Document:

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                                                                    EXHIBIT 10.3

[1ST SOURCE BANK LOGO]    Aircraft Division

860002

                           AIRCRAFT SECURITY AGREEMENT

THIS AGREEMENT is made this 2nd of November 2000, by and between 1st SOURCE
BANK, ("Bank") of P.O. Box 783, South Bend, Indiana 46624, and KITTY HAWK
AIRCARGO, INC. ("Buyer"), a Texas corporation, of 1515 West 20th Street, DFW
International Airport, Dallas, TX 75261.

1.   Concurrently herewith, Bank has loaned and advanced to Buyer and Buyer
     hereby acknowledges receipt of the principal sum specified in any Exhibit
     A, including official fees disbursed on Buyer's behalf (the "Loan") to
     finance for Buyer the aircraft identified below. For the purpose of this
     Agreement, Exhibit "A" means the original Exhibit A attached hereto and any
     subsequent Exhibit A evidencing new or additional advances that may be made
     from time to time.

2.   Buyer hereby grants to Bank a lien and security interest under the Uniform
     Commercial Code in and to the following described aircraft, its airframe
     and engines, complete with all logs, records and manuals relating thereto
     except those manuals developed by Buyer for use exclusively in conjunction
     with its Part 121 operating certificate, and all equipment, furnishing,
     avionics, navionics, parts, attachments and accessories now or hereafter
     attached to (or stored in an agreed location) or otherwise related to said
     aircraft; and with all present and future repairs, additions, accessions,
     substitutions, exchanges, replacements and all returned and repossessed
     goods; and all present and future insurance proceeds. Buyer shall further
     grant a security interest as provided herein to Bank in instruments,
     documents, accounts (including lease and rental accounts), general
     intangibles, chattel paper, and all leases and temporary rental contracts,
     and all lease payments, rental payments, proceeds (both cash and noncash)
     and other collections arising therefrom, all of which shall be specifically
     and irrevocably assigned if at any time Aircraft is subject to any contract
     which specifically identifies said Aircraft by FAA registration number or
     serial number or if Buyer becomes bankrupt, whether voluntarily or
     involuntarily, in any state or federal proceeding and the Aircraft is
     repossessed by Bank within sixty (60) days from the date of filing of
     record of the bankruptcy (all hereinafter collectively called the
     "Aircraft"). The security interest granted herein shall secure payment of
     all obligations and liabilities of Buyer to Bank hereunder, whether
     absolute or contingent, direct or indirect, now existing or hereafter
     arising, as well as the punctual performance of Buyer of all warranties and
     agreements contained herein.
<TABLE>
<CAPTION>
<S>                    <C>        <C>                <C>                 <C>         <C>
     ---------------------------------------------------------------------------------------------
     YEAR MFG          MANUFACTURER OF AIRCRAFT                          MODEL NO.   SERIAL NO.
     ---------------------------------------------------------------------------------------------
     1. 1969           Boeing                                            727-222     20040
     2. 1969           Boeing                                            727-222     20041
     ---------------------------------------------------------------------------------------------
     MFG OF ENGINE(S)           ENGINE MODEL NO(S) ENGINE SERIAL NO(S)   FAA NO.     HOME AIRPORT
     ---------------------------------------------------------------------------------------------
                                                                         N90AX
                                                                         N180AX
     Pratt & Whitney            JT8D-7B            P653709B
     Pratt & Whitney            JT8D-7B            P655282B
     Pratt & Whitney            JT8D-7B            P653826B
     Pratt & Whitney            JT8D-7B            P653468B
     Pratt & Whitney            JT8D-7B            649234
     Pratt & Whitney            JT8D-7B            653815
     ---------------------------------------------------------------------------------------------
     DESCRIBE EXTRA EQUIPMENT

     ---------------------------------------------------------------------------------------------
</TABLE>
3.   Buyer further agrees that this security interest shall not be terminated in
     whole or in part until all debts and obligations to Bank are fully paid and
     performed by Buyer; provided however, that, in the event Buyer fully
     satisfies all debts and obligations under this Agreement or if more than
     one Aircraft is described hereon, Bank, in its sole discretion is satisfied
     that Buyer has fully paid for an Aircraft, and Buyer is not in default
     under this Agreement or any other instrument or agreement with Bank, then
     Bank shall release and terminate its security interest in that Aircraft or
     Aircrafts for which payment in full has been received and accepted by Bank.

4.   The Aircraft shall not be removed from the United States for a period
     exceeding 30 consecutive days, without the prior written consent of Bank.
     Buyer shall permit Bank to inspect both Aircraft and all books, manuals,
     records and logs relating to Aircraft, its flights and its maintenance, at
     all reasonable times.

5.   Aircraft will be kept airworthy and in good repair and operating condition
     in accordance with the rules and regulations of the Federal Aviation
     Administration (hereinafter referred to as "FAA") and Buyer will promptly
     repair any and all damage Aircraft may incur and shall not sell, assign,
     mortgage, grant a security interest in or otherwise dispose of Aircraft or
     any interest therein, or any part thereof, including any of its equipment
     or accessories. Aircraft will not be leased or rented for any period
     exceeding 30 consecutive days to a third party under a contract
     specifically identifying Aircraft except with the prior written consent of
     Bank, which shall not be unreasonably withheld. Bank specifically
     acknowledges that Buyer need not seek the consent of Bank in connection
     with an ACMI (Aircraft, Crew, Maintenance and Insurance) contract for the
     use of the Aircraft, provided Aircraft is not specifically identified by
     FAA registration number or serial number. Buyer will not suffer or permit
     any material lien, encumbrance or charge of any character whatsoever upon
     or against Aircraft without cure within 30 days of written notice thereof,
     except this Agreement, and will pay or cause to be paid all taxes that may
     be levied against Aircraft. Buyer will notify Bank immediately if the
     police or any authority seizes or impounds Aircraft.

6.   Buyer warrants and agrees that it is the absolute owner of Aircraft with
     full power to grant and convey a security interest herein to Bank.

7.   Aircraft will be used at all times in accordance with all material laws,
     rules, regulations and ordinances of the United States, each of the states
     and municipalities thereof and all other sovereign jurisdictions in which
     Aircraft may be operated, including but not limited to those relating to
     intoxicating liquors, narcotics, or controlled substances, and shall
     conform with all material laws, rules and regulations governing Aircraft.
     Aircraft will be used only for the purposes and in the manner set forth in
     the insurance covering said Aircraft. Aircraft will be operated at all
     times by a currently certified flight crew having the minimum total pilot
     hours required by such insurance and Aircraft will at all times be
     maintained in an airworthy condition necessary for its operating license
     under the laws, ordinances, rules and regulations of the United States,
     each of the states and municipalities thereof, and any other sovereign
     jurisdictions in which Aircraft shall be at any time operated.

8.   At its own cost and expense, Buyer shall insure and at all times continue
     to maintain insurance on Aircraft, with companies acceptable to Bank, and
     in the amount of the full insurable value of Aircraft, or in such other
     amount(s) as shall be satisfactory to Bank, insuring against any and all
     loss, damage, and other risks and hazards as are customary in the industry,
     including but not limited to fire, theft, burglary, crash, collision, and
     bodily injury. In no event shall such coverage be in an amount whereby Bank
     shall be deemed a co-insurer of all or any part of Aircraft. Buyer shall
     deliver a copy of the original policies of insurance to Bank together with
     any certificates or other evidence satisfactory to Bank of compliance with
     these provisions. All policies of insurance shall have attached to and made
     a part thereof a standard long form, Loss Payable Endorsement, in favor of
     both Buyer and Bank. If an Event of Default occurs hereunder, or if the
     aircraft is damaged beyond economic repair, Buyer hereby assigns to Bank
     the proceeds of any and all such policies of insurance (including any
     refund of premium) and Buyer hereby directs each insurer to make payments
     of any losses or refunds directly to Bank, and further, Buyer hereby
     appoints Bank as Attorney-in-Fact for Buyer in obtaining payment, adjusting
     canceling or settling any claims upon or under any such insurance and
     related to the Aircraft, and hereby authorizes Bank to endorse in the name
     of Buyer any checks, drafts or other instruments received or given in
     payment or liquidation of any claim under any such policy of insurance, and
     to perform each and every act deemed necessary by Bank in connection with
     such Power of Attorney, the same being coupled with an interest and
     therefore non-revocable. Each policy of insurance shall provide that Bank's
     interest therein will not be invalidated by the acts, omissions or neglect
     of anyone other than Bank, and shall contain the insurer's agreement to
     give thirty (30) days written notice (7 days notice with regard to war risk
     and allied perils coverage) to Bank before cancellation of or any material
     change in any such policy will become effective as to Bank, whether such
     cancellation or change is at the direction of Buyer or insurer. Bank's
     acceptance of policies in lesser amounts or risks other than as specified
     herein will neither be, nor deemed to be, a waiver of Buyer's foregoing
     obligations.

9.   Buyer warrants to Bank that none of the terms or conditions of this
     Agreement or any other agreements or contracts between Buyer and Bank are
     in violation of any provision of the Articles of Incorporation or By-Laws
     of Buyer or any material agreements Buyer may have with any third party,
     and the execution and delivery thereof, and all other agreements or
     writings by and between Buyer and Bank have been duly authorized by
     appropriate action of the business organization, or have received the
     appropriate consent.

10.  Should Buyer fail to keep Aircraft free and clear of all encumbrances,
     liens and charges, except as herein provided; or fail to pay any tax, levy,
     assessment or public charge thereon (except (i) liens for taxes not yet due
     or which are being contested in good faith (and for payment of which
     adequate assurances in Bank's judgment have been provided to Bank) by
     appropriate proceedings so long as such proceedings do not involve any
     material risk of sale, forfeiture or loss of the Aircraft and do not and
     will not adversely affect Bank's right, title and interest in the Aircraft;
     and (ii) materialman's, mechanic's, workman's, repairman's employee's or
     other like liens arising in the ordinary course of business of Buyer for
     sums not yet delinquent or being contested in good faith (and for the
     payment of which adequate assurances in Bank's judgment have been provided
     to Bank); or neglect or refuse to protect and maintain Aircraft and/or keep
     the same airworthy, in good order, repair and operating condition in
     accordance with the rules and regulations of the FAA if same is not cured
     within thirty (30) days after such notice thereof; or fail to obtain or
     keep in force all required insurance, then Bank, at its discretion, may
     discharge such encumbrance, lien or charge; pay such tax, levy, assessment

AIR 52331 Rev 3/00                Page 1 of 3

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     or public charge; or expend such amounts as are necessary to protect and
     maintain Aircraft and/or to keep the same airworthy, in good order, repair
     and operating condition in accordance with the rules and regulations of the
     FAA; or obtain or keep in force all required insurance. All sums of money
     thus expended, and all other monies paid by Bank to protect its interest in
     Aircraft shall be repayable by Buyer to Bank on demand, and if not so
     repaid, shall be added to the Loan and bear interest, and be secured in
     like manner as the Loan.

11.  Buyer will at all times be liable to and indemnify and save Bank harmless
     from and against any and all claims and liabilities on account of death,
     bodily injury or property damage occasioned by the use or ownership of
     Aircraft so long as such claims or liabilities are not the result of Bank's
     gross negligence or willful misconduct.

12.  No transfer, renewal, extension or assignment of this Agreement or any
     interest hereunder, or loss, damage or destruction of Aircraft shall
     release Buyer from Buyer's obligations hereunder.

13.  Buyer agrees to pay on any installment in default for a period of more than
     ten (10) days a one-time delinquency charge on the amount past due (both
     principal and interest) calculated at the rate of one and one-half percent
     (1 1/2%). If the foregoing charge is not permitted by applicable law, then
     Buyer shall pay a delinquency charge on the amount past due at the highest
     lawful rate enforceable against Buyer.

14.  Buyer may prepay the unpaid principal balance of the Loan at any time. The
     unpaid principal balance remaining after application of a partial
     prepayment may, at Bank's sole discretion, be spread over the remaining
     term of the Loan, resulting in a recast schedule of installment payments,
     having due regard for the interest specified herein. The recast schedule
     shall be sent to Buyer by Bank.

