Document:

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                             STOCKHOLDERS' AGREEMENT

                                  by and among

                        WILLIS LEASE FINANCE CORPORATION,

                             CHARLES F. WILLIS, IV,

                               CFW PARTNERS, L.P.,

                 AUSTIN CHANDLER WILLIS 1995 IRREVOCABLE TRUST,

                                       and

                               FLIGHTTECHNICS, LLC

                                      as of

                                NOVEMBER 7, 2000

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                                TABLE OF CONTENTS

1.    DEFINITIONS............................................................1

2.    RELATIONSHIP BETWEEN THIS AGREEMENT AND COMPANY'S GOVERNING DOCUMENTS..1

3.    REPRESENTATIONS AND WARRANTIES.........................................2

4.    INVESTOR'S RIGHT OF FIRST OFFER WITH RESPECT TO CFW SHARES.............5

5.    RESTRICTIONS ON NEW ISSUANCES DURING EXCLUSIVITY PERIOD................6

6.    INVESTOR'S ANTI-DILUTION RIGHTS........................................6

7.    RESTRICTIONS ON TRANSFER...............................................7

8.    COMPANY GOVERNANCE; VOTING AGREEMENT..................................10

9.    APPOINTMENT OF COMPANY NOMINEE AS MANAGER OF EITHER FLIGHTLEASE OR
      SRT ..................................................................13

10.   FUNDAMENTAL TRANSACTIONS..............................................14

11.   NEGOTIATING EXCLUSIVITY...............................................15

12.   GENERAL PROVISIONS....................................................16

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                             STOCKHOLDERS' AGREEMENT

      This Stockholders' Agreement ("Agreement") is made as of November 7, 2000,
by and among Willis Lease Finance Corporation, a Delaware corporation
("Company"), Charles F. Willis, IV, a California resident ("CFW"), CFW Partners,
L.P., a Delaware limited partnership ("CFW Partners"), the Austin Chandler
Willis 1995 Irrevocable Trust, an irrevocable trust governed by the laws of the
State of California (together with CFW and CFW Partners, the "CFW Stockholders")
and FlightTechnics, LLC, a Delaware limited liability company ("Investor").

                                    RECITALS

      A. The CFW Stockholders are the beneficial owners of the CFW Shares.

      B. On the Closing Date, (i) Company will sell to Investor, 1,300,000 newly
issued shares of Company's Common Stock pursuant to an Investment Agreement (the
"Investment Agreement"), (ii) SRT Group America will purchase all of the
outstanding stock of Willis Aeronautical Services, Inc., a California
corporation and wholly-owned subsidiary of Company, pursuant to a Share Purchase
Agreement between SRT Group America and Company, (iii) SRT Group America will
purchase all of Company's equity interest in Pacific Gas Turbine Center, LLC, a
California limited liability company, pursuant to a Member Interest Purchase
Agreement between SRT Group America and Company and (iv) Company will purchase
certain engines from SRT pursuant to an Aircraft Engine Purchase Agreement
between Company and SRT.

      C. Company, the CFW Stockholders and Investor desire to enter into an
agreement to govern certain aspects of their relationship.

                                    AGREEMENT

      The parties, intending to be legally bound, agree as follows:

1. DEFINITIONS

      For purposes of this Agreement, the terms and variations have the meanings
specified in Schedule 1.1.

2. RELATIONSHIP BETWEEN THIS AGREEMENT AND COMPANY'S GOVERNING DOCUMENTS

      2.1 CORPORATE DOCUMENTS

      The parties will exercise their respective rights and fulfill their
respective obligations in accordance with this Agreement, and in such a manner
as to carry out the intentions of this Agreement, to the maximum extent
permitted by Legal Requirements.

      2.2 CONFLICT OR INVALIDITY OF PROVISIONS IN THE GOVERNING DOCUMENTS

      If there is a conflict between a provision of Company's Governing
Documents and a provision of this Agreement, the Governing Documents will
prevail with respect to the

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parties' obligations to one another. In the event there is such a conflict, each
party will take all action within its respective powers (including, in the case
of the CFW Stockholders and Investor, voting in favor of amendments to the
Governing Documents and attending meetings in person or by proxy and execution
of written consents in lieu of meetings, and including, in the case of Company,
calling special board and stockholder meetings), to provide each party with the
benefit of the rights granted to it pursuant to this Agreement, and to achieve
compliance with the procedures provided pursuant to this Agreement.

3. REPRESENTATIONS AND WARRANTIES

      3.1 COMPANY'S REPRESENTATIONS AND WARRANTIES

      Company represents and warrants to Investor as of the date hereof and on
the Closing Date as follows:

            (a) Organization and Good Standing. Company is a corporation duly
organized, validly existing, and in good standing under the laws of Delaware.

            (b) Enforceability; Authority; No Conflict.

                  (i) This Agreement constitutes the legal, valid, and binding
obligation of Company, enforceable against it in accordance with its terms,
subject to any applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to creditors' rights generally
or to general principles of equity. Company has the right, power and authority
to execute and deliver this Agreement and to perform its obligations under this
Agreement, and such action has been duly authorized by all necessary action by
all Governmental Bodies and the Company's Board. No approval of this Agreement
is required by the Company's stockholders.

                  (ii) The execution and delivery of this Agreement and the
consummation or performance of any of the Contemplated Transactions on or prior
to the Closing Date will not:

                        (A) breach any provision of any of the Governing
Documents of Company, or any resolution adopted by Company's stockholders and
Board;

                        (B) give any Governmental Body the right to exercise any
remedy or obtain any relief under any Legal Requirement or any Order to which
Company, or any of its assets, may be subject;

                        (C) contravene, conflict with, or result in a violation
or breach of any requirements of any Governmental Body;

                        (D) breach any material provision of, or give any Person
the right to declare a default or exercise any remedy under, or to accelerate
the maturity or performance of, or payment under, or to cancel, terminate, or
modify, any Company Contract; or

                        (E) result in the imposition or creation of any
Encumbrance upon or with respect to any of Company's material assets.

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                  (iii) Except as contemplated hereby or as set forth on
Schedule 3.1(b)(iii), Company is not required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions on or prior to the Closing Date.

            (c) CFW Shares. All of the CFW Shares have been duly authorized and
validly issued and are fully paid and nonassessable. None of the CFW Shares was
issued in violation of any Legal Requirement.

      3.2 REPRESENTATIONS AND WARRANTIES OF CFW STOCKHOLDERS

      The CFW Stockholders hereby jointly and severally represent and warrant to
Investor as follows:

            (a) Enforceability; Authority; No Conflict.

                  (i) This Agreement constitutes the legal, valid, and binding
obligation of each CFW Stockholder, enforceable against him or it in accordance
with its terms, subject to any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to creditors' rights generally or to general principles of equity. Each CFW
Stockholder has the right, power and authority to execute and deliver this
Agreement and to perform his or its obligations under this Agreement. Exhibit
3.2(a) is a Consent of Spouse, which has been duly authorized, executed and
delivered by, and constitutes the legal, valid, and binding obligation of, CFW's
spouse, enforceable against her in accordance with its terms, subject to any
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
now or hereafter in effect relating to creditors' rights generally or to general
principles of equity.

                  (ii) The execution and delivery of this Agreement and the
consummation or performance of any of the Contemplated Transactions on or prior
to the Closing Date will not:

                        (A) breach any provision of any of the Governing
Documents of CFW Partners, L.P.;

                        (B) give any Governmental Body the right to exercise any
remedy or obtain any relief under any Legal Requirement or any Order to which
the CFW Stockholders may be subject; or

                        (C) breach any provision of any Contract to which a CFW
Stockholder is a party.

                  (iii) Except as contemplated hereby, no CFW Stockholder is
required to give any notice to or obtain any Consent from any Person in
connection with the execution and delivery of this Agreement.

            (b) Title to Shares. The CFW Stockholders are the record and
beneficial owner and holders of the securities of the Company set forth opposite
each CFW Stockholder's name on Schedule 3.2(b) (collectively, "CFW Shares").
Such securities

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constitute all of the securities of Company beneficially owned by the CFW
Stockholders and, except as set forth on Schedule 3.2(b), the CFW Stockholders
own the CFW Shares free and clear of all Encumbrances. No legend or other
reference to any Encumbrance appears on any of the CFW Shares. Other than the
1996 Stock Option/Stock Issuance Plan, as amended to date (the "1996 Stock
Option/Stock Issuance Plan"), there are no Contracts relating to the issuance,
sale, or transfer of the CFW Shares. Only the CFW Stockholders have voting
power, power of disposition and all other stockholder rights with respect to the
CFW Shares, with no restrictions, other than pursuant to applicable securities
laws, on such Stockholder's rights of disposition pertaining to this Agreement.

      3.3 REPRESENTATIONS AND WARRANTIES OF INVESTOR

      Investor represents and warrants to Company and CFW as follows:

            (a) Organization and Good Standing. Investor is a limited liability
company duly organized, validly existing, and in good standing under the laws of
Delaware.

            (b) Enforceability; Authority; No Conflict.

                  (i) This Agreement constitutes the legal, valid, and binding
obligation of Investor, enforceable against it in accordance with its terms.
Investor has the right, power and authority to execute and deliver this
Agreement and to perform its obligations under this Agreement and such action
has been duly authorized by all necessary action by all Governmental Bodies and
Investor's members.

                  (ii) The execution and delivery of this Agreement and the
consummation or performance of any of the Contemplated Transactions on or prior
to the Closing Date will not:

                        (A) breach any provision of any of the Governing
Documents of Investor, or any resolution or decision adopted by Investor's
members or Governmental Bodies; or

                        (B) give any Governmental Body the right to exercise any
remedy or obtain any relief under any Legal Requirement or any Order to which
Investor, or any of its assets, may be subject; or

                        (C) contravene, conflict with, or result in a violation
or breach of any requirements of any Governmental Body.

                  (iii) Except as Contemplated hereby, Investor is not required
to give any notice to or obtain any Consent from any Person in connection with
the execution and delivery of this Agreement or the consummation or performance
of any of the contemplated Transactions on or prior to the Closing Date.

4. INVESTOR'S RIGHT OF FIRST OFFER WITH RESPECT TO CFW SHARES

            (a) Subject to the terms and conditions of this Article 4, Investor
will have a right of first offer (the "CFW Shares Right of First Offer") to
purchase, except for options granted under the 1996 Stock Option/Stock Issuance
Plan, any or all of the CFW Shares or

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any other equity securities of the Company hereafter acquired by any CFW
Stockholder (the "Target Shares") if such CFW Stockholder proposes to sell or
transfer to any Person other than another CFW Stockholder such Target Shares
pursuant either to: (i) a bona fide offer in writing ("Offer") from such Person,
or (ii) a determination by such CFW Stockholder to sell or otherwise transfer
such Target Shares ("Determination"). Upon either the receipt of an Offer or the
making of a Determination, such CFW Stockholder will deliver a written notice
("Notice") to Investor which includes a copy of any written proposal, term sheet
or letter of intent relating to such Offer or Determination. For a 35 day period
commencing upon the receipt of such Notice, the CFW Stockholder and Investor
will in good faith negotiate toward the execution of a definitive agreement,
which will have been approved by Investor's members, and Investor will have the
exclusive right to negotiate such a definitive agreement on terms which are
acceptable to such CFW Stockholder in its sole and absolute discretion. Investor
and the CFW Stockholder will use their Reasonable Commercial Efforts to
consummate the purchase within 120 days of the execution of the definitive
agreement. Upon termination of the 35 day period, if the parties do not execute
the definitive agreement, the CFW Stockholder may negotiate and enter into a
purchase agreement with any third party subject to Investor's consent to such
third party, which consent to such third party may not be unreasonably withheld.
If such CFW Stockholder elects, in its sole discretion, to accept bids or
proposals from multiple parties, Investor will be permitted to submit a
competing bid or proposal to such CFW Stockholder. If a definitive agreement for
the sale of such CFW Shares to a third party is not executed within 120 days
from the termination of such 35 day period, then the CFW Shares Right of First
Offer will be deemed to be revived and, such CFW Shares may not be sold unless
first reoffered to Investor in accordance with this Article 4.

