Document:

<PAGE>   1
                                                                    EXHIBIT 4.20

                                 EXHIBIT A-1 to
                             Note Purchase Agreement

                 FORM OF LEASED AIRCRAFT PARTICIPATION AGREEMENT

<PAGE>   2

             CONFIDENTIAL: Subject to Restrictions on Dissemination
                    Set Forth in Section 8 of this Agreement

===============================================================================

                             PARTICIPATION AGREEMENT
                               Dated as of _______

                                      Among

                                ATLAS AIR, INC.,
                                     Lessee,

                               [               ],
                               Owner Participant,

                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                         Not in its individual capacity
                      except as expressly provided herein,
                           but solely as Owner Trustee

                                       and

                            WILMINGTON TRUST COMPANY,
                         Not in its individual capacity
                      except as expressly provided herein,
                     but solely as Mortgagee under the Trust
                    Indenture, Subordination Agent under the
                Intercreditor Agreement and Pass Through Trustee
                 under each of the Pass Through Trust Agreements

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

                       One Boeing Model 747-47UF Aircraft
                        Bearing Manufacturer's Serial No.
                        and U.S. Registration No. ______

===============================================================================

<PAGE>   3

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>

                                                                                                           Page
                                                                                                           ----
<S>         <C>  <C>       <C>                                                                             <C>
SECTION 1. DEFINITIONS AND CONSTRUCTION.......................................................................2

SECTION 2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES; TERMINATION OF OBLIGATION
                           TO PARTICIPATE.....................................................................3
           2.1  Participation in Lessor's Cost................................................................3
           2.2  Nature of Obligations of Participants.........................................................3
           2.3  Termination of Obligation to Participate......................................................3

SECTION 3.  COMMITMENT TO LEASE AIRCRAFT......................................................................4

SECTION 4.  PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; POSTPONEMENT OF SCHEDULED
                           DELIVERY DATE......................................................................4
           4.1  Notices of Scheduled Delivery Date............................................................4
           4.2  Payment of Lessor's Cost......................................................................4
           4.3  Postponement of Scheduled Delivery Date.......................................................5
           4.4  Closing ......................................................................................6

SECTION 5.  CONDITIONS PRECEDENT..............................................................................6
           5.1  Conditions Precedent to Obligations of Participants...........................................6
           5.2  Conditions Precedent to Obligations of Owner Trustee.........................................14
           5.3  Conditions Precedent to Obligations of Mortgagee.............................................15
           5.4  Conditions Precedent to Obligations of Lessee................................................15
           5.5  Post-Registration Opinion....................................................................16

SECTION 6.  REPRESENTATIONS AND WARRANTIES...................................................................17
           6.1  Lessee's Representations and Warranties......................................................17
           6.2  Owner Participant's Representations and Warranties...........................................21
           6.3  First Security's Representations and Warranties..............................................24
           6.4  WTC's Representations and Warranties.........................................................27

SECTION 7.  COVENANTS, UNDERTAKINGS AND AGREEMENTS...........................................................31
           7.1  Covenants of Lessee..........................................................................31
           7.2  Covenants of Owner Participant...............................................................33
           7.3  Covenants of First Security and Owner Trustee................................................36
           7.4  Covenants of WTC.............................................................................38
           7.5  Covenants of Note Holders....................................................................40
           7.6  Agreements...................................................................................41
</TABLE>

                                      -i-
<PAGE>   4

<TABLE>
<CAPTION>

                                                                                                           Page
                                                                                                           ----
<S>         <C>  <C>       <C>                                                                             <C>
SECTION 8. CONFIDENTIALITY...................................................................................49

SECTION 9. INDEMNIFICATION AND EXPENSES......................................................................50
           9.1  General Indemnity............................................................................50
           9.2  Expenses ....................................................................................58
           9.3  General Tax Indemnity........................................................................59
           9.4  Payments ....................................................................................72
           9.5  Interest ....................................................................................72
           9.6  Benefit of Indemnities.......................................................................72

SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS..............................................................73
           10.1  Participants, Owner Trustee and Note Holders................................................73
           10.2  Effect of Transfer..........................................................................78

SECTION 11. REFUNDING AND CERTAIN OTHER MATTERS..............................................................79
           11.1  Refunding Generally.........................................................................79
           11.2  Limitations on Obligation to Refund.........................................................81
           11.3  Execution of Certain Documents..............................................................81
           11.4  ERISA ......................................................................................81
           11.5  Consent to Optional Redemptions.............................................................82

SECTION 12. SECTION 1110 ....................................................................................82

SECTION 13. CHANGE OF CITIZENSHIP............................................................................82
           13.1  Generally ..................................................................................82
           13.2  Owner Participant...........................................................................83
           13.3  Owner Trustee...............................................................................83
           13.4  Mortgagee ..................................................................................84

SECTION 14. CONCERNING OWNER TRUSTEE.........................................................................84

SECTION 15. MISCELLANEOUS ...................................................................................84
           15.1  Amendments .................................................................................84
           15.2  Severability ...............................................................................85
           15.3  Survival ...................................................................................85
           15.4  Reproduction of Documents...................................................................85
           15.5  Counterparts ...............................................................................86
           15.6  No Waiver ..................................................................................86
           15.7  Notices ....................................................................................86
           15.8  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE............................................87
           15.9  Third-Party Beneficiary.....................................................................88
           15.10  Entire Agreement...........................................................................88
           15.11  Further Assurances.........................................................................89

ANNEX, SCHEDULES AND EXHIBITS

ANNEX A - Definitions

</TABLE>

                                      -ii-
<PAGE>   5

<TABLE>

<S>            <C>    <C>    <C>    <C>    <C>    <C>
SCHEDULE 1     -    Accounts; Addresses
SCHEDULE 2     -    Commitments
SCHEDULE 3     -    Certain Terms

EXHIBIT A      -    Opinion of special counsel to Lessee
EXHIBIT B      -    Opinion of corporate counsel to Lessee
EXHIBIT C      -    Opinion of corporate counsel to Airframe
                      Manufacturer
EXHIBIT D      -    Opinion of special counsel to Owner Trustee
EXHIBIT E      -    Opinion of special counsel to Mortgagee and
                      the Loan Participants
EXHIBIT F      -    Opinion of special counsel to Owner
                      Participant
EXHIBIT G-1    -    Opinion of special counsel in Oklahoma City,
                      Oklahoma
EXHIBIT G-2    -    Opinion of special counsel in Oklahoma City,
                      Oklahoma
EXHIBIT H      -    Form of Assignment and Assumption Agreement
EXHIBIT I      -    Form of Opinion
EXHIBIT J      -    Form of Guaranty Agreement
</TABLE>

                                     -iii-
<PAGE>   6
                             PARTICIPATION AGREEMENT

         PARTICIPATION AGREEMENT, dated as of, (this "Agreement"), among (a)
ATLAS AIR, INC., a Delaware corporation ("Lessee"), (b) [             ] ("Owner
Participant"), (c) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national banking
association, not in its individual capacity, except as expressly provided
herein, but solely as Owner Trustee (this and all other capitalized terms used
but not defined herein shall have the respective meanings ascribed thereto in
Section 1) (in its capacity as Owner Trustee, "Owner Trustee" or "Lessor," and
in its individual capacity, "First Security"), (d) WILMINGTON TRUST COMPANY, a
Delaware banking corporation, not in its individual capacity, except as
expressly provided herein, but solely as Mortgagee under the Trust Indenture (in
its capacity as Mortgagee, "Mortgagee" and in its individual capacity, "WTC"),
(e) WILMINGTON TRUST COMPANY, not in its individual capacity, except as
expressly provided herein, but solely as Pass Through Trustee under each of the
Pass Through Trust Agreements, (each, a "Pass Through Trustee") and (f)
WILMINGTON TRUST COMPANY, not in its individual capacity, except as expressly
provided herein, but solely as Subordination Agent under the Intercreditor
Agreement ("Subordination Agent").

                                    RECITALS

         A. Owner Participant and First Security, concurrently herewith, are
entering into the Trust Agreement, pursuant to which, among other things, Owner
Trustee agrees to hold the Trust Estate for the use and benefit of Owner
Participant upon and subject to the terms and conditions set forth therein.

         B. Lessee and Airframe Manufacturer have entered into the Purchase
Agreement, pursuant to which, among other things, Airframe Manufacturer has
agreed to manufacture and sell to Lessee and Lessee has agreed to purchase from
Airframe Manufacturer, certain aircraft, including the Aircraft.

         C. On the Delivery Date, Lessee and Owner Trustee will enter into the
Purchase Agreement Assignment, pursuant to which, among other things, Lessee
will assign to Owner Trustee its right to purchase the Aircraft from Airframe
Manufacturer upon and subject to the terms and conditions set forth in the
Purchase Agreement and the Purchase Agreement Assignment.

<PAGE>   7
                                      -2-

         D. Pursuant to each of the Pass Through Trust Agreements, on the
Issuance Date the Pass Through Trusts were created and the Pass Through
Certificates were issued and sold.

         E. Pursuant to the Note Purchase Agreement, each Pass Through Trustee
has agreed to use a portion of the proceeds from the issuance and sale of the
Pass Through Certificates issued by each Pass Through Trust to purchase from the
Owner Trustee, on behalf of the related Pass Through Trust, the Equipment Note
bearing the same interest rate as the Pass Through Certificates issued by such
Pass Through Trust.

         F. Owner Trustee and Mortgagee, concurrently with the execution and
delivery hereof, have entered into the Trust Indenture for the benefit of the
Note Holders, pursuant to which, among other things, Owner Trustee agrees (1) to
issue Equipment Notes, in the amounts and otherwise as provided in the Trust
Indenture, the proceeds of which will be used to pay a portion of Lessor's Cost
and (2) to mortgage, pledge and assign to Mortgagee all of Owner Trustee's
right, title and interest in the Trust Indenture Estate to secure the Secured
Obligations, including, without limitation, Owner Trustee's obligations under
the Equipment Notes.

         G. On the Delivery Date, Lessor and Lessee will enter into the Lease,
pursuant to which, among other things, Lessor shall lease the Aircraft to Lessee
and Lessee shall lease the Aircraft from Lessor upon and subject to the terms
and conditions set forth therein.

         H. The parties hereto wish to set forth in this Agreement the terms and
conditions upon and subject to which the aforesaid transactions shall be
effected.

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

SECTION 1. DEFINITIONS AND CONSTRUCTION

         Capitalized terms used but not defined herein shall have the respective
meanings set forth or incorporated by reference, and shall be construed and
interpreted in the manner described, in Annex A.

<PAGE>   8

                                      -3-

SECTION 2. PARTICIPATION IN LESSOR'S COST; ISSUANCE OF EQUIPMENT NOTES;
           TERMINATION OF OBLIGATION TO PARTICIPATE

     2.1 PARTICIPATION IN LESSOR'S COST

         Subject to the terms and conditions of this Agreement, on the Delivery
Date, Owner Participant and each Pass Through Trustee shall participate in the
payment of Lessor's Cost as follows:

          (a) Owner Participant shall participate in the payment of
     Lessor's Cost for the Aircraft by making an equity investment in the
     beneficial ownership of the Aircraft in the amount in Dollars equal to
     Owner Participant's Percentage multiplied by Lessor's Cost; and

          (b) Each Pass Through Trustee shall make a non-recourse secured loan
     to Owner Trustee to finance, in part, the Owner Trustee's payment of
     Lessor's Cost in the amount in Dollars equal to such Pass Through Trustee's
     PTT Percentage multiplied by Lessor's Cost, such loan to be evidenced by
     one or more Equipment Notes, dated the Delivery Date, issued to the
     Subordination Agent as the registered holder on behalf of each such Pass
     Through Trustee for the related Pass Through Trust by Owner Trustee in
     accordance with this Agreement and the Trust Indenture, in an aggregate
     principal amount equal to the Commitment of each such Pass Through Trustee.

     2.2 NATURE OF OBLIGATIONS OF PARTICIPANTS

         The obligations hereunder of each Participant are several, and not
joint, and a Participant shall have no obligation to make available to Owner
Trustee any portion of any amount not paid hereunder by any other Participant.
The failure by any Participant to perform its obligations hereunder shall not
affect the obligations of Lessee toward the other Participants, except to the
extent provided in Section 5.4.

     2.3 TERMINATION OF OBLIGATION TO PARTICIPATE

         Notwithstanding any other provision of this Agreement, if the Closing
does not occur on or before the Commitment Termination Date, the Commitment of
each Participant and its obligation to participate in the payment of Lessor's
Cost shall expire and be of no further force and effect; provided, that

<PAGE>   9

                                      -4-

the liability of any Participant that has defaulted in the payment of its
Commitment shall not be released.

SECTION 3. COMMITMENT TO LEASE AIRCRAFT

         Subject to the terms and conditions of this Agreement, concurrently
with the issuance of the Equipment Notes on the Delivery Date, Owner Trustee
shall purchase and accept delivery of the Aircraft under and pursuant to the
Purchase Agreement and the Purchase Agreement Assignment, and thereupon Owner
Trustee shall lease the Aircraft to Lessee, and Lessee shall lease the Aircraft
from Owner Trustee, under the Lease.

SECTION 4. PROCEDURE FOR PARTICIPATION IN PAYMENT OF LESSOR'S COST; POSTPONEMENT
           OF SCHEDULED DELIVERY DATE

     4.1 NOTICES OF SCHEDULED DELIVERY DATE

         Without limiting its obligations to the Loan Participants under Section
1(b) of the Note Purchase Agreement, Lessee agrees to give Participants, Owner
Trustee, and Mortgagee at least one Business Day's written notice of the
Scheduled Delivery Date, which notice shall set forth Lessor's Cost and the
amount of each Participant's Commitment. Each Participant agrees that making
available its respective Commitment shall constitute a waiver of such notice.
Owner Trustee and Mortgagee shall be deemed to have waived such notice if WTC
shall have received from each Participant funds in the full amount of its
respective Commitment.

     4.2 PAYMENT OF LESSOR'S COST

         (a) Each Participant agrees, subject to the terms and conditions of
     this Agreement, to make the Dollar amount of its respective Commitment
     available, by wire transfer of immediately available funds to WTC's account
     no. [          ] at Wilmington Trust Company, Wilmington, Delaware
     ABA # 031100092 (contact: Robert P. Hines), reference Atlas Lease, at or
     before 12:00 Noon, New York City time, on the Scheduled Delivery Date. All
     such funds made available by each Participant to WTC shall, until payment
     thereof to Airframe Manufacturer as provided in Section 4.2(b)(ii) or
     return thereof to the respective Participant as provided in Section 4.3.2,
     be held by WTC in trust for the benefit of the respective Participant, as

<PAGE>   10

                                      -5-

the sole and exclusive property of the respective Participant and not as part of
the Trust Estate or the Trust Indenture Estate.

          (b) Subject to the satisfaction, or waiver by the applicable party, of
     the conditions precedent set forth in Section 5, and simultaneously with
     the receipt by the parties hereto of all amounts to be paid to them on the
     Delivery Date pursuant to this Section 4.2, Owner Trustee shall:

          (i) purchase, take title to, and accept delivery of, the Aircraft;

          (ii) in consideration of the transfer of title to the Aircraft to
     Owner Trustee, direct WTC to pay the funds made available to WTC hereunder
     by the Participants to Airframe Manufacturer, which payments in the
     aggregate shall be equal to Manufacturer's Purchase Price, by wire transfer
     of immediately available funds to Airframe Manufacturer's account set forth
     in Schedule 1;

          (iii) execute an application for registration of the Aircraft with the
     FAA and Lease Supplement No. 1, in each case with respect to the Aircraft;

          (iv) execute the Trust Indenture and the initial Trust Indenture
     Supplement and issue the Equipment Notes to the Subordination Agent in
     accordance with Section 2.1(b);

          (v) lease the Aircraft to Lessee, pursuant to the Lease; and

          (vi) take such other action as may be required to be taken by the
     Owner Trustee on the Delivery Date by the terms of any Operative Agreement.

     4.3 POSTPONEMENT OF SCHEDULED DELIVERY DATE

         4.3.1 POSTPONEMENT

         If for any reason whatsoever the Closing is not consummated on the
Scheduled Delivery Date, Lessee may, subject to the provisions of Section 1(e)
of the Note Purchase Agreement, by telephonic notice, given by 5:00 p.m., New
York City time (such telephonic notice to be promptly confirmed in writing by
personal delivery or facsimile), on the Scheduled Delivery Date

<PAGE>   11

                                      -6-

to each Participant, Owner Trustee and Mortgagee, designate a Delayed Delivery
Date, in which case each Participant shall comply with its obligations under
Section 4.2(a) on such Delayed Delivery Date.

         4.3.2 RETURN OF FUNDS

         WTC shall on the Scheduled Delivery Date or the Delayed Delivery Date
promptly return to each Participant that makes funds available to it in
accordance with Section 4.2(a) such funds, together with interest or income
earned thereon, if the Closing fails to occur on the Scheduled Delivery Date or
Delayed Delivery Date, as applicable, provided that any funds made available by
the Loan Participant shall be returned on such Scheduled Delivery Date.

     4.4 CLOSING

         The Closing shall occur at the offices of Cahill Gordon & Reindel, 80
Pine Street, New York, New York 10005, or such other place as the parties shall
agree.

SECTION 5. CONDITIONS PRECEDENT

     5.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTICIPANTS

         The obligation of each Participant to make the Dollar amount of its
respective Commitment available for payment as directed by the Owner Trustee on
the Delivery Date is subject to satisfaction or waiver by each such Participant,
on or prior to the Delivery Date, of the conditions precedent set forth below in
this Section 5.1; provided, that it shall not be a condition precedent to the
obligation of any Participant that any document be produced or action taken that
is to be produced or taken by such Participant or by a Person within such
Participant's control; provided, further, that Sections 5.1.2(iii), (xv) and
(xxiii) (H) shall not be conditions precedent to the obligation of Loan
Participant and Sections 5.1.15 and 5.1.16 shall not be conditions precedent to
the obligation of Owner Participant.

         5.1.1 NOTICE

         Such Participant shall have received the notice described in Section
4.1 or, in the case of a Delayed Delivery

<PAGE>   12

                                      -7-

Date, 4.3, when and as required thereby, or shall have waived such notice.

         5.1.2 DELIVERY OF DOCUMENTS

         Such Participant shall, except as noted below, have received executed
counterparts of the following agreements, instruments, certificates or
documents, and such counterparts (a) shall have been duly authorized, executed
and delivered by the respective party or parties thereto, (b) shall be
reasonably satisfactory in form and substance to such Participant and (c) shall
be in full force and effect:

          (i) the Lease; provided, that only Mortgagee shall receive the sole
     executed chattel paper original thereof;

          (ii) Lease Supplement No. 1; provided, that only Mortgagee shall
     receive the sole executed chattel paper original thereof;

          (iii) the Tax Indemnity Agreement; provided, that only Owner
     Participant and Lessee shall receive copies of the Tax Indemnity Agreement;

          (iv) the Trust Agreement;

          (v) the Trust Indenture;

          (vi) the initial Trust Indenture Supplement;

          (vii) the Purchase Agreement Assignment;

          (viii) the Consent and Agreement and the Engine Consent and Agreement;

          (ix) the Equipment Notes dated the Delivery Date; provided, that only
     the Subordination Agent shall receive the authenticated Equipment Notes;

          (x) an excerpted copy of the Purchase Agreement to the extent relating
     to Airframe Manufacturer's or Engine Manufacturer's respective warranties
     or related obligations or any right in the Purchase Agreement assigned to
     Owner Trustee pursuant to the Purchase Agreement Assignment; provided, that
     only Owner Trustee and Mortgagee shall receive copies of such agreements
     (copies of which may be inspected by Participants and their respective
     special counsel on the Delivery Date, but after the Delivery

<PAGE>   13

                                      -8-

     Date such copies shall be retained by Owner Trustee and Mortgagee and may
     be inspected and reviewed by Owner Participant or Loan Participant or their
     respective counsel if and only if there shall have occurred and be
     continuing a Lease Default or Lease Event of Default);

          (xi) the Bills of Sale;

          (xii) an invoice from Airframe Manufacturer to Owner Trustee in
     respect of the Aircraft in the amount of Lessor's Cost of the Aircraft;

          (xiii) an appointment of authorized representatives by Owner Trustee
     to accept delivery of the Aircraft, and an acceptance thereof by such
     representatives in each case, dated the Delivery Date;

          (xiv) the broker's report and insurance certificates required by
     Section 11 of the Lease;

          (xv) an appraisal or appraisals from an Appraiser, which appraisal or
     appraisals shall be reasonably satisfactory in form and substance to Owner
     Participant; provided, that only Owner Participant and Lessee shall receive
     copies of such appraisal or appraisals;

          (xvi) (A) a copy of the Certificate of Incorporation and By-Laws of
     Lessee and resolutions of the board of directors of Lessee and/or the
     executive committee thereof, in each case certified as of the Delivery
     Date, by the Secretary or an Assistant Secretary of Lessee, duly
     authorizing the execution, delivery and performance by Lessee of the Lessee
     Operative Agreements required to be executed and delivered by Lessee on or
     prior to the Delivery Date in accordance with the provisions hereof and
     thereof; (B) an incumbency certificate of Lessee, Owner Participant, First
     Security and WTC as to the person or persons authorized to execute and
     deliver the relevant Operative Agreements on behalf of such party; and (C)
     a copy of the Certificate of Incorporation or Articles of Incorporation and
     By-Laws and general authorizing resolutions of the boards of directors (or
     executive committees) or other satisfactory evidence of authorization of
     Owner Participant, First Security and WTC, certified as of the Delivery
     Date by the Secretary or an Assistant or Attesting Secretary of Owner
     Participant, First Security and WTC, respectively, which authorize the
     execution, delivery and performance by Owner Participant, First Security
     and WTC,

<PAGE>   14

                                      -9-

     respectively, of each of the Operative Agreements to which it is a party,
     together with such other documents and evidence with respect to it as
     Lessee or any Participant may reasonably request in order to establish the
     consummation of the transactions contemplated by this Agreement and the
     taking of all corporate proceedings in connection therewith;

          (xvii) an Officer's Certificate of Lessee, dated as of the Delivery
     Date, stating that its representations and warranties set forth in this
     Agreement are true and correct as of the Delivery Date (or, to the extent
     that any such representation and warranty expressly relates to an earlier
     date, true and correct as of such earlier date);

          (xviii) an Officer's Certificate of First Security, dated as of the
     Delivery Date, stating that its representations and warranties, in its
     individual capacity and as Owner Trustee, set forth in this Agreement are
     true and correct as of the Delivery Date (or, to the extent that any such
     representation and warranty expressly relates to an earlier date, true and
     correct as of such earlier date);

          (xix) an Officer's Certificate of Owner Participant, dated as of the
     Delivery Date, stating that its representations and warranties set forth in
     this Agreement are true and correct as of the Delivery Date (or, to the
     extent that any such representation and warranty expressly relates to an
     earlier date, true and correct as of such earlier date);

          (xx) an Officer's Certificate of WTC, dated as of the Delivery Date,
     stating that its representations and warranties, in its individual capacity
     or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the case
     may be, set forth in this Agreement are true and correct as of the Delivery
     Date (or, to the extent that any such representation and warranty expressly
     relates to an earlier date, true and correct as of such earlier date);

          (xxi) an application for registration of the Aircraft with the FAA in
     the name of Owner Trustee; provided, that only special counsel in Oklahoma
     City, Oklahoma shall receive the sole executed copy thereof for filing with
     the FAA;

          (xxii) the Financing Statements;

<PAGE>   15

                                      -10-

          (xxiii) the following opinions of counsel, in each case dated the
     Delivery Date:

               (A) an opinion of Cahill Gordon & Reindel, special counsel to
          Lessee, substantially in the form of Exhibit A;

               (B) an opinion of Lessee's Legal Department, substantially in the
          form of Exhibit B;

               (C) an opinion of corporate counsel to Airframe Manufacturer,
          substantially in the form of Exhibit C;

               (D) an opinion of Ray, Quinney & Nebeker, special counsel to
          Owner Trustee, substantially in the form of Exhibit D;

               (E) an opinion of Morris, James, Hitchens & Williams LLP, special
          counsel to Mortgagee and the Loan Participants, substantially in the
          form of Exhibit E;

               (F) an opinion of ___________, special counsel to Owner
          Participant, substantially in the form of Exhibit F;

               (G) an opinion of Crowe & Dunlevy, special counsel in Oklahoma
          City, Oklahoma, substantially in the form of Exhibit G-1; and

               (H) an opinion of ___________, special tax counsel to Owner
          Participant, with respect to certain tax consequences of the
          transactions contemplated hereby; provided, that only Owner
          Participant shall receive such opinion;

          (xxiv) a copy of a current, valid Standard Certificate of
     Airworthiness for the Aircraft duly issued by the FAA;

          (xxv) the Participants and their respective counsel shall have
     received copies of such documents and papers as such Participants may
     reasonably request, other than (A) in the case of any Loan Participant,
     excerpted copies of the Purchase Agreement, provided that special counsel
     for any Loan Participant may inspect the Purchase Agreement in connection
     with the transactions contemplated hereby or as a basis for such counsel's
     closing opinion,

<PAGE>   16

                                      -11-

     and (B) in the case of parties other than Owner Participant and its special
     counsel, the Tax Indemnity Agreement.

         5.1.3 OTHER COMMITMENTS

         Each other Participant shall have made available the Dollar amount of
its Commitment as directed by Owner Trustee in accordance with Section 4.

         5.1.4 VIOLATION OF LAW

         No change shall have occurred after the date of this Agreement in any
applicable Law that makes it a violation of Law for (a) Lessee, any Participant,
Subordination Agent, Owner Trustee or Mortgagee to execute, deliver and perform
the Operative Agreements to which any of them is a party or (b) any Participant
to make the Dollar amount of its Commitment available or, in the case of any
Loan Participant, to acquire an Equipment Note or to realize the benefits of the
security afforded by the Trust Indenture.

         5.1.5 TAX LAW CHANGE

         In respect of Owner Participant, no Adverse Change in Tax Law shall
have been enacted, promulgated or issued on or prior to the Delivery Date. Owner
Participant agrees to consider promptly, and to consult with Lessee concerning
any such Adverse Change in Tax Law and to advise Lessee and Loan Participant
promptly if Owner Participant determines that an Adverse Change in Tax Law which
has been enacted or promulgated or, if proposed, has a substantial likelihood of
becoming effective, would cause Owner Participant to elect not to close with
respect to the Aircraft. At any time on or before the Delivery Date, Owner
Participant may notify Lessee and Loan Participant that Owner Participant elects
not to close as a result of the enactment, promulgation or issuance of any
Adverse Change in Tax Law on or before the Delivery Date, specifying such
Adverse Change in Tax Law; and failure to give such notice on or before the
Delivery Date shall preclude Owner Participant from not closing with respect to
such Aircraft as a result of any Adverse Change in Tax Law.

         5.1.6 REPRESENTATIONS, WARRANTIES AND COVENANTS

         The representations and warranties of each other party to this
Agreement made, in each case, in this Agreement and in any other Operative
Agreement to which it is a party, shall be true and accurate in all material
respects as of the

<PAGE>   17

                                      -12-

Delivery Date (unless any such representation and warranty shall have been made
with reference to a specified date, in which case such representation and
warranty shall be true and accurate as of such specified date) and each other
party to this Agreement shall have performed and observed, in all material
respects, all of its covenants, obligations and agreements in this Agreement and
in any other Operative Agreement to which it is a party to be observed or
performed by it as of the Delivery Date.

         5.1.7 NO EVENT OF DEFAULT

         On the Delivery Date, no event shall have occurred and be continuing,
or would result from the sale, mortgage or lease of the Aircraft, which
constitutes a Lease Default or Lease Event of Default, or a Default or Event of
Default.

         5.1.8 NO EVENT OF LOSS

         No Event of Loss with respect to the Airframe or any Engine shall have
occurred and no circumstance, condition, act or event that, with the giving of
notice or lapse of time or both, would give rise to or constitute an Event of
Loss with respect to the Airframe or any Engine shall have occurred.

         5.1.9 TITLE

         Owner Trustee shall have good title (subject to filing and recordation
of the FAA Bill of Sale with the FAA) to the Aircraft, free and clear of Liens,
except (a) the rights of Lessee under the Lease and Lease Supplement No. 1, (b)
the Lien created by the Trust Indenture and the initial Trust Indenture
Supplement, (c) the beneficial interest of Owner Participant created by the
Trust Agreement, (d) Liens permitted by clause (d) (solely for taxes not yet
due) of Section 6 of the Lease and (e) Liens permitted by clause (e) (solely for
amounts not yet due) of Section 6 of the Lease.

         5.1.10 CERTIFICATION

         The Aircraft shall have been duly certificated by the FAA as to type
and airworthiness in accordance with the terms of the Purchase Agreement.

<PAGE>   18

                                      -13-

         5.1.11 SECTION 1110

         Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee of
Owner Trustee under the Trust Indenture), shall be entitled to the benefits of
Section 1110 (as currently in effect) with respect to the right to take
possession of the Airframe and Engines as provided in the Lease in the event of
a case under Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.

         5.1.12 FILING

         On the Delivery Date (a) the FAA Filed Documents shall have been duly
filed for recordation (or shall be in the process of being so duly filed for
recordation) with the FAA in accordance with the Act and (b) each Financing
Statement shall have been duly filed (or shall be in the process of being so
duly filed) in the appropriate jurisdiction.

         5.1.13 NO PROCEEDINGS

         No action or proceeding shall have been instituted, nor shall any
action be threatened in writing, before any Government Entity, nor shall any
order, judgment or decree have been issued or proposed to be issued by any
Government Entity, to set aside, restrain, enjoin or prevent the completion and
consummation of this Agreement or any other Operative Agreement or the
transactions contemplated hereby or thereby.

         5.1.14 GOVERNMENTAL ACTION

         All appropriate action required to have been taken prior to the
Delivery Date by the FAA, or any governmental or political agency, subdivision
or instrumentality of the United States, in connection with the transactions
contemplated by this Agreement shall have been taken, and all orders, permits,
waivers, authorizations, exemptions and approvals of such entities required to
be in effect on the Delivery Date in connection with the transactions
contemplated by this Agreement shall have been issued.

         5.1.15 NOTE PURCHASE AGREEMENT

         The conditions precedent to the obligations of the Loan Participants
and the other requirements relating to the Aircraft and the Equipment Notes set
forth in the Note Purchase Agreement shall have been satisfied.

<PAGE>   19

                                      -14-

         5.1.16 PERFECTED SECURITY INTEREST

         On the Delivery Date, after giving effect to the filing of the FAA
Filed Documents and the Financing Statements, Mortgagee shall have received a
duly perfected first priority security interest in all of Owner Trustee's right,
title and interest in the Aircraft and the Lease, subject only to Permitted
Liens.

         5.1.17 NO LESSEE MATERIAL ADVERSE CHANGE

         Since           ,      , there shall not have been any event, condition
or circumstance that could materially and adversely affect Lessee's business or
consolidated financial condition or its ability to observe or perform its
obligations, liabilities and agreements under the Lessee Operative Agreements.

     5.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF OWNER TRUSTEE

         The obligation of Owner Trustee to direct the WTC to apply the
Commitments to pay Lessor's Cost on the Delivery Date is subject to satisfaction
or waiver by Owner Trustee, on or prior to the Delivery Date, of the conditions
precedent set forth below in this Section 5.2.

         5.2.1 NOTICE

         Owner Trustee shall have received the notice described in Section 4.1
or, in the case of a Delayed Delivery Date, 4.3, when and as required thereby,
or shall have waived such notice.

         5.2.2 DOCUMENTS

         Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Owner Trustee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Owner Trustee.

         5.2.3 OTHER CONDITIONS PRECEDENT

         Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and
5.1.11 shall have been satisfied unless the

<PAGE>   20

                                      -15-

failure of any such condition to be satisfied is the result of any action or
inaction by Owner Trustee.

     5.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF MORTGAGEE

         The obligation of Mortgagee to authenticate the Equipment Notes on the
Delivery Date is subject to the satisfaction or waiver by Mortgagee, on or prior
to the Delivery Date, of the conditions precedent set forth below in this
Section 5.3.

         5.3.1 NOTICE

         Mortgagee shall have received the notice described in Section 4.1 or,
in the case of a Delayed Delivery Date, 4.3, when and as required thereby, or
shall have waived such notice.

         5.3.2 DOCUMENTS

         Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Mortgagee,
except as specifically provided therein, unless the failure to receive any such
agreement, instrument, certificate or document is the result of any action or
inaction by Mortgagee.

         5.3.3 OTHER CONDITIONS PRECEDENT

         Each of the conditions set forth in Sections 5.1.4, 5.1.6, 5.1.7 and
5.1.11 shall have been satisfied unless the failure of any such condition to be
satisfied is the result of any action or inaction by Mortgagee.

     5.4 CONDITIONS PRECEDENT TO OBLIGATIONS OF LESSEE

         The obligation of Lessee to lease the Aircraft on the Delivery Date is
subject to the satisfaction or waiver by Lessee, on or prior to the Delivery
Date, of the conditions precedent set forth below in this Section 5.4.

         5.4.1 DOCUMENTS

         Executed originals of the agreements, instruments, certificates or
documents described in Section 5.1.2 shall have been received by Lessee, except
as specifically provided therein, and shall be satisfactory to Lessee, unless
the failure

<PAGE>   21

                                      -16-

to receive any such agreement, instrument, certificate or document is the result
of any action or inaction by Lessee.

         5.4.2 SALES TAX

         Lessee shall be satisfied that no sales, use, value added, goods and
services or like tax, and no stamp tax duty, is payable with respect to the
delivery of the Aircraft on the Delivery Date to the extent that Lessee has
liability therefor under Section 9.3.

         5.4.3 OTHER CONDITIONS PRECEDENT

         Each of the conditions set forth in Sections 5.1.3 (as to all
Participants), 5.1.4, 5.1.5, 5.1.6, 5.1.7 (as to Defaults or Events of Default
not constituting Lease Defaults or Lease Events of Default, respectively),
5.1.8, 5.1.9, 5.1.10, 5.1.11, 5.1.12, 5.1.13 and 5.1.14 shall have been
satisfied or waived by Lessee, unless the failure of any such condition to be
satisfied is the result of any action or inaction by Lessee.

         5.4.4 TAX LAW CHANGE

         No Adverse Change in Tax Law shall have been enacted, promulgated or
proposed on or prior to the Delivery Date. Lessee agrees to consider promptly,
and to consult with Owner Participant concerning, any such Adverse Change in Tax
Law and to advise Owner Participant and Loan Participant promptly if Lessee
determines that an Adverse Change in Tax Law which has been enacted or
promulgated or, if proposed, has a substantial likelihood of becoming effective,
would cause Lessee to elect not to close the transactions contemplated by the
Lease and this Agreement. At any time on or before the Delivery Date, Lessee may
notify Owner Participant and Loan Participant that Lessee elects not to close
the transactions contemplated by the Lease and this Agreement as a result of the
enactment, promulgation or proposal of any Adverse Change in Tax Law on or
before the Delivery Date, specifying such Adverse Change in Tax Law.