15.  Time is of the essence. Buyer will be in default if any one or more of the
     following events takes place and is continuing (an "Event of Default"):

     (a)  Buyer fails to make any payment when due hereunder;
     (b)  Buyer fails to make timely payment or otherwise fails to perform under
          the terms of any obligation for borrowed money in excess of
          $2,500,000.00, or any such obligation is declared due and payable
          before its expressed maturity;
     (c)  Buyer fails to observe or perform any of the terms or conditions
          (other than Loan repayment or providing required insurance coverage)
          to be observed or performed by Buyer hereunder if same is not cured
          within thirty (30) days after notice thereof;
     (d)  Any material representation or warranty made herein by Buyer fails or
          is breached; or any material statement made by Buyer or any Guarantor
          in any credit application, or made in connection with Buyer's purchase
          of Aircraft is incorrect, false or misleading when made if same is not
          cured within ten (10) days after notice thereof or if same is in the
          result of intentional misrepresentation or fraud;
     (e)  Aircraft is stolen, lost, destroyed or damaged without the benefit of
          adequate insurance coverage;
     (f)  The usual business of Buyer is terminated or suspended or Buyer
          becomes insolvent, however evidenced or determined;
     (g)  Buyer or any Guarantor makes an assignment for the benefit of
          creditors;
     (h)  Buyer or any Guarantor becomes unable to pay their respective debts as
          they become due, or an application for relief is filed by or against
          Buyer or any Guarantor, under the United States Bankruptcy Code or any
          state insolvency laws or similar laws;
     (i)  A trustee or receiver is appointed for Buyer or any Guarantor or for a
          substantial part of their respective property;
     (j)  A levy, claim, seizure, writ of garnishment or attachment,
          condemnation complaint or any similar action or process is brought or
          issued against Buyer and/or Aircraft;
     (k)  Any action in connection with liquidation, dissolution or merger, is
          undertaken by or on behalf of Buyer without Bank's consent which will
          not be unreasonably withheld;

     Notwithstanding anything contained in this section to the contrary, Bank
     hereby acknowledges that on May 1, 2000, Buyer and Guarantor each filed for
     Chapter 11 protection under the United States Bankruptcy Code in the U.S.
     Bankruptcy Court, Northern District of Texas, Fort Worth Division, being
     jointly administered under case number 400-42141-BJH (the "Current
     Proceeding"), and that Bank waives its right to assert that an Event of
     Default has occurred as a result of the Current Proceeding or any action
     ancillary or related thereto.

16.  Notwithstanding ADR provisions set forth below, upon the occurrence of any
     of the foregoing Events of Default and at any time thereafter, Bank shall
     have the right to declare all or any part of the remaining unpaid principal
     balance of the Loan and/or any other indebtedness due to Bank from Buyer,
     to be immediately due and payable, together with all unpaid interest
     respectively accrued thereon, without further notice or demand.

17.  If an Event of Default occurs and is continuing, Bank shall have the right
     to:

     (a)  Collect the unpaid principal balance of the Loan and/or all other
          indebtedness becoming or declared due pursuant to the terms hereof by
          suit or otherwise as provided herein.
     (b)  Notwithstanding ADR provisions set forth below, require Buyer to
          assemble Aircraft and deliver it, upon demand, to Bank at a place to
          be designated by Bank which is reasonably convenient to both parties.
          Bank shall also have the right to retake possession of Aircraft with
          or without process of law and for this purpose may enter any premises
          in a lawful manner where Aircraft may be found and remove same, and
          sell Aircraft in a commercially reasonable manner either at public or
          private sale, after giving notice of the time and place of any public
          sale or of the time after which any private sale or any other intended
          disposition thereof is to be made, and at any such public sale Bank
          may purchase Aircraft. Such sale may be conducted with or without
          having Aircraft at place of sale. The requirements of reasonable
          notice shall be met if such notice is mailed, postage prepaid, to the
          address of Buyer set forth on Page One of this Agreement at least ten
          (10) days before the time of sale or disposition. Bank may apply
          proceeds of said sale, after first deducting all expenses and charges
          of obtaining possession of Aircraft, of reconditioning same and of
          said sale, including reasonable attorney fees, to payment of the
          unpaid principal balance of the Loan and all other sums due hereunder,
          and all accrued interest thereon, and any surplus shall be paid to,
          and any deficiency shall be paid by Buyer, including any reasonable
          attorney's fees and court costs incurred in the recover of such
          deficiency. While repossessing Aircraft, or removing it from a place
          of repossession to a place of storage and/or sale, Bank may, if
          permitted by law, use any of Buyer's licenses in respect to Aircraft.
          All of the foregoing shall be deemed to be a commercially reasonable
          method of disposing of Aircraft.

18.  Buyer's obligation to pay this Loan is independent of the obligation of any
     other person who has signed this Agreement or other documents as a Buyer or
     a Guarantor ("Signer(s)"). Bank need not make an effort to collect from all
     Signers in order to collect from any one Signer. It is not necessary for
     bank to repossess Aircraft before collecting from a Signer. Bank may extend
     the time for payment of any installment, reduce the size of monthly
     payments, release Aircraft, release one or more Signers from their
     obligations, waive any right Bank might have against any Signer, extend,
     renew or agree to alter this Agreement, all without releasing other Signers
     from their obligations under this Agreement.

19.  Subject to ADR provisions set forth below, Buyer agrees that any dispute,
     controversy or claim rising under or in connection with this Agreement, its
     performance or its enforcement by Bank shall be decided exclusively by and
     in the state or federal courts sitting in the State of Indiana. For such
     purpose, Buyer hereby submits to the personal jurisdiction of the state and
     federal courts sitting in the State of Indiana, and irrevocably consents
     and agrees that service of process in any action, suit or other proceeding
     brought in any such dispute, controversy or claim may be completed and
     shall be effective and binding upon Buyer when made upon Buyer by certified
     mail, return receipt requested, postage prepaid and properly addressed to
     Buyer at the address set forth on Page One hereof. Buyer hereby waives any
     objection to the personal jurisdiction of such courts and agrees that it
     shall be barred from asserting any such objection, as long as any process
     is served in accordance with the foregoing. In the event that Buyer is
     unable or refuses to accept delivery of such process, then process may be
     served upon the Secretary of the State of Indiana in the same fashion,
     whereupon such service shall be deemed to have been made upon Buyer. For
     purposes hereof, Buyer agrees to and does hereby waive any right to assert
     or move for transfer of venue to any court outside the State of Indiana,
     based upon the doctrine of forum nonconveniens or otherwise. Buyer further
     acknowledges that its agreements contained herein constitute a material or
     substantial element involved in Bank's decision to enter into the
     transaction contemplated hereby. Buyer agrees that nothing in this
     provision shall affect Bank's right to serve legal process in any other
     legal manner, or affect Bank's right to bring any action, suit or
     proceeding against Buyer or its property in any other jurisdiction.

20.  Any delay on the part of either party hereto in exercising any power,
     privilege or right hereunder or under any other instrument executed by
     either party hereto in connection herewith shall not operate as a waiver
     thereof and no single or partial exercise of any power, privilege or right
     shall preclude other or further exercise thereof, or the exercise of any
     other power, privilege or right. Bank's acceptance of late or partial
     payments, or excuse of any default, shall not establish a custom or course
     of conduct as to any waiver of Bank's rights and remedies. The waiver by
     Bank of any default by Buyer shall not constitute a waiver of any
     subsequent defaults, but shall be restricted to the default so waived. If
     any part of this Agreement shall be contrary to any law which Bank might
     seek to apply or enforce or should otherwise be defective, the other
     provisions of this Agreement shall not be affected thereby, but shall
     continue in full force and effect. All rights, remedies and powers of Bank
     hereunder are irrevocable and cumulative, and not alternative or exclusive,
     and shall be in addition to all rights, remedies and powers given hereunder
     or in or by any other instruments or any laws now existing or hereafter
     enacted.

21.  Both Buyer and Bank will do all such acts and execute all instruments of
     further assurance as shall be reasonably requested by the other party to do
     or execute for the purpose of fully carrying out and effectuating this
     Agreement and its intent and each party shall furnish all documents that
     other party shall reasonably request. Each party agrees that a facsimile,
     photographic or other reproduction of this Agreement or of a financing
     statement may be filed as a financing statement to the extent permitted by
     law or regulations. Buyer also agrees, when requested, to execute any
     financing statements or other documents which Bank deems necessary to
     perfect the security interests created in this Agreement, including any FAA
     form relating to Aircraft as security, as well as any Uniform Commercial
     Code financing statement(s), and to do all other things necessary to
     perfect Bank's security interests in Aircraft.

AIR 52331 Rev 3/00                Page 2 of 3

<PAGE>

22.  If Bank refers this Loan, or any part thereof, for collection or
     enforcement to any attorney who is not Bank's salaried employee, and if
     permitted by applicable law, Buyer agrees to pay actual attorney's fees
     incurred together with all costs of legal proceedings.

23.  Buyer, including any guarantor hereunder, hereby waives presentment,
     demand, protest, notice of protest, notice of non-payment or dishonor,
     notice of sale of Aircraft or any part thereof and all benefit of
     valuation, appraisement, and all exemption laws now in force and hereafter
     passed, including stay of execution and condemnation.

24.  Notwithstanding ADR provisions below and subject to the occurrence of an
     Event of Default, Bank shall have a continuing right of set-off against and
     upon all funds, credits, securities, instruments and other property,
     tangible or intangible, at any time in Bank's possession and belonging to
     Buyer, as security for all of Buyer's obligations to Bank due or to become
     due, or that may hereafter be contracted.

25.  This Agreement shall apply and inure to the benefit of and bind the respect
     heirs, administrators, successors and assigns of Buyer and Bank, as the
     case may be, and the terms "Buyer" and "Bank" shall include and mean,
     respectively, the heirs, administrators, successors and assigns of Buyer
     and Bank, as the case may be.

26.  This Agreement, the Court Order authorizing this Agreement (a copy of which
     is attached hereto as Exhibit B) and every Exhibit A constitutes the entire
     agreement between the parties and includes all oral or written agreements,
     representations, covenants, warranties and communications between Buyer and
     Bank and their respect agents, servants and employees and constitutes the
     full and complete agreement between Buyer and Bank. This Agreement can be
     modified or amended only by means of a written document signed by both
     parties hereto; provided that, Bank may by written notice to Buyer correct
     any error or complete any blank space necessary to cause this Agreement to
     be effective.

27.  Due to the high cost and time involved in commercial litigation before a
     jury, Bank and Buyer, including any Guarantors hereunder, waive all rights
     to a jury trial on all issues in any action or proceeding relating to this
     Agreement, the transaction evidenced by this Agreement, or any documents
     executed in connection with this Agreement, and no attempt shall be made to
     consolidate, by counterclaim or otherwise, any such action or proceeding
     with any other action or proceeding in which there is a trial by jury or in
     which a jury trial cannot be or has not been waived.

28.  Buyer agrees that this is an Indiana transaction; the formal and essential
     validity of this Agreement and this Loan transaction shall be construed
     according to, and governed in all respects by, the laws of the State of
     Indiana.

29.  Except as otherwise provided in this paragraph, the parties hereto waive
     litigation and agree that the sole procedure for resolving every claim or
     dispute in connection with this Agreement shall be by applying the methods
     set forth in the Indiana Rules for Alternative Dispute Resolution (ADR) at
     the Bank's office in 60 day increments as follows: (i) conduct mediation
     and (ii) conduct a mini-trial on any issues not resolved, with a neutral
     party to preside over the hearing and assist in resolving the issues. Each
     party shall pay an equal share of the costs of (i) and (ii), above. The
     parties shall agree upon a mediator and all other aspects of ADR but, if
     necessary, a party may commence an action in Indiana to compel ADR.
     Judgment on an ADR award with costs may be entered in any court with
     jurisdiction. The provisions of this paragraph shall be specifically
     enforceable by any court having jurisdiction. THIS ADR PROVISION IS FOR THE
     PURPOSE OF SAVING THE PARTIES THE TIME AND EXPENSE OF LITIGATING ISSUES AND
     IS INTENDED TO BENEFIT ALL PARTIES HERETO; PROVIDED, HOWEVER, THAT NOTHING
     HEREIN SHALL AFFECT A PARTY'S RIGHT BEFORE, DURING OR AFTER ADR TO EXERCISE
     SELF-HELP REMEDIES, SUCH AS REPOSSESSION OR SET-OFF, UNDER THE UNIFORM
     COMMERCIAL CODE OR OTHER APPLICABLE LAW, INCLUDING A PARTY'S RIGHT TO BRING
     AN ACTION IN ANY COURT OF COMPETENT JURISDICTION FOR THE PURPOSE OF
     ENFORCING SAID SELF-HELP REMEDIES AND THESE REMEDIES ARE NOT WAIVED.