            (b) Notwithstanding anything in this Article 4 to the contrary, the
CFW Shares Right of First Offer will apply only to those Target Shares that,
when added to the number of shares of Common Stock already owned by Investor and
the other SAirGroup Affiliates beneficially as of the date of the Offer or
Determination, will not exceed 49.9% of the Common Stock. Subject to the
requirements below, each CFW Stockholder will be permitted to sell up to an
aggregate of the greater of 150,000 shares of Common Stock or the maximum amount
permitted by any Legal Requirement for any rolling three-month period after the
Closing Date without being subject to the CFW Shares Right of First Offer, but
only according to the following procedures. CFW Stockholder will use reasonable
efforts to provide Investor with regular indications of any intentions to sell
shares of Common Stock during this period. CFW Stockholder will deliver to
Investor a written notice by facsimile or e-mail (an "Electronic Notice") by
8:00 A.M. (Zurich time) of the business day in which the CFW Stockholder intends
to sell shares of Common Stock pursuant to this Article 4(b) (such intended date
of sale, the "Article 4(b) Sell Date"). Investor will have until 30 minutes
prior to the opening of the NASDAQ Stock Market on the Article 4(b) Sell Date
(the "Article 4(b) Deadline") to deliver Electronic Notice to CFW Stockholder of
its intent to purchase such shares of Common Stock. If by the Article 4(b)
Deadline CFW Stockholder (i) does not receive Electronic Notice from Investor or
(ii) receives Electronic Notice from Investor that it does not intend to
purchase such shares of Common Stock, then CFW Stockholder may sell such shares
of Common Stock on the NASDAQ Stock Market for a one week period beginning on
the Article 4(b) Sell

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Date. If CFW Stockholder receives Electronic Notice from Investor of its intent
to purchase such shares of Common Stock by the Article 4(b) Deadline, then the
price per share will be the closing price per share of the Common Stock on the
NASDAQ Stock Market on the business day immediately prior to the Article 4(b)
Sell Date. During the first three months after the Closing Date, Investor will
buy any shares of Common Stock that CFW Stockholder wishes to sell at the
closing price per share of the Common Stock on the business day in which
Investor receives Electronic Notice of CFW Stockholders' intent to sell shares
of its Common Stock.

            (c) Investor will lose the rights under this Article 4 if Investor
fails to purchase at least 1,700,000 additional shares at the Second Closing (as
defined in the Investment Agreement) within 18 months after the Closing Date.
Once the Investor is the beneficial owner of 3,000,000 shares of Common Stock,
but only until the five year anniversary of the Closing Date, Investor will
retain the rights under this Article 4 for as long as Investor maintains
ownership of at least 3,000,000 or more shares of Common Stock.

5. RESTRICTIONS ON NEW ISSUANCES DURING EXCLUSIVITY PERIOD

      Unless Company first obtains Investor's consent, Company will not during
the Exclusivity Period, offer to sell, sell, or issue to any Strategic Investor
in any one transaction or series of transactions any Common Stock, the aggregate
offering price or fair market value of which represents 5% or more of the issued
and outstanding Common Stock. Investor will lose the rights under this Article 5
if Investor fails to purchase at least 1,700,000 additional shares of Common
Stock at the Second Closing within nine months after the Closing Date, provided
that Investor will regain the rights under this Article 5 if Investor purchases
at least 1,700,000 additional shares of Common Stock at the Second Closing
within 18 months after the Closing Date. Once the Investor is the beneficial
owner of at least 3,000,000 shares of Common Stock, but only until the three
year anniversary of the Closing Date, Investor will retain the rights under this
Article 5 for as long as Investor maintains ownership of 3,000,000 or more
shares of Common Stock.

6. INVESTOR'S ANTI-DILUTION RIGHTS.

      If Company intends to engage in a public offering of its Common Stock,
Company will (i) provide Investor with written notice of such intention at least
ten days prior to the scheduled offering date, describing the securities to be
offered, the number or amount thereof, and the general terms upon which Company
proposes to effect such offering, and (ii) take such steps as are necessary to
enable Investor to participate, at its option, as a purchaser in such offering
at the same Public Offering price and on the same terms and conditions as the
offerees, such that Investor, through the exercise of such option, would
maintain its same percentage interest in the outstanding Common Stock. For the
purpose of this Article 6 a Rule 144A offering will be considered a public
offering. Investor will lose the rights under this Article 6 if Investor fails
to purchase at least 1,700,000 additional shares of Common Stock at the Second
Closing within 18 months after the Closing Date. Once the Investor is the
beneficial owner of at least 3,000,000 shares of Common Stock, but only until
the five year anniversary of the Closing Date, Investor will retain these rights
under this Article 6 for as long as Investor maintains ownership of 3,000,000 or
more shares of Common Stock which have been purchased at the First Closing and
Second Closing.

7. RESTRICTIONS ON TRANSFER

      7.1 LIMITATIONS ON DISPOSITION OF INVESTOR SHARES

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      For a period of five years after the Closing Date, Investor will not make
any Disposition of all or any part of Investor Shares to any Person who is not a
SAirGroup Affiliate (such SAirGroup Affiliate to become a party to this
Agreement) unless and until:

            (a) Upon either the receipt of an Offer or the delivery of a
proposal, Investor has delivered a Notice to Company of the proposed
Disposition, which includes any written proposal, term sheet or letter of intent
relating to the proposed Disposition. For a 35 day period commencing upon the
receipt of such Notice, the Company will have the exclusive right to negotiate a
definitive purchase agreement with Investor, providing for terms which are
acceptable to Company in Company's sole discretion. If Company does not enter
into an agreement to enter into such proposed Disposition within such 35 day
period, Investor may then make such proposed Disposition to any third party
subject to Company's consent to such third party, which consent to such third
party may not be unreasonably withheld. If a definitive agreement for such
proposed Disposition to a third party is not executed within 120 days following
the termination of such 35 day period, Investor must reoffer Investor Shares to
Company pursuant to this Section 7.1 prior to any other Disposition. Company's
rights under this Section 7.1 may be assigned to the CFW Stockholders so long as
CFW is the beneficial owner of 1,500,000 shares or more of Common Stock;

            (b) Investor has furnished Company with an opinion of counsel for
Investor to the effect that such Disposition will not require registration of
such shares under the Securities Act; and

            (c) the opinion of counsel has been concurred by Company's counsel
and Company has advised Investor of such concurrence.

      7.2 LEGENDS ON CERTIFICATES

            (a) Certificates Representing Investor Shares. For as long as
Investor has obligations hereunder, each certificate or other document
representing Investor Shares will contain upon its face or upon the reverse side
thereof a legend to the following effect:

            THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
            UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY
            NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
            ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
            UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
            THAT SUCH REGISTRATION IS NOT REQUIRED.

            THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
            ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF
            EXCEPT IN CONFORMITY WITH THE TERMS OF THE INVESTMENT AGREEMENT
            DATED AS OF NOVEMBER 7, 2000, AS AMENDED FROM TIME TO TIME. THE
            SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
            STOCKHOLDERS' AGREEMENT DATED AS OF NOVEMBER 7, 2000 THAT CONTAINS
            CERTAIN RESTRICTIONS ON THE RIGHT TO TRANSFER AND VOTE THE SHARES.
            THE COMPANY WILL UPON

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            WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENTS TO THE HOLDER OF
            THIS CERTIFICATE WITHOUT CHARGE.

            THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
            CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT DATED AS OF
            SEPTEMBER 24, 1999 BETWEEN THE COMPANY AND AMERICAN STOCK TRANSFER &
            TRUST COMPANY, AS RIGHTS AGENT, AS AMENDED (THE "RIGHTS AGREEMENT"),
            THE TERMS AND CONDITIONS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
            REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
            OFFICES OF THE COMPANY. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE
            RIGHTS AGREEMENT, SUCH RIGHTS WILL BE REPRESENTED BY THIS
            CERTIFICATE. THE COMPANY WILL MAIL TO THE RECORD HOLDER OF THIS
            CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE PROMPTLY
            FOLLOWING RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
            CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY ANY PERSON WHO BECOMES A
            15% STOCKHOLDER OR ANY AFFILIATE OR ASSOCIATE OF A 15% STOCKHOLDER
            (AS SUCH CAPITALIZED TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) MAY
            BECOME NULL AND VOID.

Company will cause the legends set forth above to be placed upon any certificate
or certificates evidencing ownership of Investor Shares, together with any other
legends that may be required by state or federal securities laws. Investor
hereby covenants and agrees to promptly surrender each such certificate to
Company for the placement of such legends thereon. Company may make a notation
of such restrictions on transfer and legends in its records.

            (b) Certificates Representing CFW Shares. For as long as the CFW
Stockholders have obligations hereunder, each certificate or other document
representing the CFW Shares held by CFW will contain upon its face or upon the
reverse side thereof a legend to the following effect:

            THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
            UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"). THEY MAY
            NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
            ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES
            UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
            THAT SUCH REGISTRATION IS NOT REQUIRED.

            THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
            ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF
            EXCEPT IN CONFORMITY WITH THE TERMS OF THE INVESTMENT AGREEMENT
            DATED AS OF NOVEMBER 7, 2000, AS AMENDED FROM TIME TO TIME. THE
            SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
            STOCKHOLDERS' AGREEMENT DATED AS OF NOVEMBER 7, 2000

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            THAT CONTAINS CERTAIN RESTRICTIONS ON THE RIGHT TO TRANSFER AND VOTE
            THE SHARES. THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF
            SUCH AGREEMENTS TO THE HOLDER OF THIS CERTIFICATE WITHOUT CHARGE.

            THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
            CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT DATED AS OF
            SEPTEMBER 24, 1999 BETWEEN THE COMPANY AND AMERICAN STOCK TRANSFER &
            TRUST COMPANY, AS RIGHTS AGENT, AS AMENDED (THE "RIGHTS AGREEMENT"),
            THE TERMS AND CONDITIONS OF WHICH ARE HEREBY INCORPORATED HEREIN BY
            REFERENCE AND A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
            OFFICES OF THE COMPANY. UNDER CERTAIN CIRCUMSTANCES SPECIFIED IN THE
            RIGHTS AGREEMENT, SUCH RIGHTS WILL BE REPRESENTED BY THIS
            CERTIFICATE. THE COMPANY WILL MAIL TO THE RECORD HOLDER OF THIS
            CERTIFICATE A COPY OF THE RIGHTS AGREEMENT WITHOUT CHARGE PROMPTLY
            FOLLOWING RECEIPT OF A WRITTEN REQUEST THEREFOR. UNDER CERTAIN
            CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY ANY PERSON WHO BECOMES A
            15% STOCKHOLDER OR ANY AFFILIATE OR ASSOCIATE OF A 15% STOCKHOLDER
            (AS SUCH CAPITALIZED TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) MAY
            BECOME NULL AND VOID.

Company will cause the legends set forth above to be placed upon any certificate
or certificates evidencing ownership of the CFW Shares, together with any other
legends that may be required by state or federal securities laws. Each CFW
Stockholder hereby covenants and agrees that each CFW Stockholder will promptly
surrender each such certificate to Company for the placement of such legends
thereon.

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      7.3 OPEN MARKET PURCHASES

      Investor may not purchase any additional shares from any party or on the
open market for five years after the Closing Date except under the following
conditions: (a) Investor may purchase 250,000 shares of Common Stock beginning
immediately after the Closing Date (subject to the insider trading rules of the
Company) and (b) Investor may purchase 15% of the issued and outstanding Common
Stock within five years of the Closing Date upon the consummation within 24
months after the Closing Date of sale-leaseback transactions between the Company
and any of SRT, a Qualiflyer Group airlines or an engine repair customer of SRT
involving engines having an aggregate value of at least $60 million (excluding
the Volare transaction in process as of the date hereof); provided that (i)
Investor may not purchase more than 5% of the issued and outstanding Common
Stock in any single twelve month period; (ii) the 5% of the issued and
outstanding Common Stock that the Purchaser may purchase within the first twelve
month period will include the 250,000 shares of Common Stock purchased pursuant
to this Section 7.3; and (iii) in no event may Investor and all SAirGroup
affiliates own in the aggregate in excess of 49.9% of the Company's issued and
outstanding Common Stock. If any shares of stock are acquired in breach of this
Section 7.3, Investor will immediately sell or otherwise divest itself of shares
owned by it until such time as the effects of all such breaches of this Section
7.3 have been cured. For purposes of clarification, if sale-leaseback
transactions between the Company and any of SRT, a Qualiflyer Group airlines or
an engine repair customer of SRT involving engines having an aggregate value of
at least $60 million (excluding the Volare transaction in process as of the date
hereof) do not close within 24 months of the Closing Date, Investor's right to
purchase any shares from any party or on the open market shall be limited to the
250,000 purchase.

      7.4 STOP-TRANSFER NOTICES

      To ensure compliance with the restrictions referred to in this Agreement,
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and, if Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.

8. COMPANY GOVERNANCE; VOTING AGREEMENT

      8.1 INVESTOR'S BOARD NOMINEES

            (a) Amendment of By-Laws; Nominees. The Board will elect to the
Board as of the Closing Date, one nominee designated by Investor ("Investor's
Board Nominee") as a Class III Director); provided that if Investor acquires at
least an additional 1,700,000 shares of Common Stock at the Second Closing
within 18 months of the Closing Date, then the Board will amend Company's
by-laws to increase the size of the Board to seven and vote for the election to
the Board, of one additional Investor's Board Nominee. Such Investor's Board
Nominees will be treated as employee directors, and thus will receive no
compensation or equity in exchange for service on the Board.

