus

                           (2) a lump-sum cash amount (subject to any applicable
                  payroll or other taxes required to be withheld pursuant to
                  Section 5) in an amount equal to (i) three (3) times the
                  Executive's highest annual base salary from the Company and
                  its affiliated companies in effect during the 12-month period
                  prior to the Date of Termination, plus (ii) an amount equal to
                  the product of three (3) times such annual base salary
                  multiplied by the Executive's Target Percentage as applicable
                  immediately prior to the Date of Termination (or, if greater,
                  immediately prior to the Change in

                                      -6-
<Page>

                  Control) (or if a different short-term incentive compensation
                  opportunity is then in effect, an amount equal to the product
                  of [ ] ( )] times the annual target short-term incentive
                  compensation afforded by such different short-term incentive
                  compensation opportunity, but not less than [ ] ( )] times the
                  amount that would have been afforded by the Target Percentage
                  as in effect immediately prior to such Change in Control);
                  PROVIDED, HOWEVER, that any amount paid pursuant to this
                  Section 3(a)(2) shall be paid in lieu of any other amount of
                  severance relating to salary, short-term incentive
                  compensation or other bonus continuation to be received by the
                  Executive upon termination of employment of the Executive
                  under any severance plan, policy or arrangement of the
                  Company. Notwithstanding the foregoing, if the Company is
                  obligated by law or contract to pay severance pay, notice pay
                  or other similar benefits, or if the Company is obligated by
                  law or by contract to provide advance notice of separation
                  ("Notice Period"), then the payments made pursuant to this
                  Section 3(a)(2) shall be reduced by the amount of any such
                  severance, notice pay or other similar benefits, as
                  applicable, and by the amount of any severance pay, notice pay
                  or other similar benefits received during any Notice Period.

                  (b) In addition to the payments to be made pursuant to Section
3(a), the Company shall pay to the Executive at the time the payments pursuant
to Section 3(a) shall be made, a lump-sum cash amount equal to the actuarial
equivalent of the excess of (i) the Executive's accrued benefits under any
qualified defined benefit pension plan and any nonqualified supplemental defined
benefit pension plan of the Company in which the Executive is a participant,
calculated by increasing the Executive's age and service credit under such plans
as of the Date of Termination by three (3) year(s) over (ii) the Executive's
accrued benefits under such plans as of the Date of Termination. Such lump sum
cash amount shall be computed using the same actuarial methods and assumptions
then in use for purposes of computing benefits under such plans, provided that
the interest rate used in making such computation shall not be greater than the
interest rate permitted under Section 417(e) of the Internal Revenue Code of
1986, as amended (the "Code"), on the Date of Termination.

                  (c) For a period of three (3) years commencing on the Date of
Termination, the Company shall continue to keep in full force and effect all
policies of medical and life insurance with respect to the Executive and his
dependents with the same level of coverage, upon the same terms and otherwise to
the same extent as such policies shall have been in effect immediately prior to
the Date of Termination or as provided generally with respect to other peer
executives of the Company and its affiliated companies, and the Company and the
Executive shall share the costs of the continuation of such insurance coverage
in the same proportion as such costs were shared immediately prior to the Date
of Termination; PROVIDED, HOWEVER, that the medical and life insurance coverage
provided pursuant to this Section 3(c) shall be in lieu of any other medical and
life insurance coverage to which the Executive is entitled under any plan,
policy or arrangement of the Company or any law obligating the Company to
provide such insurance coverage upon termination of employment of the Executive.

                  (d) If during the Termination Period the employment of the
Executive shall terminate by reason of a Nonqualifying Termination, then the
Company shall pay to the Executive, within 30 days following the Date of
Termination, a cash amount equal to the sum of:

                                      -7-
<Page>

                           (1) the Executive's full annual base salary from the
                  Company through the Date of Termination, to the extent not
                  theretofore paid, and

                           (2) any compensation previously deferred by the
                  Executive (together with any interest and earnings thereon)
                  and any accrued vacation pay, in each case to the extent not
                  theretofore paid.

                  4. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.