NOTICE: (1) BUYER AGREES THAT THIS LOAN IS BEING MADE TO BUYER IN INDIANA. (2)
BUYER AGREES THAT BUYER'S PAYMENTS ARE MADE WHEN ACCEPTED BY BANK IN INDIANA.
(3) BUYER AGREES TO ALL THE TERMS OF THIS AGREEMENT. (4) THIS AGREEMENT IS NOT
EFFECTIVE UNTIL IT IS COMPLETED AND SIGNED BY BUYER, AND RECEIVED, APPROVED, AND
ACCEPTED BY BANK OF INDIANA. (5) BUYER ACKNOWLEDGES THAT BUYER HAS RECEIVED AND
RETAINED A COMPLETED COPY OF THIS AGREEMENT.

IN WITNESS WHEREOF, Buyer has caused this Agreement to be duly executed on the
day and year first above written, intending to be legally bound hereby.

ATTEST OR WITNESS:                         KITTY HAWK AIRCARGO, INC.

By:                                        By:      /s/  DREW KEITH
   --------------------------                 ----------------------------------

Title                                      Title    V.P. & C.F.O.
     ------------------------                   --------------------------------

APPROVED AND ACCEPTED by Bank, in South Bend, Indiana, this 2nd of November,
2000 (the Effective Date).

                                            1st Source Bank

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

                                            Title
                                                 -------------------------------

AIR 52331 Rev 3/00                Page 3 of 3

<PAGE>

[1ST SOURCE BANK LOGO]     Aircraft Division

860002

                                    EXHIBIT A
                                    ---------
     (This Exhibit is in addition to and supersedes all previous Exhibits A
        to the extent of new or additional advances as set forth below)

1.   This Exhibit is made a part of and subject to the terms of the Aircraft
     Security Agreement ("Agreement") between Buyer and Bank, dated November 2,
     2000 (together with all amendments and supplements to and replacements for
     said Agreement).

2.   Buyer hereby acknowledges receipt of the Total Amount Loaned specified
     below:

     1.   Existing Loan Balance                              $0.00
                                                             -----
     2.   New Advance                                $8,464,438.22
                                                     -------------
     3.   Fees                                           $1,000.00
                                                         ---------
     4.   Total Amount Loaned                        $8,465,438.22
                                                     -------------

3.   Buyer promises to pay to Bank or to Bank's order, at such office as Bank
     may direct, the unpaid principal balance of the Loan and all other sums
     which become due under the Agreement, plus interest, based on a 360 day
     year and the days actually elapsed, as follows:

     (1)  [X]  Buyer Agrees to pay the unpaid principal balance in consecutive
               monthly installments as set forth in schedule below. The interest
               is computed at the constant rate of 8.90% per annum on the unpaid
               principal balance as it changes from time to time.

     (2)  [ ]  Buyer agrees to pay the unpaid principal balance together with
               interest in consecutive monthly installments as set forth in the
               schedule below. The interest shall be computed on the unpaid
               principal balance hereunder, as it changes from time to time, at
               the rate of % per annum more than the PRIME RATE. Prime Rate
               shall mean the Prime Rate as published in The Wall Street
               Journal, and which is described as the base rate on corporate
               loans at large U.S. money center commercial banks, as such rate
               may vary from time to time. If such base is expressed in a range
               in said publication, the higher rate of the reported range will
               apply. In the event The Wall Street Journal ceases to publish a
               Prime Rate, 1st Source shall use a similar source to determine
               said Prime Rate. All payments shall be applied first to the
               interest and then to principal unless otherwise noted herein. The
               PRIME RATE shall be determined on the last day of each [ ]
               Calendar moth or [ ] Three-month, [ ] Six-month, [ ]
               Twelve-month, anniversary of this Agreement and shall be the
               basis for establishing the interest assessed on the average daily
               unpaid principal balance for the next succeeding indicated
               period.

     -------------------------------------------------------------------------
     BEGINNING DATE   NO. OF PYMTS   PAYMENT AMOUNT
     -------------------------------------------------------------------------
     12/1/00          50             $202,000.00 (principal and interest)

     2/1/05            1             Remaining principal balance plus interest
     -------------------------------------------------------------------------

ATTEST OR WITNESS:                      KITTY HAWK AIRCARGO, INC.

By:                                     By:      /s/  DREW KEITH
   -----------------------------           ---------------------------------

Title                                   Title    V.P. & C.F.O.
     ---------------------------             -------------------------------

APPROVED AND ACCEPTED by Bank in South Bend, Indiana, as of November 2, 2000.

                                         1st Source Bank

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

                                         Title
                                              ----------------------------------

AIR 53221 Rev 3/00

<PAGE>

[1ST SOURCE BANK LOGO]    Aircraft Division

                               GUARANTY OF PAYMENT

FOR VALUE RECEIVED and in consideration of any loan or any other financial
accommodation heretofore or hereafter made or granted to KITTY HAWK AIRCARGO,
INC. (the "Borrower") by 1st Source Bank ("Bank"), as an inducement to Bank to
make such loans and financial accommodations to Borrower, the undersigned,
jointly and severally if more than one person or entity ("Guarantors") hereby
promise and guarantee to Bank that Borrower shall promptly and fully pay any and
all Indebtedness, and upon failure of Borrower so to pay, Guarantors jointly and
severally promise to pay all Indebtedness to Bank on demand together with all
expenses of enforcing this Guaranty, including attorneys' and legal assistants'
fees, legal expenses and all other costs of collection. This Guaranty
constitutes and is an absolute, unconditional and continuing guarantee of
payment and shall apply to each and every default in payment by Borrower. It is
understood that repeated and successive demands may be made and recoveries had
hereunder.

In this Guaranty, "Indebtedness" is limited to the financing of a 1969 Boeing
727-222, S/N 20040, N90AX; 1969 Boeing 727-222, S/N 20041, N180AX; and six (6)
Pratt & Whitney JT8D-7B engines S/N 653815, 649234, P653468B, P653826B,
P655282B, and P653709B in the amount of $8,465,438.22.

The liability of the Guarantors hereunder shall be discharged and this Guaranty
shall terminate 120 days after payment in full of the Indebtedness if within
such 120-day period no petition is filed by or against the Borrower pursuant to
the United States Bankruptcy Code, as amended from time to time, or under any
similar law of any jurisdiction. If such a petition is filed within said 120-day
period, this Guaranty shall continue and shall remain in full force and effect
until such time as the Indebtedness has been paid in full and is no longer
subject to repayment by, or recovery from, Bank under any such law.

Demand, presentment for payment, notice of dishonor, notice of non-payment,
protest, notice of protest, diligence by Bank in collection or brining suit on
this Guaranty, notice of the creation and existence of any Indebtedness, all
benefits of valuation and appraisement laws, and all rights of sureties and
accommodation parties are hereby waived by Guarantors. Guarantors hereby also
assume the same obligations as a co-maker of the Indebtedness and waive all
rights to have Bank first attempt to secure payment of the Indebtedness from
Borrower or any collateral now or hereafter held by Bank. Bank may take new,
additional or substitute security for the Indebtedness without releasing or
impairing the obligation of Guarantors to Bank hereunder, which security may be
taken without notice to Guarantors. The liability of the Guarantors hereunder
shall not be affected or impaired by any irregularity in or amendment of the
Indebtedness or any loan agreement, security document or other instrument
related thereto or (a) any collateral security therefor, (b) any transfer of the
collateral security therefor, (c) any documents or instruments executed in
connection therewith, (d) any compromise, release, renewal, extension,
forbearance, indulgence, alteration, change in, modification of, grant of
participation in, or other disposition of any such loan agreement, security
document, or other instrument or any note executed in connection therewith, or
of any collateral therefor, (e) any release of any Guarantor or any other person
or the failure of Bank to pursue its remedies against any one or more of the
Guarantors or any other person, (f) failure to collect any of the Indebtedness
when due, (g) failure to notify any Guarantors of any payments owing hereunder,
or (h) any delay or omission by Bank in the exercise of any right or remedy
hereunder. Guarantors waive all defenses at law or in equity other than payment
and agree this instrument shall be binding on the heirs, personal
representatives, successors and assigns of Guarantors and shall inure to the
benefit of the successors and assigns of Bank.

Notwithstanding any payments made by Guarantors hereunder, the Guarantors shall
not by reason of this Guaranty have, and Guarantors hereby waive, (i) any claim
or right of subrogation in and to the Indebtedness or any loan agreement,
security document, note or other instrument related thereto or any collateral
security therefor, (ii) any claim or right of reimbursement, exoneration,
contribution or indemnification from or against any party, and (iii) any right
to participate in any claim or remedy of Bank against the Borrower or any
collateral security for the Indebtedness, whether or not such claim, right or
remedy arises in equity or under contract, statute, or common law.

Bank shall have the right to apply all amounts received hereunder, in such
amounts and in such proportions as Bank in its sole discretion shall determine,
to the costs and expenses of enforcement and collection and to the full or
partial satisfaction of the Indebtedness. Demand for payment under this Guaranty
shall be effective upon Bank placing notice in the United States mail addressed
to Guarantors at the addresses stated below by first class, registered or
certified mail.

Bank is hereby granted and shall have a lien upon and a right of setoff against
all balances, credits, deposits, accounts, moneys, securities, and other
property of Guarantors now or hereafter in the possession of or on deposit with
Bank, and every such lien and right of setoff may be exercised without demand
upon or notice to Guarantors.

To induce Bank to make the loans to Borrower, each of the undersigned covenants
and agrees to provide to Bank, on an annual basis within ninety (90) days after
the end of each year, a complete financial statement in form satisfactory to
Bank.

This Guaranty has been delivered at South Bend, Indiana, and shall be
interpreted, construed and governed by the laws of the State of Indiana.
Wherever possible, each provisions of this Guaranty shall be interpreted in such
manner as to be effective and valid under applicable law, and any provision of
this Guaranty prohibited or unenforceable under applicable law shall be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Guaranty.

Each Guarantor agrees to give Bank written notice, by registered or certified
mail, postage-prepaid, of any known action or inaction by Bank or any agent or
attorney of Bank in connection with the Indebtedness or this Guaranty or the
transactions contemplated thereby that may be actionable against Bank or any
agent or attorney of Bank or a defense to payment of the Indebtedness or this
Guaranty, including, but not limited to, commission of a tort or violation of
any contractual duty or duty implied by law. Each Guarantor hereby agrees that
unless such notice is duly given as promptly as possible (and in any event
within thirty (30) days) after such Guarantor has knowledge or with the exercise
of reasonable diligence should have had knowledge of any such action or
inaction, such Guarantor shall not assert, and such Guarantor shall be deemed to
have waived, any such claim or defense.

AIR 52736 Rev 2/99                Page 1 of 2<PAGE>

                                                                    Exhibit 10.4

                                October 31, 2002

Mr. Jay Gardner
KBK Financial, Inc.
2200 City Center II
301 Commerce Street
Fort Worth, Texas  76102

         Re:      Account Transfer and Purchase Agreement by and between KBK
                  Financial, Inc., Kitty Hawk, Inc., Kitty Hawk Aircargo, Inc.
                  and Kitty Hawk Cargo, Inc.

Mr. Gardner:

         Kitty Hawk, Inc., Kitty Hawk Aircargo, Inc. and Kitty Hawk Cargo, Inc.
(collectively "Reorganized Kitty Hawk" or the "Debtors") warrant, represent and
agree as follows:

                  (1) All conditions to the effectiveness of the Debtors' Final
         Joint Plan of Reorganization (the "Plan") which was approved pursuant
         to the terms of the Order Confirming Debtors' Final Plan of
         Reorganization (the "Confirmation Order") on August 5, 2002 by Judge
         Barbara Houser, Judge of the United States Bankruptcy Court for the
         Northern District of Texas, Fort Worth Division (the "Court") (in
         connection with the bankruptcy matter styled In Re: Kitty Hawk, Inc.,
         et al.) jointly administered under Case Number 400-42141-BJH-)
         including, but not limited to the following have occurred, have been
         satisfied or met:

                           (a) The Confirmation Order has been signed by the
                           Court and duly entered on the docket for the
                           Reorganization Cases by the clerk of the Court in
                           form and substance acceptable to the Debtors;

                           (b) The Confirmation Order has become an Effective
                           Confirmation Order and has not been stayed, modified,
                           reversed or amended;

                           (c) The Debtors have received $30.9 million from USPS
                           on the TforC Claim;

                           (d) The Debtors have executed the Aircraft Use
                           Agreement;

                           (e) The Debtors have available resources, including
                           any working capital financing, to fund the
                           Reorganized Debtors' obligations under the Plan and
                           to meet its ongoing business needs.