            (b) Board Committees. Until the five year anniversary of the Closing
Date and provided that no provision of any Legal Requirement is violated, the
Board will give due consideration and reasonably consider for nomination to any
new or existing

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committee of the Board, any Investor nominee who has appropriate qualifications,
experience and background to sit on such committee.

            (c) Vacancies. Until the five year anniversary of the Closing Date,
upon any resignation, removal of, or inability to serve as a director by, any
Investor's Board Nominee or other vacancy in the position of a director so
designated by Investor, including the expiration of the director's term, the CFW
Stockholders will vote for a successor nominee designated by Investor.

            (d) Removal of Nominees. Until the five year anniversary of the
Closing, the CFW Stockholders will vote their Common Stock in favor of the
removal of an Investor's Board Nominee from the Board only upon the written
request of Investor. If, at any time, Investor decides to remove an Investor's
Board Nominee from the Board, with or without cause, the CFW Stockholders will
vote to remove Investor's Board Nominees.

            (e) Steering Committee. Within two weeks after the Closing Date,
Company will create a three person Steering Committee, comprised of two persons
appointed by Company and one person appointed by Investor. The Steering
Committee will meet, either in person or by the telephone, to comply with the
terms of the Cooperation Agreement.

      The Investor's Board Nominee elected to the Board on the Closing Date or
any successor Investor's Board Nominee elected pursuant to Section 8.1(c), will
only remain on the Board, and Investor will only retain its corresponding rights
under Sections 8.1(c) and (d), for as long as Investor maintains ownership of at
least 1,300,000 shares of Common Stock. If an additional Investor's Board
Nominee is elected to the Board after Investor acquires at least an additional
1,700,000 shares of Common Stock at the Second Closing, such Investor's Board
Nominee or his or her successor elected pursuant to Section 8.1(c), will only
remain on the Board, and Investor will only retain its corresponding rights
under Sections 8.1(c) and (d), for as long as Investor maintains ownership of at
least 3,000,000 shares of Common Stock.

      Investor will lose the rights under Section 8.1(b) if Investor fails to
purchase at least 1,700,000 additional shares of Common Stock at the Second
Closing within 18 months of the Closing Date. Once the Investor is the
beneficial owner of at least 3,000,000 shares of Common Stock, but only until
the five year anniversary of the Closing Date, Investor will retain the rights
under Section 8.1(b), (c) and (d) for as long as Investor maintains ownership of
3,000,000 or more shares of Common Stock.

      8.2 INVESTOR'S VOTE FOR NOMINEES TO BOARD

      For as long as the CFW Stockholders are the beneficial owners of 1,500,000
shares or more of the Common Stock, but only until the five year anniversary of
the Closing Date, Investor will vote all of its Common Stock for, against,
abstain and not voted for the election and removal of directors in the same
percentage as all other shares of capital stock of the Company voted in such
election; provided, however, that nothing in this Section 8.2 will be construed
to provide the Board or any other Person with the right to nominate candidates
for director vacancies created upon any resignation, removal of, or inability of
any Investor Board Nominee to serve as a director pursuant to Section 8.1.

                                       11
<PAGE>

      8.3 CFW STOCKHOLDER'S PROXY FOR SHAREHOLDER MEETING

      CFW Stockholder will grant Investor a special irrevocable proxy to vote in
favor of the issuance and sale of additional shares of Common Stock to Investor
in accordance with the Investment Agreement, if Company stockholder approval is
required by any Legal Requirement.

      8.4 APPOINTMENT OF INVESTOR NOMINEE AS MANAGER OF THE COMPANY

      Within 60 days of the Closing Date, Company will appoint an individual
nominated by Investor as a technical sales personnel of Company ("Investor
Manager Nominee"), and upon any resignation, removal of, or inability to serve
in such office by, any Investor Management Nominee, provide for such vacancy to
be filled by a successor nominee designated by Investor. Until the three year
anniversary of the Closing Date, Company will not eliminate the position of a
technical sales personnel, and upon any resignation, removal of, or inability to
serve in such office by, any Investor Management Nominee, provide for such
vacancy to be filled by a successor nominee designated by Investor. At the
direction of Investor, Company will remove Investor Manager Nominee and replace
such Investor Manager Nominee with a successor nominee designated by Investor;
provided, however, that Investor will indemnify Company for any and all losses
that result from such removal. Company will have the right to remove an Investor
Manager Nominee for cause. Upon such removal for cause, Investor will have the
right to require the vacancy to be filled by a successor nominee designated by
Investor. The obligations of Company under this Section 8.4 are subject to the
Board's fiduciary duties to the stockholders of Company.

      8.5 CERTAIN COVENANTS WITH REGARD TO COMPANY

      Except as provided in Section 8.1(a), until the five year anniversary of
the Closing Date, the CFW Stockholders will take all Required Action to vote
their Common Stock to:

            (a) oppose and vote against any (except pursuant to Section 8.1(a))
amendment to the Governing Documents that would:

                  (i) change the number of directors from 5;

                  (ii) require a vote of a supermajority of the Common Stock for
any matter except as required by law or the current Governing Documents;

                  (iii) eliminate the management position described in Section
8.4; or

                  (iv) conflict with the terms of this Agreement; and

            (b) oppose and vote against any amendments to the Governing
Documents that would reduce the notice period for meetings of the Board.

                                       12
<PAGE>

      8.6 INVESTOR'S VOTING AGREEMENT

      Except as provided in Section 8.1(a), for as long as the CFW Stockholders
are the beneficial owners of 1,500,000 shares or more of the Common Stock, but
only until the five year anniversary of the Closing Date, Investor will:

            (a) oppose and vote against any amendment to the Governing Documents
that would:

                  (i) change the number of directors from 5 (except pursuant to
Section 8.1(a); or

                  (ii) conflict with the terms of this Agreement.

            (b) vote all of its Common Stock in the same manner, for, against,
abstain and not voted as the CFW Shares are voted or not voted with respect to
any of the following events:

                  (i) any increase in the number of authorized shares of Common
Stock; and

                  (ii) following the Exclusivity Period, (A) any acquisition of
Company by way of a merger, consolidation or share exchange, or (B) a sale of
substantially all of Company's assets.

9. APPOINTMENT OF COMPANY NOMINEE AS MANAGER OF EITHER FLIGHTLEASE OR SRT

      Within 60 days of the Closing Date, Investor will cause either Flightlease
or SRT, at Company's election, to appoint an individual nominated by Company to
the sales/marketing division of either Flightlease or SRT ("Company Manager
Nominee"). Until the three year anniversary of the Closing Date, neither
Flightlease nor SRT will eliminate such position and upon any resignation,
removal of, or inability to serve in such office by, any Company Manager
Nominee, Flightlease or SRT will provide for such vacancy to be filled by a
successor nominee designated by Company. At the direction of Company, either
Flightlease or SRT will remove the Company Manager Nominee and replace such
Company Manager Nominee with a successor nominee designated by Company;
provided, however, that Company will indemnify either Flightlease or SRT for any
and all losses that result from such removal. Either Flightlease or SRT will
have the right to remove a Company Manager Nominee for cause. Upon such removal
for cause, Company will have the right to require the vacancy to be filled by a
successor nominee designated by Company. The obligations of either Flightlease
or SRT under this Section 9 are subject to their respective board of directors'
fiduciary duties to their respective stockholders.

                                       13
<PAGE>

10. FUNDAMENTAL TRANSACTIONS

      10.1 PRIOR CONSENT

      During the Exclusivity Period and subject to Section 10.3, each of Company
and the CFW Stockholders must receive the prior written consent of Investor
prior to entering into a Fundamental Transaction. Investor will lose the rights
under this Section 10.1 if Investor fails to purchase at least 1,700,000
additional shares of Common Stock at the Second Closing within 18 months after
the Closing Date. Once Investor is the beneficial owner of at least 3,000,000
shares of Common Stock, Investor will retain the rights under this Section 10.1
during the Exclusivity Period for as long as Investor maintains ownership of
3,000,000 or more shares of Common Stock.

      10.2 NO SOLICITATION

      During the Exclusivity Period and subject to Section 10.3, each of Company
and the CFW Stockholders may not authorize or permit any of its Representatives
to :

            (a) solicit the making, submission or announcement of any proposal
for a Fundamental Transaction or take any action that could be reasonably
expected to lead to a proposal for a Fundamental Transaction other than actions
whose intent was to initiate aircraft engine transactions;

            (b) furnish any information regarding Company to any Person in
connection with or in response to a proposal for a Fundamental Transaction or an
inquiry or indication of interest that could lead to a proposal for a
Fundamental Transaction;

            (c) engage in discussions or negotiations with any Person with
respect to a proposal for a Fundamental Transaction;

            (d) approve, endorse or recommend any proposal for a Fundamental
Transaction; or

            (e) enter into any letter of intent or similar document or any
contract or agreement contemplating or otherwise relating to any Fundamental
Transaction.

      Investor will lose rights under this Section 10.2 if Investor fails to
purchase at least 1,700,000 additional shares of Common Stock at the Second
Closing within 9 months after the Closing Date but such rights will be
reinstated if Investor purchases at least 1,700,000 shares of Common Stock at
the Second Closing within 18 months of the Closing Date. Once Investor is the
beneficial owner of at least 3,000,000 shares of Common Stock, Investor will
retain the rights under this Section 10.2 during the Exclusivity Period for as
long as Investor maintains ownership of 3,000,000 or more shares of Common
Stock.

      10.3 EXCEPTIONS

      Company may furnish nonpublic information regarding Company and Company
and the CFW Stockholders may enter into discussions with any Person in response
to a proposal for a Fundamental Transaction and enter into an agreement with any
Person to enter into a Fundamental Transaction if the Board concludes in good
faith, after having taken into account the advice of its outside legal counsel,
that such an action is required in order for

                                       14
<PAGE>

Board to comply with its fiduciary obligations to Company's stockholders under
applicable law.

11. NEGOTIATING EXCLUSIVITY

      11.1 DISCLOSURE BY COMPANY

      Following the Exclusivity Period, but only until the five year anniversary
of the Closing Date, Company will promptly advise Investor orally and in writing
(and in no event later than seven calendar days after the receipt by Company) of
any proposal in writing for a Fundamental Transaction (including the identity of
the Person making or submitting such a proposal, inquiry, indication of interest
or request and the terms thereof to the extent that disclosure of the identity
or terms does not violate Company's confidentiality obligations with respect to
such Person).

      11.2 EXCLUSIVE NEGOTIATIONS FOR COMPANY PROPOSAL

      Investor will have the right, upon receipt of written notification from
Company that Company has received a proposal from a Person for a Fundamental
Transaction, which Company proposes to pursue, to notify Company within seven
calendar days that Investor desires to enter into exclusive negotiations on a
definitive agreement for a Fundamental Transaction. Upon such notification from
Investor of its desire to enter into exclusive negotiations, Company must
immediately cease any existing discussions with any Person that relates to a
Fundamental Transaction. For a 35 day period commencing upon the receipt of such
notice, Company and Investor will in good faith negotiate toward the execution
of a definitive agreement subject to the approval of Investor's board and
Investor will have the exclusive right to negotiate such a definitive agreement
on terms which are acceptable to Company in its sole and absolute discretion.
Investor and Company will use their Reasonable Commercial Efforts to consummate
the purchase within 120 days of the execution of the definitive agreement. If
Company does not execute the definitive agreement within such 35 day period,
Company may negotiate and enter into a purchase agreement with any third party
subject to Investor's consent to such third party, which consent to such third
party may not be unreasonably withheld; provided that each of Company and the
CFW Stockholders will keep Investor fully informed with respect to the status of
any such negotiation. But, if Company elects, in its sole discretion to accept
bids or proposals from any other third party, then Investor will be permitted to
submit a competing bid or proposal to such Company. Investor will lose its
rights under this Section 11.2 if Investor fails to purchase at least 1,700,000
additional shares of Common Stock at the Second Closing within 18 months of the
Closing Date. Once Investor is the beneficial owner of at least 3,000,000 shares
of Common Stock, but only until the five year anniversary of the Closing Date,
Investor will retain the rights under this Section 11.2 for as long as Investor
maintains ownership of 3,000,000 or more shares of Common Stock.

      11.3 DISCLOSURE BY INVESTOR

      Following the Exclusivity Period, but only until the five year anniversary
of Closing Date, Investor will promptly advise Company and the CFW Stockholders
(and in no event later than seven calendar days after the receipt by Investor or
any Affiliate of Investor) of any firm proposal in writing for a purchase of
Common Stock or any inquiry or indication of interest that could lead to such a
proposal (including the terms thereof).

                                       15
<PAGE>

12. GENERAL PROVISIONS

      12.1 EXPENSES

      Except as otherwise expressly provided in this Agreement, Investor and
Company will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement.