                  (a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company or its affiliated companies to or for the benefit of
the Executive (whether paid or payable or distributed or distributable pursuant
to the terms of this Agreement or otherwise, including, without limitation, as a
result of the acceleration of the vesting of stock options, restricted stock
units or other equity awards, but determined without regard to any additional
payments required under this Section 4) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code, or any interest or penalties are
incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be entitled to
receive an additional payment (a "Gross-Up Payment") in an amount such that
after payment by the Executive of all taxes (including any interest or penalties
imposed with respect to such taxes), including, without limitation, any income
and employment taxes (and any interest and penalties imposed with respect
thereto) and the Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments; PROVIDED, HOWEVER, that the Executive shall be entitled to receive
a Gross-Up Payment only if the amount of the "parachute payment" (as defined in
Section 280G(b)(2) of the Code) exceeds the sum of (A) $50,000 plus (B) 2.99
times the Executive's "base amount" (as defined in Section 280G(b)(3) of the
Code), and PROVIDED FURTHER, that if the Executive is not entitled to receive a
Gross-Up Payment, the Executive shall be entitled to receive only such amounts
under Sections 3(a)(2), 3(b) and 3(c) of this Agreement that would not include
any "excess parachute payment" (as defined in Section 280G(b)(1) of the Code).
The intent of the parties is that the Company shall be solely responsible for,
and shall pay, any Excise Tax on any Payment and Gross-Up Payment and any income
and employment taxes (including, without limitation, penalties and interest)
imposed on any Gross-Up Payment, as well as bearing any loss of tax deduction
caused by the Gross-Up Payment.

                  (b) Subject to the provisions of Section 4(c), all
determinations required to be made under this Section 4, including whether and
when a Gross-Up Payment is required and the amount of such Gross-Up Payment and
the assumptions to be utilized in arriving at such determination, shall be made
by the Company's public accounting firm (the "Accounting Firm") which shall
provide detailed supporting calculations both to the Company and the Executive
within 15 business days of the receipt of notice from the Executive that there
has been a Payment, or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the Company.
Any Gross-Up Payment, as determined pursuant to this Section 4, shall be paid by
the Company to the Executive within five (5) days of the receipt of the
Accounting Firm's determination. If the Accounting Firm determines that no
Excise Tax is payable by the Executive, it shall furnish the Executive with a
written opinion that

                                      -8-
<Page>

failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. The Accounting Firm shall make all determinations under the tax
standard of "substantial authority" as such term is used in Section 6662 of the
Code. Any determination by the Accounting Firm shall be binding upon the Company
and the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consistent with the
calculations required to be made hereunder. In the event that the Company
exhausts its remedies pursuant to Section 4(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

                  (c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than 10 business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which the Executive gives such notice to the Company (or
such shorter period ending on the date that any payment of taxes with respect to
such claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:

                           (1) give the Company any information reasonably
                  requested by the Company relating to such claim,

                           (2) take such action in connection with contesting
                  such claim as the Company shall reasonably request in writing
                  from time to time, including, without limitation, accepting
                  legal representation with respect to such claim by an attorney
                  reasonably selected by the Company,

                           (3) cooperate with the Company in good faith in order
                  effectively to contest such claim, and

                           (4) permit the Company to participate in any
                  proceedings relating to such claim;

PROVIDED, HOWEVER, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 4(c), the Company shall control all proceedings taken in connection
with such contest and, at its sole option, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or

                                      -9-
<Page>

contest the claim in any permissible manner, and the Executive agrees to
prosecute such contest to a determination before any administrative tribunal, in
a court of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; PROVIDED FURTHER, that if the Company directs the
Executive to pay such claim and sue for a refund, the Company shall advance the
amount of such payment to the Executive on an interest-free basis and shall
indemnify and hold the Executive harmless, on an after-tax basis, from any
Excise Tax or income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed income with
respect to such advance; and PROVIDED FURTHER, that any extension of the statute
of limitations relating to payment of taxes for the taxable year of the
Executive with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

                  (d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 4(c), the Executive becomes entitled
to receive, and receives, any refund with respect to such claim, the Executive
shall (subject to the Company's complying with the requirements of Section 4(c))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable thereto). If, after the
receipt by the Executive of an amount advanced by the Company pursuant to
Section 4(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such advance shall be
forgiven and shall not be required to be repaid and the amount of such advance
shall offset, to the extent thereof, the amount of Gross-Up Payment required to
be paid.

                  5. WITHHOLDING TAXES. The Company may withhold from all
payments due to the Executive (or his beneficiary or estate) hereunder all taxes
which, by applicable federal, state, local or other law, the Company is required
to withhold therefrom.