                  (2) Substantially all Collateral, as that term is defined in
         the Account Transfer and Purchase Agreement (the "Purchase Agreement")
         by and between KBK Financial, Inc. ("KBK") and Reorganized Kitty Hawk,
         is located in Texas and Indiana.

<PAGE>

Mr. Jay Gardner
October 31, 2002
Page 2

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

                  (3) Within one business day after receipt, Reorganized Kitty
         Hawk shall provide KBK with a copy of all pleadings, motions, notices,
         orders, etc. pertaining to any stay, appeal, modification, reversal
         and/or amendment of the Confirmation Order and immediate written notice
         of the occurrence of any event which might reasonably result in the
         imposition of a stay, or the granting of an appeal, modification,
         reversal and/or amendment of the Confirmation Order.

                  (4) Reorganized Kitty Hawk shall provide KBK with a written
         certification each month certifying full compliance with Article 3,
         Section 3.1(g) of the Plan and upon payment of all franchise taxes and
         related interest and penalties, if any, shall provide KBK with a
         certificate of good standing from the State of Texas and the State of
         Delaware.

                  (5) Reorganized Kitty Hawk shall indemnify KBK from and
         against any and all damages, costs, expenses, attorney's fees, expert
         fees, losses or judgments incurred by KBK as a result of or arising
         out of, directly or indirectly, (1) Reorganized Kitty Hawk's failure
         to comply with all of the terms, conditions and requirements of the
         Plan and Confirmation Order; and/or (2) the failure of any condition
         to the effectiveness of the Plan, as set forth in Article 9.1 of the
         Plan, to have occurred or been satisfied by the date of this letter,
         including, but not limited to the execution of the Registration Rights
         Agreement, as referenced in Article 9.1(d) of the Plan.

                  (6) The Effective Date of the Plan has occurred.

                  (7) The Bank Group's liens against Reorganized Kitty Hawk's
         assets other than the Class 1 Escrow Funds (as defined in the
         Confirmation Order) have been released and discharged and the Bank
         Group has executed and delivered to Reorganized Kitty Hawk appropriate
         lien release documents to release the Bank Group's liens against (and
         all security interest in) Reorganized Kitty Hawk's assets (except the
         Class 1 Escrow Funds).

                  (8) Reorganized Kitty Hawk warrants and represents that, to
         its knowledge, nothing contained in the Purchase Agreement is
         inconsistent with the Plan, the confirmation Order or the Findings of
         Fact, Conclusions of Law Regarding Debtors' Final Plan of
         Reorganization dated August 5, 2002.

                  (9) All representations and warranties and agreements
         contained herein are hereby incorporated by reference into the Purchase
         Agreement as if fully set forth therein. The breach of any
         representation, warranty and/or agreement contained herein shall
         constitute a material breach of the Purchase Agreement and an event of
         default thereunder.

         Additionally, Reorganized Kitty Hawk expressly authorizes KBK to sign
         the

<PAGE>

Mr. Jay Gardner
October 31, 2002
Page 3

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

Purchase Agreement and agrees that the Purchase Agreement is effective as of the
date of this letter.

         Unless otherwise indicated above, all terms contained herein shall have
the same meaning as in the Plan. The foregoing representations, warranties and
agreements shall be effective as of the date of this letter.

                       KITTY HAWK, INC.,
                       a Delaware corporation

                       By:           /s/ Tilmon J. Reeves
                          -----------------------------------------------------
                       Name:             Tilmon Reeves
                       Title:           Chairman & C.E.O.
                       Date:             Oct. 31, 2002
                            ---------------------------------------------------

                       KITTY HAWK CARGO, INC.,
                       a Delaware corporation

                       By:           /s/ Tilmon J. Reeves
                          -----------------------------------------------------
                       Name:             Tilmon Reeves
                       Title:           Chairman & C.E.O.
                       Date:             Oct. 31, 2002
                            ---------------------------------------------------

                       KITTY HAWK AIRCARGO, INC.,
                       a Texas corporation

                       By:           /s/ Tilmon J. Reeves
                          -----------------------------------------------------
                       Name:             Tilmon Reeves
                       Title:           Chairman & C.E.O.
                       Date:             Oct. 31, 2002
                            ---------------------------------------------------

<PAGE>

                     ACCOUNT TRANSFER AND PURCHASE AGREEMENT

This Account Transfer and Purchase Agreement (this "Agreement") is dated this
___ day of August, 2002, and is between KBK Financial, Inc., a Delaware
corporation authorized to do business in Texas ("KBK"), and KITTY HAWK, INC., a
Delaware corporation, KITTY HAWK CARGO, INC., a Delaware corporation and KITTY
HAWK AIRCARGO, INC., a Texas corporation (collectively the "Seller"). This
Agreement shall become effective as of the day it is accepted in the State of
Texas by KBK as indicated at the end hereof by the date and signature on behalf
of KBK.

         WHEREAS, KBK is in the business of purchasing accounts receivable
         ("accounts"); and

         WHEREAS, Seller desires, from time to time during the term of this
         Agreement, to sell accounts to KBK; and

         WHEREAS, the parties hereto desire to enter into this Agreement to
         govern the purchase and sale of accounts;

         NOW THEREFORE, in consideration of the premises, the mutual agreements
         herein contained and for other good and valuable consideration, the
         receipt and sufficiency of which are hereby acknowledged, the parties
         agree as follows:

1.       Offer of Accounts. At its election from time to time during the term
         of this Agreement, Seller agrees to offer for sale to KBK certain of
         its accounts arising out of sales of goods, or services rendered, by
         Seller, and to sell to KBK on the terms set forth in this Agreement
         such of the offered accounts as KBK may accept for purchase in the
         State of Texas. KBK shall have the absolute right in its sole
         discretion to reject any offered accounts that KBK, in its sole
         discretion, believes are not collectible, do not meet KBK's
         collectability criteria, or if KBK deems itself insecure with respect
         to that particular account, whether or not KBK has previously
         purchased accounts of any particular account debtor hereunder. This
         Facility Amount is offered in anticipation of KBK participating with
         another financial institution. All parties agree that: 1) KBK will use
         its best efforts to find a participant; 2) KBK will have no obligation
         to do so; 3) KBK will have no liability in the event an acceptable
         participant is not found; and 4) all obligations of Seller remain in
         force regardless of whether or not an acceptable participant is
         ultimately found. The parties agree that, without the prior consent of
         KBK, the maximum Gross Amount (as defined below) of accounts that KBK
         may purchase hereunder at any time, together with the Gross Amount of
         accounts previously purchased by KBK from Seller hereunder which then
         remain outstanding, will not exceed Ten Million and 00/100 Dollars
         ($10,000,000.00) (the "Facility Amount"), if a Participant is
         obtained. At no time will KBK's individual maximum Gross Amount exceed
         Five Million and 00/100 Dollars ($5,000,000.00). KBK's consent to
         purchase accounts in excess of such amount may be evidenced by KBK's
         acceptance for purchase of such offered accounts.

2.       Purchase and Sale of Accounts. Each account purchased by KBK hereunder
         shall be purchased by KBK without recourse against Seller. All losses
         incurred by KBK from the financial inability of the applicable account
         debtor to pay such account over and above any and all Residual
         Payments (as hereinafter defined) and Reserve (as hereinafter defined)
         amounts offset shall be borne solely by KBK; provided, however, that
         nothing in this Agreement shall be construed to relieve Seller from
         liability for any breach by Seller of any representation, warranty or
         agreement of Seller contained herein. Notwithstanding any provision in
         this Agreement to the contrary, it is contemplated by and the
         intention of the parties hereto that accounts of Seller may be
         considered and purchased as one account (herein a "batch") and the
         terms "account" and "accounts" as used herein may also refer to and
         mean a "batch" or "batches," as the case may be.

         In connection with each offer of accounts to KBK, Seller shall (i)
         forward electronically to KBK copies of its accounts receivable aging,
         sales journal and collection journal, and (ii) deliver to KBK a
         complete certificate in the form of Exhibit 1 attached hereto. Seller
         shall maintain at its offices a written assignment of all accounts
         offered to KBK, together with a copy of all invoices relating to such
         accounts, and evidence of delivery of the related goods or performance
         of the related services (and, if requested, the original purchase
         orders, airway bills or contracts from the applicable customers), all
         in a form satisfactory to KBK, and to make available to KBK all such
         assignments, invoices and evidence in accordance with Section 12
         hereof. In order for an account to be eligible for purchase by KBK, the
         related invoice must set forth, as the sole address for payment, the
         following post office box: Kitty Hawk Aircargo, Inc., P.O. Box 971389,
         Dallas, Texas 75397, Account Number 0100130152; Kitty Hawk Cargo, Inc.
         and Kitty Hawk, Inc., P.O. Box 971406, Dallas, Texas 75397, Account
         Number 1559691322 ("Authorized Remittance Address") (or, upon notice
         from KBK, another post office box of KBK) and, in the case of payments
         to be effected by wire transfer or other electronic means, the related
         invoice must set forth, as the sole bank account for such payment, a
         bank account of KBK (or a third party designated by KBK) designated by
         KBK from time to time (except in each case as otherwise agreed in
         writing by KBK). KBK's acceptance for purchase of offered accounts
         shall be evidenced by KBK's tendering of the Initial Payment (as
         hereinafter defined) to Seller or otherwise delivering to Seller a
         schedule of accounts accepted for purchase by KBK. Seller's
         transference of offered accounts shall not be effective as to any
         accounts not accepted for purchase by KBK. Seller hereby sells,
         transfers, assigns and otherwise conveys to KBK (as a sale by Seller
         and a purchase by KBK, and not as security for any indebtedness or
         other obligation of Seller to KBK) all right, title and

<PAGE>

         interest of Seller in and to all accounts accepted by KBK
         for purchase hereunder, together with all related rights (but not
         obligations) of Seller with respect thereto, including all contract
         rights, guarantees, letters of credit, liens in favor of Seller,
         insurance and other agreements and arrangements of whatever character
         from time to time supporting or securing payment of such accounts and
         all right, title and interest of Seller in any related goods,
         including Seller's rights and remedies under Article 2, Part 7 of the
         applicable Uniform Commercial Code ("UCC"). The foregoing sale,
         transfer, assignment and conveyance does not constitute and is not
         intended to result in an assumption by KBK of any obligation of Seller
         or any other person in connection with the accounts or related rights
         or under any agreement or instrument relating thereto. Seller agrees
         to execute and deliver such bills of sale, assignments, letters of
         credit, notices of assignment, financing statements (including
         continuation statements) under the applicable UCC and other documents,
         and make such entries and markings in its books and records, and to
         take all such other actions (including the negotiation, assignment or
         transfer of negotiable documents, letters of credit or other
         instruments) as KBK may request to further evidence or protect the
         sales and assignments of accounts and related rights to KBK hereunder,
         as well as KBK's interest in any returned goods referred to in Section
         7 hereof.

3.       Terms of Accounts. Except as otherwise may be agreed to in writing by
         KBK from time to time, the terms of sale offered by Seller to its
         account debtors with respect to all accounts offered to KBK for
         purchase hereunder shall be NET 30 DAYS. After an account has been
         purchased by KBK, Seller shall not have the right to vary the terms of
         sale set forth in the invoice relating to such account, or any other
         aspect of the account, except in Seller's capacity as agent for KBK for
         purposes of collection of accounts purchased by KBK as set forth in
         Section 8 hereof, and then only with the prior written consent of KBK.