     5.5 POST-REGISTRATION OPINION

         Promptly upon the registration of the Aircraft and the recordation of
the FAA Filed Documents pursuant to the Act, Lessee will cause Crowe & Dunlevy,
special counsel in Oklahoma City, Oklahoma, to deliver to Lessee, each
Participant, Owner Trustee and Mortgagee a favorable opinion or opinions
addressed to each of them with respect to such registration and recordation.

<PAGE>   22

                                      -17-

SECTION 6.  REPRESENTATIONS AND WARRANTIES

     6.1 LESSEE'S REPRESENTATIONS AND WARRANTIES

         Lessee represents and warrants to each Participant, Subordination
Agent, Owner Trustee and Mortgagee that:

         6.1.1 ORGANIZATION; QUALIFICATION

         Lessee is a corporation duly incorporated, validly existing and in good
standing under the Laws of the State of Delaware and has the corporate power and
authority to conduct the business in which it is currently engaged and to own or
hold under lease its properties and to enter into and perform its obligations
under the Lessee Operative Agreements. Lessee is duly qualified to do business
as a foreign corporation in good standing in each jurisdiction in which the
nature and extent of the business conducted by it, or the ownership of its
properties, requires such qualification, except where the failure to be so
qualified would not give rise to a Material Adverse Change to Lessee.

         6.1.2 CORPORATE AUTHORIZATION

         Lessee has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by its Certificate of Incorporation or By-Laws) to
authorize the execution and delivery of each of the Lessee Operative Agreements,
and the performance of its obligations thereunder.

         6.1.3 NO VIOLATION

         The execution and delivery by Lessee of the Lessee Operative
Agreements, the performance by Lessee of its obligations thereunder and the
consummation by Lessee on the Delivery Date of the transactions contemplated
thereby, do not and will not (a) violate any provision of the Certificate of
Incorporation or By-Laws of Lessee, (b) violate any Law applicable to or binding
on Lessee or (c) violate or constitute any default under (other than any
violation or default that would not result in a Material Adverse Change to
Lessee), or result in the creation of any Lien (other than as permitted under
the Lease) upon the Aircraft under, any indenture, mortgage, chattel mortgage,
deed of trust, conditional sales contract, lease, loan or other material
agreement, instrument or document to which Lessee is a party or by which Lessee
or any of its properties is bound.

<PAGE>   23

                                      -18-

         6.1.4 APPROVALS

         The execution and delivery by Lessee of the Lessee Operative
Agreements, the performance by Lessee of its obligations thereunder and the
consummation by Lessee on the Delivery Date of the transactions contemplated
thereby do not and will not require the consent or approval of, or the giving of
notice to, or the registration with, or the recording or filing of any documents
with, or the taking of any other action in respect of, (a) any trustee or other
holder of any Debt of Lessee and (b) any Government Entity, other than the
filing of (x) the FAA Filed Documents and the Financing Statements (and
continuation statements periodically) and (y) filings, recordings, notices or
other ministerial actions pursuant to any routine recording, contractual or
regulatory requirements applicable to it.

         6.1.5 VALID AND BINDING AGREEMENTS

         The Lessee Operative Agreements have been duly authorized, executed and
delivered by Lessee and, assuming the due authorization, execution and delivery
thereof by the other party or parties thereto, constitute the legal, valid and
binding obligations of Lessee and are enforceable against Lessee in accordance
with the respective terms thereof, except as such enforceability may be limited
by bankruptcy, insolvency, reorganization, receivership, moratorium and other
similar Laws affecting the rights of creditors generally and general principles
of equity, whether considered in a proceeding at law or in equity.

         6.1.6 LITIGATION

         Except as set forth in Lessee's most recent Annual Report on Form 10-K,
as amended, filed by Lessee with the SEC on or prior to the Delivery Date, or in
any Quarterly Report on Form 10-Q or Current Report on Form 8-K filed by Lessee
with the SEC subsequent to such Form 10-K and on or prior to the Delivery Date,
no action, claim or proceeding is now pending or, to the Actual Knowledge of
Lessee, threatened, against Lessee, before any court, governmental body,
arbitration board, tribunal or administrative agency, which is reasonably likely
to be determined adversely to Lessee and if determined adversely to Lessee would
result in a Material Adverse Change.

         6.1.7 FINANCIAL CONDITION

         The audited consolidated balance sheet of Lessee with respect to
Lessee's most recent fiscal year included in Lessee's

<PAGE>   24

                                      -19-

most recent Annual Report on Form 10-K, as amended, filed by Lessee with the
SEC, and the related consolidated statements of operations and cash flows for
the period then ended have been prepared in accordance with GAAP and fairly
present in all material respects the financial condition of Lessee and its
consolidated subsidiaries as of such date and the results of its operations and
cash flows for such period, and since the date of such balance sheet, there has
been no material adverse change in such financial condition or operations of
Lessee, except for matters disclosed in (a) the financial statements referred to
above or (b) any subsequent Quarterly Report on Form 10-Q or Current Report on
Form 8-K filed by Lessee with the SEC on or prior to the date hereof.

         6.1.8 REGISTRATION AND RECORDATION

         Except for (a) the registration of the Aircraft with the FAA pursuant
to the Act in the name of Owner Trustee, (b) the filing for recordation (and
recordation) of the FAA Filed Documents, (c) the filing of the Financing
Statements (and continuation statements relating thereto at periodic intervals),
(d) the taking of possession and retention by Mortgagee of the original
counterparts of the Lease and Lease Supplement No. 1 and (e) the affixation of
the placards referred to in Section 7.1.3 of the Lease, no further action,
including any filing or recording of any document (including any financing
statement in respect thereof under Article 9 of the UCC) is necessary in order
to establish and perfect the right, title or interest of Owner Trustee, and the
Mortgagee's security interest, in the Aircraft and the Lease, as against Lessee
and any other Person, in each case, in any applicable jurisdictions in the
United States.

         6.1.9 CHIEF EXECUTIVE OFFICE

         The chief executive office (as such term is defined in Article 9 of the
UCC) of Lessee is located [at 538 Commons Drive, Golden, Colorado 80401] or [at
2000 Westchester Avenue, White Plains, New York 10560].

         6.1.10 NO DEFAULT

         No event which, if the Aircraft were subject to the Lease, would
constitute a Lease Default or Lease Event of Default has occurred and is
continuing.

<PAGE>   25
                                      -20-

         6.1.11 NO EVENT OF LOSS

         No Event of Loss has occurred with respect to the Airframe or any
Engine, and, to the Actual Knowledge of Lessee, no circumstance, condition, act
or event has occurred that, with the giving of notice or lapse of time or both
would give rise to or constitute an Event of Loss with respect to the Airframe
or any Engine.

         6.1.12 COMPLIANCE WITH LAWS

          (a) Lessee is a Citizen of the United States and a U.S. Air Carrier.

          (b) Lessee holds all licenses, permits and franchises from the
     appropriate Government Entities necessary to authorize Lessee to lawfully
     engage in air transportation and to carry on commercial air cargo service
     as currently conducted, except where the failure to so hold any such
     license, permit or franchise would not give rise to a Material Adverse
     Change to Lessee.

          (c) Lessee is not an "investment company" or a company controlled by
     an "investment company" within the meaning of the Investment Company Act of
     1940, as amended.

         6.1.13 SECURITIES LAWS

         Neither Lessee nor any person authorized to act on its behalf has
directly or indirectly offered any beneficial interest or Security relating to
the ownership of the Aircraft or the Lease or any interest in the Trust Estate
and Trust Agreement, or any of the Equipment Notes or any other interest in or
security under the Trust Indenture, for sale to, or solicited any offer to
acquire any such interest or security from, or has sold any such interest or
security to, any person in violation of the Securities Act or any applicable
state securities laws.

         6.1.14 BROKER'S FEES

         No Person acting on behalf of Lessee is or will be entitled to any
broker's fee, commission or finder's fee in connection with the Transactions,
except for fees payable to Lessee's Advisor, if any.

<PAGE>   26

                                      -21-

         6.1.15 SECTION 1110

         Owner Trustee, as lessor under the Lease (and Mortgagee, as assignee
under the Trust Indenture), is entitled to the benefits of Section 1110 (as
currently in effect) with respect to the right to take possession of the
Airframe and Engines as provided in the Lease in the event of a case under
Chapter 11 of the Bankruptcy Code in which Lessee is a debtor.

     6.2 OWNER PARTICIPANT'S REPRESENTATIONS AND WARRANTIES

         Owner Participant represents and warrants to Lessee, Loan Participant,
Subordination Agent, Owner Trustee and Mortgagee that:

         6.2.1 ORGANIZATION, ETC.

         Owner Participant is a corporation duly incorporated, validly existing
and in good standing under the Laws of the OP Jurisdiction, has the corporate
power and authority to conduct the business in which it is currently engaged and
to own or hold under lease its properties and to enter into, and perform its
obligations under the Owner Participant Agreements, and has a tangible Net Worth
(exclusive of goodwill) greater than $75,000,000.

         6.2.2 CORPORATE AUTHORIZATION

         Owner Participant has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by its Certificate of Incorporation or
By-Laws) to authorize the execution and delivery of each of the Owner
Participant Agreements, and the performance of its obligations thereunder.

         6.2.3 NO VIOLATION

         The execution and delivery by Owner Participant of the Owner
Participant Agreements, the performance by Owner Participant of its obligations
thereunder and the consummation by Owner Participant on the Delivery Date of the
transactions contemplated thereby, do not and will not (a) violate any provision
of the Certificate of Incorporation or By-Laws of Owner Participant, (b) violate
any Law applicable to or binding on Owner Participant or (c) violate or
constitute any default under

<PAGE>   27

                                      -22-

(other than any violation or default that would not result in a Material Adverse
Change to Owner Participant), or result in the creation of any Lien (other than
as provided for or otherwise permitted in the Operative Agreements) upon the
Trust Estate under, any indenture, mortgage, chattel mortgage, deed of trust,
conditional sales contract, lease, loan or other material agreement, instrument
or document to which Owner Participant is a party or by which Owner Participant
or any of its properties is bound.

         6.2.4 APPROVALS

         The execution and delivery by Owner Participant of the Owner
Participant Agreements, the performance by Owner Participant of its obligations
thereunder and the consummation by Owner Participant on the Delivery Date of the
transactions contemplated thereby do not and will not require the consent or
approval of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of Owner Participant and
(b) any Government Entity, other than the filing of the FAA Filed Documents and
the Financing Statements.

         6.2.5 VALID AND BINDING AGREEMENTS

         The Owner Participant Agreements have been duly authorized, executed
and delivered by Owner Participant and, assuming the due authorization,
execution and delivery by the other party or parties thereto, constitute the
legal, valid and binding obligations of Owner Participant and are enforceable
against Owner Participant in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.

         6.2.6 CITIZENSHIP

         On the Delivery Date, Owner Participant is a Citizen of the United
States.

         6.2.7 NO LIENS

         On the Delivery Date, there are no Lessor Liens attributable to Owner
Participant in respect of all or any part of the Trust Estate.

<PAGE>   28

                                      -23-

         6.2.8 INVESTMENT BY OWNER PARTICIPANT

     Owner Participant's beneficial interest in the Trust Estate is being
acquired by it for its own account, for investment and not with a view to any
resale or distribution thereof, except that, subject to the restrictions on
transfer set forth in Section 10, the disposition by Owner Participant of its
beneficial interest in the Trust Estate shall at all times be within its
control.

         6.2.9 ERISA

         No part of the funds to be used by Owner Participant to acquire or hold
its interests in the Trust Estate to be acquired by it under this Agreement
directly or indirectly constitutes assets of a Plan.

         6.2.10 LITIGATION

         There are no pending or, to the Actual Knowledge of Owner Participant,
threatened actions or proceedings against Owner Participant before any court,
governmental body, arbitration board, administrative agency or tribunal which,
if determined adversely to Owner Participant, would materially adversely affect
the ability of Owner Participant to perform its obligations under the Owner
Participant Agreements.

         6.2.11 SECURITIES LAWS

         Neither Owner Participant nor any person Owner Participant has
authorized to act on its behalf has directly or indirectly offered any
beneficial interest in or Security relating to the ownership of the Aircraft or
any interest in the Trust Estate, or any of the Equipment Notes or any other
interest in or Security under the Trust Indenture for sale to, or solicited any
offer to acquire any of the same from, any Person in violation of the Securities
Act or applicable state securities Laws.

         6.2.12 BROKER'S FEES

         No Person acting on behalf of Owner Participant is or will be entitled
to any broker's fee, commission or finder's fee in connection with the
Transactions.

<PAGE>   29

                                      -24-

     6.3 FIRST SECURITY'S REPRESENTATIONS AND WARRANTIES

         First Security represents and warrants to Lessee, Owner Participant,
Loan Participant, Subordination Agent and Mortgagee that:

         6.3.1 ORGANIZATION, ETC.

         First Security is a national banking association duly organized,
validly existing and in good standing under the Laws of the United States,
holding a valid certificate to do business as a national banking association
with banking authority to execute and deliver, and perform its obligations
under, the Owner Trustee Agreements.

         6.3.2 CORPORATE AUTHORIZATION

         First Security has taken, or caused to be taken, all necessary
corporate action (including, without limitation, the obtaining of any consent or
approval of stockholders required by Law or by its Articles of Association or
By-Laws) to authorize the execution and delivery by First Security, in its
individual capacity and as Owner Trustee, of each of the Owner Trustee
Agreements, and the performance of its obligations thereunder.

         6.3.3 NO VIOLATION

         The execution and delivery by First Security, in its individual
capacity and as Owner Trustee of the Owner Trustee Agreements, the performance
by First Security, in its individual capacity and as Owner Trustee, of its
obligations thereunder and the consummation by First Security in its individual
capacity and as Owner Trustee on the Delivery Date of the transactions
contemplated thereby, do not and will not (a) violate any provision of the
Articles of Association or By-Laws of First Security, (b) violate any Law of the
State of Utah or federal banking law applicable to or binding on Owner Trustee
or First Security governing its banking and trust powers or (c) violate or
constitute any default under(other than any violation or default that would not
result in a Material Adverse Change to First Security, in its individual
capacity or as Owner Trustee), or result in the creation of any Lien (other than
the Lien of the Trust Indenture) upon any property of First Security, in its
individual capacity and as Owner Trustee, or any of its subsidiaries under, any
indenture, mortgage, chattel mortgage, deed of trust, conditional sales
contract, lease, loan or other material agreement, instrument or document

<PAGE>   30

                                      -25-

to which First Security, in its individual capacity and as Owner Trustee, is a
party or by which First Security, in its individual capacity and as Owner
Trustee, or any of its properties is or may be bound or affected in any material
respect.

         6.3.4 APPROVALS

         The execution and delivery by First Security, in its individual
capacity and as Owner Trustee, of the Owner Trustee Agreements, the performance
by First Security, in its individual capacity and as Owner Trustee, of its
obligations thereunder and the consummation by First Security, in its individual
capacity and as Owner Trustee, on the Delivery Date of the transactions
contemplated thereby do not and will not require the consent, approval or
authorization of, or the giving of notice to, or the registration with, or the
recording or filing of any documents with, or the taking of any other action in
respect of, (a) any trustee or other holder of any Debt of First Security or (b)
any Government Entity governing its banking and trust powers, other than the
filing of the FAA Filed Documents and the Financing Statements.

         6.3.5 VALID AND BINDING AGREEMENTS

         The Owner Trustee Agreements have been duly authorized, executed and
delivered by First Security, in its individual capacity or as Owner Trustee, as
the case may be, and constitute the legal, valid and binding obligations of
First Security, in its individual capacity and as Owner Trustee, and, assuming
the due authorization, execution and delivery thereof by the other party or
parties thereto, are enforceable against First Security, in its individual
capacity and as Owner Trustee, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium and other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.

         6.3.6 CITIZENSHIP

         On the Delivery Date, First Security is a Citizen of the United States.

<PAGE>   31

                                      -26-

         6.3.7 CHIEF EXECUTIVE OFFICE

         The chief executive office (as such term is defined in Article 9 of the
UCC) of Owner Trustee is located at 79 South Main Street, Salt Lake City, Utah
84111.

         6.3.8 TITLE

         On the Delivery Date, Owner Trustee shall have received whatever title
to the Aircraft as was conveyed to it by Airframe Manufacturer.

         6.3.9 NO LIENS; FINANCING STATEMENTS

         On the Delivery Date, there are no Lessor Liens attributable to First
Security or Owner Trustee in respect of all or any part of the Aircraft, Trust
Estate or the Trust Indenture Estate. Except for the Financing Statements, it
has not, either in its individual capacity or as Owner Trustee, executed any UCC
financing statements relating to the Aircraft or the Lease.

         6.3.10 LITIGATION

         There are no pending or, to the Actual Knowledge of First Security,
threatened actions or proceedings against First Security or Owner Trustee before
any court, governmental body, arbitration board, administrative agency or
tribunal which, if determined adversely to First Security, would materially
adversely affect the ability of First Security or Owner Trustee to perform its
obligations under the Owner Trustee Agreements.

         6.3.11 SECURITIES LAWS

         Neither First Security, nor any person authorized to act on its behalf,
has directly or indirectly offered any beneficial interest or Security relating
to the ownership of the Aircraft or any interest in the Trust Estate or any of
the Equipment Notes or any other interest in or security under the Trust
Indenture for sale to, or solicited any offer to acquire any such interest or
security from, or has sold any such interest or security to, any person other
than the Participants, except for the offering and sale of the Pass Through
Certificates.

<PAGE>   32

                                      -27-

         6.3.12 EXPENSES AND TAXES

         There are no Expenses or Taxes that may be imposed on or asserted
against the Trust, the Trust Estate or any part thereof or any interest therein,
the Trust Indenture Estate, Lessee, Owner Participant, any Pass Through Trustee,
Subordination Agent, Owner Trustee or Mortgagee (except, as to Owner Trustee,
Taxes imposed on the fees payable to Owner Trustee) under the laws of the State
of Utah in connection with the execution, delivery or performance of any
Operative Agreement by Owner Trustee or in connection with the issuance of the
Equipment Notes, which Expenses or Taxes would not have been imposed if Owner
Trustee had not (x) had its principal place of business in, (y) performed (in
its individual capacity or as Owner Trustee) any or all of its duties under the
Operative Agreements in or (z) engaged in any activities unrelated to the
transactions contemplated by the Operative Agreements in, the State of Utah.

     6.4 WTC'S REPRESENTATIONS AND WARRANTIES

         WTC represents and warrants (with respect to Section 6.4.10, solely in
its capacity as Subordination Agent) to Lessee, Owner Participant and Owner
Trustee that:

         6.4.1 ORGANIZATION, ETC.

         WTC is a Delaware banking corporation duly organized, validly existing
and in good standing under the Laws of the State of Delaware, holding a valid
certificate to do business as a Delaware banking corporation with banking
authority to execute and deliver, and perform its obligations under, the
Mortgagee Agreements, the Pass Through Trustee Agreements and the Subordination
Agent Agreements.

         6.4.2 CORPORATE AUTHORIZATION

         WTC has taken, or caused to be taken, all necessary corporate action
(including, without limitation, the obtaining of any consent or approval of
stockholders required by Law or by its Certificate of Incorporation or By-Laws)
to authorize the execution and delivery by WTC, in its individual capacity or as
Mortgagee, as a Pass Through Trustee or as Subordination Agent, as the case may
be, of the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements and the performance of its obligations
thereunder.

<PAGE>   33

                                      -28-

         6.4.3 NO VIOLATION

         The execution and delivery by WTC, in its individual capacity or as
Mortgagee, as a Pass Through Trustee or as Subordination Agent, as the case may
be, of the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements, the performance by WTC, in its individual
capacity or as Mortgagee, as a Pass Through Trustee or as Subordination Agent,
as the case may be, of its obligations thereunder and the consummation on the
Delivery Date of the transactions contemplated thereby, do not and will not (a)
violate any provision of the Certificate of Incorporation or By-Laws of WTC, (b)
violate any Law applicable to or binding on WTC, in its individual capacity or
(except in the case of any Law relating to any Plan) as Mortgagee, as a Pass
Through Trustee or as Subordination Agent, or (c) violate or constitute any
default under (other than any violation or default that would not result in a
Material Adverse Change to WTC, in its individual capacity or as Mortgagee, as a
Pass Through Trustee or as Subordination Agent), or result in the creation of
any Lien (other than the Lien of the Trust Indenture) upon any property of WTC,
in its individual capacity or as Mortgagee, as a Pass Through Trustee or as
Subordination Agent, or any of WTC's subsidiaries under, any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract, lease,
loan or other agreement, instrument or document to which WTC, in its individual
capacity or as Mortgagee, as a Pass Through Trustee or as Subordination Agent,
is a party or by which WTC, in its individual capacity or as Mortgagee, as a
Pass Through Trustee or as Subordination Agent, or any of their respective
properties is bound or may be affected in any material respect.

         6.4.4 APPROVALS

         The execution and delivery by WTC, in its individual capacity or as
Mortgagee, as a Pass Through Trustee or as Subordination Agent, as the case may
be, of the Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements, the performance by WTC, in its individual
capacity or as Mortgagee, as a Pass Through Trustee or as Subordination Agent,
as the case may be, of its obligations thereunder and the consummation on the
Delivery Date by WTC, in its individual capacity or as Mortgagee, as a Pass
Through Trustee or as Subordination Agent, as the case may be, of the
transactions contemplated thereby do not and will not require the consent,
approval or authorization of, or the giving of notice to, or the registration
with, or the recording or filing of any documents with, or the taking of any
other action in respect

<PAGE>   34

                                      -29-

of, (a) any trustee or other holder of any Debt of WTC or (b) any Government
Entity, other than the filing of the FAA Filed Documents and the Financing
Statements.

         6.4.5 VALID AND BINDING AGREEMENTS

         The Mortgagee Agreements, the Pass Through Trustee Agreements and the
Subordination Agent Agreements have been duly authorized, executed and delivered
by WTC and, assuming the due authorization, execution and delivery by the other
party or parties thereto, constitute the legal, valid and binding obligations of
WTC, in its individual capacity or as Mortgagee, a Pass Through Trustee or
Subordination Agent, as the case may be, and are enforceable against WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, in accordance with the respective terms thereof,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other similar Laws affecting the
rights of creditors generally and general principles of equity, whether
considered in a proceeding at law or in equity.

         6.4.6 CITIZENSHIP

         WTC is a Citizen of the United States.

         6.4.7 NO LIENS

         On the Delivery Date, there are no Lessor Liens attributable to WTC in
respect of all or any part of the Trust Estate or the Trust Indenture Estate.

         6.4.8 LITIGATION

         There are no pending or, to the Actual Knowledge of WTC, threatened
actions or proceedings against WTC, in its individual capacity or as Mortgagee,
a Pass Through Trustee or Subordination Agent, before any court, administrative
agency or tribunal which, if determined adversely to WTC, in its individual
capacity or as Mortgagee, a Pass Through Trustee or Subordination Agent, as the
case may be, would materially adversely affect the ability of WTC, in its
individual capacity or as Mortgagee, a Pass Through Trustee or Subordination
Agent, as the case may be, to perform its obligations under any of the Mortgagee
Agreements, the Pass Through Trustee Agreements or the Subordination Agent
Agreements.

<PAGE>   35

                                      -30-

         6.4.9 SECURITIES LAWS

         Neither WTC nor any person authorized to act on its behalf has directly
or indirectly offered any beneficial interest or Security relating to the
ownership of the Aircraft or any interest in the Trust Indenture Estate or any
of the Equipment Notes or any other interest in or security under the Trust
Indenture for sale to, or solicited any offer to acquire any such interest or
security from, or has sold any such interest or security to, any Person other
than the Participants, except for the offering and sale of the Pass Through
Certificates.

         6.4.10 INVESTMENT

         The Equipment Notes to be acquired by the Subordination Agent are being
acquired by it for the account of the Pass Through Trustees, for investment and
not with a view to any resale or distribution thereof, except that, subject to
the restrictions on transfer set forth in Section 10.1.3, the disposition by it
of its Equipment Notes shall at all times be within its control.

         6.4.11 TAXES

         There are no Taxes payable by any Pass Through Trustee or WTC, as the
case may be, imposed by the State of Delaware or any political subdivision or
taxing authority thereof in connection with the execution, delivery and
performance by such Pass Through Trustee or WTC, as the case may be, of this
Agreement or any of the Pass Through Trustee Agreements (other than franchise or
other taxes based on or measured by any fees or compensation received by any
such Pass Through Trustee or WTC, as the case may be, for services rendered in
connection with the transactions contemplated by any of the Pass Through Trust
Agreements), and there are no Taxes payable by any Pass Through Trustee or WTC,
as the case may be, imposed by the State of Delaware or any political
subdivision thereof in connection with the acquisition, possession or ownership
by any such Pass Through Trustee of any of the Equipment Notes (other than
franchise or other taxes based on or measured by any fees or compensation
received by any such Pass Through Trustee or WTC, as the case may be, for
services rendered in connection with the transactions contemplated by any of the
Pass Through Trust Agreements), and, assuming that the trusts created by the
Pass Through Trust Agreements will not be taxable as corporations, but, rather,
will be classified as grantor trusts under subpart E, Part I of Subchapter J of
the Code or as a partnership under Subchapter K of the Code, and assuming that
the assets

<PAGE>   36

                                      -31-

of the trusts will be treated as held for investment purposes as provided in
each Pass Through Trust Agreement, such trusts will not be subject to any taxes
(including, without limitation, net or gross income, tangible or intangible
property, net worth, capital, franchise or doing business tax) fee or other
governmental charge under the laws of the State of Delaware or any political
subdivision thereof;

         6.4.12 CONTROL

         WTC is not an Affiliate of the Owner Participant or the Owner Trustee.

         6.4.13 BROKER'S FEES

         No Person acting on behalf of WTC, in its individual capacity or as
Mortgagee, any Pass Through Trustee or Subordination Agent, is or will be
entitled to any broker's fee, commission or finder's fee in connection with the
Transactions.

SECTION 7. COVENANTS, UNDERTAKINGS AND AGREEMENTS

    7.1   COVENANTS OF LESSEE

         Lessee covenants and agrees, at its own cost and expense, with Owner
Participant, Loan Participants, Owner Trustee and Mortgagee as follows:

         7.1.1 CORPORATE EXISTENCE; U.S. AIR CARRIER

         Lessee shall at all times maintain its corporate existence, except as
permitted by Section 13.2 of the Lease, and shall at all times remain a U.S. Air
Carrier.

         7.1.2 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE

         Lessee will give Owner Participant, Owner Trustee and Mortgagee timely
written notice (but in any event within 30 days prior to the expiration of the
period of time specified under applicable Law to prevent lapse of perfection) of
any relocation of its chief executive office (as such term is defined in Article
9 of the UCC) from its then present location and will promptly take any action
required by Section 7.1.3(c) as a result of such relocation.

<PAGE>   37

                                      -32-

         7.1.3 CERTAIN ASSURANCES

         (a) Lessee shall duly execute, acknowledge and deliver, or shall cause
to be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
further commercially reasonable acts and things, in any case, as Owner
Participant, Owner Trustee or Mortgagee shall reasonably request for
accomplishing the purposes of this Agreement and the other Operative Agreements;
provided that any instrument or other document so executed by Lessee will not
expand any obligations or limit any rights of Lessee in respect of the
transactions contemplated by any Operative Agreement.

         (b) Lessee shall promptly take such action with respect to the
recording, filing, re-recording and refiling of the Lease, the Trust Agreement
and the Trust Indenture and the respective supplements thereto, including,
without limitation, Lease Supplement No. 1 and the initial Trust Indenture
Supplement, as shall be necessary to establish, perfect and protect the
interests and rights of Owner Trustee in and to the Aircraft and under the Lease
and the perfection and priority of the Lien created by the Trust Indenture.
Lessee shall furnish to Owner Participant or Owner Trustee such information
(other than with respect to the citizenship of Owner Participant and Owner
Trustee) in Lessee's possession or otherwise reasonably available to Lessee as
may be required to enable Owner Participant or Owner Trustee to make application
for registration of the Aircraft under the Act (subject to Lessee's rights under
Section 7.1.2 of the Lease) and shall pay or cause to be paid all out-of-pocket
costs and expenses thereof (including, without limitation, reasonable attorneys'
fees and disbursements).

         (c) Lessee, at its sole cost and expense, will cause the FAA Filed
Documents, the Financing Statements and all continuation statements (and any
amendments necessitated by any combination, consolidation or merger pursuant to
Section 13.2 of the Lease, or any relocation of its chief executive office) in
respect of the Financing Statements to be prepared and, subject only to the
execution and delivery thereof by Owner Trustee and Mortgagee, as applicable,
duly and timely filed and recorded, or filed for recordation, to the extent
permitted under the Act (with respect to the FAA Filed Documents) or the UCC or
similar law of any other applicable jurisdiction (with respect to such other
documents).

<PAGE>   38

                                      -33-

         (d) If the Aircraft has been registered in a country other than the
United States pursuant to Section 7.1.2 of the Lease, Lessee will furnish to
Owner Trustee, Mortgagee and each Participant annually after such registration,
commencing with the calendar year after such registration is effected, an
opinion of special counsel reasonably satisfactory to Owner Participant and
Mortgagee stating that, in the opinion of such counsel, either that (i) such
action has been taken with respect to the recording, filing, rerecording and
refiling of the Operative Agreements and any supplements and amendments thereto
as is necessary to establish, perfect and protect Owner Trustee's and
Mortgagee's respective right, title and interest in and to the Aircraft and the
Operative Agreements, reciting the details of such actions, or (ii) no such
action is necessary to maintain the perfection of such right, title and
interest.

         7.1.4 SECURITIES LAWS

         Neither Lessee nor any person authorized to act on its behalf will
directly or indirectly offer any beneficial interest or Security relating to the
ownership of the Aircraft or the Lease or any interest in the Trust Estate and
Trust Agreement or any of the Equipment Notes or any other interest in or
security under the Trust Indenture, for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
any person in violation of the Securities Act or applicable state or foreign
securities Laws.

     7.2 COVENANTS OF OWNER PARTICIPANT

         Owner Participant covenants and agrees with Lessee, and, except with
respect to Section 7.2.4, Loan Participants, Owner Trustee and Mortgagee as
follows:

         7.2.1 LIENS

         Owner Participant (a) will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Lien attributable to it on or with respect
to all or any part of the Trust Estate, the Trust Indenture Estate or the
Aircraft, (b) will, at its own cost and expense, promptly take such action as
may be necessary to discharge any Lessor Lien attributable to

<PAGE>   39

                                      -34-

Owner Participant on all or any part of the Trust Estate, the Trust Indenture
Estate or the Aircraft and (c) will hold harmless and indemnify Lessee, Owner
Trustee, each Note Holder, Mortgagee, each of their respective Affiliates,
successors and permitted assigns, the Trust Estate and the Trust Indenture
Estate from and against (i) any and all Expenses, (ii) any reduction in the
amount payable out of the Trust Estate or the Trust Indenture Estate and (iii)
any interference with the possession, operation or other use of all or any part
of the Aircraft imposed on, incurred by or asserted against any of the foregoing
as a consequence of any such Lessor Lien.

         7.2.2 REVOCATION OF TRUST AGREEMENT

          (a) Owner Participant will comply with the provisions of the Trust
     Agreement applicable to it, and will not terminate or revoke the Trust
     Agreement or the trusts created thereunder without the prior written
     consent of Lessee and Mortgagee and will not amend, modify or supplement
     the Trust Agreement, or waive any of the provisions thereof, if such
     amendment, modification, supplement or waiver would have a material adverse
     effect on Lessee, without the consent of Lessee, or on Mortgagee or any
     Note Holder, without the consent of Mortgagee.

          (b) Notwithstanding Section 7.2.2(a), Owner Participant may at any
     time remove Owner Trustee pursuant to Section 9.1 of the Trust Agreement or
     terminate the Trust Agreement pursuant to Section 11.2 of the Trust
     Agreement.

         7.2.3 CHANGE OF SITUS OF OWNER TRUST

         If, at any time, any Tax Indemnitee or the Trust Estate becomes subject
to any Taxes for which it is indemnified pursuant to Section 9.3 of this
Agreement and if, as a consequence thereof, Lessee should request that the situs
of the Trust be moved to another state in the United States from the state in
which it is then located, the situs of the Trust may be moved with the written
consent of Owner Participant (which consent shall not be unreasonably withheld)
and Owner Participant will take whatever action may be reasonably necessary to
accomplish such relocation; provided, that, in any event, (a) Lessee shall
provide such additional tax indemnification as Owner Participant and the Note
Holders or the Pass Through Trustees may reasonably request to cover any
additional unindemnified Taxes or loss of Tax benefits described in the
assumptions in the Tax Indemnity Agreement resulting from such change in the
situs of the Trust, (b) the rights and obligations

<PAGE>   40

                                      -35-

under the Operative Agreements of Owner Participant, the Note Holders, Pass
Through Trustees and Mortgagee shall not be adversely affected as a result of
the taking of such action, (c) the Lien of the Trust Indenture on the Trust
Indenture Estate shall not be adversely affected by such action, and Lessee and
Owner Trustee shall execute and deliver such documents as may reasonably be
requested by Mortgagee to protect and maintain the perfection and priority of
such Lien, (d) Owner Participant, Pass Through Trustees and Mortgagee shall have
received an opinion or opinions of counsel (which counsel is reasonably
satisfactory to Owner Participant, Pass Through Trustees and Mortgagee) in
scope, form and substance reasonably satisfactory to Owner Participant, Pass
Through Trustees and Mortgagee to the effect that (i) the Trust, as thus
relocated, shall remain a validly established trust, (ii) any amendments to the
Trust Agreement necessitated by such relocation shall have been duly authorized,
executed and delivered by the parties thereto and shall constitute the valid and
binding obligations of such parties, enforceable in accordance with their terms,
(iii) covering such other matters as Owner Participant, Pass Through Trustees or
Mortgagee may reasonably request, (e) if such relocation involves the
replacement of Owner Trustee, then Owner Participant, Pass Through Trustees and
Mortgagee shall have received an opinion of counsel to such successor Owner
Trustee in form and substance reasonably satisfactory to Owner Participant, Pass
Through Trustees and Mortgagee covering the matters described in the opinion
delivered pursuant to Section 5.1.2(xxiii)(D) and (f) Lessee shall indemnify and
hold harmless Owner Participant, Note Holders, Pass Through Trustees and First
Security, in its individual capacity and as Owner Trustee, on a net after-tax
basis against any and all reasonable out-of-pocket costs and expenses including
attorneys' fees and disbursements, fees and expenses of any new owner trustee,
registration, recording or filing fees and taxes incurred by Owner Participant,
Note Holders, Pass Through Trustees or Owner Trustee in connection with such
change of situs. Owner Participant agrees with Lessee that it will not consent
to or direct a change in the situs of the Trust Estate without the prior written
consent of Lessee.