      12.2 NOTICES

      All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed given to a party when (a)
delivered to the appropriate address by hand or by nationally recognized
overnight courier service (costs prepaid); (b) sent by facsimile or e-mail with
confirmation of transmission by the transmitting equipment; or (c) received or
rejected by the addressee, if sent by certified mail, return receipt requested;
in each case to the following addresses, facsimile numbers or e-mail addresses
and marked to the attention of the individual (by name or title) designated
below (or to such other address, facsimile number, e-mail address or individual
as a party may designate by notice to the other parties):

            Company:

            Willis Lease Finance Corporation
            2320 Marinship Way, Suite 300
            Sausalito, CA 94965
            Attention:  Charles F. Willis, IV
            Facsimile No.: 415-331-4286
            E-mail Address: cwillis@wlfc.com

            with a copy to:

            Gibson, Dunn & Crutcher LLP
            One Montgomery Street
            San Francisco, CA 94104
            Attention: Douglas Smith
            Facsimile No: 415-374-8411
            E-mail Address: dsmith@gdclaw.com

            CFW Stockholders:

            2320 Marinship Way, Suite 300
            Sausalito, CA 94965
            Attention: Charles F. Willis, IV
            Facsimile No.: 415-331-4286
            E-mail Address: cwillis@wlfc.com

            with a copy to:

                                       16
<PAGE>

            Cooley Godward LLP
            20th Floor, One Maritime Plaza
            San Francisco, California 94111
            Attention: Samuel M. Livermore
            Facsimile No.: 415-951-3699
            E-mail Address: slivermore@cooley.com

            Investor:

            FlightTechnics, LLC
            c/o Flightlease AG
            CH-8058
            Zurich Airport
            Zurich, Switzerland
            Attention:  Hans Jorg Hunziker
            Facsimile No.: 011-41-1-812-9813
            E-mail Address: hjhunzik@sairgroup.com

            and

            FlightTechnics, LLC
            c/o SR Technics Group
            CH-8058
            Zurich Airport
            Zurich, Switzerland
            Attention: Hans Ulrich Beyeler
            Facsimile No.: 011-41-1-812-9813
            Email Address: hbeyeler@sairgroup.com

            with a copy to:

            Baker & McKenzie
            One Prudential Plaza
            130 East Randolph Drive
            Chicago, Illinois 60601
            Attention: Dieter Schmitz, Esq.
            Facsimile No.: 312/861-2899
            E-mail Address: dieter.a.schmitz@bakernet.com

      12.3 USAGE

            (a) Interpretation. In this Agreement unless a clear contrary
intention appears:

                  (i) the singular number includes the plural number and vice
versa;

                  (ii) reference to any Person includes such Person's successors
and assigns but, if applicable, only if such successors and assigns are not
prohibited by this Agreement, and reference to a Person in a particular capacity
excludes such Person in any other capacity or individually;

                                       17
<PAGE>

                  (iii) reference to any gender includes each other gender and
reference to it refers to both people and entities, as appropriate.;

                  (iv) reference to any agreement, document or instrument means
such agreement, document or instrument as amended or modified and in effect from
time to time in accordance with the terms thereof;

                  (v) reference to any Legal Requirement means such Legal
Requirement as amended, modified, codified, replaced or reenacted, in whole or
in part, and in effect from time to time, including rules and regulations
promulgated thereunder and reference to any section or other provision of any
Legal Requirement means that provision of such Legal Requirement from time to
time in effect and constituting the substantive amendment, modification,
codification, replacement or reenactment of such section or other provision;

                  (vi) "hereunder", "hereof", "hereto" and words of similar
import will be deemed references to this Agreement as a whole and not to any
particular Article, Section or other provision thereof;

                  (vii) "including" (and with correlative meaning "include")
means including without limiting the generality of any description preceding
such term;

                  (viii) "or" is used in the inclusive sense of "and/or";

                  (ix) relative to the determination of any period of time,
"from" means "from and including" and "to" means "to but excluding"; and

                  (x) references to documents, instruments or agreements will be
deemed to refer as well to all addenda, exhibits, schedules or amendments
thereto.

            (b) Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used therein will be interpreted and all accounting
determinations thereunder will be made in accordance with U.S. generally
accepted accounting principles.

      12.4 FURTHER ASSURANCES

      The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement.

      12.5 INCORPORATION OF SCHEDULES

      The exhibits and schedules identified in this Agreement are incorporated
herein by reference and made a part of this Agreement.

      12.6 ENTIRE AGREEMENT AND MODIFICATION

      On the Closing Date, except for (a) the Confidential Declaration, dated
October 24, 1999 between the Company and SRT and (b) the Letter Amendment to the
Confidential

                                       18
<PAGE>

Declaration, dated February 10, 2000, this Agreement supersedes all other prior
agreements among the parties with respect to its subject matter, and constitutes
(along with the documents delivered pursuant to this Agreement) a complete and
exclusive statement of the terms of the agreement between the parties with
respect to its subject matter. This Agreement may be amended, supplemented or
otherwise modified only by a written agreement executed by Company, the CFW
Stockholders and Investor. The Confidential Declaration and the Letter Amendment
to the Confidential Declaration will survive the termination of this Agreement,
and the terms of these two agreements will continue to be effect until the five
year anniversary of the Closing Date.

      12.7 TIME IS OF THE ESSENCE

      With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence.

      12.8 SEVERABILITY

      If any court of competent jurisdiction holds any provision of this
Agreement invalid or unenforceable, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.

      12.9 ASSIGNMENTS, SUCCESSORS, NO THIRD-PARTY RIGHTS; TERMINATION

      Except as set forth herein, no party may assign any of its rights or
delegate any of its obligations under this Agreement without the prior written
consent of the other parties, except that Investor may assign any of its rights
and delegate any of its obligations under this Agreement to any SAirGroup
Affiliate or to any subsequent acquirer of Investor or of all or substantially
all of Investor's business. Notwithstanding the foregoing, any CFW Stockholder
may pledge their shares, so long as the pledgee in any such transaction agrees
to be bound by the terms of this Agreement. Subject to the preceding sentences,
this Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the parties' successors, heirs and permitted assigns. Nothing
expressed or referred to in this Agreement will be construed to give any Person,
other than the parties to this Agreement, any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement except such rights as will inure to a successor or permitted assignee
pursuant to this Section 12.9. This Agreement will terminate upon the closing of
the sale by CFW Stockholders or Investor of all of their respective shares.

      12.10 ENFORCEMENT OF AGREEMENTS

      Each party acknowledges and agrees that each other party could be damaged
irreparably if any of the provisions of this Agreement are not performed in
accordance with the specific terms and that any breach of this Agreement by any
party could not be adequately compensated in all cases by monetary damages
alone. Accordingly, each party agrees that, in addition to any other right or
remedy to which a party may be entitled, at law or in equity, it will be
entitled to enforce any provision of this Agreement by a decree of specific
performance and to temporary, preliminary and permanent injunctive relief to

                                       19
<PAGE>

prevent breaches or threatened breaches of any of the provisions of this
Agreement, without posting any bond or other undertaking.

      12.11 WAIVER

      The rights and remedies of the parties to this Agreement are cumulative
and not alternative. Neither any failure nor any delay by any party in
exercising any right, power, or privilege under this Agreement or any of the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or any of the documents referred to in this Agreement can be
discharged by one party, in whole or in part, by a waiver or renunciation of the
claim or right unless in writing signed by the other party; (b) no waiver that
may be given by a party will be applicable except in the specific instance for
which it is given; and (c) no notice to or demand on one party will be deemed to
be a waiver of any obligation of that party or of the right of the party giving
such notice or demand to take further action without notice or demand as
provided in this Agreement or the documents referred to in this Agreement.

      12.12 JURISDICTION; SERVICE OF PROCESS; GOVERNING LAW

      The Agreement will be governed by and construed in accordance with the
laws of the State of Delaware. Any Proceeding arising out of or relating to this
may be brought in the courts of the State of Delaware, County of New Castle or,
if it has or can acquire jurisdiction in the United States District Court for
the District of Delaware and each of the parties irrevocably submits to the
exclusive jurisdiction of each such court in any such Proceeding, waives any
objection it may now or hereafter have to venue or to convenience of forum,
agrees that all claims in respect of the Proceeding shall be heard and
determined only in any such court, agrees not to bring any Proceeding arising
out of or relating to this Agreement in any other court. The parties agree that
any or all of them may file a copy of this Section with any court as written
evidence of the knowing, voluntary and bargained agreement between the parties
irrevocably to waive any objections to venue or to convenience of forum. Process
in any Proceeding referred to in this Section may be served on any party
anywhere in the world. The parties hereby waive the right to a trial by jury and
any right each may have to assert the doctrine of forum non conveniens or to
object to venue to the extent any proceeding is brought in accordance with this
Section 12.12.

      12.13 COUNTERPARTS

      This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together, will be deemed to constitute one and the same agreement.

                                       20
<PAGE>

      12.14 NO SOLICITATION

      Except as may otherwise be permitted under Section 8.3 and Article 9,
neither CFW Stockholders or Company or their respective Representatives, on the
one hand, nor Flightlease or SRT or their respective Representatives, on the
other hand, will, for a period of one year following the Closing Date, solicit,
directly or indirectly, for employment any employee of the other party.
Notwithstanding the foregoing, this Section 12.14 will not apply to any general
solicitation directed at the public at large.

      12.15 PUBLIC ANNOUNCEMENTS

      Any public announcement or similar publicity with respect to this
Agreement will be issued, if at all, at such time and in such manner as Company,
CFW Stockholders and Investor mutually determine. Investor will not and will not
permit the CFW Stockholders to make any disclosure of this Agreement to any
Person, except with the prior written consent of Investor or as required by
Legal Requirements, and Investor understands and acknowledges that this
Agreement will be filed by Company as a public document with the Securities and
Exchange Commission. The CFW Stockholders and Company will not and will not
permit Investor to make any disclosure of this Agreement to any Person, except
with the prior written consent of Company and the CFW Stockholders or as
required by Legal Requirements.

                                   * * * * * *

                                       21
<PAGE>

      The parties have signed and delivered this Agreement on the date first set
forth above.

                                        WILLIS LEASE FINANCE CORPORATION

                                        By: /S/ CHARLES F. WILLIS, IV
                                           -------------------------------------
                                           Charles F. Willis, IV
                                           Chief Executive Officer and President

                                           /S/ CHARLES F. WILLIS, IV
                                           -------------------------------------
                                           Charles F. Willis, IV, Individually

                                        CFW PARTNERS, L.P.

                                        By: /S/ CHARLES F. WILLIS, IV
                                           -------------------------------------
                                           Charles F. Willis, IV,
                                           General Partner

                                        AUSTIN CHANDLER WILLIS 1995 IRREVOCABLE
                                        TRUST

                                        By: /S/ ELIZABETH LEATHERMAN
                                           -------------------------------------
                                           Elizabeth Leatherman, as Trustee

                                        By: /S/ AUSTIN CHANDLER WILLIS, IV
                                           -------------------------------------
                                           Austin Chandler Willis,
                                           as Beneficiary

                                        FLIGHTTECHNICS, LLC

                                        By: /S/ HANS JORG HUNZIKER
                                           -------------------------------------
                                           Hans Jorg Hunziker
                                           President

                                        By: /S/ HANS ULRICH BEYELER
                                           -------------------------------------
                                           Hans Ulrich Beyeler
                                           Vice President

                                       22
<PAGE>

                                    GUARANTY

Flightlease AG and SR Technics Group hereby unconditionally guarantee to each of
Willis Lease Finance Corporation ("WLFC"), Charles F. Willis, VI, and CFW
Partners, LP., Investor's performance of Investor's obligations under this
Agreement.

The liability of each of the undersigned hereunder is independent of and not in
consideration of or contingent upon the liability of Investor and a separate
action or actions may be brought and prosecuted against each of the undersigned,
whether or not any action is brought or prosecuted against Investor or Investor
is joined in any such action or actions. Each of the undersigned's obligations
hereunder will be construed as a continuing, absolute and unconditional guaranty
of payment (and not merely of collection) and performance of all of Investor's
obligations without regard to: (i) any defense (other than payment), setoff or
counterclaim that may at any time be available to Investor against, and any
right of setoff at any time held by, WLFC; or (ii) any other circumstances
whatsoever (with or without notice to or knowledge of the undersigned), whether
or not similar to any of the foregoing, that constitutes, or might be construed
to constitute, an equitable or legal discharge of Investor, in bankruptcy or in
any other instance.

The undersigned waives: (i) the right to require WLFC to proceed against
Investor or to pursue any other remedy in WLFC's power whatsoever; (ii) the
benefit of any statute of limitations affecting Investor's liability hereunder;
(iii) any requirement of the marshalling or any other principle of election of
remedies and all rights and defenses arising out of an election of remedies by
WLFC; (iv) any right to assert against WLFC any defense (legal or equitable),
setoff, counterclaim and other right that the undersigned may now or any time
hereafter have against the undersigned; (v) promptness, diligence, presentment,
demand of payment, protest, notice of dishonor or nonpayment of any such
liabilities, suit or taking of other action by WLFC against, and any other
notice to, the undersigned. The undersigned agrees that it will be bound by each
and every ruling, order and judgment obtained by WLFC against Investor in
respect of its obligations under this Agreement, whether or not the undersigned
is a party to, or has received notice of, the action or proceeding in which such
ruling, order or judgment is issued or rendered. Without limiting the foregoing,
the obligations under this guaranty will not be discharged or otherwise affected
by any bankruptcy, reorganization or similar proceeding commenced by or against
Investor.