4.       Purchase Price. The purchase price for each account purchased hereunder
         shall consist of and be paid by the Initial Payment and the Residual
         Payment. The Initial Payment shall be payable by KBK to Seller on the
         business day that KBK accepts for purchase the related account, and the
         Residual Payment shall be payable by KBK to Seller within five business
         days after KBK receives and deposits the proceeds of collection for the
         subject account in an amount equal to the Net Amount (as hereinafter
         defined) of such account (subject to KBK's right to withhold payment of
         Residual Payments hereunder, and subject to KBK's right to withhold,
         offset and charge, each as described below).

         "Initial Payment" means eighty-five percent (85%) of the Gross Amount
         of an account. "Gross Amount" of an account means the gross face amount
         payable pursuant to the related invoice. "Net Amount" of an account
         means the Gross Amount of such account, less all permitted discounts,
         deductions and allowances. "Residual Payment" with respect to an
         account means the aggregate amount collected with respect to such
         account, less the sum of (i) the Initial Payment with respect to such
         account, (ii) the KBK Discounts (as hereinafter defined), (iii) any and
         all reasonable attorneys' fees and other costs of collection.

5.       Fixed and Variable  Discounts.  "Fixed  Discount" means a discount of
         six-tenths of one percent (0.60%) of the Gross Amount of such account.
         "Variable Discount" means a discount computed on the Initial Payment
         and accruing on the basis of actual days elapsed from the date of
         Initial Payment until and including three business days after KBK
         receives and deposits the proceeds of collection of such account at a
         per annum rate equal to KBK's Base Rate (as hereinafter defined) in
         effect on the date of purchase of such account plus two percent (2.0%)
         per annum; provided, however, in no event shall the Variable Discount
         with respect to any account purchased hereunder be less than six and
         75/100 percent (6.75%) per annum. "Base Rate" means that per annum
         variable rate (expressed as a per annum percentage based on a year
         consisting of 360 days) determined from time to time by KBK without
         notice to Seller as KBK's Base Rate for purposes of calculating
         variable discounts under KBK's account transfer agreements. The Fixed
         Discount and the Variable Discount shall be collectively referred to
         herein as the "KBK Discounts". The KBK Discounts may be subject to one
         or more adjustments during the term of this Agreement if a Performance
         Based Pricing Addendum is attached hereto. If a Performance Based
         Pricing Addendum is attached hereto, it is then made a part hereof as
         though fully written herein. In the event the Base Rate hereunder
         exceeds the "Prime Rate" published in The Wall Street Journal by more
         than 25 basis points for more than 30 consecutive days, then Seller
         may terminate this Agreement prior to the end of the Term without
         being required to pay a Termination Fee.

6.       Reserve. In the event that KBK believes Seller has breached any
         material representation, warranty, covenant or agreement contained
         herein (including, without limitation, in the event an account
         purchased by KBK becomes a Disputed Account as hereinafter defined),
         any account is not paid in full within 90 days from the date of
         purchase of such account, or KBK deems itself insecure hereunder, KBK
         may at its election, withhold and accumulate the payment of the
         Residual Payments ("Reserve") with respect to any or all accounts
         purchased hereunder to the extent necessary to maintain a Reserve in
         an amount up to the sum of (a) the total Initial Payments made by KBK
         with respect to accounts purchased by KBK hereunder which remain
         uncollected, plus (b) the total of the KBK Discounts with respect to
         such accounts and (c) such other amounts which may become due by
         Seller to KBK hereunder or under any other agreement. Seller hereby
         authorizes KBK to offset and charge any and all amounts for which
         Seller or the Reserve may be obligated to pay to KBK pursuant to the
         terms of this Agreement against the Reserve, and at KBK's election,
         against any funds of Seller in the possession or control of KBK, from
         whatever source. However, if, on any business day that KBK regularly
         makes a payment to Seller for accounts purchased, none of the
         foregoing conditions exists and no other breach of this Agreement by
         Seller exists, then KBK shall distribute to Seller the Residual
         Payments then due and all funds it then has on hand that it has
         collected from accounts that KBK has not then purchased.

7.       Certain Security. For the purpose of securing KBK (a) in the payment of
         any and all sums of money that

<PAGE>

         may become due and owing KBK from Seller by reason of this Agreement,
         (b) in the performance by Seller of Seller's obligations hereunder,
         and under any other agreement, contract, document, note or other
         instrument in favor of KBK or its assignees and (c) in the performance
         of all the obligations of all Affiliates (as hereinafter defined)
         under each Affiliate's agreements, contracts, documents, notes or
         other instruments in favor of KBK or its assigns, Seller hereby grants
         to KBK a security interest in (i) all of Seller's present and future
         inventory, equipment (with the exception of Seller's aircraft and
         aircraft engines, which are expressly excluded from the Collateral (as
         defined below), and in which KBK shall have no security interest),
         accounts, account and contract rights, proceeds of inventory,
         contracts, drafts, acceptances, documents, instruments, chattel paper,
         deposit accounts, general intangibles and all products and proceeds
         therefrom, including all returned or repossessed goods, as well as all
         books and records pertaining to all of the foregoing, (ii) all amounts
         due as Residual Payments or withheld by KBK as the Reserve pursuant to
         Section 6 hereof and (iii) all money and other funds of Seller now or
         hereafter in the possession, custody or control of KBK, from whatever
         source (the "Collateral"). The term "Affiliate" shall mean with
         respect to any person or entity in question, any other person or
         entity owned or controlled by, or which owns or controls or is under
         common control or is otherwise affiliated with such person or entity
         in question. Seller agrees to execute and deliver such financing
         statements under the applicable UCC and other documents, and make such
         entries and markings in its books and records and to take all such
         other actions, as KBK may request to further evidence, perfect,
         preserve or protect the security interest granted to KBK hereunder.
         KBK shall have all rights and remedies in respect of the lien and
         security interest herein granted as are provided in this Agreement,
         the UCC and other applicable law, including the right at any time, KBK
         deems itself insecure before an event of default by Seller or after
         any default by Seller of any of its obligations hereunder, to notify
         account debtors and obligors on instruments to make payment to KBK (or
         its designee) and to take control of proceeds to which KBK is
         entitled, and to apply proceeds to (in addition to other obligations
         of Seller to KBK) the reasonable attorneys' fees and legal expenses
         incurred by KBK in connection with the disposition of collateral or
         the other exercise of rights and remedies by KBK. In the event that
         KBK has not obtained a qualified Participant (as contemplated by
         Section 1 above) with an additional commitment in the amount of at
         least Five Million and 00/100 Dollars ($5,000,000.00) by October 31,
         2002, upon Seller's written request, KBK will release its security
         interest in Seller's contracts with and accounts receivable owed by
         the United States Postal Service as long as KBK does not deem itself
         insecure at that time and/or Seller is not in default under the terms
         of this Agreement or any other agreement executed by Seller in
         connection herewith.

         Seller hereby authorizes KBK to file in any jurisdiction KBK may deem
         appropriate, without the signature of Seller, one or more financing
         statements, and all amendments and continuations with respect thereto,
         relating to the Collateral and hereby ratifies, confirms and consents
         to any such filings made by KBK prior to the date hereof. Seller
         further agrees that a carbon, photographic or other reproduction of
         this Agreement or any financing statement describing any Collateral is
         sufficient as a financing statement and may be filed in any
         jurisdiction KBK may deem appropriate.

         Seller herein acknowledges and warrants to KBK that it has received and
         will receive, direct and indirect benefits by and from granting this
         security interest to KBK to secure the obligations of any Affiliate to
         KBK.

         In the event a security interest has heretofore been granted and given
         to KBK by Seller in a prior agreement(s) or document(s) to secure
         certain obligations, then, in such event, and notwithstanding anything
         in this Agreement to the contrary, including Section 23 hereof, the
         lien and security interest herein granted and given to KBK is in
         renewal and extension, and not in extinguishment of, all such prior
         liens and security interests and are valid and subsisting liens and
         security interests to secure all prior, existing and new obligations of
         Seller to KBK hereunder and under any such prior agreements, which
         obligations are likewise herein renewed and extended, in any manner,
         including any action required in connection with or by virtue of the
         United States Bankruptcy Code (the "Bankruptcy Code").

8.       Servicing. KBK hereby appoints Seller as servicing agent for KBK
         ("Servicer") for the purpose of expediting the payment of accounts
         purchased by KBK hereunder which become past due. Servicer agrees to
         maintain an active, on-going and regular dialogue with each Account
         Debtor. Servicer further agrees to utilize all powers, influences and
         rights and take every action within its control in accordance with its
         customary practices and applicable law to expedite the collection of
         the accounts purchased by KBK which become past due and direct such
         payments in specie exclusively to the Authorized Remittance Address.
         Seller will furnish to KBK, upon request, any and all papers,
         documents and records in its possession or control related to accounts
         purchased by KBK hereunder, or related to Seller's business
         relationship with the respective account debtors, and agrees to
         cooperate fully with KBK in all matters related to collection of
         accounts purchased by KBK hereunder. KBK reserves the right to
         terminate such servicing relationship at any time with or without
         cause and without notice to Servicer; provided, however, KBK will
         provide Servicer with written notice of such termination within 10
         days after the termination.

         Seller authorizes KBK to forward directly to account debtors
         statements or invoices on accounts purchased by KBK hereunder, and to
         request payment at such address or to such bank account as may be
         designated by KBK. Seller agrees that, if any payment is made to
         Seller on any account purchased by KBK from Seller hereunder, Seller
         (i) will hold such payment in trust for KBK, (ii) will not commingle
         such payment with any funds of Seller, and (iii) will deliver such
         payment to KBK, in the exact form received, by the close of business
         on the next business day following receipt thereof by Seller. Such
         payment will be deemed delivered to KBK once such payment is deposited
         in the lock box at the Authorized Remittance Address. With respect to
         all accounts purchased by KBK from Seller hereunder, Seller shall
         direct all

<PAGE>

         account debtors for such accounts to remit all payments pertaining to
         such accounts directly to the Authorized Remittance Address. If any
         payment on such accounts is received by Seller (rather than sent to
         the Authorized Remittance Address), Seller shall give prompt notice
         thereof to KBK. Without limiting the other rights and remedies of KBK
         under this Agreement or otherwise, Seller's failure to strictly comply
         with this Section 8 shall constitute an immediate breach of and
         default under this Agreement, entitling KBK (in KBK's discretion) to
         immediately terminate this Agreement. If any goods relating to an
         account purchased by KBK hereunder shall be returned to or repossessed
         by Seller, Seller shall give prompt notice thereof to KBK and shall
         hold such goods in trust for KBK, separate and apart from Seller's own
         property, and such goods shall be owned solely by KBK and be subject
         to KBK's direction and control. Seller shall properly store and
         protect such goods and agrees to cooperate fully with KBK in any
         subsequent disposition thereof for the benefit of KBK.

         Seller authorizes KBK to collect, sue for and give releases for in the
         name of Seller or KBK in KBK's sole discretion, all amounts due on
         accounts sold to KBK hereunder. Seller specifically authorizes KBK to
         endorse, in the name of Seller, all checks, drafts, trade acceptances
         or other forms of payment tendered by account debtors in payment of
         accounts sold to KBK hereunder and made payable to Seller. KBK shall
         have no liability to Seller for any mistake in the application of any
         payment received with respect to any account, IT BEING THE SPECIFIC
         INTENT OF THE PARTIES HERETO THAT KBK SHALL HAVE NO LIABILITY HEREUNDER
         FOR ITS OWN NEGLIGENCE except for its own gross negligence or willful
         misconduct. Seller hereby waives notice of nonpayment of any account
         sold to KBK hereunder as well as any and all other notices with respect
         to such accounts, demands or presentations for payment, and agrees that
         KBK may extend or renew from time to time the payment of, or vary or
         reduce the amount payable under or compromise any of the terms of, any
         account purchased by KBK, in each case without notice to or the consent
         of Seller. Seller further authorizes KBK (or its designee) to open and
         remove the contents of any post office box of Seller or KBK (or its
         designee) which KBK believes contains mail relating to accounts, and in
         connection therewith or otherwise, to receive and, open mail addressed
         to Seller which KBK believes may relate to accounts, and in order to
         further assure receipt by KBK (or its designee) of mail relating to
         such accounts, to notify other parties including customers and postal
         authorities to change the address for delivery of such mail addressed
         to Seller to such address as KBK may designate. KBK agrees to use
         reasonable measures to preserve the contents of any such mail which
         does or does not relate to accounts purchased hereunder and to deliver
         same to Seller (or, at the election of KBK, if Seller ceases
         operations, to notify Seller of the address where Seller may take
         possession of such contents; provided, if Seller does not take
         possession of such contents within 30 days after notice from KBK to
         take possession thereof, KBK may dispose of such contents without any
         liability to Seller). Seller hereby irrevocably appoints KBK (and any
         employee, agent or other person designated by KBK, any of whom may act
         without joinder of the others) as Seller's attorneys-in-fact and
         agents, in Seller's name, place and stead, to take all actions, execute
         and deliver all notices, negotiate such instruments and other
         documents, as may be necessary or advisable to permit KBK (or its
         designee) to take any and all of the actions described in this
         paragraph or to carry out the purpose and intent thereof, as fully and
         for all intents and purposes as Seller could itself do, and hereby
         ratifies and confirms all that said attorneys-in-fact and agents may do
         or cause to be done by virtue hereof. This power of attorney is
         irrevocable and deemed coupled with an interest for so long as there
         are any outstanding obligations under this Agreement.