         7.2.4 COMPLIANCE WITH LEASE PROVISIONS

         Owner Participant will, solely for the benefit of Lessee, comply with
the provisions expressly applicable to it contained in the Lease.

<PAGE>   41

                                      -36-

         7.2.5 SECURITIES ACT

         Owner Participant will not directly or indirectly offer any beneficial
interest or security relating to the ownership of the Aircraft or any interest
in the Trust Estate or any of the Equipment Notes or any other interest in or
security under the Trust Indenture for sale to, or solicit any offer to acquire
any such interest or security from, or sell any such interest or security to,
any Person in violation of the Securities Act or applicable state or foreign
securities Laws, provided that the foregoing shall not be deemed to impose on
Owner Participant any responsibility with respect to any such offer, sale or
solicitation by any other party hereto.

         7.2.6 REGARDING THE OWNER TRUSTEE

         Owner Participant will cause Owner Trustee to perform its obligations
under each Owner Trustee Agreement.

     7.3 COVENANTS OF FIRST SECURITY AND OWNER TRUSTEE

         First Security, in its individual capacity and/or as Owner Trustee, as
provided below, covenants and agrees with Lessee, Owner Participant, each Note
Holder and Mortgagee as follows:

         7.3.1 LIENS

         First Security (a) will not directly or indirectly create, incur,
assume or suffer to exist any Lessor Lien attributable to it or Owner Trustee
with respect to all or any part of the Trust Estate, the Trust Indenture Estate
or the Aircraft, (b) will, at its own cost and expense, promptly take such
action as may be necessary to discharge any Lessor Lien attributable to First
Security or Owner Trustee on all or any part of the Trust Estate, the Trust
Indenture Estate or the Aircraft and (c) will personally hold harmless and
indemnify Lessee, Owner Participant, each Note Holder, Mortgagee, each of their
respective Affiliates, successors and permitted assigns, the Trust Estate and
the Trust Indenture Estate from and against (i) any and all Expenses, (ii) any
reduction in the amount payable out of the Trust Estate or the Trust Indenture
Estate and (iii) any interference with the possession, operation or other use of
all or any part of the Aircraft imposed on, incurred by or asserted against any
of the foregoing as a consequence of any such Lessor Lien.

<PAGE>   42

                                      -37-

         7.3.2 OTHER BUSINESS

         Owner Trustee will not enter into any business or other activity except
as contemplated by the Operative Agreements.

         7.3.3 NOTICE OF CHANGE OF CHIEF EXECUTIVE OFFICE

         First Security, in its individual capacity and as Owner Trustee, will
give Lessee, each Participant and Mortgagee 30 days' prior written notice of any
relocation of its chief executive office (as such term is defined in Article 9
of the UCC) from its then present location and will promptly take any action
required by Section 7.3.8 as a result of such relocation.

         7.3.4 SECURITIES ACT

         First Security, in its individual capacity and as Owner Trustee, will
not directly or indirectly offer any beneficial interest or Security relating to
the ownership of the Aircraft or any interest in the Trust Estate or any of the
Equipment Notes or any other interest in or security under the Trust Indenture
for sale to, or solicit any offer to acquire any such interest or security from,
or sell any such interest or security to, any Person in violation of the
Securities Act or applicable state or foreign securities Laws, provided that the
foregoing shall not be deemed to impose on First Security in its individual
capacity or as Owner Trustee, any responsibility with respect to any such offer,
sale or solicitation by any other party hereto.

         7.3.5 PERFORMANCE OF AGREEMENTS

         Owner Trustee shall perform its obligations under the Owner Trustee
Agreements in accordance with the terms thereof.

         7.3.6 RELEASE OF LIEN OF TRUST INDENTURE

         Owner Trustee, in each instance referred to in the Lease in which a
transfer of any property is required to be made by Owner Trustee to Lessee or
any other Person (other than Mortgagee or Owner Participant), shall, at Lessee's
request and expense, use its reasonable efforts to procure from Mortgagee the
prompt release of the Lien of the Trust Indenture with respect to such property.

<PAGE>   43

                                      -38-

         7.3.7 NOTICES; DOCUMENTS

         In the event any claim with respect to any liabilities is filed against
the Owner Trustee in its capacity as such and Owner Trustee shall have Actual
Knowledge thereof, the Owner Trustee shall promptly notify Lessee in writing
thereof. Owner Trustee further agrees to provide to Lessee promptly any
documents (including the certificate of aircraft registration) that it receives
from the FAA with respect to the Aircraft.

         7.3.8 FILINGS

         After the Delivery Date, Owner Trustee shall duly execute and deliver
to Lessee all filings and recordings (including, without limitation, all filings
and UCC financing statements under the Act and the UCC and any amendments to UCC
financing statements necessitated by any relocation of its chief executive
office), prepared and delivered to it by Lessee required to perfect Owner
Trustee's title to the Aircraft and the liens of and security interests granted
by the Trust Indenture (or to maintain such perfection) and to make such title,
liens and security interests valid and enforceable.

         7.3.9 TRUST AGREEMENT

         Each of First Security and Owner Trustee hereby (i) agrees with Lessee,
Loan Participants and Mortgagee not to amend, supplement, terminate or otherwise
modify any provision of the Trust Agreement in such a manner as to adversely
affect the rights of any such party without the prior written consent of such
party and (ii) agrees with Lessee, Loan Participants and Mortgagee not to revoke
the trust created by the Trust Agreement so long as the Trust Indenture remains
undischarged or if such revocation would have an adverse effect on the Lessee.
Nothing contained in this Agreement shall impair any right under the Trust
Agreement of First Security to resign as Owner Trustee in accordance with the
provisions of the Trust Agreement.

     7.4 COVENANTS OF WTC

         WTC in its individual capacity or as Mortgagee, each Pass Through
Trustee or Subordination Agent, as the case may be, covenants and agrees with
Lessee, Owner Participant and Owner Trustee as follows:

<PAGE>   44

                                      -39-

         7.4.1 LIENS

         WTC (a) will not directly or indirectly create, incur, assume or suffer
to exist any Lessor Lien attributable to it on or with respect to all or any
part of the Trust Estate, the Trust Indenture Estate or the Aircraft, (b) will,
at its own cost and expense, promptly take such action as may be necessary to
discharge any Lessor Lien attributable to WTC on all or any part of the Trust
Estate, the Trust Indenture Estate or the Aircraft and (c) will personally hold
harmless and indemnify Lessee, Owner Participant, each Note Holder, Owner
Trustee, each of their respective Affiliates, successors and permitted assigns,
the Trust Estate and the Trust Indenture Estate from and against (i) any and all
Expenses, (ii) any reduction in the amount payable out of the Trust Estate or
the Trust Indenture Estate and (iii) any interference with the possession,
operation or other use of all or any part of the Aircraft, imposed on, incurred
by or asserted against any of the foregoing as a consequence of any such Lessor
Lien.

         7.4.2 SECURITIES ACT

         WTC in its individual capacity or as Mortgagee, a Pass Through Trustee
or Subordination Agent, will not offer any beneficial interest or Security
relating to the ownership of the Aircraft or any interest in the Trust Indenture
Estate, or any of the Equipment Notes or any other interest in or security under
the Trust Indenture for sale to, or solicit any offer to acquire any such
interest or security from, or sell any such interest or security to, any Person
in violation of the Securities Act or applicable state or foreign securities
Laws, provided that the foregoing shall not be deemed to impose on WTC any
responsibility with respect to any such offer, sale or solicitation by any other
party hereto.

         7.4.3 PERFORMANCE OF AGREEMENTS

         WTC, in its individual capacity and as Mortgagee, a Pass Through
Trustee or Subordination Agent, as the case may be, shall perform its
obligations under the Indenture Agreements, the Pass Through Trustee Agreements
and the Subordination Agent Agreements in accordance with the terms thereof.

         7.4.4 WITHHOLDING TAXES

         WTC shall indemnify (on an after-tax basis) and hold harmless Lessee,
Lessor and Owner Participant against any United States withholding taxes (and
related interest, penalties

<PAGE>   45

                                      -40-

and additions to tax) as a result of the failure by WTC to withhold on payments
to any Note Holder if such Note Holder failed to provide to Mortgagee necessary
certificates or forms to substantiate the right to exemption from such
withholding tax.

     7.5 COVENANTS OF NOTE HOLDERS

         Each Note Holder (including Subordination Agent) as to itself only
covenants and agrees with Lessee, Owner Participant, Owner Trustee and Mortgagee
as follows:

         7.5.1 WITHHOLDING TAXES

         Such Note Holder (if it is a Non-U.S. Person) agrees to indemnify (on
an after-tax basis) and hold harmless Lessee, Lessor, Owner Participant and
Mortgagee against any United States withholding taxes (and related interest,
penalties and additions to tax) as a result of the inaccuracy or invalidity of
any certificate or form provided by such Note Holder to Mortgagee in connection
with such withholding taxes. Any amount payable hereunder shall be paid within
30 days after receipt by a Note Holder of a written demand therefor.

         7.5.2 TRANSFER; COMPLIANCE

         (a) Such Note Holder will (i) not transfer any Equipment Note or
     interest therein in violation of the Securities Act or applicable state or
     foreign securities Law; provided, that the foregoing provisions of this
     section shall not be deemed to impose on such Note Holder any
     responsibility with respect to any such offer, sale or solicitation by any
     other party hereto, and (ii) perform and comply with the obligations
     specified to be imposed on it (as a Note Holder) under each of the Trust
     Indenture and the form of Equipment Note set forth in the Trust Indenture.

         (b) Except as otherwise required by the terms of Section 2.13 of the
     Trust Indenture or Section 11 hereof, each Note Holder will not sell,
     assign, convey, exchange or otherwise transfer any Equipment Note or any
     interest in, or represented by, any Equipment Note (it being understood
     that this provision is not applicable to the Pass Through Certificates)
     unless the proposed transferee thereof first provides Lessee and Owner
     Participant with both of the following:

<PAGE>   46

                                      -41-

         (i) a written representation and covenant that either (a) no portion of
     the funds it uses to purchase, acquire and hold such Equipment Note or
     interest directly or indirectly constitutes, or may be deemed under the
     Code or ERISA or any rulings, regulations or court decisions thereunder to
     constitute, the assets of any Plan or (b) the transfer, and subsequent
     holding, of such Equipment Note or interest shall not involve or give rise
     to a transaction that constitutes a prohibited transaction within the
     meaning of Section 406 of ERISA or Section 4975(c)(1) of the Code involving
     Lessee, Owner Participant, a Pass Through Trustee, the Subordination Agent
     or the proposed transferee (other than a transaction that is exempted from
     the prohibitions of such sections by applicable provisions of ERISA or the
     Code or administrative exemptions or regulations issued thereunder); and

         (ii) a written covenant that it will not transfer any Equipment Note or
     any interest in, or represented by, any Equipment Note unless the
     subsequent transferee also makes the representation described in clause (i)
     above and agrees to comply with this clause (ii).

     7.6 AGREEMENTS

         7.6.1 OWNER TRUSTEE IS OWNER AND LESSOR FOR ALL PURPOSES

         Lessee, the Owner Participant and Owner Trustee agree that for all
purposes, after the Closing, Owner Trustee will be the owner and lessor of the
Aircraft (except that Owner Participant will be the owner and lessor for income
tax purposes) and Lessee will be the lessee thereof. No transfer, by operation
of Law or otherwise, of the beneficial interest of Owner Participant in and to
the Trust Estate shall operate to transfer legal title to any part of the Trust
Estate to any transferee thereof.

         7.6.2 COMMENCEMENT OF BANKRUPTCY PROCEEDINGS

         Lessee, each Participant, each Note Holder, First Security, Owner
Trustee, WTC and Mortgagee agree for the benefit of each of the others that it
will not commence or join in any proceeding under the Bankruptcy Code to
commence a case under Section 303 of the Bankruptcy Code against the Trust
Estate. Nothing contained herein shall be deemed to preclude any Participant,
any Note Holder, First Security, Owner Trustee, WTC

<PAGE>   47

                                      -42-

or Mortgagee from filing any claim against the Trust Estate in any case
commenced against the Trust Estate.

         7.6.3 CERTAIN BANKRUPTCY MATTERS

         If (a) all or any part of the Trust Estate becomes the property of, or
Owner Trustee or Owner Participant becomes, a debtor subject to the
reorganization provisions of the Bankruptcy Code, (b) pursuant to such
reorganization provisions, including Section 1111(b) of the Bankruptcy Code,
First Security or Owner Participant is required, by reason of First Security or
Owner Participant being held to have recourse liability to any Note Holder or
Mortgagee directly or indirectly (other than the recourse liability of First
Security or Owner Participant under this Agreement, the Trust Indenture or by
separate agreement), to make payment on account of any amount payable as
principal, Make-Whole Amount, if any, interest or other amounts on the Equipment
Notes, and (c) any Note Holder or Mortgagee actually receives any Excess Amount,
as defined below, which reflects any payment by First Security or Owner
Participant on account of (b) above, then such Note Holder or Mortgagee, as the
case may be, shall promptly refund to First Security or Owner Participant
(whichever shall have made such payment) such Excess Amount.

         For purposes of this Section 7.6.3, "Excess Amount" means the amount by
which such payment exceeds the amount that would have been received by a Note
Holder or Mortgagee if First Security or Owner Participant had not become
subject to the recourse liability referred to in clause (b) above. Nothing
contained in this Section 7.6.3 shall prevent a Note Holder or Mortgagee from
enforcing any personal recourse obligation (and retaining the proceeds thereof)
of First Security or Owner Participant under this Agreement (other than as
referred to in clause (b) above) or the Trust Indenture (and any exhibits or
annexes thereto) or from retaining any amount paid by Owner Participant under
Sections 2.13 or 4.03 of the Trust Indenture.

         7.6.4 QUIET ENJOYMENT; SALE BY OWNER TRUSTEE BINDING

          (a) Owner Participant, each Pass Through Trustee, Subordination Agent,
     each Note Holder, Owner Trustee and Mortgagee each agrees as to itself with
     Lessee that, so long as no Lease Event of Default shall have occurred and
     be continuing, such Person shall not (and shall not permit any Affiliate or
     other Person claiming by, through or under it to) interfere with Lessee's
     or any Permitted Sublessee's rights in accordance with the Lease to the
     quiet enjoyment, possession and use of the Aircraft during the Term.

<PAGE>   48

                                      -43-

          (b) Any assignment, sale, transfer or other conveyance of the Aircraft
     by Owner Trustee made pursuant to the terms of this Agreement or the Lease
     shall bind Owner Participant and shall be effective to transfer or convey
     all right, title and interest of Owner Trustee and Owner Participant in and
     to the Aircraft. No purchaser or other grantee shall be required to inquire
     as to the authorization, necessity, expediency or regularity of such
     assignment, sale, transfer or conveyance, or as to the application of any
     sale or other proceeds with respect thereto by Owner Trustee, as regards
     Owner Participant.

         7.6.5 RELEASE OF LIEN OF TRUST INDENTURE

         Each of Lessee, Lessor and Mortgagee agrees that in each instance
referred to in the Lease in which a transfer of any property is required to be
made by Lessor to Lessee or any other Person (other than Mortgagee), Mortgagee
shall, upon request of Lessor and compliance with the applicable provisions of
the Lease and the Trust Indenture, including payment of all amounts then due and
payable to each Liquidity Provider as Supplemental Rent, promptly execute (at
Lessee's cost and expense) such instruments as Lessor or Lessee may reasonably
request to evidence the release of the Lien of the Trust Indenture with respect
to such property.

         7.6.6 NON-RECOURSE

         Each Loan Participant and Mortgagee agrees that (a) obligations of
Owner Trustee under the Trust Indenture or any other Operative Agreement and
with respect to the Equipment Notes shall be non-recourse to Owner Participant
and to First Security and (b) they will look solely to the income and proceeds
from the Trust Estate and the Trust Indenture Estate to the extent available for
distribution to Note Holder or Mortgagee as provided in the Trust Indenture and
that neither Owner Participant nor First Security will be personally liable to
Loan Participant or Mortgagee for any amounts payable by Owner Trustee under the
Trust Indenture or any other Operative Agreement; provided, however, that the
foregoing is not intended nor shall it be construed to limit any recourse
liability of Owner Participant or First Security to the extent that such
liability is expressly set forth in this Agreement or in any of the Operative
Agreements or arises by reason of the breach of any

<PAGE>   49

                                      -44-

representation or warranty or covenant given by such Person (in the case of
First Security, in its individual capacity).

         7.6.7 OTHER DOCUMENTS; AMENDMENT

          (a) So long as the Lease has not been terminated or expired, each
     Participant, the Mortgagee and the Owner Trustee hereby agree for the
     benefit of Lessee that without the consent of Lessee they will not amend,
     supplement or otherwise modify (i) Article III, Article IX or Section 2.05
     of the Trust Indenture, (ii) any provision of any Operative Agreement that
     will affect the stated principal amount of or premium or interest on the
     Equipment Notes or (iii) any other provision of the Trust Indenture or
     Equipment Notes in a manner that would adversely affect Lessee. Mortgagee
     and Owner Trustee agree to promptly furnish to Lessee copies of any
     supplement, amendment, waiver or modification of any of the Operative
     Agreements to which Lessee is not a party; provided that Mortgagee or Owner
     Trustee, as the case may be, has in its possession a copy of such
     supplement, amendment, waiver or modification. Each Loan Participant agrees
     that it will not take any action in respect of the Trust Indenture Estate
     except through the Mortgagee pursuant to the Trust Indenture or as
     otherwise permitted by Trust Indenture or other Operative Agreement.

          (b) Owner Trustee agrees to join with Lessee to the extent that action
     on the part of Owner Trustee is necessary or appropriate (i) to cause the
     following to be duly accomplished in accordance with applicable United
     States federal Law by the time the Aircraft is delivered under this
     Agreement and the Lease: (A) the application for registration of the
     Aircraft in the name of Owner Trustee and (B) all related action necessary
     in order for Lessee to have temporary or permanent authority to operate the
     Aircraft as contemplated by the Lease and (ii) forthwith upon delivery of
     the Aircraft under this Agreement and the Lease, to cause all necessary
     documents to be duly filed for recording in accordance with applicable
     United States federal Law.

         7.6.8 CONSENTS

         Each of Owner Participant, each Pass Through Trustee, Subordination
Agent, Owner Trustee and Mortgagee covenants and agrees, for the benefit of
Lessee, that it shall not unreasonably withhold its consent to any consent or
approval requested

<PAGE>   50

                                      -45-

of it or of Owner Trustee or Mortgagee under the terms of any of the Operative
Agreements which by its terms is not to be unreasonably withheld.

         7.6.9 INSURANCE

         Each of Owner Participant, the Pass Through Trustees, the Subordination
Agent and the Owner Trustee agrees not to obtain or maintain insurance for its
own account as permitted by Section 11.2 of the Lease if such insurance would
limit or otherwise adversely affect the coverage of any insurance required to be
obtained or maintained by Lessee pursuant to Section 11 and Annex D of the
Lease.

         7.6.10 EXTENT OF INTEREST OF NOTE HOLDERS

         A Note Holder shall not, as such, have any further interest in, or
other right with respect to, the Trust Estate or the Trust Indenture Estate when
and if the principal and Make-Whole Amount, if any, of and interest on the
Equipment Note held by such Note Holder, and all other sums, then due and
payable to such Note Holder hereunder and under any other Operative Agreement,
shall have been paid in full.

         7.6.11 FOREIGN REGISTRATION

         Each Participant, Owner Trustee and Mortgagee hereby agree, for the
benefit of Lessee but subject to the provisions of Section 7.1.2 of the Lease:

          (a) that Lessee shall be entitled to register the Aircraft or cause
     the Aircraft to be registered in a country other than the United States
     subject to compliance with the following:

          (i) each of the following requirements is satisfied:

               (A) such registration shall be made only after the close of the
          Tax Attribute Period, unless Lessee prepays to the Owner Participant
          on a lump sum basis any indemnity due under the Tax Indemnity
          Agreement as a result of such registration based upon the assumption
          that such registration would continue for the remainder of the term of
          the Permitted Sublease described in clause (C) below;

<PAGE>   51

                                      -46-

               (B) no Lease Event of Default shall have occurred and be
          continuing at the time of such registration;

               (C) such proposed change of registration is made in connection
          with a Permitted Sublease to a Permitted Air Carrier;

               (D) such country is a Permitted Country with which the United
          States then maintains normal diplomatic relations or, if Taiwan, the
          United States then maintains diplomatic relations at least as good as
          those in effect on the Delivery Date;

          (ii) the Owner Trustee and Mortgagee shall have received an opinion of
     counsel (subject to customary exceptions) reasonably satisfactory to the
     Owner Participant addressed to each such party as to the effect that:

               (A) such country would recognize the Owner Trustee's ownership
          interest in the Aircraft;

               (B) the obligations of Lessee, and the rights and remedies of
          Owner Trustee, under the Lease are valid, binding and enforceable
          under the laws of such jurisdiction (or the laws of the jurisdiction
          to which the laws of such jurisdiction would refer as the applicable
          governing law);

               (C) after giving effect to such change in registration, the Lien
          of the Trust Indenture on the Owner Trustee's right, title and
          interest in and to the Aircraft and the Lease shall continue as a
          valid and duly perfected first priority security interest and all
          filing, recording or other action necessary to protect the same shall
          have been accomplished (or, if such opinion cannot be given at the
          time of such proposed change in registration because such change in
          registration is not yet effective, (1) the opinion shall detail what
          filing, recording or other action is necessary and (2) the Owner
          Trustee and the Mortgagee shall have received a certificate from
          Lessee that all possible preparations to accomplish such filing,
          recording and other action shall have been done, and such filing,
          recording and other action shall be accomplished and a supplemental
          opinion to that effect shall be delivered to the Owner Trustee

<PAGE>   52

                                      -47-

          and the Mortgagee on or prior to the effective date of such change in
          registration);

               (D) it is not necessary, solely as a consequence of such change
          in registration and without giving effect to any other activity of the
          Owner Trustee, the Owner Participant or the Mortgagee (or any
          Affiliate thereof), as the case may be, for the Owner Trustee, the
          Owner Participant or the Mortgagee to qualify to do business in such
          jurisdiction as a result of such reregistration in order to exercise
          any rights or remedies with respect to the Aircraft pursuant to the
          Lease;

               (E) there is no tort liability of the owner or lessor of an
          aircraft not in possession thereof under the laws of such jurisdiction
          (it being agreed that, in the event such opinion cannot be given in a
          form satisfactory to the Owner Participant, such opinion shall be
          waived if insurance reasonably satisfactory to the Owner Participant
          is provided to cover such risk); and

               (F) unless Lessee shall have agreed to provide insurance covering
          the risk of requisition of use of the Aircraft by the government of
          such country (so long as the Aircraft is registered under the laws of
          such country), the laws of such country require fair compensation by
          the government of such country payable in currency freely convertible
          into Dollars and freely removable from such country (without license
          or permit, unless Lessee prior to such proposed reregistration has
          obtained such license or permit) for the taking or requisition by such
          government of such use;

          (b) In addition, as a condition precedent to any change in
     registration Lessee shall have given to Lessor and Mortgagee assurances
     reasonably satisfactory to each of them:

          (i) to the effect that the provisions of Section 11 of the Lease will
     have been complied with after giving effect to such change of registration;

          (ii) of the payment by Lessee of all reasonable out-of-pocket expenses
     of Lessor, each Participant and Mortgagee in connection with such change of
     registry, including,

<PAGE>   53

                                      -48-

     without limitation (1) the reasonable fees and disbursements of counsel to
     Lessee, Lessor and Mortgagee, (2) any filing or recording fees, Taxes or
     similar payments incurred in connection with the change of registration of
     the Aircraft and the creation and perfection of the security interest
     therein in favor of Mortgagee for the benefit of Note Holders, and (3) all
     costs and expenses incurred in connection with any filings necessary to
     continue in the United States the perfection of the security interest in
     the Aircraft and the Lease in favor of Mortgagee for the benefit of Note
     Holders; and

          (iii) to the effect that the tax and other indemnities in favor of
     each person named as an indemnitee under any other Operative Agreement
     afford each such person substantially the same protection as provided prior
     to such change of registration (or Lessee shall have agreed upon additional
     indemnities that, together with such original indemnities, in the
     reasonable judgment of Lessor and Mortgagee, afford such protection).

         7.6.12 OTHER COMMERCIAL RELATIONS UNAFFECTED

         Notwithstanding anything to the contrary set forth in any Operative
Agreement:

          (a) Except as set forth in the Purchase Agreement Assignment, nothing
     contained in the Operative Agreements shall constitute or be deemed to be a
     waiver by Lessee of any rights, remedies or claims it may have against
     Airframe Manufacturer or Engine Manufacturer or any subcontractor or
     supplier of either; and the Operative Agreements do not and shall not be
     construed or deemed to create any rights, waivers, immunities or
     indemnities in favor of Airframe Manufacturer, Engine Manufacturer or any
     subcontractor or supplier of either with respect to any such rights,
     remedies or claims of Lessee; and

          (b) None of Airframe Manufacturer, by its execution and delivery of
     the Consent and Agreement, and Engine Manufacturer, by its execution and
     delivery of the Engine Consent and Agreement, shall be deemed to have
     waived any rights, remedies or claims which Airframe Manufacturer or Engine
     Manufacturer (or any subcontractor or supplier of either), as the case may
     be, may have against Lessee; and the Operative Agreements do not and shall
     not be construed or deemed to create any rights, waivers, immunities or
     indemnities in favor of Lessee with respect to any such

<PAGE>   54

                                      -49-

     rights, remedies or claims of Airframe Manufacturer or Engine Manufacturer
     (or any subcontractor or supplier of either).

         7.6.13 INTEREST IN CERTAIN ENGINES

         Each Participant, Owner Trustee, and Mortgagee agree, for the benefit
of each of the lessor, conditional seller, mortgagee or secured party of any
airframe or engine leased to, or purchased by, Lessee or any Permitted Sublessee
subject to a lease, conditional sale, trust indenture or other security
agreement that it will not acquire or claim, as against such lessor, conditional
seller, mortgagee or secured party, any right, title or interest in any engine
as the result of such engine being installed on the Airframe at any time while
such engine is subject to such lease, conditional sale, trust indenture or other
security agreement and owned by such lessor or conditional seller or subject to
a trust indenture or security interest in favor of such mortgagee or secured
party.

SECTION 8.  CONFIDENTIALITY

         Lessee, Owner Participant, Note Holders, Owner Trustee and Mortgagee
shall keep Annexes B, C and D and Schedules 1, 2A, 2B, 3 and 4 to the Lease, the
Participation Agreement, the Purchase Agreement Assignment and the Tax Indemnity
Agreement confidential and shall not disclose, or cause to be disclosed, the
same to any Person, except (A) to prospective and permitted transferees of
Lessee's, Owner Participant's, a Note Holder's, a Liquidity Provider's, Owner
Trustee's, Mortgagee's or other Indenture Indemnitee's interest or their
respective counsel or special counsel, independent insurance brokers, auditors,
or other agents who agree to hold such information confidential, (B) to
Lessee's, Owner Participant's, a Note Holder's, a Liquidity Provider's, a Pass
Through Trustee's, Owner Trustee's, Mortgagee's or other Indenture Indemnitee's
counsel or special counsel, independent insurance brokers, auditors, or other
agents, Affiliates or investors who agree to hold such information confidential,
(C) as may be required by any statute, court or administrative order or decree,
legal process or governmental ruling or regulation, including those of any
applicable insurance regulatory bodies (including, without limitation, the
National Association of Insurance Commissioners ("NAIC")), federal or state
banking examiners, Internal Revenue Service auditors or any stock exchange, (D)
with respect to Lessee and Owner Participant, by mutual agreement of such
parties, (E) with respect to a Note Holder or any Pass

<PAGE>   55

                                      -50-

Through Trustee, to a nationally recognized rating agency for the purpose of
obtaining a rating on the Equipment Notes or the Pass Through Trust Certificates
or to support an NAIC rating for the Equipment Notes or (F) such other Persons
as are reasonably deemed necessary by the disclosing party in order to protect
the interests of such party or for the purposes of enforcing such documents by
such party; provided, that any and all disclosures permitted by clauses (C),
(D), (E) or (F) above shall be made only to the extent necessary to meet the
specific requirements or needs of the Persons making such disclosures.

SECTION 9. INDEMNIFICATION AND EXPENSES

     9.1 GENERAL INDEMNITY

         9.1.1 INDEMNITY

         Whether or not any of the transactions contemplated hereby are
consummated, Lessee shall indemnify, protect, defend and hold harmless each
Indemnitee from, against and in respect of, and shall pay on a net after-tax
basis, any and all Expenses of any kind or nature whatsoever that may be imposed
on, incurred by or asserted against any Indemnitee, relating to, resulting from,
or arising out of or in connection with, any one or more of the following:

          (a) The Operative Agreements, the Pass Through Agreements, or the
     enforcement of any of the terms of any of the Operative Agreements or the
     Pass Through Agreements;

          (b) The Aircraft, the Airframe, any Engine or any Part, including,
     without limitation, with respect thereto, (i) the manufacture, design,
     purchase, acceptance, nonacceptance or rejection, ownership, registration,
     reregistration, deregistration, delivery, nondelivery, lease, sublease,
     assignment, possession, use or non-use, operation, maintenance, testing,
     repair, overhaul, condition, alteration, modification, addition,
     improvement, storage, airworthiness, replacement, repair, sale,
     substitution, return, abandonment, redelivery or other disposition of the
     Aircraft, any Engine or any Part, (ii) any claim or penalty arising out of
     violations of applicable Laws by Lessee (or any Permitted Sublessee), (iii)
     tort liability, whether or not arising out of the negligence of any
     Indemnitee (whether active, passive or imputed), (iv) death or property
     damage of passengers, shippers or others, (v) environmental

<PAGE>   56

                                      -51-

     control, noise or pollution and (vi) any Liens in respect of the Aircraft,
     any Engine or any Part;

          (c) The offer, sale, or delivery of any Equipment Notes, Pass Through
     Certificates or any interest therein or represented thereby; and

          (d) Any breach of or failure to perform or observe, or any other
     noncompliance with, any covenant or agreement or other obligation to be
     performed by Lessee under any Lessee Operative Agreement or any Pass
     Through Agreement or the falsity of any representation or warranty of
     Lessee in any Lessee Operative Agreement or any Pass Through Agreement
     other than in the Tax Indemnity Agreement.