FLIGHTLEASE AG                          SR TECHNICS GROUP

By: /S/ HANS JORG HUNZIKER              By: /S/ HANS ULRICH BEYELER
   --------------------------------        -------------------------------------
   Hans Jorg Hunziker                      Hans Ulrich Beyeler
   President and CEO                       President and CEO

By:/S/ MATTHIAS MUELLER                 By: /S/ GEORG RADON
   --------------------------------        -------------------------------------
   Matthias Mueller                        Georg Radon
   Head of Business Development            Vice President and CFO

                                       23
<PAGE>

                                  SCHEDULE 1.1

                                   Definitions

      An "Affiliate" of, or a Person "Affiliated" with, a Person is (a) a Person
that directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with such Person, (b) any corporation
(and any parent or subsidiary thereof), organization or other entity of which
such Person is an officer, director, co-venturer, partner or individual
exercising similar authority and is, directly or indirectly, the beneficial
owner of 51% or more of any class of equity securities thereof, (c) any trust or
other estate in which such Person serves as a trustee or in a similar fiduciary
capacity, (d) any relative or spouse or such Person.

      "Agreement" is defined in the introductory paragraph.

      "Article 4(b) Deadline" is defined in Article 4(b).

      "Article 4(b) Sell Date" is defined in Article 4(b).

      "Board" means Company's board of directors.

      "CFW" is defined in the introductory paragraph.

      "CFW Board Nominees" is defined in Section 8.2.

      "CFW Partners" is defined in the introductory paragraph

      "CFW Stockholders" means CFW and CFW Partners, L.P.

      "CFW Shares" is defined in Section 3.2(b).

      "CFW Shares Right of First Offer" is defined in Article 4.

      "Closing Date" means the "First Closing Date" as defined in that certain
Investment Agreement by and among Investor and Company dated as of the date
hereof.

      "Common Stock" means Company's issued and outstanding common stock, par
value $0.01 per share, and shares of stock or other securities, now or hereafter
authorized and outstanding, of any class resulting from the reclassification,
split, combination or other change thereof, dividends of securities paid thereon
and securities of any other issuer received in exchange for such Common Stock in
connection with any merger, consolidation, reorganization or acquisition
involving Company and all rights, warrants, options, convertible securities or
indebtedness, exchangeable securities or indebtedness, or other rights, which,
at such time, are directly or indirectly exercisable for, or convertible or
exchangeable into, Common Stock or securities convertible into Common Stock.

      "Company" is defined in the introductory paragraph.

      "Company Contract" means any material contract (a) under which Company has
or may acquire any rights or benefits having a monetary value of greater than
$250,000, (b)

                                       24
<PAGE>

under which Company has or may become subject to any obligation or liability
having a monetary value of greater than $250,000, or (c) by which any of the
assets owned or used by Company, which have a monetary value of greater than
$250,000, may become bound.

      "Company Manager Nominee" is defined in Article 9.

      "Consent" means any approval, consent, ratification, waiver, or other
authorization.

      "Contemplated Transactions" means all of the transactions contemplated by
this Agreement, the Share Purchase Agreement by and among SRT Group America and
Company, the Investment Agreement by and between Company and Investor, the
Member Interest Purchase Agreement by and among SRT Group America and Company,
and the Aircraft Engine Purchase Agreement between Company and SRT, all such
agreements dated as of the date hereof.

      "Contract" means any material agreement, contract, lease, proxy, power of
attorney, consensual obligation, promise, or undertaking (whether written or
oral and whether express or implied), whether or not legally binding.

      "Cooperation Agreement" means the Cooperation Agreement between Company
and SRT dated as of the date hereof.

      "Determination" is defined in Article 4.

      "Disposition" means any assignment, conveyance, donation, Encumbrance,
gift, hypothecation, pledge, sale, transfer, or other disposition of any Common
Stock or any interest therein, whether voluntary or involuntary, and whether
during a stockholder's lifetime or upon or after his death, including by
operation of law, by court order, by judicial process or by foreclosure, levy or
attachment.

      "Electronic Notice" is defined in Article 4(b).

      "Encumbrance" means any charge, claim, community or other marital property
interest, condition, equitable interest, lien, option, pledge, security
interest, mortgage, right of way, easement, encroachment, servitude, right of
first option, right of first refusal or restriction of any kind, including any
restriction on use, voting (in the case of any Security), transfer, receipt of
income, or exercise of any other attribute of ownership.

      "Exclusivity Period" means the period beginning on the Closing Date and
ending 3 years thereafter.

      "Flightlease" means Flightlease AG, a company organized under the laws of
Switzerland.

      "Fundamental Transaction" means any of the following:

            (a) an acquisition, merger, reorganization or consolidation or
similar transaction (a "Reorganization Transaction") with any person other than
Investor or its Affiliates in which the consideration is stock and the
stockholders of Company immediately prior to such Reorganization Transaction
will not own at least 75% of the entity surviving such Reorganization
Transaction;

                                       25
<PAGE>

            (b) the sale of all or substantially all of the assets of Company
unless the stockholders of Company immediately after such sale own at least 75%
of the entity acquiring such assets; or

            (c) any investment in Company by any Strategic Investor other than
an Affiliate of Investor, such investment to be evidenced by the issuance of any
voting equity interest in Company or any other securities convertible into a
voting equity interest in Company.

      "Governing Documents" means with respect to any particular entity, (a) if
a corporation, the articles or certificate of incorporation and the bylaws; (b)
if a general partnership, the partnership agreement and any statement of
partnership; (c) if a limited partnership, the limited partnership agreement and
the certificate of limited partnership; (d) if a limited liability company, the
articles of organization and operating agreement; (e) if another type of Person,
any other charter or similar document adopted or filed in connection with the
creation, formation or organization of a Person; (f) all equityholders'
agreements, voting agreements, voting trust agreements, joint venture
agreements, registration rights agreements or other agreements or documents
relating to the organization, management or operation of any Person, or relating
to the rights, duties and obligations of the security holders of any Person; and
(g) any amendment or supplement to any of the foregoing.

      "Governmental Body" means any:

            (a) nation, state, county, city, town, borough, village, district,
or other jurisdiction;

            (b) federal, state, local, municipal, foreign, or other government;

            (c) governmental or quasi-governmental authority of any nature
(including any agency, branch, department, board, commission, court, tribunal or
other entity exercising governmental or quasi-governmental powers);

            (d) multi-national organization or body;

            (e) body exercising, or entitled or purporting to exercise, any
administrative, executive, judicial, legislative, police, regulatory, or taxing
authority or power; and

            (f) official of any of the foregoing.

      "Investment Agreement" is defined in the Recitals.

      "Investor" is defined in the introductory paragraph.

      "Investor Manager Nominee" is defined in Section 8.3.

      "Investor's Board Nominees" is defined in Section 8.1(a).

      "Investor Shares" means any and all Common Stock now or hereafter acquired
by Investor or any Affiliates of Investor.

                                       26
<PAGE>

      "Legal Requirement" means any applicable federal, state, local, municipal,
foreign, international, multinational, or other constitution, law, ordinance,
principle of common law, code, regulation, statute, or treaty.

      "1996 Stock Option/Stock Issuance Plan" is defined in Article 3.3(b).

      "Notice" is defined in Article 4.

      "Offer" is defined in Article 4.

      "Order" means any order, injunction, judgment, decree, ruling, assessment
or arbitration award of any Governmental Body or arbitrator.

      "Person" means an individual, partnership, corporation, business trust,
limited liability company, limited liability partnership, joint stock company,
trust, unincorporated association, joint venture or other entity, or a
Governmental Body.

      "Reasonable Commercial Efforts" means the efforts that a reasonably
prudent business Person desirous of achieving a result would use in similar
circumstances to achieve that result.

      "Reorganization Transaction" is defined in the definition of Fundamental
Transaction.

      "Representative" means, with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.

      "Required Action" means, with respect to a particular action, that a party
will use its Reasonable Commercial Efforts to persuade other directors on the
Board to, and, as necessary, vote all Common Stock and use its Reasonable
Commercial Efforts to cause all other stockholders and directors of Company to
vote their Common Stock to, effect that action.

      "SAirGroup Affiliate" means any Affiliate of SAirGroup which signs as
counterparty to this Agreement and the Investment Agreement, and of which
SAirGroup owns at least a majority of the equity interests and has management
control.

      "Second Closing" has the meaning specified in the Investment Agreement.

      "Securities Act" means the Securities Act of 1933, together with any
amendments thereto and rules and regulations thereunder.

      "SRT" means SR Technics Group, a company organized under the laws of
Switzerland.

      "SRT Group America" means SR Technics Group America, Inc., a Delaware
corporation.

      "Steering Committee" is defined in Section 8.1.

                                       27
<PAGE>

      "Strategic Investor" means a commercial aircraft engine manufacturer, a
maintenance repair overhaul company, or a major U.S. or foreign airline.

      "Target Shares" is defined in Article 4.

                                       28

<PAGE>

                                 Exhibit 3.2(a)

                                Consent of Spouse

      I, Ms. Nancy Willis, a California resident, having received such
independent advice as I consider prudent:

            (a) confirm that Charles F. Willis, IV, is my husband;

            (b) affirms that I am aware of, understand and fully consent and
agree to, the provisions of the Stockholders' Agreement ("Agreement") by and
among Willis Lease Finance Corporation, a Delaware corporation, Charles F.
Willis, a California resident, CFW Partners, L.P., a California limited
partnership, the Austin Chandler Willis 1995 Irrevocable Trust, a trust governed
by the laws of the State of California, and FlightTechnics, LLC, a Delaware
limited liability company and its binding effect on any community property or
other interests I now and may hereafter own;

            (c) agree that the termination of my marital relationship with
Charles F. Willis, IV, for any reason will not have the effect of removing any
CFW Shares (as defined in the Agreement) from the coverage of the Agreement;

            (d) authorize, ratify and consent to the execution of the Agreement
by Charles F. Willis, IV; and

            (e) agree to the performance of all obligations by Charles F.
Willis, IV, under the Agreement, and agree to be bound by the obligations that
apply to Charles F. Willis, IV, as if I were a party to the Agreement.

                                        /s/ NANCY WILLIS
                                        ----------------------------------------
                                        Nancy Willis

                                        Date: November 7, 2000<PAGE>

                 WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY
                         QUOTA SHARE REINSURANCE CONTRACT
                            EFFECTIVE: JULY 1, 2000

                                    issued to

                            PAULA Insurance Company
                              Pasadena, California

<PAGE>

                                 TABLE OF CONTENTS

<TABLE>
<CAPTION>

ARTICLE                                                                PAGE
<S>                                                                    <C>
ARTICLE I -  CLASSES OF BUSINESS REINSURED                                1

ARTICLE II - COMMENCEMENT AND TERMINATION                                 2

ARTICLE III -  TERRITORY (BRMA 51A)                                       3

ARTICLE IV -  EXCLUSIONS                                                  3

ARTICLE V -  RETENTION AND LIMIT                                          5

ARTICLE VI -  DEFINITIONS                                                 6

ARTICLE VII -  OTHER REINSURANCE                                          7

ARTICLE VIII -  CLAIMS                                                    8

ARTICLE IX -  SALVAGE AND SUBROGATION                                     8

ARTICLE X -  ORIGINAL CONDITIONS                                          8

ARTICLE XI -  CEDING COMMISSION                                           9

ARTICLE XII -  REPORTS AND REMITTANCES                                    9

ARTICLE XIII -  LATE PAYMENTS                                             9

ARTICLE XIV -  OFFSET (BRMA 36C)                                         10

ARTICLE XV -  ACCESS TO RECORDS (BRMA 1D)                                10

ARTICLE XVI -  ERRORS AND OMISSIONS (BRMA 14F)                           10

ARTICLE XVII -  TAXES (BRMA 50B)                                         10

ARTICLE XVIII -  UNAUTHORIZED REINSURERS                                 11

ARTICLE XIX -  INSOLVENCY                                                12

ARTICLE XX -  ARBITRATION                                                13

</TABLE>

<PAGE>

                 WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY
                        QUOTA SHARE REINSURANCE CONTRACT
                            EFFECTIVE: JULY 1, 2000

                                   issued to

                            PAULA Insurance Company
                             Pasadena, California
                     (HEREINAFTER REFERRED TO AS THE "Company")

                                       by

         Insurance Corporation of Hannover, An Illinois Corporation,
                            Los Angeles, California
                 (HEREINAFTER REFERRED TO AS THE "Reinsurer")

ARTICLE I - CLASSES OF BUSINESS REINSURED

A.   By this Contract the Company obligates itself to cede to the Reinsurer
     and the Reinsurer obligates itself to accept quota share reinsurance of
     the Company's net liability under policies, contracts and binders of
     insurance (hereunder called "policies") issued or renewed on or after
     January 1, 2000 as of the effective date hereof, and classified by the
     Company as Workers' Compensation and Employer's Liability business.