9.       Representations and Warranties of Seller. Seller hereby represents and
         warrants to KBK with respect to each account offered by Seller to KBK
         hereunder that (i) Seller is the sole owner of such account, which
         account is free and clear of any liens, claims, equities or
         encumbrances whatsoever, and upon each purchase by KBK of such
         account, KBK will own such account free and clear of any liens,
         claims, equities or encumbrances whatsoever and the consideration
         received by Seller from KBK for such account is fair and adequate,
         (ii) Seller is the sole obligee under such account, and has full power
         and is duly authorized to sell, assign and transfer such account to
         KBK hereunder, and the date of sale of such account is not more than
         30 days after the date of the original invoice relating to such
         account, (iii) Seller has no knowledge of any fact which would lead it
         to expect that, at the date of sale of such account to KBK , such
         account will not be paid in the full stated amount when due, (iv) such
         account arises out of a bona fide sale of conforming goods or the bona
         fide rendition of services by Seller, and all underlying goods have
         been delivered to the account debtor, or all underlying services have
         been rendered by Seller, in complete fulfillment of all of the terms
         and conditions of a fully executed, delivered and unexpired contract
         with the account debtor, and the account debtor has accepted the goods
         or services to which the account relates, (v) such account is
         denominated and payable only in United States dollars and constitutes
         the legal, valid and binding payment obligation of the account debtor,
         enforceable in accordance with its terms (except as such
         enforceability may be limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or other similar laws affecting the
         enforcement of creditors' rights generally), (vi) such account is
         current and not past due as of the date of purchase by KBK, has not
         been paid by or on behalf of the account debtor in whole or in part,
         and to Seller's knowledge is not and will not be subject to any
         dispute, rescission, set-off, recoupment, defense or claim by the
         account debtor, whether relating to price, quality, quantity,
         workmanship, delay in delivery, set off, counterclaim or otherwise,
         and the account debtor has not and will not claim any defense of any
         kind or character (other than bankruptcy or insolvency arising after
         the date of sale of such account to KBK hereunder) against payment of
         such account, and (vii) as of the date of purchase by KBK of such
         account, the account debtor with respect to such account is located
         (within the meaning of Section 9-307 of the applicable UCC) and has
         its principal executive offices within the nited States. Seller
         further represents and warrants to KBK that (a) the execution,
         delivery and performance of this Agreement by Seller have been duly
         authorized and this Agreement constitutes the legal, valid and binding
         obligation of Seller, enforceable against Seller in accordance with
         its terms (except as such enforceability may be limited by applicable
         bankruptcy, insolvency, reorganization, moratorium or other similar
         laws affecting the enforcement of creditors' rights generally), (b)
         Seller is not

<PAGE>

          a debtor in any bankruptcy proceedings, insolvent, undergoing
          composition or adjustment of debts or unable to make payment of its
          obligations when due and no petition in bankruptcy has been filed by
          or against Seller or any Affiliate, nor has Seller or any Affiliate
          filed any petition seeking an adjustment of its debts or for any other
          relief under the Bankruptcy Code, and no application for appointment
          of a receiver or trustee for all or a substantial part of the property
          of Seller or any Affiliate is pending, nor has Seller or any Affiliate
          made any assignment for the benefit of creditors, (c) Seller is not in
          default of any debt or obligation to KBK, any other lender or other
          creditor, (d) Seller's principal place of business, chief executive
          office, the location where all records concerning its books of account
          and contract rights are kept, and (except any additional locations
          listed on Schedule A attached hereto) the sole location of any
          property subject to the security interest granted herein is its
          "Address for Notices" set forth on the signature page hereon, and (e)
          Seller is organized under the laws of the State of Delaware, Delaware
          and Texas respectively and its charter number(s) or similar
          organization number(s) in such state(s) are 2445463, 9685346, and
          011001872-0 respectively. Seller agrees not to change the location of
          its principal place of business or chief executive office, the
          location where its records concerning its books of account or contract
          rights are kept, or the location of any property subject to the
          security interest granted herein, without giving at least 15 days
          advance written notice thereof to KBK pursuant to Section 19 herein.
          Seller does business under no trade or assumed names except as may be
          listed on Schedule A attached hereto.

          Each representation and warranty of Seller contained in this Agreement
          shall be deemed to be made at and as of the date hereof and at and as
          of the date of each sale of accounts to KBK hereunder.

          Seller agrees to indemnify and hold all Indemnified Persons (as
          hereinafter defined) harmless against any breach by Seller of any
          representation, warranty or agreement of Seller contained in this
          Agreement, and against any claims or damages arising out of the
          manufacture, sale, possession or use of, or otherwise relating to,
          goods, or the performance of services, associated with or relating to
          accounts or related rights purchased (or with respect to which a
          security interest is granted) hereunder. The term "Indemnified
          Persons" shall mean KBK and its officers, directors, shareholders,
          employees, attorneys, representatives, agents, Affiliates, successors
          and assigns.

          Seller agrees to notify KBK immediately of any breach by Seller of any
          material representation, warranty or agreement of Seller contained
          herein or should any representation, warranty or agreement made herein
          become untrue or false at any time. Seller further agrees to notify
          KBK immediately of the assertion by any account debtor of any dispute
          or other claim (including any defense or offset asserted by any
          account debtor) with respect to any account sold to KBK hereunder, or
          with respect to any related goods or services ("Disputed Accounts").
          Upon KBK's request, Seller agrees to settle, at its own expense and
          for the benefit of KBK, all such Disputed Accounts; provided, that any
          such settlement shall be made only with the prior written consent of
          KBK. Unless KBK is advised in writing by Seller to the contrary, any
          account that has not been approved by the account debtor within sixty
          (60) days from the date of the invoice upon which the account is
          based, shall be deemed to be a Disputed Account. As to any Disputed
          Account, KBK shall have the right, in its sole discretion, (i) to
          settle at the expense of Seller (including all attorneys' fees and
          expenses of KBK) and for the benefit of KBK any such dispute or claim
          upon such terms as KBK may in its sole discretion deem advisable or
          (ii) to assign the related account to Seller, without recourse to KBK
          , and charge any unpaid balance with respect thereto (up to the amount
          of the Initial Payment with respect thereto and KBK's Discounts
          through the date of such charge with respect thereto) against the
          Reserve or deduct such unpaid balance from any Initial Payments or
          against any money or other funds of Seller in the possession, custody
          or control of KBK, from whatever source. Seller agrees that, in lieu
          of KBK charging any such unpaid balance against the Reserve, Initial
          Payments or against such other funds, KBK may require Seller to pay
          (and Seller hereby agrees to pay) to KBK on demand any such unpaid
          balance. An account with respect to which the account debtor has
          asserted an Insolvency Claim is not a Disputed Account. As used
          herein, "Insolvency Claim" means any defense or other claim by an
          account debtor with respect to an account sold to KBK hereunder
          arising solely out of the bankruptcy or insolvency of the account
          debtor or the financial inability of the account debtor to pay, if
          Seller has not breached its representation contained in clause (vi) of
          the first paragraph of this Section. Notwithstanding anything herein
          to the contrary, KBK shall have the right to charge all accounts not
          paid because of an Insolvency Claim against the Reserve and such
          charge shall have priority over and be paid before any Disputed
          Account charge.

          Seller covenants and agrees that at the end of each fiscal month
          during the effectiveness of this Agreement, the Seller's Dilution
          shall not exceed three percent (3.0%). As used herein, the term
          "Dilution" means for any period of time the percentage obtained by
          dividing (a) the aggregate amount of credit memos, discounts and other
          downward adjustments to the original invoiced price of inventory sold
          or services rendered by Seller during such period, by (b) gross sales
          for such period, all as determined by KBK.

10.       Financial Statements. Seller represents and warrants that all
          financial and other information provided by Seller to KBK in
          connection with or in Seller's application to KBK or to induce KBK to
          enter into this Agreement is true, complete and correct in all
          material respects. Seller agrees to furnish to KBK (i) within 90 days
          after the last day of each fiscal year of Seller, a consolidated
          statement of income and a consolidated statement of cash flows of
          Kitty Hawk, Inc. for such fiscal year, and a consolidated balance
          sheet of Kitty Hawk Inc. as of the last day of such fiscal year, in
          each case audited by an independent certified public accounting firm
          acceptable to KBK, together with a copy of any report to management
          delivered to Kitty Hawk, Inc. by such accountants in connection
          therewith; (ii) within 90 days after the last day of each fiscal year
          of Seller, company prepared unaudited statements of income and cash
          flow for

<PAGE>

          Kitty Hawk Cargo, Inc. and Kitty Hawk Aircargo, Inc. for such fiscal
          year, and balances sheets for Kitty Hawk Cargo, Inc. and Kitty Hawk
          Aircargo, Inc. as of the last day of such fiscal year; (iii) within 30
          days after the last day of each fiscal month of Seller, an unaudited
          consolidated statement of income and statement of cash flows of Kitty
          Hawk, Inc. for such fiscal month, and an unaudited consolidated
          balance sheet of Kitty Hawk, Inc as of the last day of such fiscal
          month; and (iv) within 30 days after the last day of each fiscal month
          of Seller, an unaudited consolidated statement of income and statement
          of cash flows of Kitty Hawk Cargo, Inc. and Kitty Hawk Aircargo, Inc.
          for such fiscal month, and an unaudited consolidated balance sheet of
          Kitty Hawk Cargo, Inc and Kitty Hawk Aircargo, Inc. as of the last day
          of such fiscal month. Seller represents and warrants that each such
          statement of income and statement of cash flows will fairly present,
          in all material respects, the results of operations and cash flows of
          each entity constituting the Seller for the period set forth therein,
          and that each such balance sheet will fairly present, in all material
          respects, the financial condition of each entity constituting Seller
          as of the date set forth therein, all in accordance with generally
          accepted accounting principles applied on a consistent basis, except
          as otherwise noted in the accompanying auditors' report (or, with
          respect to unaudited financial statements, in the notes thereto).
          Seller also agrees to furnish to KBK, upon request, such additional
          financial and business information concerning Seller and its business
          as KBK may reasonably request, including copies of its Form 941
          returns filed with the Internal Revenue Service and evidence of
          payment of related taxes. KBK and its agents, representatives and
          accountants shall have the right, at all times during normal business
          hours and with 48 hours prior notice to Seller (or no notice if KBK
          deems itself insecure), to conduct an audit or other examination of
          the financial and business records of Seller and to examine and make
          copies of all books and records of Seller for the purpose of assuring
          or verifying compliance by Seller with the terms of this Agreement,
          and Seller agrees to cooperate fully with KBK and its agents,
          representatives and accountants in connection therewith and to timely
          pay all costs associated with such audits at a rate equal to $750.00
          per day, per person, plus out-of-pocket expenses. KBK agrees to limit
          such audit visits to a monthly basis so long as KBK does not deem
          itself insecure or no event of default has occurred. Seller agrees to
          properly reflect the effect of this Agreement, and all sales related
          thereto, in all financial reports and disclosures, written or
          otherwise, provided to Seller's creditors and other interested
          parties. Seller specifically agrees that all accounts purchased by KBK
          will be excluded from Seller's reported accounts receivable balances.
          Seller also specifically agrees to immediately notify KBK of any
          material adverse change in Seller's financial condition or business.