                  6. REIMBURSEMENT OF EXPENSES. If any contest or dispute shall
arise under this Agreement involving termination of the Executive's employment
with the Company or involving the failure or refusal of the Company to perform
fully in accordance with the terms hereof, the Company shall reimburse the
Executive, on a current basis, for all reasonable legal fees and expenses, if
any, incurred by the Executive in connection with such contest or dispute,
together with interest thereon at a rate equal to the prime rate, as published
under "Money Rates" in THE WALL STREET JOURNAL from time to time, but in no
event higher than the maximum legal rate permissible under applicable law, such
interest to accrue from the date the Company receives the Executive's statement
for such fees and expenses through the date of payment thereof; PROVIDED,
HOWEVER, that in the event the resolution of any such contest or dispute
includes a finding denying, in total, the Executive's claims in such contest or
dispute, the Executive shall be required to reimburse the Company, over a period
of 12 months from the date of such resolution, for all sums advanced to the
Executive pursuant to this Section 6.

                                      -10-
<Page>

                  7. OPERATIVE EVENT. Notwithstanding any provision herein to
the contrary, no amounts shall be payable hereunder unless and until there is a
Change in Control at a time when the Executive is employed by the Company.

                  8. TERMINATION OF AGREEMENT.

                  (a) This Agreement shall be effective on the Effective Date
and shall expire on the second anniversary of the Effective Date, provided that
the term of this Agreement shall be extended automatically for one additional
year as of each annual anniversary of the Effective Date, commencing with the
second anniversary of the Effective Date (each such date a "Renewal Date")
unless this Agreement is terminated pursuant to Section 8(b) or, if earlier,
upon the earlier to occur of (i) termination of the Executive's employment with
the Company prior to a Change in Control and (ii) the Executive's death.
Notwithstanding the foregoing, any expiration of this Agreement shall not
retroactively impair or otherwise adversely affect the rights of the Executive
which have arisen prior to the date of such expiration.

                  (b) The Company shall have the right, in its sole
discretion, pursuant to action by the Board, to approve the amendment or
termination of this Agreement, which amendment or termination shall not
become effective until the Renewal Date coincident with or next following the
date of such action, or if later, the date fixed by the Board for such
amendment or termination; provided, that an amendment which is not adverse to
the interests of the Executive shall take effect immediately; and provided
further, that in no event shall this Agreement be amended in a manner adverse
to the interests of the Executive or be terminated during any period that a
Potential Change in Control is pending or in the event of a Change in Control.

                  9. SCOPE OF AGREEMENT. Nothing in this Agreement shall be
deemed to entitle the Executive to continued employment with the Company or its
subsidiaries and, if the Executive's employment with the Company shall terminate
prior to a Change in Control, then the Executive shall have no further rights
under this Agreement; PROVIDED, HOWEVER, that any termination of the Executive's
employment following a Change in Control shall be subject to all of the
provisions of this Agreement.

                  10. SUCCESSORS; BINDING AGREEMENT.

                  (a) This Agreement shall not be terminated by any merger or
consolidation of the Company whereby the Company is or is not the surviving or
resulting corporation or as a result of any transfer of all or substantially all
of the assets of the Company. In the event of any such merger, consolidation or
transfer of assets, the provisions of this Agreement shall be binding upon the
surviving or resulting corporation or the person or entity to which such assets
are transferred.

                  (b) The Company agrees that concurrently with any merger,
consolidation or transfer of assets referred to in Section 10(a), it will cause
any successor or transferee unconditionally to assume, by written instrument
delivered to the Executive (or the Executive's beneficiary or estate), all of
the obligations of the Company hereunder. Failure of the Company to obtain such
assumption prior to the effectiveness of any such merger, consolidation or
transfer of assets shall be a breach of this Agreement and shall entitle the
Executive to compensation and

                                      -11-
<Page>

other benefits from the Company in the same amount and on the same terms as the
Executive would be entitled hereunder if the Executive's employment were
terminated following a Change in Control other than by reason of a Nonqualifying
Termination during the Termination Period. For purposes of implementing the
foregoing, the date on which any such merger, consolidation or transfer becomes
effective shall be deemed the Date of Termination.

                  (c) This Agreement shall inure to the benefit of and be
enforceable by the Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If the
Executive shall die while any amounts would be payable to the Executive
hereunder had the Executive continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of this
Agreement to such person or persons appointed in writing by the Executive to
receive such amounts or, if no person is so appointed, to the Executive's
estate.

                  11. NOTICES.

                  (a) For purposes of this Agreement, all notices and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered or five (5) days after deposit in
the United States mail, certified and return receipt requested, postage prepaid,
addressed

                           (1) if to the Executive, to the home address of the
                  Executive on the most current Company records, and if to the
                  Company, to Avaya Inc., attention Vice President, Human
                  Resources with a copy to the Secretary of the Board, or

                           (2) to such other address as either party may have
                  furnished to the other in writing in accordance herewith,
                  except that notices of change of address shall be effective
                  only upon receipt.