B.   "Net liability" as used herein is defined as the Company's gross
     liability remaining after any other reinsurance, as per attached Schedule
     A.

C.   The liability of the Reinsurer with respect to each cession hereunder
     shall commence obligatorily and simultaneously with that of the
     Company, subject to the terms, conditions and limitations hereinafter
     set forth.

D.   "Workers' Compensation and Employer's Liability" as used herein shall
     include business written on a standard Workers' Compensation form of
     policy, insuring the liability imposed by the Workers' Compensation Acts
     and United States Longshore and Harbor Workers' Act, or similar acts or
     laws.

                                  Page 1
<PAGE>

ARTICLE II - COMMENCEMENT AND TERMINATION

A.   This Contract shall become effective on July 1, 2000, with respect to
     losses occurring on or after that date under policies allocated to
     underwriting years commencing on January 1, 2000, and shall continue in
     force thereafter until terminated.

B.   Either party may terminate this Contract on any December 31 but not
     before December 31 2001, by giving the other party not less than 90 days
     prior notice by certified mail.

C.   Notwithstanding paragraph B above, either the Company or the Reinsurer
     may terminate this Contract at any time by the giving of 30 days notice
     in writing to the other party upon the happening of any one of the
     following circumstances:

     (a)  A State Insurance Department or other legal authority orders the
     other party to cease writing business, or

     (b)  One party has become insolvent or has been placed into liquidation
     or receivership (whether voluntary or involuntary), or there has been
     instituted against it proceedings for the appointment of a receiver,
     liquidator, rehabilitator, conservator, or trustee in bankruptcy, or
     other agent known by whatever name, to take possession of its assets or
     control of its operations, or

     (c)  One party's policyholders' surplus has been reduced by whichever
     is greater, either 25% of the amount of surplus at the inception of this
     Contract or 25% of the amount at the latest year end, or

     (d)  One party has become merged with, acquired or controlled by any
     company, corporation or individual(s) not controlling the party's
     operations previously, or

     (e)  One party has reinsured its entire liability under this Contract
     without the terminating party's prior written consent.

     In the event of such termination, the liability of the Reinsurer shall
     be terminated in accordance with the termination provisions of this
     Contract.

D.   In the event of the termination of this Contract the Reinsurer shall be
     relieved of all liability hereunder for losses occurring subsequent to
     termination of this Contract.

E.  "Underwriting year" as used herein shall mean the period from January 1,
     2000, through December 31, 2000, and each subsequent 13-month period
     shall be a separate underwriting year. However, if this Contract is
     terminated, the final underwriting year shall be from the beginning of
     the then current underwriting year through the effective date of
     termination. All premiums and losses from policies allocated to an
     underwriting year shall be credited or charged, respectively, to such
     underwriting year, regardless of the date said premiums earn or such
     losses occur. It is understood that a policy will be allocated to the
     underwriting year which is in effect as of:

                                   Page 2

<PAGE>

     1.  As respects all new policies, the effective date of such policies;

     2.  As respects renewals of policies, the renewal date of such policies;

     Such policies shall remain in the same underwriting year, as originally
     allocated, until the next renewal date or premium anniversary date, at
     which time such policies shall be reallocated to the underwriting year
     in effect as of such date as provided in subparagraph 2 above.

ARTICLE III - TERRITORY (BRMA 51A)

The territorial limits of this Contract shall be identical with those of the
Company's policies.

ARTICLE IV - EXCLUSIONS

A.   This Contract does not apply to and specifically excludes the
     following:

     1.  All reinsurance assumed by the Company, except for reinsurance
         assumptions of 100% of the liability arising from primary policies
         of NMRA-SIG and Fairfield.

     2.  Financial guarantee and insolvency.

     3.  Business written by the Company on a co-indemnity basis where the
         Company is not the controlling carrier.

     4.  Business written to apply in excess of a deductible of more than
         $5,000, and business issued to apply specifically in excess over
         underlying insurance.

     5.  Nuclear risks as defined in the "Nuclear Incident Exclusion Clause -
         Liability - Reinsurance" attached to and forming part of this
         Contract.

     6.  Liability as a member, subscriber or reinsurer of any Pool,
         Syndicate or Association, but this exclusion shall not apply to
         Assigned Risk Plans or similar plans.

     7.  All liability of the Company arising by contract, operation of law,
         or otherwise, from its participation or membership, where voluntary
         or involuntary, in any insolvency fund. "Insolvency fund" includes
         any guaranty fund, insolvency fund, plan, pool, association, fund or
         other arrangement, however denominated, established or governed,
         which provides for any assessment of or payment or assumption by the
         Company of part or all of any claim, debt, charge, fee or other
         obligation of any insurer, or its successors or assigns, which has
         been declared by any competent authority to be insolvent, or which
         is otherwise deemed unable to meet any claim, debt, charge, fee or
         other obligation in whole or in part.

                                   Page 3
<PAGE>

     8.  Workers' Compensation where the principal exposures include:

         a.  Operation of aircraft;

         b.  Operation of a carrier on rails;

         c.  Operation or navigation of vessels or barges over 26 feet in
             overall length;

         d.  Repair, cleaning or demolition of vessels or barges used for
             transporting petroleum;

         e.  Stevedoring;

         f.  Oil or natural gas drilling, refining or salvage operations
             and/or oil well shooting;

         g.  Manufacturing, storage, distribution and/or transportation of
             natural or artificial gas;

         h.  Manufacturing, packing, storage, handling, distribution and/or
             transportation of explosives, explosive substances manufactured
             for the express purpose of exploding, ammunition, fuses,
             fireworks, magnesium, celluloid or pyroxylin;

         i.  Construction or maintenance of subways or tunnels more than 50
             feet long and/or subaqueous work under pressure;

         j.  Wrecking or demolition of structures over three stories or 50
             feet high;

         k.  Steeple or chimney shaft work, or construction of towers over 50
             feet high;

         l.  Underground mining;

         m.  Motion picture production;

         n.  Operation of baths, gymnasiums, health clubs and/or reducing
             salons;

         o.  Conventions, fairs, rodeos, speed contests and/or races;

         p.  Operation of amusement parks, circuses, carnivals and/or devices
             used in conjunction therewith;

         q.  Operation of grandstands, exhibition buildings, stadiums,
             baseball parks, theaters and/or skating rinks;

                                    Page 4
<PAGE>

     9.  Liability arising out of the Employee Retirement Income Security Act
         of 1974 and/or any amendments thereto;

     10. Manufacturing, packing, storage, handling, distribution, removal
         and/or transportation of asbestos or asbestos products.

B.   Notwithstanding the foregoing, any reinsurance falling within the scope
     of one or more of the exclusions set forth in subparagraph 8 of
     paragraph A that is specially accepted by the Reinsurer from the Company
     shall be covered under this Contract and be subject to the terms hereof,
     except as such terms shall be modified by the special acceptance.
     Furthermore, any exclusion set forth in subparagraph 8 of paragraph A
     shall be waived automatically when, in the opinion of the Company, the
     exposure excluded therein is incidental to the principal exposure on the
     risk in question, not exceeding 10% of total payroll.

C.   If the Company is bound, without the knowledge and contrary to the
     instructions of the Company's supervisory underwriting personnel, on any
     business falling within the scope of one or more of the exclusions set
     forth in subparagraph 8 of paragraph A, the exclusion shall be
     suspended with respect to such business until 30 days after an
     underwriting supervisor of the Company acquires knowledge thereof.

D.   If the Company is required to accept an assigned risk which conflicts
     with one or more of the exclusions set forth in subparagraph 8 of
     paragraph A, reinsurance shall apply, but in no event shall the
     Reinsurer's liability exceed the applicable limits set forth in Article
     V.

ARTICLE V - RETENTION AND LIMIT

A.   As respects business subject to this Contract, the Company shall cede to
     the Reinsurer and the Reinsurer agrees to accept no less than 10% and no
     more than 25% of the Company's net earned premium and liability for
     ultimate net loss (as defined in paragraph A of Article VI). The Company
     shall determine the cession percentage and provide notice of same to the
     Reinsurer by December 15 of each underwriting year.

B.   In addition to its initial retention, the Company shall retain an amount
     of its net liability for loss which would be ceded hereunder to the
     Reinsurer were it not for the provisions of this paragraph. Said
     additional retention (hereinafter referred to as the "loss corridor")
     shall be applied to each underwriting year and shall be 100% of the
     amount of losses incurred (as defined in Article VI, subparagraph D) for
     the underwriting year under consideration greater than 80.0% of premiums
     earned (as defined in Article VI, subparagraph E), but less than 90.0%
     of premiums earned for the underwriting year. The loss corridor shall
     not exceed an amount equal to 10.0% of premiums earned for the
     underwriting year.

                                    Page 5
<PAGE>

C.   Notwithstanding the provisions of paragraph A above, the maximum cession
     to Reinsurer is limited to $20,000,000 of premium, for any Underwriting
     year, except for the Underwriting year 2000 where the maximum cession to
     Reinsurer is limited to $12,500,000 of premium.

ARTICLE VI - DEFINITIONS

A.   "Ultimate net loss" as used herein is defined as the sum or sums
     (including loss in excess of policy limits, extra contractual obligations
     and loss adjustment expense, as hereinafter defined) paid or payable by
     the Company in settlement of claims and in satisfaction of judgments
     rendered on account of such claims, including the Company's Medical and
     Indemnity loss, after deduction of all salvage, all recoveries and all
     claims on inuring insurance or reinsurance, whether collectible or not.
     Nothing here shall be construed to mean that losses under this Contract
     are not recoverable until the Company's ultimate net loss had been
     ascertained. The Reinsurer will not be liable for amounts in excess of
     its share of the net liability (as defined in paragraph B of Article I).

B.   "Loss in excess of policy limits" and "extra contractual obligations" as
     used herein shall be defined as follows:

     1.  "Loss in excess of policy limits" shall mean 100% of any amount paid
         or payable by the Company in excess of its policy limits, but
         otherwise within the terms of its policy, as a result of an action
         against it by its insured or its insured's assignee to recover
         damages the insured is legally obligated to pay to a third party
         claimant because of the Company's alleged or actual negligence or
         bad faith in rejecting a settlement within policy limits, or in
         discharging its duty to defend or prepare the defense in the trial
         of an action against its insured, or in discharging its duty to
         prepare or prosecute an appeal consequent upon such an action.

     2.  "Extra contractual obligations" shall mean 100% of any punitive,
         exemplary, compensatory or consequential damages, other than loss in
         excess of policy limits, paid or payable by the Company as a result
         of an action against it by its insured, its insured's assignee or a
         third party claimant, which action alleges negligence or bad faith
         on the part of the Company in handling a claim under a policy
         subject to this Contract. An extra contractual obligation shall be
         deemed to have occurred on the same date as the loss covered or
         alleged to be covered under the policy.

     Notwithstanding anything stated herein, this Contract shall not apply to
     any loss in excess of policy limits or any extra contractual obligation
     incurred by the Company as the result of any fraudulent and/or criminal
     act by any officer or director of the Company acting individually or
     collectively or in collusion with any individual or corporation or any
     other organization or party involved in the presentation, defense or
     settlement of any claim covered hereunder.

C.   "Loss adjustment expense" as used herein shall mean all costs and
     expenses assignable to a specific claim that are incurred by the Company
     in the investigation, appraisal, adjustment, settlement, litigation,
     defense or appeal of a specific claim, regardless of how such expenses

                                    Page 6
<PAGE>

     are classified for statutory reporting purposes. Loss adjustment expense
     shall include, but not be limited to, the following:

     1.  Court costs and costs of supersedeas and appeal bonds;

     2.  Prejudgment interest, unless included as part of the award or
         judgment;

     3.  Post-judgment interest; and

     4.  Claim specific costs and expenses which are the result of actions
         and/or disputes between the original insured and the Company.

D.   "Losses incurred" as used herein shall mean ceded losses and loss
     adjustment expense paid as of the effective date of calculation, plus
     the ceded reserves for losses and loss adjustment expense outstanding as
     of the same date, all as respects business subject to this Contract,
     other than business classified by the Company dividend plan business. It
     is understood and agreed that all losses and related loss adjustment
     expense under policies allocated to an underwriting year shall be
     charged to that underwriting year, regardless of the date said losses
     actually occur, unless this Contract is terminated on a "cut-off" basis,
     in which event the Reinsurer shall have no liability for losses
     occurring after the effective date of termination. It is understood that
     losses retained by the Company pursuant to the loss retention corridor
     provisions of Article V shall be included in "loss incurred" as respects
     calculation of the loss retention corridor.