11.       Taxes. All taxes and governmental charges of any kind imposed with
          respect to the sale of goods or the rendering of services relating to
          accounts purchased by KBK hereunder shall be for the account of, and
          paid by, Seller.

12.       Fees. Seller has paid to KBK a one-time commitment fee (the
          "Commitment Fee") of Fifty Thousand and No/100 Dollars ($50,000.00).
          An additional Commitment Fee equal to one percent (1.0%) of the
          additional commitment amount will be due to KBK from Seller upon
          securing a qualified Participant acceptable to KBK for fundings over
          Five Million Dollars with an additional commitment amount equal to or
          in excess of Two Million and 00/100 Dollars ($2,000,000.00). Seller
          and KBK acknowledge and agree that the Commitment Fee(s) is intended
          as reasonable compensation to KBK for making this facility available
          under the terms of this Agreement and for no other purpose.
          Additionally, in the event the Facility is terminated and replaced by
          an alternative working capital facility at KBK, with a Facility Amount
          equal to current Facility, KBK shall not assess an additional
          Commitment Fee for the origination of such facility.

          Seller hereby agrees to pay to KBK a termination fee equal to two
          percent (2.0%) of the Facility Amount (the "Termination Fee") and the
          payment shall be an obligation of Seller secured under Section 7
          hereof. This Termination Fee is payable upon termination of this
          Agreement by Seller for any reason or upon termination by KBK at its
          election for the reasons set forth in the second sentence of Section
          13 below. However, if this Agreement is so terminated after the
          expiration of one (1) year from the date of KBK's execution hereof,
          but before the expiration of two (2) years from such date, one-half of
          the Termination Fee shall be waived. If the Agreement is terminated
          more than two (2) years after the date of KBK's execution hereof, all
          of the Termination Fee shall be waived. Notwithstanding the foregoing,
          KBK will waive the Termination Fee after the expiration of six (6)
          months from the date of KBK's execution hereof if KBK is unable to
          secure a participant with an additional commitment amount of at least
          Two Million and 00/100 Dollars (in addition to KBK's commitment of
          Five Million and 00/100 Dollars ($5,000,000.00)) for fundings greater
          than Five Million and 00/100 Dollars ($5,000,000.00).

13.       Termination. This Agreement may be terminated by either party hereto
          by delivery of written notice of termination of this Agreement to the
          other party specifying the date of termination, which date shall be at
          least 30 days after the date such notice is given. KBK may, at its
          election, terminate this Agreement immediately and without the
          requirement of notice to Seller if (i) Seller shall fail to perform
          any of its obligations hereunder or shall breach any of its
          representations and warranties hereunder, (ii) Seller or any of its
          Affiliates shall become insolvent or suspend all or a substantial part
          of its or their business, (iii) a petition under the Bankruptcy Code
          or any other insolvency or debtor statute shall be filed by or against
          Seller or any Affiliate or any receivership proceedings with respect
          thereto shall commence, (iv) any guarantee of any of Seller's
          obligations hereunder shall be terminated or become impaired, (v) an
          event of default occurs under any other agreement now or hereafter
          executed between Seller and KBK, or (vi) KBK otherwise determines that
          it is insecure hereunder.

          Termination of this Agreement shall not affect the rights and
          obligations of the parties hereunder with respect to transactions
          occurring on or prior to the date of such termination, and this
          Agreement shall continue to govern the rights and obligations of the
          parties hereto with respect to accounts purchased by

<PAGE>

         KBK from Seller on or prior to the date of such termination. All
         security interests granted or contemplated by this Agreement shall
         survive the termination of this Agreement until all amounts payable to
         KBK with respect to transactions occurring on or prior to the date of
         termination have been paid to KBK, and Seller has performed all its
         obligations to KBK with respect to such transactions and all
         obligations under this Agreement including but not limited to payment
         of any fees owing hereunder. KBK agrees to release all security
         interests granted or contemplated by this Agreement once Seller's
         obligations hereunder have been satisfied as determined by KBK.

14.      Notice of Proposed Refinancing. Seller hereby agrees that in the event
         (a) Seller receives a written proposal from any third party to provide
         financing or factoring ("Proposed Refinancing"), (b) the terms of the
         Proposed Refinancing are acceptable to Seller, and (c) Seller is
         considering accepting the Proposed Refinancing from the offeror
         ("Offeror"), Seller will immediately advise KBK in writing of the
         identity of the Offeror, and provide a description of the terms of the
         Proposed Refinancing. Seller agrees not to accept the Proposed
         Refinancing from the Offeror until at least 5 business days after
         delivery of the foregoing items to KBK.

15.      Attorney's Fees, Litigation Expense. Seller agrees to reimburse KBK
         upon demand for KBK's attorneys' fees, court costs and other fees and
         expenses incurred in collecting any sums due or to become due to KBK
         hereunder, enforcing any of KBK's rights under this Agreement and all
         actions taken by KBK that it deems necessary or desirable under the
         Bankruptcy Code or should any provisions of the Bankruptcy Code be
         applicable to any rights or obligations of any party to this
         Agreement, as well as all appearances, motions and actions to which
         KBK may be or become a party in any bankruptcy case of Seller. Any
         fees or costs incurred by KBK relating to the bankruptcy of an account
         debtor will be charged to the Reserve account.

16.      Governing Law; Venue; Submission to Jurisdiction. THIS AGREEMENT SHALL
         BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
         OF TEXAS WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS
         THEREOF, EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION
         OR NON-PERFECTION OF THE SECURITY INTEREST GRANTED HEREUNDER, IN
         RESPECT OF ANY PARTICULAR COLLATERAL, ARE GOVERNED BY THE LAWS OF A
         JURISDICTION OTHER THAN THE STATE OF TEXAS. THIS AGREEMENT IS
         PERFORMABLE BY THE PARTIES IN TARRANT COUNTY, TEXAS. SELLER AND KBK
         EACH AGREE THAT TARRANT COUNTY, TEXAS SHALL BE THE EXCLUSIVE VENUE FOR
         LITIGATION OF ANY DISPUTE OR CLAIM ARISING UNDER OR RELATING TO THIS
         AGREEMENT, AND THAT SUCH COUNTY IS A CONVENIENT FORUM IN WHICH TO
         DECIDE ANY SUCH DISPUTE OR CLAIM. SELLER AND KBK EACH CONSENT TO THE
         PERSONAL JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
         TARRANT COUNTY, TEXAS FOR THE LITIGATION OF ANY SUCH DISPUTE OR CLAIM.
         SELLER IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
         OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE
         VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM
         THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN
         AN INCONVENIENT FORUM.

17.      Waiver of Jury Trial. SELLER AND KBK EACH HEREBY IRREVOCABLY WAIVES, TO
         THE MAXIMUM EXTENT PERMITTED BY LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
         BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME
         ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY
         TRANSACTION CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH.

18.      Amendments; Waivers. This Agreement may be amended only in writing
         signed by the parties hereto. No failure on the part of KBK to
         exercise, and no delay by KBK in exercising, and no course of dealing
         by KBK with respect to, any right, power or privilege under this
         Agreement shall operate as a waiver thereof, nor shall any single or
         partial exercise of any right, power or privilege hereunder by KBK
         preclude any other or further exercise thereof or the exercise of any
         other right, power or privilege. The remedies of KBK hereunder are
         cumulative and not exclusive of any remedies provided by law.

19.      Notices. All notices and other communications provided for herein shall
         be given or made in writing and telecopied or delivered by courier or
         by certified mail, return receipt requested, to the intended recipient
         at the "Address for Notices" specified opposite its name on the
         signature page hereto, or at such other address or telecopy number as
         shall be designated by a party to the other party in the manner
         specified in this Section. All such notices and other communications
         shall be deemed to have been duly given when transmitted by telecopier
         (with receipt thereof confirmed by telecopier) or personally delivered
         or, in the case of a mailed notice, upon deposit in the United States
         Postal System postage prepaid and properly addressed, in each case
         given or addressed as aforesaid.

20.      Indemnification. Seller agrees to indemnify, defend and hold the
         Indemnified Persons harmless from and against any and all loss,
         liability, obligation, damage, penalty, judgment, claim, deficiency and
         expense (including interest, penalties, attorneys' fees and amounts
         paid in settlement) owing to any third party to which any Indemnified
         Person may become subject arising out of or based upon this Agreement
         as well as any prior relationship of Seller with any Indemnified
         Person, WHETHER BY ALLEGED OR ACTUAL NEGLIGENCE OF ANY INDEMNIFIED
         PERSON, except and to the extent caused by the gross negligence or
         willful misconduct of any Indemnified Person.

<PAGE>

21.       Waiver and Release. Seller and KBK, by their execution of this
          Agreement, do hereby covenant, warrant and represent that (i) neither
          of them is in default and no default exists under any prior agreements
          or transactions with the other party hereto , (ii) Seller and KBK each
          releases, relinquishes and waives any and all defenses to the
          enforceability of any prior agreements or transactions with the other
          party hereto in connection therewith to which Seller or KBK may have
          otherwise been entitled as of the date hereof, (iii) Seller and KBK
          each relinquishes, waives and releases the other party hereto from any
          and all claims known or unknown which Seller or KBK may or might have
          against the other party hereto arising directly or indirectly out of
          or from any prior agreements or transactions between Seller and KBK,
          (iv) the benefit received and to be received by Seller and KBK as a
          result of this Agreement shall and does constitute sufficient and
          valuable consideration to Seller and KBK for entering into and
          performing their respective obligations under this Agreement, (v) the
          execution, delivery and performance by Seller and KBK of this
          Agreement and the consummation of the transaction contemplated thereby
          are (a) not prohibited by any indenture, contract or agreement, law or
          corporate or partnership documents, including, but not limited to the
          Bylaws and Articles of Incorporation or Certificate of Incorporation,
          as the case may be, if Seller is a corporation, or Seller's
          partnership agreement, if Seller is a partnership, (b) duly authorized
          by appropriate action of Seller and KBK, and (c) legally valid and
          binding obligations of Seller and KBK and will continue to be such and
          enforceable according to their terms (except as such enforceability
          may be limited by applicable bankruptcy, insolvency, reorganization,
          moratorium or other similar laws affecting the enforcement of
          creditors' rights generally), (vi) that this Agreement will be
          executed and delivered by properly authorized officers of Seller and
          KBK, (vii) KBK has no obligation to continue the prior agreements or
          enter into this Agreement except for the considerations herein
          expressed, and (viii) the representations and warranties set forth
          herein will survive the execution and delivery of this Agreement.

22.       Captions; Final Agreement; Counterparts; Successors and Assigns.
          Captions and headings appearing herein are included solely for
          convenience of reference and are not intended to affect the
          interpretation of any provision of this Agreement. This Agreement
          represents the final agreement between the parties hereto with respect
          to the subject matter hereof, and supersedes all prior proposals,
          negotiations, agreements and understandings, oral or written, related
          to such subject matter. This Agreement may be executed in any number
          of counterparts, all of which taken together shall constitute one and
          the same instrument. Delivery of an executed counterpart of this
          Agreement by telecopy shall be equally as effective as delivery of a
          manually executed counterpart of this Agreement. Any party delivering
          an executed counterpart of this Agreement by telecopy also shall
          deliver a manually executed counterpart of this Agreement but the
          failure to deliver a manually executed counterpart shall not affect
          the validity, enforceability, and binding effect of this Agreement.
          This Agreement may not be assigned by Seller without the prior written
          consent of KBK. This Agreement may be assigned by KBK, and any
          accounts purchased by KBK hereunder, together with all rights and
          interests related thereto granted to KBK hereunder, may be assigned by
          KBK, all without notice to or the consent of Seller. This Agreement
          shall be binding upon the parties hereto and their respective
          successors and permitted assigns.

23.       Effectiveness of Agreement. This Agreement shall become effective only
          upon acceptance by KBK at its offices in Fort Worth, Tarrant County,
          Texas as evidenced by KBK's signature hereon.

24.       True Sales. Seller and KBK acknowledge and agree that the sale of
          accounts contemplated and covered hereby are fully intended by the
          parties hereto as true sales governed by the provisions of Section
          306.103 of the Texas Finance Code and Section 9.109(e) of the Texas
          Business and Commerce Code, as each may be amended from time to time,
          and, accordingly, legal and equitable title in all of Seller's
          accounts sold to and purchased by KBK from time to time hereunder will
          pass to KBK.