         9.1.2 EXCEPTIONS

         Notwithstanding anything contained in Section 9.1.1, Lessee shall not
be required to indemnify, protect, defend and hold harmless any Indemnitee
pursuant to Section 9.1.1 in respect of any Expense of such Indemnitee:

          (a) For any Taxes or a loss of Tax benefit, whether or not Lessee is
     required to indemnify therefor pursuant to Section 9.3 or the Tax Indemnity
     Agreement;

          (b) Except to the extent attributable to acts or events occurring
     prior thereto, acts or events (other than acts or events related to the
     performance by Lessee of its obligations pursuant to the terms of the
     Lessee Operative Agreements) that occur after the earliest of: (i) with
     respect to the Airframe, any Engine or any Part, the return of possession
     (it being understood that the date of the placement of the Aircraft in
     storage as provided in Section 5 of the Lease constitutes the date of
     return of the Aircraft under the Lease) of such Airframe, Engine or Part
     pursuant to the terms of and in compliance with the Lease (other than
     pursuant to Section 15 thereof, in which case Lessee's liability under this
     Section 9.1 shall survive for so long as Lessor shall be entitled to
     exercise remedies under such Section 15) or (ii) the termination of the
     Term in accordance with the Lease;

          (c) To the extent attributable to any Transfer (voluntary or
     involuntary) by or on behalf of such Indemnitee of any Equipment Note or
     interest therein, except (i) for out-of-pocket costs and expenses incurred
     as a result of any such Transfer pursuant to the exercise of remedies under

<PAGE>   57
                                      -52-

     any Operative Agreement resulting from a Lease Event of Default and (ii) as
     otherwise required by the terms of Section 2.13 of the Trust Indenture or
     Section 11 hereof;

          (d) To the extent attributable to any Transfer (voluntary or
     involuntary) by or on behalf of Owner Participant of any interest in the
     Aircraft, or the Trust Estate except for out-of-pocket costs and expenses
     incurred as a result of such Transfer, if, at the time of such Transfer, a
     Lease Event of Default shall have occurred and be continuing;

          (e) To the extent attributable to the gross negligence or willful
     misconduct of such Indemnitee or any related Indemnitee (as defined below)
     (other than gross negligence or willful misconduct imputed to such person
     by reason of its interest in the Aircraft or any Operative Agreement);

          (f) In the case of First Security, to the extent attributable to
     matters enumerated in the proviso to Section 14;

          (g) To the extent attributable to the incorrectness or breach of any
     representation or warranty of such Indemnitee or any related Indemnitee
     contained in or made pursuant to any Operative Agreement or any Pass
     Through Agreement;

          (h) To the extent attributable to the failure by such Indemnitee or
     any related Indemnitee to perform or observe any agreement, covenant or
     condition on its part to be performed or observed in any Operative
     Agreement or any Pass Through Agreement;

          (i) To the extent attributable to the offer or sale by such Indemnitee
     or any related Indemnitee of any interest in the Aircraft, the Equipment
     Notes, the Pass Through Trust Certificates, the Trust Estate or the Trust
     Agreement or any similar interest, in violation of the Securities Act or
     other applicable federal, state or foreign securities Laws (other than any
     thereof caused by the acts or omissions of Lessee);

          (j) (i) With respect to any Indemnitee (other than Mortgagee), to the
     extent attributable to the failure of the Mortgagee to distribute funds
     received and distributable by it in accordance with the Trust Indenture,

<PAGE>   58
                                      -53-

     (ii) with respect to any Indemnitee (other than the Owner Trustee), to the
     extent attributable to the failure of the Owner Trustee to distribute funds
     received and distributable by it in accordance with the Trust Agreement,
     (iii) with respect to any Indemnitee (other than the Subordination Agent),
     to the extent attributable to the failure of the Subordination Agent to
     distribute funds received and distributable by it in accordance with the
     Intercreditor Agreement, (iv) with respect to any Indemnitee (other than
     the Pass Through Trustees), to the extent attributable to the failure of a
     Pass Through Trustee to distribute funds received and distributable by it
     in accordance with the Pass Through Trust Agreements, (v) with respect to
     any Indemnitee (other than the Escrow Agent), to the extent attributable to
     the failure of the Escrow Agent to pay funds received and payable by it in
     accordance with any Escrow Agreement, (vi) with respect to any Indemnitee
     (other than the Paying Agent), to the extent attributable to the failure of
     the Paying Agent to distribute funds received and distributable by it in
     accordance with any Escrow Agreement, (vii) to the extent attributable to
     the failure of the Depositary to pay funds payable by it in accordance with
     any Deposit Agreement, (viii) with respect to Mortgagee, to the extent
     attributable to the negligence or willful misconduct of Mortgagee in the
     distribution of funds received and distributable by it in accordance with
     the Trust Indenture, (ix) with respect to Owner Trustee, to the extent
     attributable to the negligence or willful misconduct of Owner Trustee in
     the distribution of funds received and distributable by it in accordance
     with the Trust Agreement, (x) with respect to the Subordination Agent, to
     the extent attributable to the negligence or willful misconduct of the
     Subordination Agent in the distribution of funds received and distributable
     by it in accordance with the Intercreditor Agreement, (xi) with respect to
     the Pass Through Trustees, to the extent attributable to the negligence or
     willful misconduct of a Pass Through Trustee in the distribution of funds
     received and distributable by it in accordance with the Pass Through Trust
     Agreements, (xii) with respect to the Escrow Agent, to the extent
     attributable to the negligence or willful misconduct of the Escrow Agent in
     the payment of funds received and payable by it in accordance with any
     Escrow Agreement, and (xiii) with respect to the Paying Agent, to the
     extent attributable to the negligence or willful misconduct of the Paying
     Agent in the distribution of funds received and distributable by it in
     accordance with any Escrow Agreement;

<PAGE>   59
                                      -54-

          (k) Other than during the continuation of a Lease Event of Default, to
     the extent attributable to the authorization or giving or withholding of
     any future amendments, supplements, waivers or consents with respect to any
     Operative Agreement or Pass Through Agreement other than such as have been
     requested by Lessee or as are required by or made pursuant to the terms of
     the Operative Agreements or Pass Through Agreements (unless such
     requirement results from the actions of an Indemnitee not required by or
     made pursuant to the Operative Agreements or the Pass Through Agreements);

          (l) To the extent attributable to any amount which such Indemnitee
     expressly agrees to pay or such Indemnitee expressly agrees shall not be
     paid by or be reimbursed by Lessee;

          (m) To the extent that such Expense is a loss of future profits of, a
     cost or expense unreasonably incurred by, or an ordinary and usual
     operating or overhead expense of, such Indemnitee;

          (n) With respect to the Owner Participant or the Owner Trustee, or any
     related Indemnitee, to the extent attributable to the deregistration of the
     Aircraft under the Act as a result of Owner Participant's or Owner
     Trustee's (or any related Indemnitee of either) not being a Citizen of the
     United States as a result of any act (other than reregistration of the
     Aircraft pursuant to Section 7.1.2 of the Lease) of Owner Participant or
     Owner Trustee, or any related Indemnitee of either of the foregoing (not
     taken at the request of the Lessee);

          (o) With respect to the Owner Trustee or any related Indemnitee, to
     the extent attributable to the deregistration of the Aircraft under the Act
     as a result of Owner Trustee or any related Indemnitee not being a Citizen
     of the United States as a result of any act (other than re-registration of
     the Aircraft pursuant to Section 7.1.2 of the Lease) of the Owner Trustee
     or any related Indemnitee (not taken at the request of the Lessee);

          (p) For any Lessor Lien attributable to such Indemnitee or any related
     Indemnitee;

          (q) If another provision of an Operative Agreement or a Pass Through
     Agreement specifies the extent of Lessee's responsibility or obligation
     with respect to such

<PAGE>   60
                                      -55-

     Expense, to the extent Lessee has complied with such specified
     responsibility or obligation;

          (r) To the extent constituting principal, Make-Whole Amount or
     interest on the Equipment Notes attributable solely to an Event of Default
     not constituting a Lease Event of Default;

          (s) To the extent incurred by or asserted against an Indemnitee as a
     result of any "prohibited transaction", within the meaning of Section 406
     of ERISA or Section 4975(c)(1) of the Code; or

          (t) For any loss attributable to, arising from or in connection with
     any inspections or inspection rights arising from or in connection with any
     of the Operative Documents or the Transactions.

          For purposes of this Section 9.1, a Person shall be considered a
     "related" Indemnitee with respect to an Indemnitee if such Person is an
     Affiliate or employer of such Indemnitee, a director, officer, employee,
     agent, or servant of such Indemnitee or any such Affiliate or a successor
     or permitted assignee of any of the foregoing.

         9.1.3 SEPARATE AGREEMENT

         This Agreement constitutes a separate agreement with respect to each
Indemnitee and is enforceable directly by each such Indemnitee.

         9.1.4 NOTICE

         If a claim for any Expense that an Indemnitee shall be indemnified
against under this Section 9.1 is made, such Indemnitee shall give prompt
written notice thereof to Lessee. Notwithstanding the foregoing, the failure of
any Indemnitee to notify Lessee as provided in this Section 9.1.4, or in Section
9.1.5, shall not release Lessee from any of its obligations to indemnify such
Indemnitee hereunder, except to the extent that such failure results in an
additional Expense to Lessee (in which event Lessee shall not be responsible for
such additional expense) or materially impairs Lessee's ability to contest such
claim.

<PAGE>   61

                                      -56-

         9.1.5 NOTICE OF PROCEEDINGS; DEFENSE OF CLAIMS; LIMITATIONS

          (a) In case any action, suit or proceeding shall be brought against
     any Indemnitee for which Lessee is responsible under this Section 9.1, such
     Indemnitee shall notify Lessee of the commencement thereof and Lessee may,
     at its expense, participate in and to the extent that it shall wish
     (subject to the provisions of the following paragraph), assume and control
     the defense thereof and, subject to Section 9.1.5(c), settle or compromise
     the same.

          (b) Lessee or its insurer(s) shall have the right, at its or their
     expense, to investigate or, if Lessee or its insurer(s) shall agree not to
     dispute liability to the Indemnitee giving notice of such action, suit or
     proceeding under this Section 9.1.5 for indemnification hereunder or under
     any insurance policies pursuant to which coverage is sought, control the
     defense of, any action, suit or proceeding, relating to any Expense for
     which indemnification is sought pursuant to this Section 9.1, and each
     Indemnitee shall cooperate with Lessee or its insurer(s) with respect
     thereto; provided, that Lessee shall not be entitled to control the defense
     of any such action, suit, proceeding or compromise any such Expense during
     the continuance of any Lease Event of Default arising under Section 14.1 of
     the Lease. In connection with any such action, suit or proceeding being
     controlled by Lessee, such Indemnitee shall have the right to participate
     therein, at its sole cost and expense, with counsel reasonably satisfactory
     to Lessee; provided, that such Indemnitee's participation does not, in the
     reasonable opinion of the independent counsel appointed by the Lessee or
     its insurers to conduct such proceedings, interfere with the defense of
     such case.

          (c) In no event shall any Indemnitee enter into a settlement or other
     compromise with respect to any Expense without the prior written consent of
     Lessee, which consent shall not be unreasonably withheld or delayed. Any
     settlement or compromise without such consent of Lessee shall be deemed a
     waiver by such Indemnitee of its right to be indemnified with respect to
     such Expense under this Section 9.1.

          (d) In the case of any Expense indemnified by the Lessee hereunder
     which is covered by a policy of insurance maintained by Lessee pursuant to
     Section 11 of the Lease,

<PAGE>   62
                                      -57-

     at Lessee's expense, each Indemnitee agrees to cooperate with the insurers
     in the exercise of their rights to investigate, defend or compromise such
     Expense as may be required to retain the benefits of such insurance with
     respect to such Expense.

          (e) If an Indemnitee is not a party to this Agreement, Lessee may
     require such Indemnitee to agree in writing to the terms of this Section 9
     and Section 15.8 prior to making any payment to such Indemnitee under this
     Section 9.

          (f) Nothing herein shall be deemed to be an assumption by Lessee of
     obligations of Owner Trustee with respect to, or a guarantee by Lessee of,
     any amounts payable by Owner Trustee upon Equipment Notes or a guarantee of
     any residual value of the Aircraft.

          (g) Nothing contained in this Section 9.1.5 shall be deemed to require
     an Indemnitee to contest any Expense or to assume responsibility for or
     control of any judicial proceeding with respect thereto.

         9.1.6 INFORMATION

         Lessee will provide the relevant Indemnitee with such information not
within the control of such Indemnitee, as is in Lessee's control or is
reasonably available to Lessee, which such Indemnitee may reasonably request and
will otherwise cooperate with such Indemnitee so as to enable such Indemnitee to
fulfill its obligations under Section 9.1.5. The Indemnitee shall supply Lessee
with such information not within the control of Lessee, as is in such
Indemnitee's control or is reasonably available to such Indemnitee, which Lessee
may reasonably request to control or participate in any proceeding to the extent
permitted by Section 9.1.5.

         9.1.7 EFFECT OF OTHER INDEMNITIES; SUBROGATION; FURTHER ASSURANCES

         Upon the payment in full by Lessee of any indemnity provided for under
this Agreement, Lessee, without any further action and to the full extent
permitted by Law, will be subrogated to all rights and remedies of the person
indemnified (other than with respect to any of such Indemnitee's insurance
policies or in connection with any indemnity claim such Indemnitee may have
under Section 5.03 or Article VII of the Trust Indenture or Section 5.3 or 7 of
the Trust Agreement) in respect

<PAGE>   63
                                      -58-

of the matter as to which such indemnity was paid. Each Indemnitee will give
such further assurances or agreements and cooperate with Lessee to permit Lessee
to pursue such claims, if any, to the extent reasonably requested by Lessee and
at Lessee's expense.

         9.1.8 REFUNDS

         If an Indemnitee receives any refund, in whole or in part, with respect
to any Expense paid by Lessee hereunder, it will promptly pay the amount
refunded (but not an amount in excess of the amount Lessee or any of its
insurers has paid in respect of such Expense) over to Lessee unless a Lease
Event of Default shall have occurred and be continuing, in which case such
amounts shall be paid over to Owner Trustee (or, so long as the Trust Indenture
shall not have been discharged, to Mortgagee) to hold as security for Lessee's
obligations under the Lessee Operative Agreements or, if requested by Lessee,
applied to satisfy such obligations.

     9.2 EXPENSES

         9.2.1 INVOICES AND PAYMENT

         Each of the Owner Trustee, Mortgagee, the Owner Participant, Lessee,
the Pass Through Trustees, and the Subordination Agent shall promptly submit to
Lessee for its prompt approval (which shall not be unreasonably withheld) copies
of invoices in reasonable detail of the Transaction Expenses for which it is
responsible for providing information as they are received (but in no event
later than the 90th day after the Delivery Date). If so submitted and approved,
the Owner Participant agrees promptly, but in any event no later than the 105th
day after the Delivery Date, to pay (but not in excess of [ ]% of Lessor's Cost)
Transaction Expenses. Notwithstanding the foregoing, Lessee at its sole option
shall have the right to pay directly any and all Transaction Expenses. Lessee
shall be obligated to pay directly any and all Transaction Expenses which are in
excess of [ ]% of Lessor's Cost. If Owner Participant shall fail to pay any
Transaction Expense that it is obligated to pay hereunder, Lessee shall pay such
Transaction Expense. Any such payment by Lessee shall not affect Owner
Participant's obligations or Lessee's rights against Owner Participant for its
failure to make any such payment.

<PAGE>   64
                                      -59-

         9.2.2 PAYMENT OF OTHER EXPENSES

         Lessee shall pay (i) the ongoing fees and expenses of Owner Trustee and
Mortgagee, and (ii) all reasonable out-of-pocket costs and expenses (including
the reasonable fees and disbursements of counsel) incurred by any Participant
attributable to (A) any transfer of title to the Aircraft or any Engine
contemplated by Section 4.5 of the Lease or (B) any waiver, amendment or
modification of any Operative Agreement to the extent requested by Lessee.

         9.2.3 PAYMENTS IF TRANSACTIONS DO NOT CLOSE

         In the event that the transaction contemplated by this Agreement fails
to close as a result of the Owner Participant's failure to comply with its
obligations under this Agreement or any breach of a representation or warranty
of Owner Participant made in or pursuant to any Operative Agreement,
notwithstanding any other rights and remedies that the parties hereto shall have
against Owner Participant, the Owner Participant will be responsible for all of
its fees and expenses, including but not limited to the fees, expenses and
disbursements of its special counsel and the fees of the Appraiser referred to
in Section 5.1.2(xv).

     9.3 GENERAL TAX INDEMNITY

         9.3.1 GENERAL

         Except as provided in Section 9.3.2, Lessee agrees that each payment of
Rent paid by Lessee pursuant to the Lease, and any other payment or indemnity
paid by Lessee to a Tax Indemnitee under any Operative Agreement, shall be free
of all withholdings or deductions with respect to Taxes of any nature (other
than U.S. federal, state or local withholding taxes on, based on or measured by
gross or net income), and in the event that Lessee shall be required by
applicable law to make any such withholding or deduction for any such payment
(x) Lessee shall make all such withholdings or deductions, (y) the amount
payable by Lessee shall be increased so that after making all required
withholdings or deductions such Tax Indemnitee receives the same amount that it
would have received had no such withholdings or deductions been made, and (z)
Lessee shall pay the full amount withheld or deducted to the relevant Taxing
Authority in accordance with applicable law. Lessee further agrees that, in the
event it is required to withhold from any payment of Basic Rent, Stipulated Loss
Value (and amounts determined by reference thereto), and amounts payable upon
exercise

<PAGE>   65
                                      -60-

of Lessee's purchase option pursuant to Section 17.3 of the Lease, any Tax
imposed upon Owner Participant or Owner Trustee (including any withholding Tax
based on income or receipts of Owner Participant or Owner Trustee) and such Tax
is excluded from indemnification pursuant to Section 9.3.2, Lessee shall pay
such additional amount, if any, required so that the total amount paid by Lessee
(after making all required withholdings) is equal to (assuming timely payment of
the Equipment Notes prior to the relevant Payment Date) the aggregate principal
amount of scheduled installments due on the Equipment Notes outstanding on the
relevant Payment Date, together with accrued and unpaid interest, due on the
Equipment Notes; Owner Participant or Owner Trustee, as the case may be, shall
reimburse Lessee for any such additional amounts within two Business Days after
demand therefor. Except as provided in Section 9.3.2 and whether or not any of
the transactions contemplated hereby are consummated, Lessee shall pay,
indemnify, protect, defend and hold each Tax Indemnitee harmless from all Taxes
imposed by any Taxing Authority that may from time to time be imposed on or
asserted against any Tax Indemnitee or the Aircraft, the Airframe, any Engine or
any Part or any interest in any of the foregoing (whether or not indemnified
against by any other Person), upon or with respect to the Operative Agreements
or the transactions or payments contemplated thereby, including but not limited
to any Tax imposed upon or with respect to (x) the Aircraft, the Airframe, any
Engine, any Part, any Operative Agreement (including without limitation any
Equipment Notes) or any data or any other thing delivered or to be delivered
under an Operative Agreement, (y) the purchase, manufacture, acceptance,
rejection, sale, transfer of title, return, ownership, mortgaging, delivery,
transport, charter, rental, lease, re-lease, sublease, assignment, possession,
repossession, presence, use, condition, storage, preparation, maintenance,
modification, alteration, improvement, operation, registration, transfer or
change of registration, reregistration, repair, replacement, overhaul, location,
control, the imposition of any Lien (other than a Lessor Lien), financing,
refinancing requested by the Lessee, abandonment or other disposition of the
Aircraft, the Airframe, any Engine, any Part, any data or any other thing
delivered or to be delivered under an Operative Agreement or (z) rent, interest,
fees or any other income, proceeds, receipts or earnings, whether actual or
deemed, arising upon, in connection with, or in respect of, any of the Operative
Agreements (including the property or income or other proceeds with respect to
property held as part of the Trust Estate) or the transactions contemplated
thereby.

<PAGE>   66

                                      -61-

         9.3.2 CERTAIN EXCEPTIONS

         The provisions of Section 9.3.1 shall not apply to, and Lessee shall
have no liability hereunder for, Taxes:

          (a) imposed on a Tax Indemnitee by the federal government of the
     United States or any Taxing Authority or governmental subdivision of the
     United States or therein (including any state or local Taxing Authority)
     (i) on, based on, or measured by, gross or net income or gross or net
     receipts, including capital gains taxes, excess profits taxes, minimum
     taxes from tax preferences, alternative minimum taxes, branch profits
     taxes, accumulated earnings taxes, personal holding company taxes,
     succession taxes and estate taxes, and any withholding taxes on, based on
     or measured by gross or net income or receipts or (ii) on, or with respect
     to, or measured by, capital or net worth or in the nature of a franchise
     tax or a tax for the privilege of doing business (other than, in the case
     of clause (i) or (ii), sales, use, license or property Taxes);

          (b) imposed on a Tax Indemnitee by any Taxing Authority or
     governmental subdivision thereof or therein outside of the United States
     (including any Taxing Authority in or of a territory, possession or
     commonwealth of the United States) (i) on, based on, or measured by, gross
     or net income or gross or net receipts, including capital gains taxes,
     excess profits taxes, minimum taxes from tax preferences, alternative
     minimum taxes, branch profits taxes, accumulated earnings taxes, personal
     holding company taxes, succession taxes and estate taxes, and any
     withholding taxes on, based on or measured by gross or net income or
     receipts or (ii) on, or with respect to, or measured by, capital or net
     worth or in the nature of a franchise tax or a tax for the privilege of
     doing business (other than, in the case of clause (i) or (ii), (A) sales,
     use, license or property Taxes, or (B) any Taxes imposed by any Taxing
     Authority (other than a Taxing Authority within whose jurisdiction such Tax
     Indemnitee is incorporated or organized or maintains its principal place of
     business) if such Tax Indemnitee would not have been subject to Taxes of
     such type by such jurisdiction but for (I) the location, use or operation
     of the Aircraft, the Airframe, any Engine or any Part thereof by a Lessee
     Person within the jurisdiction of the Taxing Authority imposing such Tax,
     or (II) the activities of any Lessee Person (except for activities of a
     Lessee Person that is not an

<PAGE>   67
                                      -62-

     Affiliate, successor or assign of the Lessee, which activities are
     unrelated to the transactions contemplated by the Operative Agreements) in
     such jurisdiction, including, but not limited to, use of any other aircraft
     by Lessee in such jurisdiction, (III) the status of any Lessee Person as a
     foreign entity or as an entity owned in whole or in part by foreign
     persons, (IV) Lessee having made (or having been deemed to have made)
     payments to such Tax Indemnitee from the relevant jurisdiction or (V) in
     the case of the Pass Through Trustees, any Participant or any related Tax
     Indemnitee, the Lessee being incorporated, organized, maintaining a place
     of business or conducting activities in such jurisdiction);

          (c) on, or with respect to, or measured by, any trustee fees,
     commissions or compensation received by Owner Trustee, Pass Through
     Trustee, Subordination Agent or Mortgagee;

          (d) on the Trust or the Trust Estate that result from treatment of the
     Trust or the Trust Estate as an entity, such as a corporation, separate and
     apart from the Owner Participant;

          (e) that are being contested as provided in Section 9.3.4 hereof;

          (f) imposed on any Tax Indemnitee to the extent that such Taxes result
     from the gross negligence or willful misconduct of such Tax Indemnitee or
     any Affiliate thereof;

          (g) imposed on or with respect to a Tax Indemnitee (including the
     transferee in those cases in which the Tax on transfer is imposed on, or is
     collected from, the transferee) as a result of a transfer or other
     disposition (including a deemed transfer or disposition) by such Tax
     Indemnitee or a related Tax Indemnitee (or, in the case of the Owner
     Participant, by Owner Trustee, or, in the case of Taxes imposed on a
     transferee, by the transferor) of any interest in the Aircraft, the
     Airframe, any Engine or any Part, the Rent (other than the assignment of
     Rent to the Loan Trustee pursuant to the Trust Indenture), the Trust, the
     Trust Estate, the Trust Indenture Estate, the Lease or any interest arising
     under the Operative Agreements or any Equipment Note or a transfer or
     disposition (including a deemed transfer or disposition) of any interest in
     a Tax Indemnitee (other than (A) a substitution or

<PAGE>   68
                                      -63-

     replacement of the Aircraft, the Airframe, any Engine or any Part by a
     Lessee Person that is treated for Tax purposes as a transfer or
     disposition, (B) a transfer pursuant to an exercise of remedies upon a
     Lease Event of Default that shall have occurred and have been continuing,
     or (C) a transfer to Lessee pursuant to Section 17.3 of the Lease);

          (h) Taxes in excess of those that would have been imposed had there
     not been a transfer or other disposition by or to such Tax Indemnitee or a
     related Tax Indemnitee described in paragraph (g) above;

          (i) imposed on the Owner Participant and indemnified by Lessee
     pursuant to the Tax Indemnity Agreement;

          (j) imposed with respect to any period after the expiration or earlier
     termination of the Term and, if required pursuant to the terms of the
     Lease, the return of possession of the Aircraft to Lessor or placement in
     storage at the request of Lessor in accordance with the Lease (provided
     that this exclusion (j) shall not apply to Taxes imposed after such period
     arising as a result of payments by Lessee under the Operative Agreements
     after such period);

          (k) consisting of any interest, penalties or additions to tax imposed
     on a Tax Indemnitee as a result of (in whole or in part) failure of such
     Tax Indemnitee or a related Tax Indemnitee to file any return properly and
     timely, unless such failure shall be caused by the failure of Lessee to
     fulfill its obligations, if any, under Section 9.3.6 with respect to such
     return;

          (l) resulting from, or that would not have been imposed but for, any
     Lessor Liens arising as a result of claims against, or acts or omissions
     of, or otherwise attributable to such Tax Indemnitee or a related Tax
     Indemnitee;

          (m) imposed on any Tax Indemnitee as a result of the breach by such
     Tax Indemnitee or a related Tax Indemnitee of any covenant of such Tax
     Indemnitee or any Affiliate thereof contained in any Operative Agreement or
     the inaccuracy of any representation or warranty by such Tax Indemnitee or
     any Affiliate thereof in any Operative Agreement;

<PAGE>   69
                                      -64-

          (n) in the nature of an intangible or similar Tax (i) upon or with
     respect to the value or principal amount of the interest of Loan
     Participant or any Note Holder in any Equipment Note or the loan evidenced
     thereby or (ii) upon or with respect to the value of the interest of the
     Owner Participant in the Trust Estate or the Trust, in each case only if
     such Taxes are in the nature of franchise Taxes or result from the Tax
     Indemnitee doing business in the taxing jurisdiction and are imposed
     because of the place of incorporation or the activities unrelated to the
     transactions contemplated by the Operative Agreements in the taxing
     jurisdiction of such Tax Indemnitee;

          (o) that is included in Lessor's Cost and paid to the appropriate
     Taxing Authority;

          (p) imposed on a Tax Indemnitee by a Taxing Authority of a
     jurisdiction outside the United States to the extent that such Taxes would
     not have been imposed but for a connection between the Tax Indemnitee or a
     related Tax Indemnitee and such jurisdiction imposing such Tax unrelated to
     the transactions contemplated by the Operative Agreements; or

          (q) Taxes relating to ERISA or Section 4975 of the Code.

         For purposes hereof, a Tax Indemnitee and any other Tax Indemnitees
that are successors, assigns, agents, servants or Affiliates of such Tax
Indemnitee shall be related Tax Indemnitees.

         9.3.3 PAYMENT

          (a) Lessee's indemnity obligation to a Tax Indemnitee under this
     Section 9.3 shall equal the amount which, after taking into account any Tax
     imposed upon the receipt or accrual of the amounts payable under this
     Section 9.3 and any tax benefits actually recognized by such Tax Indemnitee
     as a result of the indemnifiable Tax (including, without limitation, any
     benefits recognized as a result of an indemnifiable Tax being utilized by
     such Tax Indemnitee as a credit against Taxes not indemnifiable under this
     Section 9.3), shall equal the amount of the Tax indemnifiable under this
     Section 9.3.

          (b) At Lessee's request, the computation of the amount of any
     indemnity payment owed by Lessee or any

<PAGE>   70
                                      -65-

     amount owed by a Tax Indemnitee to Lessee pursuant to this Section 9.3
     shall be verified and certified by an independent public accounting firm
     selected by such Tax Indemnitee and reasonably satisfactory to Lessee. Such
     verification shall be binding. The costs of such verification (including
     the fee of such public accounting firm) shall be borne by Lessee unless
     such verification shall result in an adjustment in Lessee's favor of 5% or
     more of the net present value of the payment as computed by such Tax
     Indemnitee, in which case the costs shall be paid by such Tax Indemnitee.

          (c) Each Tax Indemnitee shall provide Lessee with such certifications,
     information and documentation as shall be in such Tax Indemnitee's
     possession and as shall be reasonably requested by Lessee to minimize any
     indemnity payment pursuant to this Section 9.3; provided, that
     notwithstanding anything to the contrary contained herein, no Tax
     Indemnitee shall be required to provide Lessee with any Tax returns.

          (d) Each Tax Indemnitee shall promptly forward to Lessee any written
     notice, bill or advice received by it from any Taxing Authority concerning
     any Tax for which it seeks indemnification under this Section 9.3. Lessee
     shall pay any amount for which it is liable pursuant to this Section 9.3
     directly to the appropriate Taxing Authority if legally permissible or upon
     demand of a Tax Indemnitee, to such Tax Indemnitee within 30 days of such
     demand (or, if a contest occurs in accordance with Section 9.3.4, within 30
     days after a Final Determination (as defined below)), but in no event more
     than one Business Day prior to the date the Tax to which such amount
     payable hereunder relates is due. If requested by a Tax Indemnitee in
     writing, Lessee shall furnish to the appropriate Tax Indemnitee the
     original or a certified copy of a receipt for Lessee's payment of any Tax
     paid by Lessee or such other evidence of payment of such Tax as is
     acceptable to such Tax Indemnitee. Lessee shall also furnish promptly upon
     written request such data as any Tax Indemnitee may reasonably require to
     enable such Tax Indemnitee to comply with the requirements of any taxing
     jurisdiction unless such data is not reasonably available to Lessee or,
     unless such data is specifically requested by a Taxing Authority, is not
     customarily furnished by domestic air carriers under similar circumstances.
     For purposes of this Section 9.3, a "Final Determination" shall mean (i) a
     decision, judgment, decree or other order by any court of

<PAGE>   71

                                      -66-

     competent jurisdiction that occurs pursuant to the provisions of Section
     9.3.4, which decision, judgment, decree or other order has become final and
     unappealable, (ii) a closing agreement or settlement agreement entered into
     in accordance with Section 9.3.4 that has become binding and is not subject
     to further review or appeal (absent fraud, misrepresentation, etc.), or
     (iii) the termination of administrative proceedings and the expiration of
     the time for instituting a claim in a court proceeding.

          (e) If any Tax Indemnitee shall actually realize a tax savings by
     reason of any Tax paid or indemnified by Lessee pursuant to this Section
     9.3 (whether such tax savings shall be by means of a foreign tax credit,
     depreciation or cost recovery deduction or otherwise) and such savings is
     not otherwise taken into account in computing such payment or indemnity
     such Tax Indemnitee shall pay to Lessee an amount equal to the lesser of
     (i) the amount of such tax savings, plus any additional tax savings
     recognized as the result of any payment made pursuant to this sentence,
     when, as, if, and to the extent, realized or (ii) the amount of all
     payments pursuant to this Section 9.3 by Lessee to such Tax Indemnitee
     (less any payments previously made by such Tax Indemnitee to Lessee
     pursuant to this Section 9.3.3 (e)) (and the excess, if any, of the amount
     described in clause (i) over the amount described in clause (ii) shall be
     carried forward and applied to reduce pro tanto any subsequent obligations
     of Lessee to make payments to such Tax Indemnitee pursuant to this Section
     9.3); provided, that such Tax Indemnitee shall not be required to make any
     payment pursuant to this sentence so long as a Lease Event of Default of a
     monetary nature has occurred and is continuing. If a tax benefit is later
     disallowed or denied, the disallowance or denial shall be treated as a Tax
     indemnifiable under Section 9.3.1 without regard to the provisions of
     Section 9.3.2 (other than Section 9.3.2 (f)). Each such Tax Indemnitee
     shall in good faith use reasonable efforts in filing its tax returns and in
     dealing with Taxing Authorities to seek and claim any such tax benefit.

         9.3.4 CONTEST

          (a) If a written claim is made against a Tax Indemnitee for Taxes with
     respect to which Lessee could be liable for payment or indemnity hereunder,
     or if a Tax Indemnitee makes a determination that a Tax is due for which
     Lessee could have an indemnity obligation hereunder, such

<PAGE>   72

                                      -67-

     Tax Indemnitee shall promptly give Lessee notice in writing of such claim
     (provided, that failure to so notify Lessee shall not relieve Lessee of its
     indemnity obligations hereunder unless such failure to notify effectively
     forecloses Lessee's rights to require a contest of such claim) and shall
     take no action with respect to such claim without the prior written consent
     of Lessee for 30 days following the receipt of such notice by Lessee;
     provided, that, in the case of a claim made against a Tax Indemnitee, if
     such Tax Indemnitee shall be required by law to take action prior to the
     end of such 30-day period, such Tax Indemnitee shall, in such notice to
     Lessee, so inform Lessee, and such Tax Indemnitee shall take no action for
     as long as it is legally able to do so (it being understood that a Tax
     Indemnitee shall be entitled to pay the Tax claimed and sue for a refund
     prior to the end of such 30-day period if (i)(A) the failure to so pay the
     Tax would result in substantial penalties (unless immediately reimbursed by
     Lessee) and the act of paying the Tax would not materially prejudice the
     right to contest or (B) the failure to so pay would result in criminal
     penalties and (ii) such Tax Indemnitee shall take any action so required in
     connection with so paying the Tax in a manner that is the least prejudicial
     to the pursuit of the contest). In addition, such Tax Indemnitee shall
     (provided, that Lessee shall have agreed to keep such information
     confidential other than to the extent necessary in order to contest the
     claim) furnish Lessee with copies of any requests for information from any
     Taxing Authority relating to such Taxes with respect to which Lessee may be
     required to indemnify hereunder. If requested by Lessee in writing within
     30 days after its receipt of such notice, such Tax Indemnitee shall, at the
     expense of Lessee (including, without limitation, all reasonable costs,
     expenses and reasonable attorneys' and accountants' fees and
     disbursements), in good faith contest (or, if permitted by applicable law,
     allow Lessee to contest) through appropriate administrative and judicial
     proceedings the validity, applicability or amount of such Taxes by (I)
     resisting payment thereof, (II) not paying the same except under protest if
     protest is necessary and proper or (III) if the payment is made, using
     reasonable efforts to obtain a refund thereof in an appropriate
     administrative and/or judicial proceeding. If requested to do so by Lessee,
     the Tax Indemnitee shall appeal any adverse administrative or judicial
     decision, except that the Tax Indemnitee shall not be required to pursue
     any appeals to the United States Supreme Court. If and to the extent the
     Tax Indemnitee is able to separate

<PAGE>   73
                                      -68-

     the contested issue or issues from other issues arising in the same
     administrative or judicial proceeding that are unrelated to the
     transactions contemplated by the Operative Agreements without, in the good
     faith judgment of such Tax Indemnitee, adversely affecting such Tax
     Indemnitee, such Tax Indemnitee shall permit Lessee to control the conduct
     of any such proceeding and shall provide to Lessee (at Lessee's cost and
     expense) with such information or data that is in such Tax Indemnitee's
     control or possession that is reasonably necessary to conduct such contest.
     In the case of a contest controlled by a Tax Indemnitee, such Tax
     Indemnitee shall consult with Lessee in good faith regarding the manner of
     contesting such claim and shall keep Lessee reasonably informed regarding
     the progress of such contest. A Tax Indemnitee shall not fail to take any
     action expressly required by this Section 9.3.4 (including, without
     limitation, any action regarding any appeal of an adverse determination
     with respect to any claim) or settle or compromise any claim without the
     prior written consent of the Lessee (except as contemplated by Section
     9.3.4(b) or (c)).

          (b) Notwithstanding the foregoing, in no event shall a Tax Indemnitee
     be required to pursue any contest (or to permit Lessee to pursue any
     contest) unless (i) Lessee shall have agreed to pay such Tax Indemnitee on
     demand all reasonable costs and expenses incurred by such Tax Indemnitee in
     connection with contesting such Taxes, including, without limitation, all
     reasonable out of pocket costs and expenses and reasonable attorneys' and
     accountants' fees and disbursements, (ii) if such contest shall involve the
     payment of the claim, Lessee shall advance the amount thereof (to the
     extent indemnified hereunder) plus interest, penalties and additions to tax
     with respect thereto that are required to be paid prior to the commencement
     of such contest on an interest-free after-Tax basis to such Tax Indemnitee
     (and such Tax Indemnitee shall promptly pay to the Lessee any net realized
     tax benefits resulting from such advance including any tax benefits
     resulting from making such payment), (iii) such Tax Indemnitee shall have
     reasonably determined that the action to be taken will not result in any
     material risk of forfeiture, sale or loss of the Aircraft (unless Lessee
     shall have made provisions to protect the interests of any such Tax
     Indemnitee in a manner reasonably satisfactory to such Tax Indemnitee)
     (provided, that such Tax Indemnitee agrees to notify Lessee in writing
     promptly after it becomes aware of any such risk), (iv) no Lease Event of
     Default shall have occurred and be

<PAGE>   74
                                      -69-

     continuing unless Lessee has provided security for its obligations
     hereunder by advancing to such Tax Indemnitee before proceeding or
     continuing with such contest, the amount of the Tax being contested, plus
     any interest and penalties and an amount estimated in good faith by such
     Tax Indemnitee for expenses, and (v) prior to commencing any judicial
     action controlled by Lessee, Lessee shall have acknowledged its liability
     for such claim hereunder, provided that Lessee shall not be bound by its
     acknowledgment if the Final Determination articulates conclusions of law
     and fact that demonstrate that Lessee has no liability for the contested
     amounts hereunder. Notwithstanding the foregoing, if any Tax Indemnitee
     shall release, waive, compromise or settle any claim which may be
     indemnifiable by Lessee pursuant to this Section 9.3 without the written
     permission of Lessee, Lessee's obligation to indemnify such Tax Indemnitee
     with respect to such claim (and all directly related claims and claims
     based on the outcome of such claim) shall terminate, subject to Section
     9.3.4(c), and subject to Section 9.3.4(c), such Tax Indemnitee shall repay
     to Lessee any amount previously paid or advanced to such Tax Indemnitee
     with respect to such claim, plus interest at the rate that would have been
     payable by the relevant Taxing Authority with respect to a refund of such
     Tax.