E.   "Premiums earned" as used herein shall mean ceded net written premium
     collected for policies allocated to the underwriting year, less the
     unearned portion thereof as of the effective date of calculation, less
     the earned portion of premiums paid for inuring excess of loss
     reinsurance for the underwriting year, all as respects business subject
     to this Contract. It is understood and agreed that all premiums for
     policies allocated to an underwriting year shall be credited to that
     underwriting year, unless this Contract is terminated on a "cut-off"
     basis, in which event the ceded unearned premium remains with the
     Company.

ARTICLE VI - OTHER REINSURANCE

A.   The Company shall maintain in force excess of loss reinsurance and
     inuring reinsurance, recoveries under which shall inure to the benefit
     of this Contract.

B.   The Company shall not have any other quota share reinsurance and retain
     the retention net and unreinsured.

C.   The inuring reinsurance is detailed in Schedule A, attached and forming
     part of this contract. Changes in the inuring reinsurance will be
     advised to Reinsurer and Schedule A modified as necessary.

                                  Page 7

<PAGE>

ARTICLE VIII - CLAIMS

A.   Losses shall be reported by the Company, in summary form as hereinafter
     provided, but the Company shall notify the Reinsurer immediately when a
     specific case involves unusual circumstances or large loss possibilities
     or when the claim exceeds $75,000 in payments plus case reserves.
     Further, the Company, shall notify the Reinsurer whenever a claim
     involves a fatality, amputation, spinal cord damage, brain damage,
     blindness, extensive burns or multiple fractures, regardless of
     liability. The Reinsurer shall have the right to participate, at its
     own expense, in the defense or control of any claim or suit or
     proceeding involving these specifically-reported claims.

B.   All loss settlements made by the Company, whether under strict policy
     conditions or by way of compromise, shall be binding upon the Reinsurer,
     and the Reinsurer agrees to pay or allow, as the case may be, its
     proportion of each such settlement in accordance with Article XII. It is
     agreed, however, that if the Reinsurer's share of any loss is equal to
     or greater than $100,000, the Reinsurer will pay its share of said loss
     as promptly as possible after receipt of reasonable evidence of the
     amount paid by or on behalf of the Company.

ARTICLE IX - SALVAGE AND SUBROGATION

The Reinsurer shall be credited with its proportionate share of salvage
(i.e., reimbursement obtained or recovery made by the Company, less the
actual cost, excluding salaries of officials and employees of the Company and
sums paid to attorneys as retainer, of obtaining such reimbursement or making
such recovery) on account of claims and settlements involving reinsurance
hereunder. The Company hereby agrees to enforce its rights to salvage or
subrogation relating to any loss, a part of which loss was sustained by the
Reinsurer, and to prosecute all claims arising out of such rights.

ARTICLE X - ORIGINAL CONDITIONS

A.   All reinsurance under this Contract shall be subject to the same rates,
     terms, conditions, waivers and interpretations and to the same
     modifications and alterations as the respective policies of the Company.
     However, in no event shall this be construed in any way to provide
     coverage outside the terms and conditions set forth in this Contract.
     The Reinsurer shall be credited with its exact proportion of the
     original premiums received by the Company.

B.   Nothing herein shall in any manner create any obligations or establish
     any rights against the Reinsurer in favor of any third party or any
     persons not parties to this Contract.

                                  Page 8

<PAGE>

ARTICLE XI - CEDING COMMISSION

A.   The Reinsurer shall allow the Company a __% ceding commission on all
     premiums ceded to the Reinsurer hereunder. The Company shall allow the
     Reinsurer return commission on return premiums at the same rate.

B.   It is expressly agreed that the ceding commission allowed the Company
     includes provision for all dividends, commissions, taxes, assessments,
     and all other expenses of whatever nature, including unallocated loss
     adjustment expenses.

ARTICLE XII - REPORTS AND REMITTANCES

A.   Within 45 days after the end of each month, the Company shall report to
     the Reinsurer:

     1.  Ceded net earned premium for the month;

     2.  Ceding commission thereon;

     3.  Ceded losses and loss adjustment expense paid during the month (net
         of any recoveries during the month under the "cash call" provisions
         of Article VIII),

     4.  Pro rata portion of inuring excess of loss reinsurance premiums, if
         any, due for the month, including premium equivalents (i.e. amounts
         paid under the Annual Aggregate Deductible per Schedule A).

     The positive balance of (1) less (2) less (3) less (4) shall be remitted
     by the Company with its report. Any balance shown to be due the Company
     shall be remitted by the Reinsurer as promptly as possible after receipt
     and verification of the Company's report.

B.   Within 45 days after the end of each calendar quarter, the Company shall
     report to the Reinsurer the ceded written, unearned  premiums and ceded
     outstanding loss reserves as of the end of the calendar quarter.

C.   Annually, the Company shall furnish the Reinsurer with such information
     as the Reinsurer may require to complete its Annual Convention Statement.

ARTICLE XIII - LATE PAYMENTS

The interest penalties provided for in this Article shall apply to the
Reinsurer or to the Company in the following circumstances:

                                  Page 9

<PAGE>

A.   Payments due from the Reinsurer to the Company shall have as a due date
     the date on which the report is received by the Reinsurer, and shall be
     overdue 10 days thereafter.

B.   Payments due from the Company to the Reinsurer shall have a due date of
     the date specified in this Contract. Payments shall be overdue 10 days
     thereafter.

C.   Overdue amounts shall bear simple interest from the overdue date at a
     rate determined by the Prime Rate for the first day of the calendar
     month in which the amount becomes overdue as published in the Wall
     Street Journal. If the interest generated for 100% in respect of any
     overdue payment as outlined in paragraph A or B is less than $100,
     and/or the overdue period is 10 days or less, then interest penalty
     shall be waived.

ARTICLE XIV - OFFSET (BRMA 36C)

The Company and the Reinsurer shall have the right to offset any balance or
amounts due from one party to the other under the terms of this Contract. The
party asserting the right of offset may exercise such right any time whether
the balances due are on account of premiums or losses or otherwise.

ARTICLE XV - ACCESS TO RECORDS (BRMA 1D)

The Reinsurer or its designated representatives shall have access at any
reasonable time to all records of the Company which pertain in any way to
this reinsurance.

ARTICLE XVI - ERRORS AND OMISSIONS (BRMA 14F)

Inadvertent delays, errors or omissions made in connection with this Contract
or any transaction hereunder shall not relieve either party from any
liability which would have attached had such delay, error or omission not
occurred, provided always that such error or omission is rectified as soon as
possible after discovery.

ARTICLE XVII - TAXES (BRMA 50B)

In consideration of the terms under which this Contract is issued, the
Company will not claim a deduction in respect of the premium hereon when
making tax returns, other than income or profits tax returns, to any state or
territory of the United States of America or the District of Columbia.

                                   Page 10

<PAGE>

ARTICLE XVIII - UNAUTHORIZED REINSURERS

A.   If the Reinsurer is unauthorized in any state of the United States of
     America or the District of Columbia, or is rated "B++" or lower by A.M.
     Best, the Reinsurer agrees to fund its share of the Company's ceded
     outstanding loss and loss adjustment expense reserves (including
     incurred but not reported loss reserves) by:

     1.  Clean, irrevocable and unconditional letters of credit issued and
         confirmed, if confirmation is required by the insurance regulatory
         authorities involved, by a bank or banks meeting the NAIC Securities
         Valuation Office credit standards for issuers of letters of credit
         and acceptable to said insurance regulatory authorities; and/or

     2.  Escrow accounts for the benefit of the Company; and/or

     3.  Cash advances;

     if, without such funding, a penalty would accrue to the Company on any
     financial statement it is required to file with the insurance regulatory
     authorities involved. The Reinsurer, at its sole option, may fund in
     other than cash if its method and form of funding are acceptable to the
     insurance regulatory authorities involved.

B.   With regard to funding in whole or in part by letters of credit, it is
     agreed that each letter of credit will be in a form acceptable to
     insurance regulatory authorities involved, will be issued for a term of
     at least one year and will include an "evergreen clause," which
     automatically extends the term for at least one additional year at each
     expiration date unless written notice of non-renewal is given to the
     Company not less than 30 days prior to said expiration date. The Company
     and the Reinsurer further agree, notwithstanding anything to the
     contrary in this Contract, that said letters of credit may be drawn upon
     by the Company or its successors in interest at any time, without
     diminution because of the insolvency of the Company or the Reinsurer,
     but only for one or more of the following purposes:

     1.  To reimburse itself for the Reinsurer's share of losses and/or loss
         adjustment expense paid under the terms of policies reinsured
         hereunder, unless paid in cash by the Reinsurer;

     2.  To reimburse itself for the Reinsurer's share of any other amounts
         claimed to be due hereunder, unless paid in cash by the Reinsurer;

     3.  To fund a cash account in an amount equal to the Reinsurer's share
         of any ceded outstanding loss and loss adjustment expense reserves
         (including incurred but not reported loss reserves) funded by means
         of a letter of credit which is under non-renewal notice, if said
         letter of credit has not been renewed or replaced by the Reinsurer
         10 days prior to its expiration date;

     4.  To refund to the Reinsurer any sum in excess of the actual amount
         required to fund the Reinsurer's share of the Company's ceded
         outstanding loss and loss adjustment

                                 Page 11

<PAGE>

         expense reserves (including incurred but not reported loss
         reserves), if so requested by the Reinsurer.

     In the event the amount drawn by the Company on any letter of credit is
     in excess of the actual amount required for [(1)] or (3), or in the case
     of (2), the actual amount determined to be due, the Company shall
     promptly return to the Reinsurer the excess amount so drawn.

ARTICLE XIX - INSOLVENCY

A.   In the event of the insolvency of one or more of the reinsured
     companies, this reinsurance shall be payable directly to the company or
     to its liquidator, receiver, conservator or statutory successor
     immediately upon demand, with reasonable provision for verification, on
     the basis of the liability of the company without diminution because of
     the insolvency of the company or because the liquidator, receiver,
     conservator or statutory successor of the company has failed to pay all
     or a portion of any claim. It is agreed, however, that the liquidator,
     receiver, conservator or statutory successor of the company shall give
     written notice to the Reinsurer of the pendency of a claim against the
     company indicating the policy or bond reinsured which claim would
     involve a possible liability on the part of the Reinsurer within a
     reasonable time after such claim is filed in the conservation or
     liquidation proceeding or in the receivership, and that during the
     pendency of such claim, the Reinsurer may investigate such claim and
     interpose, at its own expense, in the proceeding where such claim is to
     be adjudicated, any defense or defenses that it may deem available to
     the company or its liquidator, receiver, conservator or statutory
     successor. The expense thus incurred by the Reinsurer shall be
     chargeable, subject to the approval of the Court, against the company as
     part of the expense of conservation or liquidation to the extent of a
     pro rata share of the benefit which may accrue to the company solely as
     a result of the defense undertaken by the Reinsurer.

B.   Where two or more reinsurers are involved in the same claim and a
     majority in interest elect to interpose defense to such claim, the
     expense shall be apportioned in accordance with the terms of this
     Contract as though such expense had been incurred by the company.

C.   It is further understood and agreed that, in the event of the insolvency
     of one or more of the reinsured companies, the reinsurance under this
     Contract shall be payable directly by the Reinsurer to the company or to
     its liquidator, receiver or statutory successor, except as provided by
     Section 4118(a) of the New York Insurance Law or except (1) where this
     Contract specifically provides another payee of such reinsurance in the
     event of the insolvency of the company or (2) where the Reinsurer with
     the consent of the direct insured or insureds has assumed such policy
     obligations of the company as direct obligations of the Reinsurer to the
     payees under such policies and in substitution for the obligations of the
     company to such payees.

                                   Page 12

<PAGE>

ARTICLE XX - ARBITRATION

A.   As a condition precedent to any right of action hereunder, any dispute
     arising out of the interpretation, performance or breach of this
     Contract, including the formation or validity thereof, shall be
     submitted for decision to a panel of three arbitrators. Notice
     requesting arbitration will be in writing and sent certified or
     registered mail, return receipt requested.

B.   One arbitrator shall be chosen by each party and the two arbitrators
     shall, before instituting the hearing, choose an impartial third
     arbitrator who shall preside at the hearing. If either party fails to
     appoint its arbitrator within 30 days after being requested to do so by
     the other party, the latter, after 10 days notice by certified or
     registered mail of its intention to do so, may appoint the second
     arbitrator.

C.   If the two arbitrators are unable to agree upon the third arbitrator
     within 30 days of their appointment, the third arbitrator shall be
     selected by the American Arbitration Association.

D.   All arbitrators shall be disinterested active or former executives of
     insurance or reinsurance companies or Underwriters at Lloyd's, London
     with expertise or experience in the area being arbitrated.