<PAGE>

IN WITNESS WHEREOF, the parties hereto, heretofore duly authorized, have
executed this Agreement as of the date first set forth above.

Address for Notices:                         SELLER:
1515 w. 20/th/ Street                        KITTY HAWK, INC.,
P.O. BOX 612787                              a Delaware corporation
DFW AIRPORT, TX
75261
Telecopy No.:  (972) 456-2449                By: /s/ TILMON J. REEVES
                                                --------------------------------
                                                Name: Tilmon Reeves
                                                Title: Chairman & C.E.O.

1515 W. 20/th/ Street                          KITTY HAWK CARGO, INC.,
P.O. BOX 612787                              a Delaware corporation
DFW AIRPORT, TX
75261
Telecopy No.:  (972) 456-2449                By: /s/ TILMON J. REEVES
                                                --------------------------------
                                                Name: Tilmon Reeves
                                                Title: Chairman & C.E.O.

1515 W. 20/th/ Street                          KITTY HAWK AIRCARGO, INC.,
P.O. BOX 612787                              a Texas corporation
DFW AIRPORT, TX
75261
Telecopy No.:  (972) 456-2449                By: /s/ TILMON J. REEVES
                                                --------------------------------
                                                Name: Tilmon Reeves
                                                Title: Chairman & C.E.O.

Address for Notices:                         KBK FINANCIAL, INC.:
301 COMMERCE STREET
2200 CITY CENTER                             By:    /s/ MARY E. HILTON
FORT WORTH, TEXAS  76102                           -----------------------------
Telecopy No.:  (817) 258-6114                Name:      Mary E. Hilton
                                                   -----------------------------
                                             Title:     Asst. Vice President
                                                   -----------------------------
                                             Date:         10/31/02
                                                   -----------------------------

<PAGE>

                                   SCHEDULE A
                                       TO
                     ACCOUNT TRANSFER AND PURCHASE AGREEMENT
                             Dated August ___, 2002
                                 By and Between
                               KBK FINANCIAL, INC.
                                       AND
                                KITTY HAWK, INC.,
                             KITTY HAWK CARGO, INC.,
                            KITTY HAWK AIRCARGO, INC.

The addresses of any other locations of Collateral referenced in Section 9:

12602 Global Drive
--------------------------------------------
YODER, IN 46798
--------------------------------------------

Any trade or assumed names referenced in Section 9:

None.

<PAGE>

                                   EXHIBIT 1

      KITTY HAWK, INC, KITTY HAWK CARGO, INC, and KITTY HAWK AIRCARGO, INC

                              Officer's Certificate

The undersigned hereby certify that they are a duly elected officer of
a         corporation (the "Company"), and are authorized by the Board of
Directors to execute this Certificate on behalf of the Company. This certificate
is issued pursuant to Section 2 of the Account Transfer and Purchase Agreement
("Purchase Agreement"), dated as of ______________ between KBK Financial, Inc.
("KBK") and the Company. Terms defined in the Purchase Agreement are used herein
as so defined. The undersigned further certify the following:

     1.   All invoices ("Offered Accounts") submitted on __________ are offered
          for sale to KBK by the Seller. True and complete sales journal,
          collections journal, and accounts receivable aging related to the
          Offered Accounts have been sent to KBK electronically in accordance
          with the terms of the Purchase Agreement.

     2.   The representations and warranties of Company (Seller) in Section 9 of
          the Purchase Agreement are true and correct as of the date hereof as
          to all accounts and specifically as to the accounts submitted
          electronically to KBK of even date herewith.

     3.   Seller further represents and warrants that for all of the accounts
          electronically submitted:

          (a)  such account arises out of a bona fide sale of conforming goods
               or the bona fide rendition of services by Seller, and all
               underlying goods have been delivered to the account debtor, or
               all underlying services have been rendered by Seller, in complete
               fulfillment of all of the terms and conditions of a fully
               executed, delivered and unexpired contract with the account
               debtor, and the account debtor has accepted the goods or services
               to which the account relates;

          (b)  such account is current and not past due as of the date of
               purchase by KBK, has not been paid by or on behalf of the account
               debtor in whole or in part, and is not and will not be subject to
               any dispute, rescission, set-off, recoupment, defense or claim by
               the account debtor, whether relating to price, quality,
               quantity, workmanship, delay in delivery, set off, counterclaim
               or otherwise, and the account debtor has not and will not claim
               any defense of any kind or character (other than bankruptcy or
               insolvency arising after the date of sale of such account to KBK
               hereunder) against payment of such account;

          (c)  the accounts are payable according to trade terms disclosed and
               agreed to by KBK;

          (d)  the accounts remain unpaid when purchased by KBK; and;

     4.   The Company has not converted any proceeds of previously purchased
          accounts.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of the ____
day of ____________, 20__.

                                            KITTY HAWK, INC., KITTY HAWK CARGO,
                                            INC., and KITTY HAWK AIRCARGO, INC.,

                                            By:________________________________
                                            Name:______________________________
                                            Title:_____________________________

<PAGE>

                                LIMITED GUARANTY

This Limited Guaranty ("Guaranty") is made by the following corporations with
mailing addresses as set forth below (referred to herein collectively as the
"Guarantors")

       Kitty Hawk, Inc.        Kitty Hawk Cargo, Inc.  Kitty Hawk Aircargo, Inc.
       P.O. Box 612787         P.O. Box 612787         P.O. Box 612787
       DFW Airport, TX  75261  DFW Airport, TX  75261  DFW Airport, TX  75261

to and for the benefit of KBK FINANCIAL, INC. ("KBK"), a Delaware corporation
authorized to transact business in Texas.

A.       KBK has contemporaneously herewith entered into that certain Account
         Transfer and Purchase Agreement of even date herewith (such agreement,
         and all amendments and modifications thereof, collectively, the
         "Purchase Agreement"), to which reference is made for all purposes,
         with KITTY HAWK, INC., a Delaware corporation, KITTY HAWK CARGO, INC.,
         a Delaware corporation, KITTY HAWK AIRCARGO, INC., a Texas corporation,
         (collectively referred to herein as the "Seller"), pursuant to which
         KBK has purchased or will purchase all right, title and interest in
         certain accounts receivable of the Seller (the "Accounts"), on those
         terms and conditions set forth in the Purchase Agreement.

B.       KBK is willing to enter into the Purchase Agreement only if the
         Guarantors execute and deliver this Guaranty to KBK.

NOW, THEREFORE, in consideration of the aforesaid premises and other good and
valuable consideration, and for the purpose of inducing KBK to enter into the
Purchase Agreement and to purchase accounts receivables from the Seller pursuant
to the terms thereof, the sufficiency of which is hereby acknowledged, the
Guarantors hereby covenant and agree as follows:

1.       The Guarantors hereby unconditionally and irrevocably guarantee the
         payment in full of any losses incurred by KBK under the Purchase
         Agreement (collectively the "Obligations") to the extent that such
         losses are related to or attributable to any of the following limited
         circumstances only:

         (a)      In the event any of the representations and warranties set
                  forth in Section 9 of the Purchase Agreement was not true when
                  made or ceases to be true for any reason.

         (b)      In the event that the Seller, any Guarantor, or any other
                  person, without receiving prior written consent from KBK,
                  shall cash, deposit, or retain, any checks, drafts, monies or
                  proceeds of the Accounts purchased by KBK, and the Seller
                  shall fail to immediately tender the entire amount of the same
                  to KBK.

2.       KBK shall not be required, as a condition precedent to making a demand
         upon the Guarantors or to bringing an action against the Guarantors
         under this Guaranty, to make demand upon, or to institute any action
         or proceeding, at law or in equity against the Seller or anyone else,
         or to exhaust its remedies against the Seller, or anyone else, or
         against any collateral security. All remedies afforded to KBK by
         reason of this Guaranty are separate and cumulative remedies and it is
         agreed that not one of such remedies, whether exercised by KBK or not,
         shall be deemed to be exclusive of any of the other remedies available
         to KBK and shall not limit or prejudice any other remedy which KBK may
         have against any party, including the Guarantors.

3.       The Guarantors shall remain liable on this Guaranty notwithstanding any
         change or changes in the terms, covenants or conditions of the Purchase
         Agreement, or any amendment thereto, hereafter made or granted, or any
         delay on the part of KBK in exercising its rights hereunder or
         thereunder, it being the intention hereof that each of the Guarantors
         shall remain liable as principals until the full amount of the
         Obligations guaranteed hereby, with interest and any sums which may be
         due thereon, shall have been fully paid, notwithstanding any act or
         omission which might otherwise operate as a legal or equitable
         discharge of the Guarantors.

4.       The Guarantors hereby waive (a) notice of acceptance of this Guaranty;
         (b) presentment and demand for payment of the Obligations or any
         portion thereof; (c) protest and notice of dishonor or default to the
         Guarantors or to any other person or party with respect to the
         Obligations or any portion thereof; (d) all other notices to which the
         Guarantors might otherwise be entitled; (e) any demand for payment or
         performance of this Guaranty; and (f) all Guaranty and suretyship
         defenses or other defenses in the nature thereof (including, without
         limitation, all rights Guarantor has under, or the requirements imposed
         by, Chapter 34 of the Texas Business and Commerce Code, as may be
         amended from time to time).

5.       Each Guarantor shall promptly furnish to KBK at any time and from time
         to time such financial statements and other financial information of
         Guarantor as KBK may require, in form and detail satisfactory to KBK
         (including, without limitation, annual financial statements within 90
         days after the end of each calendar year).

6.       This Guaranty shall inure to the benefit of, and may be enforced by
         KBK, and its respective successors and assigns, and shall be binding
         upon and enforceable against the Guarantors and their respective heirs,
         executors, legal representatives, administrators, or successors and
         assigns thereof. All obligations of the Guarantors hereunder shall be
         joint and several.

<PAGE>

7.       The Guarantors agree that in the event this Guaranty is placed in the
         hands of an attorney for enforcement, the Guarantors will reimburse KBK
         for all expenses incurred, including reasonable attorneys' fees.

8.       This Guaranty cannot be modified or amended except in a writing, duly
         executed by the Guarantors and KBK.

<PAGE>

9.       Each Guarantor has received, and will receive, direct and/or indirect
         benefits by and from the making of this Guaranty and the execution of
         the Purchase Agreement by KBK.

10.      THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
         THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE PRINCIPLES
         OF CONFLICTS OF LAWS THEREOF. THIS GUARANTY IS PERFORMABLE IN TARRANT
         COUNTY, TEXAS. EACH GUARANTOR AGREES THAT TARRANT COUNTY, TEXAS SHALL
         BE THE EXCLUSIVE VENUE FOR LITIGATION OF ANY DISPUTE OR CLAIM ARISING
         UNDER OR RELATING TO THIS GUARANTY, AND THAT SUCH COUNTY IS A
         CONVENIENT FORUM IN WHICH TO DECIDE ANY SUCH DISPUTE OR CLAIM. EACH
         GUARANTOR CONSENTS TO THE PERSONAL JURISDICTION OF THE STATE AND
         FEDERAL COURTS LOCATED IN TARRANT COUNTY, TEXAS FOR THE LITIGATION OF
         ANY SUCH DISPUTE OR CLAIM. EACH GUARANTOR IRREVOCABLY WAIVES, TO THE
         FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR
         HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING
         BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT
         IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

11.      EACH GUARANTOR HEREBY IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT
         PERMITTED BY LAW, ANY RIGHT EACH GUARANTOR MAY HAVE TO A TRIAL BY JURY
         IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING
         OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY TRANSACTION
         CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH.

12.      THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO
         WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE
         CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL
         AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
         BETWEEN THE PARTIES.

IN WITNESS WHEREOF, the undersigned have executed this Guaranty this ___ day of
August, 2002.

GUARANTORS:

KITTY HAWK, INC.                           KITTY HAWK CARGO, INC.

By:    /s/ TILMON J. REEVES                By:    /s/ TILMON J. REEVES
   -------------------------------------      ----------------------------------
Name:  Tilmon Reeves                       Name:    Tilmon Reeves
Title: Chairman & C.E.O.                   Title:   Chairman & CEO
                                                  ------------------------------

KITTY HAWK AIRCARGO, INC.

By:    /s/ TILMON J. REEVES
   -----------------------------------------
Name:    Tilmon Reeves
Title:   Chairman & CEO
      --------------------------------------

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