          (c) Notwithstanding anything contained in this Section 9.3, a Tax
     Indemnitee will not be required to contest the imposition of any Tax and
     shall be permitted to settle or compromise any claim without Lessee's
     consent if such Tax Indemnitee (i) shall waive its right to indemnity under
     this Section 9.3 with respect to such Tax (and any directly related claim
     and any claim the outcome of which is determined based upon the outcome of
     such claim), (ii) shall pay to Lessee any amount previously paid or
     advanced by Lessee pursuant to this Section 9.3 with respect to such Tax,
     plus interest at the rate that would have been payable by the relevant
     Taxing Authority with respect to a refund of such Tax, and (iii) shall
     agree to discuss with Lessee the views or positions of any relevant Taxing
     Authority with respect to the imposition of such Tax.

         9.3.5 REFUND

         If any Tax Indemnitee shall receive a refund of, or be entitled to a
credit against other liability for, all or any part of any Taxes paid,
reimbursed or advanced by Lessee, such Tax Indemnitee shall pay to Lessee within
30 days of such receipt

<PAGE>   75
                                      -70-

an amount equal to the lesser of (a) the amount of such refund or credit plus
any net tax benefit (taking into account any Taxes incurred by such Tax
Indemnitee by reason of the receipt of such refund or realization of such
credit) actually realized by such Tax Indemnitee as a result of any payment by
such Tax Indemnitee made pursuant to this sentence (including this clause (a))
and (b) such tax payment, reimbursement or advance by Lessee to such Tax
Indemnitee theretofore made pursuant to this Section 9.3 (and the excess, if
any, of the amount described in clause (a) over the amount described in clause
(b) shall be carried forward and applied to reduce pro tanto any subsequent
obligation of Lessee to make payments to such Tax Indemnitee pursuant to this
Section 9.3). If, in addition to such refund or credit, such Tax Indemnitee
shall receive (or be credited with) an amount representing interest on the
amount of such refund or credit, such Tax Indemnitee shall pay to Lessee within
30 days of such receipt or realization of such credit that proportion of such
interest that shall be fairly attributable to Taxes paid, reimbursed or advanced
by Lessee prior to the receipt of such refund or realization of such credit.

         9.3.6 TAX FILING

         If any report, return or statement is required to be filed with respect
to any Tax which is subject to indemnification under this Section 9.3, Lessee
shall timely file the same (except for any such report, return or statement
which a Tax Indemnitee has timely notified the Lessee in writing that such Tax
Indemnitee intends to file, or for which such Tax Indemnitee is required by law
to file, in its own name); provided, that the relevant Tax Indemnitee shall
furnish Lessee with any information in such Tax Indemnitee's possession or
control that is reasonably necessary to file any such return, report or
statement and is reasonably requested in writing by Lessee (it being understood
that the Tax Indemnitee shall not be required to furnish copies of its actual
tax returns, although it may be required to furnish relevant information
contained therein). Lessee shall either file such report, return or statement
and send a copy of such report, return or statement to such Tax Indemnitee, and
Owner Trustee if the Tax Indemnitee is not Owner Trustee, or, where Lessee is
not permitted to file such report, return or statement, it shall notify such Tax
Indemnitee of such requirement and prepare and deliver such report, return or
statement to such Tax Indemnitee in a manner satisfactory to such Tax Indemnitee
within a reasonable time prior to the time such report, return or statement is
to be filed.

<PAGE>   76

                                      -71-

         9.3.7 FORMS

         Each Tax Indemnitee agrees to furnish from time to time to Lessee or
Loan Trustee or to such other person as Lessee or Loan Trustee may designate, at
Lessee's or Loan Trustee's request, such duly executed and properly completed
forms as may be necessary or appropriate in order to claim any reduction of or
exemption from any withholding or other Tax imposed by any Taxing Authority, if
(x) such reduction or exemption is available to such Tax Indemnitee and (y)
Lessee has provided such Tax Indemnitee with any information necessary to
complete such form not otherwise reasonably available to such Tax Indemnitee.

         9.3.8 NON-PARTIES

         If a Tax Indemnitee is not a party to this Agreement, Lessee may
require the Tax Indemnitee to agree in writing, in a form reasonably acceptable
to Lessee, to the terms of this Section 9.3 and Section 15.8 prior to making any
payment to such Tax Indemnitee under this Section 9.3.

         9.3.9 SUBROGATION

         Upon payment of any Tax or other amount computed by reference to the
amount of any Tax by Lessee pursuant to this Section 9.3 to or on behalf of a
Tax Indemnitee or any Affiliate thereof, Lessee, without any further action,
shall be subrogated to any claims that such Tax Indemnitee or Affiliate may have
relating thereto. Such Tax Indemnitee or Affiliate shall cooperate with Lessee
(to the extent such cooperation does not result in any unreimbursed cost,
expense or liability to such Tax Indemnitee or Affiliate) to permit Lessee to
pursue such claims.

         9.3.10 FOREIGN TAX ON LOAN PAYMENTS

         If an Owner Participant is incorporated or organized, or maintains a
place of business or conducts activities in, a country other than the United
States or in a territory, possession or commonwealth of the United States
(within the meaning of the tax law of that foreign jurisdiction) and if as a
result thereof any foreign Taxes (including withholding Taxes) are imposed on
the Pass Through Trustees, Pass Through Trusts, or Note Holders, then Owner
Participant shall reimburse Lessee for any payments Lessee is required to make
to or on behalf of any Pass Through Trustee, Pass Through Trust, or Note Holder
under this Section 9.3 as a result of the imposition of such Taxes.

<PAGE>   77
                                      -72-

The amount payable by Owner Participant to Lessee shall be an amount which,
after taking into account any such Taxes, any Tax imposed upon the receipt or
accrual by Lessee of such payment by Owner Participant and any tax benefits or
tax savings realized by Lessee with respect to the payment of such withholding
Tax or the payment hereunder, shall equal the amount of Lessee's payment to or
on behalf of such Pass Through Trustee, or Note Holder.

     9.4 PAYMENTS

         Any payments made pursuant to Section 9.1 or 9.3 shall be due on the
60th day after demand therefor and shall be made directly to the relevant
Indemnitee or Tax Indemnitee or to Lessee, in immediately available funds at
such bank or to such account as specified by such Indemnitee or Tax Indemnitee
or Lessee, as the case may be, in written directives to the payor, or, if no
such direction shall have been given, by check of the payor payable to the order
of, and mailed to, such Indemnitee or Tax Indemnitee or Lessee, as the case may
be, by certified mail, postage prepaid, at its address as set forth in this
Agreement.

     9.5 INTEREST

         If any amount, payable by Lessee, any Indemnitee or any Tax Indemnitee
under Section 9.1 or 9.3 is not paid when due, the person obligated to make such
payment shall pay on demand, to the extent permitted by Law, to the person
entitled thereto, interest on any such amount for the period from and including
the due date for such amount to but excluding the date the same is paid, at the
Payment Due Rate. Such interest shall be paid in the same manner as the unpaid
amount in respect of which such interest is due.

     9.6 BENEFIT OF INDEMNITIES

         The obligations of Lessee in respect of all indemnities, obligations,
adjustments and payments in Section 9.1 or 9.3 are expressly made for the
benefit of, and shall be enforceable by, the Indemnitee or Tax Indemnitee
entitled thereto, without declaring the Lease to be in default or taking other
action thereunder, and notwithstanding any provision of the Trust Indenture.

<PAGE>   78
                                      -73-

SECTION 10. ASSIGNMENT OR TRANSFER OF INTERESTS

     10.1 PARTICIPANTS, OWNER TRUSTEE AND NOTE HOLDERS

         10.1.1 OWNER PARTICIPANT

          (a) During the Term, Owner Participant shall not Transfer any or all
     of its right, title or interest in the Trust Estate or the Trust Agreement
     and to this Agreement unless such transfer is a Transfer of the entire
     interest held by Owner Participant, and:

          (i) The Transferee shall have full power, authority and legal right to
     execute and deliver and to perform the obligations of Owner Participant
     under this Agreement and the other Owner Participant Agreements and shall
     provide reasonably satisfactory evidence of such power and authority to
     Lessee, Owner Trustee and Mortgagee;

          (ii) The Transferee shall enter into an agreement substantially in the
     form of Exhibit H hereto (or otherwise in form and substance reasonably
     satisfactory to Lessee and Mortgagee);

          (iii) Lessee shall not be obligated to pay any greater amount or incur
     any greater obligation than that which it would have been obliged to pay or
     incur under the Lease or other Lessee Operative Agreement if no transfer or
     assignment had taken place, and the terms and conditions of this Lease and
     the other Lessee Operative Agreements insofar as they relate to the rights
     and obligations of Lessee or the Loan Participant shall not be altered;

          (iv) Owner Participant shall deliver to Lessee, Owner Trustee and
     Mortgagee an opinion of counsel substantially in the form of Exhibit I
     hereto (or otherwise in form and substance reasonably satisfactory to
     Lessee and Mortgagee) to the effect that such agreement or agreements
     referred to in Section 10.1.1(a)(ii) and, if applicable, 10.1.1(a)(vi) are
     legal, binding and enforceable in accordance with its or their terms and
     that such transfer will not violate the Act, the registration provisions of
     the Securities Act, or any other applicable Federal law;

          (v) The Transferee is a Citizen of the United States (it being
     understood that the existence of any such requirement is to be determined
     without giving consideration to Section 47.9 of the FAA Regulations or any
     other provision

<PAGE>   79
                                      -74-

     that may restrict Lessee's use or operation of the Aircraft), or shall use
     a voting powers trust or similar arrangement in order to hold an interest
     in the Trust Estate such that the Aircraft can be registered in the United
     States (without giving consideration to Section 47.9 of the FAA
     Regulations); and

          (vi) The Transferee shall be a single person and shall be either (A) a
     Permitted Institution or (B) any other person (other than, without Lessee's
     consent, a commercial air carrier, a commercial aircraft operator, a
     freight forwarder or an Affiliate of any of the foregoing) the obligations
     of which under the Owner Participant Agreements are guaranteed by a
     Permitted Institution in any case, pursuant to a written guaranty, in form
     and substance reasonably satisfactory to Lessee, Owner Trustee and
     Mortgagee.

          (b) Owner Participant shall give written notice to Lessee, Mortgagee
     and Owner Trustee at least 10 days prior to any such Transfer, specifying
     the name and address of the proposed Transferee, and providing financial
     statements of the proposed Transferee evidencing satisfaction of the
     requirements described in Section 10.1.1(a)(vi)(A) or (B) above.

          (c) Any fees, charges and expenses, including the reasonable legal
     fees, charges and expenses incurred by Lessee, Owner Participant,
     Mortgagee, any Note Holder or Owner Trustee in connection with any Transfer
     by Owner Participant permitted by this Section 10.1.1, or by the Transferee
     in any such case, will be paid for by Owner Participant.

         10.1.2 OWNER TRUSTEE

         Owner Trustee may transfer its interests in the Trust Agreement
pursuant to Section 9 thereof.

         10.1.3 NOTE HOLDERS

         Subject to Section 7.5.2 hereof and Section 2.07 of the Trust
Indenture, any Note Holder may, at any time and from time to time, Transfer or
grant participations in all or any portion of the Equipment Notes and/or all or
any portion of its beneficial interest in its Equipment Notes and the Trust
Indenture Estate to any person (it being understood that the sale or issuance of
Pass Through Certificates by a Pass Through Trustee

<PAGE>   80

                                      -75-

shall not be considered a Transfer or participation); provided, that any
participant in any such participations shall not have any direct rights under
the Operative Agreements or any Lien on all or any part of the Aircraft or Trust
Indenture Estate and Lessee shall not have any increased liability or
obligations as a result of any such participation. In the case of any such
Transfer, the Transferee, by acceptance of Equipment Notes in connection with
such Transfer, shall be deemed to be bound by all of the covenants of Note
Holders contained in the Operative Agreements.

         10.1.4 LESSEE'S ASSUMPTION OF THE CERTIFICATES

          (a) Subject to compliance by the Lessee with all of its obligations
     under the Operative Agreements, each of the Owner Participant, the Owner
     Trustee, the Mortgagee, the Pass Through Trustee and the Lessee covenants
     and agrees that if the Lessee elects to purchase the Aircraft pursuant to
     Section 17.3 of the Lease, then, upon compliance with the applicable
     provisions of the Lease and the other Operative Agreements, each of the
     parties will execute and deliver appropriate documentation transferring to
     Lessee all right, title and interest in and to the Aircraft (including,
     without limitation, such bills of sale and other instruments and documents
     as Lessee shall reasonably request to evidence (on the public record or
     otherwise) such transfer and the vesting in Lessee of all right, title and
     interest in and to the Aircraft), such transfer to be without recourse or
     warranty (except as to the absence of Lessor's Liens attributable to the
     Owner Trustee) but subject to the Lien of the Indenture, and if the Lessee,
     in connection with such purchase, elects to assume the obligations of the
     Owner Trustee to the Mortgagee and the Note Holders under the Indenture,
     the Equipment Notes, and hereunder, then the Lessee shall so notify the
     Mortgagee, and each of the parties shall execute and deliver appropriate
     documentation permitting the Lessee to assume such obligations on the basis
     of full recourse to the Lessee, maintaining for the benefit of the Note
     Holders and the other Indenture Indemnitees the security interest in the
     Aircraft created by the Indenture, and upon compliance with the provisions
     of this Section 10.1.4 releasing the Owner Participant and the Owner
     Trustee from all obligations in respect of the Equipment Notes, the
     Indenture, this Agreement, and the other Operative Agreements, except any
     obligations relating to the period prior to such assumption and take all
     such other actions, at the

<PAGE>   81

                                      -76-

     Lessee's expense, as are reasonably necessary to permit such assumption of
     the Lessee.

          (b) In connection with such assumption:

          (i) the Lessee shall execute and deliver an instrument (A) pursuant to
     which the Lessee irrevocably and unconditionally assumes and undertakes,
     with full recourse to the Lessee, to pay, satisfy, and discharge when and
     as due (at the stated maturity thereof, by acceleration or otherwise) the
     principal of, Make-Whole Amount, if any, interest, and all other sums owing
     on all outstanding Equipment Notes (or on the Lessee's substituted
     obligations) or otherwise payable under the Indenture in accordance with
     their terms, and punctually to perform and observe all of the covenants and
     obligations hereunder and under the Indenture and the Equipment Notes (as
     the same may be amended in connection with such assumption) to be performed
     or observed by the Owner Trustee, and (B) which contains amendments to the
     Trust Indenture, in form and substance as reasonably satisfactory to the
     Mortgagee, that incorporate therein such provisions from the Lease and this
     Agreement as may be appropriate, including, without limitation, events of
     default substantially identical in scope and effect to those set forth in
     the Lease and covenants substantially identical to the covenants of the
     Lessee hereunder and under the Lease;

          (ii) the instrument referred to in paragraph (i) of this Section
     10.1.4(b), any Uniform Commercial Code financing statements relating
     thereto, and any other documents which shall be necessary (or reasonably
     requested by the Mortgagee) to establish the Lessee's title to and interest
     in the Aircraft or to reflect the substitution of the Lessee for the Owner
     Trustee under the Operative Agreements or to continue the perfection of the
     security interests in the Aircraft and the other rights, property, and
     interests included in the Trust Indenture Estate for the benefit of the
     Note Holders and the other Indenture Indemnitees (or the Lessee's
     substituted obligations) shall be filed in such form, manner, and places as
     are necessary or, in the reasonable opinion of the Indenture Trustee,
     advisable for such purpose;

          (iii) the Mortgagee shall have received an insurance report dated the
     effective date of such assumption of an independent insurance broker and
     certificates of insurance, each in form and substance satisfactory to the
     Mortgagee,

<PAGE>   82

                                      -77-

     as to the due compliance as of the effective date of such assumption with
     the terms of Section 11 of the Lease (as it relates to the Mortgagee)
     relating to the insurance with respect to the Aircraft;

          (iv) the Mortgagee shall have received evidence that as of the
     effectiveness of the assignment on the date of such assumption the Aircraft
     is free and clear of all Liens other than the Lien of the Indenture and
     other Permitted Liens;

          (v) the Mortgagee shall have received a certificate from the Lessee
     that no Event of Default exists as of the effective date of such
     assumption; and

          (vi) the Mortgagee shall have received (A) from counsel for the Lessee
     (who may be an attorney in Lessee's legal department) a legal opinion, in
     form and substance as reasonably satisfactory to the Mortgagee: (w) with
     respect to the compliance of the assumption contemplated hereby with the
     terms hereof, (x) with respect to the due authorization, execution,
     delivery, validity, and enforceability of the instrument referred to in
     paragraph (i) of this Section 10.1.4(b), (y) with respect to the continued
     perfection of the first and prior Lien and security interest in the
     Aircraft for the benefit of the Holders of the Equipment Notes and the
     other Indenture Indemnitees (or the Lessee's substituted obligations)
     referred to in paragraph (ii) of this Section 10.1.4(b), and (z) with
     respect to the continued availability of the benefits of Section 1110 of
     the Bankruptcy Code to the Mortgagee for the benefit of the Holders with
     respect to the Aircraft after giving effect to such assumption, provided,
     that the opinion required by subclause (z) need only be given if
     immediately prior to such assumption the Owner Trustee should have been
     entitled to the benefits of Section 1110 of the Bankruptcy Code, (B) from
     counsel to the Mortgagee and special counsel in Oklahoma City, a legal
     opinion comparable to the respective opinions delivered on the Issuance
     Date or the Delivery Date, as the case may be, with such changes therein as
     may be appropriate in light of such assumption, and (C) in the case of each
     opinion described in clause (A) or (B) above, covering such additional
     matters as the Mortgagee shall reasonably request.

          (c) The Lessee shall pay all reasonable expenses (including reasonable
     fees and expenses of counsel) of the Mortgagee, the Owner Trustee, the Pass
     Through Trustee,

<PAGE>   83

                                      -78-

     the Subordination Agent, each Liquidity Provider and the Owner Participant
     in connection with such assumption.

          (d) Such assumption may occur only if, the Lessee has (i) indemnified
     the then existing beneficial owners of certificates against any incremental
     U.S. federal income taxes that may be imposed on them as a direct
     consequence of such assumption (including any taxes that may be imposed as
     a result of the payment of such indemnification) and (ii) if such an
     opinion can be given, provided an opinion of counsel to the effect that
     holders of such Equipment Notes will not recognize income, gain or loss for
     U.S. federal income tax purposes as a result of such assumption and will be
     subject to U.S. federal income tax on the same amount and in the same
     manner and at the same time as would have been the case if such assumption
     had not occurred.

     10.2 EFFECT OF TRANSFER

         Upon any Transfer in accordance with Section 10.1.1, 10.1.2 or 10.1.3
(other than any Transfer by any Note Holder, to the extent it only grants
participations in Equipment Notes or in its beneficial interest therein),
Transferee shall be deemed an "Owner Participant," "Owner Trustee" or a "Note
Holder," respectively, for all purposes of this Agreement and the other
Operative Agreements and, in the case of a Transferee of any Participant or Note
Holder, shall be deemed to have paid its ratable portion of Lessor's Cost
previously made by Owner Participant or Loan Participant, respectively, making
such conveyance and represented by the interest being conveyed, and each
reference herein to Owner Participant, Owner Trustee or Note Holder,
respectively, shall thereafter be deemed a reference to such Transferee for all
purposes, and the transferring Owner Participant, Owner Trustee, Loan
Participant or Note Holder shall be released (except, in the case of Owner
Participant, to the extent of any guaranty provided by it under Section
10.1.1(a)(vi)) from all of its liabilities and obligations under this Agreement
and any other Operative Agreements to the extent such liabilities and
obligations arise after such Transfer and, in each case, to the extent such
liabilities and obligations are assumed by the Transferee; provided, that such
transferring Owner Participant, Owner Trustee or Note Holder (and its respective
Affiliates, successors, assigns, agents, servants, representatives, directors
and officers) will continue to have the benefit of any rights or indemnities
under any Operative Agreement vested or relating to circumstances, conditions,
acts or events prior to such Transfer.

<PAGE>   84
                                      -79-

SECTION 11. REFUNDING AND CERTAIN OTHER MATTERS

     11.1 REFUNDING GENERALLY

         Subject to Sections 11.2 and 11.4, in the event that at any time Lessee
shall have given written notice to Owner Participant, Owner Trustee, and
Mortgagee that Lessee is requesting a voluntary redemption of all, but not less
than all, of the outstanding Equipment Notes (in compliance with the provisions
of Sections 2.11 and 2.12 of the Trust Indenture) by Owner Trustee as part of a
refunding transaction, Owner Participant agrees to negotiate in good faith and
to promptly conclude an agreement with Lessee as to the terms of such refunding
transaction in form and substance reasonably satisfactory to Owner Participant
(including the terms of any debt to be issued in connection with such refunding
transaction and the documentation to be executed in connection therewith), and
after Lessee and Owner Participant shall have concluded such an agreement:

         11.1.1 REFUNDING CERTIFICATE

         Within 10 Business Days after reaching such agreement, Owner
Participant will deliver to Lessee a Refunding Certificate. Within 10 Business
Days of its receipt of the Refunding Certificate, Lessee may demand a
verification pursuant to Section 3.2.1(d) of the Lease of the information set
forth in the Refunding Certificate. Upon the acceptance by Lessee of the
accuracy of the information set forth in the Refunding Certificate or the
determination pursuant to such verification procedures of the Refunding
Information, the appropriate parties will take the actions specified in Sections
11.1.2 through 11.1.7 below.

         11.1.2 FINANCING AGREEMENTS

         The appropriate parties will enter into appropriate documentation
(which may include an underwriting agreement or similar private placement
agreement) with the institution or institutions to be named therein providing
for (a) the issuance and sale by Owner Trustee to such institution or
institutions on the Refunding Date of the New Debt and (b) the application of
the proceeds of the sale of the New Debt to the redemption of all such Equipment
Notes on the Refunding Date. Lessee, acting on behalf of Owner Trustee, shall
give Mortgagee at least 20 days revocable prior written notice of the proposed
date of the optional redemption.

<PAGE>   85

                                      -80-

         11.1.3 LEASE AMENDMENTS

         As a condition to the closing of the refunding transaction, Lessee and
Owner Trustee will amend the Lease, as contemplated by Section 3.2.1(b) of the
Lease, to provide that (a) Basic Rent in respect of the period from and after
the Refunding Date shall be as provided in the Refunding Information and (b)
amounts payable in respect of Stipulated Loss Value and Termination Value and,
if applicable, the EBO Price and the EBO Date, from and after the Refunding Date
shall be as provided in the Refunding Information.

         11.1.4 SECURITY AGREEMENTS

         Owner Trustee will enter into an agreement to provide for the securing
thereunder of the New Debt in like manner as the Equipment Notes and will enter
into such amendments and supplements to the Trust Indenture (or such new
indenture or other security agreement) and the other Operative Agreements as may
be necessary to effect such refunding.

         11.1.5 EXPENSES

         Whether or not such refunding transaction is consummated, Lessee shall
pay or reimburse all of the reasonable out-of-pocket expenses of all parties to
such refunding transaction, including, without limitation, any underwriting or
placement fees and the reasonable fees and expenses of such parties' counsel and
any related loan or commitment fees.

         11.1.6 MAKE WHOLE AMOUNT

         At the closing of such refunding, Owner Trustee shall pay, upon receipt
of the same from Lessee (which Lessee shall pay as Supplemental Rent as a
condition to the closing to the refunding transaction), to the Mortgagee for the
account of each Note Holder, the Make-Whole Amount, if any, payable to such Note
Holder under Section 2.11 of the Trust Indenture.

         11.1.7 RETURN OF EQUIPMENT NOTES

         Subject to compliance by Owner Trustee and Lessee with all applicable
terms and conditions for voluntary prepayment under the Trust Indenture and this
Agreement, each Note Holder will transfer to Owner Trustee the Equipment Notes
held by it for cancellation (and Owner Trustee shall cancel the same), against
receipt by such Note Holder of the then-

<PAGE>   86

                                      -81-

outstanding principal amount of such Equipment Notes, accrued and unpaid
interest and Make-Whole Amount, if any, thereon, together with payment in full
of all other amounts then payable to such Note Holder and Mortgagee hereunder or
under the Trust Indenture.

     11.2 LIMITATIONS ON OBLIGATION TO REFUND

         Notwithstanding the foregoing, Owner Participant shall have no
obligation to proceed with any refunding transaction as contemplated by this
Section 11:

          (a) If such transaction would have, or creates a material risk of, an
     adverse tax consequence to Owner Participant unless Lessee agrees to
     indemnify Owner Participant against such adverse tax consequence;

          (b) Unless Lessee indemnifies Owner Participant for any liability,
     obligation (other than the obligation to pay principal and interest and
     related payments in respect of the New Debt), cost or expense (including,
     without limitation, reasonable attorneys' fees) related to or arising out
     of any such refunding transaction;

          (c) If a Lease Event of Default shall have occurred and be continuing;
     or

          (d) If there shall have previously been consummated three refunding
     transactions at Lessee's request pursuant to this Section 11.

     11.3 EXECUTION OF CERTAIN DOCUMENTS

         Lessee, Owner Participant, Owner Trustee and Mortgagee each agree to
execute any document necessary or advisable to implement this Section 11
(including, without limitation, the execution, delivery and/or provision of any
appropriate additional or modified amendment, representation, warranty,
certificate, opinion or other document that may reasonably be requested by
Lessee or any other person).

     11.4 ERISA

         Owner Participant shall not be obligated to conclude the proposed
refunding transaction unless the agreements utilized to effect such refunding
contain an agreement by the initial holders of the New Debt substantially the
same as Section 7.5.2(b) of this Agreement, except in the case of any refunding

<PAGE>   87

                                      -82-

transaction where the New Debt is sold in a public offering under the Securities
Act or a private placement intended for resale pursuant to Rule 144A under the
Securities Act, in which case the holders of the New Debt shall be subject to
the restrictions relating to ERISA substantially the same as those applicable to
the purchasers of the Pass Through Certificates, as described in the Offering
Memorandum relating to the initial issuance and sale of the Pass Through
Certificates.

     11.5 CONSENT TO OPTIONAL REDEMPTIONS

         Each of Owner Participant, Owner Trustee and Mortgagee agrees with
Lessee not to cause an optional redemption of the Equipment Notes without
Lessee's consent except as set forth in Section 2.12 of the Trust Indenture.

SECTION 12. SECTION 1110

         It is the intention of each of Lessee, Owner Participant, Loan
Participant, the Note Holders (such intention being evidenced by each of their
acceptance of an Equipment Note), Owner Trustee and Mortgagee that Owner
Trustee, as lessor under the Lease (and Mortgagee as assignee of Owner Trustee
under the Trust Indenture), shall be entitled to the benefits of Section 1110 in
the event of a case under Chapter 11 of the Bankruptcy Code in which Lessee is a
debtor.

SECTION 13. CHANGE OF CITIZENSHIP

     13.1 GENERALLY

         Without prejudice to the representations, warranties or covenants
regarding the status of any party hereto as a Citizen of the United States:

          (a) Each of Lessee, First Security, WTC and Mortgagee agrees that it
     will, immediately upon obtaining knowledge of any facts that would cast
     doubt upon its continuing status as a Citizen of the United States and
     promptly upon public disclosure of negotiations in respect of any
     transaction which would or might adversely affect such status, notify in
     writing all parties hereto of all relevant matters in connection therewith;
     and

          (b) Owner Participant agrees that, in the event its status is to
     change or has changed as a Citizen of the

<PAGE>   88

                                      -83-

     United States, or it makes public disclosure of circumstances as a result
     of which it believes that such status is likely to change, it will notify
     all the other parties to this Participation Agreement of (i) such change in
     status promptly after obtaining Actual Knowledge thereof or (ii) such
     belief as soon as practicable after such public disclosure but in any event
     within ten Business Days after such public disclosure.

     13.2 OWNER PARTICIPANT

         Owner Participant agrees, solely for the benefit of Lessee and the Note
Holders that if, during such time as the Aircraft is registered in the United
States, (a) it shall not be a Citizen of the United States and (b) the Aircraft
shall be, or would therefore become, ineligible for registration in the name of
Owner Trustee under the Act and regulations then applicable thereunder (without
giving consideration to Section 47.9 of the FAA Regulations or any other
provision that may restrict Lessee's use or operation of the Aircraft), then
Owner Participant shall as soon as is reasonably practicable, but in any event
within 30 days after obtaining Actual Knowledge of such ineligibility and of
such loss of citizenship, (y) effect voting trust or other similar arrangements
(in which case any provisions contained in the Operative Agreements restricting
Owner Participant's or Owner Trustee's ability to amend the Trust Agreement
shall not apply to the extent necessary to permit the use of such a voting trust
or other similar arrangement) or take any other action as may be necessary to
prevent any deregistration or maintain the United States registration of the
Aircraft or (z) transfer in accordance with the terms of this Agreement all its
right, title and interest in and to this Agreement, the Trust Estate and the
Trust Agreement in accordance with Section 10.1.

     13.3 OWNER TRUSTEE

         Upon First Security giving any notice in accordance with Section
13.1(a), Owner Trustee shall, subject to Section 9.1.1 of the Trust Agreement,
resign as Owner Trustee. Upon its receipt of such notice, Owner Participant
shall as promptly as practicable appoint a Citizen of the United States as
successor Owner Trustee pursuant to Section 9.1 of the Trust Agreement.

<PAGE>   89

                                      -84-

     13.4 MORTGAGEE

         Upon WTC giving any notice in accordance with Section 13.1(a),
Mortgagee shall (if and so long as such citizenship is necessary under the Act
as in effect at such time or, if it is not necessary, if and so long as
Mortgagee's citizenship could have any adverse effect on Lessee, any Participant
or any Note Holder), subject to Section 8.02 of the Trust Indenture, resign as
Mortgagee promptly upon its ceasing to be such a citizen.

SECTION 14. CONCERNING OWNER TRUSTEE

         It is understood and agreed that, except as otherwise expressly
provided herein or in the Trust Agreement or the Trust Indenture, Owner Trustee
is entering into this Agreement solely in its capacity as trustee as provided in
the Trust Agreement and not in its individual capacity and in no case whatsoever
will it be liable or accountable in its individual capacity for any of the
statements, representations, warranties, agreements or obligations of Owner
Trustee hereunder, or for any loss in respect thereof, as to all of which the
parties agree to look solely to the Trust Estate; provided, that nothing in this
Section 14 shall be deemed to limit in scope or substance the personal liability
of First Security (a) to Owner Participant as expressly set forth in the Trust
Agreement, (b) in respect of the representations, warranties and agreements of
First Security expressly made as such herein or in any other Operative Agreement
to which it is a party, and (c) for the consequences of its own gross
negligence, willful misconduct, and, in receiving, handling or remitting of
funds only, its willful misconduct or simple negligence as a trustee.

SECTION 15. MISCELLANEOUS

     15.1 AMENDMENTS

         No provision of this Agreement may be amended, supplemented, waived,
modified, discharged, terminated or otherwise varied orally, but only by an
instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate or otherwise vary and is signed by the party against which the
enforcement of the amendment, supplement, waiver, modification, discharge,
termination

<PAGE>   90

                                      -85-

or variance is sought. Each such amendment, supplement, waiver, modification,
discharge, termination or variance shall be effective only in the specific
instance and for the specific purpose for which it is given. No provision of
this Agreement shall be varied or contradicted by oral communication, course of
dealing or performance or other manner not set forth in an agreement, document
or instrument in writing and signed by the party against which enforcement of
the same is sought.

     15.2 SEVERABILITY

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

     15.3 SURVIVAL

         The representations, warranties, covenants and indemnities set forth
herein shall survive the delivery or return of the Aircraft, the Transfer of any
interest of Owner Participant in this Agreement, the Trust Estate and the Trust
Agreement, the Transfer of any interest by any Note Holder of its Equipment Note
and the expiration or other termination of this Agreement or any other Operative
Agreement.

     15.4 REPRODUCTION OF DOCUMENTS

         This Agreement, all annexes, schedules and exhibits hereto and all
agreements, instruments and documents relating hereto, including, without
limitation, (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be as admissible in
evidence as the original itself in any judicial or administrative proceeding
(whether or not the original is in existence and whether or not such
reproduction was made by such party in

<PAGE>   91

                                      -86-

the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction likewise is admissible in evidence.

     15.5 COUNTERPARTS

         This Agreement and any amendments, waivers, consents or supplements
hereto may be executed in any number of counterparts (or upon separate signature
pages bound together into one or more counterparts), each of which when so
executed shall be deemed to be an original, and all of which counterparts, taken
together, shall constitute one and the same instrument.

     15.6 NO WAIVER

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

     15.7 NOTICES

         Unless otherwise expressly permitted by the terms hereof, all notices,
requests, demands, authorizations, directions, consents, waivers and other
communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement or other applicable Operative Agreement, and shall be personally
delivered, sent by facsimile (followed by overnight courier service for next
Business Day receipt) or telecommunication transmission (which in either case
provides written confirmation to the sender of its delivery), sent by registered
mail or certified mail, return

<PAGE>   92

                                      -87-

receipt requested, postage prepaid, or sent by overnight courier service, in
each case to the respective address, or facsimile number set forth for such
party in Schedule 1, or to such other address, facsimile or other number as each
party hereto may hereafter specify by notice to the other parties hereto. Each
such notice, request, demand, authorization, direction, consent, waiver or other
communication shall be effective when received or, if made, given, furnished or
filed (a) by facsimile or telecommunication transmission, when confirmed;
provided there is receipt of such notice the next Business Day from an overnight
courier service or (b) by registered or certified mail, three Business Days
after being deposited, properly addressed, with the U.S. Postal Service.

     15.8 GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE

          (a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAWS OF
     THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND
     PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.

          (b) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND SUBMITS
     ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW
     YORK IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE
     SOUTHERN DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR
     PROCEEDING WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN
     CONNECTION WITH THIS AGREEMENT.

          (c) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES THAT THE
     SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF ANY
     OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE
     MADE BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
     PREPAID, AT THE ADDRESS SET FORTH PURSUANT TO SECTION 15.7. EACH PARTY
     HERETO HEREBY AGREES THAT SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH
     CASE IN ACCORDANCE WITH THIS SECTION 15.8(C), SHALL CONSTITUTE VALID AND
     EFFECTIVE PERSONAL SERVICE UPON SUCH PARTY, AND EACH PARTY HERETO HEREBY
     AGREES THAT THE FAILURE OF ANY OF ITS AGENTS TO GIVE ANY

<PAGE>   93

                                      -88-

     NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR OR AFFECT IN ANY
     WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT RENDERED IN
     ANY ACTION OR PROCEEDING BASED THEREON.