E.   Within 30 days after notice of appointment of all arbitrators, the panel
     shall meet and determine timely periods for briefs, discovery procedures
     and schedules for hearings.

F.   The panel shall be relieved of all judicial formality and shall not be
     bound by the strict rules of procedure and evidence. Unless the panel
     agrees otherwise, arbitration shall take place in Los Angeles,
     California, but the venue may be changed when deemed by the panel to be
     in the best interest of the arbitration proceeding. Insofar as the
     arbitration panel looks to substantive law, it shall consider the law of
     the State of California. The decision of any two arbitrators when
     rendered in writing shall be final and binding. The panel is empowered
     to grant interim relief as it may deem appropriate.

G.   The panel shall make its decision considering the custom and practice of
     the applicable insurance and reinsurance business within 60 days
     following the termination of the hearings. Judgment upon the award may
     be entered in any court having jurisdiction thereof.

H.   If more than one reinsurer is involved in arbitration where there are
     common questions of law or fact and a possibility of conflicting awards
     or inconsistent results, all such reinsurers shall constitute and act as
     one party for purposes of this Article and communications shall be made
     by the Company to each of the reinsurers constituting the one party;
     provided, however, that nothing therein shall impair the rights of such
     reinsurers to assert several, rather than joint defenses or claims, nor
     be construed as changing the liability of the reinsurers under the terms
     of this Contract from several to joint.

                                     Page 13

<PAGE>

I.   Each party shall bear the expense of its own arbitrator and shall
     jointly and equally bear with the other party the cost of the third
     arbitrator. The remaining costs of the arbitration shall be allocated by
     the panel. The panel may, at its discretion, award such further costs
     and expenses as it considers appropriate, including but not limited to
     attorneys fees, to the extent permitted by law.

                                    Page 14

<PAGE>

IN WITNESS WHEREOF, the Company by its duly authorized representative has
executed this Contract as of the date undermentioned at:

Pasadena, California, this 11th day of August in the year 2000.

                                       /s/ Jeffrey A. Snider
                                       --------------------------------
                                       PAULA Insurance Company

IN WITNESS WHEREOF, the Reinsurer by its duly authorized representative has
executed this Contract as of the date undermentioned at:

Los Angeles, California, this 11th day of August in the year 2000.

                                       /s/ Axel Freiboth
                                       --------------------------------
                                       Insurance Corporation of Hannover,
                                       An Illinois Corporation

                                   Page 15

<PAGE>

U.S.A.
------

             NUCLEAR INCIDENT EXCLUSION CLAUSE - LIABILITY - REINSURANCE
         (APPROVED BY LLOYD'S UNDERWRITERS' FIRE AND NON-MARINE ASSOCIATION)

     (1)  This reinsurance does not cover any loss or liability accruing to
the Reassured as a member of, or subscriber to, any association of insurers
or reinsurers formed for the purpose of covering nuclear energy risks or as a
direct or indirect reinsurer of any such member, subscriber or association.

     (2)  Without in any way restricting the operation of paragraph (1) of
this Clause it is understood and agreed that for all purposes of this
reinsurance all the original policies of the Reassured (new, renewal and
replacement) of the classes specified in Clause II of this paragraph (2) from
the time specified in Clause III in this paragraph (2) shall be deemed to
include the following provision (specified as the Limited Exclusion
Provision):

     LIMITED EXCLUSION PROVISION.*

     I.    It is agreed that the policy does not apply under any liability
            coverage, to (INJURY, SICKNESS, DISEASE, DEATH OR DESTRUCTION/
            bodily injury or property damage) with respect to which an
            insured under the policy is also an insured under a nuclear
            energy liability policy issued by Nuclear Energy Liability
            Insurance Association, Mutual Atomic Energy Liability
            Underwriters or Nuclear Insurance Association of Canada, or would
            be an insured under any such policy but for its termination upon
            exhaustion of its limit of liability.

     II.    Family Automobile Policies (liability only), Special Automobile
            Policies (private passenger automobiles, liability only), Farmers
            Comprehensive Personal Liability Policies (liability only),
            Comprehensive Personal Liability Policies (liability only) or
            policies of a similar nature; and the liability portion of
            combination forms related to the four classes of policies stated
            above, such as the Comprehensive Dwelling Policy and the
            applicable types of Homeowners Policies.

    III     The inception dates and thereafter of all original policies as
            described in II above, whether new, renewal or replacement, being
            policies which either
            (a) become effective on or after 1st May, 1960, or
            (b) become effective before that date and contain the Limited
            Exclusion Provision set our above;
            provided this paragraph (2) shall not be applicable to Family
            Automobile Policies, Special Automobile Policies, or policies or
            combination policies of a similar nature, issued by the Reassured
            on New York risks, until 90 days following approval of the
            Limited Exclusion Provision by the Governmental Authority having
            jurisdiction thereof.

    (3)  Except for those classes of policies specified in Clause II of
paragraph (2) and without in any way restricting the operation of paragraph
(1) of this Clause, it is understood and agreed that for all purposes of this
reinsurance the original liability policies of the Reassured (new, renewal and
replacement) affording the following coverages:

         Owners, Landlords and Tenants Liability, Contractual Liability,
         Elevator Liability, Owners or Contractors (including railroad)
         Protective Liability, Manufacturers and Contractors Liability,
         Products Liability, Professional and Malpractice Liability,
         Storekeepers Liability, Garage Liability, Automobile Liability
         (including Massachusetts Motor Vehicle or Garage Liability)

shall be deemed to include, with respect to such coverages, from the time
specified in Clause V of this paragraph (3), the following provision
(specified as the Broad Exclusion Provision):

    BROAD EXCLUSION PROVISION.*

It is agreed that the policy does not apply:
        I.   Under any Liability Coverage to (INJURY, SICKNESS, DISEASE, DEATH
             OR DESTRUCTION bodily injury or property damage)

             (a)  with respect to which an insured under the policy is also
                  an insured under a nuclear energy liability policy issued
                  by Nuclear Energy Liability Insurance Association, Mutual
                  Atomic Energy Liability policy issued by Nuclear Energy
                  Liability Insurance Association, Mutual Atomic Energy
                  Liability Underwriters or Nuclear Insurance Association of
                  Canada, or would be an insured under any such policy but for
                  its termination upon exhaustion of its limit of liability; or
             (b)  resulting from the hazardous properties of nuclear material
                  and with respect to which (1) any person or organization is
                  required to maintain financial protection pursuant to the
                  Atomic Energy Act of 1954, or any law amendatory thereof, or
                  (2) the insured is, or had this policy not been issued would
                  be, entitled to indemnity from the United States of America,
                  or any agency thereof, under any agreement entered into by
                  the United States of America, or any agency thereof, with any
                  person or organization.

<PAGE>

        II.  Under any Medical Payments Coverage, or under any Supplementary
             Payments Provision relating to (IMMEDIATE MEDICAL OR SURGICAL
             RELIEF first aid), to expenses incurred with respect to (BODILY
             INJURY, SICKNESS, DISEASE OR DEATH/bodily injury) resulting from
             the hazardous properties of nuclear material and arising out of
             the operation of a nuclear facility by any person or
             organization.
        III. Under any Liability Coverage to (INJURY, SICKNESS, DISEASE,
             DEATH OR DESTRUCTION/bodily injury or property damage) resulting
             form the hazardous properties of nuclear material, if
             (a)  the nuclear material (1) is at any nuclear facility owned
                  by, or operated by or on behalf of, an insured or (2) has
                  been discharged or dispersed therefrom;
             (b)  the nuclear material is contained in spent fuel or waste at
                  any time possessed, handled, used, processed, stored,
                  transported, or disposed of by or on behalf of an insured; or
             (c)  the (INJURY, SICKNESS, DISEASE, DEATH OR DESTRUCTION/bodily
                  injury or property damage) arises out of the furnishing by
                  an insured of services, materials, parts or equipment in
                  connection with the planning, construction, maintenance,
                  operation or use of any nuclear facility, but if such
                  facility is located within the United States of America,
                  its territories, or possessions or Canada, this exclusion
                  (c) applies only to (INJURY TO OR DESTRUCTION OF PROPERTY
                  AT SUCH NUCLEAR FACILITY/property damage to such nuclear
                  facility and any property thereat).
        IV.  As used in this endorsement:
             "hazardous properties" include radioactive, toxic or explosive
             properties; "nuclear material" means source material, special
             nuclear material or byproduct material; "source material",
             "special nuclear material", and "byproduct material" have the
             meanings given them in the Atomic Energy Act of 1954 or in any
             law amendatory thereof; "spent fuel" means any fuel element or
             fuel component, solid or liquid, which has been used or exposed
             to radiation in a nuclear reactor; "waste" means any waste
             material (1) containing byproduct material and (2) resulting
             from the operation by any person or organization of any nuclear
             facility included within the definition of nuclear facility
             under paragraph (a) or (b) thereof; "nuclear facility" means
             (a)  any nuclear reactor,
             (b)  any equipment or device designed or used for (1) separating
                  the isotopes of uranium or plutonium, (2) processing or
                  utilizing spent fuel, or (3) handling processing or
                  packaging waste,
             (c)  any equipment or device used for the processing, fabricating
                  or alloying of special nuclear material if at any time the
                  total amount of such material in the custody of the insured
                  at the premises where such equipment or device is located
                  consists of or contains more than 25 grams of plutonium or
                  uranium 233 or any combination thereof, or more than 250
                  grams of uranium 235,
             (d)  any structure, basin, excavation, premises or place
                  prepared or used for the storage or disposal of waste, and
                  includes the site on which any of the foregoing is located,
                  all operations conducted on such site and all premises used
                  for such operations; "nuclear reactor" means any apparatus
                  designed or used to sustain nuclear fission in a
                  self-supporting chain reaction or to contain a critical
                  mass of fissionable material; (WITH RESPECT TO INJURY TO OR
                  DESTRUCTION OF PROPERTY, THE WORD "INJURY" OR "DESTRUCTION"/
                  "property damage") includes all forms of radioactive
                  contamination of property (INCLUDES ALL FORMS OF
                  RADIOACTIVE CONTAMINATION OF PROPERTY).
        V.   The inception dates and thereafter of all original policies
             affording coverages specified in this paragraph (3), whether
             new, renewal or replacement, being policies which become
             effective on or after 1st May, 1960, provided this paragraph (3)
             shall not be applicable to
                  (i)  Garage and Automobile Policies issued by the Reassured
             on New York risks, or
                  (ii) statutory liability insurance required under Chapter
             90, General Laws of Massachusetts, until 90 days following
             approval of the Broad Exclusion Provision by the Governmental
             Authority having jurisdiction thereof.
      (4) Without in any way restricting the operation of paragraph (1) of
this Clause, it is understood and agreed that paragraphs (2) and (3) above
are not applicable to original liability policies of the Reassured in Canada
and that with respect to such policies this Clause shall be deemed to include
the Nuclear Energy Liability Exclusion Provisions adopted by the Canadian
Underwriters' Association of the Independent Insurance Conference of Canada.

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

*NOTE. THE WORDS PRINTED IN ITALICS IN THE LIMITED EXCLUSION PROVISION AND IN
THE BROAD EXCLUSION PROVISION SHALL APPLY ONLY IN RELATIONS TO ORIGINAL
LIABILITY POLICIES WHICH INCLUDE A LIMITED EXCLUSION PROVISION OR A BROAD
EXCLUSION PROVISION CONTAINING THESE WORDS.

<PAGE>

                 WORKERS' COMPENSATION AND EMPLOYER'S LIABILITY
                       QUOTA SHARE REINSURANCE CONTRACT
                            EFFECTIVE: JULY 1, 2000

     Between PAULA Insurance Company and Insurance Corporation of Hannover

                       Schedule A - INURING REINSURANCE

PAULA Insurance Company is reinsured for Workers' compensation and Employer's
Liability by General Reinsurance Corporation on an excess of loss basis in
three layers providing a total coverage of $10,000,000 excess of $250,000 per
accident. The first layer, $250,000 excess of $250,000 per accident, is
subject to a deductible of $2,000,000 for each year beginning July 1. (In
other words, until PAULA pays an aggregate of $2,000,000 for the portion of
individual claims that is between $250,000 and $500,000, the retention is
$500,000.)

PAULA  Insurance Company is also reinsured for Workers' Compensation by
several carriers through Herbert Clough Inc. on an excess of loss basis in
three layers providing a total coverage of $50,000,000 excess of $10,250,000
per accident, subject to a per employee limit of $5,000,000 in each layer,
and with one automatic pro-rata paid reinstatement.

PAULA Insurance Company is also reinsured for Workers' Compensation Industrial
Aid Aircraft by several carriers through Herbert Clough Inc. on an excess of
loss basis for $5,000,000 excess of $150,000 per occurrence subject to a per
employee limit of $2,000,000.

Allocated lass adjustment expenses are pro-rata in addition on the other than
industrial aid reinsurance and are part of loss on the industrial aid
reinsurance.

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