                  (b) A written notice of the Executive's Date of Termination by
the Company or the Executive, as the case may be, to the other, shall (i)
indicate the specific termination provision in this Agreement relied upon, (ii)
to the extent applicable, set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated and (iii) specify the termination
date (which date shall be not less than fifteen (15) days after the giving of
such notice). The failure by the Executive or the Company to set forth in such
notice any fact or circumstance which contributes to a showing of Good Reason or
Cause shall not waive any right of the Executive or the Company hereunder or
preclude the Executive or the Company from asserting such fact or circumstance
in enforcing the Executive's or the Company's rights hereunder.

                  12. FULL SETTLEMENT; RESOLUTION OF DISPUTES.

                  (a) The Company's obligation to make any payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not
be affected by any set-off, counterclaim, recoupment, defense or other claim,
right or action which the Company may have against the Executive or others. In
no event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the

                                      -12-
<Page>

Executive under any of the provisions of this Agreement and such amounts shall
not be reduced whether or not the Executive obtains other employment.

                  (b) If there shall be any dispute between the Company and the
Executive in the event of any termination of the Executive's employment, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause, that the
determination by the Executive of the existence of Good Reason was not made in
good faith, or that the Company is not otherwise obligated to pay any amount or
provide any benefit to the Executive and his dependents or other beneficiaries,
as the case may be, under Sections 3(a), 3(b) and 3(c), the Company shall pay
all amounts, and provide all benefits, to the Executive and his dependents or
other beneficiaries, as the case may be, that the Company would be required to
pay or provide pursuant to Sections 3(a), 3(b) and 3(c) as though such
termination were by the Company without Cause or by the Executive with Good
Reason; PROVIDED, HOWEVER, that the Company shall not be required to pay any
disputed amounts pursuant to this Section 12(b) except upon receipt of an
undertaking by or on behalf of the Executive to repay all such amounts to which
the Executive is ultimately adjudged by such court not to be entitled.

                  13. EMPLOYMENT WITH SUBSIDIARIES. Employment with the Company
for purposes of this Agreement shall include employment with (i) any "subsidiary
corporation" of the Company, as defined in Section 424(f) of the Code, (ii) an
entity in which the Company directly or indirectly owns 50% or more of the
voting interests or (iii) an entity in which the Company has a significant
equity interest, as determined by the Board or by the Corporate Governance and
Compensation Committee (or any successor committee) of the Board.

                  14. GOVERNING LAW; VALIDITY. The interpretation, construction
and performance of this Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware without
regard to the principle of conflicts of laws. The invalidity or unenforceability
of any provision of this Agreement shall not affect the validity or
enforceability of any other provisions of this Agreement, which other provisions
shall remain in full force and effect.

                  15. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original and both of which
together shall constitute one and the same instrument.

                  16. MISCELLANEOUS. No provision of this Agreement may be
modified or waived unless such modification or waiver is agreed to in writing
and signed by the Executive and by a duly authorized officer of the Company. No
waiver by either party hereto at any time of any breach by the other party
hereto of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or subsequent
time. Failure by the Executive or the Company to insist upon strict compliance
with any provision of this Agreement or to assert any right the Executive or the
Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason, shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement. Except as otherwise expressly set forth in this Agreement, the rights
of, and benefits

                                      -13-
<Page>

payable to, the Executive, his estate or his beneficiaries pursuant to this
Agreement are in addition to any rights of, or benefits payable to, the
Executive, his estate or his beneficiaries under any other employee benefit plan
or compensation program of the Company.

                                      -14-
<Page>

                  IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed by a duly authorized officer of the Company and the Executive has
executed this Agreement as of the day and year first above written.

                                                AVAYA INC.

                                                By: /s/ Michael J. Harrison
                                                   ----------------------------

                                                EXECUTIVE

                                                /s/ Donald K. Peterson
                                                ------------------------------
                                                Donald K. Peterson

                                      -15-

<Page>

NOTE: The Company has also entered into Severance Agreements, each dated as of
September 1, 2001, with each of the following executive officers:

Garry K. McGuire, Sr.     Chief Financial Officer and Senior Vice President,
                          Operations

Michael A. Dennis         Group Vice President, Services

David P. Johnson          Senior Vice President, Sales and Marketing

Karyn Mashima             Senior Vice President, Strategy and Technology

Such Severance Agreements are substantially identical to Mr. Peterson's in
all material respects, except that the severance benefit for each above
listed executive officer is two times the sum of their respective annual base
salaries and target bonuses. In addition, these executive officers are
entitled to continuation of medical and life insurance and a pension
enhancement payment for a two-year period.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}]]