          (d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
     PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS
     A DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT
     HEREUNDER IN ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING
     IS BROUGHT IN AN INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR
     PROCEEDING IS IMPROPER OR THAT THIS AGREEMENT OR ANY OTHER OPERATIVE
     AGREEMENT MAY NOT BE ENFORCED IN OR BY SUCH COURTS.

          (e) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A JURY
     TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION
     BASED UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.

     15.9 THIRD-PARTY BENEFICIARY

         This Agreement is not intended to, and shall not, provide any person
not a party hereto (other than the Liquidity Provider, the Depositary, the
Escrow Agent and the Paying Agent, each of which is an intended third party
beneficiary with respect to the provisions of Section 9.1) with any rights of
any nature whatsoever against any of the parties hereto and no person not a
party hereto (other than the Liquidity Provider, the Depositary, the Escrow
Agent and the Paying Agent, with respect to the provisions of Section 9.1) shall
have any right, power or privilege in respect of any party hereto, or have any
benefit or interest, arising out of this Agreement.

     15.10 ENTIRE AGREEMENT

         This Agreement, together with the other Operative Agreements, on and as
of the date hereof, constitutes the entire agreement of the parties hereto with
respect to the subject matter hereof, and all prior or contemporaneous
understandings or agreements, whether written or oral, among any of the parties
hereto with respect to such subject matter are hereby superseded in their
entireties.

<PAGE>   94

                                      -89-

     15.11 FURTHER ASSURANCES

         Each party hereto shall execute, acknowledge and deliver or shall cause
to be executed, acknowledged and delivered, all such further agreements,
instruments, certificates or documents, and shall do and cause to be done such
further commercially reasonable acts and things, in any case, as any other party
hereto shall reasonably request in connection with the administration of, or to
carry out more effectively the purposes of, or to better assure and confirm into
such other party the rights and benefits to be provided under this Agreement and
the other Operative Agreements.

                      [This space intentionally left blank]

<PAGE>   95

     IN WITNESS WHEREOF, each of the parties has caused this Participation
Agreement to be duly executed and delivered as of the day and year first above
written.

                                   ATLAS AIR, INC.,
                                     Lessee

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

                                   ------------------------------------------,
                                     Owner Participant

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

                                   FIRST SECURITY BANK, NATIONAL ASSOCIATION,
                                     not in its individual capacity, except as
                                     expressly provided herein, but solely as
                                     Owner Trustee

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

                                   WILMINGTON TRUST COMPANY,
                                     not in its individual capacity, except as
                                     expressly provided herein, but solely as
                                     Mortgagee

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

<PAGE>   96

                                   WILMINGTON TRUST COMPANY,
                                     not in its individual capacity,
                                     except as expressly provided
                                     herein, but solely as Pass
                                     Through Trustee under the Pass
                                     Through Trust Agreement for the
                                     Atlas Air, Inc. Pass Through
                                     Trust, 2000-__

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

                                   WILMINGTON TRUST COMPANY,
                                     not in its individual capacity,
                                     except as expressly provided
                                     herein, but solely as Pass
                                     Through Trustee under the Pass
                                     Through Trust Agreement for the
                                     Atlas Air, Inc. Pass Through
                                     Trust, 2000-__

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

                                   WILMINGTON TRUST COMPANY,
                                     not in its individual capacity,
                                     except as expressly provided
                                     herein, but solely as Pass
                                     Through Trustee under the Pass
                                     Through Trust Agreement for the
                                     Atlas Air, Inc. Pass Through
                                     Trust, 2000-__

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

<PAGE>   97

                                   WILMINGTON TRUST COMPANY,
                                     not in its individual capacity, except as
                                     expressly provided herein, but solely as
                                     Subordination Agent

                                   By:
                                      -----------------------------------------
                                      Name:
                                      Title:<PAGE>   1

                                                                    EXHIBIT 4.21

                                 EXHIBIT A-2 to
                             Note Purchase Agreement

                                  FORM OF LEASE

<PAGE>   2

      CONFIDENTIAL: Annexes B, C and D and Schedules 1, 2A, 2B, 3 and 4 of
      this Lease Agreement are subject to Restrictions on Dissemination Set
      Forth in Section 8 of the Participation Agreement (as defined herein)

================================================================================

                                 LEASE AGREEMENT

                           Dated as of _______________

                                     Between

                    FIRST SECURITY BANK, NATIONAL ASSOCIATION
                         Not in its Individual Capacity,
                      except as expressly provided herein,
                          but solely as Owner Trustee,
                                     Lessor

                                       and

                                ATLAS AIR, INC.,

                                     Lessee

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

                   One Boeing Model 747-47UF Aircraft Bearing
                     United States Registration No. N______
                  and Bearing Manufacturer's Serial No. ______
                          with four GE Model __ Engines
                      Bearing Engine Manufacturer's Serial
                     Nos. ______, ______, ______ and ______

================================================================================

         The right, title and interest of Lessor in and to, among other things,
this Lease Agreement has been assigned to and is subject to a security interest
in favor of Wilmington Trust Company, a Delaware banking corporation, as
Mortgagee, under the Trust Indenture and Mortgage, dated as of               ,
           , for the benefit of the holders of the Equipment Notes referred to
in such Trust Indenture, all to the extent provided in such Trust Indenture.
This Lease Agreement has been executed in multiple counterparts; to the extent,
if any, that this Lease Agreement constitutes chattel paper (as defined in the
Uniform Commercial Code as in effect in any applicable jurisdiction), no
security interest in Lessor's right, title and interest in and to this Lease
Agreement may be perfected through the delivery or possession of any counterpart
of this Lease Agreement other than the counterpart of this Lease Agreement that
contains the original receipt executed by Wilmington Trust Company, as
Mortgagee.

<PAGE>   3

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                        <C>
SECTION 1.  DEFINITIONS AND CONSTRUCTION......................................................................1

SECTION 2.  DELIVERY AND ACCEPTANCE...........................................................................2
   2.1  Delivery and Lease of Aircraft........................................................................2
   2.2  Acceptance by Lessee..................................................................................2

SECTION 3.  TERM AND RENT.....................................................................................3
   3.1  Term .................................................................................................3
   3.2  Rent .................................................................................................3
   3.3  Payments..............................................................................................7

SECTION 4.  DISCLAIMER; CERTAIN AGREEMENTS OF LESSOR; SECTION 1110 MATTERS....................................8
   4.1  Disclaimer............................................................................................8
   4.2  Certain Agreements of Lessor..........................................................................9
   4.3  Quiet Enjoyment.......................................................................................9
   4.4  Investment of Funds Held as Security.................................................................10
   4.5  Title Transfers by Lessor............................................................................11
   4.6  Lessor's Interest in Certain Engines.................................................................12
   4.7  Lease for U.S. Federal Income Tax Law Purposes; Section 1110 of Bankruptcy Code......................12

SECTION 5.  RETURN OF AIRCRAFT...............................................................................13
   5.1  Compliance with Annex B..............................................................................13
   5.2  Storage and Related Matters..........................................................................13
   5.3  Return of Other Engines..............................................................................14
   5.4  Fuel ................................................................................................14

SECTION 6.  LIENS ...........................................................................................14

SECTION 7.  REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND RECORDS......................................16
   7.1  Registration and Operation...........................................................................16
   7.2  Possession...........................................................................................18
   7.3  Certain Limitations on Subleasing or Other Relinquishment of Possession..............................23

SECTION 8.  MAINTENANCE; REPLACEMENT AND POOLING OF PARTS; ALTERATIONS, MODIFICATIONS
                         AND ADDITIONS; OTHER LESSEE COVENANTS...............................................25
   8.1  Maintenance; Replacement and Pooling of Parts; Alterations, Modifications and
                Additions....................................................................................25
   8.2  Information, Certificates, Notices and Reports.......................................................25
</TABLE>

                                      -i-

<PAGE>   4

<TABLE>
<S>                                                                                                         <C>
SECTION 9.  VOLUNTARY TERMINATION UPON OBSOLESCENCE..........................................................27
   9.1  Right of Termination.................................................................................27
   9.2  Election by Lessor to Sell...........................................................................29
   9.3  Retention of Aircraft by Lessor......................................................................32

SECTION 10.  LOSS, DESTRUCTION, REQUISITION, ETC.............................................................34
   10.1  Event of Loss With Respect to Aircraft..............................................................34
   10.2  Event of Loss With Respect to an Engine.............................................................37
   10.3  Conditions to any Replacement.......................................................................38
   10.4  Conveyance to Lessee................................................................................41
   10.5  Application of Payments.............................................................................41
   10.6  Requisition of Aircraft for Use.....................................................................42
   10.7  Requisition of an Engine for Use....................................................................43
   10.8  Application of Payments.............................................................................43
   10.9  Application of Payments During Existence of a Special Default.......................................44

SECTION 11.  INSURANCE ......................................................................................44
   11.1  Lessee's Obligation to Insure.......................................................................44
   11.2  Insurance for Own Account...........................................................................45
   11.3  Indemnification by Government in Lieu of Insurance..................................................45
   11.4  Application of Insurance Proceeds...................................................................45
   11.5  Application of Payments During Existence of a Special Default.......................................46

SECTION 12.  INSPECTION .....................................................................................46

SECTION 13.  ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE.....................................................47
   13.1  In General..........................................................................................47
   13.2  Merger of Lessee....................................................................................48
   13.3  Assignment Security for Lessor's Obligations........................................................49
   13.4  Successor Owner Trustee.............................................................................50

SECTION 14.  LEASE EVENTS OF DEFAULT.........................................................................50
   14.1  Payments............................................................................................50
   14.2  Insurance...........................................................................................51
   14.3  Other Covenants.....................................................................................51
   14.4  Representations and Warranties......................................................................51
   14.5  Bankruptcy and Insolvency...........................................................................52

SECTION 15.  REMEDIES AND WAIVERS............................................................................53
   15.1  Remedies............................................................................................53
   15.2  Limitations Under CRAF..............................................................................57
   15.3  Right to Perform for Lessee.........................................................................58
   15.4  Determination of Fair Market Rental Value and Fair Market Sales Value...............................58
</TABLE>

                                      -ii-

<PAGE>   5

<TABLE>
<S>                                                                                                         <C>
   15.5  Remedies Cumulative.................................................................................59

SECTION 16.  LESSEE'S OBLIGATIONS; NO SETOFF, COUNTERCLAIM, ETC..............................................59

SECTION 17.  RENEWAL AND PURCHASE OPTIONS....................................................................60
   17.1  Preliminary Notices.................................................................................60
   17.2  Renewal Options.....................................................................................61
   17.3  Purchase Option.....................................................................................63
   17.4  Appraisals..........................................................................................65

SECTION 18.  MISCELLANEOUS...................................................................................66
   18.1  Amendments..........................................................................................66
   18.2  Severability........................................................................................67
   18.3  Third-Party Beneficiary.............................................................................67
   18.4  Reproduction of Documents...........................................................................67
   18.5  Counterparts........................................................................................68
   18.6  Notices.............................................................................................68
   18.7  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE....................................................69
   18.8  Survival............................................................................................70
   18.9  No Waiver...........................................................................................70
   18.10 Entire Agreement....................................................................................71
</TABLE>

EXHIBITS, SCHEDULES AND ANNEXES

EXHIBIT A             Form of Lease Supplement
EXHIBIT B             Form of Return Acceptance Supplement

SCHEDULE 1            Certain Terms
SCHEDULE 2A           Basic Rent
SCHEDULE 2B           Basic Rent Allocation
SCHEDULE 3            Stipulated Loss Value Schedule
SCHEDULE 4            Termination Value Schedule
SCHEDULE 5            Permitted Countries
SCHEDULE 6            Placards

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

                                     -iii-

<PAGE>   6

                                 LEASE AGREEMENT

                  LEASE AGREEMENT dated as of _______________ (this "Agreement"
or "Lease"), between (a) FIRST SECURITY BANK, NATIONAL ASSOCIATION, a national
banking association, not in its individual capacity, except as expressly
provided herein, but solely as Owner Trustee (this and all other capitalized
terms used but not defined herein shall have the respective meanings ascribed
thereto in Section 1 below) ("Lessor" or "Owner Trustee"), and (b) ATLAS AIR,
INC., a Delaware corporation ("Lessee").

                                    RECITALS

                  A. Lessor and Lessee are parties to the Participation
Agreement, pursuant to which, among other things, Lessor and Lessee have agreed
to enter into this Agreement.

                  B. Pursuant to the Trust Agreement, Owner Participant has
authorized Lessor to enter into this Agreement.

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

SECTION 1.  DEFINITIONS AND CONSTRUCTION

                  Capitalized terms used but not defined herein shall have the
respective meanings set forth or incorporated by reference, and shall be
construed and interpreted in the manner described, in Annex A.

SECTION 2.  DELIVERY AND ACCEPTANCE

         2.1  Delivery and Lease of Aircraft

                  Lessor hereby agrees (subject to the satisfaction or waiver of
the conditions set forth in Section 5 of the Participation Agreement) to lease
to Lessee for the Term and Lessee hereby agrees (subject to the satisfaction or
waiver of the conditions set forth in Section 5 of the Participation Agreement)
to lease from Lessor for the Term, the Aircraft, commencing

<PAGE>   7
                                      -2-

immediately upon acquisition of the Aircraft by Lessor pursuant to the Purchase
Agreement Assignment.

         2.2  Acceptance by Lessee

                  (a) By executing and delivering Lease Supplement No. 1, Lessee
confirms to Lessor that Lessee has duly and irrevocably accepted delivery of the
Aircraft for all purposes of this Agreement.

                  (b) Lessor has authorized one or more employees of Lessee,
designated by Lessee in writing, as the authorized representative or
representatives of Lessor to accept delivery of the Aircraft on behalf of Lessor
pursuant to the Purchase Agreement Assignment and the Participation Agreement.
Lessee hereby agrees that if delivery of the Aircraft shall be accepted by an
employee or employees of Lessee pursuant to such authorization by Lessor, such
acceptance of delivery by such employee or employees on behalf of Lessor shall,
without further act, irrevocably constitute acceptance by Lessee of the Aircraft
for all purposes of this Agreement.

SECTION 3.  TERM AND RENT

         3.1  Term

                  The Aircraft shall be leased hereunder for the Term, unless
this Agreement or the leasing of the Aircraft is earlier terminated in
accordance with any provision of this Agreement. Lessee shall have the option to
renew the leasing of the Aircraft hereunder pursuant to, and subject to the
terms and conditions of, Section 17.

         3.2  Rent

                  3.2.1 Basic Rent; Adjustments to Basic Rent and Certain Other
                        Amounts

                  (a) During the Base Lease Term, Lessee shall pay to Lessor, on
each Payment Date, Basic Rent in the amount equal to the percentage of Lessor's
Cost specified in Schedule 2 for such Payment Date, which shall be allocated to
the Payment Period ending on such Payment Date, if designated as a payment in
arrears, or allocated to the Payment Period commencing on such Payment Date, if
designated as a payment in advance, in each case as specified in Schedule 2, as
such amount may be adjusted pursuant to Section 3.2.1(b).
<PAGE>   8
                                      -3-

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

                   (i) In the event that Transaction Expenses paid by Lessor
         pursuant to Section 9.2 of the Participation Agreement are determined
         to be other than [ ]% of Lessor's Cost, then in each case the Basic
         Rent percentages set forth in Schedule 2, the Stipulated Loss Value
         percentages set forth in Schedule 3, the Termination Value percentages
         set forth in Schedule 4 and the EBO Price and the EBO Date set forth in
         Schedule 1 shall be recalculated (upwards or downwards) by the Owner
         Participant, on or prior to the 120th day after the Delivery Date using
         the same methods and assumptions used to calculate the original Basic
         Rent, Stipulated Loss Value and Termination Value percentages and the
         EBO Price and the EBO Date in order to (1) maintain the Owner
         Participant's Net Economic Return and (2) minimize the Net Present
         Value of Rents and the EBO Price to Lessee to the extent possible
         consistent with clause (1) hereof.

                  (ii) In the event of a refinancing as contemplated by Section
         11 of the Participation Agreement, then the Basic Rent percentages set
         forth in Schedule 2, the Stipulated Loss Value percentages set forth in
         Schedule 3, the Termination Value percentages set forth in Schedule 4
         and the EBO Price and the EBO Date set forth in Schedule 1 shall be
         recalculated (upwards or downwards) by the Owner Participant using the
         same methods and assumptions used to calculate the original Basic Rent,
         Stipulated Loss Value and Termination Value percentages and the EBO
         Price and the EBO Date to (1) maintain the Owner Participant's Net
         Economic Return and (2) to the extent possible consistent with clause
         (1) hereof, minimize the Net Present Value of Rents and the EBO Price
         to Lessee.

                 (iii) In the event that Lessee is required to indemnify the
         Owner Participant under the Tax Indemnity Agreement, then (A) in the
         event that Lessee agrees to satisfy such indemnity obligation pursuant
         to Section __ of the Tax Indemnity Agreement, the Basic Rent
         percentages set forth in Schedule 2, and (B) in any case, the
         Stipulated Loss Value percentages set forth in Schedule 3 and the
         Termination Value percentages set forth in Schedule 4 shall be
         recalculated (upwards or downwards) by Owner Participant, using the
         same methods and assumptions (except to the extent such assumptions
         shall be varied to take

<PAGE>   9
                                      -4-

         into account the Tax Loss [or Foreign Tax Credit Loss] (as each such
         term is defined in the Tax Indemnity Agreement) that is the subject of
         such indemnification and any prior or contemporaneous Tax Loss [or
         Foreign Tax Credit Loss]) used to calculate the Basic Rent percentages,
         the Stipulated Loss Value percentages and the Termination Value
         percentages in order to (1) maintain the Owner Participant's Net
         Economic Return and (2) to the extent possible consistent with clause
         (1) hereof, minimize the Net Present Value of Rents and the EBO Price
         to Lessee.

                  (c) All adjustments pursuant to Section 3.2.1(b) shall be made
as promptly as practicable after either Owner Participant or Lessee gives notice
to the other that an event has occurred that requires an adjustment. Owner
Participant and Lessee shall give prompt notice to the other of any event
requiring an adjustment. Any recalculation of the percentages of Basic Rent, the
EBO Price and the EBO Date (which may change only at the election of Lessee),
Stipulated Loss Value and Termination Value shall be prepared by Owner
Participant, subject to verification by Lessee in accordance with Section
3.2.1(d), using the same methodology and assumptions used by Owner Participant
in determining the percentages of Basic Rent, Stipulated Loss Value and
Termination Value and the EBO Price and the EBO Date as of the Delivery Date,
except as such methodologies and assumptions have been modified to reflect the
events giving rise to adjustments hereunder. Promptly after an adjustment is
made hereunder, Owner Participant shall deliver to Lessee a description of such
adjustment, setting forth in reasonable detail the calculation thereof. All
adjustments shall (i) be made so as to avoid characterization of the Lease as a
"disqualified leaseback or long-term agreement" within the meaning of Section
467 of the Code and/or regulations thereunder (or any successor or relevant code
provision or regulations) and (ii) be in compliance with the requirements of
Sections 4.02(5), 4.07(l) and, on a prospective basis, 4.08(1) of Revenue
Procedure 75-28 (or any successor or relevant procedure), except to the extent
that on the Delivery Date the Lease constituted a "disqualified leaseback or
long-term agreement" or was not in compliance with the revenue procedure
referred to in clause (ii). All adjustments required pursuant to Section
3.2.1(b) shall be set forth in a Lease Supplement or in an amendment to this
Lease, and , promptly after execution thereof by Lessor and Lessee, Lessee shall
give a copy thereof to Mortgagee.

                  (d) If Lessee believes that any calculations by Owner
Participant pursuant to Section 3.2.1(c) are in error,

<PAGE>   10
                                      -5-

and if, after consultation, Lessee and Owner Participant are unable to agree on
an adjustment, then Babcock & Brown Inc. or any other nationally recognized
certified public accounting or lease advisory firm selected by Lessee and
reasonably satisfactory to Owner Participant shall verify such calculations.
Owner Participant will make available to such firm, but not, in any
circumstances, to Lessee or any representative of Lessee, the methodology and
assumptions referred to in Section 3.2.1(b) and any modifications thereto made
to reflect the events giving rise to adjustments hereunder (subject to the
execution by such firm of a confidentiality agreement, reasonably acceptable to
Owner Participant, prohibiting disclosure of such methodology and assumptions to
any third party). The determination by such firm shall be final. Lessee will pay
the reasonable costs and expenses of such further verification by such firm,
provided that if such verification results in a decrease in Basic Rent which
decreases the remaining Net Present Value of Rents and/or the EBO Price by
$10,000 or more from the remaining Net Present Value of Rents and/or the EBO
Price as recalculated by the Owner Participant, then the Owner Participant will
pay such costs and expenses.

                  (e) Notwithstanding anything to the contrary in any Operative
Agreement, the amount of the payment of Basic Rent due and payable on each
Payment Date shall be at least sufficient to pay in full, as of such Payment
Date (assuming timely payment of the Equipment Notes prior to such Payment
Date), the aggregate principal amount of scheduled installments due on the
Equipment Notes outstanding on such Payment Date, together with the accrued and
unpaid interest thereon, due on such Payment Date in respect of the Equipment
Notes; provided, however, that no installment of Basic Rent shall be increased
to the extent such increase would be based upon (i) any attachment or diversion
of Basic Rent on account of Lessor Liens attributable to Lessor or Owner
Participant, (ii) any modification of the payment terms of the Equipment Notes,
other than as required or permitted by any Operative Agreement (including,
without limitation, as permitted upon the occurrence of a Lease Event of
Default) or (iii) the acceleration of any Equipment Note or Equipment Notes due
solely to the occurrence of an Event of Default that does not constitute a Lease
Event of Default.

                  3.2.2  Supplemental Rent

                  Lessee shall pay to Lessor, or to whosoever shall be entitled
thereto, any and all Supplemental Rent when and as the same shall become due and
owing. Lessee will also pay to Lessor, or to whosoever shall be entitled thereto
as Supplemental

<PAGE>   11
                                      -6-

Rent, to the extent permitted by applicable Law, interest at the Payment Due
Rate on any part of any amount of Rent (including, without limitation,
Supplemental Rent) not paid by 12:30 p.m., New York time, on the date when due
(so long as, in the case of any person not a party to the Participation
Agreement, Lessee had received timely notice of the account to which such
payment was required to be made), for the period from and including the date on
which the same was due to, but excluding, the date of payment in full.

         3.3  Payments

                  (a) Payments of Rent by Lessee shall be paid by wire transfer
of immediately available Dollars, not later than 12 noon, New York time, on the
date when due, to the account of Lessor specified in Schedule 1 to the
Participation Agreement or to such other account in the United States as
directed by Lessor to Lessee in writing at least 10 Business Days prior to the
date such payment of Rent is due or, in the case of any payment of Supplemental
Rent expressly payable to a person other than Lessor, to the person that shall
be entitled thereto to such account in the United States as such person may
specify from time to time to Lessee at least 10 Business Days prior to the date
such payment of Rent is due.

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

                  (c) So long as Lessee has not received written notice from the
Mortgagee that the Lien of the Trust Indenture has been discharged, and
notwithstanding Section 3.3(a), Lessor hereby directs, and Lessee agrees, that
all payments of Rent and all other amounts payable by Lessee hereunder, other
than Excluded Payments, shall be paid directly to Mortgagee on behalf of Lessor
by wire transfer of immediately available Dollars to the account of Mortgagee
specified in Schedule 1 to the Participation Agreement, or to such other account
in the United States as Mortgagee may specify by written notice to Lessor and
Lessee at least 10 Business Days prior to the date such payment of Rent is due.

                  (d) Excluded Payments shall be paid by wire transfer to the
person entitled thereto pursuant to the Operative Agreements of immediately
available Dollars to the account of such

<PAGE>   12
                                      -7-

person specified in the Participation Agreement or, if not so specified, to such
account in the United States as may be specified by such person by written
notice to Lessor and Lessee from time to time at least 10 Business Days prior to
the date such payment is required to be made.

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

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

         4.1  Disclaimer

                  LESSOR LEASES AND LESSEE TAKES THE AIRCRAFT "AS-IS, WHERE-IS."
LESSEE ACKNOWLEDGES AND AGREES THAT AS BETWEEN LESSEE AND EACH OF LESSOR,
MORTGAGEE AND ANY PARTICIPANT (i) LESSEE HAS SELECTED THE AIRCRAFT AND THE
MANUFACTURER THEREOF AND (ii) NONE OF LESSOR, MORTGAGEE AND ANY PARTICIPANT
MAKES, HAS MADE OR SHALL BE DEEMED TO HAVE MADE, AND EACH WILL BE DEEMED TO HAVE
EXPRESSLY DISCLAIMED, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO:

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

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

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

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

                  (z) THE ABSENCE OF OBLIGATIONS BASED ON STRICT LIABILITY IN
         TORT, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER (OTHER THAN
         REPRESENTATIONS AND WARRANTIES OF THE OWNER TRUSTEE AND ANY OWNER
         PARTICIPANT WITH RESPECT TO LESSOR LIENS IN EXISTENCE ON THE DELIVERY
         DATE), EXPRESS OR IMPLIED, WITH RESPECT TO THE AIRFRAME, ANY ENGINE OR
         ANY PART THEREOF.

<PAGE>   13
                                      -8-

         4.2  Certain Agreements of Lessor

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

         4.3  Quiet Enjoyment

                  So long as no Lease Event of Default shall have occurred and
be continuing, Lessor shall not take or cause to be taken or permit any Person
lawfully claiming by or through it to take any action to interfere with Lessee's
(or any Permitted Sublessee's) rights hereunder to continued possession, use and
operation of, and quiet enjoyment of the Aircraft, the Airframe, any Engine or
any Part and other rights with respect to the Aircraft hereunder during the
Term.

         4.4  Investment of Funds Held as Security

                  4.4.1  Investment

                  Any moneys held by Lessor as security for Lessee's obligations
under the Operative Agreements, shall, until paid to Lessee as provided herein
or applied as provided herein, be invested by Lessor from time to time as
directed in writing by Lessee (or, if Lessee fails to so direct, as directed by
Lessor in its sole discretion) and at the expense and risk of Lessee in Cash
Equivalents so long as such Cash Equivalents specified by Lessee or Lessor, as
the case may be, can be acquired by Lessor using its best efforts; provided,
that so long as the Lien of the Trust Indenture shall not have been discharged,
such moneys shall be invested and held by Mortgagee, as assignee of Lessor, in
accordance with this Lease and upon discharge of such Lien, Mortgagee shall pay
any such money held by it to Lessor to be held and invested in accordance with
this Section.

                  4.4.2  Payment of Gain or Loss

                  Any net gain (including interest received) realized as the
result of investments pursuant to Section 4.4.1 (net of any fees, commissions
and other reasonable expenses, if any, incurred in connection with such
investment) shall be held and applied in the same manner as the principal amount
is to be

<PAGE>   14
                                      -9-
held and applied hereunder. Lessee will promptly pay to Lessor, on
demand, the amount of any loss realized as the result of any such investment
(together with any fees, commissions and other reasonable expenses, if any,
incurred in connection with such investment), such amount so paid to be
held and applied by Lessor as contemplated in Section 4.4.1 above.

                  4.4.3  Limitation of Liability

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

         4.5  Title Transfers by Lessor

                  If Lessor shall be required to transfer title to the Aircraft,
Airframe or any Engine to Lessee or any other person pursuant to this Lease,
then (a) Lessor shall (1) transfer to Lessee or such other person, as the case
may be, all of Lessor's right, title and interest in and to the Aircraft,
Airframe or such Engine, as the case may be, free and clear of all Lessor Liens
attributable to Lessor or Owner Participant, (2) so long as the Lien of the
Trust Indenture has not been discharged, comply with the terms of the Trust
Indenture relating to the release of the Aircraft, Airframe or such Engine, (3)
assign to Lessee or such other person, as the case may be, if and to the extent
permitted under the Purchase Agreement, all warranties of Airframe Manufacturer
and Engine Manufacturer with respect to the Aircraft, Airframe or such Engine,
and (4) assign to Lessee or such other person, as the case may be, if and to the
extent permitted, all claims, if any, for damage to the Aircraft, Airframe or
such Engine, in each case free of Lessor Liens attributable to Lessor or Owner
Participant, and without recourse or warranty of any kind whatsoever (except as
to the transfer described in clause (1) above and as to the absence of such
Lessor Liens, as aforesaid), and (b) Lessor shall promptly deliver to Lessee or
such other person, as the case may be, a bill of sale and agreements of
assignment, evidencing such transfer and assignment, and such other instruments
of transfer, all in form and substance reasonably satisfactory to Lessee (or
such other person, as the case may be), as Lessee (or such other person, as the
case may be) may reasonably request.

<PAGE>   15
                                      -10-

         4.6  Lessor's Interest in Certain Engines

                  Lessor hereby agrees for the benefit of each lessor,
conditional seller, indenture trustee or secured party of any engine leased to,
or purchased by, Lessee or any Permitted Sublessee subject to a lease,
conditional sale, trust indenture or other security agreement that Lessor, its
successors and assigns will not acquire or claim, as against such lessor,
conditional seller, indenture trustee or secured party, any right, title or
interest in any engine as the result of such engine being installed on the
Airframe at any time while such engine is subject to such lease, conditional
sale, trust indenture or other security agreement and owned by such lessor or
conditional seller or subject to a trust indenture or security interest in favor
of such indenture trustee or secured party.

         4.7  Lease for U.S. Federal Income Tax Law Purposes; Section 1110 of
              Bankruptcy Code

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

                  (b) It is the intention of each of Lessee and Lessor that
Lessor (and Mortgagee as assignee of Lessor under the Trust Indenture) shall be
entitled to the benefits of Section 1110 with respect to the right to take
possession of the Aircraft, Airframe, Engines and Parts as provided in this
Lease.

SECTION 5.  RETURN OF AIRCRAFT

         5.1  Compliance with Annex B

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

         5.2  Storage and Related Matters

                  If Lessor gives written notice to Lessee not less than 60 days
nor more than 120 days prior to the end of the Term requesting outdoor parking
of the Aircraft upon its return hereunder, Lessee will assist Lessor in
arranging outdoor parking facilities for the Aircraft for a period up to 30
days, commencing on the date of such return, and upon request of Lessor to
Lessee made at least 10 days prior to the end of such initial 30 day period, for
an additional 30 day period commencing

<PAGE>   16
                                      -11-

upon expiration of such initial period, at such outdoor parking facility in the
48 contiguous states of the United States as Lessee may select. Lessee shall, at
Lessor's written request, maintain insurance (if available) for the Aircraft
during such outdoor parking period, provided that Lessor shall reimburse Lessee
for Lessee's out-of-pocket cost of providing such insurance. Such outdoor
parking shall be at Lessor's risk, and Lessor shall pay all applicable outdoor
parking fees; provided that Lessee's obligation to assist Lessor in arranging
parking shall be subject to Lessor entering into an agreement prior to the
commencement of the outdoor parking period with the outdoor parking facility
providing, among other things, that Lessor shall bear all maintenance charges
(other than maintenance required as a direct result of Lessee's failure to
comply with the provisions of Annex B) and other costs incurred.

         5.3  Return of Other Engines

                  In the event that any Engine owned by Lessor shall not be
installed on the Airframe at the time of return hereunder, Lessee shall be
required to return the Airframe hereunder with a Replacement Engine meeting the
requirements of, and in accordance with, Section 10 hereof and Annex B hereto.
Thereupon, Lessor will transfer to Lessee the Engine constituting part of such
Aircraft but not installed on such Airframe at the time of the return of the
Airframe.

         5.4  Fuel

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

SECTION 6.  LIENS

                  Lessee shall not, directly or indirectly, create, incur,
assume or suffer to exist any Lien on or with respect to the Aircraft, the
Airframe, any Engine or any Part, title to any of the foregoing or any interest
of Lessee therein, or the Lessee's rights in and to this Lease or any Permitted
Sublease,

<PAGE>   17
                                      -12-

except (a) the respective rights of Lessor, Mortgagee, the Participants or
Lessee under the Operative Agreements, or of any Permitted Sublessee under any
Permitted Sublease; (b) Lessor Liens; (c) the rights of others under agreements
or arrangements to the extent permitted by the terms of Sections 7.2 and 7.3;
(d) Liens for Taxes of Lessee or any Permitted Sublessee (and their respective
U.S. federal tax law consolidated groups), or Liens for Taxes of any Tax
Indemnitee (and its U.S. federal tax law consolidated group) for which Lessee is
obligated to indemnify such Tax Indemnitee under any of the Lessee Operative
Agreements, in any such case either not yet due or being contested in good faith
by appropriate proceedings so long as such Liens and such proceedings do not
involve any material risk of the sale, forfeiture or loss of the Aircraft, the
Airframe, any Engine or the interest of any Participant therein or impair the
lien of the Trust Indenture; (e) materialmen's, mechanics', workers',
repairers', employees' or other like Liens arising in the ordinary course of
business for amounts the payment of which is either not yet delinquent for more
than 60 days or is being contested in good faith by appropriate proceedings, so
long as such Liens and such proceedings do not involve any material risk of the
sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
interest of any Participant therein or impair the lien of the Trust Indenture;
(f) Liens arising out of any judgment or award against Lessee (or against any
Permitted Sublessee), so long as such judgment shall, within 60 days after the
entry thereof, have been discharged or vacated, or execution thereof stayed
pending appeal or shall have been discharged, vacated or reversed within 60 days
after the expiration of such stay, and so long as during any such 60-day period
there is not, or any such judgment or award does not involve, any material risk
of the sale, forfeiture or loss of the Aircraft, the Airframe, any Engine or the
interest of any Participant therein or impair the lien of the Trust Indenture,
and (g) any other Lien with respect to which Lessee (or any Permitted Sublessee)
shall have provided a bond, cash collateral or other security adequate in the
reasonable opinion of Lessor. Lessee shall promptly take (or cause to be taken)
such action as may be necessary duly to discharge (by bonding or otherwise) any
Lien not excepted above if the same shall at any time arise in respect of the
Aircraft, the Airframe, any Engine or any Part during the Term.

<PAGE>   18
                                      -13-

SECTION 7.  REGISTRATION, OPERATION, POSSESSION, SUBLEASING AND RECORDS

         7.1  Registration and Operation

                  7.1.1  Registration and Recordation

                  Subject to the compliance by Lessor and Owner Participant with
their respective obligations under Section 13 of the Participation Agreement,
Lessee shall cause the Aircraft to be, and at all times during the Term to
remain, duly registered with the FAA under the Act or with such other country of
registry as shall be permitted under Section 7.1.2 below, in the name of Lessor
as owner and lessor (except to the extent that such registration under the Act
cannot be effected with the FAA because of Lessor's or Owner Participant's
failure to comply with the citizenship requirements for registration of the
Aircraft under the Act). Lessor shall execute and deliver all such documents as
Lessee (or any Permitted Sublessee) may reasonably request for the purpose of
effecting and continuing such registration. Unless Mortgagee has given Lessee
notice that the Trust Indenture has been discharged, Lessee shall also cause the
Trust Indenture to be duly recorded and at all times maintained of record as a
first-priority perfected mortgage (subject to Permitted Liens) on the Aircraft,
the Airframe and each of the Engines (except to the extent such perfection or
priority cannot be maintained solely as a result of the failure by Lessor or
Mortgagee to execute and deliver any necessary documents).

                  7.1.2  Reregistration

                  So long as no Lease Event of Default shall have occurred and
be continuing, Lessee may, by written notice to Lessor, request to change the
country of registration of the Aircraft. Any such change in registration shall
be effected only in compliance with, and subject to all of the conditions set
forth in, Section 7.6.11 of the Participation Agreement.

                  7.1.3  Markings

                  If permitted by applicable Law, on or reasonably promptly
after the Delivery Date, Lessee will cause to be affixed to, and maintained in,
the cockpit of the Airframe and on each Engine, in each case, in a clearly
visible location (it being understood that the location of such placards, as
identified to the Owner Participant prior to the Delivery Date, shall be deemed
to be in compliance with this requirement), a placard

<PAGE>   19
                                      -14-

of a reasonable size and shape bearing the legend, in English, set forth in
Schedule 6. Such placards may be removed temporarily, if necessary, in the
course of maintenance of the Airframe or Engines. If any such placard is
destroyed or becomes illegible, Lessee shall promptly replace it with a placard
complying with the requirements of this Section 7.1.3.

                  7.1.4  Compliance With Laws

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

                  7.1.5  Operation

                  Lessee agrees not to operate, use or locate the Aircraft, the
Airframe or any Engine, or allow the Aircraft, the Airframe or any Engine to be
operated, used or located (a) in any area excluded from coverage by any
insurance required by the terms of Section 11, except in the case of a
requisition by or transfer to the U.S. Government where Lessee obtains an
indemnity in lieu of such insurance from the U.S. Government, or insurance from
the U.S. Government, covering such area, in accordance with Section 11.3 or (b)
in any recognized area of hostilities unless fully covered in accordance with
Annex D by war-risk insurance as required by the terms of Section 11 (including,
without limitation, Section 11.3), unless in any case referred to in this
Section 7.1.5 the Aircraft is only temporarily operated, used or located in such
area as a result of an emergency, equipment malfunction, navigational error,
hijacking, weather condition or other similar unforeseen circumstances,

<PAGE>   20
                                      -15-

so long as Lessee diligently and in good faith proceeds to remove the Aircraft
from such area.

         7.2  Possession

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

                  7.2.1  Interchange and Pooling

                  Subject or permit any Permitted Sublessee to subject any
Engine to normal interchange agreements or pooling agreements or arrangements,
in each case customary in the commercial air cargo industry and entered into by
Lessee or such Permitted Sublessee, as the case may be, in the ordinary course
of business; provided, however, that if Lessor's title to any such Engine is
divested under any such agreement or arrangement, then such Engine shall be
deemed to have suffered an Event of Loss as of the date of such divestiture,
with the effect that Lessee shall be required to replace such Engine with a
Replacement Engine meeting the requirements of, and in accordance with,
Section 10.

                  7.2.2  Testing and Service

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

                  7.2.3  Transfer to U.S. Government

                  Transfer or permit any Permitted Sublessee to transfer
possession of the Aircraft, Airframe or any Engine to the U.S. Government, in
which event Lessee shall promptly notify Lessor and Mortgagee in writing of any
such transfer of possession and, in the case of any transfer pursuant to CRAF,
in such

<PAGE>   21
                                      -16-

notification shall identify by name, address and telephone numbers the
Contracting Office Representative or Representatives for the Military Airlift
Command of the United States Air Force to whom notices must be given and to whom
requests or claims must be made to the extent applicable under CRAF.

                  7.2.4  Installation of Engines on Owned Aircraft

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

                  7.2.5  Installation of Engines on Other Airframes

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

                  7.2.6  Installations of Engines on Financed Aircraft

                  Install or permit any Permitted Sublessee to install an Engine
on an airframe owned by Lessee or such Permitted Sublessee, leased to Lessee or
such Permitted Sublessee, or purchased by Lessee or such Permitted Sublessee
subject to a conditional sale or other security agreement under circumstances
where neither Section 7.2.4 or 7.2.5 is applicable; provided, however, that any
such installation shall be deemed an Event of Loss with respect to such Engine,
and Lessee shall comply with

<PAGE>   22
                                      -17-

Section 10.2 hereof in respect thereof. Until Section 10.2 has been fully
complied with, Lessor's interest in any such Engine shall continue in full force
and effect.

                  7.2.7  Subleasing

                  With respect to the Aircraft, Airframe or any Engine, so long
as no Lease Event of Default shall have occurred and is continuing, enter into a
sublease with any Permitted Air Carrier, but only if:

                  (a) Lessee shall provide written notice to Lessor and
         Mortgagee (such notice in the event of a sublease to a U.S. Air Carrier
         to be given promptly after entering into any such sublease or, in the
         case of a sublease to any other Permitted Air Carrier, 10 days in
         advance of entering into such sublease);

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

                  (c) Any such sublease (i) shall not extend beyond the
         expiration of the Base Lease Term or any Renewal Lease Term then in
         effect unless Lessee shall have irrevocably committed to purchase the
         Aircraft, (ii) shall include provisions for the maintenance, operation,
         possession, inspection and insurance of the Aircraft that are the same
         in all material respects as the applicable provisions of this Lease and
         (iii) shall be expressly subject and subordinate to all the terms of
         this Agreement and to the rights, powers and remedies of Lessor
         hereunder, including, without limitation, Lessor's rights under Section
         15 to repossess the Aircraft, Airframe and Engines and to terminate
         such sublease upon the occurrence of a Lease Event of Default;

                  (d) In connection with a sublease to a Permitted Foreign Air
         Carrier or a Permitted Foreign Manufacturer, (1) the United States
         maintains diplomatic relations with the country of domicile of such
         Permitted Foreign Air Carrier or Permitted Foreign Manufacturer (or, in
         the case of Taiwan, diplomatic relations at least as good as those in
         effect on the Delivery Date) and (2) Lessee shall have furnished
         Lessor, Owner Participant and Mortgagee a favorable

<PAGE>   23
                                      -18-

         opinion of counsel, reasonably satisfactory to Lessor and Owner
         Participant, in the country of domicile of such Permitted Foreign Air
         Carrier or Permitted Foreign Manufacturer, that (i) the terms of such
         sublease are the legal, valid and binding obligations of the parties
         thereto enforceable under the laws of such jurisdiction, (ii) it is not
         necessary for Owner Participant, Lessor or Mortgagee to register or
         qualify to do business in such jurisdiction, if not already so
         registered or qualified, as a result, in whole or in part, of the
         proposed sublease, (iii) Lessor's title to, and Mortgagee's Lien in
         respect of, the Aircraft, Airframe and Engines will be recognized in
         such jurisdiction, (iv) the Laws of such jurisdiction of domicile
         require fair compensation by the government of such jurisdiction,
         payable in a currency freely convertible into Dollars, for the loss of
         title to the Aircraft, Airframe or Engines in the event of the
         requisition by such government of such title (unless Lessee shall
         provide insurance in the amounts required with respect to hull
         insurance under Section 11 covering the requisition of title to the
         Aircraft, Airframe or Engines by the government of such jurisdiction so
         long as the Aircraft, Airframe or Engines are subject to such sublease)
         and (v) the agreement of such Permitted Foreign Air Carrier or
         Permitted Foreign Manufacturer that its rights under the sublease are
         subject and subordinate to all the terms of this Lease is enforceable
         against such Permitted Foreign Air Carrier or Permitted Foreign
         Manufacturer under applicable law;

                  (e) Lessee shall furnish to Lessor, Mortgagee and Owner
         Participant evidence reasonably satisfactory to Lessor that the
         insurance required by Section 11 remains in effect;

                  (f) All necessary documents shall have been duly filed,
         registered or recorded in such public offices as may be required fully
         to preserve the title of Lessor, and the first priority security
         interest (subject to Permitted Liens) of Mortgagee, in the Aircraft,
         Airframe and Engines;

                  (g) Lessee shall reimburse Lessor, Mortgagee and Owner
         Participant for all of their reasonable out-of-pocket fees and
         expenses, including, without limitation, reasonable fees and
         disbursements of counsel, incurred by Lessor, Mortgagee and Owner
         Participant in connection with any such sublease;

<PAGE>   24
                                      -19-

                  (h) For all purposes of this Section 7.2.7, the term
         "sublease" shall be deemed to include interchange agreements with
         respect to the Aircraft or Airframe; and

                  (i) No such sublease shall be made to a Permitted Foreign Air
         Carrier or a Permitted Foreign Manufacturer prior to the close of the
         Tax Attribute Period, unless Lessee prepays on a lump-sum basis any
         liability due under the Tax Indemnity Agreement as a result of such
         sublease based upon the assumption that such sublease were to continue
         for the remainder of the term of such sublease; provided, however, that
         such sublease shall not be restricted under this paragraph (i) if it
         would not have the effect of lengthening the "recovery period" (as
         defined in Section 168 of the Code) then applicable to the Aircraft.

         7.3  Certain Limitations on Subleasing or Other Relinquishment of
              Possession

                  Notwithstanding anything to the contrary in Section 7.2:

                  (a) The rights of any person that receives possession of the
         Aircraft in accordance with Section 7.2 shall be subject and
         subordinate to all the terms of this Lease, and to Lessor's rights,
         powers and remedies hereunder, including, without limitation (i)
         Lessor's right to repossess the Aircraft pursuant to Section 15, (ii)
         Lessor's right to terminate and avoid such sublease, delivery, transfer
         or relinquishment of possession upon the occurrence of a Lease Event of
         Default and (iii) the right to require such person to forthwith deliver
         the Aircraft, the Airframe and Engines subject to such transfer upon
         the occurrence of a Lease Event of Default;

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

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

<PAGE>   25
                                      -20-

                  (d) Any event that constitutes or would, with the passage of
         time, constitute an Event of Loss under paragraph (c), (d), or (e) of
         the definition of such term (as set forth in Annex A) shall not be
         deemed to violate the provisions of Section 7.2; and

                  (e) Any Wet Lease or ACMI Contract shall not constitute a
         delivery, transfer or relinquishment of possession for purposes of
         Section 7.2 and shall not be prohibited by the terms hereof, but shall
         be subject and subordinate to the terms of this Lease. Neither a Wet
         Lease nor an ACMI contract shall be deemed to be a "sublease", and the
         counterparty of a Wet Lease or an ACMI Contract shall not be deemed to
         be a sublessee for any purposes under this Lease. Any contract that is
         part of the United States Civil Reserve Air Fleet Program shall not be
         deemed to be a sublease for any purposes under this Lease.

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

         8.1  Maintenance; Replacement and Pooling of Parts; Alterations,
              Modifications and Additions

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

         8.2  Information, Certificates, Notices and Reports

                  8.2.1  Financial Information

                  Lessee will furnish to Lessor:

                  (a) Within 90 days after the end of each of the first three
         fiscal quarters in each fiscal year of Lessee, a consolidated balance
         sheet of Lessee as of the end of such quarter and related statements of
         income and cash flows for the period commencing at the end of the
         previous fiscal year and ending with the end of such quarter, setting
         forth in each case in comparative form the corresponding figures for
         the corresponding period in the preceding fiscal year, prepared in
         accordance with GAAP; provided that so long as Lessee is subject to the
         reporting requirements of the Securities Exchange Act of 1934, a

<PAGE>   26
                                      -21-

         copy of Lessee's report on Form 10-Q for such fiscal quarter (excluding
         exhibits) will satisfy this paragraph (a).

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

                  8.2.2  Annual Certificate

                  Within 120 days after the close of each fiscal year of Lessee,
Lessee shall deliver to Lessor and Mortgagee an Officer's Certificate of Lessee
to the effect that such officer is familiar with or has reviewed or caused to be
reviewed the relevant terms of this Lease and the other Lessee Operative
Agreements and that such officer does not have knowledge of the existence as of
the date of such certificate of any Lease Event of Default.

                  8.2.3  Information for Filings

                  Lessee shall promptly furnish to Owner Participant or Lessor
such information (other than with respect to the citizenship of Owner
Participant and Lessor) within Lessee's or any Permitted Sublessee's possession,
or reasonably available to or obtainable by Lessee or such Permitted Sublessee,
as may be required to enable Lessor timely to file any reports required to be
filed by it as lessor under the Lease or to enable Owner Participant to timely
file any reports required to be filed by it, as the beneficiary of the Trust
Estate, in either case, with any Government Entity because of, or in connection
with, the interest of Owner Participant or Lessor in the Aircraft, Airframe or
Engines, this Lease or any other part of the Trust Estate; provided, however,
that with respect to any such information which Lessee or such Permitted
Sublessee reasonably deems commercially sensitive or confidential, Owner
Participant or Lessor, as the case may be, shall afford Lessee or such Permitted
Sublessee a reasonable opportunity to seek from any such Government Entity a
waiver of the obligation of Owner Participant or Lessor to file any such
information, or shall consent

<PAGE>   27
                                      -22-

to the filing of such information directly by Lessee or such Permitted Sublessee
in lieu of filing by Owner Participant or Lessor, and if any such waiver or
consent is evidenced to the reasonable satisfaction of Owner Participant or
Lessor, as the case may be, then Lessee shall not be required to furnish such
information to Owner Participant or Lessor.

                  8.2.4  Other

                  Lessee shall furnish annually any such opinions as may be
required pursuant to Section 7.1.3(d) of the Participation Agreement.

SECTION 9.  VOLUNTARY TERMINATION UPON OBSOLESCENCE

         9.1  Right of Termination

                  (a) Lessee shall have the right at its option to terminate
this Lease during the Base Lease Term, effective only on a Termination Date
occurring on or after the fifth anniversary of the Delivery Date, if:

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

                  (ii) the Aircraft is to be disposed of pursuant to a program
         of fleet renewal.

                  Lessee shall give to Lessor written notice of Lessee's
exercise of its option to terminate this Agreement not less than 90 days prior
to the proposed Termination Date specified in such notice.

                  (b) Lessor shall notify Lessee and Mortgagee of Lessor's
intention to sell or retain the Aircraft, as provided in this Section 9, within
30 days of receipt by Lessor of the written notice from Lessee given pursuant to
Section 9.1(a). Any failure by Lessor to give such notice of its election shall
be deemed to be an election to sell the Aircraft, as provided in this Section 9.

                  (c) Any termination pursuant to this Section 9 shall become
effective on the date of the sale, if any, pursuant to Section 9.2 or upon the
date of termination and payment by Lessee

<PAGE>   28
                                      -23-

and Lessor in accordance with Section 9.3 if Lessor elects to retain the
Aircraft.

         9.2  Election by Lessor to Sell

                  9.2.1  Bids; Closing of Sale

                  Unless Lessor has given Lessee notice of Lessor's election to
retain the Aircraft, Lessee (or a person authorized by the Lessee, acting as
agent for the Lessor, for a commercially reasonable commission) shall, until the
date 10 Business Days prior to the proposed Termination Date, use commercially
reasonable efforts to obtain bids for a cash purchase of the Aircraft and Lessor
may, if it desires to do so, also seek to obtain such bids. In the event Lessee
receives any bid, Lessee shall promptly, and in any event at least 10 Business
Days prior to the proposed date of sale, certify to Lessor in writing the amount
and terms of such bid, the proposed date of such sale and the name and address
of the person (who shall not be Lessee or any Affiliate of Lessee or any person
with whom Lessee or any such Affiliate has an arrangement for the future use of
the Aircraft by Lessee or any such Affiliate) submitting such bid. In the event
Lessor receives any bid on or prior to the date 10 Business Days prior to the
proposed Termination Date, Lessor shall, at least 10 Business Days prior to the
proposed date of sale, certify to Lessee in writing the amount and terms of such
bid, the proposed date of such sale and the name and address of the person
submitting such bid. Notwithstanding anything in this Section 9.2 to the
contrary, Lessee shall have no liability to Lessor or any other party for
failure to obtain a higher price for the Aircraft than the price actually
obtained, if any, or for the manner in which Lessee solicited bids for the
Aircraft, such manner of soliciting bids to be in the sole discretion of Lessee,
including, without limitation, the decision whether or not to solicit bids
publicly or in any particular market or venue. In addition, Lessee shall have no
obligation to Lessor or any other party to accept any bid solicited pursuant to
this Section 9.2.1 that Lessee, in good faith, believes is unlikely to result in
the consummation of the sale of the Aircraft in accordance with the terms
hereof.

<PAGE>   29
                                      -24-

                  9.2.2  Closing of Sale

                  (a) On the proposed Termination Date (i) Lessee shall deliver
the Airframe and Engines or engines constituting part of the Aircraft to the
bidder, if any, which shall have submitted the highest cash bid (net of any
fees, commissions or expenses of any broker retained by the Lessee) on or before
the date 10 Business Days prior to such Termination Date, in the same manner as
if delivery were made to Lessor pursuant to Section 5 and Annex B and in full
compliance with the terms thereof, and shall duly transfer to Lessor title to
any such engines not owned by Lessor, all in accordance with the terms of
Section 5 and Annex B, and (ii) Lessor shall simultaneously therewith transfer
the Airframe and Engines or engines to such bidder, in the manner described in
Section 4.5, against cash paid by such bidder to Lessor in the amount of such
highest bid (net of any fees, commissions or expenses of any broker retained by
the Lessee) and in the manner and in funds of the type specified in Section 3.3.

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

                   (i) all unpaid Basic Rent due at any time prior to such
         Termination Date and all Basic Rent due on such Termination Date to the
         extent payable in arrears with respect to the Payment Period then
         ended; plus

                  (ii) an amount equal to the excess, if any, of the Termination
         Value for the Aircraft, computed as of such Termination Date, over the
         net proceeds of any sale described in Section 9.2.2(a); plus

                 (iii) as provided in Section 3.2.2, interest on the amounts
         specified in the foregoing clause (i) at the Payment Due Rate from and
         including the date on which any such amount was due to the date of
         payment of such amount in full.

                  As a further condition precedent to such sale and delivery,
Lessee shall pay all Supplemental Rent (other than Termination Value) due by
Lessee to Lessor, Mortgagee or the Participants under this Lease, including,
without limitation, (A) Supplemental Rent in respect of Make-Whole Amount, if
any, payable

<PAGE>   30
                                      -25-

pursuant to Section 2.10(b) of the Trust Indenture in connection with a
prepayment of the Equipment Notes upon such sale, (B) all interest charges
provided for hereunder or under any other Lessee Operative Agreement with
respect to the late payment of any amounts so payable and (C) the reasonable
out-of-pocket fees and expenses (including any sales, transfer or similar taxes)
incurred by Lessor, Mortgagee and Owner Participant in connection with such
termination and sale, other than any fees, commissions or expenses payable to
any broker retained by the Lessor.

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

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

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

                  (d) A sale of the Aircraft pursuant to this Section 9.2.2
shall take place only on a Termination Date or any other date within 10 Business
Days after a Termination Date as Lessor may consent to, which consent shall not
be withheld unreasonably; provided that interest shall accrue on each such day
of the aforementioned 10-day extension at the Debt Rate. Subject to Section 9.3,
if no sale shall have occurred on or as of the proposed Termination Date (or
such later date pursuant to the immediately preceding sentence), this Agreement
shall continue in full force and effect, and all of Lessee's obligations shall
continue, including, without limitation, its obligation to pay Rent, in each
case, as if the notice under Section 9.1 shall not have been given and, subject
to Section 9.2.3(b), Lessee may give another notice pursuant to Section 9.1.

                  9.2.3  Withdrawal of Notice of Termination

                  (a) Lessee may withdraw any notice given pursuant to Section
9.1 at any time on or before the date 10 Business Days prior to the proposed
Termination Date, whereupon this Agreement shall continue in full force and
effect and all of Lessee's

<PAGE>   31
                                      -26-

obligations shall continue, including, without limitation, its obligation to pay
Rent, in each case, as if the notice under Section 9.1 shall not have been given
and Lessee may give another notice pursuant to Section 9.1; provided that Lessee
shall not be entitled to give more than five notices pursuant to Section 9.1.

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

         9.3  Retention of Aircraft by Lessor

                  (a) If Lessor shall elect to retain the Aircraft in accordance
with Section 9.1, on the proposed Termination Date:

                  (i) Lessor shall pay, or cause to be paid, in the manner and
         in funds of the type specified in Section 3.3, to the Mortgagee an
         amount sufficient to prepay all outstanding Equipment Notes pursuant to
         Section 2.10(b) of the Trust Indenture plus the Make-Whole Amount, if
         any;

                  (ii) subject to receipt by Mortgagee of the funds described in
         paragraph (i) above, Lessee shall deliver the Airframe and Engines or
         engines constituting part of the Aircraft to Lessor pursuant to Section
         5 and Annex B and in full compliance with the terms thereof, and shall
         duly transfer to Lessor title to any such engines not owned by Lessor,
         all in accordance with the terms of Section 5 and Annex B;

                  (iii) Lessee shall pay to Lessor, in the manner and in funds
         of the type specified in Section 3.3:

                           (1) all unpaid Basic Rent due at any time prior to
                  such Termination Date (or any later date agreed by the parties
                  pursuant to Section 9.2.2(d)) and all Basic Rent due on such
                  Termination Date (or any later date agreed by the parties
                  pursuant to Section 9.2.2(d)) to the extent payable in arrears
                  with respect to the Payment Period then ended; plus

                           (2) as provided in Section 3.2.2, interest on the
                  amounts specified in the foregoing clause (1) at the Payment
                  Due Rate from and including the date on

<PAGE>   32
                                      -27-

                  which any such amount was due to the date of payment of such
                  amount in full; and

                  (iv) Lessee shall also pay all Supplemental Rent due and
         payable by Lessee to Lessor, Mortgagee or the other Participants under
         this Lease (other than any Supplemental Rent in respect of Make-Whole
         Amount, if any, payable pursuant to Section 2.10(b) of the Trust
         Indenture in connection with a prepayment of the Equipment Notes upon
         such sale), including without limitation all interest charges provided
         for hereunder or under any other Lessee Operative Agreement with
         respect to the late payment of any amounts, so payable, and the
         reasonable out-of-pocket fees and expenses incurred by Lessor,
         Mortgagee and Owner Participant in connection with such termination and
         sale.

                  (b) Upon full and final payment to Lessor, Mortgagee and the
Participants of the amounts described in Section 9.3(a), and compliance by
Lessee with all the other applicable provisions of this Section 9.3,

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

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

SECTION 10.  LOSS, DESTRUCTION, REQUISITION, ETC.

         10.1  Event of Loss With Respect to Aircraft

                  10.1.1  Notice and Election

                  (a) Upon the occurrence of an Event of Loss with respect to
the Airframe, and any Engine or Engines installed thereon at the time of such
Event of Loss, Lessee shall promptly (and in any event within 15 days after such
occurrence) give Lessor and Mortgagee written notice of such Event of Loss.
Within 60 days after such occurrence, Lessee shall give Lessor and Mortgagee
written notice of Lessee's election to make payment in respect of such Event of
Loss, as provided in Section 10.1.2, or to replace the Airframe, and any such
Engines, as provided in Section 10.1.3.

<PAGE>   33
                                      -28-

                  (b) Any failure by Lessee to give such notice of its election
shall be deemed to be an election of the option set forth in Section 10.1.2.

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

                  (d) Notwithstanding the foregoing, if (i) an Event of Default
has occurred and is continuing or (ii) if a Lease Event of Default under Section
14.5 has occurred and is continuing, Lessee shall be required to make payment in
respect of such Event of Loss pursuant to Section 10.1.2.

                  10.1.2  Payment of Loss and Termination of Lease

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

                   (i) on the earlier of (x) the first Business Day following
         the 180th day after the date of the occurrence of such Event of Loss,
         and (y) the Business Day specified by Lessee as the payment date in an
         irrevocable notice delivered by Lessee to the applicable Lessor and
         Mortgagee not less than 20 days prior to such payment date, Lessee
         shall pay to Lessor an amount equal to the Stipulated Loss Value of the
         Aircraft as of the Loss Payment Date plus:

                           (1) any unpaid Basic Rent or Renewal Rent, as the
                  case may be, payable in advance and due prior to the Loss
                  Payment Date; plus

                           (2) any unpaid Basic Rent or Renewal Rent, as the
                  case may be, payable in arrears and due on or before such Loss
                  Payment Date; plus

                           (3) all other amounts of Supplemental Rent due on or
                  before the Loss Payment Date (but excluding any Make-Whole
                  Amount) and any reasonable out-of-pocket fees and expenses
                  incurred in connection with such Event of Loss by Lessor,
                  Owner Participant or Mortgagee; plus

<PAGE>   34
                                      -29-

                  (ii) on or before the Loss Payment Date, Lessee shall also pay
         to Lessor, Mortgagee and each Participant all other amounts due and
         payable by Lessee to Lessor, Mortgagee and such Participant under this
         Lease, the Participation Agreement or any other Lessee Operative
         Agreement.

                  (b) Upon payment in full of all amounts described in the
foregoing paragraph (a),(i) the obligation of Lessee to pay Basic Rent or
Renewal Rent hereunder with respect to the Aircraft shall terminate, (ii) the
Term for the Aircraft shall end and (iii) Lessor will transfer the Aircraft to
Lessee, as-is and where-is, and subject to any insurer's salvage rights, but
otherwise in the manner described in Section 4.5.

                  10.1.3  Replacement of Airframe and Engines

                  (a) If Lessee elects, in accordance with Section 10.1.1, to
replace the Airframe, and any Engines actually suffering the Event of Loss, then
Lessee shall, as promptly as possible and in any event within 180 days after the
occurrence of such Event of Loss, convey or cause to be conveyed to Lessor, in
compliance with Section 10.3 and as replacement for the Airframe, title to a
Replacement Airframe (which shall comply with paragraph (b) below), and for each
such Engine, title to a Replacement Engine, in each case free and clear of all
Liens other than Permitted Liens. If Lessee makes such election, but for any
reason fails or is unable to effect such replacement within such time period and
in compliance with the requirements set forth in Section 10.3, then Lessee shall
be deemed to have initially made the election set forth in Section 10.1.2 with
the effect that Lessee shall immediately pay, in the manner and in funds of the
type specified in Section 3.3, the amounts required under, and in accordance
with, Section 10.1.2.

                  (b) Any replacement airframe shall be an airframe that is the
same model as the Airframe to be replaced thereby, or an improved model, and
that has a value, utility and remaining useful life (without regard to hours or
cycles remaining until the next regular maintenance check), at least equal to
the Airframe to be replaced thereby (assuming that such Airframe had been
maintained in accordance with this Lease) (a "Replacement Airframe"). Any such
Replacement Engine shall meet the requirements of, and be conveyed by Lessee to
Lessor in accordance with, Section 10.2 (other than the notice requirement set
forth in Section 10.2.1).

<PAGE>   35
                                      -30-

         10.2  Event of Loss With Respect to an Engine

                  10.2.1  Notice

                  Upon the occurrence of an Event of Loss with respect to an
Engine under circumstances in which an Event of Loss with respect to the
Airframe has not occurred, Lessee shall promptly (and in any event within 15
days after such occurrence) give Lessor written notice of such Event of Loss.

                  10.2.2  Replacement of Engine

                  Lessee shall, promptly and in any event within 90 days after
the occurrence of such Event of Loss, convey or cause to be conveyed to Lessor,
in compliance with Section 10.3 and as replacement for the Engine with respect
to which any Event of Loss occurred, title to a Replacement Engine free and
clear of all Liens other than Permitted Liens. Any replacement engine shall be
an engine that is the same or improved make and model as the Engine to be
replaced, and that is suitable for installation and use on the Airframe, and
that has a value, utility and remaining useful life (without regard to hours and
cycles remaining until overhaul) at least equal to the Engine to be replaced
thereby (assuming that such Engine had been maintained in accordance with this
Lease) (a "Replacement Engine").

                  10.2.3  Engine Exchange

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

         10.3  Conditions to any Replacement

                  10.3.1  Documents

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

                  (a) furnish Lessor with a full warranty bill of sale duly
         conveying to Lessor such Replacement Airframe or Replacement Engine, in
         form and substance reasonably satisfactory

<PAGE>   36
                                      -31-

         to Lessor and cause such Replacement Airframe to be duly registered in
         the name of Lessor pursuant to the Act;

                  (b) cause (i) a Lease Supplement subjecting such Replacement
         Airframe or Replacement Engine to this Lease, duly executed by Lessee,
         to be delivered to Lessor for execution and, upon such execution, to be
         filed for recordation with the FAA pursuant to the Act, (ii) a Trust
         Indenture Supplement, subjecting such Replacement Airframe or
         Replacement Engine to the Trust Indenture, to be delivered to Lessor
         for execution and, upon execution, to be filed for recordation with the
         FAA pursuant to the Act and (iii) such Financing Statements and other
         filings, as Lessor or Mortgagee may reasonably request, duly executed
         by Lessee and, to the extent applicable, Lessor and Mortgagee (and
         Lessor and Mortgagee shall execute and deliver the same), to be filed
         in such locations as any such party may reasonably request;

                  (c) furnish such evidence of compliance with the insurance
         provisions of Section 11 with respect to such Replacement Airframe or
         Replacement Engine as Lessor may reasonably request;

                  (d) furnish an opinion or opinions of Lessee's counsel (which
         may be Lessee's legal department) reasonably satisfactory to Lessor and
         addressed to Lessor and Mortgagee to the effect that (i) such full
         warranty bill of sale referred to in Section 10.3.1(a) constitutes an
         effective instrument for the conveyance of title to the Replacement
         Airframe or Replacement Engine and (ii) in the case of a Replacement
         Airframe, Lessor and Mortgagee, as assignee of Lessor, will be entitled
         to the benefits of Section 1110 with respect to the Replacement
         Airframe, provided that such opinion referred to in this clause (ii)
         need not be delivered to the extent that immediately prior to such
         replacement the benefits of Section 1110 were not, solely by reason of
         a change in law or court interpretation thereof, available to Lessor or
         Mortgagee, as assignee of Lessor;

                  (e) furnish an opinion of Lessee's aviation law counsel
         reasonably satisfactory to Lessor and addressed to Lessor and Mortgagee
         as to the due registration of any such Replacement Airframe and the due
         filing for recordation of each Lease Supplement and Trust Indenture
         Supplement with respect to such Replacement Airframe or Replacement
         Engine under the Act;

<PAGE>   37
                                      -32-

                  (f) with respect to any Replacement Airframe, furnish an
         opinion of tax counsel, selected by Owner Participant and reasonably
         satisfactory to Lessee, as to the federal income tax consequences
         (without any requirement as to the nature of such Federal income tax
         consequences) to Lessor and Owner Participant of any such replacement;

                  (g) with respect to the replacement of the Airframe, and any
         Engine installed thereon at the time of the subject Event of Loss, if
         requested by Lessor and at Lessor's expense, furnish a certified report
         of a qualified independent aircraft appraiser, reasonably satisfactory
         to Lessor, certifying that such Replacement Airframe and any such
         Replacement Engine complies with the value, utility and remaining
         useful life requirements set forth in Section 10.1.3(b).

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

                  10.3.2  Other Obligations

                  (a) Lessor and Lessee agree that, upon any Replacement
Airframe becoming the Airframe hereunder, and upon any Replacement Engine
becoming an Engine hereunder, this Lease shall continue to be, and shall be
treated as, a lease for U.S. federal income tax purposes of, among other things,
such Replacement Airframe and such Replacement Engine. Without limiting the
foregoing, Lessee and Lessor intend that Lessor shall, in all events, be
entitled to the benefits of Section 1110 with respect to any Replacement
Airframe or Replacement Engine and Lessee and Lessor shall cooperate and take
such action as the other may reasonably request so as to ensure that Lessor
shall be entitled to such benefits; provided that Lessor shall not be entitled
to such benefits to the extent that immediately prior to any Replacement Engine
becoming an Engine hereunder, the benefits of Section 1110 were not, solely by
reason of a change in law or court interpretation thereof, available to Lessor
or Mortgagee, as assignee of Lessor.

                  (b) No Event of Loss with respect to an Engine, or with
respect to an Airframe, shall result in, or otherwise allow

<PAGE>   38
                                      -33-

or permit (other than as provided in Section 10.1.2(b)), any reduction,
deferral, discharge or other change in the timing or amount of any Rent payable
by Lessee hereunder, and (subject to such Section 10.1.2(b)) Lessee shall pay
all such Rent and other amounts as though such Event of Loss had not occurred.

         10.4  Conveyance to Lessee

                  Upon compliance by Lessee with the applicable terms of
Sections 10.1.3, 10.2 and 10.3.1, Lessor will transfer to Lessee the Airframe or
Engine, as the case may be, with respect to which such Event of Loss occurred,
in accordance with Section 4.5.

         10.5  Application of Payments

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

                  10.5.1  Replacement of Airframe and Engines

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

                  10.5.2  Loss of Engine

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

                  10.5.3  Payment of Loss

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

<PAGE>   39
                                      -34-

                  (a) first, if the sum described in Section 10.1.2 has not then
         been paid in full by Lessee, such amounts shall be paid to Lessor (or
         to Mortgagee so long as Mortgagee has not given notice to Lessee that
         the Lien of the Trust Indenture has been duly discharged, except with
         respect to Excluded Payments) to the extent necessary to pay in full
         such sum;

                  (b) second, the remainder, if any, shall be paid to Lessee.

         10.6  Requisition of Aircraft for Use

                  If any Government Entity shall requisition for use the
Airframe and the Engines or engines installed thereon, and if the same does not
constitute an Event of Loss, Lessee shall promptly notify Lessor and Mortgagee
of such requisition and all of Lessee's obligations under this Agreement shall
continue to the same extent as if such requisition had not occurred; provided,
however, that if the Airframe and Engines or engines installed thereon are not
returned to Lessor by Lessee at the end of the Term or within 180 days
thereafter, and Lessor, upon notice given not less than 30 days nor more than
120 days before the end of the Term, shall have elected to treat such event as
constituting an Event of Loss with respect to the Aircraft, Lessee shall then be
deemed to have made the election set forth in Section 10.1.2 with the effect
that Lessee shall be obligated to pay the Stipulated Loss Value and all other
amounts payable pursuant to Section 10.1.2 with respect to the Aircraft as if an
Event of Loss had occurred as of the end of the Term. If Lessor shall not have
elected to treat such event as an Event of Loss, Lessee shall be obligated to
return the Airframe and Engines or engines to Lessor pursuant to, and in all
other respects to comply with the provisions of, Section 5 promptly upon their
return by such Government Entity, and Lessee shall pay to Lessor upon such
return an amount equal to the average daily Basic Rent or Renewal Rent, as the
case may be, payable by Lessee during the Term for each day after the end of the
Term to but excluding the day of such return, up to a maximum of 30 days.

         10.7  Requisition of an Engine for Use

                  If any Government Entity shall requisition for use any Engine
but not the Airframe, Lessee will, if such requisition continues to the end of
the Term, replace such Engine by complying with the applicable terms of Sections
10.2 and 10.3 to the same extent as if an Event of Loss had occurred with
respect

<PAGE>   40
                                      -35-

to such Engine, and any payments received by Lessor or Lessee from such
Government Entity with respect to such requisition shall be paid or retained in
accordance with Section 10.5.2.

         10.8  Application of Payments

                  All payments received by Lessor or Lessee, or any Permitted
Sublessee, from any Government Entity for the use of the Airframe and Engines or
engines installed thereon during the Term shall be paid over to, or retained by,
Lessee and all payments received by Lessor or Lessee from any Government Entity
for the use of the Airframe and Engines or engines installed thereon after the
Term shall be paid over to, or retained by, Lessor; provided that, if such
requisition constitutes an Event of Loss, or Lessor has elected under Section
10.6 to treat such requisition as an Event of Loss, then all such payments shall
be paid over to Lessor (or to Mortgagee so long as Mortgagee has not given
notice to Lessee that the Lien of the Trust Indenture has been duly discharged),
and held as provided in Section 10.5.

         10.9  Application of Payments During Existence of a Special Default

                  Any amount described in this Section 10 that is payable or
creditable to, or retainable by, Lessee shall not be paid or credited to, or
retained by, Lessee if at the time such payment, credit or retention would
otherwise occur a Special Default shall have occurred and be continuing, but
shall instead be held by or paid over to Lessor (or to Mortgagee so long as
Mortgagee has not given notice to Lessee that the Trust Indenture has been duly
discharged) as security for the obligations of Lessee under this Lease and the
other Lessee Operative Agreements and shall be invested pursuant to Section 4.4
hereof unless and until such amount is applied, at the option of Lessor, or upon
the written request of Lessee to Lessor, from time to time during the
continuance of a Special Default, to Lessee's obligations under this Lease as
and when due, it being understood that any such application shall be made to
such obligations of Lessee as Lessor may determine in its sole discretion. At
such time as there shall not be continuing any Special Default, such amount
shall be paid to Lessee to the extent not previously applied in accordance with
this Section 10.9.

<PAGE>   41
                                      -36-

SECTION 11.  INSURANCE

         11.1  Lessee's Obligation to Insure

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

         11.2  Insurance for Own Account

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

         11.3  Indemnification by Government in Lieu of Insurance

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

         11.4  Application of Insurance Proceeds

                  As between Lessor and Lessee, all insurance proceeds received
as a result of the occurrence of an Event of Loss with respect to the Aircraft
or any Engine under policies required to be maintained by Lessee pursuant to
this Section 11 will be applied in accordance with Section 10.5. All proceeds of
insurance required to be maintained by Lessee, in accordance with Section 11 and
Section B of Annex D, in respect of any property damage or loss not constituting
an Event of Loss with respect

<PAGE>   42
                                      -37-

to the Aircraft, Airframe or any Engine will be applied in payment (or to
reimburse Lessee) for repairs or for replacement property, and any balance
remaining after such repairs or replacement with respect to such damage or loss
shall be paid over to, or retained by, Lessee.

         11.5  Application of Payments During Existence of a Special Default

                  If a Special Default shall have occurred and be continuing at
any time that an amount described in this Section 11 is payable or creditable
to, or retainable by, Lessee, Lessee shall cause such amount to be paid over to
Lessor (or to Mortgagee so long as Mortgagee has not given notice to Lessee that
the Lien of the Trust Indenture has been duly discharged) as security for the
obligations of Lessee under this Lease and shall be invested pursuant to Section
4.4 hereof unless and until such amount is applied, at the option of Lessor, or
upon the written request of Lessee to Lessor, from time to time during the
continuance of a Special Default, to Lessee's obligations under this Lease and
the other Lessee Operative Agreements as and when due, it being understood that
any such application shall be made to such obligations of Lessee as Lessor may
determine in its sole discretion. At such time as there shall not be continuing
any Special Default, such amount shall be paid to Lessee to the extent not
previously applied in accordance with this Section 11.5.

SECTION 12.  INSPECTION

                  (a) At all reasonable times Lessor, Mortgagee or the Owner
Participant, and their respective authorized representatives (the "Inspecting
Parties") may (not more than once every 12 months unless a Lease Event of
Default has occurred and is continuing in which case such inspection right shall
not be so limited) inspect the Aircraft, the Airframe and the Engines
(including, without limitation, the Aircraft Documents) and any such Inspecting
Party may make copies of such Aircraft Documents not reasonably deemed
confidential by Lessee or such Permitted Sublessee.

                  (b) Any inspection of the Aircraft hereunder shall be limited
to a visual, walk-around inspection and shall not include the opening of any
panels, bays or other components of the Aircraft (although those otherwise open
may be inspected), and no such inspection shall interfere with Lessee's or any

<PAGE>   43
                                      -38-

Permitted Sublessee's maintenance and operation of the Aircraft, the Airframe
and the Engines.

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

                  (d) Each Inspecting Party shall bear its own expenses in
connection with any such inspection (including the cost of any copies made in
accordance with Section 12(a)).

SECTION 13.  ASSIGNMENT; MERGER; SUCCESSOR OWNER TRUSTEE

         13.1  In General

                  This Lease and the other Lessee Operative Agreements shall be
binding upon and inure to the benefit of Lessor and Lessee and their respective
successors and permitted assigns. Except as otherwise expressly permitted by the
terms of the Lease or any other Lessee Operative Agreement, Lessee will not,
without the prior written consent of Lessor and Mortgagee, assign any of its
rights under this Lease, such consent not to be unreasonably withheld. Except as
otherwise provided herein (including, without limitation, under the provisions
of Section 15 hereof), Lessor and Mortgagee may not assign or convey any of
their right, title and interest in and to this Lease or the Aircraft without the
prior written consent of Lessee, such consent not to be unreasonably withheld.

         13.2  Merger of Lessee

                  13.2.1  In General

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

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

                  (b) such Person executes and delivers to Lessor and Mortgagee
a duly authorized, legal, valid, binding and enforceable

<PAGE>   44
                                      -39-

agreement, reasonably satisfactory in form and substance to Lessor, containing
an effective assumption by such Person of the due and punctual performance and
observance of each covenant, agreement and condition in the Lessee Operative
Agreements to be performed or observed by Lessee;

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

                  (d) immediately after giving effect to such consolidation or
merger no Lease Event of Default shall have occurred and be continuing.

                  13.2.2  Effect of Merger

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

         13.3  Assignment Security for Lessor's Obligations

                  In order to secure the indebtedness evidenced by the Equipment
Notes, Lessor has agreed in the Trust Indenture, among other things, to assign
to Mortgagee this Lease and to mortgage the Aircraft, the Airframe and the
Engines in favor of Mortgagee, subject to the reservations and conditions
therein set forth. Lessee hereby accepts and consents to the assignment of all
Lessor's right, title and interest in and to this Lease pursuant to the terms of
the Trust Indenture. In accordance with Section 3.3(c), Lessee agrees to pay
directly to Mortgagee (or, after receipt by Lessee of notice from Mortgagee of
the discharge of the Lien of the Trust Indenture, to Lessor), all amounts of
Rent (other than Excluded Payments) due or to become due hereunder and assigned
to Mortgagee and Lessee agrees that Mortgagee's right to such payments hereunder
shall be absolute and unconditional and shall not be affected by any
circumstance, including, without limitation, the circumstances set forth in
Section 16 hereof. Notwithstanding the foregoing assignment of this Lease, the
obligations of Lessee to Lessor

<PAGE>   45
                                      -40-

to perform the terms and conditions of this Lease shall remain in full force and
effect.

         13.4  Successor Owner Trustee

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

SECTION 14.  LEASE EVENTS OF DEFAULT

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

         14.1  Payments

                  Lessee shall fail to pay any amount of Basic Rent, Renewal
Rent, Stipulated Loss Value or Termination Value when due and such failure shall
continue for a period in excess of 10 Business Days after the same shall have
become due; Lessee shall fail to pay any Supplemental Rent (other than
Stipulated Loss Value or Termination Value or Excluded Payments) when due and
such failure shall continue for a period in excess of 10 Business Days from and
after the date of any written notice to Lessee from Lessor or the Mortgagee of
the failure to make such payment when due; or Lessee shall fail to pay any
Excluded Payment when due and such failure shall continue for a period in excess
of 10 Business Days from and after the date of any written

<PAGE>   46
                                      -41-

notice to Lessee and Mortgagee from the Owner Paticipant that such failure
constitutes a Lease Event of Default.

         14.2  Insurance

                  Lessee shall fail to carry and maintain, or cause to be
carried and maintained, insurance on and in respect of the Aircraft, Airframe
and Engines in accordance with the provisions of Section 11.

         14.3  Other Covenants

                  Lessee shall fail to observe or perform (or caused to be
observed and performed) in any material respect any other covenant, agreement or
obligation set forth herein or in any other Lessee Operative Agreement (other
than the covenants, agreements and obligations set forth in the Tax Indemnity
Agreement), and such failure shall continue unremedied for a period of 30 days
from and after the date of written notice thereof to Lessee from Lessor or
Mortgagee, unless such failure is capable of being corrected and Lessee shall be
diligently proceeding to correct such failure, in which case there shall be no
Lease Event of Default unless and until such failure shall continue unremedied
for a period of 180 days after receipt of such notice.

         14.4  Representations and Warranties

                  Any representation or warranty made by Lessee herein, in the
Participation Agreement or in any other Lessee Operative Agreement (other than
the representations and warranties of Lessee in the Tax Indemnity Agreement) (a)
shall prove to have been untrue or inaccurate in any material respect as of the
date made, (b) such untrue or inaccurate representation or warranty is material
at the time in question, and (c) the same shall remain uncured (to the extent of
the adverse impact of such incorrectness on the interest of the Participants or
Lessor) for a period in excess of 30 days from and after the date of written
notice thereof from Lessor or Mortgagee to Lessee.

         14.5  Bankruptcy and Insolvency

                  (a) Lessee shall consent to the appointment of or the taking
of possession by a receiver, trustee or liquidator of itself or of substantially
all of its property, or Lessee shall admit in writing its inability to pay its
debts generally as they come due, or does not pay its debts generally as they
become due or shall make a general assignment for the benefit

<PAGE>   47
                                      -42-

of creditors, or Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization, liquidation or other
relief in a case under any bankruptcy Laws or other insolvency Laws (as in
effect at such time), or Lessee shall seek relief by voluntary petition, answer
or consent, under the provisions of any other bankruptcy or other similar Law
providing for the reorganization or winding-up of corporations (as in effect at
such time) or Lessee's board of directors shall adopt a resolution authorizing
any of the foregoing; or

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

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

SECTION 15.  REMEDIES AND WAIVERS

         15.1  Remedies

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

                  15.1.1  Return and Repossession

                  Lessor may cause Lessee, upon giving written notice to Lessee,
to return promptly, and Lessee shall return promptly, the Airframe and Engines
as Lessor may so demand, to Lessor or its order in the manner and condition
required by, and otherwise in accordance with, all the provisions of Section 5

<PAGE>   48
                                      -43-

as if the Airframe or Engines were being returned at the end of the Base Lease
Term or any Renewal Lease Term or Lessor, at its option, may enter upon the
premises where the Airframe or any Engine, or any Part thereof, are located and
take immediate possession of and remove the same by summary proceedings or
otherwise, all without liability accruing to Lessor for or by reason of such
entry or taking of possession, whether for the restoration of damage to property
caused by such taking or otherwise.

                  15.1.2  Sale and Use

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

                  15.1.3  Certain Liquidated Damages

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

<PAGE>   49
                                      -44-

                  (a) all unpaid Basic Rent or Renewal Rent, as the case may be,
         due at any time prior to the Stipulated Loss Value Date specified in
         such notice; plus

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

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

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

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

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

                  15.1.4  Liquidated Damages Upon Sale

                  If Lessor, pursuant to Section 15.1.2 or applicable Law, shall
have sold the Airframe and/or any Engine, Lessor, in lieu of exercising its
rights under Section 15.1.3 with respect to the Aircraft, Airframe or any
Engine, as the case may be, may, if Lessor shall so elect, upon giving written
notice to Lessee, demand Lessee to pay Lessor, and Lessee shall pay to Lessor,
on the date of such sale and in the manner and in funds of the type specified in
Section 3.3, as liquidated damages for

<PAGE>   50
                                      -45-

loss of a bargain and not as a penalty (in lieu of the Basic Rent or Renewal
Rent, as the case may be, for the Aircraft in respect of all periods commencing
on or after the date of such sale), the following amounts:

                  (a) all unpaid Basic Rent or Renewal Rent, as the case may be,
         due at any time prior to the Stipulated Loss Value Date on or
         immediately preceding the date of such sale; plus

                  (b) an amount equal to the excess, if any, of (i) the
         Stipulated Loss Value of the Aircraft, computed as of the Stipulated
         Loss Value Date used in the foregoing clause (a) for the computation of
         unpaid Rent, over (ii) the proceeds of such sale; plus

                  (c) all reasonable brokerage and other out-of-pocket fees and
         expenses incurred by Lessor and, Mortgagee in connection with such
         sale; plus

                  (d) if the date of such sale is not a Stipulated Loss Value
         Date, an amount equal to interest on the outstanding principal amount
         of the Equipment Notes at the rate per annum borne thereby from and
         including the Stipulated Loss Value Date used in the foregoing clause
         (a) for the computation of unpaid Rent to the date of such sale; plus

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

                  (f) interest on the sum of the amounts specified in the
         foregoing clause (b) at the Payment Due Rate from and including the
         date of such sale to the date of payment of such amounts.

                  15.1.5  Rescission

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

                  15.1.6  Other Remedies

<PAGE>   51
                                      -46-

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

                  (b) The prevailing party in any dispute between Lessee and
Lessor under this Lease shall be entitled to reimbursement from the other party
for all reasonable attorneys' fees and other costs and expenses of such
prevailing party, incurred by reason of such dispute.

         15.2  Limitations Under CRAF

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

         15.3  Right to Perform for Lessee

                  If Lessee (i) fails to make any payment of Rent required to be
made by it hereunder or (ii) fails to perform or comply with any of its
agreements contained herein and such

<PAGE>   52
                                      -47-

failure continues for a period of 30 days after written notice thereof is given
by Lessor or Mortgagee to Lessee, Lessor or Mortgagee may (but shall not be
obligated to) make such payment or perform or comply with such agreement, and
the amount of such payment and the amount of the expenses of Lessor or Mortgagee
incurred in connection with such payment or the performance of or compliance
with such agreement, as the case may be, together with interest thereon at the
Payment Due Rate, shall be deemed Supplemental Rent, payable by Lessee upon
demand by Lessor or Mortgagee, whichever is entitled thereto. No such payment,
performance or compliance shall be deemed to cure any Lease Default or Lease
Event of Default or otherwise relieve Lessee of its obligations with respect
thereto.

         15.4  Determination of Fair Market Rental Value and Fair Market Sales
               Value

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

         15.5  Remedies Cumulative

                  Nothing contained in this Lease shall be construed to limit in
any way any right, power, remedy or privilege of Lessor hereunder or under any
other Operative Agreement or now or hereafter existing at law or in equity. Each
and every right, power, remedy and privilege hereby given to, or retained by,
Lessor in this Lease shall be in addition to and not in limitation of every
other right, power, remedy and privilege given under the Operative Agreements or
now or hereafter existing at law or in equity. Each and every right, power,
remedy and privilege of Lessor under this Lease and any other Operative
Agreement may be exercised from time to time or simultaneously and as often and
in such order as may be deemed expedient by Lessor. All such rights, powers,
remedies and privileges shall be cumulative and not mutually exclusive, and the
exercise of

<PAGE>   53
                                      -48-

one shall not be deemed a waiver of the right to exercise any other. Lessee
hereby waives to the extent permitted by applicable Law any right which it may
have to require Lessor to choose or elect remedies.

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

                  (a) Lessee's obligation to pay Rent hereunder shall be
absolute and unconditional, and shall not be affected by any event or
circumstance, including, without limitation: (i) any setoff, counterclaim,
recoupment, defense or other right that Lessee may have against Lessor,
Mortgagee, any Participant, any Note Holder, or any other Person for any reason
whatsoever; (ii) any defect in the title, airworthiness, condition, design,
operation or fitness for use of, or any damage to or loss or destruction of, the
Aircraft, Airframe or any Engine, or any interruption or cessation in the use or
possession thereof by Lessee for any reason whatsoever; (iii) any insolvency,
bankruptcy, reorganization or similar proceedings by or against Lessee or any
other Person; or (iv) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.

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

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

<PAGE>   54
                                      -49-

SECTION 17.  RENEWAL AND PURCHASE OPTIONS

         17.1  Preliminary Notices

                  (a) At least (i) 120 days prior to the Scheduled Expiration
Date or a Renewal Term Expiration Date, as applicable, or (ii) if a Renewal
Lease Term of six months or less is then in effect, 60 days prior to the Renewal
Term Expiration Date, Lessee may provide notice to Lessor that Lessee may
exercise the option to extend the leasing of the Aircraft for a Renewal Lease
Term pursuant to Section 17.2 or the option to purchase the Aircraft on the
Scheduled Expiration Date or Renewal Term Expiration Date of such Renewal Lease
Term, as the case may be, pursuant to Section 17.3 (a "Preliminary Notice").

                  (b) If any such Preliminary Notice is given by Lessee, then
Lessee may provide a further notice specifying which option it intends to elect,
with respect to the relevant period, pursuant to Section 17.2.1 or 17.3.1, as
the case may be. If Lesser fails to provide such further notice, such
Preliminary Notice shall be deemed revoked.

         17.2  Renewal Options

                  17.2.1  Renewal Notice

                  (a) If Lessee has given a Preliminary Notice, as specified in
Section 17.1, and subject to the terms and conditions of this Section 17.2,
Lessee may exercise its option to extend the leasing of the Aircraft hereunder
until the applicable Renewal Term Expiration Date, on the same terms, provisions
and conditions (except as contemplated by this Section 17) set forth herein and
in the other Lessee Operative Agreements with respect to the Base Lease Term, by
delivery of a notice (a "Renewal Notice") to Lessor not less than (i) 75 days
prior to the Scheduled Expiration Date or a Renewal Term Expiration Date, as
applicable, or (ii) if a Renewal Lease Term of six months or less is then in
effect, 20 days prior to the Renewal Term Expiration Date.

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

                   (i) No Renewal Notice shall be binding on Lessor or oblige
         Lessor to extend the leasing of the Aircraft hereunder for a Renewal
         Lease Term if any Lease Event of Default shall have occurred and be
         continuing on and as of

<PAGE>   55
                                      -50-

         the date that such Renewal Lease Term would otherwise commence.

                  (ii) Any Renewal Notice shall be revocable by Lessee until 10
         Business Days after the Renewal Rent is determined in accordance with
         Section 17.2.2 and unless revoked by written notice by Lessee to Lessor
         shall thereafter become irrevocable and shall constitute an
         unconditional obligation of Lessee to extend the leasing of the
         Aircraft hereunder for the Renewal Lease Term to which such Renewal
         Notice relates.

                 (iii) Lessee shall not be entitled to give any Renewal Notice
         if it has (x) not delivered a Preliminary Notice or (y) delivered a
         Purchase Notice to Lessor.

                  17.2.2  Renewal Rent

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

                  (b) The Renewal Rent payable by Lessee on each Payment Date
during the First Renewal Lease Term shall be the lower of (i) an amount equal to
one-half of the average of the semiannual Basic Rent amounts payable during the
Base Lease Term and (ii) the Fair Market Rental Value of the Aircraft for such
Renewal Lease Term. The Renewal Rent payable by Lessee on each Payment Date
during any Subsequent Renewal Lease Term shall be the Fair Market Rental Value
of the Aircraft for such Subsequent Renewal Lease Term. Any such Fair Market
Rental Value shall be determined not more than 35 days after delivery of a
Preliminary Notice by mutual agreement of Lessor and Lessee or, if they shall be
unable to agree, by an appraisal in accordance with Section 17.4.

                  17.2.3  Stipulated Loss and Termination Values

                  (a) For any Renewal Lease Term, Stipulated Loss Value Dates
and Termination Value Dates shall be extended throughout such Renewal Lease Term
on the same day of each month as during the Base Lease Term, and a new EBO Date
shall be established.

                  (b) Stipulated Loss Value and Termination Value amounts and
the EBO Price that are payable during any Renewal Lease Term shall be determined
at the same time that the Renewal Rent for such Renewal Lease Term is determined
under Section 17.2.2.

<PAGE>   56
                                      -51-

Stipulated Loss Values and Termination Values for any such Renewal Lease Term
shall, commencing on the first day of such Renewal Lease Term, be equal to the
Fair Market Sales Value of the Aircraft, computed as of the first day of such
Renewal Lease Term, and shall decline ratably on a monthly basis to the Fair
Market Sales Value of the Aircraft as of the last day of such Renewal Lease
Term.

                  (c) Any Fair Market Sales Value of the Aircraft, for purposes
of calculating Stipulated Loss Value and Termination Value amounts applicable
during any such Renewal Lease Term, shall be determined 35 days after delivery
of a Preliminary Notice by mutual agreement of Lessor and Lessee or, if they
shall be unable to agree, by an appraisal in accordance with Section 17.4.

         17.3  Purchase Option

                  17.3.1  Purchase Notice

                  (a) Subject to the terms and conditions of this Section 17.3,
Lessee or its designee may elect to purchase the Aircraft, (A) on any Purchase
Date, at a purchase price equal to the Fair Market Sales Value of the Aircraft,
(B) on the EBO Date at a purchase price equal to the EBO Price or (C) at any
time following the occurrence of a Materially Adverse Tax Event at a purchase
price equal to the Fair Market Sales Value of the Aircraft (or, if greater, the
Termination Value) determined as of the date of purchase.

                  (b) Lessee may exercise its option to purchase the Aircraft
pursuant to clause (A), clause (B) or clause (C) of Section 17.3.1(a), by
delivery of a notice (a "Purchase Notice") to Lessor not less than (i) in the
case of clause (A), 75 days prior to the Purchase Date specified in such
Purchase Notice, or (ii) in the case of Clause (A) if a Renewal Lease Term of
six months or less is then in effect, 20 days prior to the Purchase Date
specified in such Purchase Notice, or (iii) in the case of clause (B), not less
than 30 days prior to the EBO Date, or (iv) in the case of clause (C) at any
time following a Materially Adverse Tax Event.

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

                   (i) Any Purchase Notice (whether delivered or deemed to have
         been delivered) shall be revocable until 10 Business Days after the
         determination of the Fair Market Sales

<PAGE>   57
                                      -52-

         Value in accordance with Section 17.3.2 or until 16 days prior to the
         EBO Date, and unless revoked by written notice by Lessee to Lessor
         shall thereafter become irrevocable and shall constitute an
         unconditional obligation of Lessee to purchase the Aircraft under this
         Section 17.3.

                  (ii) Lessee shall not be entitled to give any Purchase Notice
         in respect of any Purchase Date if it has delivered a Renewal Notice
         for a Renewal Lease Term that would commence immediately following such
         Purchase Date.

                  (d) If any purchase option is exercised, upon payment of the
applicable purchase price any Rent otherwise due and payable on the date of
purchase or thereafter with respect to such Aircraft shall not be due and
payable.

                  (e) At the election of the Lessee, any purchase option
described in this Section 17.3 may be exercised by a designee of the Lessee.

                  17.3.2  Determination of Fair Market Sales Value

                  The Fair Market Sales Value of the Aircraft shall be
determined not more than 35 days after delivery of a Preliminary Notice by
mutual agreement of Lessor and Lessee or, if they shall be unable to agree, by
an appraisal in accordance with Section 17.4.

                  17.3.3  Title

                  Upon full and final payment by Lessee of (a) the applicable
purchase price of the Aircraft, (b) all unpaid Rent due and payable through and
including the Purchase Date, EBO Date or the date of Purchase under clause (C)
of Section 17.3.1(a), as the case may be, and (c) all other amounts due and
payable by Lessee under this Agreement, Lessor will transfer to Lessee title to
the Aircraft in accordance with Section 4.5.

         17.4  Appraisals

                  Whenever Fair Market Rental Value or Fair Market Sales Value
of the Aircraft is required to be determined by an appraisal under the foregoing
provisions of this Section 17, Lessee and Lessor shall, within seven days after
the expiration of the 35-day period referred to in Sections 17.2.2(b), 17.2.3(c)
and 17.3.2, appoint a mutually satisfactory Appraiser to complete such appraisal
within seven days of the appointment

<PAGE>   58
                                      -53-

and the determination of such Appraiser shall be final and binding on Lessor and
Lessee. If Lessee and Lessor fail to agree within such 7-day period upon a
satisfactory Appraiser then each shall within one day thereafter appoint a
separate Appraiser and such Appraisers shall within seven days of such
appointment jointly determine such amount and such jointly determined amount
shall be final and binding on Lessor and Lessee. If either Lessee or Lessor
fails to so appoint an Appraiser, the determination of the single Appraiser
appointed shall be final and binding on Lessor and Lessee. If two Appraisers are
appointed and within seven days after the appointment of the latter of such two
Appraisers, they cannot agree upon such amount, such two Appraisers shall,
within two days after such seventh day, appoint a third Appraiser and such
amount shall be determined by such three Appraisers, who shall make their
separate appraisals within seven days following the appointment of the third
Appraiser, and any determination so made shall be conclusive and binding upon
Lessor and Lessee in accordance with the following provisions of this Section
17. If three Appraisers are appointed and the difference between the
determination which is farther from the middle determination and the middle
determination is more than 125% of the difference between the middle
determination and the third determination, then such farther determination shall
be excluded, the remaining two determinations shall be averaged and such average
shall be final and binding upon Lessor and Lessee. Otherwise, the average of all
three determinations shall be final and binding upon Lessor and Lessee. If no
such third Appraiser is appointed within such 2-day period, either Lessor or
Lessee may apply to the American Arbitration Association to make such
appointment, and both parties shall cooperate in making, and be bound by, such
appointment. The fees and expenses of all such Appraisers and such appraisal
procedure shall be borne equally by Lessee and Lessor; provided, that if Lessee
elects not to renew this Lease or purchase the Aircraft following the conclusion
of such appraisal, Lessee shall pay all such fees and expenses of such
appraisal.

SECTION 18.  MISCELLANEOUS

         18.1  Amendments

                  No provision of this Agreement may be amended, supplemented,
waived, modified, discharged, terminated or otherwise varied orally, but only by
an instrument in writing that specifically identifies the provision of this
Agreement that it purports to amend, supplement, waive, modify, discharge,
terminate

<PAGE>   59
                                      -54-

or otherwise vary and is signed by Lessor and Lessee. Each such amendment,
supplement, waiver, modification, discharge, termination or variance shall be
effective only in the specific instance and for the specific purpose for which
it is given. No provision of this Agreement shall be varied or contradicted by
oral communication, course of dealing or performance or other manner not set
forth in an agreement, document or instrument in writing and signed by Lessor
and Lessee.

         18.2  Severability

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

         18.3  Third-Party Beneficiary

                  This Agreement is not intended to, and shall not, provide any
person not a party hereto (other than Mortgagee, the Participants, the Indenture
Indemnitees and the Persons referred to in Section 4.6) with any rights of any
nature whatsoever against either of the parties hereto, and no person not a
party hereto (other than Mortgagee, the Participants, the Indenture Indemnitees
and the Persons referred to in Section 4.6) shall have any right, power or
privilege in respect of, or have any benefit or interest arising out of, this
Agreement.

         18.4  Reproduction of Documents

                  This Agreement, all annexes, schedules and exhibits hereto and
all agreements, instruments and documents relating hereto, including, without
limitation (a) consents, waivers and modifications that may hereafter be
executed and (b) financial statements, certificates and other information
previously or hereafter furnished to any party hereto, may be reproduced by such
party by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process, and such party may destroy any original
documents so reproduced. Any such reproduction shall be admissible in evidence
as the original

<PAGE>   60
                                      -55-

itself in any judicial or administrative proceeding (whether or not the original
is in existence and whether or not such reproduction was made by such party in
the regular course of business) and any enlargement, facsimile or further
reproduction of such reproduction likewise is admissible in evidence.

         18.5  Counterparts

                  This Agreement and any amendments, waivers, consents or
supplements hereto may be executed in any number of counterparts (or upon
separate signature pages bound together into one or more counterparts), each of
which when so executed shall be deemed to be an original, and all of which
counterparts, taken together, shall constitute one and the same instrument.

         18.6  Notices

                  Unless otherwise expressly permitted by the terms hereof, all
notices, requests, demands, authorizations, directions, consents, waivers and
other communications required or permitted to be made, given, furnished or filed
hereunder shall be in writing (it being understood that the specification of a
writing in certain instances and not in others does not imply an intention that
a writing is not required as to the latter), shall refer specifically to this
Agreement and shall be personally delivered, sent by facsimile (followed by
overnight courier service for next Business Day receipt) or telecommunication
transmission (which in either case provides written confirmation to the sender
of its delivery), sent by registered mail or certified mail, return receipt
requested, postage prepaid, or sent by overnight courier service, in each case
to the respective address or facsimile number set forth for such party in
Schedule 1 to the Participation Agreement, or to such other address or number as
either party hereto may hereafter specify by notice to the other party hereto.
Each such notice, request, demand, authorization, direction, consent, waiver or
other communication shall be effective when received or, if made, given,
furnished or filed (a) by facsimile or telecommunication transmission, when
confirmed; provided there is receipt of such notice the next Business Day from
overnight courier service or (b) by registered or certified mail, three Business
Days after being deposited, properly addressed, with the U.S. Postal Service.

<PAGE>   61
                                      -56-

         18.7  GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE

                  (a) THIS AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE
LAWS OF THE STATE OF NEW YORK, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY
AND PERFORMANCE. THIS AGREEMENT IS BEING DELIVERED IN THE STATE OF NEW YORK.

                  (b) EACH PARTY HERETO HEREBY IRREVOCABLY AGREES, ACCEPTS AND
SUBMITS ITSELF TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK IN THE CITY AND COUNTY OF NEW YORK AND OF THE UNITED STATES FOR THE
SOUTHERN DISTRICT OF NEW YORK, IN CONNECTION WITH ANY LEGAL ACTION, SUIT OR
PROCEEDING WITH RESPECT TO ANY MATTER RELATING TO OR ARISING OUT OF OR IN
CONNECTION WITH THIS AGREEMENT.

                  (c) EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS AND AGREES
TO THE SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE
MADE BY MAILING COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID,
AT THE ADDRESS SET FORTH PURSUANT TO SECTION 18.6. EACH PARTY HERETO HEREBY
AGREES THAT SERVICE UPON IT, OR ANY OF ITS AGENTS, IN EACH CASE IN ACCORDANCE
WITH THIS SECTION 18.7(c), SHALL CONSTITUTE VALID AND EFFECTIVE PERSONAL SERVICE
UPON SUCH PARTY, AND EACH PARTY HERETO HEREBY AGREES THAT THE FAILURE OF ANY OF
ITS AGENTS TO GIVE ANY NOTICE OF SUCH SERVICE TO ANY SUCH PARTY SHALL NOT IMPAIR
OR AFFECT IN ANY WAY THE VALIDITY OF SUCH SERVICE ON SUCH PARTY OR ANY JUDGMENT
RENDERED IN ANY ACTION OR PROCEEDING BASED THEREON.

                  (d) EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, AND AGREES NOT TO ASSERT, BY WAY OF MOTION, AS A
DEFENSE, OR OTHERWISE, IN ANY LEGAL ACTION OR PROCEEDING BROUGHT HEREUNDER IN
ANY OF THE ABOVE-NAMED COURTS, THAT SUCH ACTION OR PROCEEDING IS BROUGHT IN AN
INCONVENIENT FORUM, THAT VENUE FOR THE ACTION OR PROCEEDING IS IMPROPER OR THAT
THIS AGREEMENT OR ANY OTHER OPERATIVE AGREEMENT MAY NOT BE ENFORCED IN OR BY
SUCH COURTS.

<PAGE>   62
                                      -57-

                  (e) EACH PARTY HERETO HEREBY WAIVES ITS RESPECTIVE RIGHTS TO A
JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION IN ANY COURT IN ANY JURISDICTION
BASED UPON OR ARISING OUT OF OR RELATING TO THIS AGREEMENT.

         18.8  Survival

                  The representations, warranties, indemnities and covenants set
forth herein shall survive the delivery of the Aircraft, the Transfer of any
interest of Owner Participant in this Agreement, the other Operative Agreements,
the Trust Estate and the Trust Agreement, the Transfer or any interest by any
Note Holder of its Equipment Notes, but no such provision other than such
indemnities shall survive the expiration or other termination of this Lease in
accordance with its terms; it being expressly understood and agreed that the
foregoing shall not be construed so as to release Lessee from any obligation
theretofore accrued, including the payment of any Rent then due and payable,
provided that the foregoing shall not be construed to change any provision in
the Operative Agreements in which any such representation, warranty, indemnity
or covenant expires by its terms.

         18.9  No Waiver

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

         18.10  Entire Agreement

                  This Agreement, together with the other Operative Agreements,
on and as of the date hereof constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof, and all prior or
contemporaneous understandings or agreements, whether written or oral, between
the parties

<PAGE>   63
                                      -58-

hereto with respect to such subject matter are hereby superseded in their
entireties.

                     [This space intentionally left blank.]

<PAGE>   64

                  IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease Agreement to be duly executed as of the day and year first above written.

                                  FIRST SECURITY BANK,
                                  NATIONAL ASSOCIATION,
                                    as Lessor, not in its individual capacity,
                                    except as expressly provided herein, but
                                    solely as Owner Trustee under the Trust
                                    Agreement

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

                                  ATLAS AIR, INC.,
                                     as Lessee

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

<PAGE>   65

                  IN WITNESS WHEREOF, Lessor and Lessee have each caused this
Lease Agreement to be duly executed as of the day and year first above written.

                                  FIRST SECURITY BANK,
                                  NATIONAL ASSOCIATION,
                                    as Lessor, not in its individual capacity,
                                    except as expressly provided herein, but
                                    solely as Owner Trustee under the Trust
                                    Agreement

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

                                  ATLAS AIR, INC.,
                                     as Lessee

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

                  Receipt of this original counterpart of the foregoing Lease
Agreement is hereby acknowledged on this ____ day of _________, ____.

                                  WILMINGTON TRUST COMPANY, not in
                                    its individual capacity, but
                                    solely as Mortgagee

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

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